New High Street Rental Auction powers for Councils from 2 December 2024

• 26 November 2024
• Views

The High Street Rental Auction provisions in the Levelling-up and Regeneration Act 2023 will come into effect from today (2 December 2024). 

In an aim to save our diminishing high streets, the new powers will enable Councils to:

• Designate areas as high streets or town centres which are important to the local economy because of a concentration of high-street uses (such as shops, cafes, restaurants).
• Serve notice on landlords in these designated areas requiring them to let vacant premises (for a high-street use for a minimum of 1 year) if the following two conditions are met:
  • the “vacancy condition” – the premises must have been vacant for at least 1 year out of the last 2 years – the use must have been substantial, sustained and involve the regular presence of people at the premises; and
  • the “local benefit condition” – this is that the Council considers the occupation of the premises for suitable high-street use would be beneficial to the local economy, society or environment.
• If the landlord is unable to let the premises within 8 weeks of the notice, then the Council will be entitled to hold a Rental Auction for the letting of the premises (for a 1-5 year lease, with the rent determined by the successful bidder) within 14 weeks.

These new powers have serious muscle, allowing for Councils to enter into tenancies on behalf of landlords and granting deemed consent of superior lessors/mortgagees. There is also criminal liability for unauthorised works to premises whilst there is an active letting notice in place. Landlords will have a right of appeal against a letting notice on grounds such as the vacancy condition not being met, the Council unreasonably holding consent to a letting or the landlord requiring possession of the property for redevelopment or refurbishment works. 

To support these provisions, there is a new permitted development right (Class DB: Use of qualifying high-street premises changing to a suitable high-street use) to facilitate any required change of use of the premises. As with any permitted development right, the ability to rely on the right will be subject to any conditions on the operative planning permission restricting use, which is something to look out for. 

How the rental auction process will work remains unclear, with further regulations required in this area. Detailed Government Guidance is also expected in December when the provisions come into force. To date, it is understood four Councils have signed up with the Government to trial the powers and provide their feedback. 

With only £1m of funding allocated to Councils collectively to implement these measures, it seems unlikely there will be sufficient resources for these powers to have the Government’s desired clout. It also feels that a complex problem may have been wrongly distilled into a simple conclusion; that it is landlords choosing not to let their premises that is leading to such low occupancy on our high streets. Other factors such as online shopping habits, market forces and tighter regulations on lettings in terms of EPCs are undoubtedly also playing their part in the high street’s downturn. 

Only time will tell if these new powers are able to breathe the life back into our town centres that the Government hopes they will.

“High streets are the beating heart of our communities. But for too long, too many have been neglected, with more and more empty lots and boarded up shopfronts.”

https://www.gov.uk/government/news/high-streets-to-be-revitalised-with-new-legal-powers

Discharging covenants: not a “piecemeal” of cake

• 17 October 2024
• Views

The case of Patel & Ors v Spender & Ors [2024] UKUT 62 (LC) (15 March 2024)  is a warning to aspiring developers wishing to discharge or modify restrictive covenants to get their ‘ducks in a row’. 

The developer applicants did not succeed with an application under s. 84 of the Law of Property Act 1925 to modify covenants affecting their land. Their argument that the covenants no longer secured practical benefits of substantial advantage failed because: 

1. they lacked an agreed plan between them to undertake the works at the same time; and 
2. they did not demonstrate that each of them could immediately fund their respective part of the development; and 
3. given the above, any future remedy for injunctive relief would not have any ‘teeth’.

The Tribunal considered the risk that a ‘gap toothed’ and ‘piecemeal’ development might arise, which would be inconsistent with the architecture of the estate and street scene. On this basis (and on a thin-edge of the wedge argument not considered in this article) the Tribunal did not consider that it had jurisdiction to modify the covenants.  

Background

The five applicants owned a run of 11 terraced properties in St. David’s Square, London.  The Square comprises numerous blocks of flats, bounded to the south by the Thames and to the north and east by terraced housing. The development has a particular architectural style of brickwork and patterns which runs through not just the terraced housing, but also the blocks of flats.

The applicants wished to undertake two sets of alterations to the premises. To extend the ground floor kitchen/dining areas to the rear, and to convert the loft space of the properties to habitable rooms with shower facilities (creating four bedrooms where there had been three).

The properties are burdened by restrictive covenants against additions or alterations. These covenants form part of a building scheme across the whole square and, as a consequence, any one of the 104 other flats or houses in the development could object to the application. 

The decision

An application to modify the covenants and allow the proposed development was brought under s. 84(1) of the Law of Property Act 1925 on grounds (aa) and (c), these being respectively that:

• the covenants continued existence would impede a reasonable use of the land for public or private purposes; and 
• that the proposed modification would cause no injury to the persons entitled to the benefit. 

The Tribunal was concerned that the five applicants may not all immediately be in a position to undertake the works in ‘one go’. The costs per property were estimated to be in the order of £50,000.00, and with various applicants of varying financial means and who might do the works at different times, there was a high chance of a ‘gap toothed’ form of development arising that would be at odds with the existing uniformity of the estate.   

The applicants did offer a covenant that they would undertake all of the works at once, but the Tribunal was not persuaded (for the reasons set out above) that this would be effective. Enforcing this would be difficult with so many parties and factors that could not be controlled.

The warning to developers here is to make sure your plans are in order (beyond simply obtaining a planning permission), before applying to the Tribunal. In assessing whether covenants secure benefits of substantial advantage the Tribunal will consider the risks and realities of the development, and a hypothetical development scenario that may arise from those risks. To that end, being able to demonstrate that scheme is deliverable assumes considerable importance, especially when there are multiple applicants.  

Summary judgment in “unopposed” lease renewal proceedings

• 3 October 2024
• Views

Pleased to have secured summary judgment on behalf of our client, in circumstances where the landlord refused to engage in unopposed lease renewal proceedings. 

We made the summary judgment application after we had filed and served our client’s witness and expert evidence and the landlord had failed to serve theirs.  The Court decided that the landlord had wilfully not participated in the litigation process and found in our client’s favour on the term, rent, and all other material terms on the basis that there was no viable alternative but to accept our client’s evidence. 

Interestingly, the Court even made provision for one of the partners in our firm to sign the lease on the landlord’s behalf because it anticipated that the landlord would refuse to do so.

An unusual case (even the most reluctant of landlords or tenants still tend to comply with the Court’s directions and partake in the process), but a reminder of the efficacy of a carefully deployed summary judgment / interim application, and the importance of submitting admissible and CPR-compliant evidence.

Government signposts further changes to building safety regulations

• 3 September 2024
• Views

In advance of the Phase 2 report from the Grenfell Inquiry, the Government yesterday set out proposals to update various building regulations.

1. Fire safety and evacuation
   1. Residential PEEPs
      1. The Government propose to introduce Personal Emergency Evacuation Plans (or PEEPs), which will be known as “Residential PEEPs”. As highlighted in the Grenfell Inquiry, there was a clear lack of information and personal plans in place for the evacuation of vulnerable residents. Requiring “person-centred” risk assessments to be undertaken to produce a Residential PEEP should assist in evacuations.
      2. Additionally, funding is to be committed to social housing providers to deliver Residential PEEPs for their renters. It is not clear how much funding has been allocated and whether this will be sufficient. As well as the financial cost involved in undertaking a risk assessment, it will also be necessary to have trained staff members with the time to undertake such assessments. This may not be straightforward, given the other building safety compliance work that is currently being undertaken by such organisations.
   2. Evacuation Alert Systems (known as sounders) – An amendment is to be made to the statutory guidance to the building regulations requiring sounders to be fitted in new buildings over 18 metres in height (as such, “higher-risk buildings” under the Building Safety Act 2022). The Government has confirmed they will consider whether a requirement to install sounders in existing buildings is required once the Phase 2 report has been published. It is not clear whether these changes are in anticipation of further criticism of the “stay-put” policy in respect to fighting fires in high rise buildings or whether there will be a recommendation that the stay-put policy is dropped in favour of full evacuation. 
2. Sprinklers in new care homes – There will be an update to Approved Document B that makes provision for sprinklers in all new care homes. The guidance update will be subject to a 6-month transition period and then there will be a further 6 months to enable work on current development projects that are underway or about to start to continue (we assume this means that any projects currently or to commence in the next 12 months will not need to have complied with the requirement to include sprinklers in the design). The Government acknowledges that it is already relatively common for sprinklers to be included in new care home designs.
3. Extension of the recognition of the CE marking for construction products  –Recognition of the CE mark was to expire at the end of June 2025. The Government has confirmed that recognition will continue for the CE mark in the UK indefinitely, which will allow for a wider reform of construction products regulation. When they do look to make further changes to the CE mark recognition this would be subject to a minimum 2-year transitional period, which is designed to give certainty and to support supply chains.
4. Rationalising and removing duplication in regulations – The Government is withdrawing the outdated National Classes fire testing standards (within the building regulations Approved Document B) which ends a period of dual specification in favour of the “more robust European standard” (known as BS EN 13501). There will be a transitional period of 5 years for fire resistance products and 6 months for reaction to fire products to allow for manufacturers to switch to the European standard. This reflects recommendations from the Hackitt Report for a clearer, transparent and effective testing regime.

"A compassionate society protects its most vulnerable"

https://questions-statements.parliament.uk/written-statements/detail/2024-09-02/hcws62

Take Notice: Supreme Court rules on procedural failure in RTM Claim

• 22 August 2024
• Views

On 16 August 2024 the Supreme Court gave its judgement in A1 Properties (Sunderland) Ltd v Tudor Studios RTM Co Ltd [2024] UKSC 27, which upheld a ruling that failure of a right to manage (“RTM”) company to serve a claim notice under s79(6)(a) of Part 2 of the Commonhold and Leasehold Reform Act 2002 (“CRLA”) on an intermediate landlord did not invalidate the transfer of the right to manage the accommodation in question. 

 The issues for the court to address were:

 “(1) Whether a failure to serve a claim notice on a landlord as required by section 79(6)(a) will always invalidate the acquisition of the right to manage powers by the RTM company pursuant to the process purportedly commenced by service of the claim notice on other relevant landlords; and

 (2) If not, whether nevertheless the failure to serve the claim notice in this case on all relevant landlords had the effect of invalidating the purported acquisition of the right to manage powers by the RTM company pursuant to the CLRA acquisition process.”

 In addressing these issues, the Supreme Court’s main focus was to consider Parliament’s intention as to how the statutory regime of the CRLA should be interpreted and its purpose. It noted that the CRLA was designed to minimise opportunities for obstructive landlords to thwart the transfer of the right to manage. It also acknowledged that the absence of a central register made the process of identifying relevant landlords inherently difficult.

The Supreme Court held that in evaluating whether a procedural failure under the regime invalidated the process, the questions to be addressed were whether a relevant party has been deprived of its opportunity to oppose the making of an order to transfer the right to manage, having regard to (a) what objections they could have raised and would have wished to raise and (b) whether, despite the procedural omission, they in fact had the opportunity to have their objections considered.   

 As the appellant in this case had been joined to the Tribunal proceedings, it had been afforded the same opportunity of participating in the statutory procedure as it would have had if it had been served with a claim notice in accordance with s79(6)(a).  Accordingly, the failure to serve notice on it had not invalidated the process. 

 The Supreme Court considered the similar Court of Appeal case of Elim Court RTM Co Ltd v Avon Freeholds Ltd [2017] EWCA Civ 89 (“Elim Court”) where Lewison LJ concluded that failure to serve a claim notice on an intermediate landlord of a flat with no management responsibilities did not invalidate the notice.  Although the Supreme Court upheld the result in Elim Court, it departed from the reasoning on the basis it did not consider it was sufficient to say that the right to participate may be ignored if the intermediate landlord has no power of management.  

 It also considered the case of Osman v Natt [2014] EWCA Civ 1520  which followed the guidance of R v Soneji [2006] 1 AC 340 , a case that questioned whether it was the purpose of the legislation that an act done in breach of a provision should be invalid.  The Supreme Court ruled that in accordance with the approach in Soneji, the respondent’s failure to serve a notice of claim upon the appellant did not render the transfer of the right to manage void, it instead rendered it voidable unless, or until, the tribunal approved the transfer scheme.

 The judgment reduces the “traps for the unwary” involved in the process of transferring rights to manage, and will be welcomed by tenants and their advisers alike. 

Tenant administration on the rise?

• 21 August 2024
• Views

Following a decision to place the company into administration in March of this year, Ted Baker has this week announced steps to close its final 31 shops in the UK and Republic of Ireland. This follows a number of other high profile tenant administrations over the last year, including the likes of Wilko and The Body Shop. 

From a landlord’s perspective, tenant administrations present a high degree of uncertainty and often leave them facing shortfalls in rent and other sums due under the lease. As unsecured creditors, this can often leave landlords with little prospect of recovery.  

To help navigate what can be an unfamiliar and technical process we have put together a short guide dealing with some of the first questions landlords will often ask when they find themselves in this position. 

Leasehold reform – how will this be affected by the General Election?

• 19 June 2024
• Views

On 24 May 2024, the Leasehold and Freehold Reform Act (“LAFRA”) was the last Bill passed in the current Parliament. It was pushed through the Commons at speed to ensure it received Royal Assent before Parliament was prorogued.

However, it’s worth pointing out that LAFRA is not yet in force.

Some parts of LAFRA will come into force next month i.e. those that amend the Building Safety Act 2022 and those that deal with rent charge arrears but the remainder needs to be commenced by the Secretary of State via statutory instrument and, as Parliament is now in purdah, this responsibility will fall to the next Government.  

Exactly when the next Government will do this is difficult to predict but it is pleasing to note that leasehold reform features heavily in the manifestos of each of the three main political parties, all of which were published last week.

Here is a summary :

Liberal Democrats:

“Liberal Democrats are committed to tackling these housing failures head-on by…: 
– Abolishing residential leaseholds and capping ground rents to a nominal fee, so that everyone has control over their property.”

• This is the most leaseholder-friendly manifesto – suggesting that the Liberal Democrats will go much further than LAFRA.

Conservative and Unions Party:

“We will complete the process of leasehold reform, to improve the lives of over four million leaseholders. We will cap ground rents at £250, reducing them to peppercorn over time. We will end the misuse of forfeiture so leaseholders don’t lose their property and capital unfairly and make it easier to take up commonhold.”

• This appears to acknowledge that LAFRA was rushed through and suggests that the Conservatives are committed to “completing” the process of leasehold reform by dealing with the omissions in LAFRA that relate to the ground rent cap, forfeiture and commonhold. 

Labour Party:

“Labour will act where the Conservatives have failed and finally bring the feudal leasehold system to an end. We will enact the package of Law Commission proposals on leasehold enfranchisement, right to manage and commonhold. We will take further steps to ban new leasehold flats and ensure commonhold is the default tenure. We will tackle unregulated and unaffordable ground rent charges. We will act to bring the injustice of ‘fleecehold’ private housing estates and unfair maintenance costs to an end. ”

• This confirms Labour’s commitment to continue with the process of leasehold reform, and again suggests that they would go much further than the proposals set out in LAFRA – implementing all of the proposals recommended by the Law Commission. 

It does seem that the passing of secondary legislation to bring LAFRA (and more?) into force  is likely to be high on the next Government’s agenda – this something that will certainly be welcomed by the industry, as this period of limbo benefits no-one.   

However, the policies are frustratingly vague and at this point, we are really still none the wiser as to the likely timescale for enactment.

UK Election 2024: The Liberal Democrats’ Manifesto – Employment Round Up

• 14 June 2024
• Views

Earlier this week the Liberal Democrats published their Election manifesto, which contains a number of pledges for working people and employers if they win the election on 4 July. 

We have set out their key employment pledges below.

Status and the gig economy

• Establish a new ‘dependent contractor’ employment status inbetween employment and self-employment, with entitlements to basic rights such as minimum earning levels, sick pay and holiday entitlement.
• Review the tax and National Insurance status of employees, dependent contractors and freelancers to ensure fair and comparable treatment.
• Set a 20% higher minimum wage for people on zero-hour contracts at times of normal demand to compensate them for the uncertainty of fluctuating working hours. 
• Give zero-hours and agency workers a right to request a fixed-hours contract after 12 months (a right not to be unreasonably refused). 

Family and carer rights

• Double statutory maternity pay and shared parental pay to £350 per week.
• Introduce an extra ‘use-it-or-lose-it’ leave of one month for fathers and partners, paid at 90% of earnings (with a cap for high earners).
• Parental leave and pay to be a day 1 right, which will also apply to self-employed parents.
• Require large employers to publish their parental leave and pay policies.
• Make caring and care experience protected characteristics, as well as introducing paid carer’s leave and a Carer’s Minimum wage.

Sick pay 

• Statutory sick pay to be payable from day 1 of sickness.
• Ensure that statutory sick pay is available for employees who earn less than £123 per week and align it with national minimum wage.
• Introduce a right for every disabled person to work from home, unless there is a significant business reason not to.
• Simplify the Access to Work scheme.
• Introduce “Adjustment Passports” to record all adjustments, modifications and equipment that a disabled person has received, and ensure that Access to Work support and equipment stays with the individual if they change jobs.

Employee protection

• Make flexible working a day 1 right.
• Encourage employers to promote employee ownership by giving staff in listed companies with more than 250 employees a right to request shares.
• Scrap the lower apprentice rate and ensure that apprentices receive at least national minimum wage.
• Shift the burden of proof for employment status claims in the Employment Tribunal from the individual to the employer.

Equality, Diversity and Inclusion

• Require larger employers to monitor and publish data on gender, ethnicity, disability, LGBTQ+ employment levels, pay gaps and progression and publish 5-year aspirational diversity targets.
• Provide support and advice to employers on neurodiversity in the workplace.
• Extend the use of the name-blind recruitment process.

UK Election 2024: The Conservative Party Manifesto – Employment Round Up

• 14 June 2024
• Views

The Conservatives released their manifesto on Tuesday this week. On a first glance, the manifesto did not include much by way of employment-related announcements.  However, we have included a summary of pledges that will impact working people and employers below. 

• As announced by Kemi Badenoch earlier this month, change the definition of “sex” in the Equality Act 2010 to mean biological sex.
• Reform the assessment system for, and reduce the number of individuals claiming, disability benefits.  Those with “moderate” mental health issues or mobility problems will be given tailored support to work rather than disability benefits.  Although not necessarily “employment-related”, organisations would need to be prepared to provide the relevant “return to work” support to those individuals affected by this change.
• Overhaul the “fit note” process by moving the responsibility for issuing fit notes from GPs to specialist work and health professionals. 
• Cut tax for workers by reducing employee national insurance contributions to 6%.
• Abolish the main rate of self-employed national insurance by the end of the next Parliament.
• Continue with the implementation of minimum service level agreements in relation to industrial action.

Examination of the Upper Tribunal’s power to modify restrictive covenants

• 19 February 2024
• Views

When faced with a restriction on freehold and sometimes leasehold land, there are certain circumstances in which the owner of the land may seek to have a restrictive covenant modified or removed. The process of modification or removal involves making an application to the The Upper Tribunal (Lands Chamber). The applicant must satisfy one of the statutory grounds on which a restrictive covenant may be discharged or modified. 

The statutory grounds for removal or modification are the following: 

1. That the covenant is obsolete;
2. That the covenant impedes the reasonable use of the land; 
3. The modification or removal would not injure those who are entitled to benefit from the restriction; or
4. Where all parties who benefit from the covenant give their consent to its modification or discharge. 

If the Upper Tribunal is satisfied that one of these grounds are met, the Tribunal must then decide whether they will exercise their discretion to make the change that has been requested. 

This process was examined in the recent case of Blackhorse Investments (Borough) Ltd v London Borough of Southwark [2024] UKUT 33 (LC). The applicant was the leaseholder of a pub which was to be closed down, demolished and re-constructed as a mixed-use building. The applicant applied to the Tribunal to vary the leasehold covenants that required the property to be kept open and to be used as a pub, and the restrictions against alienation and alterations. The applicant also wanted to be released from their obligation to use their best endeavours to renew licences. 

The Upper Tribunal initially ordered that the covenants be modified and the property was demolished on that basis. However, the respondent disputed the Upper Tribunal’s jurisdiction on the grounds that the covenant in relation to alienation, keeping the pub open and the covenant to renew the licences were positive in nature and the Tribunal accordingly did not have jurisdiction to modify them. 

The Upper Tribunal issued a new order that modified the covenants only to the extent permitted. 

This case serves as a useful reminder that it is not always easy to establish whether a covenant is truly restrictive in nature and that a landowner cannot simply rely on the Tribunal agreeing to modify the covenants that affect their land. 

It ends with .ai…

• 12 February 2024
• Views

The inadvertent allocation of domain names has led to a windfall unexpectedly for one tiny island. Where .tv (and also .it to some extent) was the first example of a domain name being used for business context it seems that .ai is going to be the next big thing (if it isn’t already the current big thing!)

the nation has been able to pay some debts down and eliminate residential property taxes.

https://thehustle.co/one-big-benefactor-of-the-ai-boom-the-tiny-island-of-anguilla/

Olympic Village decision makes stark reading for developers

• 31 January 2024
• Views

A significant recent decision concerning the Olympic Village development in Stratford has demonstrated the reach of “remediation contribution orders” made under the Building Safety Act 2022.

The decision requires the original developer and its parent company to contribute circa £18 million towards the costs of major cladding remediation works and associated costs, even though the ultimate beneficial owners of the developer have changed since the buildings were constructed. The case is notable as the application was made by a leaseholder who was not liable to contribute to the cost of the major works via the service charge, where funding for those works had been secured from the taxpayer funded “Building Safety Fund”.  That funding will now, no doubt, need to be repaid.

What is a Remediation Contribution Order?

The Remediation Contribution Order, or “RCO” is a creation of the Building Safety Act 2022 (“the Act”). An RCO can require the current landlord, former landlord (as at 14 February 2022) or developer of a building, or someone associated with them, to meet costs incurred or to be incurred in remedying relevant defects. The Act allows the First-Tier Tribunal (“FTT”) to grant an RCO in relation to a relevant building (i.e. a self-contained building or part in England that contains at least 2 dwellings and is at least 11 metres high or has at least 5 storeys) if it considers it just and equitable to do so.

The Olympic Village Application

The Olympic Village case concerned five residential buildings that were originally developed by Stratford Villa Development Partnership (“SVDP”) to provide accommodation for athletes and officials taking part in the London 2012 Olympic Games. The freehold is still owned on trust for SVDP, although the beneficial owners have changed since the buildings were first developed. Notably Get Living Plc (“Get Living”), which is known to be well financed, is now SVDP’s parent company but was not involved with the original development.

Beneath the freehold, a headlease of the buildings is in place to a management company (“EVML”), which has the responsibility to repair and maintain the structure and common parts. In this case, EVML is jointly owned by subsidiaries of Get Living as well as an affordable housing provider, Triathlon Homes LLP (“Triathlon”), who both, in turn, have underleases of various parts of the buildings. Those underleases provide for the underlessees to pay a service charge to EVML.

Following the Grenfell Tower fire, work was undertaken by EVML to identify the materials used in the construction of the building. Serious fire safety defects were discovered, relating to both the design and construction of the cladding systems used for the external facades. In response to the discoveries, a waking watch and other temporary measures were implemented.  A programme of works to remedy the defects is now ongoing. 

Although some of the costs associated with the waking watch and investigatory work were demanded via the service charge, the costs of the major works were not.  Instead, EVML secured circa £24.5 million of funding for those works from the Building Safety Fund. 

Triathlon made an application for SVDP (the original developer) and Get Living (in its capacity as SVDP’s parent company):

• to reimburse the costs which Triathlon had already paid via the service charge as undertenant (and to pay service charges demanded from, but not yet paid by, Triathlon to EVML); and
• to pay what would otherwise have been Triathlon’s share of the cost of the major works and professional fees to EVML.

It was acknowledged that the cost of the major works could not be recovered from Triathlon as an underlessee via the service charge (presumably due to the leaseholder protections in the Act). In view of this, one of the more interesting aspects of the case was that the application was still brought by Triathlon, in a context where public funding for the work had been secured. Triathlon explained its position by saying that it was concerned that funding for the works via the Building Safety Fund was not necessarily guaranteed, and that there may be a shortfall between the cost of the works and the funding secured.

The decision

The FTT granted the RCO, compelling SVDP and Get Living to pay EVML the total sum of around £18 million in respect of the cost of remediation works, professional fees, other remedial measures and additional costs. 

The FTT found Triathlon’s concerns regarding the availability of funding via the Building Safety Fund to be fanciful (saying that there was no good reason to believe that the remedial works would founder for lack of money), but the certainty of funding was not a reason to refuse the RCO. The Act provides a set hierarchy of liability for relevant defects, and it is not necessary for someone to be at fault in order to be liable. The FTT said that, in view of this, it would be difficult to see how it could ever be just and equitable for a party falling within that hierarchy, who is able to fund the relevant remediation works, to be able to claim those works should instead be funded by the public purse.

Much of the argument in the case concerned the question of whether it was “just and equitable” for the RCO to be made. Ultimately, it was relevant (and supported the making of the RCO) that SVDP was the original developer, and that Get Living is the entity on which it relies on for financial support. The FTT held that it was not relevant that the ownership of the developer had changed hands since the buildings were constructed.

The FTT also commented that it is possible for it to be just and equitable for an RCO to be made even where costs were incurred before the relevant parts of the Act came into force (28 June 2022). There might be a case where a person against whom an RCO is sought, in respect of costs incurred prior to 28 June 2022, could say that they had acted to their irretrievable prejudice, in the belief that they could safely expend the relevant funds as service charges validly demanded and received. In such a case there might be traction for an argument that it was not just and equitable to require that person to fund the relevant costs itself. That was not the case here. 

Implications for developers and building owners.

EVML will now recover circa £18 million from SVDP and Get Living. EVML will, no doubt, be liable to reimburse the Building Safety Fund and may look to pursue a claim against the original contractor.

Each RCO decision will turn on its own facts, as what is “just and equitable” will differ from case to case. That said, this decision was given by the President of the Lands Chamber and his Deputy, following argument by expert Counsel on both sides. As such, it provides significant insight into how the FTT will approach these applications, and the factors that are likely to be relevant. 

The decision itself will make worrying reading for some, however. That the FTT made this order even though the beneficial owners of the original developer had changed since the building was constructed will be unwelcome news to many who have purchased buildings containing defects. The decision clearly demonstrates that entities may still be liable for remediation costs, even where they did not have any involvement with the building at the time it was redeveloped or where they have secured funding from the Building Safety Fund. Anyone contemplating the share purchase of a real estate company will now be well advised to carry out due diligence on all properties previously developed or owned by that entity, as well as existing ones.  

The decision also makes clear that funding from the Building Safety Fund can not be relied upon as a permanent solution. The grant funding agreements entered into when Building Safety Fund monies are allocated require monies to be repaid where they can be recovered from a third party. This decision demonstrates that the RCO route has significant teeth and makes it more likely that the Building Safety Fund will expect these applications to be made. 

It also remains to be seen whether the Building Safety Fund will now ask for RCO applications to be pursued before monies are granted. It is possible that they may now view an RCO as a viable alternative method of securing short term funding for necessary works, given the relative speed with which these applications can be brought compared with High Court litigation.

Key Takeaways

• The taxpayer should be the last resort for funding to remediate defective buildings. 
• An RCO can be made against the current landlord, former landlord (as at 28 June 2022) or developer of a relevant building, even if the shareholders have changed since the building was developed.
• An RCO can still be made in respect of works carried out prior to 28 June 2022, which were funded via the BSF. If an RCO is made in such circumstances, the BSF will need to be repaid.
• It remains to be seen if the Building Safety Fund’s approach to granting funding will now change.

Building Safety Act: the regulator is late… what then?

• 22 January 2024
• Views

Developers will by now be familiar with the implications of the “Gateways” procedure introduced by the BSA.  If nothing else, it’s now clear that construction programmes will need to account for the 12-week and 8-week review periods which the Building Safety Regulator (BSR) will have to determine a building control approval application (Gateway 2) and issue its completion certificate (Gateway 3).

An obvious question is what then happens if the BSR fails to respond within these statutory time periods?  The latest government guidance confirms that applicants can contact the Secretary of State for a non-determination application by emailing [email protected] for full instructions on how to submit their application.   The non-determination application is made under Section 30A of the Building Act 1984.  Should this application be successful, the Secretary of State must then determine (or appoint someone to determine) the developer’s original application.

Bearing in mind that some project delays arising out of the implementation of the BSA might, depending on the negotiated position, end up being “developer’s risk” under the building contract, developers should make sure that they and their advisors understand the process for having applications decided as soon as possible, in the event of a BSR-induced delay.  

The applicant must inform the Regulator of their intention to make a non-determination application to the Secretary of State. This notification must be given to the Regulator at least 2 working days before submitting the application.

https://www.gov.uk/guidance/non-determination-applications-for-higher-risk-buildings-procedures-applying-to-the-secretary-of-state?utm_content=immediately

The Judgment of National Importance

• 18 January 2024
• Views

In the Supreme Court case of Wolverhampton City Council and others (Respondents) v London Gypsies and Travellers and others [2023] the court was asked whether they have the power to grant injunctions against persons who are unknown and unidentified at the date of the grant of the injunction, and who have not yet performed, or even threatened to perform, acts the injunction prohibits. These persons are known as “newcomers” and the injunctions made against them are called “newcomer injunctions”. When the Supreme Court handed down the judgment on 29 November 2023, it was described by Wolverhampton City Council as a “judgment of national importance”. 

Background 

Between 2015 and 2020, 38 different local authorities obtained injunctions designed to prevent Gypsies and Travellers from camping on local authority land without permission.

 The injunctions were addressed to “persons unknown” because the Gypsies and Travellers could not generally be identified in advance. When the injunctions were granted, these “persons unknown” or “newcomers” had not yet committed, or threatened to commit, any breach of planning control, trespass, or other relevant unlawful activity. The power of the courts to grant these injunctions was appealed to the highest court in England and Wales. 

  Supreme Court Judgment 

The Supreme Court held that the court has power to grant newcomer injunctions because its powers to grant injunctions is unlimited (subject to statutory restrictions). These are a wholly new form of injunction, which are granted without prior notice against persons who cannot be known at the time the order is made. Therefore, they can potentially apply to anyone in the world. 

 This means that injunctions may be granted in new circumstances as and when required by the principles of justice and equity which underpin them. That said, the Supreme Court clarified that these injunctions should only be granted in certain circumstances and subject to certain safeguards.  

1. First, there is a compelling need to protect civil rights or enforce public law that is not adequately met by any other remedies. 
2. Second, newcomer applications are made without notice. The applications need to be advertised widely so affected persons are given a fair opportunity to make representations. The injunction needs to be displayed in a prominent location at the affected site. 
3. Third, the applicant must comply with a strict duty which requires them to disclose to the court any matter which a newcomer might raise to oppose the making of the order. 
4. Fourth, newcomer injunctions should be limited so they do not apply for a disproportionately long time period or to a disproportionately wide geographical area. 
5. Finally, the court must be satisfied that it is just and convenient that a newcomer injunction is granted. 

Concluding thoughts 

This is a welcomed decision as it helps to provide clarity on injunctions in the context of Gypsies and Travellers but also confirms that a newcomer injunction can be granted in other circumstances provided the conditions and safeguards have been satisfied. It also avoids, as the Supreme Court stated, the prospect of “litigation without end”.

Therefore, it will be interesting to watch this space for further developments, see how this decision will impact protestor injunctions, and if private landowners will utilise newcomer injunctions on their private property. 

Protections from redundancy to be extended

• 18 December 2023
• Views

From 6 April 2024, protection from redundancy afforded to employees on maternity, adoption or shared parental leave will be extended to employees who are pregnant or returning from such leave.

Currently, employees on maternity, adoption or shared parental leave have special rights in a redundancy situation.  Under regulation 10 of the Maternity and Parental Leave Regulations 1999 parents on these types of leave must be offered first refusal of any suitable alternative employment available in a redundancy situation.  This gives such employees priority access to redeployment opportunities over other redundant employees.

Draft regulations have now been laid before Parliament designed to bring the Redundancy (Pregnancy and Family Leave) Act 2023 into operation.  The new Act will extend the period of special protection from redundancy to employees who are pregnant or returning from maternity, adoption or shared parental leave.  

It should be noted that the protection is not a ban on making employees redundant during the protection period. Employees with priority status can still be selected for redundancy, but they are afforded special rights when it comes to the allocation of alternative roles.

What happens if an employer gets it wrong?

If an employer fails to comply with the “priority” requirements, this could enable an employee to bring a claim for automatic unfair dismissal.  An automatic unfair dismissal claim does not require two years’ qualifying service (unlike an ordinary unfair dismissal claim).  Depending on the facts, employees may also have a claim for discrimination.  It is therefore key for employers to understand the new rules and how to apply them. 

From 6 April 2024, protection from redundancy afforded to employees on maternity, adoption or shared parental leave will be extended to employees who are pregnant and returning from such leave.

https://insights.forsters.co.uk/post/102iv8t/flexible-working-requests-become-a-day-1-right

Litigation at whose cost?

• 13 December 2023
• Views

Holland Park (Management) Limited-v- Dell (8 December 2023)

INTRODUCTION

The judgment of the Court of Appeal in this very substantial service charge dispute is likely to have a profound effect as to how, and whether, landlords (and particularly lessee-owned freehold companies) can litigate at the lessees’ expense.   

The rather extraordinary facts of this case are set out below but the conclusion of the Court of Appeal was to uphold the judgment of the Upper Tribunal that the costs of litigation to enforce covenants against an adjoining owner were irrecoverable from the lessees, Mr and Mrs Dell, as the service charge only covered services relating to the management and maintenance of the demised building and not any adjoining building. 

THE FACTS

89 Holland Park (“the Building”) comprises 5 flats and the freehold is owned by the lessees through the management company, 89 HP. Mr and Mrs Dell’s lease was entered into in 1989 and has been extended to a term of 999 years. 

 For about 10 years, HP has been engaged in substantial and very contentious litigation with the architect, Sophie Hicks, in relation to her wish to build a new house next door. Under covenants entered into in 1968, Ms Hicks needs 89 HP’s consent to her plans before she can proceed and 89HP have strenuously and successfully refused to give consent for what would be a major redevelopment that would have considerable impact on the Building and the lessees’ enjoyment of their flats. 

By January 2021, 89 HP had billed the lessees a total of £2,763,521 in relation to litigation costs but Mr and Mrs Dell had made it clear in 2014 that they did not want to spend any more on legal proceedings. They challenged liability for the balance of £430,411 sought from them for work thereafter.  

THE DECISION

Mr and Mrs Dell succeeded. The Court of Appeal unanimously found in their favour as:-

1. The leases were drafted with a clear focus on the service charge just relating to the maintenance and management of the Building and had to be interpreted in that context. 

2. The service charge related to items of a day-to-day nature which 89 HP were obligated to provide, rather than as to providing funding for unlimited costs of discretionary major litigation. Further, the leases reserved right to the landlord to deal with any adjoining land as it saw fit. 

3. Reference to the maintenance, safety, amenity and administration of the Building were not aimed at covering costs aimed at preventing any adjoining development even though there were concerns as to the structural impact of such development and its effect on the views from the Building and other amenities. 

4. The leases make provision to recover legal costs for specific contemplated events, such as lessee default, but contain no reference to enforcing or dealing with the 1968 covenants even though they pre-dated the leases and future disputes as to the development of the undeveloped adjoining land were foreseeable. 

THE CONSEQUENCES AND LESSONS TO BE LEARNED

So far as 89 HP is concerned, subject to any appeal to the Supreme Court, it will have to fund the shortfall but, as a management company with no real assets, it is not clear how it can do so or, even, how it will pay Mr and Mrs Dell’s legal costs? 

For all landlords, this judgment drives home how uncertain and unclear residential leases often are and that it certainly cannot be assumed that all costs are recoverable thereunder, particularly substantial and uncertain litigation costs. 

In some cases, the articles of association of management companies can compel the lessees, as shareholders, to contribute to any costs incurred and, as with collective enfranchisement claims, participation agreements between the lessees are also a way of securing their buy-in for the full course of proceedings.

But the ultimate lesson is that litigation with neighbours is expensive, uncertain, time-consuming and almost always best avoided.