Raise your (MEES) standards: new government guidance provides clarity and confusion

Author: Deborah Caldwell, Professional Support Lawyer, Real Estate, London

 

In February 2015, we reported on Regulations introduced by the Government to prohibit the letting of commercial properties in England and Wales rated F or G on their Energy Performance Certificates ("EPC"s) (see our blog post here). With some exceptions, these Regulations, known as the Minimum Energy Efficiency Standard ("MEES"), affect the majority of commercial leases. The Regulations will come into force from 1 April 2018 for new leases (including lease renewals) and 1 April 2023 for all leases. "Sub-standard properties" is the new label that will attach to properties with an energy efficiency rating below E.

What's new?

There are two recent developments for landlords to be aware of:

  • Government guidance on the MEES Regulations has recently been published; and
  • The opening date for the centralised self-certification register known as the PRS Exemptions Register ("PER") has been delayed.

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The limits of good faith

Author: Michael Mendelblat, Professional Support Lawyer, Construction and Engineering, London

 

The NEC Form of Contract is now in wide use in construction projects. The first clause says that the parties "shall act as stated in this contract and in a spirit of mutual trust and co-operation", often referred to as "good faith". What this means in practice is a question of importance for the development industry, both in relation to this particular contract and to the numerous other standard form or bespoke arrangements where "good faith" obligations are included.

 

The extent of the good faith obligation was considered in a recent case, Costain v Tarmac. Here the Court was not prepared to allow a contractor to escape the effect of an express time bar clause by relying on the duty of good faith as imposing a positive obligation to point out its effect. The court commented that the express duty in this case said little more than was previously thought to be implied into all construction contracts in terms of a duty to co-operate. So, whilst a good faith obligation prohibits unreasonable conduct which is without regard to the interests of the other party, it does not, it would appear, extend to informing the other party about the adverse effect of a particular term of the contract of which it should already be aware.

 

Good faith clauses, therefore, do not prevent parties from relying on express terms of the contract. The effect is confined to a restraint on unreasonable conduct amounting to improper exploitation of the other party.

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Time to respond to the Housing White Paper

Author: Matthew White, Partner and Head of Planning, London

There is just over one month left to submit responses to the Government's Housing White Paper and Build to Rent consultations. Published on 7 February 2017, the consultation period closes for the Build to Rent consultation on 1 May 2017 and for the Housing White Paper on 2 May 2017. The outcome that the Government seeks from its proposals is an increase in the supply of appropriate housing in England to meet demand. It aims to achieve this by planning for the right homes in the right places, building homes faster and encouraging diversification of the housing market.

Those in the property industry are assessing whether and how to respond to the Government's proposals. Many summaries of the Housing White Paper and Build to Rent consultations have been produced by the property press and industry bodies for this purpose. We have produced our own analysis of the main issues that impact the clients we serve. Please get in touch if you would like help assessing how these consultation proposals affect you.

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Forfeiture traps for developer landlords

Author: Matthew Weal, Associate, Real Estate Dispute Resolution, London

What do you do if you acquire a site containing problem tenants who may consistently be in arrears of rent or in breach of covenants under their leases?  It is understandable in these circumstances that a developer, when becoming a landlord, may want to remove these tenants from the site and obtain vacant possession so as to attract better tenants and generate additional income. Often you hear developers wanting to avail themselves of the forfeiture clause in the lease as a panacea to this problem. However, unless carefully considered, the exercise of this draconian remedy can have some nasty pitfalls.

This is the subject of an e-bulletin we have just published, which discusses some of the issues which any developer landlord should bear in mind before attempting to go down the forfeiture route without first having sought legal advice.  If there is anything here you would like to discuss, please get in touch.

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Private Fund Limited Partnerships: the new real estate investment vehicle?

Author: Paul Chases, Senior Associate, Corporate Real Estate, London and Alex Wright, Associate, Corporate Real Estate, London

In an article published in Property Week on 2 March 2017, Paul Chases and Alex Wright of our corporate real estate team discuss the potential benefits for real estate investors of the proposed introduction of Private Fund Limited Partnerships ("PFLP"s), including greater flexibility and administrative costs savings. Following government consultation into modernising UK limited partnership law (previously reported here in August 2015), HM Treasury's recently published draft legislative reform order proposing the PFLP is expected to be brought into law this April.

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The changing cost of environmental claims

Authors: Andrew Lidbetter, Partner, London and Jasveer Randhawa, Of Counsel, London

 

In environmental (Aarhus Convention) claims, judges can now award costs that take into account the claimant's financial resources. As of 28 February 2017, judges in environmental judicial review claims and statutory challenges now have the ability to vary previously fixed costs caps or remove them altogether. This is due to changes to the Civil Procedure Rules governing environmental claims. It is worth noting that three non-governmental organisations, ClientEarth, Friends of the Earth and the RSPB, are challenging the new rules.

 

Herbert Smith Freehills has produced a bulletin setting out more detail on this, which can be found here.

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Sky’s the limit?

Author: Helena Thompson, Associate, Planning and Environment, London

Almost a month on, we have now all had a chance to consider what the Housing White Paper means for the future of housing. The planning team here at Herbert Smith Freehills have been asking ourselves – what do we each find most interesting about it? For me, it was the continued protection of the Green Belt and the proposals to build 'up' rather than 'out'. Before local planning authorities can amend Green Belt boundaries, they must first look at the use of brownfield and public sector land and denser building, as well as whether neighbouring authorities can help them out with their development requirements.

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The importance of consistency

Author: Michael Mendelblat, Professional Support Lawyer, Construction and Engineering, London

 

In a construction project, how a builder and/or designer's potential liability is classified in the contract and technical documentation can be crucial to recovery of any costs associated with remedying a defect in design. In some cases, liability arises from failure to comply with a specified level of output, or because the design is otherwise unfit for purpose. If this is the measure of liability, all that matters is the result achieved and not merely whether reasonable care and skill were applied. In other cases, there will be no liability if reasonable care and skill were applied, irrespective of the outcome.

 

Some recent cases have highlighted the problems that can arise if the contract terms and the technical documentation conflict and prescribe different tests of liability. In the recent SSE case, the Court of Session in Scotland decided that a building contract, when looked at as a whole, provided for an obligation to exercise reasonable care and skill, rather than to achieve a particular result. An earlier case (Hojgaard) had come to the same conclusion but is now being appealed to the Supreme Court.

 

The lesson of these cases is that consistent drafting is necessary to avoid complications further down the line, but they do also indicate that the courts will not readily read technical documentation in such a way as to override contract terms. A priority of documents clause may also assist.

 

To read our e-bulletin on the SSE case please click here, and click here for our e-bulletin on the Hojgaard case.

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IPF Non-Disclosure & Exclusivity Agreements

Author: Richard Forsdyke, Partner, Real Estate, London

We find this interesting and so thought we would share.

To save unnecessary time and resources drafting bespoke agreements, the Investment Property Forum ("IPF") has published a standard form Non-Disclosure Agreement ("NDA") for parties to a potential property transaction wanting to review marketing material and/or begin due diligence.  They have also published a standard form of Exclusivity Agreement ("EA") and guidance notes for each agreement.

Both agreements and the guidance notes can be found on the IPF website.

For more information please contact:

Richard Forsdyke
Richard Forsdyke
Partner, Real Estate, London
Email | Profile
+44 20 7466 2856

 

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Successful sub-sales – being a good middle man

Author: David Evans, Senior Associate, Real Estate, London

Negotiating the purchase of a property while simultaneously negotiating the sale of the same property can be difficult, especially where the sub-sale element is confidential. But a sub-sale can be a very attractive way to structure a transaction for a middle man. Provided substantial performance or completion of the contracts to purchase and sell the property occur more or less simultaneously, the middle man will not be liable for SDLT on the purchase (subject to satisfying the conditions in the pre-completion transactions rules) and can potentially walk away from the transaction with a profit and limited residual liability in respect of the property. It can be a useful tool for developers who are keen to develop but not hold a long-term interest in the property – a developer middle man could sub-sell property but at the same time agree with the ultimate purchaser to develop the property on their behalf. However, careful consideration should be given to how the due diligence process is managed and what is included in the sale contract.

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