Lawyers to the real estate & construction industry
overriding
interest
Autumn 2003
contents
New responsibilities
for the property industry
1
Legal Cases - Autumn
2
Deals Autumn 2003
3
Planning section
4
Welcome to the
Autumn edition....
Those who work in the property
industry are set for an Autumn
full of changes. We already have
the Land Registration Act 2002, in
force as from 13 October with its
new rules for adverse possession
claims, dematerialisation and
many other changes paving the
way for e-conveyancing. And 1
December sees the arrival of
Stamp Duty Land Tax on which
we have conducted some very
popular client seminars.
These are enormous changes, and
we look forward to working with
you to help you and your
business make the adjustment
and take advantage of the
opportunities. One change of our
own is the arrival of Sebastian
Charles. You can read about him
on page 3.
www.ngj.co.uk
New responsibilities for the
property industry
Corporate Social Responsibility
requires property companies to
consider the impact that their
businesses have on employees, the
local community, shareholders and
investors. In addition to these social
duties, a company owes economic
responsibilities to its investors and
shareholders so as to maximise the
return on their investment. These
duties are enshrined in the definitive
revised Combined Code of Principles
of Good Governance and Best Practice
that has now been published further
to the Higgs Report (on the role and
effectiveness of non-executive
directors in UK listed companies)
released earlier this year.
The new Combined Code is effective
for reporting years beginning on or
after 1 November 2003. Its impact
will be significant for property
companies, and has already been
seen. British Land in contravention of
the new Combined Code currently
retains John Ritblat as both chief
executive and chairman, but following
pressure from institutional
shareholders has announced that it
will split Mr Ritblat's roles and appoint
a chief executive by the annual
meeting in July 2004. More recently,
Freeport plc’s investors rejected the
executive remuneration report which
led to the resignation of the
remuneration committee’s chairman.
overriding
interest
Although the Combined Code strictly
applies only to companies on the
Official List, it is anticipated that AIM
companies will continue to follow it as
a matter of best practice. Compliance
is often seen as necessary to meet the
high standards of corporate
governance required to attract and
retain institutional investors.
The principal differences from the
current Combined Code are:
the chairman, chief executive or
finance director.
Appointment and tenure
J
J
J
Board balance
J
At least half the members of the
board should be independent nonexecutive directors. There is an
exception for smaller listed
companies (i.e. those outside the
FTSE 350) who need only include 2
such independent non-executive
directors.
J
Training and
performance evaluation
J
Chairman and the chief
executive
J
J
The same individual should not act
as both chairman and chief
executive.
The chief executive should not
become chairman of the same
company.
The role of the nonexecutive director and
the independent director
J
J
2
The chairman should hold regular
meetings with the non-executive
directors without the executives
present.
A senior independent director
should be available to receive
shareholders' concerns which
cannot be resolved through the
normal channels of contact with
The nomination committee should
consist of a majority of nonexecutive directors.
Any term beyond 6 years for a
non-executive director should be
subject to rigorous review.
Executive directors should not take
on more than 1 non-executive
directorship in a FTSE 100
company, nor become chairman of
such a company.
No individual should be appointed
to a second chairmanship of a
FTSE 100 company.
J
The chairman should ensure that
new directors receive a full, formal
and tailored induction on joining
the board.
The board should undertake a
formal and rigorous annual
evaluation of its own performance
and that of its committees and
individual directors.
For advice on corporate governance
issues please contact:
Kevin McGuinness
kevin.mcguinness@ngj.co.uk
tel: 020 7360 8120
Elizabeth Dillabough
elizabeth.dillabough@ngj.co.uk
tel: 020 7360 8240
Legal cases
Break notices
Where a break notice is served on the
landlord in respect of a headlease, all
subtenancies created out of the
headlease also come to an end.
Parties cannot contract to the
contrary.
Comment: The Pennell -v- Payne
(1995) and Barrett -v- Morgan (2000)
line of reasoning was followed by the
Court.
PW & Co -v- Milton Gate Investments,
ChD
Sureties
It was found that a surety remained
liable to a new landlord following the
liquidation of the tenant company,
disclaimer by the liquidator and the
subsequent assignment of the
(notional) reversion.
Comment: Confirmation that a
disclaimer only impacts on the interest
of the insolvent company.
Scottish Widows -v- Tripipatkul, ChD
Rent reviews
A rent review provision that required
the valuer to treat evidence from a
different location as comparable was
upheld. The wording of the lease was
clear in requiring a departure from
reality.
Comment: The Court accepted that
the tenant might pay a higher rent as
a result.
Beegas Nominees -v- Decco, ChD
ADR
The refusal of an offer of mediation
may not necessarily result in an
adverse costs order where the party
refusing the offer has been making
Autumn 2003
genuine efforts the settle the dispute.
Comment: The much talked about
decision in Dunnett -v- Railtrack
(2002) was distinguished.
Valentine -v- Allen, CA
Alienation
Where a landlord took a month to
respond to a tenant's request for
consent to underlet and cited minor
breaches of covenant as a reason for
refusing consent, it was held that the
consent had been unreasonably
withheld.
Comment: Useful further guidance on
timing and grounds of
reasonableness.
Mount Eden Land -v- Folia, ChD
Restrictive covenants
A complaint by the beneficiary of a
restrictive covenant which only
allowed "detached homes" to be built
on land that the construction of a
block of flats would breach the
covenant was upheld.
Comment: The Court made the
obvious point that no one ever
described a block of flats as
"detached".
Cala Homes (South) -v- Carver, ChD
Arbitration
It was held that an arbitrator had the
power to order specific performance
of the requirement in an agreement
for lease for the execution of remedial
works despite the limits in s.48
Arbitration Act 1996.
Comment: The s.48 restriction was
said to be limited to contracts to
create or transfer land.
Tilia Sonera AB -v- Hilcourt Docklands,
ChD
Profile
Deals
Sebastian Charles
J
We acted for The Old Henley
Brewery Limited on the acquisition
of the former Brakspeares Brewery
site at Henley with adjoining
cottages, hotel, pub and reception
centre for £9.17m. Part of the site
has been sold on to Hotel du Vin
for a new hotel and the remainder
is being developed for housing
and/or retail and/or licensed
premises or sold off in parts as
housing and/or office buildings.
Property partner Piers Coleman led
the transaction.
J
We acted for Windsor Life on the
sale of warehouse premises at
Wolseley Road, Kempston,
Bedfordshire for £8.054m. The
purchaser was Clerical Medical
Investment Group Limited.
Property assistant Redmond Byrne
led the transaction.
J
We acted for acted for Peter
Ridsdale, the former Chairman of
Leeds United plc, on the
acquisition of Barnsley Football
Club Holdings Limited and Barnsley
Football Club 2002 Limited from
Peter Doyle, and the associated
sale of property at the football
club to Oakwell Community Assets
Limited, a joint venture operated
by Patrick Cryne and Barnsley
Metropolitan Borough Council.
The Planning and Environment Group
has been further strengthened by the
arrival of Sebastian Charles from
Norton Rose. Sebastian has advised a
wide range of clients in the energy,
manufacturing, health, education,
leisure, retail and residential and
commercial development sectors, on
such matters as established uses,
enforcement and a wide range of
planning proposals. He has
negotiated many planning
agreements, relating to issues such as
highway improvements, public
transport provision, affordable
housing and green transport plans.
He has been involved in
representations at public inquiries into
local plans, mineral local plans and
planning appeals and recently was at
the Examination in public into the
Mayor's London Plan. He has resolved
highways issues associated with many
prominent buildings around the city
and beyond. Whilst usually acting for
developers and funders he has also
acted for local authorities and
heritage interests.
Corporate Partners Richard Herbert
and Warren Phelops led our team
assisted by corporate solicitor Nick
Wargent and property solicitor Liz
Moir.
3
overriding
interest
...Deals
Continued
J
We advised NPI Limited, the
specialist pensions provider, on the
sale of a freehold property
portfolio for £40.5m to Grainger
Trust plc. Partners Stuart Borrie
(corporate) and Steven Cox
(property) led the Nicholson
Graham & Jones team.
J
We acted for HSBC Bank plc in
connection with increased loan
facilities of £225m to Edwardian
International Hotels Limited. The
facility will partially be utilised by
Edwardian in connection with its
recent £115m acquisition of the
London May Fair Intercontinental
Hotel.The team was led by
commercial banking partner
Andrew Besser, supported by
property partners Sheila Stewart
and Melanie Curtis, corporate
partners Alex Woodfield and
Richard Talbot, tax partner Alison
Dillon and banking assistants Kate
Norris and Karen Papworth.
Planning section
Discretion for local authorities to sell their land for
less than market value
The Office of the Deputy Prime
Minister (ODPM) has recently
published the General Disposal
Consent 2003 ("the 2003 Consent"),
together with ODPM Circular 06/2003.
The 2003 Consent replaces the Local
Government Act 1972 General
Disposal Consents issued in December
1998. It allows local authorities to sell
off land in certain circumstances for
less than its market value, without the
need to seek the Secretary of State's
permission. This follows the
Government's commitment in the
Local Government White Paper
"Strong Local Leadership - Quality
Public Service" which was published in
December 2001.
Before this, the General Disposal
Consents 1998 imposed certain
restrictions on land disposals at less
than market value, and only specific
categories of freehold or leasehold
interests could be sold without the
Secretary of State's consent.
Under the 2003 Consent, authorities
may dispose of any interest in land
held under the Local Government Act
1972 which they consider will aid the
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 2003
4
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.
promotion or improvement of an area
whether this is in an economic, social
or environmental context provided
that, if the land is sold at an
undervalue, the undervalue does not
exceed £2m. If this threshold is
exceeded, specific consent from the
Secretary of State will need to be
obtained. The procedure for obtaining
this consent is outlined in the Circular.
The new Circular, which replaces
Circular DOE 6/93 and the Circular
Letter dated 11 December 1998,
provides guidance for local authorities
on the changes to their disposal
powers. Before any land is disposed
of, local authorities are advised to
obtain a realistic valuation of the land
and the Technical Appendix of the
Circular provides advice in this regard.
All disposals of land at less than
market value will have to comply with
the European Commission's State aid
rules because such a disposal of land is
interpreted as the grant of a subsidy
on the part of the local authority to
the owner, and any occupier or
developer of the land.