News

Stay due to Coronavirus

2020 was the strangest of years leaving us all rather shell shocked. However, news of the log awaited vaccines lifted our spirits for a short time until the arrival of a new variant of the virus. 2021 has plunged us again into a lockdown in England with similar steps being taken in Scotland, Wales and Northern Ireland. What does all this mean to us in the property world?

In March, April and May 2020 we set out some of the restrictions placed on landlords and morgagees preventing, temporarily, eviction proceedings being commenced. With some exceptions (e.g. for trespassers and squatters), a property possession order could not be sought or enforced during the period from 27 March to 20 September, 2020. From then until, presently 28 March 2021 Part 55 of the Civil Procedure Rules (cpr) and, in particular, its Practice Direction 55C have been amended to introduce an ‘interim period’ during which proceedings can only be commenced if a ‘reactivation notice’ has first been served (details are within the cpr). This applies to both commercial and residential property in England.

In relation to privately rented residential property in England, after 29 August 2020 until at least 31 March 2021, a landlord must give a tenant at least six months’ notice requiring possession of the property or seeking a possession order under the Housing Act, 1988. If the tenant remains in possession after expiry of the notice, a landlord must issue court proceedings and obtain a possession order and subsequently, a warrant for possession which can be enforced by court bailiffs. Warrants cannot be so enforced prior to 21 February 2021.

In relation to all proceedings, courts will take into consideration the impact of the Covid-19 pandemic on the parties when considering applications for time extensions, adjournments and relief from sanctions (Practice Direction 51ZA to Part 51 of the cpr).

Throughout the pandemic, landlords and tenants should communicate with each other and reach agreements wherever possible.


Developer in ‘cynical breach’

The Upper Tribunal (Lands Chamber) has the power to discharge or modify a restrictive covenant affecting land (s84 Law of Property Act, 1925). Surprisingly, neither the old House of Lords nor the current Supreme Court has ever been requested to consider this section until now (Alexander Devine Children’s Cancer Trust v Housing Solutions [2020] UKSC 45).

A restrictive covenant, preventing development of a piece of open land, was held in favour of the Trust, which owned neighbouring land. It would enable terminally ill children to benefit from the privacy offered by the open land. A developer, Millgate, obtained the land and despite opposition from the Trust built 13 units of affordable housing in breach of the covenant. It made an application to the Upper Tribunal to have lifted the covenant. Millgate’s application succeeded although the Upper Tribunal ordered Millgate to pay £150,000 to the Trust. The decision was overturned by the Court of Appeal. Millgate, having sold the housing to Housing Solutions, appealed.

The Supreme Court looked at the proceedings below and considered “the central issue on this appeal which is the relevance of Millgate’s cynical breach”. The Court held that whilst the Upper Tribunal could discharge or modify a covenant which impeded a use contrary to the public interest and where money would adequately compensate for loss (s84(1A)), this should be narrowly interpreted. However, Millgate’s cynical breach is not relevant in determining s84(1A) but is “a highly relevant consideration when it comes to the discretionary stage of the decision”. Whilst an appellant court should not interfere with a lower court in exercising its discretion, it can interfere if in so doing, the lower court makes an error law. The Upper Tribunal did make an error in ignoring Millgate’s cynical breach.

The Supreme Court held the Court of Appeal was correct in overturning the Upper Tribunal’s decision and dismissed the appeal. In so doing, it made it clear that nothing said is determinative on how the courts would treat an application by the Trust to enforce the covenant and the decision will strengthen the Trust’s hands in relation to any financial settlement of the case.

Our view is that whilst the courts may not order demolition of the housing units, developers should not believe they can simply ‘buy out’ a restrictive covenant by paying a party damages.


Business Rates Review – What Again?

We considered a government review of business rates in our newsletter of April 2015. Views were sort at that stage from all interested parties. However, a further call for evidence was made by the Treasury in July 2020 after the terms of reference for a fundamental review were published in the 2020 Budget. Consultation closed at the end of October 2020. The government is to produce its conclusions in the spring of 2021. They are awaited with interest.

The present system has a long history. It is based on the letting value of a property occupied for business purposes multiplied by a rates multiplier in England and Wales and by a poundage rate in Scotland. Reviews of the letting value are conducted, generally speaking, on a five year review pattern. The next review was to be conducted in 2022 but was to be brought forward to 2021 until the coronavirus disaster occurred. The review will now be conducted in 2023 but will be based on 2021 valuations. Liability for the tax falls on the occupier with the owner responsible for empty properties.

In its 2020 publication, the Treasury reports that “Previous reviews have reflected a consensus that business rates have distinct strengths as a tax.” However, the government recognises that concerns remain about the level of rates levied, the wider functioning of the system and its impact on businesses. The present review will, therefore, be wide ranging and will explore the pros and cons of alternatives to the business rates.

One area of concern is the number of reliefs available. To quote from the Government’s review issued by HM Treasury “Several stakeholders, including the Treasury Select Committee, have suggested that the number of business rates reliefs available is evidence that the system is ‘broken’.” Whilst the Government has said it does not agree with this assessment, it is aware of concerns about the complexity of reliefs. Concerns, too, have been expressed about how the rates multiplier or poundage is set. Should this be based on a geographical basis or perhaps the property type with differing multipliers for retail, offices and warehouses? Again, we await the government’s conclusions: watch this space although with Covid-19 and Brexit, the government has a lot on its plate at present.


Limitations on proceedings

The public inquiry initiated as a result of the horrific fire at Grenfell Tower led to similar buildings clad in similar materials being examined and found wanting, leaving many people considering commencing proceedings. However, they must first consider the limitation rules.

Generally, a legal claim in tort, contract or statute cannot be brought after the expiration of six years from the date on which the cause of action accrued (see ss 2,5 and 9 of Part I of the Limitation Act, 1980 – ‘the Act’) but there are legal exceptions. Part II of the Act deals with extensions to and/or exclusions of the usual time limits including at s 32, postponement of the usual time limits in cases of fraud, or a defendant deliberately concealing a fact relevant to the claim arising as a consequence of a mistake. In such a case, the time period does not commence until the claimant has discovered the fraud, concealment or mistake or could, with reasonable diligence have discovered it.

In RG Securities (No. 2) Ltd v Allianz Global Corp and others [2020] EWHC 1646 (TCC), RG Securities bought a block of flats in Ipswich in April 2015. Built in the 1960s, it was substantially refurbished between 2006 and 2009. This included the cladding of the building with materials alleged by RG Securities to be highly inflammable and used by the contractor (Maskell, the third defendant) in breach of Building Regulations. The claimant commenced proceedings on 10 December 2019 claiming the building is not fit for habitation in breach of the Defective Premises Act, 1972.

Maskell said the claim is statute barred and applied for an order by way of summary judgement (i.e. without a full trial), striking out the claim according to Part 24 of the Civil Procedure Rules (‘CPR’). However, it came to light that a final Building Consent approval had not been obtained by Maskell. The claimant said Maskell had deliberately concealed this fact from the claimant and the calculation of time did not commence until the claimant became aware of the concealment (April 2016).

Considering previous cases, the judge said he must be cautious about making a summary determination where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and refused summary judgement.

Although the case turns on its own particular facts, it is an interesting reminder re the limitation rules.


Expert Witness’s Statement of Truth to be strengthened

In our newsletter of April 2019, we gave a warning of an almost inevitable jail sentence for expert witnesses and their instructing solicitors if in contempt of court by making or causing to be made, whether deliberately or recklessly, a false statement in a document verified by a statement of truth without an honest belief in its truth. We quoted the Court of Appeal in looking at the suspended sentence handed down by the judge (Liverpool Victoria Insurance Co. Ltd v Zafar [2019] EWCA Civ 392):

We say at once, however, that the deliberate or reckless making of a false statement in a document verified by a statement of truth will usually be so inherently serious that nothing other than an order for committal to prison will be sufficient.”

A change to be made to Part 35 of the Civil Procedure Rules (‘CPR’) underlines that the Ministry of Justice stands firmly behind the judges. Part 35 and its accompanying Practice Statement relate to Experts and Assessors and set out what is required from an expert witness’s report. Paragraph 3.3 of the Practice Statement states an expert witness report must contain a statement of truth. At present, a statement of truth must say:

I confirm that I have made clear which facts and matters referred to in this report are within my own knowledge and which are not. Those that are within my own knowledge I confirm to be true. The opinions I have expressed represent my true and complete professional opinions on the matters to which they refer.”

As from 1 October, 2020 a further sentence must be added:

I understand that proceedings for contempt of court may be brought against anyone who makes, or causes to be made, a false statement in a document verified by a statement of truth without an honest belief in its truth.”

This must bring it home to expert witnesses that they are to give their true independent view on the matters before them and not give an opinion tainted by the requirements of the party paying them.


Planning for the Future

The Ministry for Housing, Communities and Local Government has produced a White Paper (‘Planning for the Future’) and is seeking consultation on its contents for a period of 12 weeks from 6th August, 2020. Applying to England only it seeks views on “proposals for reform of the planning system in England to streamline and modernise the planning process, improve outcomes on design and sustainability, reform developer contributions and ensure more land is available for development where it is needed.”

Looking at the present planning system put together in 1947 and much altered since, the Prime Minister calls it “outdated and ineffective”. The authors of the White Paper give many reasons for change but identify the fact that the present system is too complex with decisions being made on a case by case basis rather than determined by compliance with clear rules. Importantly, it has lost the public trust: “for example, a recent poll finding that only seven per cent trusted their local council to make decisions about large scale development that will be good for their local area (49 percent and 36 percent said they distrusted developers and local authorities respectively).” The authors complain that there is not enough focus on design and quite simply, not enough homes are being built. What the Paper attempts to do is “rediscover the original mission and purpose of those who sought to improve out homes and streets in late Victorian and early 20th century Britain. That original vision has been buried under layers of legislation and case law.”

Concentrating upon local plans, these will place land in three categories: growth areas leading to substantial development, renewal areas suitable for some development and protected areas where development will be restricted. The local plans should be standardised, visual and map-based using digital tools which make it easier for people to understand what is proposed for their area. Decision making should be faster and ensure that development supports efforts to combat climate change and maximise envionmental benefits. A new body to support delivery of design codes across the country is proposed whilst protection of historic buildings and areas will be maintained.

Fine words – it is hoped that what emerges fulfils the authors’ visions.


Is Alice off to Wonderland again?

In our March newsletter we reported that landlords of business tenancies to which the Landlord and Tenant Act, 1954 applies cannot enforce, by proceedings or otherwise, a right to forfeit or re-enter premises for non-payment of rent during ‘the relevant period’. This relevant period commenced on 26 March and was due to expire on 30 June, 2020. That date was subsequently extended to 23 August, 2020. Residential tenants, too, were given protection from eviction until 30 September.

In the meantime, Ministers worked with the Judiciary to ensure that when eviction proceedings do re-commence, arrangements are in place to assist the courts in giving appropriate directions re further protection for those tenants who have been particularly affected by coronavirus. Additionally, the Civil Procedure Rules needed some temporary amendments and, for instance, a stay was imposed on any proceedings commenced under Part 55 (other than in relation to trespassers). Part 55 relates to any claim for the recovery of land (including buildings or parts of buildings).

However, litigation arose in several cases over whether or not subject tenancies had been properly excluded from the Landlord and Tenant Act, 1954 and if not, whether the stay on possession proceedings applied. The question extended, too, to any appeal. The Court of Appeal found (TFS Stores Ltd v BMG (Ashford) Ltd and others [2020] EWCA Civ 833) that in any proceedings where possession was ordered, possession must have been claimed. Giving judgement, Sir Geoffrey Vos said “CPR Part 55 is mandatorily applicable to possession claims brought by landlords”and a stay must therefore apply. He continued to say if proceedings are stayed, “nothing can happen in court at all”.

Wilberforce Chambers expressed the view on its website that the clear message in the above case would reach courts at all levels but then points out that a differently constituted Court of Appeal sitting just a week later appears to have cast doubt on the decision. “Perhaps a stay does not quite mean what it says in every case, and tenants must prepare to fight more applications to lift the stay.” Oh dear!!


Welcome Back to the Housing Market!

On 13 May, the Housing Secretary, the Rt Hon Robert Jenrick MP, delivered to the House of Commons and published a speech in which he set out the Government’s “clear, coherent and comprehensive plan to restart, reopen and renew the housing market and our construction industry.” It applies to England only – the devolved administrations to Scotland, Wales and Northern Ireland, to quote from the Financial Times “have all declined to follow the Westminster government’s revision of lockdown restrictions.” However, Nicola Sturgeon has since announced that the Scottish government will work with the property industry in the hope of re-opening the Scottish housing market on or after 18 June.

The English property and construction industry was quick to respond – estate agencies re-opened, appointments to view were made, conveyancers and removal firms swung into action and construction firms returned to abandoned sites. However, all must be conducted within social distancing and safety rules.

Under the coronavirus lockdown, people could only move house if they thought it ‘reasonably necessary‘. Mr Jenrick said this meant 450,000 had to put their plans on hold. Now, however, so long as people follow the Government’s guidance, moves can take place. The new guidance was first published at the end of March with subsequent updates made during May. As might be anticipated, the rules include extensive cleaning and hand washing.

100 construction firms have signed up to the Charter for Safe Working Practice published by the Home Builders’ Federation. It ensures that house building activities are conducted safely and within Government advice. Mr Jenrick thanked in particular Taylor Wimpey. This company has returned workers to the majority of its sites, thus removing its staff from the furlough scheme and allowing them to return to work on full pay. A 5% reduction on the company’s new homes has been offered to NHS and care workers and has, in particular, caught the Minister’s eye.


Coronavirus: some assistance

Amongst the measures introduced by the UK Government to assist people in these difficult times is the morgage holiday. Introduced first in March to assist both individuals and businesses, it proposed mortgage lenders should give a three month payment holiday to those clients who required it. The Government reports that 1.8million morgagee payment holidays were taken up.

HM Treasury has now proposed that in order to further assist mortgagors and “to give people the certainty they need, they will be contacted by their lender to discuss a way forward. Where consumers can afford to re-start morgage payments, it is in their best interest to do so. However, if people are still struggling and need help, a full extension of the morgage holiday for a further three months will be available as one of the options open to them.” The current lender ban on repossession of residential property will, it is proposed also continue until 31 October, 2020. This will, no doubt, be welcomed by those who face life with a reduction in their income and, in particular, those poor souls who presently have no or very little income at all.

Consultation on these proposals finished on 26 May and the Finance Conduct Authority expects to finalise its guidance to mortgagees “shortly afterwards”.

The independent consumer body ‘Which?’ has been championing the cause for consumers since 1957 and has an on-line publication entitled “Coronavirus what it means for mortgages, credit cards, loans and savings”. It is well worth a read considering, as it does, not just loan holidays but some Government concessions re withdrawal of savings. For instance, Which? says “The latest move comes from the Treasury which has announced it has lowered the withdrawal penalty on lifetime Isas from 25% to 20% to help those who need to access their savings during the coronavirus crisis.”

We are all living through strange and very difficult times but at least some assistance is available to those in need of it.


More temporary protection

The restrictions imposed by the UK government in order to prevent the spread of coronavirus continue but so, too, will measures to be introduced to, it is hoped, assist some businesses.

As we said in March 2020, business tenants have been given temporary protection from forfeiture for non-payment of rent (s82 of the Coronavirus Act, 2020). This protection presently extends to 30 June 2020. Additionally, on 23 April the Ministry of Housing, Communities & Local Government and the Department for Business, Energy & Industrial Strategy issued a joint statement saying “High street shops and other companies under strain will be protected from aggressive rent collection and asked to pay what they can during the coronavirus pandemic.”

The statement records that whilst the majority of landlords and tenants are working together to reach agreements on debt obligations, some landlords have been putting their tenants under undue pressure by using aggressive debt recovery tactics. To prevent this, if a company cannot pay its bills due to coronavirus, the government will temporarily prevent the use of statutory demands made between 1 March 2020 and 30 June 2020 and the issuing of winding up petitions presented from 27 April 2020 to 30 June 2020. The measures are to be included in the Corporate Insolvency and Governance Bill. Secondary legislation will provide tenants with “more breathing space” by preventing landlords from using the Commercial Rent Arrears Recovery (‘CRAR’) scheme unless they are owed 90 days of unpaid rent.

Communities Secretary, Robert Jenrick said the government is doing everything it can to ensure commercial tenants are as well placed as possible to get back to business after the lock down. However, he recognized that landlords, too, are facing very serious pressures and thus the government is “working with banks and investors to seek ways to address these issues and guide the whole sector through the pandemic.

The British Retail Consortium and UK Hospitality welcome the measures but emphasize they may need to be extended to ensure businesses can survive.


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