Business Brief: December 2018

Welcome to the December 2018 edition of the Gaby Hardwicke Business Brief. We publish the Business Brief regularly and it contains information on important legal developments, forthcoming legislation and other items of interest to you and your business. Our aim is to update you on the most important issues in the shortest possible time and to give you advance warning of regulation, with advice on how to minimise its impact.

We hope that you find this newsletter useful. If you have any comments or suggestions, please email us or call David Getty on 01323 435900.

This month's articles:

Landlord loses right to forfeit commercial lease

The landlord of commercial premises exercised Commercial Rent Arrears Recovery (CRAR) when their tenant fell into arrears of rent. CRAR is a statutory method of enforcement to recover rent arrears for commercial property. CRAR allows a landlord to instruct an enforcement agent to take control of a tenant’s goods and sell them in order to recover an equivalent value to the rent arrears. CRAR requires the enforcement agent to serve various notices on the tenant at each stage of the process.

A week or so after exercising CRAR the landlord purported to forfeit the lease by peaceable re-entry (where a landlord changes the locks and takes back possession of the property without a court order). The tenant argued that by exercising CRAR the landlord had waived his right to forfeit the lease. The County Court agreed with the tenant and the landlord appealed to the High Court.

The High Court upheld the County Court’s decision and found that by exercising CRAR the landlord had recognised the lease as continuing and thus waived its right to forfeit the lease. This meant that the landlord had not validly forfeited it.

One way round this potential difficulty for landlords is to exercise CRAR after the lease has ended. However, this can only be done in certain circumstances. If the lease ended by forfeiture, the CRAR procedure is not available.

For further information please contact Cathy Allen.

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Time limit for employment tribunal claims

The Employment Appeal Tribunal (EAT) has held that where the deadline for bringing a claim (also known as the limitation date) in an employment tribunal falls on a weekend or bank holiday the deadline is not extended to the next working day. This is contrary to the position in the civil courts.

Ordinarily (unless the contrary can be proved) a claim sent by first-class post will be deemed presented on the second day after posting, not counting Sundays or bank holidays.

In this case a claim was posted to the tribunal on a Friday by first-class post and was stamped as being received by the tribunal on the following Monday. As the limitation date was the Sunday after posting, the EAT found the claim was out of time.

Where the limitation date is very close to the date of posting it may be safer to arrange for the claim to be hand delivered to a tribunal during opening hours or for it to be submitted online. However, submissions by fax and email are not permitted.

For further information please contact Nicholas Febrer.

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Another break clause case

Issues concerning break clauses in leases frequently come before the courts. Break notices are notoriously difficult to exercise and often contain technical provisions which must be scrupulously complied with.

In a recent case the High Court held that a tenant’s break notice was valid and was not conditional upon its obligation to re-instate the premises. This ultimately turned on the particular wording of the relevant clauses in the lease.

Break notices are often expressed in commercial leases to be conditional upon certain events happening or criteria being met.

In this case the tenant was given the option to end the lease early. The question before the court was whether the option was conditional on the tenant removing any alterations and reinstating the property to its original layout and condition. Each party interpreted the relevant clause differently and although both interpretations were possible, the court found that the natural and ordinary meaning of the clause was to impose a single condition, which was for the tenant to vacate the property. As the reference in the clause to reinstating the premises was unclear, the court found that it was not a suitable condition to be attached to the break clause. The case demonstrates the importance of both drafting break clauses clearly and ensuring that any conditions are met.

For further information on drafting commercial leases please contact Hannah Bambury.

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Employment references – new guidance

ACAS recently issued guidance on employment references that is aimed at helping both employers and employees. The main points to note are:

  • There is no general legal right to be provided with a reference from a former employer. However, there are certain exceptions for employees in the financial services sector.
  • In giving a reference there is a duty to ensure that the information is true, accurate and does not give a misleading impression, whether by omission, nuance or innuendo. Any opinions given should be based on facts.
  • A good approach is to ensure that all references follow the same format so that they can be given efficiently and also avoid any potential claims of discrimination arising from an inconsistent approach.
  • The data protection legislation enables employees to request personal data held about them from their former employer. The Data Protection Act 2018 provides an exception to this for references which means that the former employer does not have to disclose to the employee the reference it gives. However, the new prospective employer does not benefit from this exception, which means that they will be obliged to disclose it if the employee makes an appropriate subject access request, so a former employer should always presume that a reference given for a former employee will be read by that former employee.
  • Where a potential new employer is unable to obtain a reference from a previous employer they will have to consider the possibility of obtaining references from elsewhere and/or the possibility of engaging the employee on a probationary period.

For further information please contact Paul Maynard.

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Japanese knotweed – nuisance claim between neighbours

The Court of Appeal recently decided a case in which one party claimed damages for nuisance caused by Japanese knotweed on neighbouring land.

The County Court found that Network Rail had caused a private nuisance against its neighbours by allowing Japanese knotweed to spread onto the neighbours’ land albeit there was no damage. The County Court held that the knotweed was an actionable nuisance because of its effect on the amenity of the land, even if it was treated, and potentially caused a reduction in its value. Network Rail appealed.

The Court of Appeal dismissed the appeal. It upheld the County Court’s decision but found in favour for the claimant for a different reason. It found that the presence of knotweed was an interference with the amenity value of land and rejected the argument that the presence of knotweed on land within seven metres of neighbouring properties was an actionable nuisance based on a reduction of the market value of the property.

Cases concerning Japanese knotweed are relatively new but there are a number of recent rulings on the issue.

Property owners should be very careful to treat and eradicate Japanese knotweed with specialist care and be sure to disclose issues in any conveyancing transaction.

For further information about contentious matters please contact Daniela Catuara.

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Deregulation Act 2015 – assured shorthold tenancy (AST) provisions

From 1 October 2018, the provisions concerning EPCs, gas safety certificates (if applicable) and ‘How to Rent’ checklists as well as the law concerning retaliatory eviction and the new prescribed notice apply to all assured shorthold tenancies regardless of when they commenced. This means that there are additional hurdles for landlords to overcome. In particular, landlords must provide tenants with the relevant documentation before they serve a section 21 notice, otherwise the notice will be invalid.

For further information on contentious landlord and tenant matters please contact Daniela Catuara.

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New code of practice – commercial service charges

The Royal Institution of Chartered Surveyors (RICS) has published a professional statement on commercial service charges, which replaces previous versions of a RICS code of conduct. The statement, which takes effect from 1 April 2019, can be found here.

It sets out best practice in the management and administration of service charges in commercial premises and is a good reference point where there may be difficulty interpreting lease provisions.

For further information please contact Hannah Bambury.

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New HMO provisions

Where a residential property in England or Wales is occupied by more than one household, it may need to be licensed. The type of licence required depends on the area, property and circumstances. With effect from 1 October 2018, in England only, the scope of mandatory licensing was widened by the removal of the minimum number of storeys from the mandatory Houses in Multiple Occupation (HMO) licensing requirements. Previously, the building had to comprise three or more storeys, but mandatory licensing now extends to HMOs occupied by five or more people forming more than one household, regardless of the number of storeys, where the HMO satisfies either the ‘standard test’, or the ‘converted building test’, or where the HMO satisfies the ‘self-contained flat test’, save where it is a purpose-built flat situated in a block comprising three or more self-contained flats. Consequently, more properties will fall within the HMO mandatory licensing scheme. Landlords should consult with their local council if they are unsure as to whether their property falls within the new licensing provisions.

For further information please contact Simon Harris.

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Landlord’s consent to alterations breached landlord’s own lease obligations

The Court of Appeal recently found that a landlord was in breach of its own lease covenants when it consented to a tenant’s application for alterations.

In this case there was a block of nine flats owned by a company. The leases contained various covenants, including:

  1. a covenant prohibiting lessees from cutting into walls and ceilings;
  2. a covenant that the landlord would enforce the covenants given by another lessee of a flat in the building; and
  3. a covenant that all the leases of the flats would contain similar covenants.

One of the lessees asked the landlord for consent to make alterations to its flat that involved cutting into several walls. The landlord was willing to give consent but two other lessees in the building objected on the basis that if the landlord consented then it would not be able to enforce covenants between lessees.

The case reached the Court of Appeal, which found that if the landlord consented and allowed the lessee to do the works then it would be in breach of its own covenant.

For further information please contact Cathy Allen.

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Contract ‘entire agreement’ clause deemed inadequate

The High Court recently found that an entire agreement clause in a contract was insufficient to exclude liability for misrepresentation. Entire agreement clauses are used to exclude any reference to anything other than the contract when interpreting it, for example letters, emails, websites or brochures. The court held that the wording of such clauses needs to be very clear and specific in order for parties to successfully argue they exclude claims for misrepresentation. Even where words are clear it will remain a question of fact in each case whether the clause will sufficiently limit one party’s liability. The wording must go beyond defining the scope of the contractual agreement and excluding other claims.

For further information please contact Gemma Ritchie.

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Letting agents – requirement to join redress scheme

Since 2014 letting agents have been required to join redress schemes. Until August 2018 there were three such schemes: 1) The Property Ombudsman, 2) the Property Redress Scheme; and 3) The Ombudsman Services: Property. The third scheme, The Ombudsman Services: Property, no longer handles consumer complaints in this sector. Any agent who has yet to switch schemes should do so. They should also update their stationery and websites accordingly.

Details of the schemes available can be found at https://www.tpos.co.uk/ and https://www.theprs.co.uk/.

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Rent increase on residential assured tenancy

Section 13 of the Housing Act 1988 sets out the law on landlords increasing rent. The rules as to the notice required are complex including that the landlord must use a prescribed form, and the rent increase should not begin before a certain date (that date depending on when notice is given and the type of tenancy in place). In turn, a tenant who wishes to challenge the rent increase must apply to the First Tier Tribunal (Property Chamber) seeking a determination of the rent payable. The tenant must make such an application before the beginning of the new period specified in the notice. The First Tier Tribunal (Property Chamber) has held that the time limit for a tenant to make an application will be strictly applied as a statutory time limit and that the tribunal has no discretion to extend it. This will be welcome news for landlords. In this particular case the tribunal found that the landlord’s notice was properly completed and served. Had that not been the case, the notice would not have taken effect as it is likely to have been successfully challenged, even if such a challenge was out of time.

For further information please contact Daniela Catuara.

 

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Disclaimer and copyright notice

This service is provided free of charge for information purposes only. The information and opinions contained in this bulletin are not necessarily comprehensive and do not purport to give professional advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this service.

© Gaby Hardwicke June 2018

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