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Minor changes to the Model Commercial Lease website 30 July 2014

Three minor changes have been made this week to the Model Commercial Lease (MCL) website.

1.  Keeping the MCL documents updated

Potential users of the MCL documents were expressing concern that they (the MCL documents) might not be kept up to date.  The working group that produced the MCL documents has clarified that they will keep the MCL documents under review in the light of feedback from users, new law, court decisions and developments in market practice, and update them when appropriate.

The wording of the relevant FAQ on the MCL website has been updated accordingly.

2.  RSS Feed

An RSS Feed has been added to the MCL website.  Subscribers to the RSS Feed will be notified automatically when new items are added to the News page of the MCL website.  The subscription button for the RSS Feed is on the MCL website’s Home Page.

3.  Link to Gateley’s blog article on the MCL

A link has been added from the Guidance page of the MCL website to Gateley’s recent blog article on the MCL.

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Minimum Energy Efficiency Standard – thoughts on the consultation proposals 28 July 2014

The purpose of this article is to comment on DECC’s consultation paper on non-domestic properties, to inform discussions about the proposals and to provide ideas that readers can incorporate into their consultation responses.

This is a very long article. I have therefore prepared a PDF version of it, to make it easier to read and print out.

PDF version of this article

Last week, DECC issued two consultation documents on Minimum Energy Efficiency Standards (which I shall call MEES although I do not know whether that is going to become its accepted acronym). One document relates to domestic properties and the other to non-domestic properties. This article deals only with non-domestic properties, as I know nothing about MEES in the context of domestic properties. I have spotted that the consultation paper about domestic properties is half as long again as the one about non-domestic properties, which suggests there are more complications to be accommodated. In the interests of my sanity, I have not yet even looked at it.

Link to consultation paper on non-domestic properties

Link to consultation paper on domestic properties

 

The purpose of this article

The purpose of this article is to comment on DECC’s consultation paper on non-domestic properties, to inform discussions about the proposals and to provide ideas that readers can incorporate into their consultation responses.

The consultation period, at six weeks, is ridiculously short. Almost one week has already passed and the majority of people affected are not aware of the consultation, let alone the details of what is proposed. Moreover the six weeks exactly spans the summer holidays, when few committees meet and no training events of any kind are scheduled.

I have written an article about the non-domestic consultation for Estates Gazette but that will not appear until the issue of 9 August 2014.

I have been told that the reason for the speed is to ensure that the regulations themselves can be made before Government closes down for the election in September 2015. I still think that a six week consultation period that exactly spans the summer holiday period is derisory. It gives the unfortunate impression that the Government is consulting because it has to, not because it wants to obtain ideas.

 

The purpose of the consultations

The purpose of the consultations is to enable DECC to finalise the regulations dealing with MEES, which the Secretary of State is under a duty to make no later than April 2018, according to section 49 Energy Act 2011. (This section is not yet in force; I imagine that the intention is to bring it into force at the same time as the regulations are made.) The draft regulations apparently exist but have not yet been made public. This is a bit of a nuisance as so far we have an incomplete picture of what is being proposed. Some of the issues are addressed in the text of the consultation paper but there are some issues that can only be understood by reference to the text of the regulations themselves.

 

Stakeholder working groups

This is not the first time that DECC has sought guidance from the property industry. As mentioned in paragraph 12 of the consultation paper’s executive summary, in February 2013 DECC gathered together two working groups of stakeholder representatives – one for domestic properties and the other for non-domestic properties – and asked them to consider various issues related to MEES. I was a member of the non-domestic properties working group. Our role was effectively to devise the questions for this forthcoming consultation, and to suggest possible solutions.

The report of the non-domestic working group is now available on the Government’s website at this link:

https://www.gov.uk/government/publications/non-domestic-private-rented-sector-regulations-working-group-report-report-to-government

I suspect that part of DECC’s justification for the short consultation period is that stakeholders have already had an input through this working group. I would not agree with that argument (were it to be raised). The working group members came from a variety of organisations (they are listed in Annex 1 of the report) but it is still important for property owners and occupiers to be allowed their own say on the MEES proposals – and a six-week period across the summer is not long enough.

 

My comments on the MEES proposals relating to non-domestic properties

I will use as headings the questions that DECC asks in the consultation paper. I am not mentioning any issues that I believe to be sufficiently covered in the consultation paper.

1. Do you agree with the proposed scope of buildings and leases that should be covered by the minimum standard regulations? If not, what building or lease types should be included or excluded?

The Government acknowledges that there is not yet any Green Deal finance for non-domestic properties (para 30). One wonders what the fall-back position will be if none is in place by April 2018.

It is stated in para 43 that the scope of buildings within MEES will be those within the EPC requirements. This will cause difficulties for listed buildings as no-one knows whether they require EPCs or not.

Even where MEES apparently applies, it will not be relevant to a property where there is no EPC in place (since section 49(1) Energy Act 2011 states that MEES applies only where a property has an EPC). For the proposed “backstop” in 2023, we can expect many properties that would be caught by it not to have EPCs, as many leases will have been granted before EPCs became compulsory in 2007 or thereabouts. But if a landlord deliberately does not obtain an EPC when granting a lease after April 2018, MEES will also not apply, and the landlord’s only offence is not to have obtained an EPC, for which the penalty is relatively low. The working group identified this loophole. We do not know if DECC is doing anything to resolve it.

The Government suggests in para 45 excluding very short leases (six months or less) and very long leases (99 years or more).

Further lettings that could be put forward for exclusion are listed in Annex C of the working group’s report. They include the following four categories:

(a) where the landlord has no choice over granting the lease

(b) where the transaction is short-term only

(c) where the transaction is more akin to a sale than a letting, although it is being accomplished through the grant of a lease for reasons connected with landlord and tenant law

(d) sub-lettings of parts of buildings.

Categories (b) and (c) have been raised by DECC already.

Under category (a) the working group identified

  • Existing contractual arrangements as at April 2018
  • Lease granted to a guarantor following insolvency of the tenant
  • Lease granted under section 19 Landlord and Tenant (Covenants) Act 1995
  • Lease granted by order of the court
  • Lease granted by operation of law
  • Lease renewal under Landlord and Tenant Act 1954 (see question 8 below)
  • Renewal of periodic tenancy
  • Extension of lease (effectively an example of a lease granted by operation of law)

Under category (d), I have a major concern. A tenant of part of a building may wish to grant an underlease and MEES will apply to the transaction. But the tenant will not have control of the parts of the building that will enable him to comply with MEES – nor would the landlord want the tenant to try to upgrade the structure of a building, or its plant. This important issue is mentioned in the consultation document (para 47) but only in terms of “consent”. I am not convinced that this is sufficient. It is not correct that a tenant of part would need the landlord’s “consent” to upgrade the building’s air conditioning system. The correct analysis is that the tenant has no right to do so at all. So would this be covered by the “consent” protection? Or should it be dealt with in a more logical fashion?

2. Do you agree that where a property falls below an E EPC rating, the landlord would only be required to make those improvements which could be made at no net or upfront cost, for example through a Green Deal finance arrangement? For those properties that do not meet an E EPC rating, do you have any suggestions for how the process could be streamlined?

This proposal sets out what the Government has always said would be the case.

There is a suggestion in para 58 that the landlord would need to obtain three Green Deal quotes where no measures at all pass the Golden Rule. This seems extreme and suggests that the Government does not have much confidence in the accuracy of Green Deal Assessments. Furthermore, presumably on each occasion the landlord would have to pay for this, which seems unfair.

3. Should the Government allow landlords the option of demonstrating compliance by installing those measures which fall within a maximum payback period, and if so do you have any evidence on an appropriate payback period? Do you have any views on how the process of identifying improvement payback periods should operate?

I cannot see how this differs from the Green Deal Assessment system. The Government seems to be answering its own question in paragraph 62.

4. Do you agree with the proposed method for demonstrating an exemption where works would result in a material net decrease in a property’s value? What would be the most appropriate way to set the threshold?

The greatest concern here is the installation of internal wall insulation which could reduce the net lettable area.

I think a simple percentage reduction would be the only safe way to demonstrate a material net decrease in a property’s value. The landlord has to know that the exemption has been assessed by an objective method and cannot be challenged later by a Trading Standards Officer.

5. Do you have any evidence that shows the scale of the costs and benefits (including non-financial costs and benefits) associated with improving the energy efficiency of a property, for example time taken to undertake cost effective improvements?

I do not have any comment on this.

6. Does the proposed consents exemption strike the right balance between recognising existing landlord obligations, whilst also ensuring that the allowance is not used as a loophole to avoid undertaking improvements? Do you have any views on how beneficial owner consents should be taken into account?

Paragraphs 76 and 77 raise some difficult issues as to the implications of “unreasonable” conditions attached to consents. I do not understand the second sentence of para 76, which reads “In this case, where the conditions are unreasonable, the landlord would not be expected to proceed.” The difficulty is that an “unreasonable” condition has two possible meanings – that it is unreasonable for the person to make it in the first place and that it is unreasonable for the other party to have to comply with it. For example, consider a condition imposed by a supermarket tenant that, in order to fit in with its business requirements, any works can carried out by the landlord only between midnight and 4.00 am. Is that an unreasonable condition, in either of those senses? The regulations need to make this clear.

7. Do you think the regulations should have a phased introduction applying only to new leases to new tenants from 1 April 2018? Do you agree the regulations should also have a backstop, applying to all leases from 1 April 2023? If not, what alternatives do you suggest?

I have always argued for a soft start as it seems unreasonable to require a landlord to revisit an agreement it has already entered into with a tenant (as would be the case with a hard start). Therefore I am pleased to see that the Government favours this option.

However, a backstop has been proposed. This would require all landlords at least to talk to their tenants where leases are already in place now and will run beyond 2023. Presumably the tenant would still be able to refuse consent to the landlord to carry out the works on the basis that the lease does not reserve to the landlord any right to enter the premises for such purposes. Once again we need to ensure that the definition of “consent” is sufficiently wide to cover this possibility.

But even the backstop will not be effective where there is no EPC in place for the building. There is no requirement in the Energy Act 2011 for landlords to obtain an EPC where one does not already exist. So in such a case a landlord might benefit from not obtaining an EPC at that stage. That is counter-intuitive but apparently is the effect of the legislation.

The date for the backstop is a political decision.

8. Should the regulations apply upon lease renewals or extensions where a valid EPC exists for the property?

DECC and I clearly are thinking differently in this area.

DECC believes it is best for the landlord to request permission from the tenant to carry out the works, and for the tenant to refuse if it does not want disruption to its business (or for any other reason). That would constitute an exemption for the landlord (subject to the “unreasonable conditions” point mentioned above).

I feel that this is against the spirit of MEES. The spirit is that the landlord does not have to upgrade an inefficient building, but if it wishes to let it then it must bring it up to an E rating. The alternative is an empty building (or the landlord can occupy it itself). But in a lease renewal (within the 1954 Act at least) the landlord has no choice about granting a new lease, and therefore should not be required to comply with MEES at all. Even where the lease does not have the protection of the 1954 Act, it is still economically sensible for the parties to renew the lease if they both wish to.

So my view is that lease renewals should not be within MEES at all.

Incidentally, as the consultation paper says, no EPC is required for a lease renewal and so this would only apply where an EPC was already in place. (Actually I do not agree that no EPC is required for a lease renewal – there is no exemption in the underlying EU Directive – but I lost that argument long ago.)

DECC insists on talking about “lease renewals or extensions” refusing to accept that there is no such animal as a “lease extension”. It can only take effect as the grant of a new lease.

9. Do you agree that an exemption for properties below an E rating should last for five years, or where the exemption was due to a tenant’s refusal to consent, when that tenant leaves, if before five years?

Politically this makes sense.

10. Do you agree that the Government should set a trajectory of standards beyond 2018, and if so, how and when should this be done?

Personally, I consider that it will be difficult enough to enforce a policy that requires a minimum of an E rating. To announce in a few years’ time that landlords must repeat the process so that they now need to have (say) a D rating would not be well received.

So if there is an intention to improve the energy efficiency of buildings over time, it would be best to make this clear at the outset. Otherwise there could be a great deal of ill-feeling later.

11. Do you consider where a property has a valid exemption for letting below an E EPC rating that certification of compliance would be helpful? If so should this be voluntary or mandatory? Do you have any other comments regarding compliance and how Trading Standard Officers (TSOs) could be supported with enforcement, for example identifying landlords?

The concept of a certificate of compliance is something that was not considered by the working group and so it is a new issue to me.

There are no sanctions on a tenant who takes a lease of a property that is not compliant with MEES and it seems to me that the types of tenant that are likely to occupy F and G rated properties are (in the main) not likely to be interested in whether or not the landlord has complied with MEES.

So the only people interested in a certificate of compliance would be the landlord and the TSO.

A landlord intent on ignoring MEES would not apply for a voluntary certificate in the first place.

So for a certificate to have any use, it would have to be mandatory. But this would require enormous TSO resource.

Who would pay the cost? It would be inappropriate to require landlords to pay for a compliance certificate when the entire basis of MEES is that there is no upfront cost to the landlord. It would be particularly egregious to charge the landlord for a certificate to say that he is exempt from complying with MEES.

And if a mandatory certification process was put in place, there would need to be an appeal process to cover those occasions when a landlord believed he was exempt but the TSO refused to grant an exemption certificate.

All in all, my current view is that the concept of a mandatory certificate of compliance is unlikely to be practicable.

12. Do you agree that the penalty for non-compliance should be linked to a percentage of a property’s rateable value? If so, what percentage should this be? If not, what alternatives do you suggest? Should the Government set a minimum and maximum fine level, and if so at what levels should these be set?

The decisions as to the size of penalty is a political one.

As this is only a civil offence, landlords are likely to compare very carefully the size of any possible penalty with the costs of complying with MEES. This will particularly be the case if there is a maximum penalty.

Landlords are also likely to take into account the fact that there have been very few publicised sanctions under the EPC regulations, and conclude that this is likely to be the same with MEES.

13. Do you consider that the First-tier Tribunal is the appropriate body to hear and determine appeals about decisions regarding non-compliance with the minimum standard regulations? Do you consider that the General Regulatory Chamber Rules of the First-tier Tribunal will suit the handling of these appeals? If not, what tribunal could be used?

This is outside my area of expertise.

14. Do you have any comments not raised under any of the above questions?

We have been told that the changes in building regulations mean that EPC ratings become more strict over time – so that a building with an E rating today might have only an F rating in a few years’ time.

We are concerned that this could put a landlord in breach of MEPS. Were a re-rating to happen in, say, 2021, the landlord could grant a lease today (2014) when the building had an E rating. However by the time of the backstop in 2023, the building might be treated as having only an F rating and therefore the landlord would have to take some action under MEES.

15. Do you have any comments or evidence regarding the consultation impact assessment that could inform the final impact assessment, for example the average length of void periods or length of tenant stay in different sectors?

I have not yet read the impact assessment document.

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Law Commission to review the Land Registration Act 2002 25 July 2014

The Law Commission this week unveiled its 12th programme of law reform.  It will not get property lawyers’ pulses quickening, but inevitably many potentially interesting topics have to be discarded to produce the final list of projects.  It is presumably also necessary to pick projects across a range of areas, to make use of the specialist knowledge of all of the Law Commission’s staff, not to mention that of the five Law Commissioners themselves.  Apparently over 250 proposals for law reform projects were submitted, by 180 consultees. 

The Law Commission’s website says that the following questions are used to determine which projects make the final cut:

  • How important is it: to what extent is the law unsatisfactory?
  • What are the potential benefits of reform?
  • Is the independent, non-political Law Commission the most suitable body to conduct the project?
  • Are the necessary resources available?

Before taking on a project, the Law Commission must also have confirmation from the relevant Government Department that it has a “serious intention” to take forward law reform.  I think that explains why so many suggestions relating to landlord and tenant law keep falling by the wayside year after year.  Sorting out the ludicrous Landlord and Tenant Act 1987, or trying to make sense of the anti-avoidance provisions of the Landlord and Tenant (Covenants) Act 1995 (think House of Fraser case), are simply not vote-winners. 

PROJECTS TO BE UNDERTAKEN

So, these are the projects that the Law Commission will be undertaking in its 12th programme (using the Law Commission’s own summary on its website):

Bills of sale
A law reform review of the law relating to “bills of sale” loans, including logbook loans.

Firearms 
A scoping exercise to consider the enactment of a single statute containing modified and simplified versions of all firearms offences.

The form and accessibility of the law applicable in Wales
An Advice to Government, considering ways in which the existing legislation can be simplified and made more accessible, and how future legislation could reduce problems.

Land registration 
A law reform project to examine the extent of Land Registry’s guarantee of title, rectification and alteration of the register, and the impact of fraud.  (This is not really an accurate summary.  Rather this project will comprise a wide-ranging review of the whole of the Land Registration Act 2002, as described in the following section of this article).

Mental capacity and detention
A law reform project to consider how deprivation of liberty should be authorised and supervised in settings other than hospitals and care homes.

Planning and development control in Wales
A law reform project to recommend a simplified and modernised planning system for Wales.

Protecting consumer prepayments on retailer insolvency
A scoping review to assess the scale of the problem and consider was to increase protection for consumers.

Sentencing procedure
A law reform project to recommend a single sentencing statute.

Wills
A
law reform project to review the law of wills, focusing on mental capacity and will making, formalities that dictate how a will should be written and signed, and how mistakes in wills can be corrected.

LAND REGISTRATION PROJECT

So the only project directly affecting property lawyers relates to land registration, described as “a wide-ranging review of the 2002 Act”.  The Law Commission says that it will start work on this project later this year and expects to publish its report, making recommendations for reform, and accompanied by a draft Bill, late in 2017.  This is how the project is described by the Law Commission in its programme (paragraphs 2.13 to 2.16):

The Land Registration Act 2002 established a regime for the registration of title to freehold and some leasehold land, and interests affecting such land. The 2002 Act was implemented following a joint project between the Law Commission and Land Registry.

The land registration regime is of enormous and growing importance. Over 80% of the land in England and Wales is registered, with Land Registry maintaining more than 23 million titles. Dealings and disputes that engage the land registration regime can be complex and require expert advice. Uncertainty in the regime makes advising clients difficult, incentivises litigation, and increases costs for landowners.

This project will comprise a wide-ranging review of the 2002 Act, with a view to amendment where elements of the Act could be improved in light of experience with its operation. There is evidence that, in some areas, revision or clarification is needed. The Twelfth Programme consultation revealed a range of often highly technical issues that have important commercial implications for Land Registry and its stakeholders, including mortgage providers.

In particular, this project will examine the extent of Land Registry’s guarantee of title, rectification and alteration of the register, and the impact of fraud. The project will also re-examine the legal framework for electronic conveyancing. We will consider how technology might be harnessed to reduce the time and resources required to process applications, while maintaining the reliability of the register and public confidence in it.

An example of the type of issue that might be re-examined is the decision in Swift 1st Ltd v Colin [2011] EWHC 2410 (Ch), in which the court held that it is not necessary for a legal charge to be substantively registered in order for the chargee to be able to sell under its power of sale.  This came as a surprise to everyone, not least the Land Registry, which had (until the court’s decision in this case) refused to register a transfer by a mortgagee in such circumstances.

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Minimum Energy Efficiency Standard consultations published 22 July 2014

For a further article on this topic , see “Minimum Energy Efficiency Standard – thoughts on the consultation proposals” published on 28 July 2014.

The Department of Energy & Climate Change (DECC) has today published the two long-awaited consultations on what we used to term MEPS (minimum energy performance standard), but will from today have to term MEES (minimum energy efficiency standard).

One consultation covers “domestic” properties and the other “non-domestic” properties.  These terms are defined in the Energy Act 2011.

Consultation on MEES regulations (non-domestic)

Consultation on MEES regulations (domestic)

Each is accompanied by an impact assessment document, which will need to be examined in the same detail as the consultation documents.  The impact assessments are lengthy documents (96 pages in each case).  But the consultation documents are pretty hefty as well – 40 pages in the case of non-domestic, and 61 in the case of domestic.  [Note added on 25 July: I have since established that there is only one impact assessment, which covers both domestic and non-domestic properties.]

Perhaps surprisingly, the consultation documents do not contain draft regulations, as I had expected.  Perhaps the Government is not yet confident enough of the overall policy to start the drafting process.

The final date for response is 2 September 2014, which is a ridiculously short period given the complexities that the regulations will involve, and the fact that it falls exactly over the summer holiday period.  On an initial look at the non-domestic consultation I was unable to see any explanation for such a short period, which strikes me as discourteous.   (The consultation document states that the consultation has been carried out in accordance with the Government’s Code of Practice on consultation, but I am not sure that is correct given that this specifies a minimum consultation period of 12 weeks “under normal circumstances”.) ***

Overview of the non-domestic consultation

This is a brief overview of the issues raised within the non-domestic consultation document (I will have to deal separately with the domestic consultation, in a different article).

The non-domestic consultation document contains 15 questions, mainly setting out the Government’s proposals for dealing with specific issues, and asking whether consultees agree with them.

I will write a longer commentary later in the week on the Government’s specific proposals as set out in the consultation document (and my comments upon them), but in the meantime these are the questions that are raised, to give a flavour of the issues on which the Government is seeking views:

1.  Do you agree with the proposed scope of buildings and leases that should be  covered by the minimum standard regulations? If not, what building or lease types should be included or excluded?

2.  Do you agree that where a property falls below an E EPC rating, the landlord would only be required to make those improvements which could be made at no net or upfront cost, for example through a Green Deal finance arrangement? For those properties that do not meet an E EPC rating, do you have any suggestions for how the process could be streamlined?

3.  Should the Government allow landlords the option of demonstrating compliance by installing those measures which fall within a maximum payback period, and if so do you have any evidence on an appropriate payback period? Do you have any views on how the process of identifying improvement payback periods should operate?

4.  Do you agree with the proposed method for demonstrating an exemption where works would result in a material net decrease in a property’s value? What would be the most appropriate way to set the threshold?

5.  Do you have any evidence that shows the scale of the costs and benefits (including non-financial costs and benefits) associated with improving the energy efficiency of a property, for example time taken to undertake cost effective improvements?

6.  Does the proposed consents exemption strike the right balance between recognising existing landlord obligations, whilst also ensuring that the allowance is not used as a loophole to avoid undertaking improvements? Do you  have any views on how beneficial owner consents should be taken into account?

7.  Do you think the regulations should have a phased introduction applying only to new leases to new tenants from 1 April 2018? Do you agree the regulations should also have a backstop, applying to all leases from 1 April 2023? If not, what alternatives do you suggest?

8.  Should the regulations apply upon lease renewals or extensions where a valid EPC exists for the property?

9.  Do you agree that an exemption for properties below an E rating should last for five years, or where the exemption was due to a tenant’s refusal to consent, when that tenant leaves, if before five years?

10.  Do you agree that the Government should set a trajectory of standards beyond 2018, and if so, how and when should this be done?

11.  Do you consider where a property has a valid exemption for letting below an E EPC rating that certification of compliance would be helpful? If so should this be voluntary or mandatory? Do you have any other comments regarding compliance and how Trading Standard Officers (TSOs) could be supported with enforcement, for example identifying landlords?

12 and 13.  Questions about enforcement.

14.  Any other comments?

15.  Any comments on the impact assessment?

That’s enough to be getting on with.  Now to read the consultation document in detail.  It is already clear that a number of my concerns have not been addressed.  I will cover them in the next article.

For a further article on this topic , see “Minimum Energy Efficiency Standard – thoughts on the consultation proposals” published on 28 July 2014.


 

*** Note added on 23 July – it turns out that the link to the code of practice on consultation that is contained in the rubric at the start of the consultation document is a link to an old version (from 2008).  This is a link to the current version (which is undated but has “Oct 2013” in the title of the link).  On timing, the new version is vaguer and does not specify a minimum 12 week consultation period, but it does say:

“Timeframes for consultation should be proportionate and realistic to allow stakeholders sufficient time to provide a considered response and where the consultation spans all or part of a holiday period (see note) policy makers should consider what if any impact there may be and take appropriate mitigating action. The amount of time required will depend on the nature and impact of the proposal (for example, the diversity of interested parties or the complexity of the issue, or even external events), and might typically vary between two and 12 weeks. The timing and length of a consultation should be decided on a case-by-case basis; there is no set formula for establishing the right length. In some cases there will be no requirement for consultation, depending on the issue and whether interested groups have already been engaged in the policy making process. For a new and contentious policy, 12 weeks or more may still be appropriate. When deciding on the timescale for a given consultation the capacity of the groups being consulted to respond should be taken into consideration.”

The note about holiday periods says “Holiday period assumptions: Easter = 5 Working Days (1 Week); Summer (August) = 22 Working Days (4.2 Weeks); Christmas = 6 Working Days (1.1 Week)”.

I still feel strongly that we should have been allowed a period longer than six weeks, particularly where it exactly spans the summer holiday period.

 

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Update from the Law Commission 21 July 2014

The Law Commission has issued its report for 2013-14.   As one would expect, there is a discernible element of self-congratulation about it, but I don’t think one can object to that.  The Law Commission does indeed do an extraordinarily impressive job, and need not be embarrassed about reminding people about that.  And it is not its fault if the Government drags its feet over the proposals that it makes.

By way of example, the report is punctuated by quotes from Important People, such as this one from Simon Hughes MP:

“I end by thanking the Law Commission, which does an extremely good job for us in this country.  I add my tributes to it for the work that it does all the time to present us with considered and measured proposals for legislation.  (Simon Hughes, HC Deb, 26 March 2014, c427)” 

I particularly like the section that tries to assess the success of the Law Commission.  Implementation of the Law Commission’s recommendations (states the report) is clearly a key success measure, but it also considered numbers of mentions in court judgments over the past year (307 in the UK and 72 in other common law jurisdictions) and in Hansard (108).  Then it went on to say:

“In addition, the Commission’s work is widely quoted in academic journals and the media. A basic search on the internet reveals 220 references made in UK academic journals during the calendar year 2013, and our monitoring service picked up over 650 references to the Law Commission from the mainstream media during 2013–14.  There were many more mentions in local and specialist press and in blogs.  Some of these will be made in support of the Commission; some will not.  At the very least these figures show that the Law Commission is gaining attention and stimulating debate on the issues we address.”

It feels great to receive a personal mention !

Outstanding business

The most interesting part of the report for lawyers is of course hearing what is happening about projects that are still in train, or are awaiting a response from the Government.  The report contains some information obtained from the Ministry of Justice’s report that the Lord Chancellor is required to compile annually under the Law Commission Act 2009, reporting to Parliament each year on the extent to which Law Commission proposals have been implemented by the Government.  The most recent report was produced in May 2014 (for effectively the calendar year 2013), and can be accessed here.

So, in summary, this is the current position relating to projects of interest to readers of this blog:

Rights to light – this is probably the most important Law Commission project affecting real property at the moment, and a matter where people have deeply differing views.  The Law Commission issued a consultation document in February 2013.  It received over 125 responses and is on track to produce a final report by the end of this year.  Some of the proposals suggested by the Law Commission – such as the prospective abolition of the acquisition of rights of light by prescription – were “courageous” (as Sir Humphrey Appleby might have said), and it will be interesting to see whether its views have changed when the final report appears.  (Incidentally I much prefer “rights of light” to the Law Commission’s “rights to light” and so I hope that at least will have changed in the final report.)

Level crossings – the Law Commission reported in September 2013.  The Government is promising a response by September 2014 (taking up the whole of the twelve month period by which the Government is meant to respond!)

Electronic Communications Code – the Law Commission reported in February 2013.  The Government states that it has considered and analysed its recommendations.  As part of this the Department for Culture, Media and Sports commissioned a piece of further analysis “to study the economic impact of various alternative wayleave regimes”.  The MOJ report states that the Government “aims to provide a detailed response to the Commission’s report by the end of 2014”.  For a project that was originally said to be urgent, this one is proceeding remarkably slowly.

Easements, covenants and profits à prendre – this dates back to 2011.  The MOJ report states that the Government has been consulting with stakeholders but “the completion of the response to the report has … been delayed by work on other priorities”.  It promises that “[t]he Government intends to respond to the report in 2014.”  There is so much in this report that would improve the English land law system (not forgetting Wales).   A simplification of the rules relating to prescriptive easements and the introduction of (positive and restrictive) land obligations, for a start.  Cross your fingers that this gets the green light (and not just because I am a law lecturer).

Termination of tenancies for tenant default – remember this report, from 2006 ?  This would effectively re-invent the law relating to forfeiture of leases.  The Government says it is still thinking about it and “intends to reach a final decision in 2014.”

Future projects

The report mentions in passing that the projects to be included in the Twelfth Programme (it sounds rather like something from Soviet Russia) will be announced shortly.  Rumour has it that it will include a look at how the rectification provisions in the Land Registration Act 2002 are faring.  The courts have very little guidance from the 2002 Act and have had to fall back on some principles from the 1925 legislation.  This is unlikely to have been what the original draftsfolk of the 2002 Act had in mind.

I will write an article about the Twelfth Programme when the projects are announced.

 

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Can a licensee grant a tenancy ? 17 July 2014

I am currently writing a series of articles for Landlord & Tenant Review about recent House of Lords cases involving (you guessed it) landlord and tenant law.

The first article, on Street v Mountford and Bruton v London & Quadrant Housing Trust, was published earlier this year and is now also available on the new Articles page of this website.

Street v Mountford [1985] AC 809 is a case with which every property lawyer is familiar.  The House of Lords held that occupation that confers exclusive possession will almost always constitute a tenancy (there are a few exceptions, but they are exceptions and should be treated as such).

Bruton v London & Quadrant Housing Trust [1999] UKHL 26 is less familiar but nevertheless important.  In that case the House of Lords held that a body that was merely a licensee could nevertheless grant a tenancy.  This came as a shock to everyone.  We had always assumed that only a freeholder or a tenant could grant a tenancy.

The effect of the decision in that case was that L&Q was subject to the provisions of the Housing Act 1985 that required it to keep the property in good repair.  In the context of a commercial occupant, one can imagine that it might confer security of tenure on the occupier under the Landlord and Tenant Act 1954.

Please do read the article on the new Articles page of this website.  The link is “Exclusively yours – a look back at Street v Mountford“.

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Land Registry model to remain unchanged (for now) 14 July 2014

The Government has today (14 July 2014) issued its response following the consultation on “Introduction of a Land Registry Service Company“.

As anticipated in the Daily Mail several weeks ago, and the Guardian last Saturday, the Government is not proceeding (for now, anyway) with its proposals for what many are describing as “privatisation”.

This statement appears in paragraph 9 of the Executive Summary:

“Given the importance of the Land Registry to the effective operation of the UK property market, we have concluded that further consideration would be valuable. Therefore, at this time, no decision has been taken to change Land Registry’s model.”

The document can be downloaded from this website.   It is 26 pages long.  Unusually for a consultation response, it does not list the people who responded to the original consultation.  Perhaps this is because there were 304 of them, and it would have taken up too many pages.

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The Model Commercial Lease 10 July 2014

This is the first of several articles about the Model Commercial Lease, which is launched today.

In one of those thoughts that appear unexpectedly from the depths of one’s memory, I have just recalled an event from long, long ago, when I was a young assistant solicitor at Norton, Rose, Botterell & Roche (those commas are deliberate).  I also remember the name of the other party, but I think he is still practising and so I will keep his identity to myself.

It was probably about 8.30 pm one evening.  He, also an assistant solicitor, showed me a lease he was marking up on behalf of the tenant.  We are talking about 1988 or thereabouts, so it was probably a 25 year upwards-only lease.   It was covered with red ink on every one of its 100+ pages.  “This is just my working document,” he said proudly.  “Now I am going to mark up the travelling draft and send it back to the landlord’s solicitors.”

It was then that I realised that nearly all lease negotiations take longer, and cost more, than either landlord or tenant want or expect – and almost certainly need.  People say, and it is probably more or less correct, that it is rare for either party to look at a commercial lease after it has been granted, other than to check the service charge schedule, the rent review provisions, the dilapidations clause and any break clause.  So when negotiating a lease, it ought to be possible for the lawyers to concentrate on the areas that actually matter to the parties, and take the rest as read.  It has taken 25 years for my vision to come to fruition, as has happened this week with the unveiling of the Model Commercial Lease (MCL).

The MCL, so it says in the article that will be appearing in Estates Gazette this coming weekend, is intended to become a familiar starting point for the majority of commercial letting transactions.  The MCL comprises various template commercial leases and associated documents, which are available for anyone to download, entirely free of charge, from www.modelcommerciallease.co.uk.  Users can then customise them to their particular requirements, or incorporate text from them into their own documents.

Different versions of MCL leases are available to suit different types of commercial buildings such as offices, shops, shopping centre units and industrial/logistics units.  There are also asset management documents – a rent deposit deed and various types of licence.  

The MCL was originally commissioned by the British Property Federation.  A large number of well-known law firms, clients and trade organisations have been represented on the working group that produced the documents, or taken part in extensive informal consultations.  (I have an interest (proudly) to declare: I am a member of the working group, and I will be managing the MCL website on behalf of the working group.)

This is not the first time that a standard lease has been attempted.  Other perfectly sensible leases have fallen by the wayside – in part because the legal world was (at the time) not yet ready for pre-negotiated documents, and in part I think because (in the best known example, the Lease Book),  departures from the standard form had to be listed in a schedule, making the document unwieldy and awkward to read.  Modern word-processing software has eliminated this difficulty.

Will solicitors be prepared to accept a reduction in their workload?  Some I have spoken to have been doubtful (and one or two actively hostile to the idea); others, however, have accepted the reality of the situation, which is that clients are no longer happy to pay lawyers to negotiate leases for them – or at least not happy to pay as much as lawyers need to charge at their basic hourly rates to keep their managing partners happy.   I am pretty sure that most large law firms must be losing money a large proportion of the time when negotiating leases for fixed fees.

So I reckon that this new lease is going to prove extremely popular, with both clients and lawyers.  When the CLLS Land Law Committee introduced its certificate of title as long ago as (from memory) the 1990s, individual law firms ceased to need their own precedent certificates.  Similarly, we saw individual firms’ enquiries before contract disappear overnight when the Commercial Property Standard Enquiries were introduced about twelve years ago (another interest to declare: I was involved in their gestation as well).  I see the MCL succeeding in just the same way, only perhaps over a slightly longer period of time.  Currently every major law firm expensively maintains its own set of precedent leases and asset management documents.  How many will still have them in five years’ time?  None, I confidently predict.

Download the MCL from the MCL website today.

 

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Law, but not as we know it 5 July 2014

I found myself transported back to my law course at the University of Birmingham last week.  (Actually it was not last week, it was virtually 37 years ago, but you know what I mean.)

Not all the readers of my blog articles are property lawyers.  Indeed, not all are lawyers of any sort, and sometimes one forgets how much lawyers take for granted that is, to lay people, utterly mysterious.

For example, in my article “Why are we waiting?” on 4 June 2014, about the considerable delay in the long-expected MEPS consultation, I wrote:

“… although the requirement on the Government to introduce MEPS is contained in the Energy Act 2011, it is not yet in force.

One of my readers asked me how that could be.  Surely an Act is an Act?  Alas, it is not so simple.

Enactment is only the beginning

Parliament passes legislation.  An Act goes onto the statute book when it has been approved by the House of Commons, the House of Lords and the Queen (although the Queen’s consent is merely formal – by convention she cannot refuse to approve it).

Every statute has this formal wording at the beginning:

“BE IT ENACTED by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:— “

However, just because something is in an Act of Parliament does not mean that it has immediate effect.  Every Act has a provision in it that says when it comes into force.  Some say that it comes into force immediately.  Others have a specific date in them.  A third possibility is that a provision comes into force when a commencement order is made by a Government Minister.

The MEPS legislation contains provisions of all three kinds.  Section 121 Energy Act 2011 is the commencement section.  It is too long to set out here, but you can look at by clicking on this link:

http://www.legislation.gov.uk/ukpga/2011/16/section/121

As you will see, it is extremely tedious.  We are concerned with section 49 (among others).  So you have to look at the various provisions of section 121 to see whether section 49 is mentioned as coming into force when Scottish Ministers appoint (as in sub-section (2)) – obviously inapplicable in our case.

Nor is in sub-section (3) – two months after the Act was passed.

Nor in sub-section (4) – the day the Act was passed.

Nor in sub-section (5) – which refers only to Schedule 1, which contains amendments to other statutes.

So you end up with the basic rule, which is in sub-s(1):

“The provisions of this Act come into force on such day as the Secretary of State may by order made by statutory instrument appoint.”

And to date the Secretary of State (ie the Secretary of State for Energy and Climate Change in this instance – Ed Davey) has not appointed any date for section 49 (among other sections) to come into force.  So although section 49 is on the statute book, it is not yet in force.  Which means that the Secretary of State is not (yet) under any duty to do the things that section 49 says he is required to do.   Such as, for example, to 

“… make regulations for the purpose of securing that a landlord of a non-domestic PR [private rented] property—

(a)  which is of such description of non-domestic PR property as is provided for by the regulations,

(b)  in relation to which there is an energy performance certificate, and

(c)  which falls below such level of energy efficiency (as demonstrated by the energy performance certificate) as is provided for by the regulations,

may not let the property until the landlord has complied with the obligation mentioned in subsection (2) [ie to make to the property such relevant energy efficiency improvements as are provided for by the regulations].”

(So you can see how complex the regulations will need to be – which is why I ventured in my early article that I will not be surprised if MEPS, as originally envisaged, never makes it to the starting post.  I fear that it is just too complicated to be capable of delivery.)

So the message of this article is that just because something is in an Act of Parliament does not meant that it is in force.  It may not yet be in force, or (another complication) it may have been repealed by later legislation.  At least with the Internet it is relatively easy to find out the status of individual sections in, and schedules to, an Act.  Before the coming of the web, it was much more difficult.

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