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 Lasting
Powers of Attorney
Alexander Bosher Solicitors
- The Mental Capacity Act comes
into force on the 1st October 2007. With effect from that date
Enduring Powers of Attorney will no longer be valid documents
for individuals to enter into, although any Enduring Powers of
Attorney entered into prior to the 1st October 2007 will remain
valid subject to appropriate registration if the need arises.
- Lasting Powers of Attorney are
intended to give people more choice to plan ahead for the future
but with appropriate safeguards built in. These documents are
however more complex and hence more costly than an Enduring Power
of Attorney.
- A Lasting Power of Attorney
enables people to set out their wishes in a comprehensive way.
There are in addition rigorous safeguards and in particular a
Lasting Power of Attorney must be registered with the Office
of the Public Guardian (which with effect from the 1st October
2007 replaces the Public Guardianship Office) before use. A central
register will be kept of all Lasting Powers of Attorney which
means that it will then be easy for anyone to check the validity
of a document presented to them. This is intended to prevent
fraud and abuse.
- In addition to the above up
to five people are to be notified when the Lasting Power of Attorney
is submitted for registration. This is again a crucial safeguard
to allow any of those individuals to object to the registration
if they suspect that the person granting the power of attorney
was unduly pressurised into making it.
- A further safeguard is that
a certificate will need to be provided to confirm that at the
time the power was drawn up the person granting it was fully
aware of what he or she was doing and that no undue pressure
was placed upon that person. The certificate can be completed
by a range of people, including someone who has known the individual
concerned for at least 2 years. If the person granting the power
does not name anyone to be notified (as indicated above) in the
application for registration, then two certificate providers
are required as a safeguard.
- Enduring Powers of Attorney
were widely recommended for use by a full range of people because
they were easy and cheap to complete. Furthermore an Enduring
Power of Attorney only needed to be registered once the individual
concerned became mentally incapable. A Lasting Power of Attorney
will require registration straight away and this will significantly
increase the costs, and it therefore remains to be seen, on cost
grounds, whether there documents will be as popular as Enduring
Powers of Attorney.
Author: Alexander
Bosher
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Tax Aspects of Property Investment.
BirdLuckin
Income arising from land and
buildings is generally treated as investment income unless it
is from furnished holiday lettings or from property development
or provision of services such as hotels and guest houses, in
which case it would be classified as trading income.
From an accounting and tax point
of view, all rental income (except furnished holiday lettings)
is treated together as from one Schedule A business, regardless
of the terms of letting. Profits and losses are calculated using
the same general accounting rules as for trading, including accruals
to cover the timing differences of rent or expenses in advance
or arrears. A cash basis is allowable for total annual rents
under £15,000.
Allowable expenses
Expenses allowable in calculating income include interest incurred
on loans used towards the purchase of the property (adjusted
for any part private use), business rates or council tax, rent
payable to a higher landlord, insurance and management expenses
including advertising for tenants, and maintenance, repairs and
redecorations. Management expenses can also include costs of
travelling exclusively for property letting purposes.
Expenses on improving the property
(such as extensions or installing central heating) and those
which were necessary to bring newly acquired property to a state
where it could actually be brought into use all form part of
the capital cost of the property.
Allowances for equipment
In general it is not possible to claim capital allowances for
plant and machinery in a dwelling house. By concession, an allowance
is available to cover the wear and tear on items such as suites,
beds, carpets, curtains, linen, crockery, cutlery, cookers, washing
machines and dishwashers. For such items it is possible to claim
either the cost of replacement (but not the original purchase)
or instead to claim a global annual wear and tear allowance of
10% of the rents received on furnished lettings (excluding items
such as council tax and water rates which would normally be payable
by the tenant). In addition to this 10% allowance it is also
possible to claim a deduction for the cost of renewal of fixtures
such as baths, washbasins and toilets.
For commercial properties, capital
allowances may be claimed in respect of plant and machinery supplied
by the landlord. The landlord may also claim industrial or agricultural
buildings allowance, where appropriate for the business of the
tenant. The allowances are calculated in the same way as for
trades, and are deducted as an expense.
Rent a Room relief
Owner occupiers and tenants who let furnished rooms in their
only or main residence may claim rent-a-room relief. This is
available both for Schedule A businesses and where substantial
services are also provided, for instance guest houses and bed
and breakfast businesses where the rent would be chargeable as
trading income. No tax is payable for gross annual rents (for
accommodation and related goods and services) up to £4,250
(£2,125 each for a couple). Where rents exceed £4,250
you can choose to pay tax on the excess, or on the total rent
less expenses in the normal way.
Furnished holiday lettings
Schedule A businesses which comply with the relevant conditions
can qualify for some very important tax concessions. Furnished
holiday lettings are treated for tax purposes as if they were
trades. Unlike other domestic lettings, the expenses can include
capital allowances on furniture and kitchen equipment. The income
counts as relevant earnings for pension contribution purposes,
and there are other advantages relating to the disposal of such
properties (see below).
Other considerations
Where there is mixed use of property, business rates may well
be payable as well as council tax, unless the business use does
not materially detract from the private use. Non-domestic properties,
such as commercial premises and boarding houses, are in any event
subject to business rates. Provision of bed and breakfast in
your own house is not caught if there are no more than six guests.
Staff accommodation is counted as domestic and therefore subject
to council tax.
Value Added Tax on land and buildings
is a complicated area. Generally sales of commercial buildings
less than three years old are standard rated, sales of new residential
properties are zero rated and most other sales or leases are
exempt. The VAT provisions on property letting are particularly
complex.
There is no charge to Stamp Duty
Land Tax if residential property is purchased for £125,000
(£150,000 in disadvantaged areas) or less, or on non residential
property for £150,000 or less. Any excess is charged at
1%, 3% or 4%, as appropriate.
Special incentives
Support for disadvantaged areas is actively being encouraged,
and investment in Enterprise Zone properties can be extremely
tax efficient, so long as the prices are not artificially inflated.
Landlords installing loft insulation, floor insulation, cavity
wall insulation, hot water system insulation and draught proofing
up to 5 April 2015 may claim an income tax deduction of up to
£1,500 per property (Landlord's Energy Saving Allowance).
Initial allowances of up to 100%
are available for expenditure by property owners and occupiers
on the renovation or conversion of empty or underused space above
qualifying shops and other commercial premises to provide residential
flats for leases of not more than five years.
Disposal of properties
If the purchase and sale of properties amounts to a trade then,
of course, property disposals will be taxed as income in the
normal way.
In all other cases, disposals
will be subject to the normal rules for the calculation of capital
gains. Most let properties will count as non-business assets
for taper relief purposes. However, business asset taper relief
is available in respect of furnished holiday lettings and properties
where the tenant carries on a qualifying trade (even though there
is no connection with the landlord).
The situation may be complicated
where a principal private residence has been let other than during
the last three years of ownership or during a period of allowable
absence. In these circumstances, the associated lettings relief
of up to £40,000 could be brought into play.
Furnished holiday lettings may
also qualify for rollover relief or gifts relief. In some circumstances
they may also trigger inheritance tax business property relief,
in which case they would pass free of any inheritance tax charge.
Whilst some of the principles
of property taxation may seem relatively straightforward, there
are many traps for the unwary, and professional help is definitely
advisable. Please contact us for more information.
Author: BirdLuckin
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Buy-to-Let
Properties.
BirdLuckin
At one time, investing in
the Stock Market was looked upon as the sure-fire way to achieve
long-term growth, but the ups and downs of the Market over the
last 20 years have caused many people to look at alternative
forms of investment.
The property market has also
had its ups and downs, but the public perception is that these
are less extreme than has been witnessed with the Stock Market.
This perception has spawned a
significant expansion in the Buy-to-Let sector. Basically this
involves investing in property in the expectation of capital
growth, and in the meantime earning rent which can be applied
to cover the costs of ownership.
Many investors were encouraged
by soaring house prices, but it must be recognised that prices
cannot continue upwards at such a rate, nor can rent levels always
be sustained, and there could well come a stage where it may
not be possible to cover mortgage repayments out of rents.
Typically a rental yield of about
6% is required to cover mortgage interest of about 5% and any
additional costs such as letting agents' fees, but yields can
be as low as 3% (and as high as 9%). Please remember that the
greater the borrowing, the greater the risk.
However, experts believe that
Buy-to-Let investors can expect a reasonable rate of return on
their capital if they take a long term view of at least seven
years. Properties should be chosen with care, in areas where
tenant demand is high. The cautious investor will build up a
cash reserve to be able to cut rents or go without a tenant for
a couple of months, if necessary.
The Student Scene
One special area where Buy-to-Let makes very good sense is in
the provision of accommodation for student members of the family.
Traditionally, this has involved paying out fairly high rents
over a period of three or four years and seeing nothing in return
(except perhaps a sizeable student loan).
By buying a house in the university
area, your children can be assured of somewhere decent to live
and should be able to cover most of the costs by renting rooms
to other students.
The situation presents significant
tax saving opportunities, but the correct formalities need to
be observed. One of the most important is that the property should
be bought by the student, not the parent. Lenders are normally
happy to offer a mortgage to a student if the parents act as
guarantors, and good rates should be available to the student
first time buyer.
The property should then qualify
as the student's principal private residence and so capital gains
tax (CGT) exemption will be available on any profits from the
eventual sale.
The rental income is potentially subject to income tax under
the Schedule A business rules, which allow a proportion of the
running costs (including mortgage interest) to be claimed against
the rent. Alternatively, the provisions of the Rent a Room scheme
allow the first £4,250 of rent in each tax year to escape
tax, with any excess rent over £4,250 being taxed in full.
Furnished Holiday Lettings
The purchase of a dwelling with a view to short term letting
for at least part of each year can give rise to some quite striking
tax concessions.
The qualifying conditions are
that the accommodation must be let on a commercial basis (ie
not merely to offset the costs of ownership). It must be available
as holiday accommodation for at least 140 days in the tax year
and actually let as such for at least 70 of those days. It must
not normally be in the same occupation for a continuous period
of more than 31 days during at least seven months of the year,
which need not be continuous but includes any months containing
any of the 70 let days.
If these conditions are met,
then the income is broadly treated as trading income, even though
it is strictly a notional Schedule A business. Interest paid
on a loan to purchase or improve the property is allowed as a
trading expense (restricted if necessary by any private use proportion).
Capital allowances and loss relief may be claimed and the income
qualifies as relevant earnings for personal pension purposes.
This last point has become of less significance since the personal
pension contribution regime was relaxed.
Properties used for qualifying
furnished holiday lettings count as business assets for the purpose
of CGT taper relief, though it is very unlikely that they would
attract business property relief for inheritance tax. Such properties
are eligible for CGT rollover relief and business gifts relief.
Main residence
If a property has, at any time, been your main residence for
CGT, it may also be possible to claim the residential lettings
exemption as well as exemption for the period of occupation as
your main residence and the final 36 months exemption
A significant CGT saving can
result from occupying a property as your main residence for a
relatively short time - consult us about this, and any queries
you have about residential letting.
Author: BirdLuckin
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Health
& Safety: More onus on you.
Alexander Bosher Solicitors
The Health & Safety Executive
(HSE) has now introduced revised regulations (CDM 2007) which
came into force on 6th April 2007.
This revision is clearly aimed
at reducing accidents and ill health in the construction industry.
In domestic cases building owners
still have no such particular duties, but designers and contractors
must comply with CDM 2007.
On larger commercial projects
clients, designers, and contractors have additional duties. For
example the client must appoint a CDM Co-ordinator (the successor
to the Planning Supervisor) and a Principal Contractor. There
now has to be a Construction Phase Plan and at the end of the
project a Health and Safety file which, as before, is handed
over to the client.
Under the new regulations there
is a much wider definition of design, which now extends not only
to operations but also to the co-ordination of design works.
Designer includes for these purposes a quantity surveyor. In
every major building project a Senior Co-ordinator must now be
appointed.
The party who commissions the
design is the party responsible. Complex issues may arise under
the new regulations, for instance where a contractor takes over
another's work based on a prior design and the employer uses
this to his detriment and cost. At Common Law the contractor
may remain responsible, except where he uses JCT 2005 with the
express reservation that he is not responsible for checking the
design.
Other changes include the renaming
of the pre-construction phase Health and Safety Plan which is
now called the Pre-construction information.
Here the onus is on clients to
ensure that others are responsible for checking the Health and
Safety arrangements.
No work can start on site unless
until the Health and Safety Plan has been prepared.
Importantly where design has
been carried out abroad, the person commissioning that design
will be responsible for compliance under CDM 2007 and if the
designer is not within Great Britain then the client will be
responsible for the design.
These regulations extend to all
contractors so that contractors are responsible for ensuring
that before the start of a project suitable welfare provisions
exist on site and will continue throughout the project. The client
also has a duty to ensure that such arrangements are made prior
to start on site.
In summary a tightening up of
the regulations with fewer escape routes.
Author: Mike Reynolds
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Are
you at risk?
Alexander Bosher Solicitors
The question we are often asked by contractors
and developer clients is:
"How can we limit our risk?"
The legal answer may lie on an
interpretation of the legal relationship between the parties
whether determinable in contract or tort. The practical solution
may be to avoid the risk by seeking proper drafting advice. These
days contractors take responsibility for design and construction
and hence are encumbered with warranties and professional indemnity
insurance premiums. Developers have to be sure that the risk
is covered both in the terms of contract and with insurance cover
for the particular occurrence or event that may give rise to
liability.
This topic was recently debated
in the Technology and Construction Court in the case of Shepherd
Homes Ltd v. Encia Remediation Ltd and Green Piling Ltd (January
2006). The term in question stated that the specialist piling
sub-contractor's liability was limited up to £100,000,
this being the fixed cost of piling works for the manufacture
and installation of 641piles for 94 housing units at Eden Park
in Hartlepool.
The Technology and Construction Court judge Mr Justice Clarke
held that there was nothing unusual in such a price cap and this
was neither unreasonable nor unfair. There was no particular
need in such a commercial transaction to bring the term to the
employer's notice because it was usual to find such terms these
days. The Employer was in a superior bargaining position being
a subsidiary of AIG Engineering Group part of the American International
Group of companies, one of the largest insurance groups in the
world. The Employer knew what Green's contract terms were and
that other potential sub-contractors had similar terms. In addition
Encia had negotiated an earlier start on site and more favourable
payment terms.
In answer to the question...
- When you are negotiating a contract
bear in mind who is really best to bear the risk in terms of
insurance and resources.
- Remember that our courts will
not enforce unreasonable or unfair commercial terms where bargaining
positions are unequal, nor will they permit tedious, unusual
or extortionate terms, especially those hidden away in small
print or on the reverse side of an order form. But neither will
the courts save you from freely undermining your commercial interests.
- It is cheaper to bargain commercially
than to litigate;
- Bargaining between equals makes
sense: inequality does not;
- Commercial agreements come unstuck
when nobody knows what was agreed: get it in writing.
For the industry at large this
case provides a sobering lesson to those who use unfair commercial
bargaining to force sub contractors to accept a lower price or
more onerous payment terms.
Author: Mike Reynolds
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Brownfield Briefing - Developers Guide
to Brownfield February 2006
The Brownfield Risk Jungle. Don't Fall into the Trap
Tyser & Co Limited
- UK Division
In 1996 I
spoke at a conference about partnering in the construction industry.
There was to be a new atmosphere of collaboration in an integrated
fashion; the old adversarial ways didn't work and the industry
was wasting a fortune as a result. Last year I spoke at another
conference where the topic was, yes you guessed it…….partnering.
Some speakers enthused as though it was a great new idea but,
in reality, almost a decade later, nothing had changed. For most,
partnering remains a myth, the confrontational approach continues,
unabated.
The major problem, I believe,
is the traditional structure of construction contracts. Take
the most common, JCT, for example. JCT is all about what will
go wrong. It perpetuates an acutely defensive approach. On the
one hand, you have the client who wants a "Rolls Royce"
job at a "Mondeo" price. On the other you have the
poor contractor who, to win the tender, has had to cut cost to
a suicidal price to hang on to his miserly 1% margin. No wonder
the trouble starts!
About 20 years ago, the industry
created a wonderful new concept "design and build".
Instead of suing the entire professional team when a defect manifested
itself, you just sued the contractor to whom all the professional
skills had been novated. A classic case of risk being passed
down to the entity least able to embrace it. Is it any wonder,
therefore, that today 80% of all construction insurance claims
consist of legal and forensic costs only. It doesn't take much
to figure who takes the real margins out of the industry.
So many of today's construction
professionals have been brought up in this adversarial culture
and they just can't see that, when it comes to risk, the traditional
procurement route is utterly flawed. So, chances are when clients
say "I'm risk averse: I pass all risk to clients and consultants",
they are probably being advised by the "luddite" project
managers and quantity surveyors and perhaps lawyers who have
a vested interest or perhaps, don't know any better. Even worse,
many of the banks who provide the project financing, are often
paying a lot of money for this suspect advice.
Traditionally procured insurance
mirrors the construction industries fault lines. It protects
individual firms, not integrated teams and the "blame culture"
perpetuates a protectionist approach. There are various mechanisms
which underpin the client's false sense of security; the most
common being professional indemnity insurance (PI).
Many clients possess a kind of
"machismo" when it comes to PI. One will say "I've
got £5,000,000 PI from the contractor" while the other
upstages him with "I've got £10,000,000 from the consultants".
The sad thing is they don't why they want £5,000,000 or
£10,000,000. Even worse, they don't know what it covers.
It is likely that a huge amount
of potential remediation work will be undertaken in the next
few years; the Thames Gateway area is the largest regeneration
opportunity in Europe and the winning of the 2012 Olympics has
had the construction industry generating a fervour of anticipation.
Chances are, much of the work will be inappropriately insured
or not insured at all, with potentially disastrous consequences.
Once I was amazed (now I just
shrug my shoulders) that remediation contractors, tasked with
the actual work of cleaning up contamination, are being asked
for high levels of PI cover which is of no value to anyone. PI
essentially protects consultants against negligent professional
advice. The principal risk associated with a remediation contractor's
work is that its activities mobilise residual contamination to
create a pollutant linkage. In such circumstances, a site can
be brought into Part llA of the Environmental Protection Act
1990. If sued as a result, the client will have no remedy under
a PI policy. This is a Public Liability (PL) risk but crazily,
most remediation contractors have "pollution" exclusions
under their PL policies.
Within the construction industry,
there is an institutional obsession with collateral warranties.
To have any effect whatsoever, they have to be backed by PI.
Even in circumstances where a PI policy may respond, clients
should be reminded that PI is no benefit to them; it is a defence
mechanism for the consultant. The chances of proving negligence
under someone's PI policy, within 5 years, if at all, are remote.
In my view, collateral warranties are a complete waste of time
and money. In over 20 years I never known a client, a tenant
or a third party successfully seek redress under a collateral
warranty.
Why are they getting it so wrong?
Well, many professionals believe they know better than the few
specialist insurance brokers in the market who are often not
consulted until it is too late. We are better placed than anyone
to understand how risk should be managed, mitigated or transferred.
We should be seen as a member of the professional team; not as
a bunch of used endowment salesmen.
The client, with the assistance
of the professional broker, is best placed to handle risk, not
the contractor or consultants. There are too many prevailing
uncertainties to pass the liability parcel. Many of these uncertainties
can be removed with controlled risk transfer through the use
of specialist environmental insurance. This market has developed
dramatically during the past few years and now provides cost
effective solutions to the technical, legal and financial uncertainties
associated with brownfield development. Much of this insurance
is triggered by funders and institutional investors who are not
prepared to expose their investment to such risk. The Law Society's
"warning card" focusing on the importance of environmental
due diligence has resulted in increasing numbers of law firms
recognising the value of insurance. We collaborate with many
in designing and delivering bespoke insurance solutions, which
make a solid contribution to real risk transfer.
Author: Graham De
Roy, Director Tysers
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Contaminated Land Redevelopment - Safe, Secure
and Sustainable?
Tyser & Co Limited
- UK Division
With the multitude
of committees, working groups, brownfield targets and billions
spent on regeneration you would expect most people to be thinking
along the same lines ('joined up thinking') and the future of
England's regeneration safe, secure and sustainable. However
the fundamentals of science, law and policy, in the realm of
contaminated land redevelopment, are increasingly complex and
one could argue increasingly divergent.
A key issue is a lack of clarity
and uncertainty that prevails with both the regulators and private
sectors - mainly due to the fact that the science, specifically
Soil Guideline Values (SGV's) or lack of them, that is supposed
to underpin the whole process has yet to arrive to a significant
degree.
To further exacerbate problems
the first case under the contaminated land regime (Circular Facilities
(London) Ltd v Sevenoaks District Council) has raised more issues
rather than brought clarity. As a result local authority progress
in the enforcement of contaminated land legislation is likely
to slow.
What is 'safe and secure' is
still in reality yet to be resolved to any degree of confidence
in either the legal or scientific fields and it is prehaps not
surprising then that environmental consultants professional indemnity
insurance (PI) is coming under increased pressure as clients
seek protection.
In response to market pressures
on PI both the Association of Geotechnical Specialists (AGS)
and Environmental Industries Commission (EIC), through the working
group on contaminated land, have at the end of 2005 started initiatives
to promote standardisation of terms and agreements in place for
consultants and their clients.
Consultants PI - Safe, Secure
and Sustainable?
Clients seek consultants
PI as a safeguard against historical contamination problems often
under the misapprehension that PI offers them a benefit, in the
form of environmental insurance. There is an increasing awareness
of the limitations of this approach, a brief summary of some
of these is provided below:
- PI is negligence based cover,
incepted primarily for the protection of the consultant against
claims that they have been negligent in their work or professional
duties. The burden of proof for negligence is extremely onerous.
- Collateral Warranties are usually
non-transferable, so persons outside of the original client will
not receive any benefits from the warranty. If the collateral
warranty is in breach of the terms of the PI policy then the
policy is invalidated and the contractor or consultant will be
left to defend and settle the claim themselves.
- Collateral Warranties require
PI insurance to be renewed annually for a period of 12 years
provided it remains "available at economic cost". Many
consultants and contractors have relied on this "concession"
in recent years to reduce cost and consequently, quality of cover.
- PI cover is usually placed as
annual cover rather than a 'one-off' cover for the period of
the contract, and the basis of the policy is 'claims made'. This
means that any claims have to be made during the policy period.
- The majority of environmental
PI policies are placed on an "aggregate basis" thus
if the consultant has offered an identical limit of indemnity
backing collateral warranties for a number of contracts over
the policy period and suffered a claim or claims, there is a
possibility that the aggregate limit of indemnity has been exhausted.
- Many contractors and consultants
have exclusions under their PI policies for claims arising from
"gradual pollution" - the most likely cause of claims
associated with intrusive site investigations or remediation
activities.
Tysers have responded to PI market
needs by initiating in 2006 the first known market wide survey
of environmental consultants PI with the objective of providing
some clarity to market standards, patterns in claims etc. A summary
of the survey results is expected to be available to the industry
by April 2006.
Contaminated land insurance
- Secure and Sustainable?
Increasingly contaminated
land insurance is being used to 'take the risk' rather than put
it onto another party or retaining the risk. The risk is transferred
to an insurance company that is strictly controlled by the Financial
Services Authority with a suitable credit rating. The insurance
industry is the most regulated industry for the transfer of liability
and risks. Most other companies have very limited requirements
to keep long term financial reserves in place for potential environmental
liabilities.
Policies can provide cover for
10 year duration that includes protection against change in either
UK or EU law. Polices can cover for third party and regulatory
claims and can include consequential loss, property damage, bodily
injury and remediation costs, technical and legal defence costs.
Cover can be extended to both the vendor and the purchaser, funders
and tenants with relative ease.
In addition commercial benefits
can be gained by the client with an insurance policy which may
include:
- Achieving maximum asset value
for sales;
- Long term policies that can
be transferred with site ownership;
- FRS12 provisions, insurance
cover for a potential liability can improve the companies profit/loss
sheet;
- High credit rating and protection
can secure funders and in some instance; reduce level of the
funders risk rating and therefore loan interest rates;
- Long term and sustainable approach.
Insurance remains intact even if member of the project becomes
insolvent.
Currently a number of government
and corporate contracts ask for unlimited transfer of liability
in terms of time and duration. This approach has flaws, it is
not sustainable business practice and arguably not secure. 'Blue
chip' companies (Enron, Marconi) have spectacularly hit the wall
and few companies can sustain large claims.
In lieu of sufficient science,
guidelines or provision of environmental security clients should
consider environmental insurance as a method of protection. Indeed
to protect against the risks presented by contaminated land redevelopment
councils should consider as a policy the mandatory purchase of
insurance for contaminated land redevelopments at least where
housing is involved. This could be argued as the only real way
of providing long term protection to the community on a sustainable
basis.
Author: Mathew Hussey,
Associate Director, Tyser
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BUSINESS
CONTINUITY "What will they
think?"
ClientAct
TIPS: - Internal
& External Public Relations
A crisis - what crisis?
A fire in a neighbouring building, a flood from tenants in the
block, delay in completing a new building or other disaster may
interrupt your business may cause loss of earnings, dissatisfied
customers, bad press. Tips that could help your business:
- Be prepared for the unusual, unexpected, the unwanted
and the unbelievable; plan your business continuity strategy,
test the plan and review it..
- Listen and learn from the experts, there are a number
of specialist Crisis Management companies offering advice or
select your own experts to fill your knowledge gap.
- Identify target audience - who needs to know: everything, the
essentials
- Belt & Bracers: take a hard copy of essential information
off site as well as electronic backups: staff contact numbers
(next of kin), media contacts, top clients/customers, stockists,
suppliers, banks, transport, payroll, builders, electricians,
engineers, staff agencies, caterers
- Staff - need to be kept informed - they need to know
that you care about their safety - what will happen to them,
their job, their personal possessions lost in the building.
- Customers - need reassurance that their business
will not suffer as a result of your problems - effective communications
is essential.
- Be as accurate and as honest as the circumstances permit
- Do not give people false
hope - telling them the
restaurant will be open at 6 p.m. or the factory will be producing
goods by 2 p.m. when you know this is not possible, creates mistrust,
frustration and could result in lack of future loyalty.
- Use the media to your advantage. Talk to the press, when it is appropriate,.
Avoid "no comment". Seek professional P.R. advice before
the crisis.
- Set up a strict procedures for dealing with the media:
For detailed advice on working
with the media contact ClientAct
PR
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Thames gateway reaches out to South Essex
Lambert Smith Hampton
Although still
in its embryonic stage in South Essex, new research into the
investment potential of the Thames Gateway has outlined a number
of industrial and business space developments which will transform
the region.
The 'Thames Gateway Report',
published by commercial property consultant, Lambert Smith Hampton
(LSH), highlights the regions proposed developments.
Stuart Mowle, director at LSH's
Chelmsford office, said: "The extension of the Thames Gateway
into South Essex will provide opportunities for growth in the
large sub-regional centres of Basildon, Castle Point, Southend-on-Sea
and Rochford."
"The Thames Gateway transformation
is still in its early stages in South Essex. The proposed developments
will create business hubs with improved economic growth complimented
by appropriate transport, business and community infrastructure."
At Castle Point, one of the key
objectives is to reduce the necessity for people to travel out
of the Borough for work purposes. To that end 50 acres of land
has been allocated for industrial and business development to
the south of Northwick Rd, Canvey Island.
One of the biggest sites at Gardiners
Lane South in Basildon, predominantly owned by English Partnerships,
is earmarked for residential, headquarter development, office
and light industry and hotels and leisure space. A further site
at Courtauld Road is also being considered for development.
Mowle comments: "The Gardiners
Lane South development will provide 1.2m sq/ft of new business
space in Basildon alone. We have yet to see whether this space
will satisfy customer requirements. At LSH we are experiencing
more demand for freehold self-contained property rather than
the leasing of mid-terrace properties with absentee landlords."
This consideration holds true
for the development of the Rochford Business Park 10 acre site
adjacent to London Southend Airport. Once complete the business
park will provide a further 38,000 sq m of commercial floorspace.
Mowle continues: "Whilst
the demand for commercial properties continues to outstrip supply,
it is likely that, despite investor and lessor preferences for
freehold units, these new developments will be acquired."
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Changes lie ahead
for squatters
Alexander Bosher Solicitors
There have
been a number of famous cases in the press where squatters have
successfully claimed legal ownership to properties they occupied,
sometimes becoming overnight millionaires as a result.
THE PREVIOUS SITUATION:
Under previous Law, once a squatter had fully occupied land or
buildings openly, unopposed yet without consent for 12 years
or more, he had the right to apply for full registered ownership,
whether the actual legal owner objected or not.
The common perception of a squatter
is someone who takes up residence in a derelict house. However,
more common are squatters who assume the use of some land over
a course of years. These cases often include pieces of disused
land beside railway embankments at the ends of gardens which
over time become fenced into the adjoining homeowner's land.
A House of Lords case, J A Pye
(Oxford) Ltd & others v Graham & others (2002) hit the
headlines a few years ago. The Claimants J A Pye Ltd bought farmland
in Berkshire in 1977. They sold the farm but retained 25 acres
of fenced in adjoining land intending one day to develop it into
upmarket residential housing. For the next few years they granted
grazing licences over the land to the neighbouring farmer. The
Graham family bought the farm in 1982 and entered a new grazing
licence with J A Pye shortly after. Despite the licence expiring
in 1984, Mr Graham's attempts to get it renewed were ignored
so he continued to use the land unimpeded but against Pye's wishes.
It was not until Mr Graham registered a caution claiming adverse
possession on Pye's title in 1998 that Pye applied to court to
remove him. Their claim failed as the Grahams had enjoyed 14
clear years of unimpeded exclusive use by then, without Pye's
consent, so they became the new legal owners. Their new land
had a residential development value of £10 million.
SO HOW HAS THIS CHANGED ?
The Land Registration Act (2002) dramatically limits squatters'
rights and goes some way to redressing the balance in favour
of landowners. (It is an enormous piece of legislation and will
be enacted in stages over seven years though this provision is
now in force. None of these new regulations will apply to unregistered
land however). Under the Act, a squatter will be able to apply
for good title after ten years' uninterrupted full use. What
is crucial is that the registered owner will be informed of the
squatter's intention by notice and will be able to oppose it.
Only if the owner consents will the squatter gain good title.
(But do watch out - if you successfully oppose the squatter and
then leave him in possession for a further two years, he can
then claim good title regardless of your objections).
This Act will also affect the
'innocent' squatters. People claiming extra garden land may be
defeated if, for example, the Legal owner objects to the application
for legal title and instead demands payment for a piece of land
you already enjoyed as part of your garden.
In essence, the new Act gives
landowners a second chance where by mistake or neglect they have
long since forgotten about the exact boundaries of land they
own, or are unaware of third parties trespassing upon them. As
a property owner or manager it is vital that your address listed
on Land Registry records is kept up to date so that if a squatter
serves notice to possess, it reaches you and not a long since
abandoned address elsewhere.
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FLOOD RISK - Resident
demands satisfaction!
 Ducks
swimming past the front door were one of the photographs used
to illustrate the reality of coping with floods, during the Essex
Property Forum's Debate on Flood Risk & Development in Essex
held in Chelmsford last week. Speakers from the Environment Agency,
a flood victim from the National Flood Forum and a representative
of the insurance industry joined chairman Maurice Rozario from
MDR Developments Ltd in a lively
debate.
Left to right - Maurice
Rozario, Aaron Dixey, Gillian Holland &Simon Barlow
Simon Barlow and Aaron Dixey
(from Development Control and Planning Liaison) at the Environment
Agency set out their reasons for flooding discussed the assessment
of risk and gave hints to developers. They reported that flooding
could be related to:
- historic development with
more building on flood plains,
- regeneration of brown field
sites,
- reducing land availability
- the ever increasing need
for new housing stock.
They reported that the dramatic
influence of climate change with increased winter rainfall draining
onto fewer flood plains had had a devastating affect in certain
areas of the country and this was illustrated by flood victims.
Simon and Aaron discussed the
need for sustainable development and explained that the onus
was with developers to prove land was safe. Developers must:
- assess risk of flooding
- inform planners of that risk
- demonstrate how minimum standards
of safety will be put in place.
"If you don't prove it's going to be OK (to build)"
warned Aaron, "It
must be assumed it is not." He
then gave hints to developers to consider:
- Will the development be at risk
of flooding or will there be a risk of flooding elsewhere?
- Could the risk be overcome?
- How much will it cost and how
does this affect the land value?
Gillian Holland, Operations Director,
National Flood Forum presented her first hand experience of flooding
as the ducks had drifted down her street in the floods of 2000
at Bewdley. Gillian has used her knowledge and practical experience
to liaise with a network of groups seeking advice and information
on flooding and practical ways to assist the less mobile. The
media coverage of the Bewdley floods ensured their constant high
profile resulting in the installation of flood defences.
Facing floods from river, salt
water or over stretched drains each householder or business faces
their own personal trauma of lost property, polluted homes or
factories due to overflowing sewers or fuel or chemical leaks.
Gillian reported that it has been
deemed that it is the householder's
duty to protect their home. "How?" she asked, "Can any individual
protect their home from invasion by a fast flowing flooded river."
"We think that the only way forward is for all the
agencies to sit down together to assess the problem. Without
Multi Agency Partnerships everyone will pass the buck and no
one takes responsibility,"
concluded Gillian Holland.
Louise Warren, Area Underwriting
Manager, Axa Insurance briefed the audience on factors considered
during the underwriting process and reported that 1.8 million
residential and 130,000 commercial properties were at risk from
inland or coastal flooding. Louise reported that insurance companies
in general used the following solutions to manage the risk of
flood risk properties:
- limit the risk through deductibles
- physical risk management - flood
defences
- control damage - claims management
procedures
- transfer of risk - through reinsurance
or a government fronted scheme
- quoting the right price for
the risk.
The new ABI statement of the
Principle of Flood Insurance referred to the following:
- In future Environment Agency
maps would be used to identify flood risk areas
- Individual consideration of
risks would be undertaken by underwriters
- Insurers would continue to write
flood cover
- Insurers would work with the
government in improving defences.
A lively debate followed the
formal presentations. Concern was expressed that Planning Authorities
were going against the recommendations of the Environment Agency
and it was suggested that the Agency needed to be more forceful
and gain greater public support. Despite assurances that properties
that had been flooded could be covered by insurance, the additional
costs were sometime excessive; a frustrated speaker from Coggeshall
reported that his home had been flooded for the first time and
that he was now liable for a £5,000 excess - and he found
the current insurance system, less than helpful.
During the wide ranging discussions,
it was suggested that selling a house that is on the "at
risk of flooding register" is becoming a major problem for
some home-owners. Details of the environment agency maps can
be seen on www.environment-agency.gov.uk - your environment -
my back yard - insert post-code.
Maurice Rozario closed the meeting
by inviting members of the audience to join the Essex Property
Forum and strengthen its voice in Essex.
For Details about the next debate or to
reserve a place please Click Here.
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Networking Tips!
by Sally
Carpenter, ClientAct
- SELECT - be Selective - choose the right event for you
and your business -
2 hours at the wrong event can be a waste of time and money
- PLAN - know your objectives - set a target e.g. 2 new
contacts, leads, info etc
- PREPARE - check that you have: cash, and sufficient cards.
Check venue location, speakers' background, what to wear (to
some people: "formal dress" can mean lounge suit or
black tie)
- WEAR - check your name badge or take your own quality
badge (print should be large enough to read without a specs)
- MARK - look at the guest list and identify "who"
you really want to meet
- WHAT to say - listen & learn - opening line - read
badges - ask questions
- USE your body language - eyes - hands - feet. Learn
to read other people's body language.
- GIVE - 2 cards if they suggest passing it to a colleague
and read their card
- DON'T GET CORNERED - if you are stuck with someone - learn
how to escape and leave the other person feeling good.
- ACTION - Follow-up - make your first impression - a good
lasting impression
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Contract
With a Double Edged Sword
by M.
P. Reynolds
The relatively recent decision
of Henry Boot v. Cooperative Insurance Society (July 2002) must
serve as a warning to all contractors using the design and build
form where consultants have been novated to the contractor.
The design and build contractor
already has potential problems as a result of the Blyth and Blyth
v. Carillion decision (which settled before reaching the Court
of Appeal) under that decision the contractor inherits all the
design liability of the consultant in such circumstances, regardless
of the fact that the negligent act was committed before the date
of the novation of the consultant's appointment to the contractor.
There is thus a need for all
contractors to very carefully review the wording of their novation
agreements with consultants and to assess precisely the nature
of the risks they are taking on board.
The contractor's dilemma is now
made even more difficult by reasoning of Judge Richard Seymour
QC in the Henry Boot case.
The facts were in that in September
1995 Cooperative entered into an agreement in the JCT 1980 Standard
Form by which they agreed to undertake works for the demolition
design and reconstruction of an office in Glasgow. In March 1996
the sub-basement was flooded during the work. In the action that
followed on a preliminary issue the Court had to decide whether
a Ground Investigation Report prepared on behalf of Cooperative
and provided by Cooperative to Henry Boot had been incorporated
into the contract. That report was not specifically mentioned
in the contract documents list nor was it designated as a "contract
document" nor even was it referred to in the notes to one
or more documents expressly identified or marked as "contract
documents".
The Court held that the report
had not been incorporated into the contract and therefore it
did not amount to any sort of warranty or representation from
the Coop as to the actual ground conditions.
The overall effect of the case
seems to be that when a contractor undertakes the obligation
to complete the design and build works, utilising or adapting
the design undertaken by consultants who are novated to the contractor
then the contractor assumes their liability.
The contractor who assumes responsibility
for novated consultants runs unforeseen risks. In particular
the contractor has not had the opportunity to price the works
properly to take into account such issues as may arise in the
relationship with the consultant and will inevitably have to
reassess its insurance for Professional Indemnity risks.
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Not the Way You Should do Business
- no contract, no recovery
by M.
P. Reynolds
For an industry that uniquely
is this country has some of the most sophisticated and inscrutable
standard form contracts it seems ironic that it is also often
common practice for very busy consultants or contractors to spend
less time considering contract forms and terms than planning
the work. Very often contractors and consultants who have difficulty
have such a difficulty because either they have no contract at
all, the terms are vague as to be inoperable and unenforceable
or are ambiguous so as to result in uncertainty. In this context
the case of Barratt v. B.B.F. Consultancy Group (A Firm) . The
Court of Appeal's judgment in this case is a warning to all enter
into arrangements in haste without proper agreements being formalised.
All too often there is too much pressure to start the job at
the expense of not having a proper contract.
In this case a construction group
had purchased land for development in Working in Surrey in June
1998. On the 29th June1998 the contractor met planning and architectural
consultants on the site. The contractors said work on the development
was urgent and they were meeting these particular consultants
because they had already done some planning work . At the meeting
a contractor's representative told the consultants following
a presentation: "I've heard enough. We will run with you,"
or words to that effect. But the consultants, without, apparently,
concluding proper negotiations or agreeing terms, carried out
work on a speculative basis at once and devoted substantial time
and resources in producing plans. The fee levels were not agreed
before that work. On 1st July 1998 the consultants wrote to the
contractor about fees but the person who was responsible in the
construction organisation for such matters was away at the time.
The consultants were requested to prepare a sketch proposal for
the site.
No such proposal, however, was
provided by the consultants and the consultants never received
any response to their fee proposals. The contractors telephoned
the consultants on the 27th July 1998 to say that there was an
urgent need for a meeting and they also said that they had appointed
other consultants as at the 29th July 1998. On 4th August 1998
the consultants submitted a demand for fees. On 6th August 1998
the contractor replied that there was no contract.
The first instance the Judge
considered that the words: "I've heard enough. We will run
with you," and the fact that matters were urgent supported
the case for a contract. The contractors, however, appealed to
set aside this judgment because there had been no agreement on
fee levels and the instructions were vague. They contended that
those words did not indicate an undertaking of mutual contractual
obligations.
The Court of Appeal found it
difficult to reconcile the Judge's findings with the correspondence
between the parties. The letter dated 1st July 1998 was not evidence
of an appointment. No appointment had occurred. A response of
the 6th July 1998 was further evidence that no contract had been
concluded. There was no immediate follow up and no sketch proposals
were returned. No contract was found.
The lesson of this case for consultants
and others is that proposals and suggestions do not amount to
serious offers and acceptances and that rash common expressions
of possible intent do not amount to serious intentions to enter
into formal contractual arrangements. The case also underlines
the need for proper professional advice being given on the formation
of a contract before any work is done or considerable costs are
incurred.
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Avoiding Dispute Resolution
by M.
P. Reynolds
Since 1998 the most incessant remonstrance from
the Lord Chancellor's Department to lawyers has been to promote
ADR instead of the courts. The public might be forgiven for thinking
that they pay taxes in order to fund the State to provide them
with cost effective judicial services and that their constitutional
right of "a day in court" like so many other ancient
rights is now a thing of the past. That is not to say that lawyers
encourage clients to go to court. Far from it. The best lawyers
are those who keep their clients out of court but not at any
price.
ADR is the title given by American lawyers to alternative
forms of dispute resolution outside the courts. In fact it all
started in a little court house in Cleveland Ohio in 1914 and
was called "conciliation" but it never really caught
on in the United States until the U.S. Treasury decided it had
had enough of the Federal justice budget and asked Chief Justice
Burger to do something. He and the Dean of Harvard Law School
decided that ADR was the real alternative; whether it was mediation,
arbitration or mini trial, anything other than the courts to
save the Treasury money. Curious that a Chief Justice of any
state should champion his colleagues demise or promote a system
of amateur informal justice in place of professional formal justice.
But like many things American it seemed a good idea at the time.
So in 1976 the ADR movement came to life with disputes service
being set up mainly by lawyers but also by others. Some were
quite effective and the court dockets decreased to the relief
of the Chief Justice and the Treasury.
It has had varying degrees of success the most notable
being the facilitation of the war claims against the U.S. Government
by members of its armed forces who were affected by the use of
chemical weapons by the U.S: the famous Agent Orange case where
one of my teachers in the subject settled a case worth billions
of dollars in two days. He proved that ADR can work and can be
effective and sometimes the only sensible alternative to the
unthinkable trial which might last an eternity. The case for
ADR was therefore proven.
In England ADR's popularity is marginal. The State
here has tried to force it on the construction industry with
statutory adjudication that has largely replaced arbitration,
arbitration having failed despite the opportunity provided by
Lord Saville's 1996 Arbitration Act. But adjudication is not
a final solution nevertheless it helps sub-contractors in a relatively
cost-effective way recover their unpaid accounts in a 28 day
period. Whether it is fair or not is hard to say but it serves
a commercial purpose for the industry. Its difficulty is that
whilst it is adequate in terms of process for payment disputes
it is inappropriate for larger more complex cases involving volumes
of technical evidence. Outside that mediation and conciliation
are available and the courts as a matter of policy encourage
mediation by levying cost penalties against those who unreasonably
refuse to consider or attempt ADR. That is easy to understand
as a matter of Government policy save of course that the State
is let off the hook for its civil justice responsibility. It
also poses something of a dilemma for lawyers brought up in an
adversarial conservative system like the law. For how can a lawyer
prefer an ad hoc tribunal to a court of law, or an amateur dispute
resolver to a professional one albeit they are professional people
but not necessarily professionally trained in law or evidence
or factual or interpretative analysis techniques like judges.
But there is another problem for the commercial
world which has hardly been considered. That is commerce itself.
If it were the case that all disputes were mediated privately
without recourse to the courts there would be no precedent, no
certainty of legal rights, no rights of appeal, and increasing
numbers of disputes. The courts like the nuclear deterrent in
cold war days is the ultimate weapon and deterrent. It is a sanction
of ultimate enforcement of rights without which there is anarchy
and in the commercial world uncertainty. Commercial men want
certainty to know their buildings will be built on time, the
cost will be fixed and regulated, the goods will be delivered
on time fit for use and the provider of services will be paid
on time a fair and reasonable price for the value he has provided.
Even the process of negotiation by far the most popular form
of amicable dispute resolution needs the ultimate sanction behind
it. Reliance on ADR alone cannot solve the problem.
Perhaps the best of both worlds is a court annexed
ADR system which is where it all began in Cleveland in 1914
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Lords Give Final Deadline to
Challenging
Planning
Decisions
by Alexander
Bosher Solicitors
Background
Since the decision of the Laws J in the Divisional
Court in the case of The Secretary of State for Trade and Industry
-v- Greenpeace Limited (1998), it has been held that a judicial
review applicant must move against the substantive act or decision
which is a real basis of his complaint, accordingly, the lower
Courts have in a string of decisions held that applicants for
judicial review must proceed against a resolution of the Local
Planning Authority authorising the issue of a grant of planning
permission and not against the planning permission grant itself.
The Civil Procedure Rules provide that a judicial
review claim against a planning decision has to be made promptly
and in any event, within three months from the date of the matter
being challenged. In the earlier lower Court decisions "promptly"
has been held to be within six weeks.
The London Borough of Hammersmith
-V- Biukett
In this case the House of Lords held unanimously
that the last time for challenging the grant of planning permission
was the date when the planning permission was actually granted
The Local Planning Authority had resolved to grant
the planning consent subject to the Secretary of State not calling
the application in and the Local Planning Authority and the applicant
agreeing terms for agreement under Section 106 of the Town and
Country Planning Act 1990 in September 1999.
Originally, the applicant's judicial review challenge
was against the resolution, but the applicant did not file their
application to challenge until April 2000.
In May Mr Justice Newman refused permission to apply
for judicial review on the papers in respect of both delay and
merits. In June 2000 Mr Justice Richards accepted, after reading
what he described as detailed skeleton arguments from Local Planning
Authority and the developer, but without hearing oral arguments
from either the Local Planning Authority, the developer or the
applicant that the grounds for judicial review were on the merits
arguable, but refused permission on the grounds of delay. He
held following the Greenpeace case that the relevant date for
challenging the grant of the planning consent was the date of
the resolution.
In February 2000 the Secretary of State decided
not to call in the planning application.
In May 2000 the Local Planning Authority and the
developer reached agreement on the content of the agreement under
Section 106 of the Town and Country Planning Act 1990 and the
Local Planning Authority and the developer accordingly entered
into that agreement and the Local Planning Authority on the same
day as the entry into the agreement issued the planning consent.
Lord Steyn in the leading judgment considered the
argument in favour of holding that the applicant for judicial
review had to challenge the resolution to grant planning consent
as opposed to the grant of the planning consent and doing so
promptly and, in any event, within three months and decided that
whilst the applicant could challenge the decision at a number
of earlier stages, including the resolution, the final stage
in the process of the grant of the planning consent was the actual
grant itself and that accordingly, that was the latest date from
which time runs for the purposes of calculating when in accordance
with the Civil Procedure Rules, the applicant was barred from
challenging the decision to grant planning consent. The other
Law Lords unanimously agreed with his view and also, agreed with
his view that the requirement to act promptly within the period
of three months was uncertain and as such, incompatible with
both European Community Law and the European Convention on Human
Rights. Therefore, the House of Lords came to the conclusion
that provided the applicant for judicial review lodges his or
her application within three months from the date of the grant
of the planning consent, he or she is not barred by delay under
the Civil Procedure Rules.
Comment
Whilst this decision has increased the length of
time during which members of the public can challenge planning
permissions, nevertheless, it will inevitably lead to greater
certainty for all concerned, because the time when members of
the public are barred from challenging is calculated now by reference
to an single easy ascertained event, namely the grant of the
planning consent and not by reference to an uncertain standard
of acting promptly and in any event within three months from
the earliest date on which the applicant could have challenged
a decision. This earliest event could have been the resolution
to grant planning consent, or it could have been the earlier
decision by the Local Planning Authority to accept the possibly
invalid environmental statement, or indeed, any number of other
procedural steps in the process of the developer obtaining planning
consent.
As against this a developer may be reluctant to
begin expenditure on the site until he or she is certain that
his or her planning permission is no longer vulnerable.
This, in turn, will put pressure on the Local Planning
Authorities and also the developers to concentrate on completing
the process including the negotiation of planning agreements
without unnecessary delays in order to minimise the period for
challenge by members of the public. However, Local Planning Authorities
are probably unlikely to want to use their scarce resources on
negotiating agreements in respect of developments that have not
yet been approved in principle. The developers may be required
once their developments have been approved in principle to incur
costs with the risk of them being wasted if permission is not
subsequently granted, or is successfully challenged.
Another aspect which should be borne in mind is
the timing of an option or a conditional contract by a developer
to acquire a site. Frequently options have been made exercisable
on the grant of planning permission; similarly contracts have
been made conditional on the grant of planning permission. Any
in the future should be made, and any now existing but not exercisable
or unconditional should be amended, so that the operative date
is after expiry of three months after the grant, so as to avoid
the developer acquiring a property, the planning permission for
which is successfully challenged.
Conclusion
The House of Lords has brought certainty to this
area, but at the cost of extending the period in which planning
consents are subject to challenge and hence, increasing the risk
that both a Local Planning Authority and a developer may incur
costs which are abortive. The remedy from the perspective of
both Local Planning Authorities and developers is to avoid unduly
prolonging the time spent in negotiations between when a scheme
is approved in principle and when it is granted planning consent.
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Dangers Of Relaxed Approach
by Alexander
Bosher Solicitors
Landlord and Tenant Act 1954
Part 2 of the Landlord and Tenant Act 1954 gives
Tenants of business premises, which are not excluded from protection
under the Act by Court Order, the right to apply to the County
Court for a new tenancy. The Landlord can oppose the grant of
a new tenancy on certain grounds set out in the Act. One of those
grounds is that the Tenant had persistently delayed in paying
rent. Another is that the Tenant has failed to comply with his
obligations under the tenancy.
If the Landlord proves one of these grounds, then
the Court, nevertheless, still has a discretion to grant a new
tenancy.
Hazel - v - Akhtar and Another
There are very few reported decisions on how the
Court should exercise its discretion in this area. Therefore,
this Court of Appeal decision is of considerable interest.
In this case, the Claimant Mr Hazel, had held a
Lease of a shop in which he had a business selling hair and beauty
products since 1984. The Lease was due to expire on 31st July
2000. In January 2000 the Landlord served a notice terminating
the Lease and opposing renewal under Part II of the 1954 Act,
on the basis that Mr Hazel had failed to comply with his repairing
obligations under the Lease and had been guilty of persistent
delay in paying rent.
The Arrears Schedule drawn up by the Landlord for
the period 25th March 1997 to 25th December 2000, show that Mr
Hazel always paid his rent late, varying for 1 day to 21 days.
There was evidence of late payment of rent from 1984 to 1997,
and Mr Hazel admitted that he had always paid his rent a little
late.
However, the Landlords had not purchased the freehold
until 1997 and in 1999 had replaced the Agent managing the property.
Before then the previous Landlord and his Agents readily accepted
slightly late rent payments by cheque.
This practice did not vary the Lease, but it did
mean that the Landlords were estopped from insisting that the
Tenant should revert to strict compliance with the Lease, unless
they gave reasonable notice to him to that effect.
In July 1999 the new Agents had written to the Tenant
demanding payment of rent, which the Agents mistakenly believed
that the Tenant had failed to pay on two earlier occasions. In
this letter it was indicated that no further demands for rent
would be sent and there was a threat to call in the baliffs and
to commence legal proceedings.
However, when the position became clear that the
Tenant had paid the two earlier rent payments, no further steps
were taken.
The Court of Appeal held on a proper interpretation
of this correspondence, that it did not amount to a Notice to
the Tenant that whatever the previous practice, the Landlord
now required payments to be made on time.
So rather than the evidence showing persistent late
rent payments as a breach of the Lease, the correct view, according
to the Court of Appeal, is that the longer the practice of accepting
late rent continued, the stronger that the Tenants argument that
late payment should be tolerated.
In the first instance, the County Court Judge had
found that the Tenant was in breach of the repairing obligations
and appeared to be unlikely to be able to afford to repair the
premises. Additional evidence not before the County Court Judge,
suggested that Mr Hazel was able to carry out the repairs at
or near a lower figure for costs as put forward by his Surveyor
and that the presence of dry rot in part of the premises was
caused by water leakage from a neighbouring property, also owned
by the Landlords.
In these circumstances, the Court of Appeal had
no hesitation in granting a new tenancy to Mr Hazel.
Conclusion
It is clear from this case that if Landlords or
their Agents acquiesce in late payment of rent by a Tenant, then
the Landlord runs the risk of not being able to successfully
oppose an application by the Tenant for new tenancy under the1954
Act. If the Tenant pays rent late, he should be clearly told
that this is not acceptable. If, in the past, late payment has
been tacitly accepted, then a line should be drawn in the sand
by a clear warning being given to the Tenant that whilst this
might have been acceptable in the past, it is no longer going
to be accepted and that if the Tenant continues to persistently
delay in paying the rent, the Landlord will rely upon this to
oppose any renewal of the Tenant's tenancy.
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