8 January 2015

Forsters review of the leading property cases of 2014

Despite the popularity of Mediation, many property cases continued to reach Court in 2014. Some cases were a remnant of disputes and professional negligence claims arising out of the collapse of the market a few years back and others arise out of the current strength of the market and the wish of landlords or property owners to enhance the value of their properties.

Forsters property litigation partner, Jonathan Ross, sets out his thoughts on 22 leading cases, starting with the five of most interest:

1. Coventry -v- Lawrence (26/2/2014) 
Probably, the most important case of the year as the Supreme Court not only changed the rules for securing an injunction to restrain a nuisance but also queried the basis for gains based damages. Now, the question is much more as to whether damages will be an adequate remedy and what is just in all the circumstances. Its most noticeable affect has been on right to light claims relating to commercial properties where the interference is not that substantial. The later decision relating to a landlord not being liable for a tenant's nuisance is also of considerable importance.

2. Pillar Denton -v- Jervis (24/02/2014) 
This is the GAME decision where the Court of Appeal reached the sensible commercial decision that rent payable by an Administrator for use of the premises post-administration is payable on a daily basis as a priority expense of the Administration. The decision, though, leaves many practical issues undecided such as what other liabilities aside from rent will the Administrators have and what constitutes making use of premises?

3. Century Projects -v-Almacantar (Centre Point) Limited (13/02/14) 
The tenant of the rooftop bar at Centre Point unsuccessfully sought an injunction to restrain the works proposed that would obscure the views. It argued cradles rather than scaffolding should be used. The Court considered the delicate balance between the tenant's rights as to quiet enjoyment and non derogation of grant and the landlord's reserved rights to repair and otherwise do works. Ultimately, an injunction was refused because of doubts as to the tenant's ability to meet any damages if the injunction was later set aside but the case is subject to Appeal and the works have not commenced.

4. Marks & Spencer PLC -v- BNP Paribas (14/05/14) 
A very important break clause decision by the Court of Appeal who overturned the earlier decision which implied a term into the Lease that rent was to be apportioned so the tenant only paid up to the break date. The Court made clear that terms would not be readily implied into carefully drafted documents prepared by lawyers and, as in the Friends Life case above, parties and their lawyers need to consider the practicalities when drafting the documentation. Accordingly, there was no cash back for Marks & Spencer for the additional two months rent paid under each of their four leases.

5. Titan Europe 2006-3 PLC -v- Colliers International (30/09/14) 
A must read Judgment for any valuer as to how not to be possibly sucked in to providing a valuation required to support the proposed loan. Colliers valued a property in Germany in 2005 that was part of a syndicated loan at €135 million and the Lender advanced €110 million but the property was eventually worth only about €22.5 million. The Court held the correct valuation was €103 million given the age and nature of the premises and the difficulty of re-letting it. It held the loan would not have proceeded if the property had been correctly valued and that the permissible margin for error was 15%. As a result of the valuation being outside the permissible bracket, Colliers were liable for the difference of €32 million between its valuation and a correct one.

Iceland Foods Limited -v- Castlebrook Holdings Limited (12/12/2013) 
A case decided in late 2013 but not reported until 2014. It is a rare reported Judgment on an unopposed lease renewal and highlights the importance of having the correct expert evidence regarding comparables when it comes to fixing the rent. It is also of interest in relation to the Court ordering a new term of 10 years and the separate costs Judgment highlights the importance of getting any Part 36 Offer right.

Topland Portfolio No. 1 Limited-v- Smiths News Trading Limited (21/01/2014) 
A Surety was released from liability under a Lease where it was not a party to a Licence for Alterations which materially increased the tenant's obligations and liabilities under the Lease. This case highlights the need to establish that a Surety is still on the hook when acting for a purchaser of the reversion.

Dwyer -v- Lord Mayor and Citizens of the City of Westminster ( 19/02/2014) 
This case highlights how difficult it is to lose the use of a right of way by abandonment through lengthy non-use. Where the non-use is because there is no need for any use, there is no abandonment.

H.Waites Limited -v- Hambledon Court Limited (11/03/2014) 
Leases of 12 flats also contained demises of a garage with each flat but, unlike the flats, the Leases did not clearly set out what was demised regarding the garages. The landlord wanted to develop above the terrace of garages but the Court held that the long leases included the roofs and airspace above. Therefore no such development was possible.

Erimus Housing -v- Barclays Wealth (18/03/2014) 
The Court of Appeal quite correctly overturned the earlier decision in which tenants holding over after Lease expiry were held to have entered into a periodic tenancy that they could not simply walk away from. Where tenants hold over whilst negotiations proceed for a new tenancy, they will usually occupy under a tenancy at will terminable by either party at any time without the need to give any period of notice. This situation is to be contrasted with business tenants holding over under protected tenancies where the tenancy continues under the 1954 Act and the tenant has to give three months notice to determine it if it does not want a new Lease.

Horne & Meredith Properties -v- Cox & Billingsley (19/03/2014) 
An unusual successful opposition to the grant of a new business tenancy based on the tenant's longstanding bad behaviour in pursuing litigation without proper legal advice over an alleged breach of its rights.

Wood -v- Waddington (1/05/2014) 
A good example of the need to expressly grant rights of way when splitting up land. Section 62 of the Law of Property Act 1925 could only carry over existing rights of way and the transfer with "all liberties privileges and advantages" did not cover the rights of way claimed.

Friends Life Management Services Ltd -v- A & A Express Building Limited (9/05/2014) 
Whilst the Court made clear that, when a break clause is exercised, a tenant cannot be held liable for prospective service charges re major works, it held that the tenant's liability for the last service charge year ending 31 December 2010 was to be based on an apportionment of all costs in that year and not just costs incurred up to the break date of 24 March 2010.

Youseffi -v- Mussellwhite (2/07/2014) 
Another successful business tenancy opposition - based this time on persistent breaches of the Lease.

Schroder Exempt Property Unit Trust -v- Birmingham City Council (10/07/2014) 
An unsuccessful attempt by a landlord to avoid liability for rates where a tenant went into Liquidation and the Liquidator disclaims the Lease. The fact that there was a Guarantor whose liability remained did not stop the Lease having been terminated and the landlord being the party entitled to possession of the premises. Landlords therefore need to do deals with Liquidators if they wish to avoid rates liabilities.

Barrett -v- Robinson (21/07/2014) 
Where a Lease provided for a tenant to pay costs in relation to forfeiture steps or proceedings, the landlord had to have in mind taking such steps if it could recover its costs. In this case where the amount of an insurance premium was disputed before the Tribunal, costs were not recoverable as proceedings for forfeiture were not contemplated.

Tindall Cobham 1 Limited -v- Adda Hotels (5/09/2014) 
Another Good Harvest type case where the drafting on assignment of leases fell foul of the requirement under the 1995 Act that an existing guarantor could not be required to guarantee an assignee - a problem often experienced in intra-group dealings. But, once again, the Court of Appeal reached a commercial decision in holding that the tenant could not simply assign as it pleased on the basis the whole provision was void but needed landlord's prior consent.

Rentokil Initial 1927 PLC -v- Goodman Derrick LLP (12/09/2014) 
A complete vindication for commercial property solicitors who draft complex agreements- this time for the conditional sale of a property. They were held not to be negligent because the agreement as drafted allowed some wriggle-room for the purchaser to seek to get out the contract. The Court recognised that the agreement was a compromise between the parties and it applied a very commercial interpretation which limited the ability of the purchaser to rely on literal and uncommercial interpretations of the agreed terms. The fact Rentokil's in house lawyer was involved was also considered to be relevant to the solicitor's duties and liability.

Sirhowy Investments -v- Henderson and Knight (30/10/2014) 
Another unsuccessful break clause case illustrating the great difficulty, if not impossibility, of a tenant complying with all Lease obligations for a break to be effective. In this case, not properly repairing damaged fencing prevented the break being effective and left the tenant with a £70,000 liability. The Court did, however, make clear it was current, and not historic, breaches that mattered.

Francis -v-Phillips (31/10/2014) 
The Court of Appeal again imposed a sensible and commercial construction so that, in the case of the need for consultation with residential lessees before undertaking works, this is not to be based on all works during the service charge year but only on the appropriate set or sets of works where consultation is needed as the limit of £250 per lessee will be exceeded.

Hardy -v- Griffiths (2/12/2014) 
A clear case of caveat emptor applying on a residential purchase regarding the state of the property and purchasers losing their deposit even if the vendor successfully re-sales elsewhere. A sorry case made even sorrier by the fact the purchasers were both lawyers and there was no proof they had even seen the Replies to Enquiries which they claim misrepresented the state of the property.

Nicholson -v- Thames Water Utilities Limited (18/12/2014) 
A sad case illustrating that, whilst water companies have a statutory liability for flooding from water pipes, they have no liability for escapes of sewage and no duty to operate a pro-active system to prevent sewers being damaged by tree roots or suchlike.


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