Eversheds in Focus

February 2013
EvershedsInFocus...
Real Estate Dispute Resolution
Focus
Empty rates liability: the charitable saga continues...
Following the High Court decision in the
Makro cash and carry case reported in the
last edition of In Focus, two further decisions
have increased the pressure on councils over
empty rates avoidance schemes.
primarily on the basis of the restriction on
the use to which sub-licensees could put the
property, they were satisfied that when next
in use each unit would be wholly or mainly
used for charitable purposes.
The first case: Preston City Council v Oyston
Angel Charity [2012] EWHC 2005 (Admin)
PCC appealed, arguing that zero-rating would
only apply if it appeared that, when next in
use, the property would be occupied and
used by the owning charity itself, that is OAC.
However, upholding the magistrates’ decision,
the High Court ruled that there was no such
requirement. The focus of the scheme was on
ownership, and not on occupation.
Oyston Angel Charity (OAC) was a registered
charity that had entered into a licence
agreement with the freehold owner of a
number of commercial units in Preston. The
licence agreement allowed OAC to occupy
the units for the permitted use of charitable
purposes only. The terms of OAC’s licence
allowed it to sub-license the units provided
that it was for “charitable services”.
Preston City Council (PCC) issued demands
for payment of business rates in respect of
eight units, which OAC did not pay. PCC then
applied to the Magistrates’ Court for a liability
order. The magistrates found that OAC did
not itself intend to occupy the units but,
OAC was therefore exempt from non-domestic
rating liability on the basis that the occupiers
or users of the units (whether or not OAC)
would be charities. However, the High Court
stressed that this conclusion was based on the
issues that the magistrates had before them,
which did not include the possibility that any
sub-licensees might have charitable purposes
entirely different from those of OAC.
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EvershedsInFocus... • Focus
The second case: Cheshire and West
Chester Council v Public Safety
Charitable Trust (unreported)
The Public Safety Charitable Trust Limited
(PSCT) is well known to most local
authorities, occupying somewhere in the
region of 1000 properties across the UK,
by way of a small Wi-Fi device, from which
public safety messages are broadcast.
A large number of councils have taken
the view that, in the circumstances of
the occupation, PSCT are not entitled to
charitable relief on non-domestic business
rates and have issued liability order
proceedings against them for outstanding
business rates.
In the latest case, the Cheshire and West
Chester Council (CWCC) had originally
granted both the mandatory 80% and
additional 20% discretionary rates relief to
PSCT. However, it subsequently cancelled
the discretionary relief after receiving a
“large number” of similar applications from
the charity in respect of other properties
in the area. The Council applied to the
Magistrates’ Court for liability orders, which
PSCT challenged.
The Court found that the law was
clear that the installation of wireless
transmitters within the property counted as
“occupation” for the purposes of calculating
the property’s rateable value, since periodic
access to the property was needed for
maintenance purposes. CWCC has now
appealed this decision.
It is noteworthy that PSCT has issued
appeals against South Cambridgeshire
District Council and Milton Keynes Council,
who both won their cases against PSCT
at first instance. These appeals have been
linked and are now listed for an appeal
hearing in mid-May 2013. It is anticipated
that CWCC will also seek to have their appeal
linked to the existing proceedings.
EvershedsInFocus... • Focus
Key points:
• The Court’s decision in the Oyston case
leaves open the question of whether
the rules require a sub-tenant or sublicensee to have charitable purposes
that are the same or similar to those of
the head-tenant or head-licensor.
• It is clear that the courts at first instance
have taken a differing approach in the
PSCT cases and therefore, provide little
guidance for local authorities seeking
to apply the statutory regulations in
relation to charitable relief.
• It is hoped that the linked appeals
in the PSCT cases will provide some
much needed clarity but in the
meantime, Councils will be entitled to
investigate each application fully and
where there is evidence of a charity
entering into commercial transactions
with any of the parties involved,
charitable relief may be refused.
STOP PRESS - in the unreported
first instance case of Chiltern District
Council v Principled Partnership
Limited and Heathcote Distribution
Limited, the Court followed the Makro
High Court decision and held that the
provision of short term storage facilities
by a business whose principal aim was
to assist landlords to mitigate their
rates liability was sufficient beneficial
occupation to enable the landlord to
avoid non domestic rates liability (even
where it was found that some of the
storage boxes were empty!).
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EvershedsInFocus... • Focus
Have you properly applied for consent to assign?
The case: E.ON UK plc v Gilesports
Limited [2012] EWHC 2172 (Ch)
This case highlights the need to satisfy
strict procedural steps in connection with
applications to assign a lease. Here, E.ON
was head-tenant of a property which had
been sub-let to Gilesports.
The sub-lease had been assigned without
consent, and the assignee had gone into
administration; E.ON therefore wished to
establish that Gilesports remained liable on
the tenant’s covenants, and the principal
issue was whether the assignment was
unlawful. If so, Gilesports would be liable.
The High Court decided that Gilesports’
application to assign the sub-lease had
not been “served” for the purposes of the
Landlord and Tenant Act 1988, since the
formalities provided for in the sub-lease for
service of notices had not been followed.
This meant that the 1988 Act duties did
not arise: the landlord was not obliged to
act reasonably, or to give consent within a
reasonable period. It followed that it had not
been lawful to assign the sub-lease without
consent, and Gilesports remained liable.
For good measure, since the assignment
had not been registered at the Land Registry,
the transfer was void and the legal estate
reverted to Gilesports, providing another
route to liability.
Key points:
• This case highlights the need to
comply strictly with service formalities
when applying to assign a lease, or
to sub-let. The applicant must ensure
its application is served on the right
party in the right way. If serving on an
agent, always confirm that the agent
is authorised to receive the application.
• The formal service requirements also
apply to a landlord giving notification
of its decision, so landlords who wish
to avoid allegations that their decision
has been unreasonably withheld or
delayed must also be alive to the point.
• If you assign a lease, it is worth
ensuring that (where necessary) the
new tenant registers the assignment at
the Land Registry.
EvershedsInFocus... • Focus
Make sure your development isn’t parked!
The case: Kettel & Others -v- Bloomfold
Limited [2012] EWHC 1422
A recent High Court decision has provided a
salutary reminder to developers of the risks
of ignoring the rights of neighbours.
In this case, 8 long leaseholders of
residential apartments held rights to park on
designated spaces within the development’s
car park. They took action against the
freehold owner who had obtained planning
permission to construct a new residential
block upon the area occupied by their
parking spaces. Prior to commencing
construction works, the developer had
unilaterally sought to relocate the position
of the designated parking spaces and,
as part of that process, fenced off the
existing spaces to prevent the leaseholders
gaining access. The leaseholders sought an
injunction preventing the obstruction of
their parking rights and the commencement
of the construction works.
Having concluded that each leaseholder’s
right over their parking space constituted
an easement, and did not form part of their
demise, the Court went on to hold that:
• The freehold owner had no implied
right to vary the position of the parking
spaces unilaterally; and
• Fencing off the leaseholders’ designated
spaces was an actionable interference
with the parking easements.
The Court decided that the appropriate
remedy was to grant the leaseholders an
injunction preventing the obstruction of the
easements. In doing so, it decided against
granting damages in lieu of an injunction.
Key points:
• This decision is a continuation of
the general judicial trend to order
injunctions rather than damages as the
remedy for interference with property
rights. Developers can no longer
consider the prospect of an injunction
being awarded in these circumstances
as a low risk and, therefore, should
approach issues of third party ancillary
rights with caution.
• The normal rules on damages in lieu
of an injunction still apply, so if the
impact on the tenant’s rights is trivial
and can be adequately compensated
by damages then an injunction may
still be avoided. This case confirms that
the Courts are toughening their stance
on what is considered ‘trivial’.
• When selling off part of the
development, developers are best
advised to seek to insert ‘lift and shift’
provisions into plot sales, giving it
the potential to relocate easements in
order to retain some flexibility whilst
the development is finalised.
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EvershedsInFocus... • Focus
When is a house not a house?
The cases: Day and another v Hosebay
Limited; Howard de Walden Estates Limited
v Lexgorge Limited [2012] UKSC 41
The leasehold enfranchisement legislation
is designed to improve the position of
residential tenants, by giving them rights in
certain circumstances to buy the freehold
interest of the property in question. An
investor in commercial property will not
expect to find his tenants trying to take
advantage of it, and can now derive comfort
from this decision of the Supreme Court,
which has unanimously overturned the
decision of the Court of Appeal as to the
definition of “house” in the Leasehold
Reform Act 1967.
In both cases, the tenants of the properties
in question had applied to purchase the
freeholds from their landlords pursuant to
the Act and the success of the application
hinged on whether the properties satisfied
the definition of “house” contained in
section 2(1) of the Act. That definition
contains two main limbs:
• that the building is “designed or adapted
for living in”, notwithstanding that it is
“not structurally detached, or was or is
not solely designed or adapted for living
in”; and
• that the building is a house “reasonably
so called”.
Here, like a good many properties, the
buildings had originally been designed
and built as houses, but were at the time
of the tenants’ applications used purely for
commercial purposes (in this case a a selfcatering hotel and offices). In both cases
the Court of Appeal held that the building
was a “house” for the purposes of the Act
on the basis that, in essence, if it was built
as a house and/or now looked like a house
it would be a house “reasonably so called”,
irrespective of its actual or intended use.
The Supreme Court has concluded that
the Court of Appeal’s decision was not the
result intended by Parliament. It held that the
definition of “house” in the Act needs to be
read “in the context of a statute which is about
houses as places to live in, not about houses
as pieces of architecture or features in a street
scene”. The fact that the buildings looked like
houses and might be referred to as houses for
some purposes was not sufficient to displace
the fact that their use was entirely commercial.
Key points:
• This closes up a loophole which
commercial tenants sought to exploit
in an attempt to buy the freeholds to
their properties. The Supreme Court
has made it clear that, when deciding
what is or is not a “house” under the
1967 Act, substance prevails over form.
The decision is a much needed dose of
reality in this area of law.
• This case is a useful reminder of the
often overlooked difficulties that
residential aspects of property can
cause in a portfolio. However, clearly
this is a sensible decision that will be
welcomed by landlords of commercial
premises that have been residential
houses in the past.
• The case does however leave some
important questions unanswered? How
are mixed use premises to be treated?
EvershedsInFocus... • Focus
Seeing the light?
The case: CGIS City Plaza Shares 1 Limited
and another v Britel Fund Trustees Limited
[2012] EWHC 1594 (Ch)
The existence of rights of light can
significantly impede development.
Although rights of light can be expressly
granted, many rights are obtained by
prescription through 20 years’ use (section
3, Prescription Act 1832). Generally, once a
window has enjoyed uninterrupted access
to light for 20 years, the right to access that
light becomes absolute. Any development
of neighbouring land must be carried out
without substantial interference with the
use and enjoyment of the neighbouring
landowners rights.
However, s.3 of the 1832 Act also provides
that the acquisition of rights to light by
prescription can be avoided if the access to
light is enjoyed by written consent. Therefore,
when part of land is transferred, the buyer
and seller will often each take from the other
reciprocal rights to build on their respective
pieces of land, even if such development
would obstruct access to light on the other
piece. Such a right can, depending on the
wording used, be construed as a consent to
have access to light, pending any exercise of
the right to build.
In this case, the court considered a 1967
transfer which contained such provisions
for the benefit of both the buyer and seller.
The court concluded that the rights to build
granted in the transfer constituted written
consent for the purposes of s.3. Although
the original buyer and seller of the land
had subsequently sold their interests on,
the buildings on both the retained and
transferred land enjoyed access to light by
consent and such access could therefore
be interrupted. No rights to light by
prescription could arise.
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EvershedsInFocus... • Focus
Key points:
• Consider whether rights to build should
be contained within any transfer of
land (whether buyer or seller). Ensure
the provisions in the transfer are clearly
drafted to show whether access to light
or any other amenities are enjoyed by
consent, which land is to benefit from
those amenities, and what building
work may be carried out. The transfer
should also make it clear that the
amenities are enjoyed by consent or
agreement for the purposes of s.3.
• A right to light acquired by prescription
must be enjoyed for 20 years without
any interruption. To prevent a right
being acquired by prescription, a light
obstruction notice can be lodged with
the local authority. Interruption must
be for one year, so effectively a right
to light by prescription arises if it is
enjoyed uninterrupted (whether by
notice or otherwise) for 19 years and
one day. This must be borne in mind
when calculating when an obstruction
notice should be lodged – in short, if
you fear a right may have arisen, lodge
a notice sooner rather than later!
• The primary remedy for an actionable
interference with any rights to light
is an injunction. Therefore resolving
rights to light issues as early as
possible is beneficial - learning it too
late can lead to well advised adjoining
owners seeking to recover ransom
payments.
EvershedsInFocus... • Snapshots
Snapshots
Suffered loss?
This recent case of Platform Funding Limited v
Anderson & Associates Limited [2012] EWHC
1853 (QB) involved an alleged overvaluation of
a newly built flat. The lender alleged that the
surveyor overvalued the flat at £274,995. The
Court agreed and found that the valuer had
not acted with proper skill and care. However,
the sale took place as part of a large-scale fraud
perpetrated by the seller of all the flats in the
development, part of which involved valuers
being provided with misleading comparables.
The judge found that even if the valuer had
acted with reasonable skill and care, he would
not have discovered any further information to
suggest that the valuation was too high, due
to the fraud.
The Court concluded that valuer had been
misled into providing the overvaluation due to
the fraud. The lender’s loss was caused by the
fraud and not by the negligence of the valuer.
Key points:
• It must be remembered that causation
is a key part of any negligence claim;
it is generally always necessary for any
claimant to prove that the alleged loss
arises as a consequence of the breach of
duty of care.
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EvershedsInFocus... • Snapshots
Update on Defective Premises
10% damages increase
The recent cases of Hannon v Hillingdon
Homes Limited [2012] All ER (D) 128 (Jul)
and Drysdale v Hedges [2012] All ER (D) 345
(Jul) provide useful guidance on the extent
of a landlord’s duty of care both to the
tenant and others under section 4, Defective
Premises Act 1972. This duty extends to both
commercial and residential landlords.
The Lord Chief Justice used the case
of Simmons v Castle (an otherwise
unremarkable personal injury matter) to
confirm the judiciary’s approval of reforms to
civil damages payments, proposed in a recent
report by Sir Rupert Jackson LJ, and provided
for in legislation that will come into force on
1 April 2013. In judgments given from that
date, the judiciary will increase damages
awarded in many civil claims by 10%,
including those relating to property disputes,
where the claim involves a nuisance action, or
where suffering, inconvenience or distress is
caused to individuals.
Under the Act, a landlord has a duty to
ensure those accessing the landlord’s
premises are “reasonably safe from personal
injury or damage to property caused by
a relevant defect” (i.e. caused by a breach
of the landlord’s repair obligations). The
duty will arise where: (a) a tenancy imposes
an obligation on the landlord to repair
the premises; or (b) the tenancy gives the
landlord the right to enter the premises to
carry out repair.
Key points:
• Where leases give landlords the right to
enter premises to carry out works, the
duty under the Act will arise irrespective
of whether that right is exercised. In
such circumstances, it is vital that
regular inspections are carried out to
ensure that there are no relevant defects.
• Liability under the Act may arise even if
the disrepair is caused by the tenant.
• A landlord will not generally be liable
to rectify any defects that existed at
the start of the tenancy. However,
even where repair obligations are nonexistent or do not apply, a landlord
still owes a common law duty to
take reasonable care not to create
an unnecessary risk of injury when
carrying out works to the property.
Key points:
• Following an application to intervene
from the Association of British Insurers,
the Court of Appeal has reopened
the appeal, in order to reconsider
the issues raised. This includes reanalysing the impact of the increase to
damages awarded where conditional
fee agreements, or after the event
insurance, are in place. Watch this space
for further updates!
EvershedsInFocus... • Snapshots
Squatting in a residential building
becomes a criminal offence
Section 144 of the Legal Aid, Sentencing and
Punishment of Offenders Act 2012 came
into force on 1 September 2012, creating
a new offence of squatting in a residential
building. A person will commit the offence
if they both enter and remain in the building
as a trespasser, with the intention to live
there, and in the knowledge that they are
a trespasser. A building is ‘residential’ if it
is designed or adapted for use as a place
to live, and ‘building’ includes moveable
structures. These elements of the offence
suggest that:
• it will not apply to tenants holding over;
• it will not apply to shop-squatters; and
• it will probably apply in relation to
caravans and house-boats.
Key points:
• The courts will have to work out how
this will apply in specific instances. For
example, if a student sit-in occupies
a university hall of residence, is an
offence committed? (Perhaps the
answer to this particular example will
differ according to whether actual
accommodation units are occupied, as
opposed to common parts.)
• Previous measures to attach criminal
sanctions to certain types of trespass
have been ineffective because of the
reluctance of the police to enforce
existing laws. Time will tell whether
the new offence will be enforced with
more enthusiasm, at a time when
police resources are under pressure
more than ever; and indeed whether
the police will take a robust line when
trespassers produce a bogus tenancy
to justify their occupation.
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EvershedsInFocus... • Motion pictures
Motion pictures
What we’ve been up to...
Judicial review
The London team have received the eighth
successful judgment in the ongoing Humber
Oil litigation. Associated British Ports have
successfully opposed an application by
Humber Oil, a joint venture owned by Total
and Phillips 66, which brought a claim for
judicial review in respect of the Marine
Management Organisation’s rejection of
their application to acquire compulsorily an
interest in the Immingham Oil Terminal.
West End flooding
The Cambridge team is advising one of our
retail clients on a flooding issue at one of
the most prestigious recent developments
in the West End. Its ground floor showroom
has been badly affected by the recent
unseasonal downpours and the client is
considering claims against its landlord, the
contractor and their insurers.
Westgate redevelopment, Oxford
David Feist and Chris Preston are advising
Land Securities and the Crown Estate on
vacant possession strategy and acting in
a number of contested redevelopment
lease renewals in Oxford, relating to the
£300million redevelopment and extension
of the Westgate Shopping Centre.
Agriculture
Lisa Barge is preparing to deliver training
around six cities (via a national training
provider) in the Autumn on agricultural
tenancies and their impact for clients who
are not in the agriculture sector but come
across such issues (agriculture is an area in
which Eversheds is one of the few large firms
to specialise).
Wind farm
The London team have successfully
defended a Section 288 challenge on behalf
of Renewable Energy Systems in respect of a
proposed wind farm development at Jack’s
Lane near Kings Lynn in Norfolk. This was
despite the Secretary of State offering to
consent to the quashing of the order days
before trial.
EvershedsInFocus... • Motion pictures
Scotland
Restrictive covenant dispute
Our Edinburgh office has been instructed
to apply to the Lands Tribunal of Scotland
to seek a discharge or variation of a title
condition hindering residential development
on a site in Edinburgh. Simultaneously, we
are also instructed to apply to court for the
discharge of a standard security over the
same property.
Kath Cook and Julie Dilcock have also been
advising a transport client on a restrictive
covenant dispute affecting substantial office
premises in central London.
Possession
James Batham and the Manchester team
are in the contest of a £1m+ dilapidations
case, seeking to review the obiter comments
made by the learned judge in the K/S
Victoria Street -v- House of Fraser case and
whether in fact a party can assign validly a
lease to a guarantor.
Acting for a retail client, Paul Moorcroft and
Rob Holloway successfully defended a rather
unusual attempt by a landlord, opposing a
new lease under the Landlord and Tenant Act
1954 on grounds of redevelopment, to obtain
possession through a summary judgment
application. Eversheds also successfully acted
for the landlord in Somerfield Stores Ltd v
Spring (Sutton Coldfield) Ltd [2009]; the only
reported decision to-date on this particular
topic.
Mediation
Arbitration
Kath Cook has just concluded a successful
mediation of a multi million pound valuer’s
negligence claim in respect of a portfolio of
buy to let properties.
The Newcastle office is acting for a developer
in significant arbitration proceedings
against a national housebuilder regarding
remediation of a valuable development site
in the Midlands. The arbitration is reaching
its conclusion over the next few weeks.
Dilapidations
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EvershedsInFocus... • Focused on
Focused on real estate
dispute resolution
What we do for our clients
The Eversheds Real Estate Dispute
Resolution team provide creative solutions
to all property-related problems, acting for
institutional landlords, tenants and real estate
developers. More importantly we will help
you avoid these problems in the first place.
We organise around our clients; accessible in
London but with broad coverage across the
UK and internationally. We have unbeatable
market knowledge by keeping close to our
clients and the key commercial players and by
using a networked approach to ensure that
this knowledge is managed and transferred.
Where possible we employ the strategic use
of ADR and mediation. Established links with
leading experts (Counsel, rating experts and
surveyors) can offer preferential rates and allow
us to test ideas.
Did you know?
1
We have the largest real estate dispute resolution team in the UK: ten partners; sixty
lawyers; including a Scottish qualified real estate dispute resolution lawyer and a full time
specialist practice support lawyer. The team have built up a specialist knowledge which is
unrivalled.
2
Our wealth of experience includes acting for both landlords and tenants in disputes,
specifically in the UK’s leading rating dispute case.
3
We make the law - we win high profile cases at the Supreme Court, Court of Appeal and
in other tribunals with reported leading cases every month. Our cases often lead the
debate on current issues and our comments are sought and articles written in The Lawyer,
Property Week and Estates Gazette.
4
We have extensive sector and international experience demonstrated by our work for
AXA, BBA Aviation, Barclays, Comet, Defra, East Coast Trains, EDF, Faurecia Group,
Hammerson, Homes and Communities Agency, HSBC, JD Sports, Land Securities, Legal
and General, Mitchells and Butler, National Grid, Network Rail, NEXT, Segro and Taylor
Wimpey.
5
We work on high profile developments on a range of issues including the Shard of
Glass for a major Qatari investor, Shaftesbury in substantial litigation connected with its
various development projects and acting for the Olympic Park legacy vehicle in a large
number of disputes and development agreements relating to key relocations as well as
on easements and rights. We are also acting on the enforcement of the ‘AGA’ against the
defunct firm Halliwells.
6
We have surveyed our clients independently through Acuigen and received feedback on
over 300 cases. 97% of our clients would recommend Eversheds for litigation work.
EvershedsInFocus... • Focused on
What the market says about us
Our Real Estate Dispute Resolution team is highly recommended by legal directories.
Each of our ten Partners is recognised in the Legal 500 and Chamber & Partners
Directories as leaders in their field and a number of Associates are noted as rising stars.
It is a team you can count on, recently winning plaudits in the Legal 500 and Chamber &
Partners Directories for:
“...outstanding reputation and national reach...”
“...superb breadth and depth of expertise, which is second to none...”
“...leaves no stone unturned for clients...”
“...good commercial awareness, strong team working and good legal analysis...”
“...high-end litigation expertise to an ever-growing client roster... a formidable outfit...”
What our clients say about us
Client reviews really speak for themselves. Here are some of our most recent reviews from
the last few months:
“
Thier knowledge and
their turnaround time
was praiseworthy: they
treated us like a top
priority client.
Prometric
“
”
Very creative and
commercial; good
communication, and
good quality advice.
CALA Properties
“
Controlled events with
great expertise.
Southern Scientific
”
“
”
Always a pleasure to
deal with, and delivers
clear confident advice,
follwed by strong
supporting action
where appropriate.
Forestry
Commission
”
“
It was a great result and
the advice that we were
given was excellent.
HCA
“
”
It is the experience
and knowledge that
sets them apart.
Mitchells and
Butlers Retails
Limited
”
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EvershedsInFocus... • Contacts
Contacts
If you have any comments or questions, please contact one of the following:
Paul Moorcroft
Partner, Head of Real Estate
Dispute Resolution
Tel: 0845 497 1277
[email protected]
Will Densham
Partner
Tel: 0845 497 0582
[email protected]
James Batham
Partner
Tel: 0845 497 8131
[email protected]
Damian Hyndman
Partner
Tel: 0845 498 4073
[email protected]
Kath Cook
Partner
Tel: 0845 498 7165
[email protected]
David Feist
Partner
Tel: 0845 497 1330
[email protected]
John Kemkers
Partner
Tel: 0845 497 4772
[email protected]
Suzanne Gregson
Partner
Tel: 0845 497 8242
[email protected]
Lisa Barge
Partner
Tel: 0845 497 1143
[email protected]
Alison Oldfield
Partner
Tel: 0845 498 4660
[email protected]
www.eversheds.com
©EVERSHEDS LLP 2013. Eversheds LLP
is a limited liability partnership. DT01284
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