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Real Estate Newsletter – Autumn 2021

Welcome to the Autumn edition of our Real Estate Newsletter.

As winter and the end of the year draws closer, we are taking the opportunity to reflect on some of the main planning and property stories of the last few months.

We would welcome feedback on the content covered below and any comments you may have on the future focus of this newsletter.

Nicholas Brent, Partner and Head of Druces’ Real Estate Team.

Property – General

1. Break Clauses in Commercial Leases – What Does ‘Vacant Possession’ Mean?

Commercial leases frequently stipulate that premises are to be handed back to the landlord ‘with vacant possession’ – but what exactly does that mean? The Court of Appeal pondered the issue in a case concerning an office block that was stripped back almost to the walls prior to the tenant’s departure.

Before it purported to exercise a break clause in the block’s 24-year lease, the tenant removed almost all fixtures and fittings, including ceiling tiles, window sills, pipework and floor finishes. Some of the features stripped out formed part of the original base build of the premises and were either the landlord’s property or elements of the building itself.

After the landlord launched proceedings, a judge found that the break clause had not been validly exercised and that the lease therefore continued in force. The building having been left in a dysfunctional and unlettable state, the premises handed back by the tenant were considerably less than the premises defined in the lease. The stripped-out condition of the building posed a major impediment to the landlord’s use of the premises and the tenant could not, therefore, be said to have given up vacant possession.

In upholding the tenant’s appeal against that outcome, the Court found that the landlord’s interpretation of the break clause had implications that the parties were unlikely to have intended and that ran counter to business common sense. A situation would arise where the tenant would be able to validly terminate the lease if it handed back the premises in a dreadful state of repair, but not if a more than minimal number of ceiling tiles or other original features were missing, regardless of whether the deficiency was the tenant’s fault.

The landlord argued that, if the tenant’s interpretation were correct, it would have been able to exercise the break clause if it had demolished the building altogether, leaving a bare patch of earth. The Court, however, noted the improbability of such a scenario. The tenant had validly exercised the break clause in that it had, in accordance with the lease, handed the premises back to the landlord free of people, chattels and third-party interests.

After ruling that the lease had terminated on service of the break notice, the Court noted that the landlord was not left without a remedy. If it could establish that the tenant had, by stripping out the premises, breached repair or other covenants in the lease, it would be entitled to compensation.

2. Court of Appeal Corrects ‘Absurd’ Drafting Error in Commercial Lease

Judges will generally interpret a commercial lease or any other legal document in accordance with its strict wording – but they are able to make an exception in the event of an obvious drafting error. The Court of Appeal did just that in relieving a tenant of the crushing consequences of an absurd rent review clause.

The case concerned a lease of 15 acres of land granted by a company to a tenant who used it as a solar farm. The lease was for a term of 25 years and 6 months and stipulated an initial rent of £15,000. It included a formula by which the rent payable was to be reviewed on an annual basis.

There was no dispute that the formula was clear and unambiguous on its face. On a literal reading, it meant that the rent would be recalculated annually by reference to a percentage reflecting the cumulative increases in the Retail Price Index (RPI) in all previous years since the start of the lease.

On the basis of average annual increases in the RPI over the preceding 20 years, the tenant estimated that application of the formula would result in its rent being increased to just over £76 million by year 25 of the term.

After the tenant launched proceedings, a judge corrected what he found to be a clear drafting error. He granted a declaration that the rent should increase with the RPI on a non-cumulative basis. If the RPI continued on its average trajectory, that would result in an annual rent of less than £30,000 at the end of the term.

Dismissing the company’s challenge to that outcome, the Court acknowledged that the RPI can, in the rare event of deflation, go down. It was, however, abundantly clear that the literal application of the formula would lead to an absurd, arbitrary and commercially nonsensical result. It was impossible to imagine that any rational landlord or tenant would have intended such a consequence. The Court noted that, although the error was obvious enough when pointed out, it was easy to believe that a draftsperson might not have noticed it at the time.

3. Deemed Commercial Tenancy Inferred from Possession and Payment of Rent

Even in the absence of a formal lease, the existence of a tenancy can in some cases be inferred from an occupier’s exclusive possession of premises and the payment of rent. The Upper Tribunal (UT) did just that in opening the way for a company to seek compensation following the compulsory purchase of its nightclub premises.

The company operated the nightclub, which was located in a railway arch, for about two years prior to the compulsory acquisition of the premises to make way for a rail construction project. The question of whether the company had an interest in the premises for the loss of which it should be compensated by Network Rail Infrastructure Limited was considered by the UT as a preliminary issue.

The company’s primary case was that, at a meeting with representatives of Network Rail and the then tenant of the premises, a final and binding agreement was reached that it would be granted a 20-year lease of the premises at a rent of up to £50,000 a year. In reliance on that agreement, it said it had invested between £1.2 and £1.5 million on improving the premises and fitting them out as a nightclub.

The UT, however, noted that there was no written record of what was agreed at the meeting. Although a tenancy was discussed in principle, the company received no formal or binding assurance that it would be granted a 20-year lease. It proceeded with the fitting-out works in part because it was willing to take some risk in order to get the nightclub open as soon as possible.

However, the company succeeded in establishing its alternative case that it had a periodic tenancy of the premises, from year to year, with the benefit of security of tenure under the Landlord and Tenant Act 1954. To that extent, it had an interest in the premises for the loss of which it was entitled to be compensated.

Although there was no formal document conferring such a tenancy, the UT deemed its existence from the company’s exclusive possession of the premises, the extent of its expenditure on them and its payment, on a quarterly basis, of £18,000 a year in rent. Network Rail’s contention that the company was no more than a tenant at will of the premises was rejected.

4. Commercial Property Developer Fails in Bank ‘Intimidation’ Claim

Banks and other lenders must serve their clients with reasonable care and skill – but they are not obliged to act against their own economic interests. The Court of Appeal resoundingly made that point in the case of a commercial real estate developer who borrowed £75 million on the eve of the 2007 property crash.

After he failed to repay the money, the developer arrived at a compromise with the lender, a high street bank, whereby £10 million of the loan was written off. Certain properties in his portfolio were transferred to a subsidiary of the bank at a price that was well above their market value. Remaining properties were retained by the developer on payment of £20.5 million to the bank.

The developer later launched proceedings, alleging that the bank had breached its duty to provide its services with reasonable care and skill. He claimed that the bank had acted in bad faith in coercing him to enter into the compromise. He said that unlawful pressure placed upon him amounted to intimidation and that the compromise agreement was voidable for economic duress.

Rejecting his claim, however, a judge found that the bank was in no way at fault in its conduct of commercial negotiations, which were carried on at arm’s length and with the benefit of legal advice on both sides. The developer was not coerced into the agreement and the bank had acted in good faith throughout. He had in any event affirmed the agreement and, for five years, had taken no steps to set it aside.

Dismissing his appeal against that outcome, the Court observed that the developer needed no lessons in commercial negotiation skills. The duty that the bank owed to him did not extend to an obligation to advise him how best to resist its attempts to get as much money out of him as it could.

Everything the bank did was rationally connected to its commercial interests and its objective throughout was to recover as much of the loan as possible. Acquisition, via its subsidiary, of part of the developer’s portfolio was only ever a second-best means of achieving that objective. The developer had persuaded the bank to accept the compromise despite its reluctance to do so.

5. Protection of Community Facilities – High Court Steps In to Save Village Pub

It is a common objective of planning policies to protect important community facilities and services – and what is more important than a rural pub? In a case on point, the High Court gave villagers a chance to come up with innovative ways of saving their local hostelry from being converted into a home.

The pub had been closed for 18 months before the local authority granted planning permission to change its use to that of a residential dwelling. Attempts to run it as a going concern had been unsuccessful and it had been on the market for months without a sale being achieved.

In upholding a local resident’s challenge to the permission, however, the Court found that the pub’s lack of commercial viability did not relieve the council of its duty to act in accordance with a local planning policy requiring that the loss of community services and facilities should be resisted.

That policy applied unless there was evidence that local residents had been properly consulted and that consideration had been given to alternative ways of saving the pub. Neither of those provisos had been complied with. Quashing the permission, the Court rejected the council’s argument that, as the pub had closed its doors, it could no longer be viewed as a community facility.

6. Tower Block Owners Granted Pre-Emptive Anti-Urban Exploring Injunction

Commercial property owners are increasingly plagued by so-called ‘urban explorers’ who risk life and limb by scaling high-rise buildings for the entertainment of an online audience. As a High Court ruling showed, however, judges can take effective – even pre-emptive – action to stop such hair-raising acts of trespass.

The case concerned a large and prestigious building site on which a 155-metre-tall office block was under construction. Tower cranes were on site, the tallest of which would measure 162.5 metres. No incursions onto the site by urban explorers had thus far been detected, but its owners and the construction company engaged in the project launched proceedings, seeking a pre-emptive interim injunction.

Granting the application, the Court noted that urban exploring – known as ‘urbexing’ by its aficionados – has become increasingly prevalent since 2018. The internet is awash with footage of urban explorers dangling from cranes and high buildings that they view as trophies. Between June 2013 and September 2019, 17 urban explorers, mostly young men, were known to have died.

The construction company had taken robust security precautions, but online material showed that urban explorers delight in evading such measures. The risk of urban explorers trespassing on the site was sufficiently real and imminent to justify the grant of a pre-emptive order. There was evidence that such orders – which are backed by the threat of contempt proceedings and imprisonment of those who breach them – form an effective deterrent against urban exploring.

Given the difficulty in identifying urban explorers, who, for obvious reasons, tend not to advertise their targets in advance, the injunction was issued against ‘persons unknown’. Without the consent of the owners and the construction company, the order banned anyone from climbing more than five metres above street level on any part of the site. Service of the order would be achieved by prominently displaying weatherproof copies of it on hoardings around the site. The Court gave directions for a further hearing at which a permanent injunction would be sought.

7. Commercial Leases and Opting Out of Security of Tenure – Test Case Ruling

Commercial landlords and tenants may contract out of the security of tenure provisions of the Landlord and Tenant Act 1954, but only if certain conditions are met. One of those conditions came under close analysis by the Court of Appeal in a ruling that will be essential reading for property professionals.

The case concerned six fixed-term leases entered into by a retailer with various linked landlords. In accordance with the Act, warning notices were served on the tenant, giving notice that the leases would not provide security of tenure. The Act required the tenant, in each case, to submit a declaration that it had received the warning and understood its consequences.

The declarations had to be ‘in the form, or substantially in the form’ required by the Act. They were variously expressed, but none of them stated the precise date on which the leases would commence. Some of them stated that the lease would start on a date to be agreed, others that the commencement date would be that on which the tenancy was granted or access to the premises given.

The tenant argued that the declarations did not conform to the requirements of the Act and that it therefore enjoyed security of tenure in each case. Those arguments failed to persuade a judge, who ruled that the declarations achieved their statutory purpose and were effective to exclude the leases from the protection of the security of tenure provisions.

Dismissing the tenant’s appeal against that outcome, the Court noted that it was the tenant’s responsibility to complete the declarations. It was an unattractive argument on the part of the tenant to say that it had done so in a way that invalidated the parties’ agreement to contract out of the security of tenure provisions.

The tenant’s arguments, if correct, would introduce undue technicality to the process and result in practical problems that Parliament could not have intended. It would, amongst other things, be open to a tenant to deliberately sabotage a declaration by inserting the wrong commencement date, thus rendering it invalid.

The declarations submitted by the tenant fulfilled the statutory purpose in that they identified the relevant leases beyond doubt and stated that, after reading the warnings, the tenant understood and accepted their consequences. The declarations were in the form, or substantially the form, prescribed and were thus effective to contract out of the protection provided by the Act.

8. Supreme Court Takes a ‘Real-World’ Approach to Rates Avoidance Schemes – for another approach see Article 9

When assessing whether tax mitigation schemes are effective, judges must interpret legislation in the real world and with regard to the likely intentions of Parliament. The Supreme Court made those points in a test case concerning schemes designed to avoid non-domestic rates (NDR) liabilities on vacant commercial premises.

The schemes involved the proprietors of various empty buildings granting leases of the premises to single-purpose corporate vehicles (SPVs). The intention was that NDR liabilities would fall upon the SPVs on the basis that, when the leases were signed, they became ‘owners’ of the premises in the sense that they were legally entitled to possession of them. The SPVs were subsequently either dissolved or placed in liquidation, leaving NDRs unpaid.

Two local authorities launched proceedings on the basis that they were entitled to unpaid NDRs from the original proprietors. They argued, amongst other things, that the leases did not have the effect of rendering the SPVs ‘owners’ of the premises within the meaning of the Local Government Finance Act 1988. The councils’ claims were, however, struck out by the Court of Appeal on the basis that they stood no real prospect of success.

Upholding the councils’ challenge to that outcome, the Supreme Court noted that there were 55 similar cases waiting in the wings with the value of unpaid NDRs ranging from a few thousand to millions of pounds. It was agreed on all sides that the leases were not shams and that the SPVs were, as a matter of property law, entitled to possession of the premises. However, the schemes had no business or real-world purpose other than the avoidance of NDRs.

The SPVs had no assets or business and it was never intended that they would pay NDRs. Although the leases on the face of it placed rent obligations on the SPVs, there was no intention to demand or pay such rent. In those circumstances, the schemes, which relied upon hoped-for administrative inertia on the part of local authorities, involved abuse of the legal process or insolvency legislation.

Taking a modern approach to statutory interpretation, the Court noted that the Act should be construed as a whole, in the light of its historical context, and with a view to giving effect to the intention of Parliament. The purpose of charging NDRs on unoccupied premises was to deter proprietors from leaving properties unoccupied for their own financial advantage and to encourage them to bring vacant premises back into use for the benefit of the community at large.

The Court interpreted the word ‘owner’, as used in the Act, as requiring more than an immediate legal right to physical possession of a property. Given that the SPVs had no real or practical ability to exercise their possession rights, and the fact that those rights were conferred for the sole purpose of avoiding NDRs, Parliament could not have intended that the SPVs would qualify as ‘owners’ within the meaning of the Act.

The Court found that, notwithstanding the leases, the entitlement to possession of the premises remained with their original proprietors. They, rather than the SPVs, had retained the real ability to decide whether to leave the premises unoccupied. There was thus a triable issue as to whether the original proprietors remained liable for NDRs throughout and the councils’ claims should not have been struck out.

9. Are You Paying Business Rates on Empty Premises? Please refer to Article 8 above

What exactly constitutes ‘occupation’ of a commercial property? The High Court has provided a definitive answer to that question in a ruling which will ease the path to obtaining business rates exemptions in respect of unoccupied premises.

The case concerned a public health body which purchased a large office building to serve as its future national headquarters. On advice, the body moved about 30 crates of documents into the building for two periods of six weeks. Its liability or otherwise to more than £2.5 million in non-domestic rates hinged on whether the property could be viewed as having been occupied during those periods.

The local authority for the area argued that the installation of the crates fell short of actual occupation and merely gave a semblance of occupation. The presence of the crates, the contents of which were alleged to be obsolete and ripe for disposal, was said to be too trifling to establish the body’s intention to occupy the premises.

Ruling on the dispute, the Court noted that, under rating rules, it is possible to reduce non-domestic rates liability for a property by occupying it for a period of six weeks, then leaving it empty for three months in a cyclical pattern. The effect of such arrangements is that the property is subject to rates during the six-week periods of occupation and effectively exempt during the three-month periods of vacancy. The total rates liability for such a property is reduced to about one third of what it would be if the property were left empty for the same period.

Resolving the occupation issue in the body’s favour, the Court noted that it was quite open about its rates mitigation motive in shifting the crates in and out of the property. It did not seek to convey an impression that differed from reality and was not intent on creating merely a semblance of occupation. The minor issue concerning the utility of the crates’ contents was immaterial.

The Court noted that there is no requirement that use of property must be substantial in order to constitute occupation. Minimal, eccentric, even whimsical uses, like the storage of empty pizza boxes, may be sufficient to establish occupation. The storage of the crates was of some value or benefit to the body and served a purpose that went beyond upkeep or development of the property itself.

Only one possible conclusion, the Court ruled, could be drawn from the presence of the crates – that the body was in occupation of the premises during the two six-week periods. In taking the opposite view, the council had erred in law. The council was on that basis ordered to repay to the body £2.5 million in non-domestic rates that it had previously remitted under protest.

The Court observed that, unless a possessor of commercial property misunderstands the law or takes a wrong step, it is in a position to benefit by occupying and vacating the property at times of its choosing. There was nothing surprising or disturbing about that conclusion, which flowed from the established principle that the Court is not an arbiter of morals, but of law.

10. Charitable Donations of Land for Schools – Supreme Court Test Case

Hundreds of British schools are located on land that was donated by charitable benefactors in the dim and distant past. In an important test case, the Supreme Court considered whether the proceeds of sale of such plots should revert to the donor’s heirs or continue to be available for the purposes of education.

The case concerned a council-run primary school that stood on a plot of land donated by a wealthy financier in 1914 and 1928. The expanding school moved to a new site in the 1990s, leaving the plot vacant. After it was later sold to a property developer for over £1.24 million, the council used the money to help fund the school’s new premises.

Four of the donor’s heirs launched proceedings on the basis that, when the plot was left empty, it ceased to be used for the purposes of the school. They asserted that ownership of the plot reverted to them at the moment when the plot fell vacant and that they were thus entitled to the proceeds of sale. Those arguments did not persuade the High Court but succeeded before the Court of Appeal.

Ruling on the council’s challenge to the latter ruling, the Supreme Court noted that the case hinged on the correct interpretation of the School Sites Act 1841, which enabled benefactors to give up to one acre of land to be held on charitable trust for educational purposes. Although there were no recent statistics, it was estimated in 1981 that more than 2,000 schools stood on sites donated under the Act and so would be potentially affected by the outcome of the case.

Section 2 of the Act provides that, if donated land ceases to be used for an educational purpose, it reverts to the donor or the donor’s heirs. However, where schools need new premises, Section 14 of the Act permits trustees to enable relocation by selling or exchanging donated plots.

Upholding the council’s appeal, the Court found that the relevant plot had not ceased to be used for the purposes of the school, even after its relocation. Despite its temporary vacancy, the council’s intention was always to use the proceeds of its sale to defray the cost of the school’s new premises.

Giving effect to what it found was Parliament’s purpose in passing the Act, the Court ruled that priority should be afforded to the continuation of the charitable objective envisaged by the donor. Any other interpretation of the legislation was likely to have unfortunate effects, educationally or financially.

11. Singapore Property Market Collapse Triggers Commercial Contract Dispute

No commercial contract, however carefully drafted, can make flawless provision for a future that is always unknowable. In a case on point, the Court of Appeal pondered the legal consequences after a luxury flats development was hit by a dramatic and unforeseen collapse in property prices.

The development constituted a 16-storey building in an exclusive residential enclave in Singapore, providing 28 top-end apartments. A highly regarded interior design company was engaged to work on the project for a fee of $1.6 million, plus incentives and potential commission on sales.

A quick sale of the flats was envisaged before the 2008 financial crash intervened. Due to the resulting decline in the Singaporean property market, the developer had since been unable to sell the flats for anything like the prices that were originally hoped for. None of them had been sold to date.

In accordance with its agreement with the developer, the company had received one third of its fee, $480,000. The balance, however, only became payable on the sale of apartments. In those circumstances, it launched proceedings arguing, amongst other things, that the developer was under an implied contractual obligation to market and sell the flats within a reasonable time.

In dismissing the company’s claim, however, a judge ruled that the developer was under no such obligation. The agreement included no express timeframe for sale of the flats. It was unlikely that the developer would have taken on an obligation to sell flats against its wishes, in a depressed climate, so as to enable the company to earn the balance of a fee which, in the grand scheme of things, was relatively small.

Rejecting the company’s appeal against that outcome, the Court noted that the agreement was commercially coherent as it stood. The implied term contended for was neither obvious nor necessary to give the agreement business efficacy. The company had chosen to entrust the sale of the flats to the developer.

Given its entitlement to share in the hoped-for upside of the development, whilst retaining its right to its fee come what may, it was unsurprising that the company had agreed to take the risk of having to wait for payment. The developer had invested vast sums in the project and it was commercially counterintuitive for it to have anything other than absolute control over the timing of sales.

12. Commercial Tenants’ Rent Obligations Continue Unabated During Lockdowns – refer also to Article 13

The burning question in many commercial tenants’ minds is whether they are obliged to pay rent even though the COVID-19 pandemic has forced them to shut down their premises and cease trading. In a ground-breaking case, the High Court has ruled that, no matter where sympathies may lie, the answer to that question is ‘yes’.

Institutional landlords issued proceedings against three well-known and substantial tenants seeking payment of arrears of rent, plus VAT and interest. In resisting the claims, the tenants argued that, on a proper interpretation of their leases, no rent was payable during periods of lockdown when closure of their premises was compelled or necessitated by the Covid Regulations.

They asserted, amongst other things, that the landlords should seek to recover lost rent from their insurers and that it was the landlords’ fault if no such insurance was in place. Lockdowns were said to be unforeseen supervening events that frustrated the whole purpose of the leases. Having obtained no benefit from their premises during legally enforced periods of closure, it was argued that obligations to pay rent were temporarily suspended.

The Court, however, preferred the landlords’ interpretation of the leases and ruled that there was no express or implied basis on which the tenants could be excused from paying rent during lockdowns. Notwithstanding the existence of the Covid Regulations and their dire impact on the hospitality industry and non-essential retailers, rents fell due and became payable in the ordinary way.

Although it was impossible not to feel sympathy for the tenants, the Court noted that the landlords were in a position akin to trustees and that their investors, many of them pensioners, were entitled to look to them to provide returns. The issue in the end came down to whether tenants, landlords or insurers should bear the brunt of the massive financial losses arising from the pandemic.

The tenants argued that the law should be adapted to cater for the unprecedented health crisis so as to achieve what they viewed as a fairer apportionment of risk. The Court, however, found that that was a matter for Parliament, not judges. The need for legal certainty was paramount and, on the application of settled legal principles, the tenants had no viable defence to the landlords’ claims. The landlords were awarded summary judgment on the rent, VAT and interest claims that were common to the three tenants.

13. High Court Grants Breathing Space to Commercial Tenant Hit by Pandemic – see also Article 12

Many commercial tenants who are experiencing cash-flow crises due to the COVID-19 pandemic have been constrained to stop paying rent and are racing to restructure their debts – but where does that leave their landlords? The High Court squarely confronted that issue in a guideline case.

There was no dispute that the landlord of a health club, part of a national chain, was owed more than £900,000 in respect of the premises after rent was withheld in four successive quarters at the height of the pandemic. In seeking summary judgment in the amount of the debt against the club’s corporate tenant, the landlord said that, in accordance with government guidance, it had not pressed the tenant too hard and had held back from taking enforcement action for a considerable period.

In arguing that the claim should be stayed, however, the tenant pointed out that proposals to restructure its debts were at an advanced stage and would shortly be submitted for judicial approval under Part 26A of the Companies Act 2006. The scheme would involve shareholder injections of £45 million in fresh funding and a further £22.3 million in liquidity support. The restructuring was said to offer a far better outcome for creditors than if the tenant were to fall into administration.

Granting the stay sought, the Court noted that more than 75 per cent of the tenant’s secured creditors had already indicated their support for the scheme and that there was, at minimum, a reasonable prospect of it receiving judicial sanction. Firm court dates had been set for the hearing of the tenant’s application.

The tenant argued that, were an immediate judgment granted to the landlord, the scheme could be seriously disrupted. The amount of the judgment debt would probably have to be removed from the pot available to creditors and the landlord would be in a position to recover substantially more than others in the same position.

In the interests of equal treatment of all the tenant’s creditors, the Court found that the restructuring process should be allowed to proceed without a judgment being entered in the landlord’s favour. Overall, the interests of the wider class of creditors trumped the landlord’s private interests. The order staying the claim included a recital that the landlord was entitled to judgment.

14. Landlords – Are You Complying with the Letter of Your Tenants’ Rights?

Service charges are by far the most common source of disputes between residential tenants and their landlords. As an Upper Tribunal (UT) ruling showed, landlords who fail precisely to abide by the letter of leases when collecting them place themselves in financial jeopardy.

A landlord’s managing agent served a demand on a residential tenant requiring her to pay advance services charges of £2,255. It stated that payment of that sum was due ’30 days after date of demand’. After she failed to pay, the landlord launched County Court proceedings against her which were later transferred to the First-tier Tribunal (FTT).

In dismissing the landlord’s claim, the FTT noted that the tenant’s lease stated in terms that she was entitled to ‘not less than one month’s notice’ of any advance service charges before she was required to pay them. The demand was invalid in that the payment deadline it purported to set was not compliant with the wording of the lease. The tenant therefore owed nothing.

In dismissing the landlord’s challenge to that outcome, the UT noted that, allowing for time taken by postal delivery, the landlord gave the tenant only 29 days’ notice of the demand, possibly less. Given that every month of the year, save February, has 30 or 31 days, the notice period given was not equivalent to the full calendar month required by the lease.

The notice provision in the lease was a proviso, or mandatory condition, which had to be satisfied before any sum became payable. Although the sum at stake was relatively modest, the UT’s decision had important implications for the landlord in terms of legal costs.

Property – Planning

15. Planning Rules Do Not Require Preservation of Listed Buildings in Aspic

Planning rules do not require listed buildings to be preserved in aspic and changes that do no harm to their character, setting and architectural merit will sometimes be permitted. In a case on point, the High Court gave its blessing to the proposed extension of a listed house in the academic heart of Cambridge.

The mid-19th-century brick-built house is part of a group of listed buildings that front onto the rear of a historic college. Using delegated powers, planning officers granted consent for replacement of a one-storey extension with a one- and two-storey extension. That was despite local objections that the development would partially obscure views of a neighbouring, larger listed building. Opponents viewed the proposed extension as a gross overdevelopment of the site.

The council, however, said that the development would not affect any features of the house or its neighbour that were of architectural significance. The particular features mentioned in the listing were at the front, rather than the rear, of the buildings. The area had already undergone significant change and the council decided that the extension would cause no harm to the setting of the listed buildings. It would not inflict any damage on the fabric of the house and was in any event reversible.

Dismissing a local objector’s challenge to the permission, the Court found that, although the extension was intended to be permanent, the council was entitled to take into account the reversibility of the development. The fact that the extension would render parts of the larger listed building no longer visible from some viewpoints did not necessarily equate to harm to its setting.

The Court emphasised that the question was not whether the appearance of the larger building would be affected by the proposal, but whether any such effect would be adverse to a material degree. Given the council’s view that the building’s rear elevation had no particular architectural merit, the decision to grant planning permission could not be characterised as irrational.

16. Embarking on a Property Development? Consulting a Solicitor is Step One

Before embarking on any form of property development it is absolutely vital to seek a lawyer’s confirmation that you are entitled to proceed. The point was underlined by the case of a couple who knocked down their home and replaced it with a block of flats in breach of their neighbours’ rights.

The couple’s home was on an estate characterised by spacious residences in leafy gardens. With a view to downsizing, they obtained planning permission to demolish their house and erect a building containing five flats in its place. After proceeding with the development, they moved into one of the flats and planned to sell the others on long leases.

Lurking in their title deeds, however, were restrictive covenants that dated back to the 1920s. They restricted the number of dwellings that could be built on the estate and dictated that only one private dwelling could be erected on the couple’s plot. It was not disputed that the development, which was largely complete, had been carried out in breach of those covenants.

The couple said that the breach was entirely inadvertent and that they were unaware of the covenants’ existence until it was pointed out to them by an objector to the development. Unless the restrictions were modified, they accepted that they would have to convert the new building back into a single dwelling.

In the hope of legitimising the development, they applied to the Upper Tribunal (UT) under Section 84 of the Law of Property Act 1925 for such a modification to be made. Their application was resisted by more than 50 of their neighbours and the company which owns the road that runs through the estate.

The UT accepted that the development represented a reasonable use of the couple’s plot. In refusing their application, however, it noted the objectors’ concerns that it formed the thin end of a wedge. They feared that the development would give a perceived green light to developers and that, over time, it would result in a proliferation of flats on the estate.

The covenants continued to confer on the objectors a practical benefit of substantial advantage in that they preserved the current sparsely developed character of the estate. In those circumstances, the UT ruled that it had no power to modify the covenants, which would remain unchanged.

17. Has Your Property Been Compulsorily Purchased? Don’t Sit on Your Hands!

If your property has been compulsorily purchased by a public authority to make way for an infrastructure project, you should be entitled to compensation. As one case showed, however, such claims are subject to a strict time limit and lodging them at the last possible moment is an unnecessary gamble that you may well not win.

A property developer’s long leasehold interest in land and buildings was compulsorily acquired by a local authority to enable construction of a transit system. That interest was vested in the council at midnight on 1 July 2014. By virtue of Section 10(3) of the Compulsory Purchase (Vesting Declarations) Act 1981, the developer had six years to refer its compensation claim to the Upper Tribunal (UT).

The claim – which the developer valued at over £1.3 million – was referred to the UT by email at 5:08pm on 30 June 2020. In resisting the reference, the council asserted that the deadline expired at 5pm on that day and had thus been missed. The time limit being strict and incapable of extension, it argued that the UT had no power to entertain the developer’s claim.

Ruling on the matter, the UT accepted that the deadline expired on 30 June, rather than on 1 July 2020. On a correct interpretation of the tribunal’s procedural rules, however, it found that time did not run out until midnight on that day. The reference was thus narrowly in time and would be permitted to proceed.

The UT observed that the case served as a salutary warning to litigants of the grave consequences that can arise from leaving the submission of references or other types of appeal to the very last moment.

18. Traveller Sternly Punished for Calculated Breaches of Planning Control

Deliberate flouting of planning rules is likely to have severe consequences and can even result in imprisonment. In one case, a traveller whose arrival on farmland with his family caused fury amongst villagers received a suspended jail term for his repeated disobedience of court orders.

About a year after he purchased the agricultural plot, he began to populate it with his extended family. There were eight caravans in situ when the local authority obtained an emergency injunction that forbade any further development of the site. However, excavation and other works continued thereafter and, by the time a second order was obtained, the number of caravans had swelled to 13.

The man explained that his family had been forced to relocate following an arson attack on their former home. His father, who had since died, had at the time been diagnosed with terminal cancer. After the first three caravans arrived, a retrospective application for planning permission had been made.

After the council took action, however, a judge found that his repeated breaches of the orders each amounted to a contempt of court. The judge had no doubt that he took up occupation of the site in the full knowledge that doing so was in clear and obvious breach of planning control. He was also fully aware of the potential penal consequences of disobeying court orders.

He was no novice when it came to planning matters and the judge ruled that no sentence other than committal to prison would be adequate to mark the gravity of his conduct. His calculated and planned breaches had caused considerable concern in the village and he had shown little remorse. An eight-month jail term was an appropriate punishment.

Suspending the term, however, the judge noted that the man was already in custody, having been recalled to prison in connection with an unrelated offence. He also bore in mind additional hardships that COVID-19 restrictions had placed upon prisoners and the impact of incarceration on the man’s family and employees. He received, however, a stern warning that any further breaches of court orders would be likely to result in immediate imprisonment.

19. Planning Error Authorised Massive Holiday Park Expansion

Mistakes made by planners can have grave consequences stretching far into the future. That was certainly so in the case of a permission which was inadvertently granted for a massive expansion of a holiday park in the midst of an area of outstanding natural beauty (AONB).

The park, made up of lodges, caravans and camping facilities, was long established on a coastal site. The planning permission, granted in 2014, was intended to do no more than extend the park’s opening times. Attached to it, however, was a plan on which a red line demarcated an area of land far larger than the existing park.

The line encompassed roughly 22 hectares of land – all of it within the AONB and most of it owned by third parties – on which no caravans or lodges had previously been placed. Some years passed before the mistake was detected and a local residents’ association launched a judicial review challenge to the permission.

The local authority and the park’s owner agreed that a mistake had been made. The latter, however, defended the permission on the basis that the association’s case had been lodged far too late. Challenges to planning permissions must generally be brought within six weeks but, in this case, six and a half years had passed.

In quashing the permission, however, the High Court described the case as unique. The council had erroneously granted consent for a different purpose, and in respect of a different area of land, than it intended. The permission was in clear conflict with a number of local and national planning policies and no thought had been given to the objective of conserving and enhancing the AONB.

The Court acknowledged that not all of the exceptionally long delay in launching the proceedings was readily explicable and that the park’s owner would suffer some financial and other prejudice if the permission were quashed. The overriding factor, however, was the harm to the AONB that would flow from upholding the consent.

The interests of the credibility of the planning system also weighed heavily in favour of quashing the permission. The Court noted that it would be very hard to explain to a member of the public why a permission that was granted in complete error should remain extant.

 

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