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Property purchase is not straight forward and an overage payment (an agreement that a sum is paid over and above the basic purchase price if and when certain conditons or contingencies are fulfilled) adds to the complications.  Such clauses are often added late in the day and the terms may be negotiated by advisers under pressure to conclude the deal.  A recipe for disaster and sadly, litigation can ensue.

In Walker v Kenley and another [2008] EWHC 370, if the purchaser of a hotel obtained planning permission for a development of “residential flats”, an overage payment was payable to the hotel’s vendor in respect of each flat sold.  The purchaser obtained planning permission for 17 apartments subject to a condition that they be used “for holiday accommodation only”.  Did holiday apartments amount to “residential flats”?  The court held the words, given their natural meaning, meant flats which an occupier would consider his or her residence and there was nothing in the circumstances of this case which led to the conclusion that the words would include a holiday apartment.  Is that what the parties meant?  We will never know.

It should be remembered that evidence of negotiations is not accepted by the courts.  As Lord Wilberforce explained in Prenn v Simmonds [1971] 1 WLR 1381, this is because the position of the parties change until a final consensus is reached and that consensus is then recorded in the written agreement.

Nevertheless, the House of Lords ordered rectification of the wording of an overage agreement in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38.  Lord Hoffman stated that the wording used by the parties is paramount but there must be some exceptions to this rule if a mistake is made in recording the deal done.  For instance, the words used may be capable of more than one meaning or the parties might have given during their negotiations, a particular meaning to the words used or the wording used does not reflect the agreement reached.  In such cases, the courts might consider rectification and then, said Lord Hoffman “All that is required is that it is clear that something has gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant.”

Contact Hatherleigh Training to hear more re overage payments and mistakes in written agreements.

Generally, a tenant occupying premises for its business purposes, is entited to apply to the courts for a new tenancy (unless its lease states otherwise) pursuant to the Landlord and Tenant Act, 1954.

The landlord can oppose the grant of a new tenancy on one or more grounds specified in s30(1) of the Act.  The landlord must state its ground(s) of opposition either in its own notice terminating the tenant’s tenancy (a s25 notice) or in answer to a tenant’s request for a new tenancy (a s26 request).  Once the landlord has stated any ground(s) of opposition, the tenant may choose to either vacate the property (without making an application for a new tenancy) or continue to make its court application.  If the landlord’s ground(s) of opposition has or have nothing to do with the tenant’s default (e.g. the landlord requires the premises for its own purposes), the tenant is entitled to compensation pursuant to the Act (based on the rateable value of the premises).  Payment is made if the tenant simply vacates the premises or the court refuses to grant a new tenancy.

There is a further little used potential head of compensation payable to the tenant under the Act.  If the tenant accepts a landlord’s ground of opposition and quits the premises, or makes a court application for a new tenancy but then withdraws it, and it later appears that he did so by reason of the landlord’s misrepresentation or concealment of material facts, the tenant can seek compensation for damage or loss sustained as a result of quitting the premises (s37A of the Act).  In Inclusive Technology v Williamson [2009] the landlord stated orally to the tenant and in its written s25 notice that it opposed the grant of a new tenancy because it intended to demolish, reconstruct or carry out substantial works of construction on the premises and could not do so without obtaining possession of the property.  At the time the landlord genuinely intended to refurbish the premises and the tenant, relying on this representation, vacated the property.  The landlord later decided to “hold fire” and leave the proposed works until some time in the future.  The landlord failed to inform the tenant of the changed circumstances and the tenant successfully applied to the courts for compensation.  Hughes LJ made it clear that a landlord, having made a statement of intention, can still change his mind and “he has not promised to redevelop or refurbish the premises - but if he has made the representation which this landlord did, then he must correct it when it becomes, to his knowledge, false.  Fair dealing, and for that matter s37A, require nothing less.”

If you wish to hear more about the Landlord and Tenant Act, 1954, speak to Hatherleigh Training.

Occupying property comes with a duty of care to visitors and trespassers in respect of dangers at the property (Occupiers’ Liability Acts 1957 and 1984).  Danger comes in many forms and whilst a pond, lake, river or sea side might be very attractive to many, there are those, even if warned, who carry on regardless.  Where does that leave the occupier?

In Tomlinson (FC) v Congleton Borourgh Council and others [2003] UKHL 47, a man dived into a lake in a derelict sand quarry on land open to the public and owned and managed by local authorities.  He struck his head, broke his neck and was rendered a tetraplegic.  He had acted despite signs saying “Dangerous Water.  No swimming.”  The judge found there to be no hidden dangers in the lake.  On appeal, the Master of the Rolls said “It seems to me that Mr Tomlinson suffered his injury because he chose to indulge in an activity which had inherent dangers, not because the premises were in a dangerous state.”  However, by a majority, the Court of Appeal found the authorities liable.  The case went to the House of Lords.  Lord Hobhouse of Woodborough recognised that there might be some risks arising from natural features on the land against which the owner should offer some protection (“for example, where there was a very narrow and slippery path with a camber beside the edge of a cliff from which a number of persons had fallen”), but generally, there should be no legal policy to protect the foolhardy or reckless few to the detriment of others.  “The pursuit of an unrestrained culture of blame and compensation has many evil consequences and one is certainly the interference with the liberty of the citizen.”

The law has recently been considered again (Marsden v Bourne Leisure Ltd (t/a British Holidays) [2009] EWCA Civ 671).  A 2 year old boy, on holiday with his family, drowned in a pond in a holiday park.  A judge allowed his father’s claim that the owner had breached its duty of care.  However, the Court of Appeal found that liability is not attributed on the basis that someone was to be blamed for the accident.  An occupier, exercising reasonable care, does not have to underline or emphasis an obvious peril to any conscientious parent.

Want to hear more?  Why not contact Hatherleigh Training?

Landlords commonly seek a guarantor for a tenant, be it from a major shareholder of a small company, the parent company for a subsidiary or from the out-going tenant on an assigment, in an attempt to protect themselves particularly against the tenant’s insolvency.

Liquidators and trustees in bankruptcy are enabled to disclaim onerous contracts.  It was once thought that a disclaimer of the tenant’s interest in a lease, which brings it to an end so far as the insolvent tenant is concerned, would also automatically release the tenant’s guarantor’s liability.  However, the House of Lords confirmed that a disclaimer only terminates the interest between the landlord and the insolvent tenant - it affects no other party including a guarantor (Hindcastle Ltd v Barbara Attenborough Associated Ltd [1996]).

This decision does not, of course, prevent the guarantor from attempting other arguments (not always successful) in an attempt to find a way out of its liabilities when called upon to meet them by the landlord.  In Unicomp Inc v Durodis Electron plc [2004], the landlord had the option of forfeiting the lease when the tenant’s related company went in to occupation in breach of the lease but failed to act thereby (claimed the guarantor) materially altering the guarantor’s liability (an argument which had been successful in the 1878 case of Holme v Brunskill).  However, the guarantee was stated to be unaffected by “any neglect or forbearance of the Landlord” and the argument failed.  The guarantor’s argument failed too in Doleman v Shaw [2009].  The guarantee lasted for “the period during which the Assignee is bound by the tenant covenants”.  Upon a disclaimer of the assignee tenant’s interest the guarantor claimed release despite the Hindcastle case - the Court of Appeal did not agree.  However, the guarantor was successful in arguing that the wording of a subsequent deed (to which the guarantor was not a party) varied the contract and thereby released the guarantor under the original guarantee in The Prudential Assurane Co Ltd v Ayres and another [2008].

If you wish to hear more, contact Hatherleigh Training - Vivien King would be pleased to help you.

A tenant, in breaching a covenant in its lease, runs the risk that the landlord will forfeit the term.  Forfeiture is at the option of the landlord but once it is indicated to the tenant that the lease is to continue, the landlord may waive its right to forfeit.

There have long been legal arguments about waiver but it appears clear that acceptance of rent by a landlord after knowledge of circumstances founding a right to forfeit is regarded as evidence of an intention to allow the tenancy to continue.  Arguments abound about, for instance, when the landlord has, or is deemed to have, the requisite knowledge of the breach and whether the breach is a once and for all breach or a continuing breach.  However, the recent Court of Appeal case of Seahive Investments Ltd v Osibanjo and another [2008] EWCA 1282 highlighted other difficulties i.e. whether it mattered that the rent accepted fell due before or after the landlord’s knowledge of the breach relied upon to ground the forfeiture and what amounted to acceptance of rent.

In the Seahive case, the landlord presented a bankruptcy petition against the tenant for unpaid rent.  The landlord subsequently became aware of other breaches of covenant.  The tenant submitted a cheque in settlement of both the petition sum and a smaller amount for other rental payments.  The landlord accepted the cheque but returned a sum equating to the other rental payments.  The tenant claimed waiver.  The judge found the monies retained by the landlord were not in payment of rent (but in settlement of the bankruptcy debt) and in consequence the Court of Appeal agreed there had been no waiver.  Practitioners will regret that their Lordships failed to agree upon whether or not the landlord could have accepted rent which fell due prior to becoming aware of the other breaches of covenant and not waive the right to forfeit.

Want to hear more?  Why not contact Hatherleigh Training?

Modern leases of commercial property usually contain a tenant’s covenant to comply with statute.  In preparing a schedule of dilapidations at the end of the term (”a terminal schedule”), many a building surveyor will home in on this covenant and purport a breach.  In many cases, they do so erroneously and without the necessary detailed consideration.

The wording of the covenant will vary from lease to lease and should be studid with care.  It might, for instance, only apply during the term and not once the term has ended.  One should also examine the covenant to yield up the property to ascertain whether its ambit is wide enough to incorporate the covenant to comply with statute (or whether it applies, for instance, simply to the covenant to repair).  One should also give thought to any covenant given by the tenant to re-instate - this may require works, which might fall within a statutory requirement, to be removed as a tenant’s improvement at the end of the lease.

Attention should next be drawn to the statutory requirement itself.  In many cases it will only apply if certain facts exist (e.g. the tenant is required to be in occupation of the premises and hence will not apply when the lease has terminated).  Expert advice (e.g. from a fire officer) may be required before stating there is a breach of a particular statutory requirement.  It should also be remembered that building regulations generally only apply if works are required to be done (e.g. some disrepair has been identified).  There is rarely, if ever, a statutory requirement to comply with modern building regulations when works are not being conducted.

When drawing up the schedule of dilapidations, the covenant and the statute should be identified (stating that “the tenant should ascertain that they have met statutory requirements” - e.g. in relation to lighting - simply will not do) together with details of the alleged breach and the remedial works required.

Want to hear more?  Then why not contact Hatherleigh Training?

As with so many legal disputes between neighbours, the law relating to easements gives rise to many problems and much debate and argument.

Whilst there is no definitive description of an easement, it does entitle one owner of land to exercise some kind of right over land owned by another.  For instance, a private right of way, or to draw water from a spring on another’s land, to receive light or support for a building have all been held to constitute easements.

The right can be exercised for years with few difficulties arising.  However, matters often come to a head when there is a change of owner or circumstances or an escalation in the use.

The recently reported Court of Appeal case of Waterman and anor v Boyle and anor [2009] EWCA Civ 115 concerned several arguments arising over the exercising of a right of way including whether there was an implied right to park.  A right to park might be implied if it is reasonably necessary in order to exercise or enjoy a right of vehicular access.  However, it is going to depend on the particular circumstances of the case and here, where the respondents had other areas in which they might park it was held unnecessary to park on the right of way.  In giving judgement on this and other disputes between the parties, Lady Justice Arden gave a warning to disputing neighbours:

“The law expects neighbours to show some give and take towards each other.  The parties to this litigation should keep that point in mind for the future and now draw a line under the past.  Parties to other boundary disputes and their advisers should also, at all times, have this point firmly at the forefront of their minds, and seek to resolve their disputes accordingly, and without resort to complex and expensive litigation.”

Why not contact Hatherleigh Training if you want to hear more about easements?

Whilst most commercial property disputes are settled between the parties, some do need to be resolved by a third party - a judge, arbitrator or independent expert.

In such cases, surveyors are often called upon to give evidence as an expert witness.  In addition to following the rules applicable to the tribunal before whom they appear, surveyors adopting such a role must also comply with the RICS Practice Statement and Guidance Note for Surveryors acting as expert witnesses.  A new, third edition has been effective since 1 January 2009.  Its principal message is to remind an expert witness that his prime duty is to the tribunal before whom he appears.  His evidence must be independent, impartial and uninfluenced by those instructing or paying him.  The expert witness is there to assist the tribunal and not to act as an advocate for his client.

There are occasions, however, when a surveyor appears before a tribunal (not a court before which a surveyor has no right of audience) as an advocate.  Here again, the RICS has produced a 1st edition of a Practice Statement and a 2nd edition of a Guidance Note.  Both have been effective since 1 January 2009.  If undertaking this role, the surveyor-advocate owes duties to his client but also must act properly, fairly and assist in maintaining the integrity of the tribunal’s process.

The roles of expert and advocate are very different and one would think it is not appropriate to undertake both when appearing before one tribunal.  However, unless the tribunal prohibits a dual role, or other relevant factors make it inappropriate, the RICS advises it is possible.  In fact, the undertaking of the dual role is not unusual particularly in relation to rent reviews.  The surveyor must, though, understand the distinction between the two roles and clearly distinguish between them at all times.  If he does not, the tribunal may form the view that the expert evidence is little more than advocacy and thus give it little or no weight.

If you need to know more, why not contact Hatherleigh Training?

One of the most contentious areas in the landlord and tenant arena is that of service charges.  Charges for residential tenancies are to a degree governed by statute requiring, for instance, consultation between landlords and tenants before expenditure under the Landlord and Tenant Act 1985.  Disputes may be resolved by the Leasehold Valuation Tribunal.

However, service charges in the commercial sector are not so governed and depend on the wording of the lease negotiated between the parties.  In an attempt to guide the parties into reasonable terms, the property industry produced the Service Charge Guide now published as the Service Charge Code for Commercial Property by the RICS (there being one each for England and Wales, for Scotland and for Northern Ireland) and has the status of a Guidance Note for Chartered Surveyors.  The RICS is to release further information papers (for instance on sinking funds, reserve funds and depreciation charges) in the near future.

Despite that and despite recent reports that some large landlords are reducing, substantially, their service charges to retailers, service charges still lead to numerous disputes.  These might revolve around whether the head of expenditure falls within the definitions in the lease, how the sum claimed has been calculated or divided between the payees, whether a sum can be claimed outside the specified procedure in the lease and whether the cost of long-term works can be claimed from a short term tenant.

The Code states, for instance that service charges costs “will include reasonable costs of maintenance, repair and replacement (where beyond economic repair)” and whilst the same or similar words might be repeated in the lease, what is reasonable and when matters are really beyond economic repair can lead to considerable argument.

To hear more about the Code and some of the reported cases, contact Hatherleigh Training.

Times are hard.  The British Retail Consortium has announced that UK retail sales values fell 3.3% on a like-for-like basis compared to a year ago and many retailers are struggling.  In order to assist cash flow, traders have asked landlords to accept monthly and not quarterly payments of rent in advance.  The market also knows that some retailers are taking longer to meet their debts - thereby putting pressure on small suppliers.

The Sunday Times reports that one landlord, Prupim (the property owning arm of the Prudential), is in talks with tenants of its retail parks and shopping centres about lower service charges or offering assistance over rental payments.  No doubt some other landlords will be unwilling or financially unable to assist and will be looking to enforce the tenants’ leasehold covenants.

These circumstances give rise to the spectre of the keep open covenant which haunted landlord and tenant practitioners years ago.  The House of Lords refused to grant a mandatory injunction requiring the retail tenant to carry on trading in England and Wales (see the 1997 decision in Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd)).  The reasoning related to the difficulty of supervision.  Instead, the Courts will award damages if the landlord can show it is suffering a loss because of the tenant’s refusal or inability to trade.  The law differed in Scotland but in the 2007 Court of Session case of Douglas Shelf Seven Ltd v Co-operative Wholesale Society Ltd the landlord of a Dundee store sought damages rather than an order to enforce the covenant.  The threat of an award of damages may be detrimental to rental at review.  So why do landlords seek to impose the covenant upon their retail tenants?

Wish to hear more?  Why not ask Hatherleigh Training to conduct a training session for you?