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Lunchtime talk in Norwich: Tuesday 11 March 2014 26 February 2014

Peter Williams, until recently a Professional Support Lawyer at Eversheds LLP, will be presenting a lunchtime talk in Norwich on Tuesday 11 March 2014.

It is open to any legal advisers and other members of law firms in Norwich and the surrounding area.

Topic

The topic will be “Priorities at the Land Registry” and it will answer the ten everyday questions set out at the foot of this page.

This is one of the “Ten Important Pointers” talks from Falco Legal Training.  Further details of this series of talks are available on this page of this website.

Cost

The cost will be £45 plus VAT per person, with a maximum of £225 plus VAT per firm.  In other words, any people above the first five can attend free.  Invoices will be sent after the lecture.

Venue

The venue will be the offices of Birketts which is

Kingfisher House
1 Gilders Way
Off Barrack Street
Norwich
NR3 1UB

Falco Legal Training is grateful to Birketts for providing this venue.

Please note that NO car parking will be available.

Timings

Please please in your seats by 12.20.  The talk will last from 12.30 to 1.30.

No lunch will be provided but you are welcome to bring your own lunch with you.

CPD

This event qualifies for one non-accredited CPD hour, so it will count towards the target of up to 12 hours of non-accredited CPD that you require.  (Remember only 4 hours of CPD out of your 16 hours needs to be accredited CPD)

A written hand-out will be provided.

Booking and further enquiries

It is essential that Birketts’ staff know how many people are planning to attend, and their names.  Please e-mail Peter Williams at the link on this page of this website if you are planning to attend.  You are not committing yourself to attend by doing this.

Similarly please e-mail with any further enquiries about the event.

Contents of the talk

This course on Priorities at the Land Registry will consider the following questions:

1. In what circumstances will the priority of interests at the Land Registry be an issue ?

2. How do mortgages rank in priority at the Land Registry ?

3. How do other interests rank in priority at the Land Registry ?

4. How do overriding interests fit into the scheme of priorities ?

5. Does it make any difference whether interests are legal or equitable ?

6. Can you extend the priority period conferred by a priority search by carrying out a second search?

7. Is a priority search of the whole of a title effective to protect a dealing with part of the title ?

8. Is any protection conferred by a priority search made after the completion of a transaction ?

9. Will a restriction prevent a sale by a mortgagee ?

10. How does the buyer of registered land from a mortgagee ensure that it takes free of interests that are protected by notice ? 

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Landlords win the Game 24 February 2014

In a decision that will delight landlords everywhere, the Court of Appeal has ruled today in Pillar Denton Ltd v Jervis [2014] EWCA 180 that administrators are bound to pay rent for the whole period during which they are making use of a property, regardless of when the rent fell due.  This decision overrules a recent first instance decision, Leisure (Norwich) II Ltd v Luminar Lava Ignite Ltd [2012] EWHC 951 (Ch), in which the judge held that administrators did not have to pay any rent for the quarter in which they were appointed, if the administration started after the rent payment day.  This litigation arose from the decision of the Game group of companies to enter into administration on 26 March 2012, one day after the March quarter day, which angered the company’s hundreds of landlords.  This case was brought by a representative selection of those landlords.

The Court of Appeal’s decision was given by Lewison LJ and is impeccably written.  It is long and detailed, at 32 pages.  It can be downloaded here.

It was agreed between all parties that if rent falls within the principle known as what Lewison LJ calls the “salvage principle” (also known as “the Lundy Granite principle”), it is an administration expense, and payable to the landlord.  Otherwise it is merely a debt, for which the landlord has to prove, equally with other creditors. 

Lord Hoffmann had explained the concept of the salvage principle in Re Toshoku Finance Ltd [2002] UKHL 6 at [29]:

“The principle … is thus one which permits, on equitable grounds, the concept of a liability incurred as an expense of the liquidation to be expanded to include liabilities incurred before the liquidation in respect of property afterwards retained by the liquidator for the benefit of the insolvent estate.”

The question for the court was whether such a principle applied even where the rent had already fallen due before the administration started. Rent payable in arrears can be apportioned under the Apportionment Act 1870. However, as a result of the decision in Ellis v Rowbotham [1900] 1 QB 470, rent payable in advance is not subject to the Apportionment Act. And payment of rent in advance is now not only the norm but universal.

The Court of Appeal’s decision in favour of the landlords was reached on the basis that the salvage principle will apply to all rent.  Lewison LJ explained it like this at [101]:

“The true extent of the principle, in my judgment, is that the office holder must make payments at the rate of the rent for the duration of any period during which he retains possession of the demised property for the benefit of the winding up or administration (as the case may be). The rent will be treated as accruing from day to day. Those payments are payable as expenses of the winding up or administration. The duration of the period is a question of fact and is not determined merely by reference to which rent days occur before, during or after that period. This, in my judgment, is the way that James LJ formulated the underlying principle in Lundy Granite itself.”

 Some thoughts

1.  Landlords will be pleased with this decision, but there is a possible suggestion of an appeal to the Supreme Court in [7]:  

“It is common ground that at common law rent (whether payable in advance or in arrear) is not apportionable in respect of time; and it is also common ground that rent payable in advance is not apportionable under the Apportionment Act 1870. The latter proposition is the result of the decision of this court in Ellis v Rowbotham [1900] 1 QB 470, although the landlords may wish to challenge its correctness if this case goes further.” (Emphasis added)

2.  It is not yet clear whether the same result would apply if the administrator were to cease to use part of the property for the purpose of the administration.  Would apportionment on the same basis apply in relation to the space occupied, as opposed to apportionment on the basis of time?  That was not part of the current dispute so the question was not considered by the court.

3.  The reference to the “Lundy Granite” principle comes from the case of Re Lundy Granite Co ex p Heavan (1870-71) LR 6 Ch App 462, which arose from a dispute after the company had agreed to take an assignment of a lease of Lundy Island.  Not wholly relevant, but I used to go on family holidays to Lundy Island when I was a kid.  The island lies in the Bristol Channel, just off Bideford, reached by a small ship called Oldenburg run by the Lundy Company.  It’s now run by the Landmark Trust and there are 20 or so holiday cottages available on the island (or you can take a day trip from Bideford or Barnstaple). My father was responsible for the construction of the pier on the island about fifteen years ago.  In my youth, we had to transfer to small boats in order to land.  It’s less exciting now, but much less dangerous.  Do try to visit if you are in the West Country.

4.  At [83], Lewison LJ says (in the context of landlords trying to demand rent for a period after the administrator has vacated):

“It may not be a maxim of equity, but in simple terms: you can’t have the penny and the bun.”

If that is not yet a maxim of equity, it should be.

5.  We will gloss over the fact that this is the second of five Court of Appeal cases handed down within a fortnight in which I have wrongly called the result.  I may be the only one hoping for a referral to the Supreme Court!

 

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Don’t rock me Amadeus 22 February 2014

“Why Falco Legal Training?” is a question that gets asked pretty frequently.  I wanted a name that was memorable, was available as a website and as a limited company, and that wouldn’t be confused with anything else.

We support the Hawk Conservancy Trust near Andover, so I started to think about names of raptors.  The best names in English were already taken so I looked at Latin names. I tried red kite (but milvus didn’t sound very appealing) and owls (same with tyto and strix).

But falco seemed much more promising, especially as we sponsor a peregrine falcon named Usain [Bolt] at the Hawk Conservancy. Falco is also the Latin word for sickle, which led to thoughts of “cutting-edge training” – fortunately dropped at an early stage. So Falco Legal Training it was.

What it isn’t

Falco means different things to some of you. Here are some people and organisations after whom/which Falco Legal Training is not named:

Mark Peter Falco, the former professional footballer with a number of clubs including Tottenham Hotspur, Watford, Rangers and Queens Park Rangers. Just a couple of years younger than me, but a lot taller.

Falco, the Austrian pop and rock musician (real name Johann (Hans) Hölzel). Born a year before me, and died in 1998. Had a worldwide hit with Rock Me Amadeus in 1985-6.

Edith “Edie” Falco, an American television, film and stage actress.  I had never heard of her and I imagine it’s mutual.

Falco UK Limited, the manufacturer of an innovative range of high quality street furniture, cycle shelters, smoking shelters and bike storage systems.

Le Falco, a cafe in Montreal, Canada.  “Sunny warehouse space with communal tables for fair-trade coffee, sandwiches & Japanese rice bowls.”

Marcus Didius Falco, the laid-back Roman ‘informer’ who investigates crimes and acts as an often reluctant imperial agent. Features in books by Lindsey Davis.

Falco, the Estonian manufacturer of Olympic bows.

Falco Construction Limited, based in Caterham in Surrey, a multi-disciplinary civil engineering services company covering utilities, building, rail, RC concrete, ground works and labour hire.

The resort of Cala di Falco in Sardinia, Italy.

Falco Engineering Limited in Sheffield.

Falco Bikes, a cycle manufacturer established in Southern China in 2011 and also named after the peregrine falcon. Falco’s latest triathlon bike launched at the 2013 Interbike, the Falco V, has received much attention by cycling and triathlon media, according to the company’s website.

Falco Lombardi, an anthropomorphic falcon character from the Star Fox series of video games.

Torre del Falco Nero di Troia, a delicious Italian red wine made from the indigenous grape variety Nero di Troia grown on the hills of Puglia. Currently £7.99 per bottle from Waitrose.

Falco SK sro, the Slovakian manufacturer of gun holsters and accessories.

Cala Falco, a very pretty, small and quiet beach situated to the south of Magaluf in the south west of Majorca.

Falco, a state-of-the-art medium-altitude endurance and tactical unmanned air vehicle (UAV) manufactured by the Italian sensors developer Selex Galileo.

Felco SA, the world-leading manufacturer of professional pruning tools.

It’s fortunate that I didn’t choose a common name, otherwise this article would be a great deal longer!

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Peel Appeal 19 February 2014

In my blog article last week, “Five important landlord and tenant appeal decisions awaited”, I rashly included my (admittedly off-the-cuff) predictions of how the cases would be decided. Now, mixing my metaphors somewhat, the chickens are coming home to roost.

The Court of Appeal has given its decision in the appeal in Peel Land and Property (Ports No 3) Ltd v TS Sheerness Steel Ltd and, to my surprise, it reversed part of the first instance decision (click here for the transcript). Admittedly, my prediction last week that the first instance decision would be upheld was based on the major part of the judgment, in which the judge had had to decide whether large pieces of plant within a steelworks comprised chattels or fixtures and, if fixtures, whether they were landlord’s fixtures or tenant’s fixtures. It turned out that that part of the judgment was not appealed.  The subject of the appeal was whether the tenant was prohibited from removing tenant’s fixtures by the terms of the lease.

On a strict construction of the lease, the Court of Appeal decided unanimously that the lease did prohibit the tenant from removing tenant’s fixtures.  It rejected the tenant’s argument that an express provision to that effect would be required (see below for more on that argument).  The court interpreted the prohibition on alterations in the lease as extending to prohibiting removal of tenant’s fixtures during the term.  (A separate covenant provided that the tenant was allowed to remove tenant’s fixtures at the end of the term.)

Woodfall found wanting

This decision means that part of the relevant section in Woodfall is going to need rewriting. Woodfall currently includes an extract from Lambourn v McLellon [1903] 2 Ch 268, in which Vaughan Williams LJ had said:

“If the landlord wishes to restrict his tenant’s ordinary right to remove trade machinery or fixtures attached to the demised premises … the landlord must say so in plain language.  If the language used leaves matters doubtful, the ordinary right of the tenant to remove trade fixtures will not be affected.”

Morgan J, at first instance, had quoted the statement in Woodfall with approval on this point. However, after considering the decision in Lambourn v McLellon in detail, Rimer LJ in this case observed:

“I do not regard [the statement above], uttered only by one Lord Justice, and not expressly embraced by the others, as establishing any principle of a binding nature.  That said, I certainly do not disagree with it.  I do not, however, consider that it can be elevated to the status of a proposition that, for example, nothing but language expressly imposing a restriction on the removal of tenant’s fixtures … will be effective to impose such a restriction.”

It must be extremely unusual for a proposition set out in Woodfall in this way to be disapproved of in this manner.

Coming soon

Four more Court of Appeal decisions (mentioned in my earlier blog article) are now awaited – with some trepidation.

My thanks go to John Anderson and Mark Shelton for assistance in preparing this blog article.

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Construing a rent review clause in a 1960s lease 17 February 2014

One might have thought that there could be no more unanswered questions in relation to open market rent reviews, but the case of Bywater Properties Investments LLP v Oswestry Town Council [2014] EWHC 310 (Ch) shows that is not the case.

The case concerned leases of a kind that would never be granted today: 99 year building leases of commercial property in Oswestry town centre, with 25 year rent reviews to be triggered only by the landlord, and a provision stating that the rent could not fall below the original rent.  They were granted in the early 1960s.

The dispute arose after the landlord triggered the first review, after 25 years, but did not trigger the second one, after a further 25 years (for fear that the rent would drop).  The drafting of the lease did not expressly provide for what would occur if a subsequent review did not take place.  Did the rent stay at the amount determined at the 25th year, or did it revert to the original rent  payable at the start of the lease ?  The judge observed that the latter interpretation would save the tenant some £1 million over the next 25 years.

The judge construed the terms of the lease, and held that the rent should stay at the level determined at the 25th year.  This was on the basis that there was nothing in the rent review clause that would allow the rent to fall below the rent currently being payable, if the landlord decided not to invoke the review on any rent review date.

The facts of the case are unlikely to be replicated in the future, but the decision may be helpful in general terms for the judge’s observation that he did not derive any assistance from trying to ascertain the overall commercial purpose of the rent review clause.  Furthermore, it would be wrong to assume that the parties intended to create an upwards only rent review clause, particularly so in the case of a lease granted in the 1960s.

The transcript can be read here.

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Five important landlord and tenant appeal decisions awaited 12 February 2014

Decisions from the Court of Appeal are awaited in five important landlord and tenant cases.

Jervis v Pillar Denton Ltd [2013] EWHC 2171 (Ch)

This is an appeal by several landlords in the Game Station administration.  The company was put into administration in March 2012, one day after the March quarter day rent payment date.  The administrators are claiming that no rent was due until the June quarter day, even though the properties were occupied throughout.  Today was the first day of the appeal hearing.

How will the Court decide?  My money is on the administrators.  The Court of Appeal will not disturb the current state of the law.

Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2013] EWHC 1279 (Ch)

This has to be one of the longest company names in any law report, but that is not why the case is important.   In this case Morgan J implied a term into a lease to the effect that, when the tenant exercised its break right, the landlord was required to return to the tenant rent in respect of the period after the break date.  The concept of the implied term has not been used in this argument before.

How will the Court decide?  With respect to Morgan J, I think the Court of Appeal will overturn the first instance decision and say that a tenant is not entitled to the return of rent unless it is specifically mentioned in the lease.

Siemens Hearing Instruments Ltd v Friends Life Ltd [2013] EWHC B15 (Ch)

In this case the lease required the break notice to specify particular wording, for reasons which are too complex to explain here (but are explained clearly in the judge’s decision).  For a reason known only to the tenant’s solicitors, they did not include the “magic words” in the break notice.  At first instance, the notice was held valid, on the basis that it was clear what it was meant to achieve.  The landlord has appealed.

How will the court decide?  I think the Court of Appeal will uphold the decision.

Barclays Wealth Trustees (Jersey) Ltd v Erimus Housing Ltd [2013] EWHC 2699

Tenants stayed so long in a property after the expiry of the lease, continuing to pay rent, that the court held that a new tenancy – not a tenancy at will – had arisen.  Curiously on the facts this favoured the landlord, as the tenants wanted to leave and found they had to give a significant period of ntoice.   The tenants have appealed.

How will the court decide?  I think the Court of Appeal will overturn the decision and hold that there was only a tenancy at will.  (Actually I’m not nearly as certain in this instance as this makes me sound.)

Peel Land and Property (Ports No 3) Ltd v TS Sheerness Steel Ltd [2013] EWHC 1658 (Ch)

This was the simplest of all cases: were items chattels or fixtures, and if they were fixtures, were they tenant’s fixtures that the tenant could remove at the end of a lease?  The complicating factor was that the premises were a steelworks so the items were all extremely large and difficult to move.   Everything turned on the facts, of course, and Morgan J held that all the items were chattels or at the most tenant’s fixtures, so they could all be removed; also that on the terms of the lease the tenant did not have to leave the machinery in place.  The landlord has appealed.

How will the court decide?  I think the Court of Appeal will uphold Morgan J’s decision.

 

This is only a taster of the property or landlord and tenant cases that will be decided by the Court of Appeal or the Supreme Court this year.  Keep watching this space.

 

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CRELA’s Commercial Real Estate Update – Central London – Monday 10 March 2014 9 February 2014

CRELA’s Commercial Real Estate Update takes place in Central London on Monday 10 March 2014.

The session starts at 6.00 pm and finishes at 7.30 pm.  It will be followed by drinks.

The session will cover three topics:

  • Capital Allowances (Derek Hussey, AECOM)
  • Chancel Repair Liability (Peter Williams, Falco Legal Training)
  • RICS Service Charge Code (Sue Highmore, Practical Law Company)

 

Further details of the topics and the speakers are available on the CRELA website.

Venue: Atlantic House, Holborn Viaduct, London EC1A 2FG (kindly hosted by Hogan Lovells International LLP)

The session is open to everyone, whether or not a member of CRELA (Commercial Real Estate Legal Association).  However, space is limited so booking is essential.  Click here for the booking form.

Tickets £20 plus VAT for members; £30 plus VAT for others.

1.5 CPD points

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Consultation on ending CPD box-ticking requirement 7 February 2014

Please ensure that you respond to the consultation paper on proposed changes to current CPD requirements that was issued this week by the Solicitors Regulation Authority (SRA).  You have until 2 April 2014 to respond.  A link to the consultation paper is set out at the end of this article. 

The SRA has this week issued a consultation paper looking at how it can use continuing professional development (CPD) to assist it to ensure the continuing competence of the entities it regulates and the individuals within them (yes – that means you, dear readers).

The paper sets out a number of objections to the current system, which was introduced in 1985.  The key weaknesses include it being “over-prescriptive and inflexible” and, most damningly “concentrates on compliance with the arbitrary requirement to undertake 16 hours CPD rather than focusing on how CPD might assure competence”.  Few solicitors would disagree with that last comment.

The SRA’s favoured approach is “to remove the prescriptive requirement for solicitors to undertake CPD through specific regulations” (hooray).  It would instead be the responsibility of both entities and individuals to identity areas for development and ensure “appropriate development activity” is undertaken.  Non-mandatory guidance would be provided by the SRA.  “The guidance would not be prescriptive about the number of hours CPD to be undertaken, or about the type of CPD activity that solicitors should undertake.  It would focus on the outcomes to be achieved through development activity and on ways to implement the reflective cycle”.  This would “provide flexibility for entities and individuals to determine training and development according to their own needs.”

So in this brave new world, who would be responsible for ensuring that such training and development takes place ?  The consultation paper says “Responsibility for delivery of competent legal services and the education and training necessary to support this outcome would be shared between the individual delivering the service and the entity in which they work.”

There are obviously downsides to such a “fuzzy” approach, and lawyers in particular do feel most comfortable when they are following rules.  In fact, I suspect that most lawyers prefer ticking boxes, if the alternative is not being certain what they need to do to comply.  The SRA also observes wryly “Those responsible for compliance or education and training in entities might in some cases find it harder to ensure that individuals undertake appropriate CPD if there is no specific regulatory obligation in this regard.”  I am pretty sure that is correct.  It is so much easier to say “Have you done your 16 hours CPD yet?”, which Wikipedia tells me is technically called a “polar question” – one in which the answer can only be “yes” or “no”.  So much easier than “Have you undertaken sufficient CPD to ensure you can continue to deliver competent legal services?”

Two other options are mentioned.  Option 2 would require solicitors to reflect on their practice, identify their training needs and plan, implement and evaluate their training on an annual basis.  This would differ from the first option in that it would specify, in regulations, a level of detail as to how CPD must be planned.

Option 3 would retain something much more like the current system.  It would retain a minimum hours requirement, but would allow a wider range of activities to count towards CPD, and “[recognise] the value of on-the-job training”.  The downside (as now) is that “there is a significant risk that [this] could encourage solicitors to focus on minimum compliance with the CPD requirement rather than on their competence and the relevant outcomes in the Code of Conduct.  For some solicitors the minimum hours would be too few while, for others, it might be too many.”

No-one (except for providers of CPD) much likes the current system, mainly for the reason set out in the last sentence in the previous paragraph.  But I suspect that both entities and solicitors would prefer the certainty that a simple requirement for 16 hours CPD provides to something much more nebulous and more difficult to implement.

If you have read this far (or even jumped from the beginning to this final paragraph), I hope you agree with me that this is a very important consultation, and that you will take the trouble to read the paper (it’s only 15 pages long) and respond to the SRA by the end date of 2 April 2014.  In fact, why not break the habit of a lifetime and try to respond a week before the deadline – just to prove to yourself that you can.

You can download the consultation from this link:

Training For Tomorrow: A new approach to continuing competence 

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Verba ita sunt intelligenda ut res magis valeat quam pereat (Validate where possible) 4 February 2014

It’s every solicitor’s nightmare.  You complete a lease, or a licence, or a deed of variation, and then a third party claims that it does not achieve what you intended it to achieve.  Typically, the third party is a potential buyer who needs to be 110% satisfied (as modern parlance would have it).  What do you do ?

There seem to be only two practical options.  The first is to approach the second party (typically a tenant), cap in hand, and ask for the document to be amended (at your expense).  In an extreme case, a completely new document needs to be completed – such as where a contracting-out process has gone awry, and the lease has already been completed.

The second approach is to tell the third party to live with the problem (and, in the worst case, to provide an indemnity for any loss arising out of the error – but that is best avoided if possible).  The attraction is obviously there is no need to go back to the tenant (in the example above) – who may not have spotted that anything was wrong in the first place.

The recent case of Pavilion Property Trustees Ltd v Permira Advisers LLP [2014] EWHC 145 (Ch), decided on 30 January 2014, demonstrates that there is a viable third option – to apply for a declaration that the document does what you intended it to do in the first place.  That has always been a theoretical possibility, but the courts are reluctant to opine on the meaning of a document that involves two people without giving them both the opportunity to put forward their points of view.

In this case, the document in question was a strangely worded authorised guarantee agreement (AGA) that appeared to make the guarantor liable for the defaults of not just the assignee of the lease, but the next assignee as well.  At least, that was apparently what the document was trying to do although there was considerable doubt as to whether it actually achieved it on its wording.  But of course an AGA is valid only to the extent that it complies with section 16 of the 1995 Act, so it cannot require the outgoing tenant’s guarantee to continue past the first assignment.

Unusually, Morgan J (who was of course a silk at Falcon Chambers before being elevated to the bench) agreed to decide on the meaning of the guarantee, despite only one of the parties being represented.  He decided that it was appropriate to act in accordance with the maxim that is being used as the title to this blog entry – Verba ita sunt intelligenda ut res magis valeat quam pereat  (or “Validate where possible”).  On that basis, it was clear what the badly drafted AGA was intended to achieve (ie only what is permitted under section 16), and the deed was construed accordingly.  On that basis, the AGA was valid.

However, Morgan J did consider an ingenious alternative solution: section 25 allows severance of any provisions that go beyond what is permitted, by (in this case) invalidating any term [only] “to the extent that” it does not comply with section 16.   On that basis, the provisions of the guarantee that arguably were not permitted within an AGA were struck out using the “blue pencil” test, leaving the remainder of the document valid.

So it turned out that (with a bit of expert judicial assistance, and a fair amount of expense, presumably), the AGA was valid.  But it would have been far more preferable to have drafted the AGA correctly in the first place, taking heed of what is permitted by section 16 – and what most definitely is not permitted.

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