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News and Comment
How much rent do I have to pay!? – PCE Investors v Cancer Research
How much rent do I have to pay!? – PCE Investors v Cancer Research
You are an occupier of commercial premises with a lease which requires rent of £190,000 per annum to be paid quarterly in equal instalments in advance on the usual quarter-days (25 March, 24 June, 29 September and 25 December ). You have a clause in your lease entitling you to bring it to an end by giving 6 months’ notice in writing to your landlord ending on 11 October 2011 (“the termination date”). The break will take effect provided that you have paid the rent in full “up to the termination date” and provided that you give vacant possession of the property to the landlord on 11 October 2011.
How much rent do you need to pay on 29 September 2011? You might think that you have to pay £6,767.12. That is the amount of rent that covers the period of 13 days between 29 September 2011 to 11 October 2011: (£190,000 / 365 days) x 13. That certainly seems logical because the break clause requires the rent to be paid “up to the termination date” and because it surely cannot have been intended that you have to pay rent for any time after the lease has come to an end on 11 October 2011.
Unfortunately for you that is not the right answer. The right answer is that the lease contains an obligation to pay a quarter year’s rent, that is to say £47,500, on each quarter day, so that is the amount that you should have paid on 29 September 2011. The reference to paying the rent due “up to the termination date” is actually a requirement to pay all the rent that is liable to be paid up to that date.
This scenario is a very common one and it never ceases to surprise commercial occupiers of property the first time they come across it. It never ceases to aggravate them either because in reality they are having to pay an amount of rent for a period of time after the lease has come to an end.
Not unnaturally I often get asked whether it is possible to challenge this in Court. My answer is no, because the law is very clearly on the landlord’s side on this issue. Nevertheless a tenant has recently tried to challenge this point in the case of PCE Investors Limited -v- Cancer Research UK and got badly burned in the process.
Having paid a lesser amount of rent for the period 29 September to 12 October, it has found that, in trying to save about £39,712.33, it has made itself liable for the full rent of £190,000 per annum plus all the other associated charges under the lease for the remainder of the contractual term to 27 September 2014, the Judge having ruled that its break notice was invalidated by its failure to pay the correct figure by the termination date. Its total liability for failing to get it right is likely to be more than £517,000 in extra rent to September 2014 and probably the landlord’s costs of the action.
This post emphasises again the pitfalls and bear-traps that lie in wait for tenants to seeking exercise break clauses in leases and follows on from Karen Chapman’s post on break clauses and our briefing note on the case of Avocet Industrial Estates v Merol Limited. The answer for tenants is to speak to a lawyer specialising in landlord and tenant law – and here that means me, Julian Johnstone, Head of Druces LLP’s Litigation & Dispute Resolution team.
Posted in News and Comment
Tagged break clause, high court, julian johnstone, property, rent
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My lease has come to an end, … hasn’t it?
My lease has come to an end, … hasn’t it?
In these times of economic uncertainty everyone in business is looking at ways of reducing their costs. If you are a business tenant, reviewing your property requirements is often an obvious starting point.
So you check your lease and see that there is a clause allowing you to bring your lease to an end early by serving a break notice and that the date for serving the notice is coming up shortly. You decide it would be in the best interest of the business to take advantage of this. You have plenty of time to serve a notice and the lease tells you what you must and must not do to get it right. It all looks pretty straightforward so you ask your in-house property administrator to get the notice off to the landlord.
Confident that all is well you make plans to leave the building and maybe even sign up to relocate. Your rent is up to date and you are going to make sure you leave the property in good repair when you go.
Out of the blue the landlord refuses to accept that the lease has come to an end on the break date. It turns out your notice is defective or you have not complied fully with the pre-conditions in the lease for the valid operation of your break notice and it is too late to put things right. Your lease is not going to end after all.
We have seen many cases of tenants getting what appears to be a relatively simple process wrong because the law relating to the preparation and service of break clauses and compliance with pre-conditions is so strict. In a recent case, Avocet Industrial Estates LLP -v- Merol, the tenant’s failure to pay £130 of interest arising out of the late payment of rent under its lease was enough to mean its break notice was ineffective, leaving it liable for 5 more years of rent, service charges and other costs.
The consequences of getting a break notice wrong can often be financially very serious – you may have tried to break a 25 year lease at year 10 and suddenly have another 15 years to go. In a weak letting market, landlords do not want to lose income from existing tenants, so many are unlikely to waive their strict contractual entitlements to continue treating a lease as continuing when a break notice has been incorrectly prepared or served.
You might think it is not worth asking a lawyer to review your lease or to serve the break notice for you. However, we know what the potential pitfalls are and we know how to avoid them. Using us could save you a substantial amount of money in rent, service charges and insurance premiums. Money well spent.
Please give me, Karen Chapman, Partner in Druces LLP’s Property team or Julian Johnstone, Partner in Druces LLP’s Litigation & Dispute Resolution team a call if you would like us to help you draft and serve your break notice and advise you as to your lease obligations generally. We can also help you if you are relocating to new premises
Posted in News and Comment
Tagged avocet v merol, break notice, julian johnstone, karen chapman, property
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High Court orders O2 to disclose customer details of pornographic film filesharers
High Court orders O2 to disclose customer details of pornographic film filesharers
The High Court has ordered Telefonica UK Limited, trading as O2, to disclose the names and addresses of its broadband customers who are alleged to have committed copyright infringements through BitTorrent filesharing of pornographic films.
Arnold J stated in his judgment that the claim by Golden Eye (International) Limited and Ben Dover Productions was one made by a copyright owner and its exclusive licensee and that they had a good arguable case that many of the relevant intended defendants had infringed their copyrights by peer-to-peer file sharing of the films. It was held that the interests of the claimants in enforcing their copyrights outweighed the interests of the intended defendants in protecting their privacy and data protection rights.
The full judgment can be accessed at Golden Eye (International) Limited & Anor v Telefonica UK Limited (2012) http://www.bailii.org/ew/cases/EWHC/Ch/2012/723.html
You don’t need a Shareholders Agreement, do you?
You don’t need a Shareholders Agreement, do you?
Your business is up and running, it’s growing fast and everyone gets on really well. You all want the same thing, right? A successful venture, to build the company and to exit in 5 years? Oh, I see, you want to have a 3 year plan instead and then get one of the big boys involved? Actually, you’d rather have regular dividends and a longer-term growth strategy? Oh, you want your other business partner to get involved – he can subscribe for new shares, yes? Or buy some of yours? He can be on the Board as well, right?
Still think you all want the same thing?
A Shareholders Agreement can be the elephant in the room. Everyone involved would like to have one in place, but there’s so much going on that it gets pushed to the bottom of the wish-list as something that’s too time-consuming or expensive to deal with. Then people start to want different things and that’s when the trouble starts.
If you don’t have a Shareholders Agreement you have to rely on the Companies Act 2006 and the Articles of Association. You could find out the hard way that something as basic as getting first refusal on the issue of new shares or having the right to appoint a director isn’t covered. Or you might find that the provisions on share transfer in the Articles of Association make it impossible for you to sell your shares, even if you could find someone who wanted to buy a minority shareholding in a private company with no right of veto over major decisions.
It doesn’t have to be that way. You’re all the best of friends right now, so now is the time to get it sorted out. A couple of hours talking to a lawyer who knows what they’re doing and you can agree what you want and how you can take it forwards. You can then get the Shareholders Agreement and Articles drafted that really work for you, giving you the flexibility you need to run your business and the security of knowing where you stand.
That lawyer I mentioned, the one who knows what they’re doing. Turns out it’s me. Check me out on LinkedIn at: www.linkedin.com/in/susanperrylegal or drop me a line on s.perry@druces.com.
Susan Perry is a Senior Associate in Druces LLP’s Corporate & Commercial team. She works with Entrepreneurs and Businesses.
Posted in News and Comment
Tagged business, corporate, Corporate & Commercial, entrepreneurs, shareholders agreement, Susan Perry
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The Deep celebrates the 10th anniversary of its opening
The Deep celebrates the 10th anniversary of its opening
Druces LLP is pleased to pass on its congratulations to the Deep on the 10th Anniversary of its opening. The Deep, one of the most spectacular aquariums in the world is located in Hull, East Yorkshire and is the world’s only submarium. Druces LLP was involved in the structured lease financing relating to the project and we are especially pleased to see that the Deep is now the most successful of the Millenium Projects having attracted over 4.5million visitors since its opening.
Neil Porteus, Finance Director, The Deep commented “Druces LLP were instrumental in assisting The Deep to secure the last £3m of capital funding to complete its stunning aquarium in Hull and so it is fair to say that we wouldn’t be here today – let alone be 10 years old – without the most invaluable advice of Druces LLP! In the intervening years, Druces LLP have continued to provide advice on a range of issues and we are entirely grateful for their wise counsel.“
Please speak to Richard Monkcom, head of Druces LLP’s Private Client team or Toby Stroh, head of Druces LLP’s Corporate & Commercial team for more information about structured lease finance and our corporate law services
Posted in News and Comment
Tagged corporate law, richard monkcom, structured lease finance, the deep, toby stroh
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Budget Update 2012 – Stamp Duty Land Tax
Budget Update 2012 – Stamp Duty Land Tax
The Chancellor has today announced that with effect from 22 March 2012 the rate of Stamp Duty Land Tax (SDLT) will be 7% for residential properties over £2 million. In addition the Government intends to tackle the “enveloping” of high value properties into companies by introducing a 15% rate of SDLT for residential properties over £2 million purchased by “non-natural persons, such as companies”. This new rate will take effect on 21 March 2012. In addition, the Government will consult on the introduction of an annual charge on residential properties valued at over £2 million owned by “non-natural persons” with the intention of legislating in the Finance Bill 2013 for commencement in April 2013.
Please contact Susan Perry, Senior Associate in Druces LLP’s taxation team for further information on Stamp Duty Land Tax and the changes imposed by the Budget.
Pre-Action Protocol for Disrepair claims in commercial property comes into force
Pre-Action Protocol for Disrepair claims in commercial property comes into force
Dilapidations claims involve the resolution of tenants’ obligations to repair and decorate the property let to them, usually at the end of their lease. The tenants’ obligations to repair and decorate are normally set out in covenants contained within their lease. A failure to comply with those covenants may give the landlord a claim for damages.
A pre-action protocol for dilapidation claims was introduced by the Property Litigation Association in 2002 to help parties resolve claims before the issue of legal proceedings. The protocol sets out the information that a landlord is expected to give the tenant about the claim and the information that the tenant is expected to give in response. The protocol was subsequently endorsed by the Royal Institution of Chartered Surveyors (RICS) as ‘best practice’, and has been adopted and employed ever since by both surveyors and property litigation practitioners.
The snappily entitled “Pre-Action Protocol for Claims for Damages in relation to the physical state of commercial property at termination of a tenancy (The “Dilapidations Protocol”)“ is now formally adopted as a pre-action protocol under the Civil Procedure Rules pursuant to the 58th Update on 6 April 2012, although as yet the protocol has not been published by the Ministry of Justice website on the Civil Procedure Rules pages. The formal adoption means that compliance with the protocol is more important than ever as conduct can now be assessed by a Court when considering the question of costs.
Please speak to Julian Johnstone, Head of Druces LLP’s Litigation & Dispute Resolution team or Benjamin Lomer, Senior Associate in the same team for more information
Posted in News and Comment
Tagged court, dispute resolution, julian johnstone, landlord and tenant, litigation, property, property litigation
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Charitable Status Victory for Independent Schools
Charitable Status Victory for Independent Schools
The Sunday Times and the Daily Telegraph have reported that the Charity Commission has announced it will no longer assess the public benefit of Independent Schools. Following the judgment in the case of The Independent Schools Council -v- The Charity Commission and others (see our Briefing Note) the Charity Commission was expected to issue revised guidance on public benefit. However it appears that they have now accepted defeat in their six year battle with Independent Schools over charitable status.
The Commission has said that instead of assessing Independent Schools to establish whether they have the requisite public benefit, schools will simply be able to determine for themselves whether they are operating for the public benefit. The Charity Commission will then only act against the school in the event that they receive a complaint and evidence that they are abusing charitable status. While this move does not give free reign to Independent Schools to deviate from the principles of charitable status or public benefit, it suggests that they will now have a greater degree of flexibility.
Please speak to Richard Monkcom, head of Druces LLP’s Private Client team for further information
Posted in News and Comment
Tagged charities, charity commission, charity law, independent schools, public benefit
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Pump Court Tax Chambers sets up Tax and Finance ADR Panel
Pump Court Tax Chambers sets up Tax and Finance ADR Panel
In response to Her Majesty’s Revenue & Customs pledge to make available alternative forms of dispute resolution to taxpayers, Pump Court Tax Chambers have announced a Tax and Finance Alternative Disputes Resolution Panel.
Providing the widest possible expertise, the panel is drawn from current Members of Chambers, in particular Giles Goodfellow QC (ADR Chambers accredited) and Penny Hamilton (CEDR accredited). In addition, former Member of Chambers, Sir Stephen Oliver QC (ex-President of the Tax Chamber of the First-tier Tribunal) and Dr. John Avery-Jones CBE, who has recently retired as a Judge of the Upper Tier Tribunal (Tax and Chancery Chamber), have been invited to join Chambers. Also, Peter Nias (CEDR accredited), formerly partner and head of McDermott Will & Emery’s tax practice, will join on re-qualifying as a Barrister. Peter Nias has been working with HMRC’s Dispute Resolution Unit in developing a collaborative dispute resolution programme.
The panel offer their services as Mediators, Arbitrators, Facilitators and Expert Witnesses in all tax disputes and other financial disputes, for example, those arising from the Financial Services & Markets Act and disputes between States in relation to the application of taxation treaties.
All enquiries should be made to the Senior Clerk to Chambers, Nigel Jones