Commercial Property Practice: An Expert GuideEDITED BY LAURA SLATER

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Contents

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Executive summary .................................................................................. VII

About the authors .................................................................................... XI

Commercial property update 2015 .............................................................1By Miri Stickland, property business support lawyer, Forsters LLP

Repeat guarantees .......................................................................... 1May I have your autograph? ............................................................ 2At breaking point ........................................................................... 2Service charge shocker ................................................................... 3Making a nuisance of yourself .......................................................... 3Prescriptive rights and wrongs ........................................................... 3Public procurement ......................................................................... 4Regulatory reforms we have seen… ................................................... 4And those we haven’t (yet)… ............................................................ 6Land Registry ................................................................................. 7Professional conduct ....................................................................... 7And finally… ................................................................................. 8

Commercial landlord and tenant update .....................................................9By Daniel Gatty, barrister, Hardwicke

A miscellany of recent cases ........................................................... 9Lease renewal ............................................................................... 9Forfeiture ......................................................................................11Break clauses ...............................................................................13Rent following a tenant’s administration ............................................. 14

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Paying rent: When, how much, and what for? ........................................... 17By Mark Shelton, commercial property management law trainer

When rent is due ..........................................................................17Late and early payment ..................................................................18Apportionment of rent .....................................................................19Apportionment and different methods of lease termination .................... 20Waiver of the right to forfeit, and the rules on appropriation................. 22A case for reform? ........................................................................ 23

Issues to consider from a tenant’s perspective when considering vacating premises .................................................................................... 25By Lesley Robinson, partner, head of Real Estate Disputes, and William Scott, senior associate, Bates Wells Braithwaite

Break option .............................................................................. 25Do what the lease says: Common-sense does not prevail! ................... 26Cashback or the prepayment of rent for periods after the break date ..... 26Demise ....................................................................................... 27Moving out and vacant possession .................................................. 28Repairs and dilapidations............................................................... 29Assignment .................................................................................. 30Relief from forfeiture .......................................................................31Conclusion ...................................................................................31

Contractual drafting to deal with environmental issues ............................... 33By Malcolm Dowden, director, Gwentian Consulting Limited

A regime of last resort ................................................................... 33Liability for remediation .................................................................. 34Drafting for Part 2A ...................................................................... 36Payment for remediation ................................................................ 39Warning – Related companies ........................................................ 39Beyond contaminated land ............................................................ 40What next? ................................................................................. 40

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An Englishman’s home is his castle (unless your neighbour can say otherwise) ............................................................................................... 43By Robert Kelly, commercial business development manager, Stewart Title

How indemnity insurance can help you deal with restrictive covenants ... 43How do restrictive covenants affect land? ......................................... 43Is it restrictive or positive? ............................................................... 44How can a restrictive covenant be removed? .................................... 44How does restrictive covenant indemnity insurance help an owner? ....... 44What does an insurer need to see? ................................................. 45Can you get insurance for a future breach? ....................................... 46Insurance or release? .................................................................... 46

A guide to capital allowances on fixtures for commercial property solicitors ................................................................................................. 49By Rachel Sanders, director, head of financial & economic consulting, AECOM

Buyer beware .............................................................................. 49The new fixtures rules .................................................................... 50The role of the property solicitor acting for the buyer ........................... 52The role of the property solicitor acting for the seller ........................... 53Final considerations ...................................................................... 54

Risky business: Answering questions on construction insurance ................... 55By Chris Holwell, head of construction procurement, Freeths LLP

PII .............................................................................................. 55Non-negligent damage insurance .................................................... 58Delay insurance ........................................................................... 60

Know the warning signs: Money laundering in commercial property practice .................................................................................................. 63By Tracey Calvert, director, Oakalls Consultancy Limited

What needs to be done to ensure that there is a robust but proportionate response to the risks in the commercial property department? .............. 65

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What are the warning signs which are particularly relevant in the commercial property sphere? ......................................................... 65Top tips to ensure an appropriate response to the risk of money laundering in the commercial property department ............................. 69

An introduction to charity land transactions ............................................. 71By Jane Lonergan, partner and notary public, Wilsons Solicitors LLP

Types of charity ........................................................................... 71Forms of charity ........................................................................... 72Charity trustees .............................................................................74The Charity Commission ............................................................... 75Official Custodian for Charities ....................................................... 75Some terms specifically used in charity land transactions ..................... 77Disposals of land by a charity ........................................................ 78Acquisitions of land by charities ...................................................... 85Mortgages ................................................................................. 87Further information (and bibliography) ............................................... 90

Getting the best return from your marketing efforts .................................... 93By Douglas McPherson, director, Size 10½ Boots

Getting more work from your – and your firm’s – current client base ....... 93Getting more work from your professional contacts ............................. 95Winning more new business ........................................................... 96Improving your visibility .................................................................. 97

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COMMERCIAL PROPERTY is booming in the UK, with a record £70.7 billion invested in 2014,1 and rents in the sector increasing at the fastest pace in 20 years.2 Even a general election and the threat of an EU referendum have had little impact on the rate of transactions taking place over the past 18 months. As the economy recovers, businesses expand, and employment picks up, solicitors working in this area must ensure they can meet clients’ demands for value-added services and keep up with the SRA’s compliance expectations, while also managing growing workloads. It’s a lot to keep on top of, and this guide is designed to help the busy practitioner achieve these aims.

Commercial Property Practice: An Expert Guide is broken into a series of direct and insightful articles from a range of expert practitioners and consultants which not only bring you up to speed with the latest developments in commercial property law and practice, but also delve into some of the more challenging and related areas commercial property solicitors should be familiar with, such as charities law, litigation, insurance, and tax.

Designed to aid practitioners in their everyday practice, this easy-to-reference guide includes information and guidance on a broad range of key topics, from practical tips on drafting leases and contracts, to managing risks relating to money laundering and terrorist financing, to boosting your business development and marketing activities.

The guide opens with an introduction and update on recent developments affecting commercial property. Miri Stickland, property business support lawyer at Forsters LLP, provides an overview of key changes, including leading case law relating to landlords and tenants, rights of light, and prescriptive rights; recent and upcoming regulatory reforms; lessons learned from professional negligence cases; and the move away from CPD hours to a competence-based approach to learning and development.

Barrister Daniel Gatty (Hardwicke), then kicks of a trilogy of articles focused on landlord and tenant law with a round-up of leading cases related to four

Executive summary

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key areas – lease renewal under the Landlord and Tenant Act 1954 (and landlords’ grounds for refusal), rights to forfeit, break clauses, and rent as an expense of administration – and draws out key lessons for landlords, tenants, and their advisors.

At the heart of the landlord-tenant relationship, of course, is rent, which is the focus of the next article in this book. Drawing on leading case law examples, commercial property management law trainer and former property litigator Mark Shelton provides guidance for those advising both landlords and tenants, on payment, apportionment, and forfeiture of rent, and makes the case for the reform of laws which, after centuries, remain somewhat vague.

With reference to recent court decisions, the next article from Lesley Robinson and William Scott at Bates Wells Braithwaite then highlights several common issues that need to be considered when tenants vacate commercial premises, including break options and assignments, repairs and dilapidations, and what “vacant possession” means for modern technology-heavy businesses, and how to avoid disputes arising.

As the reach of environmental legislation and regulation continues to expand, while the costs of non-compliance remain steep, real estate and environmental lawyer and legal training provider Malcolm Dowden gives best practice advice for those advising clients buying or selling land on various risks related to land contamination. With the first compliance date for the Energy Saving Opportunities Scheme (ESOS) coming up in December 2015, he also looks ahead to the introduction of this new regime, the potential penalties for companies that find themselves in breach, and the likely impact on business sales.

Capital allowances (CAs) have always been hugely complicated, and remain so despite government attempts to simplify the regime through new rules which came into effect in April 2014. While the new requirements shift much of the risk of loss onto the buyer, solicitors acting for either party should be prepared to advise on CAs as early as possible. This tricky topic is tackled by Rachel Sanders, director, head of financial & economic consulting at AECOM, who outlines the new fixtures rules and warns that failure to deal with CAs as part of the transaction process could result in financial loss to your client, who may seek compensation.

Commercial property is a high risk sector when it comes to insurance claims, as illustrated by frequent newspaper headlines, the number of cases that have been through the courts in recent months, and indeed the range and complexity of insurance coverage now available. While solicitors are not

Executive summary

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responsible for the level and types of insurance their clients choose to adopt, this is a question that they are often asked to advise on. Head of construction procurement at Freeths LLP, Chris Holwell, addresses types of insurance that may be necessary for commercial property developers in various common situations.

The question of insurance is also picked up in the next article from Robert Kelly, commercial business development manager at Stewart Title, who explains why this may be the best solution to help your client deal with the risks related to restrictive covenants. The article also provides a refresher on the law in this area and the various ways that restrictive covenants may be removed or lessened.

Property work can also be high risk for solicitors and law firms, with the SRA warning that ‘Property transactions are particularly attractive to money launderers’,3 while many firms have ‘inadequate systems and controls’ for dealing with these risks.4 While residential conveyancing is seen as particularly attractive to criminals, commercial property transactions also offer significant opportunities. As director of Oakalls Consultancy Limited, and former member of the SRA policy team, Tracey Calvert discusses in the next chapter of this guide, this is something that the advising solicitor should be alive to throughout the course of the transaction. The article provides practical advice to help commercial property departments ensure an appropriate response to money laundering and terrorist financing risks, and to avoid potentially serious consequences for individuals and the firm.

Acting for a charity buying, mortgaging, or disposing of land can be tricky and solicitors who do not specialise in this area may easily get caught out. With close reference to Charity Commission guidance and advice, relevant sections of the Charities Act 2011, and illustrated with specific transactions, charity property specialist Jane Lonergan (partner at Wilsons Solicitors LLP), provides an introduction for commercial property solicitors to the particular requirements which apply to charity land transactions, and provides guidance on some common problems.

As the sector continues to recover, this is the perfect time for commercial property teams to extend their marketing efforts. In the final article in this guide, Douglas McPherson, director of business development agency Size 10½ Boots, outlines several straightforward approaches solicitors and teams can take to pull in more work through professional referrals, new clients, and above all by maximising work from existing clients.

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Executive summary

By all accounts, ‘the UK property market is set for a promising and prosperous 2015’,5 and this can only be good news for commercial property lawyers, whether your client base includes developers, investors, landlords, or occupiers in any business sector. This expert guide provides essential industry insight and practical advice necessary to help practitioners to position themselves to make the most of the buoyant market, serve their clients well, and grow their practices.

References

1. CoStar, ‘Q4 2014 Investment Review’, available at: www.propex.co.uk/investment/bulletin.html.

2. According to the Royal Institute of Chartered Surveyors (RCIS), ‘Q2 2015 UK Commercial Property Market Survey’, available at: www.rics.org/Global/RICS%20UK%20Commercial%20Property%20Market%20Survey%20-%20Q2%202015.pdf.

3. SRA, ‘Cleaning up: Law firms and the risk of money laundering’, November 2014, available at: www.sra.org.uk/risk/resources/risk-money-laundering.page.

4. SRA Risk Outlook, 2015-16, http://www.sra.org.uk/risk/outlook/risk-outlook-2015-2016.pageIbid.

5. CBRE Research, ‘Viewpoint: UK Property Outlook 2015’, December 2014, available at: www.cbre.co.uk/portal/pls/portal/CBWEB.utils_news_public.show_image?id=17794&field=doc1&trans=n.

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Tracey CalvertTracey Calvert is a lawyer who has worked in the law since 1985. She initially worked in a niche shipping law practice in the City of London, specialising in non-contentious work, and was then employed by a local authority in Worcestershire before joining the Law Society in 1997. Tracey was recruited as an ethics adviser in the Professional Ethics guidance team and became a senior ethics adviser in 2003. Her responsibilities in this role included the training and quality assurance of this highly popular and successful team, which provided confidential guidance to members of the profession on all aspects of conduct.

Tracey has also accepted secondments to the Law Society/SRA professional indemnity team and as a manager of the casework and operational policy team, dealing with admission, character, and suitability issues. In 2009, she took up her final role within the SRA, joining the policy team. She was a member of a very small team which drafted the SRA Handbook and her particular responsibilities were in respect of the new SRA Code of Conduct and the rules in the ‘Specialist Services’ section of the Handbook.

Tracey’s particular interests are conduct, equality and diversity development, financial services, and anti-money laundering policy. During her time at the SRA she has drafted many rules, guidance, and articles, and has engaged in many stakeholder activities, both generally and in respect of the SRA Handbook.

Tracey is the director of Oakalls Consultancy Limited which provides regulatory compliance services to individuals and entities regulated by the SRA. She lectures on professional conduct, financial services, and anti-money laundering policies, and also provides compliance training and writes on compliance topics. Tracey can be contacted at: tcalvert@oakallsconsultancy.co.uk.

Malcolm DowdenMalcolm Dowden is an experienced real estate and environmental lawyer, and

About the authors

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an internationally accredited legal training provider. He has advised on major real estate and infrastructure development projects involving sites with significant historic contamination issues. Malcolm retains a role in private practice as Consultant to Charles Russell Speechlys LLP. He is lead training consultant to the Law Society of England and Wales in relation to its international training programme, and has designed and delivered training workshops for UKTI, British Expertise, and the Law Society in a wide range of jurisdictions including, most recently, Kenya, Tanzania, Uganda, Zimbabwe, and Zambia. In 2014 and 2015 Malcolm was a speaker in the real estate strand of SJ Live.

Daniel GattyDaniel Gatty is a barrister at Hardwicke Chambers and specialises in property litigation, including landlord and tenant, real property, land registration, mortgages and secured lending, and enfranchisement. He has recently appeared in the Supreme Court in Scott v Southern Pacific Mortgages Ltd; other reported cases include Mortgage Business plc v O’Shaughnessy [2012] 1 WLR 1521, Franks v Chief Land Registrar [2012] 1 All ER 326, Seeff v Ho [2011] PLSCS 102, Family Mosaic HA v Pimlico School HA [2011] All ER (D) 18 (Dec). Daniel’s practice also encompasses professional negligence (usually property related) and commercial/Chancery disputes, and he is also an accredited mediator. He is recommended as a leading junior for property litigation in The Legal 500 and Chambers UK.

Chris Holwell Chris Holwell is the partner who heads the Construction Procurement team at Freeths LLP. He specialises in construction and engineering procurement work including advising on and negotiating: procurement strategies; framework contracts; highways contracts; building, engineering, process plant, and remediation contracts; joint venture construction agreements; consultants’ appointments; bonds; guarantees; warranties; and associated issues, including the construction aspects of PFI/PPP and similar projects. He is currently advising a major international airport in relation to its £100 million expansion project; an international project management firm in relation to numerous private, public, and PFI projects in the UK and overseas; contractors and sub-contractors in relation to a variety of projects; consortia of highways authorities in relation to highways framework contracts; university clients in relation to new academic buildings; local authorities in relation to a variety of construction projects;

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and private sector developers in relation to office, healthcare, and residential developments. He is married, has three children, is active in his Church and other local bodies, and when time permits plays the celtic harp.

Robert KellyCommercial business development manager Robert joined Stewart Title in 2013 after 25 years of experience as a commercial property lawyer specialising in development and portfolio management. During his career, Robert has worked with regional and national developers, retailers, and landowners on a wide variety of schemes. This experience plays a vital part in his role working closely with interested parties to use indemnity insurance to resolve title problems and facilitate development and use of property. Robert can be contacted via email (robert.kelly@stewart.com) or via mobile (07415 240 703).

Jane LonerganJane Lonergan is a Commercial Property partner at Wilsons Solicitors LLP, a leading charity firm based in Salisbury and London. She acts for many of the best known charities in the country, advising on the entire spectrum of property issues affecting charities as well as assisting with complicated charity restructures and charity mergers. In short, Jane helps charities with all matters involving property.

A well regarded charity property specialist, Jane regularly lectures other professionals, usually solicitors but also accountants, on charity property law and is often asked to assist larger charities with their in-house legal training.

Before becoming a solicitor, Jane was an officer in the British Army, ‘retiring’ as a Captain. Her military experience means she has a particular interest (and expertise) in military charities.

Douglas McPhersonDoug has worked with professional service firms for over 20 years, first as head of sales and marketing for Intellectual Property Publishing, then as the commercial director of Lloyds of London’s Marine Intelligence Unit. Doug is now a director of Size 10½ Boots, a business development agency that works solely with professional service firms.

Size 10½ Boots work with law firms, patent and trademark attorneys, Chambers, and accountancy practices all over the UK. They combine their knowledge of the professional services market and direct in-house experience

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About the authors

with the sales and marketing skills Doug and his partner Bernard Savage acquired from past roles in international blue chip sales-led organisations. In addition to providing strategic marketing advice, Size 10½ Boots provide a range of more tactical support, including training and personal coaching for professionals at all levels, copywriting and design services, and targeted PR support.

Doug is a regular contributor to a range of publications in addition to Solicitors Journal, including Managing Partner, Private Client Adviser, Intellectual Property, The Patent Lawyer, and The Barrister.

Lesley RobinsonAs head of the Real Estate Disputes team at Bates Wells Braithwaite, Lesley acts for many commercial, charity, and not-for-profit clients and individuals dealing with issues caused during recessions. She has advised on all aspects of disputes connected to the occupation, ownership, and use of property including lease renewals under the Landlord and Tenant Act 1954. This includes the exercise of break options, rights of occupation, express or implied claims for damages for dilapidations at the end of a tenancy, and service charge disputes. She also advises possession claims for both landlords and tenants of commercial property as well as residential property under the Housing Act 1988 and the Rent Act 1977. This is in addition to advising on breach of covenant claims, enforcement of contracts and recovery of damages, insolvency and disclaimer, as well as on resolving disputes using alternative dispute resolution including mediation and arbitration or adjudication.

William ScottWilliam Scott is a senior associate at Bates Wells Braithwaite, advising a wide range of clients from multinationals to small family-run business, charities of all sizes including a number of household names, unions, and educational establishments, as well as private individuals on all aspects of property-related disputes but with a particular specialism in landlord and tenant work. William likes, where possible, to get involved at an early stage to advise on preventative measures to avoid litigation.

Mark SheltonMark has worked in major commercial law firms for 30 years. As a property litigator he worked at Linklaters, and was later a partner at Lawrence Graham.

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He has acted for clients including Land Securities, British Land, Allied Dunbar Assurance, J Sainsbury plc and the Burton Group, gaining experience of the full range of contentious work in a commercial property context. More recently, he has practised as a professional support lawyer, working at DLA Piper and Eversheds, and now works freelance as a legal trainer.

Miri Stickland Miri is a property business support lawyer in the Commercial Real Estate group at Forsters. She joined Forsters in October 2012. Miri co-ordinates the group’s learning and development programme, provides technical legal updates, updates on market trends and changes in practice, and general industry know how. She is also responsible for the maintenance of the group’s precedent bank. A further function of Miri’s role at Forsters is to assist with the provision of value-added services to key property clients, which can include providing skills training and know how support to clients and arranging knowledge-sharing sessions with clients and their wider professional services teams. Miri also works closely with her business development and marketing colleagues to provide support in relation to business development opportunities.

Miri trained at Taylor Wessing LLP, qualifying in 2004 into the Real Estate department where she specialised in real estate finance and investment acquisitions, disposals and asset management, restructuring, and corporate recovery based work. She also has extensive experience in advising on landlord and tenant matters and providing real estate based corporate support. Miri’s clients included banks, institutional investors, funds, and insolvency practitioners.

Rachel SandersRachel Sanders is director, Head of Financial & Economic Consulting at AECOM. She is passionate about Capital Allowances and Asset Depreciation acting for a wide range of clients investing in property. The team encompasses a broad range of professional services including Fiscal Incentives, Funder Advisory, Transaction/P3 Advisory, Business Economics, and very shortly a Policy & Economics capability. She is a chartered surveyor.

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