Lawyers to the real estate & construction industry
overriding
interest
Summer 2004
contents
Farewell forfeiture?
1
Profiles
2
Legal Cases
3
Deals - Summer
4
Who to contact
4
Welcome to the
Summer edition.
The ODPM is consulting on Upwards
Only Rent Reviews, in response to
the interim report from Reading
University which, on limited
information, has decided that the
Commercial Lease Code has had little
effect on the market. The ODPM is
no doubt expecting the final report
(due December 2004) to say the
same. The paper sets out 6
alternatives, some of which are so
implausible that we must infer that
government intends to outlaw
Farewell Forfeiture?
Types of tenancies
J
UORRs perhaps with the proviso that
the rent can never go below the
The scheme would apply to all
commercial tenancies and to
residential tenancies granted for
terms of 21 years or more.
initial rent. We cannot see investors
and lenders letting UORRs go
without a considerable fight but
legislation looks likely.
www.ngj.co.uk
insolvency. It would not be
necessary for a lease to contain a
forfeiture clause for the scheme to
apply. It would, however, be
possible for parties expressly to
exclude the operation of the
scheme as a whole or with
reference to particular covenants
or circumstances.
At the start of the year the Law
Commission ("the Commission")
published a consultation paper setting
out its proposals for the reform of the
law of forfeiture. The Commission
proposes the abolition of the current
law of forfeiture and its replacement
by a scheme for the termination of
tenancies for tenant default.
Methods of termination
J
The scheme would provide for two
methods of termination of
tenancies:
J
Tenant default
J
Tenant default could be any breach
of covenant, whether express or
implied, though not tenant
J
A court termination order
("CTO"); and
Unilateral recovery of
possession ("URP").
overriding
interest
CTO - Notices
J
Before seeking a CTO, a landlord
would have to serve a pre-action
notice in prescribed form on the
tenant (with copies to be sent to
subtenants and mortgagees). The
notice would have to be served
within six months of the landlord
becoming aware of the default.
The notice could require the tenant
to remedy the default and state
that, on compliance with the
notice, no further action would be
taken. Alternatively, the notice
could say that, regardless of
compliance, a CTO would be
sought. The time given for
compliance would have to be
reasonable and not less than seven
days.
tenancies (unless the tenant was
not in occupation) nor in respect
of commercial tenancies with more
than 25 years unexpired. The preaction notice would be similar to
that to be served prior to seeking a
CTO but would have to state that
the landlord intended to seek URP.
Conclusion
J
The scheme has been criticised for,
amongst other things, being
tenant biased. The consultation
period for making comments to
the Commission has recently
ended, so we should know
relatively soon the revisions the
Commission proposes to take into
account the comments received.
URP - Possession
J
Possession would be recoverable
by a landlord if the tenant failed to
comply with the notice. However
the tenancy would not determine
at that time. If the tenant failed to
apply to Court for relief within one
month of the landlord taking
possession, then the tenancy
would come to an end.
If you have any queries please contact
Milton McIntosh on 020 7360 8259
or email milton.mcintosh@ngj.co.uk
CTO - Court Proceedings
J
An application for a CTO would
have to be made within six months
of the date for compliance stated
in the notice. The Court would
have the power to make:
J
J
J
No order;
An absolute termination
order, bringing the tenancy to
an end; or
A remedial order, giving the
tenant time to carry out
certain actions before a stated
date.
The tenancy would continue until
an absolute termination order was
made.
URP - Notice
J
2
URP would not be available to a
landlord in respect of residential
Profiles
Neil Rainey
Ben Cripps
Neil is a Partner in the Real Estate &
Construction industry group. He
qualified in 1983. He has broadbased experience of major property
development work, investment
acquisitions and sales, property
finance, landlord and tenant and
owner/occupier work.
Ben has recently joined our property
litigation team. He worked for many
years at city firm, Berwin Leighton
Paisner where he became a Legal
Executive. He then broadened his
experience at steeles (law) llp by
working for local authority clients on
housing disrepair litigation. Ben deals
with most aspects of real estate
litigation, such as 1954 Act business
tenancy renewals,
dilapidations
claims, "squatters"
possession claims
and other property
disputes for both
landlord and
tenant clients.
He has worked on some of Europe's
largest shopping
centre schemes
including Bluewater
in Kent and the
Touchwood Centre,
Solihull.
Summer 2004
Legal cases
Surrender
Where, after the liquidation of a
tenant company, the landlord
accepted rent from a third party, it
was held that there was no
surrender by operation of law.
Comment: A surrender by
operation of law requires evidence
of acts inconsistent with the
continuation of the lease such that
would be inequitable for the lease
to continue.
Eurodis Electron -v- Unicomp, ChD
Negligence
It was held that a firm of surveyors
who failed to take into account the
prospects of obtaining planning
permission for development when
valuing a rugby ground had been
negligent.
Comment: On the facts, it was
found that there had been at least a
50% chance of obtaining planning
consent.
Montlake -v- Lambert Smith
Hampton, QBD (Comm)
Yielding Up
A tenant who, after the service of a
break notice, vacated the property
but left in place security guards and
fencing and did not return the keys
to the landlord was said still to have
yielded up the property.
Comment: Yielding up occurs when
the tenant asserts no further right in
respect of the premises and the
landlord can occupy or deal as it
wishes.
John Laing Construction -v- Amber
Pass, ChD
Alterations
It was found that a landlord had not
unreasonably withheld his consent
to proposals by the tenant to
undertake works which included
changes to walls which may or may
not have been structural and the
installation of a door outside the
demise.
User
Where a tenant proposed to use a
new extension for purposes that
would have competed with and
damaged the landlord's business, it
was held that trading and
profitability considerations could be
relied upon by the landlord as
grounds for refusing consent to the
change.
Comment: A landlord is not
restricted to considering its property
interests.
Sargeant -v- Macepark
(Whittlebury), ChD
Repairs
Though premises were left in
disrepair by a tenant, the landlord
recovered no damages as it failed to
discharge its burden of establishing,
pursuant to section 18(1) of the
Landlord and Tenant Act 1927, that
its reversion had been damaged.
Comment: The tenant's plans lacked
detail and also proposed a trespass.
Iqbal -v- Thakrar, CA
Sale Contracts
Parties to a proposed sale of land
made two agreements, one of which
was oral and set a date for
exchange of contracts. It was held
that there had been failure to
comply with the Law of Property
(Miscellaneous Provisions) Act 1989
and so there was no enforceable
contract.
Comment: An agreement to
exchange contracts creates an
equitable interest to which section
2(1) of the 1989 Act applies.
Sharif -v- Sadiq, ChD
Comment: Shortlands Investments v- Cargill (1995) was distinguished
as in that case damage had been
presumed.
Simmons -v- Dresden, QBD (TCC)
3
overriding
interest
Deals
J
J
Havana Holdings Limited
on joint venture with
Conran Group to establish
a new London
bar/restaurant
facilities provided to it and secured
against ibis London Earls Court
financed by a syndicate arranged
by Oversea-Chinese Banking
Corporation (OCBC).
Jeremy Landau, assisted by Howard
Kleiman, Rachel Boothroyd and
Redmond Byrne, acted for Havana
Holdings Limited and advised the
company on its joint venture with
the Conran Group to establish a
new bar/restaurant in central
London. Based on the original
world famous 'Floridita', in Havana
Cuba, and a selection of La Casa
del Habano venues, the restaurant
will bring the Floridita concept and
Cuban culture to London in the
form of a classic Cuban bar and a
vibrant contemporary restaurant.
The restaurant will open at
Conran's newly refurbished Mezzo
restaurant in Soho, London.
The Nicholson Graham & Jones
team was led by Richard Hardwick
and Justin Salkeld, assisted by
Victoria Pegrum and Kate Gould.
Nicholson Graham & Jones
advise Goodearth Hotels
on £40m banking facility
Nicholson Graham & Jones acted
for Goodearth Hotels Limited in
relation to £40 million investment,
refurbishment and working capital
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
J
Funding of 18 Somerston
Hotels for Anglo Irish
Paul Salsbury, Karen Papworth, Neil
Rainey and Fiona McPhillips
advised Anglo Irish Bank
Corporation Plc on one of its
largest facilities of 2004, namely its
sterling term loan facility to the
Somerston Hotel Group. This
involved the refinancing of four
existing Somerston lenders secured
on Somerston's 18 hotel portfolio
in England and Scotland.
J
Advising Plustrade on sale
of block of flats
Nicholson Graham & Jones acted
for Plustrade Limited on the sale at
auction of its headleasehold
interest in a residential block of
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.
over 80 flats at William Court, St
John's Wood, including advice on
the requirements of the Landlord
and Tenant Act 1987 and
parcelling off three areas of
William Court for sale in separate
lots as investments and
development opportunities.
Property assistant Kate Gould dealt
with the matter.
British 10k London
Nicholson Graham & Jones is
delighted to announce that once
again we are "official lawyers" to the
British 10K Road Race. This is a major
event taking place in central London
on Sunday 1 August.
If you are interested you can join the
race as either an individual or a team
in the "Corporate Challenge" part of
the Race raising money for your
company's nominated charity. The
winning team will be judged on
sponsorship raised with up to 12
runners in each team. Everyone from
fun runners to international athletes
will be taking part.
For more information about the race,
route and how to enter see
www.thebritish10klondon.co.uk