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An introduction to LinkedIn and other social media for lawyers 26 November 2014

Are you confident that your profile on LinkedIn is suitable ?

Do you wonder whether LinkedIn can be used for any purpose other than seeing what people look like in photographs taken over ten years ago ?

Are you asked to provide information to your marketing team that can be used for Tweets (whatever they are) and wonder what is needed ?

Do you ever muse over why “lawyers”, “marketing” and “Twitter” are ever used in the same sentence ?

If any of these points is relevant, then CRELA’s forthcoming talk “Social media: you mean it’s just a conversation?” is right up your street.  It features Helen Hammond from Elephant Creative, who will take a practical look at a selection of the most important social media tools.

The event is being held at the offices of Berwin Leighton Paisner on the evening of Tuesday 2 December.  The event is open to everyone, not just members of CRELA (Commercial Real Estate Legal Association).  Tickets are still available and are ridiculously good value.

More details, including how to book your tickets, are in my blog article dated 24 October 2014 entitled “Social Media  you mean it’s just a conversation?“.

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Dry stone walls and steel mills 20 November 2014

What is it about steel mills that creates litigation ?  In Peel Land and Property (Ports No 3) Ltd v TS Sheerness Steel Ltd [2014] EWCA Civ 100, we have recently seen a battle between a landlord and a tenant who were arguing over 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.   You can see my article about the Court of Appeal decision here.  (Incidentally on 30 October the Supreme Court refused Sheerness Steel leave to appeal, meaning that the Court of Appeal’s decision will stand.)

Now we have Lictor Anstalt v Mir Steel UK Ltd [2014] EWHC 3316 (Ch), with an even stranger set of facts.  The judge was unable to get to the bottom of some of them.  Boiled down to its essentials, the question was this.  If you let me assemble and use your hot strip steel mill (abbreviated to “HSM” in the judge’s decision) on my land and I sell my land to a third party, can you recover your mill or is it now owned by the third party and gone for good?  Actually, it was a good deal more complex than that, which explains why the judgment is no fewer than 88 pages long.

What does a hot strip steel mill look like?  It is big, for a start.  This one was 300 metres long. The judge had this to say about it when she went on a visit of inspection (at [130]):

“I should add that I had the opportunity during the trial of this matter to visit the Site and to view the HSM in situ.  It is not operational at present.  The impression gained was one of enormity and complexity.  The HSM itself is upon prepared foundations and in some cases, is sunk below the surface, positioned over aligned pits and upon specially erected parapet walls.  The electrical connections, lubrication and water pipes are themselves extremely large and durable as are the means by which they are attached to the HSM itself.  All of the fixings and boltings are also of an extremely heavy duty nature.  Further, the HSM stands in a building or shed which is some 300 metres in length.”

Not your usual chattel/fixture dispute then.

The facts

Lictor owned a hot strip steel mill (in pieces) which was surplus to requirements.  It agreed with Alphasteel, a related company, that Alphasteel could erect the mill on Alphasteel’s own land, and use it to make steel, and keep the profits.  An agreement (“the April agreement”) was signed between the parties to this effect, but it also provided that the mill remained the property of Lictor, despite being erected on Alphasteel’s land, and that Lictor could enter on the land (on reasonable notice) and dismantle the mill and remove it when it wished.  Despite little evidence of any reason why Lictor should want to enter into such an agreement, the court held it to be genuine.

Alphasteel became insolvent and administrators were appointed.  The administrators hived down the assets of Alphasteel (including such interest as Alphasteel had in the mill) into a subsidiary company (which became known as Mir Steel) and then sold the shares in Mir Steel to Libala.  The administrators made clear to Libala that ownership of the mill was disputed, but nonetheless both parties went along with the sale in the knowledge that the transaction made it impossible for Alphasteel to comply with its obligations in the April agreement to allow Lictor onto the land to dismantle and recover the mill.

So the issue became: if the mill was a chattel, then it still belonged to Lictor and Lictor could recover it.  But if it was part of the land, then ownership had passed to Mir Steel.  Among the many questions that the court had to resolve, the key one for us was whether the mill had become part of the land or remained a chattel.

Bizarrely, this is a question not dissimilar to the 19th century cases involving looms attached to factory floors.  There are many cases that consider whether a chattel has become part of the land to which it has been affixed (or into which it has been built).  Many of these cases are now suspect after the House of Lords case of Elitestone Ltd v Morris [1997] 1 WLR 687 in which the House of Lords favoured a threefold distinction (a chattel; a fixture; or part and parcel of the land itself), rather than the twofold distinction between fixtures and chattels previously adopted.  However they still offer useful guidance.

The judge held that the mill had become part of the land and therefore was no longer owned by Lictor.  Her reasoning is too lengthy to set out here, and it would be misleading to pick out specific paragraphs from it.  You can see it in paragraphs 184 onward of her judgment (click here).

It is useful to recall here that the parties’ subjective intentions (as expressed in the April agreement) were not relevant – no more than the parties’ subjective intentions are relevant in a dispute as to whether an arrangement constitutes a lease or a licence.  The label given by the parties is irrelevant.  The judge quoted from Lord Browne-Wilkinson in Melluish v BMI (No 3) Ltd [1996] AC 454 at 473:

“The terms expressly or implicitly agreed between the fixer of the chattel and the owner of the land cannot affect the determination of the question whether, in law, the chattel has become a fixture and therefore in law belongs to the owner of the soil…  The terms of such agreement will regulate the contractual rights to sever the chattel from the land as between the parties to that contract and, where an equitable right is conferred by the contract, as against certain third parties.  But such agreement cannot prevent the chattel, once fixed, becoming in law part of the land and as such owned by the owner of the land so long as it remains fixed.”

Equitable rights 

So far, so conventional.  But one additional issue arose, which is likely to be unfamiliar to many readers.  The court held, following earlier cases including Cookes v Morrison, Jones & Taylor Ltd [1914] 1 Ch 50, that the agreement allowing Lictor to remove the mill in the future created an equitable interest over the land in favour of Lictor.

This equitable interest would be binding on anyone acquiring an interest in the property – except for equity’s darling, the bona fide purchaser of a legal estate for value without notice.  As the property in question comprised registered land, notice in this case equated to protection by means of a notice on the register.  This had not been done.  So even though Libala was aware that Lictor was claiming ownership of the mill, and claimed the right to enter on the land to remove it, Libala (or more accurately its subsidiary company Mir Steel) took free of Lictor’s rights when Alphasteel’s assets were transferred from Alphasteel to Mir Steel, because they had not been protected at the Land Registry.

Lictor did not lose everything.  The court held that Mir Steel was liable for procuring a breach of contract in relation to the April agreement.  Intention to cause loss is not a necessary element of the tort of inducing breach of contract.  The judge said (at [257]):

“Libala and Mir intended to purchase Alphasteel’s assets including the HSM. That end was achieved by getting Alphasteel to execute the [relevant legal documents to achieve the sale], in other words by getting Alphasteel to do the very thing it had to Mir’s knowledge promised not to do under the terms of the April Agreement.  Mir intended those steps or means to its end of purchasing the assets.  All the parties were aware of the content of the April Agreement.  Accordingly, in my judgment, it intended to procure the breach of the April Agreement.”

The lessons for us 

The case contains a lot of law, and would make good reading for a rainy Sunday afternoon (click here for the transcript).

But for the property lawyers among my readers (the majority of readers, I suspect), there are two lessons:

First, a hot strip steel mill may well be part of the land on which it sits (the similar issue in the Sheerness Steel case did not need to be resolved, as the judge held that many of the items were either chattels or tenant’s fixtures, which the tenant was entitled to remove – or would have been entitled to remove had the lease permitted it).

Secondly, an agreement under which a party retains a right to enter land to remove items on it creates an equitable interest over the land in favour of that person – which needs to be protected if it is to give priority against third parties.  This could apply, for example, in the case of a hire purchase agreement under which items installed into a property (an alarm system, for example) remain the property of the hirer and can be removed if payment is not made as required.  This is probably an area of law new to many people.

And there is also a lesson for any readers who are lawyers but not property specialists. Remember this extract from Holland v Hodgson (1872) LR 7 CP 328 by Blackburn J.  It might come in handy one day:

“Thus blocks of stone placed one on the top of another without any mortar or cement for the purpose of forming a dry stone wall would become part of the land, though the same stones, if deposited in a builder’s yard and for convenience sake stacked on the top of each other in the form of a wall, would remain chattels.”

If this can happen with something as simple as blocks of stone, think what could happen with the component parts of a steel mill !  Mr Taylor, a partner at Fox Williams who acted for Lictor, was – not surprisingly, in my view – apparently unaware of this area of law.  About Mr Taylor, the judge observed (at [79]):

“Rather surprisingly, [Mr Taylor] stated in cross examination that he was not aware of the law relating to the annexation of chattels to the land.  Given that he is a qualified solicitor who has been on the Roll for a considerable time, I find this difficult to accept and on the balance of probabilities, consider it unlikely to be the case. “

Given that Mr Taylor is a partner in the Corporate group, he might be entitled to feel a bit miffed about that comment.

 

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CRELA event: learn how to become comfortable with social media at work 16 November 2014

This is an invitation to attend a talk from a marketing expert who will explain why lawyers need to be comfortable using social media to promote their practices – and how to do it.  The talk takes place on the evening of Tuesday 2 December and everyone is invited.

Lawyers today need many skills.  A decent understanding of the law is still pretty useful, but you also need to be an expert in marketing (including self-marketing), business development, networking, IT (including, ideally touch-typing  whoever would have guessed that twenty years ago) and … it also helps to have an understanding of Social Media.

Social Media ranges from stuff that people use at home that I really don’t understand like FaceBook and Instagram (I had to look that one up) to stuff that people use at work that  I sort of understand – like LinkedIn and Twitter.  I have a LinkedIn page (click here) and a Twitter page (click here) but I’m sure I don’t use them to best advantage (particular Twitter, which remains a permanent mystery to me).

And I’m sure I am not alone, which is why CRELA (Commercial Real Estate Legal Association) has arranged for Helen Hammond of Elephant Creative to present a talk on Social Media for lawyers on the evening of Tuesday 2 December 2014 at the offices of Berwin Leighton Paisner at London Bridge.  The talk is suitable for all lawyers, whatever their area of specialism.

In view of the importance of the topic, the event is open to everyone to attend, whether or not a member of CRELA.  Tickets cost £25 plus VAT for members and £30 plus VAT for members’ guests and non-members.

You will have guessed that there are still tickets available and I encourage everyone to attend. There will be drinks afterwards as well so you get both CPD points and penalty points (only joking).

More details, including how to book your tickets, are in my blog article dated 24 October 2014 entitled “Social Media  you mean it’s just a conversation?“.

I hope to see you there.  I am chairing the event by the way, so if you do attend and we do not yet know one another, please do introduce yourself beforehand or during the networking afterwards.

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London’s Centre Point – first hated but now listed 15 November 2014

A fascinating article in the Evening Standard on Tuesday 11 November – What makes one tower worth saving and another wrecking? – celebrates (if that is the right word) the effect that architect Richard Seifert had on the London skyline.  The NatWest Tower (I still can’t get used to calling it Tower 42), Centre Point, the Royal Garden Hotel in Kensington and the iconic but outrageously out-of-scale Tolworth Tower, as well as the redevelopment of Euston station (involving the destruction of the Euston Arch) are all examples of his work.  Few people have a good word for him nowadays although of course he was not working alone.  The modern planning legislation was already in force and he would not have been able to do it without the support of the local authorities.  But in the 1960s and 1970s Georgian terraces were out and concrete skyscrapers were most definitely in, the taller the better.

The author of the Evening Standard article, Robert Bevan, writes that Seifert “did more to alter the London skyline than any architect since Sir Christopher Wren”.  The reason for focusing on Seifert at this time is that one of his buildings, Copyright House in Berners Street, is about to be demolished.  It failed to win listing status from English Heritage.  Others of his buildings have similarly been rejected – including Tower 42 – but the article says that Space House, off Kingsway (the home of the Civil Aviation Authority), is likely to be listed shortly.

One building that is already listed (as long ago as 1995) is Centre Point, above Tottenham Court Road station.  This is already a busy place, and once Crossrail opens in a few years’ time it will be even busier.  The history of Centre Point is interesting: its developer, Harry Hyams, initially refused to let the building in parts, insisting on waiting for a tenant of the whole building to come forward.  As a result, the building sat empty for years.  According to the Wikipedia entry on Centre Point, Hyams eventually relented but the tower remained a symbol of the brutalism of the property development industry in the 1960s for years.

Centre Point was the subject of a recent court case, triggered by the new owner’s wish to repair the concrete exterior of the building using scaffolding for access.  In Century Projects Ltd v Almacantar (Centre Point) [2014] EWHC 394 (Ch), the tenant of the Paramount restaurant on the 33rd floor of the tower was seeking an injunction to prevent the landlord carrying out the repair works in this way, since the scaffolding would obstruct the “spectacular views across the West End and City of London” from the restaurant described by Mr Condou, the tenant’s director, in his witness statement.  The tenant wanted the landlord to carry out the works using cradles suspended from the roof of the tower.  The respective experts disagreed as to the wisdom and practicality of the different approaches.

Ultimately the court refused to grant the tenant an injunction, leaving it (if it believes it has a case) to bring a claim for damages against the landlord for breach of quiet enjoyment.  One of the key reasons for the decision was, as the judge explained, “it is a surprising submission that the tenant can tell the landlord how the landlord is to carry out works for which the landlord is responsible. This would cut across what I regard as the prima facie right of a landlord to choose for itself how to carry out works of repair.”

A sheath of scaffolding

The scaffolding that the tenant was trying to stave off is now up, as part of the new owner’s project to convert the tower from offices to flats.  As the Evening Standard article says, rather poetically:

“… the tower is now strapped into a sheath of scaffolding and a veil of green netting as repairs are made to its facade, a honeycomb screen of concrete made with crushed Portland stone.”

And once the scaffolding is down, I hope to be paying a visit, perhaps with my new food-loving blogger friend The Food Judge and and my non-blogging friend B, to the Paramount restaurant on the 33rd floor.  The restaurant claims to offer “the highest afternoon tea in London” – but I hope that we will be visiting for something more robust than tea.

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Supreme Court upholds rule that one joint tenant can end a periodic tenancy 12 November 2014

In Sims v Dacorum Borough Council [2014] UKSC 63 decided today, the Supreme Court has upheld the common law rule that one joint tenant can end a periodic tenancy by serving a notice to quit.

The background to the case, and the previous law, are set out in my article from earlier this week “How many joint tenants does it take to end a periodic tenancy?“.

Although there were seven justices deciding the case, Lord Neuberger gave the only judgment, and the other six justices agreed with him.

There are a couple of curiosities about the case.  First, it seems that although Mr Sims’ counsel had argued in the Court of Appeal that the rule that one joint tenant can end a periodic tenancy should be revisited, this was (according to the Supreme Court’s press summary on the decision) not argued in the Supreme Court.  Mr Sims’ case was simply that the effect of the decision in Hammersmith and Fulham LBC v Monk [1992] 1 AC 478 in his circumstances was to breach his human rights (see below).

In spite of that, Lord Neuberger took the opportunity to approve the decision in Monk, saying:

“… someone’s interest has to suffer when one of two joint periodic tenants serves a notice to quit. If the result is not as decided in Monk, either the tenant who served the notice is forced to remain a tenant against her will, or the landlord is landed with one tenant instead of two, which means less security – and, in a case such as the present, a family property occupied by a single person. Just as a joint tenant in Mr Sims’s position can claim that the outcome determined as correct in Monk is harsh,  so could a joint tenant in Mrs Sims’s position or a landlord in Dacorum’s  position contend that either of the alternative outcomes is harsh.”

Secondly, the case was highly fact-specific.  Lord Neuberger held that Mr Sims’ rights had not been infringed under Article 8 of the ECHR (right to respect for a person’s private and family life) or Article 1 of the First Protocol (everyone is entitled to peaceful enjoyment of their possessions and should not be deprived of them except in the public interest and subject to conditions provided for by law).  Part of the reason for the decision was that the tenancy agreement that Mr and Mrs Sims had entered into with Dacorum BC contained these two provisions:

“100.  Where either joint tenant wishes to terminate their interest in a tenancy they must terminate the full tenancy as in (92) above.

“101.  We will then decide whether any of the other joint tenants can remain in the property or be offered more suitable accommodation.”

Clause 92 required any notice to quit to give four weeks notice and to be in writing.

Lord Neuberger observed that clause 100 is effectively reproducing the common law rule laid down in Monk.  He mentioned specificially, however, that Mr Sims had expressly agreed to the provision.

Similarly, Mr Sims had had the benefit of the provision in clause 101.  The council had considered his request and had – after appropriate consideration – refused it.  The result might presumably have been different had the council not gone through the correct procedures (there are several recent cases that consider this point, but they are not really dealing with landlord and tenant law and so I have not been following them very closely).

But one wonders what difference (if any) the existence of clause 100 made to the decision.  Lord Neuberger expressly mentioned the fact that Mr Sims had agreed to this provision.  But surely he would have been equally subject to the same rule even if it had not been mentioned in the tenancy agreement?

For our purposes, however, I think these are mere quibbles.  The importance of the case is that the decision in Hammersmith and Fulham LBC v Monk remains good law.

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How many joint tenants does it take to end a periodic tenancy? 10 November 2014

On Wednesday this week (12 November) the Supreme Court is scheduled to hand down its judgment in the case of Sims v Dacorum Borough Council.

These facts are taken from the summary of the case on the Supreme Court’s website.

Mr Sims and his wife were joint periodic secure tenants of a house owned by Dacorum Borough Council.  On the break-up of their marriage, Mrs Sims left the property and gave notice to quit to the Council which – following Hammersmith and Fulham London Borough Council v Monk [1992] 1 AC 478 – had the effect of terminating the tenancy. The Council obtained a possession order against Mr Sims. He appealed, arguing that the rule in Monk was incompatible with Article 8 of the European Convention on Human Rights and Article 1 of the First Protocol to the ECHR.  The Court of Appeal was bound by the House of Lords’ decision in Monk and dismissed the appeal.

Article 8 provides a right to respect for a person’s private and family life, his home and (I did not know this) his correspondence. Article 1 of the First Protocol provides that no-one (this includes both natural and legal persons) should be deprived of his possessions except in the public interest and subject to the conditions provided for by law.

The case was heard during the summer by no fewer than SEVEN Supreme Court Justices. Is that a sign that a momentous change in the law is a possibility?

The current law

As mentioned above, the leading case on this area of law is Hammersmith and Fulham London Borough Council v Monk [1992] 1 AC 478.  Lord Bridges, who gave the leading opinion in that case, said that the question to be determined was “whether, at common law, a contractual periodic tenancy granted to two or more joint tenants is incapable of termination by a tenant’s notice to quit unless it is served with the concurrence of all the joint tenants.”

The (unanimous) decision in that case – that one joint tenant is able to terminate the joint tenancy, regardless of the wishes of the others – is based on the logic that a periodic tenancy is made up of a series of short tenancies, normally one for each period in respect of which rent is paid.   At the end of each tenancy, a new tenancy comes into existence automatically – but (where there are joint tenants) this will happen only if all the tenants want it to happen.  If one of the tenants does not want a new tenancy (as indicated by the service of a notice to quit), then no new tenancy arises and both parties’ contractual rights to occupy the property cease.  This is the essence of Mr Sims’ complaint.  He lost his right to occupy his home as a result of a notice to quit served by his wife.

Overlaying human rights

Mr Sims’ argument is that the common law position needs to be modified, to become compatible with the ECHR (to which the courts are now required to have regard by section 6 Human Rights Act 1998).  In the Court of Appeal (you can see the transcript here), Mummery LJ explained the argument in this way:

“…  in order to achieve compatibility with Article 8 of the European Convention on Human Rights (ECHR) and Article 1 of the First Protocol and the Human Rights Act 1998, [Mr Sims’ argument is that] English law is required to recognise that he has a sole tenancy of the property as his home, following his wife’s termination of the periodic secure joint tenancy by unilateral notice. The ECHR points are taken by the husband in the possession proceedings that the authority has taken against him.

“In his only remaining defence to a possession order the husband’s reliance on the following matters is emphasised.  He did not himself give any notice to quit the joint tenancy.  He did not concur in the notice given by his wife.  He did not receive any prior notice from either his wife or the authority.  As the property is still his home, he is entitled to respect for it under Article 8.  As the property was one of his possessions, he was entitled to protection from interference with his enjoyment of it under Article 1 of the First Protocol to the ECHR.  The recognition of his sole tenancy of the property would give legal and practical effect to his ECHR entitlements. “

Mummery LJ gave the only judgment in the Court of Appeal, with which Etherton LJ and Sir Scott Baker agreed.  The Court of Appeal held, in a remarkably short judgment, that there was no breach of Article 8.  There was also no breach of Article 1 of the First Protocol, as:

“The Council’s role regarding the rule in Monk was simply as recipient of the notice given to it by Mrs Sims terminating the joint tenancy.  The Council itself did nothing in relation to the termination of the joint tenancy that could possibly be described as an interference by it with the peaceable enjoyment by Mr Sims of the property.”

Furthermore, it refused consent to appeal to the Supreme Court, saying (presciently – with my emphasis added here):

“Finally, the proposed appeal to the Supreme Court. It is unarguable. There is no incompatibility between the rules of English property and contract law relating to the termination of a joint tenancy by one joint tenant and the ECHR. I cannot think of a sensible purpose that would be served by the expenditure of yet more public funds (on both sides) on a repeat of this debate before five (or even more) Justices of the Supreme Court of the United Kingdom.”

Clearly, the Supreme Court thought differently, and the case was heard in June this year.

On tenterhooks

What will the Supreme Court decide?  Part of me says “wait and see” but another part is telling me that I should advance at least a tentative view.  The latter part is winning, so here it is.

There seems to be no suggestion on Mr Sims’ part that the service of a notice to quit by one joint tenant should be ineffective (as would be the case, for example, if one joint tenant attempted to serve a break notice).  His argument is that it should result in the release of the tenant that had served the notice to quit, resulting in a new periodic tenancy granted to the other joint tenant (or tenants).

This would mean, however, that the landlord would end up in a contractual relationship that was different from the one when the tenancy was granted originally.  It could also mean that the law relating to periodic tenancies would differ between cases where Article 8 is engaged (where the property is someone’s home) and other cases (commercial properties, for example).  That does not seem to be very desirable.

I will stick my neck out and venture that I anticipate that, for these and other reasons, the Supreme Court will dismiss Mr Sims’ appeal, leaving the law as it is.  I imagine that is the result that David Cameron is hoping for as well.  He has enough problems with the ECHR as it is, without it interfering with the law relating to the termination of periodic tenancies in England and Wales.

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Government seeks to renegotiate Pool Re arrangements 7 November 2014

Uninsured risk provisions are becoming more common in commercial leases.  In the past, leases were generally silent on the point since – until the IRA’s activities in the City in 1993 – the idea that insurance would not be obtainable against particular risks had not even entered anyone’s head.  Two bombs in quick succession changed that overnight.

Cover against damage caused by terrorism is now pretty standard, following the Government’s agreement to stand behind Pool Re Insurance.  But this might be about to change.

Yesterday’s Evening Standard contained an astonishing article by Anthony Hilton in the City Comment column entitled “Risk of pain in insurance hardball game“.   It appears that the Government is trying to change the deal under which Pool Re was set up in 1993.

According to the article, currently the Government receives 10% of the premiums paid to Pool Re.  In return the Government agreed to stand behind Pool Re and provide funds, by way of a loan, if a terrorist incident occurs where the claims exceed Pool Re’s reserves.  The loan would be repaid out of future premium income.

Pool Re’s reserves are now £5.5 billion, which apparently should to be sufficient to pay claims in all but the most extreme circumstances.

It appears that the Government has said that it wishes to change the arrangements so that it receives 50% of the premium income, rather than 10%.   Pool Re has called an EGM for about two weeks’ time, and has recommended that this change is accepted.  It appears to have little choice.  According to an article in the FT earlier this week, if the 200 or so member firms in Pool Re do not agree to the new arrangements at the EGM, Pool Re could be wound up.  Cover against damage caused by terrorism would then cease to be available.

Over the past twenty years, we have become used to terrorism cover being available without difficulty, and were beginning to assume that flooding would become the next risk for which cover would cease to be available.  There appears to be a slight, although nonetheless chilling, risk that we could have got that badly wrong.

UPDATE ADDED ON 15 MARCH 2015

The EGM was held on 21 November 2014.  Members voted in favour of the revised proposals.

Click here to see an article on the EGM from a journal called Commercial Risk Europe.

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Lunchtime training event in Norwich: Tuesday 18 November 2014 6 November 2014

Peter Williams, formerly a Professional Support Lawyer at Eversheds LLP, is returning to Norwich on Tuesday 18 November 2014 to present a lunchtime talk.  It is open to any legal advisers and other members of law firms in Norwich and the surrounding area.

Topic

The topic of the talk will be “Guarantees and Indemnities in Real Estate Transactions” 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 Falco Legal Training’s website.

Cost

The cost will be £55+VAT per person, with a maximum of £275+VAT per firm.  In other words, any people above the first five in a firm can attend free.  Invoices will be sent after the lecture.

Venue

The venue will be the offices of Birketts, the address of 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 CPD hour.

A written hand-out will be provided by e-mail after the event.

Booking and further enquiries

It is essential that Birketts’ staff know who is attending this event.  Please e-mail Peter Williams at the link on this page of this website to book your place.

Similarly please use the same e-mail link for any enquiries about the event.

Contents of the talk

This course on Guarantees and Indemnities in Real Estate Transactions will consider the following questions:

1.  What is the difference between a guarantee and an indemnity, and why does it matter?

2.  Why state that the guarantor is liable as primary obligor?

3.  Why do landlords insist on joining guarantors into later variations?

4.  How effective is wording saying that guarantors do not need to be joined into subsequent documents?

5.  What protections are available to someone entering into an indemnity covenant?

6.  Can a landlord retain a guarantee on an implied surrender and re-grant of a lease?

7.  Who protects the guarantor’s interests on the grant of a lease, and what needs to be considered?

8.  Does a guarantee in a lease pass with the reversion so as to benefit a subsequent landlord?

9.  Is a guarantor still liable if the tenant becomes insolvent and the tenant’s liquidator disclaims the lease, or if the lease is forfeited?

10.  I am being pursued by a landlord under a guarantee that I provided several years ago. What hope do I have of escaping liability?

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Service charge consultation requirements with residential tenants: as you were 3 November 2014

Francis v Phillips is a strange case.  It concerns a holiday camp in Cornwall.  New owners spent loads of money improving it (according to their evidence). and then sought to recover their expenditure from the lessees (under 999 year leases) of the chalets (over 150 of them).

The lessees claimed that their landlords had not consulted with them, as required by the Landlord and Tenant Act 1985.  As a result, the maximum amount that the landlords could recover was £250 per lessee.

The matter came to court.  At first instance, in December 2012, the then Chancellor (Sir Andrew Morritt) held that the consultation requirements operated in a way that took people by surprise.  He said that it is necessary to aggregate all the works being carried out by the landlord in the relevant service charge year, and then decide whether consultation is necessary – ie where the amount payable by each tenant exceeds £250 in that service charge year.

The difficulty with this approach is, of course, that one cannot know whether consultation is necessary until one knows the amount of service charge payable by each tenant – by which time, if consultation is required, it is too late to consult, as the works have been carried out.

There was consternation within the residential landlord world, as it was generally agreed that this new approach was (a) unworkable and (b) simply wrong.  This is not what the Landlord and Tenant Act 1985 requires.

In an excellent article on the first instance decision, Nicola Muir of Tanfield Chambers commented:

“It seems that most landlords have dealt with the [first instance] decision in Phillips v Francis by ignoring it.  What else can they do?  However, while the decision stands, the landlord faces the risk of an argument that multiple maintenance jobs over the financial year are “qualifying works” and should have been subject to consultation.”

Court of Appeal to the rescue

Fortunately the Court of Appeal last Friday ([2014] EWCA Civ 1395) overturned this part of Sir Andrew Morritt’s decision.  The consultation requirements apply to discrete sets of works, as we had always understood.

This decision does not solve all the difficulties, of course.  A landlord still has to work out what constitutes a set of works, so that it knows when to consult with the tenants.  That could be particularly difficult in a case where the facts are similar to this case, where the landlords’ evidence suggested that there was no “set of works” in mind at the outset.  One bit of work just led to another, but nothing was pre-planned.  In practice, said the Master of the Rolls (Lord Dyson) in this case –

… the answer … should be determined in a common sense way taking into account all relevant circumstances.  Relevant factors are likely to include (i) where the items of work are to be carried out (whether they are contiguous to or physically far removed from each other); (ii) whether they are the subject of the same contract; (iii) whether they are to be done at more or less the same time or at different times; and (iv) whether the items of work are different in character from, or have no connection with, each other.  I emphasise that this is not intended to be an exhaustive list of factors which are likely to be relevant.  Ultimately, it will be a question of fact and degree.”

One curiosity of this case is that since the first instance decision, Sir Andrew Morritt has been replaced as Chancellor by Sir Terence Etherton.  Sir Terence was one of the judges in the Court of Appeal in this case, so one has the Chancellor reversing a decision of the Chancellor, in so many words:

Management charges

The Court of Appeal also reversed the first-instance decision in relation to the question of whether, on a construction of the lease, the landlord could charge the tenants in the service charge both a management fee and the wages of the landlord’s staff.  At first instance this had been allowed.  The Court of Appeal held that the wages of the landlord’s staff could not be charged to the tenants. This would be double recovery by the landlords .  But Sir Terence had the following warning for residential landlord and tenant lawyers (which in my view applies equally to commercial transactions) –

“Finally, it must be said that this litigation and so many of the cases show how predictable it is that there will be disagreement and often litigation when service charge provisions in a lease fail to make absolutely clear (1) whether the lessor can recover by way of service charge, and if so how much, for (a) specific activities carried out personally by the lessor bearing in mind that during the currency of the lease the reversion may be or become vested in either an individual or a company, (b) general management by the lessor, including estate strategy, and (c) management advice and activities by an agent appointed by the lessor, and if so whether limited to specific activities or including general management oversight and strategy; and (2) whether there is any restriction on the lessor recovering the entirety of the cost of all of (1)(a)(b) and (c).  Lack of clarity on these common issues is capable of affecting huge numbers of lessors and tenants across the country and involving them in expense and disharmony.  The reported cases show that many of the disputes turn on similar or nearly similar provisions.  Those who draw up or approve residential leases for their clients are plainly under a duty to take care that there is clarity and certainty in relation to those matters.”   (Emphasis added)

In conclusion

This is a strange case.  The Court of Appeal disagreed with virtually all of the first instance decision, and where the result was unchanged, disagreed with the reasoning.  Yet no new law has been created, particularly in relation to the consultation provisions in the Landlord and Tenant Act 1985.  Granted, we now have helpful guidance from the Court of Appeal as to how the provisions operate in practice – but we knew that already.  At least we did until Sir Andrew Morritt’s first instance decision in December 2012.

 

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