Lawyers to the real estate & construction industry
overriding
interest
Autumn 2004
contents
Property Managers:
take note!
1
E Conveyancing
2
Legal Cases
3
Deals - Autumn
4
Who to contact
4
Welcome to the
Autumn edition.
We are pleased to tell you that we
will be merging with the US law firm
of Kirkpatrick & Lockhart LLP with
effect from 1 January 2005. The
merger will, we believe, allow us to
continue to attract the best lawyers,
increase our international work and
widen our existing practice areas.
Naturally that will include real
estate.
On more mundane matters...
Commonhold came into effect at the
end of September 2004. It is
designed to facilitate condominium
style ownership arrangements but
will also be useful for mixed and
Property Managers:
take note!
Readers of OI may already be aware
of the forthcoming changes to the
regulation of insurance sales, the
details of which we summarise below.
New Regime
From January 2005, the Financial
Services Authority's (FSA) powers are
to be extended to include the
compulsory regulation of general
insurance sales and administration.
After that date, it will be a criminal
offence to operate in this area unless
in accordance with the new FSA rules.
commercial schemes.
We will provide an overview in a
future issue.
www.ngj.co.uk
The regulations are to be widely
applied and will affect the majority of
firms involved in property
management. Regulated activities
include:
J Advising on contracts of insurance;
J Concluding contracts of insurance
as agent for someone else;
J Arranging for someone to enter
into an insurance contract; and
J Assisting in the administration and
performance contracts of
insurance.
Firms carrying out regulated insurance
activities have two choices:
J To become directly authorised by
the FSA; or
J To become an appointed
representative of a firm authorised
by the FSA.
overriding
interest
...continued from page 1
Direct Authorisation
On becoming FSA authorised, a firm
must comply with the detailed
requirements of the FSA rules.
Broadly, these rules fall into six areas:
1. Fees
Firms must pay an application fee,
an annual fee and make
contributions to the Financial
Ombudsman Service and the
Financial Services Compensation
Scheme;
2. Financial requirements
Firms must maintain levels of
capital and professional indemnity
insurance and hold client monies in
accordance with FSA client money
rules. The FSA is the process of
consulting on the handling of client
monies by property managing
agents. The outcome may be to
limit client money regulation
simply to compliance with section
42 of the Landlord and Tenant Act
1987;
3. Insurance Conduct of Business
Rules
These are prescriptive rules that
govern the way in which firms
provide insurance related services
to clients;
4. Training
The staff involved in insurance
activities must be vetted and
trained on an ongoing basis to
ensure they are competent to
perform those activities;
5. Systems and controls
Firms must have documented
systems and controls which are
appropriate to its business,
2
including controls to ensure
compliance with FSA rules; and
6. Approved persons
At least one individual within the
firm will need to be individually
approved and registered with FSA.
Appointed
Representatives
An appointed representative (AR) can
carry on regulated activities without
being FSA authorised. Instead, the
authorised firm who appoints the AR
accepts responsibility to FSA and to
customers for the AR's activities. The
firm that appoints the AR will have to
ensure the AR's compliance with FSA
rules.
The RICS is discussing with the
Government the possibility of its
becoming a designated professional
body and taking on the role of
regulator for chartered surveyors who
provide insurance services for their
clients. However those discussions
will not be concluded before the
January 2005 deadline.
Further guidance
The FSA has published a guidance
paper for Property Managers. Also
details of the changes can be
obtained from the RICS's website.
E Conveyancing
The computerised conveyancing
system which will allow conveyancers
to obtain information and agree
documentation on-line is already
being used by a large number of
residential conveyancers. The
Government and Land Registry are
keen to see e-conveyancing used for
all residential conveyancing
transactions in the anticipation that
this will speed up and significantly
improve the conveyancing process.
In the long term it is hoped that
commercial conveyancing will also
follow the same route. However,
there is no immediate likelihood of
this, given the highly individual nature
of each transaction and the
documentation involved.
Land Registration
The Land Registration Act 2002 has
now been in force for a year. The Act
was brought in to move towards the
Government's stated goal that all land
in the United Kingdom will be
registered at Land Registry in due
course - so called "Total Registration".
In 2008 the Government is to
undertake a review of progress
towards this goal and, although no
clear statement has been made, it
may be that measures will be brought
in to make unregistered land
compulsorily registerable. It may
therefore be worth thinking sooner
rather than later about any large areas
of unregistered land which you could
put forward for voluntary registration.
Autumn 2004
Legal cases
Restrictive Covenants
Break Clauses
A restrictive covenant not to use
land as a cinema was held not to
have been breached by the use of
the land for access to a mixed retail
and cinema development.
A lease break clause expressed to be
personal to the original tenant but
assignable to specified classes of
assignees was held to have passed
on an assignment despite there
being no specific reference to the
break clause in the assignment
deed.
Comment: The Court said that if the
draftsman had wanted to restrict
the use of the land further, he
would have said so.
GLN (Copenhagen) Southern -v- ABC
Cinemas, CA
Comment: The tenant was saved by
Section 63 of the Law of Property
Act 1925.
Harbour Estates -v- HSBC Bank, ChD
Options
A land purchase option exercisable
after the grant of planning
permission was said to have been
triggered, not by the passing of a
resolution by the local planning
authority to grant consent and enter
into a Section 106 Agreement, but
by the subsequent final grant of
permission.
Misrepresentation
A statement by a vendor
immediately after it had carried out
dry rot eradication works that it was
not aware of the property having
suffered dry rot entitled the
purchaser to claim damages for
fraudulent misrepresentation.
Comment: The tenant had not been
given a reasonable period in which
to remedy the breach.
Courtney Lodge Management -vBlake, CA
Mistake
Where, during negotiations for the
sale of a development site, the
purchaser omitted from the final
draft of the contract a material
clause that had been present in
earlier drafts, the Court said that it
would rectify the contract.
Comment: The conduct of the
vendor, who knew of the purchaser's
mistake but said nothing, was said
to have been unconscionable.
George Wimpy UK -v- VI
Components, ChD
Rent Review
Comment: The conclusion of a
Section 106 Agreement was not
certain.
Comment: The purchaser's claim
succeeded even though its own
surveyor had advised that there was
evidence of dry rot.
Strata Land and Developments -vJones, ChD
Clinicare -v- Orchard Homes &
Developments, QBD
A rent review clause that assumed a
hypothetical term "equal to the term
originally granted under this lease"
was said to require the assumption
of the grant of a 25 year lease, not
from the rent review date, but from
the original term commencement
date some 20 years earlier.
Forfeiture
Where a tenant was in breach of his
lease covenant not to cause a
nuisance, it was held that the
attempt by the landlord to terminate
the lease just four working days
after the service of a Section 146
Notice failed.
Comment: C.f. Canary Wharf
Investments -v- Telegraph Group
(2003) in which the opposite
decision was reached.
Chancebutton -v- Compass Services
UK & Ireland, ChD
3
overriding
interest
Deals
J
refurbishment and new build, all of
which was undertaken subject to
guaranteed pricing.
Henderson - Swansea
We advised Henderson UK Retail
Warehouse Fund on its acquisition
of Fforestfach Retail Parc Swansea
for £88.75 million from
Hammerson UK Properties plc.
Property partner Wayne Smith led
the team, comprising partners
Melanie Curtis, Kevin Greene and
Richard Woolich and solicitors
Richard Mulcock, Ian Johnson,
Ashley Mather,Yassir Mahmood
and Sarah Taylor.
The construction element of the
project involved the establishment
of an Integrated Project Team and
is the first project of its kind to be
completed in accordance with the
recommendations of the
government sponsored Strategic
Forum for Construction. Property
partner Melanie Curtis led the
team, assisted by partner Kevin
Greene and solicitor Karen Peart.
Widmerpool Hall
J
Arrowcroft - Widmerpool
Hall
J
J
Henderson - Cambridge
We advised Henderson UK Retail
Warehouse Fund on its further £25
million participation in the
Cambridge Retail Park Limited
Partnership. Property partner
Wayne Smith led the team,
comprising partners Melanie
Curtis, Howard Kleiman, Kevin
Greene, Richard Woolich and Elisa
de Wit, and solicitors Richard
Mulcock, Redmond Byrne and
Yassir Mahmood.
Who to contact
For further information contact
Steven Cox, Milton McIntosh, or Susan
Henning.
steven.cox@ngj.co.uk
milton.mcintosh@ngj.co.uk
susan.henning@ngj.co.uk
© Nicholson Graham & Jones 2004
4
We acted for Arrowcroft, one of
three joint venture partners in
property solutions company,
Amcroft (the others being Amey
and CB Richard Ellis) in relation to
the relocation of the Automobile
Association’s training facilities from
Widmerpool Hall, a Grade II Listed
mansion in Nottinghamshire, to a
new AA Academy at Six Hills,
Melton Mowbray, Leicestershire.
Arrowcroft agreed to purchase
both properties, to work with the
AA to redevelop Widmerpool and
to grant a lease of the Academy
premises following a substantial
Nicholson Graham & Jones
110 Cannon Street, London EC4N 6AR
020 7648 9000.
Internationally a member of GlobaLex.
The contents of these notes have been
gathered from various sources. You
should take advice before acting on any
material covered in overriding interest.
Morley - Cambridge
We also advised Morley Fund
Management Limited for
Commercial Union Life Assurance
Company Ltd, on the property
aspects of Commercial Union's
£25 million participation in the
Cambridge Retail Park Limited
Partnership. Property partner
Wayne Smith led the team,
comprising partners Melanie
Curtis, Kevin Greene, Richard
Woolich and Elisa de Wit, and
solicitors Richard Mulcock,
Redmond Byrne and Yassir
Mahmood.