Decision time: Case round-up
Greater uncertainty for landlords opposing a lease renewal using ground (f)
The Landlord and Tenant Act 1954 gives business tenants security of tenure so that on expiry of their lease, they are entitled to request a new lease. A landlord can oppose the renewal on the basis that it can establish a statutory ground of opposition under section 30(1) of the 1954 Act. Ground (f) enables the landlord to oppose the renewal where it has redevelopment plans which cannot be carried out without obtaining vacant possession of the tenant's premises.
In order to satisfy ground (f) the landlord needs to prove that it has the requisite intention to undertake those works and it has always been understood that the landlord's motive does not come into the equation.
The Supreme Court has now given its judgement in the much publicised case of S Franses v Cavendish Hotel (London) Limited and it will have major implications for opposed lease renewals on redevelopment grounds. In order to satisfy ground (f) the landlord must have an unconditional intention to carry out the works and will need to show that it would still carry out the works even if the tenant left the premises voluntarily.
In this case the tenant served a notice to renew its lease and the landlord opposed the renewal on redevelopment grounds citing ground (f). The landlord's proposals changed a number of times but eventually comprised a scheme of works which did not require planning permission but the works had no practical utility. However the landlord was prepared to give an undertaking to do the works if the landlord successfully opposed the tenant's lease renewal. The landlord made no secret of the fact that the works had no commercial purpose and made clear that it would not do the works if the tenant left voluntarily. Indeed the landlord's witness evidence was that the scheme had been designed "purely for the purpose of satisfying ground (f)".
In the County Court the Judge held that the landlord did have the necessary intention to carry out the works and therefore had satisfied ground (f) and so the lease should end. That decision was upheld by the High Court but permission was granted to allow the tenant to appeal direct to the Supreme Court because of the importance of the issues raised in the case.
The Supreme Court disagreed with the High Court and found that the landlord had not satisfied ground (f). Giving the leading judgment, Lord Sumption stated very clearly that whilst motive was still irrelevant to ground (f), it is useful evidence of the landlord's underlying intention. In the Court's view the landlord's intention to carry out the works cannot be conditional upon whether the tenant is seeking to renew its lease. Critically the "acid test" is whether the landlord would do the works if the tenant left voluntarily. If not, then the landlord would not have the fixed and settled intention that ground (f) requires.
The facts of this case are fairly extreme but the Court pointed out that this decision is likely to affect situations where the landlord intends to redevelop but some of the works are not strictly necessary but are included only to meet the test in ground (f). Therefore, in the future it is likely that tenants will seek to rely on this case in a ground (f) dispute and the landlord will need to be prepared to prove it's unconditional intention to carry out the works.
(S Franses Ltd v The Cavendish Hotel (London) Limited [2018] UKSC 62.)
Restrictive covenants: Ignore at your peril.
The developer, Millgate, had constructed a large market value housing development in Maidenhead. The terms of the planning consent required Millgate to build twenty three affordable homes. Thirteen of these properties stood on land which Millgate knew was burdened by a restrictive covenant. The covenant prevented building on the land and use of the land for anything other than a car park. There was a children's hospice next door which benefitted from the restrictive covenant.
After completing the development, Millgate applied to the Upper Tribunal to have the restrictive covenant modified. Under section 84(1)(aa) of the Law of Property Act 1925, the Upper Tribunal has the discretion to discharge or modify a restrictive covenant if:
- the restrictive covenant does not secure any practical benefit of substantial value or is contrary to the public interest; and
- money would be adequate compensation to the benefitting landowner
At first instance the Upper Tribunal agreed with the developer. The Upper Tribunal recognised that the restrictive covenant ensured privacy and seclusion for the hospice patients, which had a practical benefit and was of substantial value. However, the tribunal also noted that the covenant prevented use of the burdened land for social housing, which was of significant public interest.
The Upper Tribunal decided that the public interest of social housing outweighed the private rights of the beneficiaries of the restrictive covenant. The court took into account the fact that there was a long waiting list for social housing and it would be a waste of resources for the properties to be left empty. Secondly, the tribunal found that money would be adequate compensation for the loss of privacy to the hospice. The developer was directed to pay £150,000 to the beneficiaries so they could plant trees along the boundary between the housing development and the hospice.
The Upper Tribunal emphasised that although they had decided in this case to modify the covenant, such modification was not an automatic right. Even if one of the grounds under section 84 is proven, the Upper Tribunal still has discretion to decide whether or not to modify the covenant.
However the Court of Appeal has now reversed the decision and held that the Upper Tribunal had placed too much significance on the grant of planning consent as evidence that the development was in the public interest. The Court of Appeal made it clear that it is just as much in the public interest to give effect to private property rights in dealings between private persons. For this reason, the fact that the beneficiaries had not objected to the grant of Millgate's planning consent was irrelevant as they were entitled to rely on their private rights.
The Court also ruled that the tribunal should have placed more weight on the fact that the developer's section 106 agreement had been varied to provide for an alternative solution if the covenant could not be discharged, namely payment of a commuted sum of £1.6 million for the local authority to provide equivalent social housing elsewhere within the borough. The public interest in the provision of social housing could still have been satisfied whilst preserving the restrictive covenant by the payment of a commuted sum by the developer.
The Court also made the point that, when assessing the public interest, it was necessary to look at the surrounding circumstances. Millgate had been aware of the covenant and could have sought a release or modification of the covenant from the beneficiaries or, alternatively, applied under Section 84 for it to be discharged or modified before it started building.
The Court of Appeal concluded that the developer has not satisfied the public interest test and therefore the judge did not need to consider whether or not to exercise their discretion. However the Court went on to say that, if it had been required to exercise its discretion, it would still have found against Millgate because it "proceeded to breach the restrictive covenants without any justification or excuse".
So, the restrictive covenants remain in full force and effect and should the beneficiaries seek an injunction to demolish the thirteen offending properties it is difficult to see why the Court would refuse to grant it.
(The Alexander Devine Children's Cancer Trust v Millgate Developments Ltd. and Housing Solutions Ltd. 2018 EWCA Civ 2679)
Landlord's duty to consult: Recognising a qualifying long term agreement
The Commonhold and Leasehold Reform Act 2002 (CLRA 2002) requires that long residential leaseholders must be consulted before a landlord carries out qualifying works or enters into a qualifying long term agreement the costs of which they intend to recover through the leaseholders' service charge. Section 151 of CLRA 2002 introduced section 20ZA into the Landlord and Tenant Act 1985 and the Service Charges (Consultation Requirements) (England) Regulations 2003 (SI 2003/1987) set out the stringent procedures to be followed.
A qualifying long term agreement is an agreement entered into by the landlord with a contractor for a period of more than 12 months. Landlords must consult leaseholders where the amount payable by any one leaseholder under the agreement will exceed £100 including VAT in any accounting period. If the landlord fails to comply with the section 20 procedure in relation to qualifying long term agreements, the landlord's ability to recover any cost is limited to £100 per leaseholder per year.
The First Tier Tribunal (FTT) can dispense with the requirements for consultation if it is satisfied that it is reasonable to do so. Before granting a dispensation the FTT will consider the prejudice suffered by the tenants due to the landlord's failure to comply.
In the latest case on QLTAs - - the landlord entered into a service agreement with a management company for a block of flats in Pontefract. The contract was renewed annually and the landlord and the management company always agreed that the new contract would last no longer than 364 days on the basis that the contract was not a QLTA and consultation with the residential tenants was not required. The Upper Tribunal agreed and held that none of these contracts was for longer than one year and so there had been no duty on the lessor to consult with the tenants. Although there may have been an expectation that the contract would be renewed this was not the same as a binding obligation to renew.
It is worth comparing the outcome of this case with last year's decision in Corvan (Properties) Ltd v Abdel-Mahmoud [2017]. In that case the contract stated that it “will be for a period of one year from the date of signature.. and will continue thereafter until terminated upon three months’ notice by either party”. The landlord argued that the agreement was only for one year and so was exempt from the consultation requirements. However the Upper Tribunal concluded that the earliest date that notice to terminate could be given was the day following the expiry of the initial 12 month period – thus tipping the contract into QLTA territory. As a result the landlord is likely to be limited to recovering just £100 per leaseholder.
These decisions illustrate the need to take extra case when drafting and reviewing the terms of contracts which may be QLTAs as there are consequences for a landlord in terms of service charge recovery if the consultation process is not adhered to.
(Bracken Hill Court at Ackworth Management Ltd v Dobson and others [2018] UKUT 0333 (LC))
Waiver of the right to forfeit a lease by using use Commercial Rent Arrears Recovery (CRAR)
CRAR is a process by which a landlord of commercial property can take control of a tenant’s goods and sell them to recover money owed in rent arrears. It was introduced by the Tribunal, Courts and Enforcement Act 2007, and it replaced the common law right of distress. To exercise CRAR, a landlord must serve notice of its intention to do so seven clear days before seizing the goods.
Most leases contain a right by the landlord to terminate the lease by forfeiture for breach of tenant covenants. Once the right to forfeit has arisen, if the landlord (with knowledge of the tenant’s breach) acts in such a way that it unequivocally treats the lease as continuing, the landlord will waive its right of forfeiture.
In this case, the tenant was granted a lease for a term of 21 years. The rent was payable in four equal quarterly instalments.
The lease contained a forfeiture clause which stated:
“The landlord may re-enter the property…at any time after …any rent is unpaid 21 days after becoming payable whether it has been formally demanded or not”.
Part of the quarter’s rent which fell due on 25 December 2015 went unpaid and so a right to forfeit arose 21 days later. After the right to forfeit arose the landlord instructed enforcement agents to use CRAR to recover goods from the tenant's premises to cover the arrears..
Following the attendance of the baliffs at the premises the landlord entered the property to forfeit the lease by peaceable re-entry.
The tenant claimed that the action to forfeit the lease was unlawful because the exercise of CRAR acknowledged the continued existence of the lease after the right to forfeit had arisen. At first instance, the judge agreed. The landlord appealed.
- On appeal the court looked at the 2007 Act which does include references to situations when CRAR might be exercised once a lease has ended, but none of them applied here meaning that CRAR could only be used when the lease was continuing. Therefore by using CRAR the landlord had elected to treat the lease as continuing and so had lost its right to forfeit.
In this case it all came down to timing.. The lease provided that the right to forfeit arose 21 days after the rent fell due. Had CRAR been exercised before the 21 days had elapsed, the landlord would not have been able to waive the right to forfeit because it had not yet arisen. This illustrates the need for the landlord to consider enforcement options carefully when there are arrears of rent.
(Saravananthan Thirunavukkrasu v Brar [2018] EWHC 2461 (Ch))
A reasonable recipient saves a section 25 notice
Under the Landlord and Tenant Act 1954, tenants of business premises have the right to remain in occupation once the contractual term of their lease has expired and to request a new lease on similar terms. To end the lease or to start the renewal process, either the landlord or the tenant needs to serve a statutory notice.
In this case the landlord served a section 25 notice on the then tenant, Dukeminster (UG) Limited opposing a renewal of the tenant's lease citing one of the statutory grounds of opposition under section 30(1) of the 1954 Act. When drafting the notice however, the landlord's solicitor omitted the letters “UG” from the tenant's name and the notice was addressed to ‘Dukeminster Limited’, the tenant’s holding company instead of the tenant Dukeminster (UG) Limited.
Following receipt of the notice, the tenant alleged that the section 25 notice had not been served on Dukeminster (UG) Limited and was therefore invalid.
It is worth noting that following the commencement of proceedings, Dukeminster (UG) Limited assigned the lease to its holding company, Dukeminster Limited. The directors of Dukeminster Limited are also the directors of each of its subsidiaries, including Dukeminster (UG) Limited.
The landlord alleged that the error was insubstantial and no reasonable person in the position of the board of directors of either Dukeminster Limited or Dukeminster (UG) Limited could reasonably have misunderstood for whom the notice was really intended.
The court cited previous case law, including the authoritative Mannai investment Co v Eagle Star Life Assurance Co Ltd [1997], and emphasised that the test is how a reasonable recipient in all the circumstances would have understood the notice. In this case, it found that a reasonable recipient would have had no reasonable doubt as to how the section 25 notice was to operate and in respect of which company.
This meant that the landlord’s section 25 notice was valid.
Having established that the landlord’s section 25 notice was valid, the Court turned to the terms of the new lease and this produced an interesting decision on the terms of the rent review clause in the new lease because the court ordered that the new lease would have a rent review after five years on an upward/downward basis.
The existing lease had no rent review clause and the judge concluded that in the absence of any evidence affecting the landlord’s capital investment, the upwards/downwards option was the best option. The judge made it clear that the Court was not following the most commonly adopted option of an upwards only review.
This decision gives a valuable insight into the court's reasoning on this point although it is a county court decision only and so not binding authority.
(Dukeminster Ltd v West End Investments (Cowell Group) Ltd [2018])
The Electronic Communications Code put to the test
The Lands Chamber of the Upper Tribunal in England and Wales have given their first rulings on the new Electronic Communications Code (ECC) which came into force on 28th December 2017. The Upper Tribunal has provided key guidance on how the ECC will be interpreted. It is apparent that the Tribunal will seek to apply the Code in light of its policy objective to enable the fast and cost-effective roll-out of new electronic communications services notwithstanding the interference with private property rights. Indeed the Deputy Chamber President Martin Rodger QC clearly stated that the Code is "not simply concerned with the better regulation of private rights" and that "its objective is the speedy and economical delivery of communications networks in the public interest".
In the first case CTIL (a joint-venture between Telefonica and Vodafone) asked the University of London for permission to survey the rooftop of one of its buildings, in order to assess whether it would be suitable for a new electronic communications mast. The university refused access and so CTIL applied to the Upper Tribunal for an ‘interim’ agreement under the Code that would allow it to access the rooftop.
The University contended that the Code Rights referred to in Paragraph 3 of the code only granted a right for operators to carry out works and did not grant rights for operators to gain access on a speculative basis to assess the suitability of a site. The University also argued that there could be no basis on which the operator could be entitled to an interim agreement unless the operator could demonstrate that it had the intention of applying for permanent Code Rights bearing in mind the relative ease with which an operator can obtain an interim agreement under the Code. The University argued that this could have the potential to give rise to unfair and invasive access by operators who may have no intention of applying for permanent rights.
The Upper Tribunal held that the definition of Code Rights in Paragraph 3 does include the right to access a potential site for the purpose of conducting preparatory inspections, whether or not the site in question is ultimately found to be suitable for the installation of apparatus. Rodger commented in the judgement that "it simply cannot have been intended that, before an operator may insist on the acquisition of Code Rights in consideration of payments assessed on a favourable 'no network' basis, it must first negotiate outside the scope of the Code to acquire a right of entry to undertake essential preliminary surveys."
Paragraph 26 of the ECC enables an operator to apply to the Tribunal for the grant of Code Rights over land on an interim basis. This means that such rights will only apply for a limited period of time or until a specified event. When deciding whether to exercise its discretion to grant such a request, the Tribunal must have regard to the tests that operators must satisfy to obtain a permanent code agreement under paragraph 20 of the Code:
- that the prejudice caused to the landowner by the grant of the rights is capable of being adequately compensated by money; and
- that the public benefit likely to result from the making of the order outweighs the prejudice to the landowner.
However in an application for interim rights it only needs to be convinced that the operator has a “good arguable case” for satisfying them and in this case the Upper Tribunal found that operator had proved an arguable case that the landowner could be compensated in money and that public benefit outweighed the prejudice suffered by the landowner.
The second case concerned a dispute between telecoms operators EE and Three, and the mayor of the London borough of Islington. EE and Three asked the Upper Tribunal to give them an interim agreement to install and then use telecoms apparatus on the roof of Threadgold House, a block of flats in Islington as an alternative to their existing rooftop location as the landlord of the existing building had redevelopment plans.
The Upper Tribunal decided that a monetary payment would compensate the site owner for any inconvenience caused here. The fact that the parties had been negotiating and had disagreed only about the compensation payable tended to support this interpretation. However the Upper Tribunal was only prepared to grant the interim rights on the basis that planning permission for the redevelopment of the existing building was granted. Should it be refused, then the operators would lose their right to install and use equipment on the Threadgold House site because they could legitimately remain in their existing location.
Shortly after these decisions the Government published a consultation to amend it. The consultation seeks views on placing "an obligation on landlords to facilitate the deployment of digital infrastructure in their properties where a request for service has been made by the tenant and an operator has suitably notified that landlord".
(EE Ltd & Hutchison £G UK Ltd v London Borough of Islington [2018] UKUT 0361 (LC) Cornerstone Telecommunications Infrastructure Ltd v The University of London [2018] UKUT 356 (LC))
The registration gap and parting with possession
This Court of Appeal decision highlights the problem of the ever widening registration gap and how that might affect tenant covenants in leases not to part with possession of the premises without the consent of the landlord.
In this case the landlord (Triplark Limited) owned a large residential block of flats in Highgate. All of the flat leases required landlord's consent to an assignment subject to the usual proviso that consent would not be unreasonably withheld. One of the tenants sold her flat but failed to obtain licence to assign. The seller moved out of the flat, gave up physical possession of the flat and handed the keys to the buyer. Did this mean that the seller was in breach of the covenant in her lease not to assign without landlord's consent?
Triplark found out what was going on and lodged an objection with HM Land Registry and applied for the registration of a restriction to prevent the assignment to the buyer being registered. It then applied to the First Tier Tribunal for a declaration that the seller was in breach of the lease. Both the First Tier Tribunal and the Upper Tribunal on appeal held that the seller was in breach. So the seller appealed to the Court of Appeal.
When dealing with registered land the Land Registration Act 2002 provides that during the period between completion of the assignment of the lease and registration – commonly known as the registration gap - the seller remains the legal owner but holds the premises on trust for the buyer. As a bare trustee the seller is required to exercise all legal rights in accordance with the buyer's directions. Therefore as the seller remained the legal tenant she was not in breach of the covenant not to assign without consent because an assignment of registered land is only recognised at law once it has been registered at HM Land Registry. It was common ground between the parties that unless and until the assignment was registered there was no "assignment" for the purposes of the alienation covenant in the lease. However the lease also prohibited parting with possession and the Appeal Court (following Clarence House Ltd v National Westminster Bank Plc [2009] and Akici v LR Butlin Ltd [2005]) had no trouble deciding that the seller was in breach of this requirement because she had given vacant possession to the buyer when the assignment completed. The hallmark of the right to possession is the right to exclude all others from the property in question. Although she held the flat on trust, all rights of enjoyment and possession of it were vested in the buyer and she had no right to possession.
This case is also interesting as it looks at the statutory protections available to a landlord where a Right To Manage Company (RTM Company) has taken over the management of a residential block of flats. It is important to understand that whilst the RTM Company takes over the maintenance of the block it also takes over the landlord's functions "as to the grant of approvals" under the leases pursuant to the Commonhold and Leasehold Reform Act 2002 (the Act). However, as a condition of assuming this function the RTM Company is required to pass on applications for consent to assign (as well as underletting, charging, parting with possession, the making of structural alterations or improvements or alterations or use) and allow 30 days for the landlord to object to that application ( section 98(4) of the Act) . Where the landlord objects to the grant of any approval within the time limit the RTM Company may not grant the approval without the subsequent written agreement of the landlord or in accordance with a determination of the Leasehold Valuation Tribunal. An application to the tribunal may be made by the RTM Company or by the tenant seeking the approval or by the landlord
Although the seller's solicitors applied to the RTM Company for consent to assign this was not passed on to the landlord and consent was not forthcoming from the RTM Company. Both the seller and the buyer argued before the court that the RTM Company had unreasonably delayed or withheld its consent and, accordingly, the seller was entitled to proceed with the transaction.
The Court of Appeal agreed with the Tribunal that unless the RTM Company had complied with its statutory obligation under section 98(4) to pass the application to the landlord then it was not is a position to deal with the application let alone grant or refuse the application for consent and therefore could not at the same time be held to have unreasonably withheld or refused such consent. So, the seller would be in breach of the lease if they proceeded with the assignment in these circumstances. It was always open to the tenant to apply for an order under section 107 of the Act, requiring the RTM Company to comply with its obligation to notify the landlord.
This case provides useful clarification that an assignment will be in breach of a covenant not to part with possession, even if it has not been registered at the Land Registry.
(Reiner and Anor v Triplark [2018] EWCA Civ 2151)
Notice to complete: Ready willing and able
A recent High Court case considers the validity of a notice to complete and the concept of being "ready, able and willing to complete" at the date of service of the notice.
Cantt Pak Limited (the seller) owned industrial premises which were occupied by a number of short term licensees. The seller contracted to sell the property to Pak Southern China Property Limited (the buyer) for £1.2m . The contract incorporated the standard commercial property conditions (second edition) and obliged the seller to provide vacant possession on completion. Essentially in order to comply with an obligation to give vacant possession the seller needed to remove all occupiers and chattels from the premises so that it was capable of beneficial occupation by the buyer.
A dispute arose because the buyer was insisting on vacant possession before completion. The buyer's funder would only advance the mortgage monies on this basis. However, the seller did not want to begin the process of terminating the various licences and removing the industrial equipment until it had been provided with confirmation that the buyer had available funds to cover the purchase price. The contractual completion date passed and the seller served a notice to complete. Following the expiry of the notice to complete the seller elected to terminate the contract and forfeited the buyer's deposit.
The buyer argued that the notice to complete was invalid because the Seller was not ready, able and willing to complete as it had failed to provide vacant possession at the date of service of the notice.
The SCPCs provide that:
“At any time on or after completion date, a party who is ready, able and willing to complete may give the other a notice to complete.”
In the earlier case of Midill (97PL) Ltd v Park Lane Estates Ltd [2008] the High Court highlighted the fact that minor outstanding administrative matters would not prevent a party being ready, willing and able to complete. The court, in the present proceedings, held that the seller was still "ready, able and willing to complete" despite not having secured vacant possession at the date the notice was served. The lack of vacant possession seems to be rather more than an outstanding minor administrative matter. However, the notice to complete was valid on the basis that the seller could prove it was possible to secure vacant possession by the completion date specified in the notice. After hearing a significant amount of evidence from the various occupiers the court found that the seller was both entitled and able to terminate the licences and clear the site in time for completion. It therefore held that the notice was valid when served.
However on the evidence before the court it became clear that following the service of the notice to complete the seller could not have actually procured vacant possession before the expiry of the notice to complete due to inaction on its part. Therefore both parties were in repudiatory breach, the buyer for failing to pay and the seller for not providing vacant possession. Did this mean that neither party could terminate the contract because they were both in breach?
The court held that the effect of a valid notice to complete is that time becomes of the essence and the parties must comply with their contractual obligations. Failure to do so will result in the defaulting party being in repudiatory breach of the contract. A repudiatory breach allows the innocent party to terminate the sale contract and, generally, recover the deposit it has paid (if the buyer terminates) or keep the deposit for itself (if the seller terminates).
However it was the timing of those breaches that was important for the court in this case. The seller’s failure to secure vacant possession provided the buyer with an opportunity to terminate the contract or to treat it as continuing and claim damages for the seller’s breach. The buyer chose not to terminate and therefore affirmed the contract. In the circumstances the buyer was required to complete and pay the completion monies.
The buyer's failure to make payment then gave rise to a repudiatory breach which entitled the seller to either terminate or affirm the contract and claim damages. The seller chose to terminate.
Property owners seeking to sell tenanted property may be reluctant to procure vacant possession where they have suspicions that the prospective buyer may not be able to complete. Whilst this judgment is helpful ammunition for a seller it all depends on the ability of the seller to procure vacant possession before the expiry of a notice to complete otherwise there is a real risk that the seller will be in repudiatory breach thereby allowing the buyer to terminate the contract and recover its deposit and potentially claim damages.
(Cantt Pak Limited v Pak Southern China Property Investment Limited [2018] EWHC 2564 (Ch))
Real estate forecast for 2019
Despite the ongoing political uncertainty over the UK's future relationship with the EU it seems likely that real estate will remain a steady port in a storm for long-term investors. Of course overseas investors will need to get to grips with the new beneficial ownership register for foreign entities that hold UK land. The Government expects to formally introduce this legislation to Parliament in 2019. Following royal assent and the enactment of any secondary legislation it is anticipated that the register will go live in 2021.
We are also expecting the release of a consultation on the proposal outlined in the recent Budget to impose an SDLT surcharge of 1% for overseas investors buying UK residential property. This proposal will require a good deal of interrogation as it could have unintended consequences. Simply increasing the tax burden on purchasers could make investment in UK residential property less attractive and this, in turn, could adversely affect the development pipeline of much needed build to rent accommodation.
The Budget also delivered a surprise announcement which will be good news for commercial property owners. Next year will see the introduction of a new structures and buildings allowance for new commercial buildings provided the construction or works contract was entered into on or after 29th October 2018. This tax relief will be a welcome boost for investors in new and refurbished commercial buildings.
Over the past year we have seen a slew of measures from Government designed to address the housing crisis and 2019 will also see the results of a number of consultations aimed at reforming leasehold practices in England.
We can expect to see the publication of the draft bill to implement the cap on all ground rents at £10 and the ban on new leasehold houses (which will apply retrospectively back to December 2017, when the announcement was first made). Whilst it is important to prevent abuse of the leasehold structure there remain good reason s for using a leasehold scheme for estate management purposes which clearly benefits tenants. The retrospective nature of the ban on new leasehold houses will cause problems for developers who contracted to buy a leasehold site prior to the December 2017 date, but completed the purchase after this date.
The Law Commission is also consulting on an overhaul of the leasehold enfranchisement legislation with a view to making it simpler, easier and quicker. A report and recommendations will be published in 2019.
The industry is also bracing itself for the possibility of further legislative change to improve the energy efficiency of buildings. As it stands the minimum EPC rating for a commercial letting is an E. However we are anticipating that this threshold will rise. Even if this change does not materialise in 2019 it would be advisable to consider "future proofing" assets. Residential landlords are already resigned to the change in the Minimum Energy Efficiency Regulations which will come into force next year which means that landlords of sub-standard residential property will be required to contribute to the cost of improving the energy efficiency subject to a cap of £3,500 per property.
Of course, technology continues to have an impact in the real estate sector. This will only gain more momentum in 2019. Whether 2019 will see the first real estate transaction carried out on the blockchain remains to be seen. Perhaps not, but it will not be too far away that is for sure.
"A landmark decision which means greater uncertainty for landlords seeking to oppose lease renewals on redevelopment grounds"
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