Journal RSS Feed

Don't lose your break right!

Mon, 15 Oct 2012 10:45:00 +0100

You’re a tenant with a break right. That’s great. However, it pays to plan ahead as there are several hurdles for you to jump over before a break right can be validly exercised.

Are you entitled to exercise the break option?

Particular care should be taken where you are not the original contracting tenant to the lease. Double check the terms of your lease to ensure that the break right is not personal to someone else.

2. Time limits

Time is of the essence in the exercise of break rights so time periods must be strictly adhered to.
Break rights usually prescribe strict time frames for service of notices, so make sure you know all the relevant dates. Don’t wait until that date to serve the notice.

3. How should the notice be served?

Most leases will specify that the break notice should be ‘in writing’. However, this does not mean that an email from you to your landlord notifying your intention to break will suffice.
The break notice must strictly comply with the notice provisions in the lease, so these will have to be carefully considered.

4. Are there any pre-conditions attached to the break right?

Examples of the types of pre-conditions which may be attached to a break right are as follows:

That all rents have to be paid up to the break date. You will need to check whether just the annual rent has to be paid or ‘all rents’. If the latter ‘rents’ may also include service charge, insurance rent, VAT, interest and all other sums reserved by the lease as ‘rent’. Also, it is possible that, in order to comply with the condition, the rents for the full quarter (i.e. a period beyond a break date) may have to be paid. Make sure you know how much you have to pay and make the payment (in cleared funds) to your landlord well ahead of the break date. If in doubt, over pay.
‘Vacant possession’ of the premises must be given on or before the break date. If you have staff, furniture or chattels at the premises, plans will have to be made to remove them/these from the premises by the break date. Even if you are undertaking works to satisfy the yielding up provisions, ensure that the works are completed and that there are no workmen, materials or rubbish left at the premises on the break date.
That all tenant’s covenants under the lease have been complied with as at the break date. This is a potentially dangerous pre-condition as even a minor breach of a tenant’s covenant may mean that the pre-condition is not satisfied. If this is a pre-condition of your break right, you may find yourself having to go through your lease covenants with a fine-toothed comb to see if there have been any breaches and then try and rectify the breaches before the break date.

The key to validly exercising a break right is to plan ahead. So long as you’re prepared, there’s no reason why breaking your lease should be hard to do.

For more information on these issues please contact Seleena Nadkarni or your usual Lewis Silkin contact.

Don't waive your lease goodbye

Tue, 03 Jul 2012 13:38:00 +0100

In the current economic climate, it appears that landlords are forfeiting leases for non-payment of rent as a last resort. However, it is still an option for landlords to exercise this remedy by physically re-entering the premises, although there are some restrictions imposed by statute in certain cases. Most tenants are aware that if a landlord does forfeit the lease by physical re-entry, they may make an application to court to obtain relief from forfeiture. However, what most tenants and landlords may not know is that if, after the lease has been forfeited the tenant pays the rents arrears, even with the agreement of the landlord, the tenant cannot just continue occupying the premises where it left off.

The reason for this is that forfeiture by physical re-entry brings the lease to an end by operation of law. Once forfeiture occurs, the parties cannot simply agree to waive the forfeiture and revive the lease. The only way the original lease can be revived is if the tenant makes an application to court for relief from forfeiture.

If relief from forfeiture is not obtained, any agreement between the landlord and tenant ignoring the forfeiture can amount to the grant of a new lease by the landlord to the tenant. This can have adverse consequences on both the landlord and tenant. For example, for the landlord, the new lease may be considered to be within the security of tenure protection afforded by the Landlord and Tenant Act 1954 (whereas the old lease may have been contracted out); any guarantees given under the old lease may be released; the consent of superior landlords and/or mortgagees to the grant of ‘the new lease’ may have to be obtained. For the tenant, the grant of the new lease may have Stamp Duty Land Tax consequences.

It is therefore not open to the parties to bring a forfeited lease back to life. It is only for the courts (on the application of the tenant) to revive the life back into a lease by granting relief from forfeiture.

How will the Olympics affect your business and are you prepared?

Mon, 02 Apr 2012 10:33:00 +0100

There is a real buzz in London at the moment and one can only assume that the excitement will continue to build over the next few months. You will see a lot of articles in the press talking about the positive economic impact the 2012 Games will have on the UK economy but, you do not see many articles on how London businesses are going to be affected.

London businesses need to plan ahead to try and minimise the impact the Games is going to have so far as that is possible.

What are the issues facing London businesses?

The internet is likely to be slower during the Games, how will that affect you?
Internet based remote access - are there enough licences so that more staff can work outside the office?
Staff may want to watch the Games through their office PC. How will that affect the business? Do you have a policy to deal with this?
Flexible working for staff so that they can come in to work early or late depending upon transport disruption? Employees to be permitted to work at an alternative office location? Allowing staff to work part time?
Holiday requests - limiting the number of staff on leave at any one time?
Staff getting to work. Can they get to work?
Is it likely that the Games will mean less work flow? How can costs be managed during the downturn in work flow?
Food deliveries for the staff canteen - will they be affected?
Is your disaster recovery plan up to date?
Safety of your staff - do your security procedures need to be reviewed?

It is not all doom and gloom. The 2012 Games is a welcome opportunity for many UK businesses, and there may still be some business opportunities to be had. The Olympic Delivery Authority is keen to make Stratford an economic and financially viable area in the long term. Community, housing, education, retail are all part of that and that can only be a good thing.

However, there is a bit of a down side and London businesses should prepare now to try and minimise the impact of the Games.

Be careful not to slip up

Mon, 30 Jan 2012 15:15:00 Z

As we’re now in the winter months, it is possible that we may be faced with the harsh weather conditions which engulfed the country last year. The clearance of snow and ice from and around buildings and estates can be onerous and expensive. The question then arises as to who (i.e. landlords or tenants) is responsible for clearing buildings, estates and their common areas of snow and ice.

Generally, if a tenant has a lease of part of a building or estate, the landlord retains control of the common parts (which may include roadways and paths) and grants its tenants rights of way over these parts. Landlords usually have an obligation to maintain the common parts with the tenant contributing towards the costs through the service charge. Although it is unlikely that a lease would specifically refer to the clearance of snow and ice in the list of service the landlord is to provide, the lease may contain a general clause permitting the landlord to provide (and charge for) services in the interests of good estate management. It is then a question as to whether the clearance of snow and ice from the common parts is in the interests of good estate management for that particular building or estate. For example, it may be easier for a landlord of a health centre to argue that snow and ice clearance around the accesses to the building is in the interests of good estate management than that of a landlord of a small office.

If a tenant has a lease of a whole building, it is unlikely that the lease will impose any obligations on the landlord to provide services. It will then be the responsibility of the tenant to repair and maintain the building. Again, although the lease may not specifically mention the clearance of snow and ice, it is likely that such works will be covered by the tenant’s repairing and maintenance obligations.

Neither landlords nor tenants are responsible for clearing snow and ice from public highways. Notwithstanding this, landlords or tenants may want to clear public highways that lead to their premises to allow better access to the premises but may be worried about people getting injured. Directgov has therefore issued advice on this by issuing a ‘snow code’.

A tenant also has to be mindful not to fall foul of its statutory obligations towards its employees and visitors. Most leases (whether of part or of whole) will oblige the tenant to comply with all statutory obligations in respect of the premises, including health and safety. Therefore, even if under the lease the landlord is not obliged to clear snow and ice, the tenant may well have to in order to comply with its statutory obligations and to ensure that its employees and visitors are safe.

The issues surrounding snow and ice clearance is “snow” joke - if in doubt as to who is responsible for clearing snow and ice from and around your premises, legal advice should be sought.

Do you have the energy?

Mon, 30 Jan 2012 12:26:00 Z

Energy Performance Certificates (EPCs) were introduced under The Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 (the Regulations) to help improve the energy efficiency of buildings. As with most domestic electrical goods, EPCs rate buildings “A” to “G” (with “A” being the most energy efficient and “G” being the least). The EPC is also accompanied by a report which makes recommendations to make a building more energy efficient.

The Department for Communities and Local Government (DCLG) had proposed changes to the Regulations which were meant to come into force on 1 July 2011. These have now been pushed back to come into force on 6 April 2012.

The DCLG’s proposed changes now have a further impact on non-residential buildings including:

The requirement to commission EPCs before marketing properties for sale or rent (previously applicable to residential properties) is to apply to all buildings;
The seller/landlord must ensure that a valid EPC is provided within 7 days of the start of marketing. (The regulations currently allow for 28 days). A further 21 days is permitted if, despite reasonable efforts are made, the EPC is not provided within the 7 day time limit;
EPCs can no longer be delayed until just before the parties enter into a contract for sale or rent;
All agents/sellers/landlords are to ensure that a full EPC is included in all marketing material, including sales particulars and written particulars which are produced for rented out buildings and commercial properties;
Trading standards officers are to have increased powers of enforcement to ensure that properties being marketed have an EPC in place. The powers to require production of the EPC documentation is to also cover persons acting on behalf of sellers/landlords, e.g. estate and letting agents. This means that trading standards officers will be authorised to require estate agents to produce evidence showing that an EPC has been commissioned where they are marketing a building without one.

Failure to comply with these rules will enable trading standards to issue potential fines to sellers/landlords of £200 for each tenant or purchaser that has rented/purchased the property during the period of non-compliance. It is therefore arguable as to whether the proposed fines will actually incentivise compliance with the regulations. In fact, research has shown that as at April 2011, approximately £7.2 million was provided to English and Welsh local authorities to enforce The Energy Performance of Buildings regulations but that there were less than 7,000 enquiries made by trading standards over the 3 year period. Also, it appears that no enforcement action has ever been undertaken by local trading standards.

Notwithstanding the changes referred to above, it is reported that further EPC changes in line with European Union legislation are expected this year. EU legislation requires energy ratings to be included in all ‘property adverts’ but it is likely that there will have to be consultation as to what constitutes a ‘property advert’. So watch this space for further changes to the Regulations!