14/03/2024
Steve Eccles and James Teagle covered some key disputes in the commercial property market over the last 12 months and key considerations for the year ahead. They also discussed issues for landlords and tenants around the expiry of a commercial lease and top tips for landlords to consider during a financial downturn.
Key Takeaways
Property cases from the past year of importance
- Building Safety Act 2022 (BSA): remediation contribution orders (RCO)
Triathlon Homes v SVDP, Get Living and EVML [2024] –The Tribunal confirmed the public purse should be a funder of last resort and the decision exemplifies the “polluter pays” principle underpinning the BSA, although the decision is likely to be appealed.
- ‘Newcomer injunctions’
Wolverhampton CC & Ors v London Gypsies and Travellers & Ors [Supreme Court, 2023] – The Supreme Court found that it is a valuable and proportionate remedy in appropriate cases (and subject to necessary procedural safeguards) for courts to grant injunctions without notice, against unknown ‘newcomers’ to prevent acts of entry onto land that have not been carried out, or even threatened.
· Guidance on leasehold consent applications
Messenex Property Investments Ltd v Lanark Square Ltd (High Ct, 2024)
Jacobs v Chalcot Crescent (Management) Co. Ltd (High Ct, 2024)
The courts have provided helpful guidance where applications are made for a landlord’s consent under a lease; there is a subjective and objective test that the courts will apply to the reasonableness of refusal of consent, and a landlord’s ability to properly evidence any grounds for refusal is important.
Commercial Lease Expiry – Common Legal Issues
· Dilapidations are often a late consideration and that will need to change as Minimum Energy Efficiency Standards (MEES) will tighten by 2030 (to a ‘C’ rating). Someone is going to have to pay eventually and this may lead to an increase in service charges and additional interim dilapidation claims. Landlords and tenants should engage with a dilapidations surveyor at an earlier stage.
· Conduct a review of your property portfolio’s to see if a notice to reinstate is necessary. Serve a notice to reinstate even if you are unclear whether the tenant will be vacating the premises and take specialist advice with regard to successors, renewals and damages in dealing with the reinstatement.
· Diarise expiry of contracted out leases and ascertain the tenant’s future plans six months before expiry of the lease. If the tenant wishes to remain in the premises, commence those negotiations early or consider demanding possession, issuing a without prejudice letter in relation to negotiations for a new lease, or implementing rent stops.
Top tips for landlords during a financial downturn
· Monitor changes in behaviour e.g. rental payments becoming less regular/reliable.
· Open/maintain dialogue with your tenant, particularly if you suspect there is an issue.
· Serve s40 Landlord and Tenant Act 1954 notice if you are uncertain of who is occupying.
· Setup alerts about the tenant’s business (e.g. Google, checking Companies House) and form your own view on the tenant’s business.
· Conduct an inspection of the premises.
What’s on the horizon for property litigation?
· Renters (Reform) Bill – dramatic changes to housing law expected and how tenants occupy premises. Assured shorthold tenancies are likely to be abolished and it will be the end of ‘no fault’ evictions and be replaced with periodic assured tenancies and updated statutory grounds of possession. Links to our spotlight series are below:
o Spotlight on: an overview of the Bill
o Spotlight on: New grounds for possession
o Spotlight on: Supported and Temporary Accommodation
o Spotlight on: Tenancy structure reform and the abolition of S21 ‘no fault’ evictions
o Spotlight on: rent controls, tenant redress, regulation of landlords…and pets
· Freehold and Leasehold Reform Bill – the “effective destruction of the leasehold system” (Michael Gove). Standard lease extension terms are likely to increase to 990 years and ground rents where a premium is paid are to be abolished. Changes are expected to the “non residential limit” to allow leaseholders to buy the freehold even where there is a high non-residential element to the building and new rules to ensure greater transparency to service charges are planned.
· Law Commission Consultation on Landlord and Tenant Act 1954 – the Commission’s aim is to review the need for modernisation of Part 2 with emphasis on contracting out, supporting efficient use of space in high streets and fostering a “productive and beneficial commercial leasing relationship”, whilst taking account of wider priorities such as net zero and levelling up.
If you would like to discuss any of the topics covered in our webinar in more detail, or have a specific query for us, please do get in touch with Steve Eccles or James Teagle.
