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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Comfort and joy

Author: Alex Rhodes, Senior Associate, Planning, London

While this may feel like yet another winter with warmer than usual temperatures, the harsh reality is that not everyone will be celebrating the season of goodwill with a roof over their heads. It's an issue bothering local and central government alike. We're still waiting for the government's Housing White Paper, now due to be published in January. However, the Mayor of London published his draft SPG on affordable housing and viability on 29 November, and this has been followed by a government consultation on a new housing costs model for supported housing, "Ensuring new supply of supported housing", concerning housing for the most vulnerable people such as those with learning difficulties, older people with support needs, young people leaving care, and crisis and emergency accommodation.

The government is expressly seeking the views of developers on its supported housing costs model, the consultation for which runs until 13 February 2017, and the Mayor's draft SPG consultation closes on 28 February. Wouldn't it be good if progress can be made on closing the housing gap; perhaps these consultations may result in some comfort and joy for affordable and supported housing occupiers.

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When quiet enjoyment means just that

Author: Julian Pollock, Partner, Real Estate, London

Earlier this year, the courts decided that, even if there is an express right to carry out works in a lease, a landlord cannot ride a coach and horses through a quiet enjoyment covenant or the obligation not to derogate from grant.  They must take all reasonable steps to minimise disturbance to their tenants, including:

  • notifying the tenant as part of lease negotiations of any intended works;
  • keeping the tenant notified of the programme of works, how long they will last and, how disturbance is proposed to be minimised;
  • ensuring that all practical measures are implemented by the contractor and project manager; and
  • bearing in mind that a higher standard of reasonableness may be required where the landlord is carrying out works for its own benefit.

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Air quality – further developments this week

Authors: Julie Vaughan, Senior Associate, Environment and Helena Thompson, Associate, Planning and Environment, London

There have been a number of developments in relation to air quality since our blog post last week:

  1. Revision of the National Emissions Ceilings Directive was agreed at EU level.
  2. The Committee on Climate Change queried the Government's ability to meet future carbon targets if the Heathrow expansion is allowed to proceed.
  3. Courts have given the Government 8 months to produce a new national air quality plan.

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