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GRESB – a tool for assessing sustainability 25 June 2015

How does one assess how sustainable one’s property, or property portfolio, is?  This is becoming an increasingly important question, particularly for organisations with large portfolios who want to demonstrate their “green” credentials to potential shareholders/investors.

GRESB, the Global Real Estate Sustainability Benchmark, is a measuring tool that is becoming popular.  I recently attended a presentation on GRESB given by Lizzie Batchelor, the Sustainability Manager of Savills (UK) Ltd.  I thought it would be helpful for others to learn about GRESB, and Lizzie has kindly contributed the following explanation.

About GRESB

The Global Real Estate Sustainability Benchmark has been running for 5 years. This is the only benchmark which fully examines sustainability-related issues specifically for the real estate sector. The survey has seen growing popularity, with 637 property companies submitting last year.

The GRESB Survey runs each year from 1 April to 30 June.  The questions cover seven aspects, with the highest weighting falling under “Performance Indicators” and “Stakeholder Engagement” sections. The highest ranking organisations or funds will achieve “Green Stars”.  Last year approximately a third of organisations obtained this status.

Why organisations are choosing GRESB

● Transparent performance metrics

● It is a well-regarded portfolio benchmark, providing assurance to investors, shareholders and other stakeholders.

● Scope to improve PR recognition on sustainability.

● Improving a score may lead to a fall in the operational costs of a property or portfolio.

● Creates a clear focus, helping to engender continuous improvement for the organisation.

This is only a brief introduction, so that you recognise the abbreviation when you see it.  You can find more information about GRESB at www.gresb.com.

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Amended versions of the MCL suite of documents 24 June 2015

An amended set of the Model Commercial Lease documents was made available on the MCL website at 9.00 am this morning.

Further information is available in this news item on the MCL website.

 

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Amended versions of the MCL suite of documents available on 24 June 2015 22 June 2015

The Working Party that prepared, and now keeps up to date, the Model Commercial Lease (MCL) suite of documents has announced that an amended set of documents will be available on the MCL website at 9.00 am on Wednesday 24 June 2015.

Further information is available in this news item on the MCL website.

Declaration of interest (1): I am a member of that Working Party.

Declaration of interest (2): I wrote the text of the news item.

Declaration of interest (3): I loaded the text of the news item onto the MCL website.

That’s enough declarations of interest for now.

INCIDENTALLY

If you wish to receive a personal e-mail when a news item is added to the MCL website, you can sign up on the subscription page of the MCL website.  Over 100 people have done so already.

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Not such a new Act after all 19 June 2015

It has come as something of a shock to realise that a lawyer needs to be no older than 35 to have never dealt with land certificates, stamp duty or the process of contracting-out a business tenancy by obtaining a court order.

One of the topics that I cover in my Ten Important Pointers: Easements talk is the tricky question of when easements need to be protected under the Land Registration Act 2002, or the “new Act” as I tend to call it.  So it came as something of a shock earlier this week – in the middle of the talk – to realise that it isn’t very new now.  It came into force in October 2003, which is almost twelve years ago.

As I observed, quite a number of the lawyers listening to the talk were probably still at school in 2003.

So let’s have a look at various key property events, and see how old you would have to be to remember them when they happened.  Let’s assume you qualified as a solicitor at the age of 25, as I did.  There was, incidentally, less law back in those days – and in the days before the Internet, e-mails and PSLs, it was difficult to find out about new law anyway.  There have always been lawyers who are not very knowledgeable about (or even aware of) recent legal changes.  I suspect it was a lot more common in the past.

Look at statutes first.  The first serious change in the law that I can remember having to learn about was the Law of Property (Miscellaneous Provisions) Act 1989.  Most of my readers will immediately recognise the significance of that act, which introduced stricter requirements for the formalities for creating contracts for the sale and purchase of property and other interests in land.  By then I had been qualified for six years. But you would need to be 26 years PQE now to remember that change.  Assuming qualification at the age of 25, you would need to be at least 51.

The next major milestone in terms of statutes is probably the Landlord and Tenant (Covenants) Act 1995 – another “new Act”.  As I type this, it comes as a huge shock to realise that it was passed almost exactly 20 years ago (19 July 1995, to be exact.  I have just checked).  It came into force on 1 January 1996 and it feels like only yesterday that we were marking its tenth anniversary.  Again, assuming qualification at the age of 25, you would need to be 44 now to have been there at the time.  Lawyers younger than that can never imagine the confusion and uncertainty that the 1995 Act engendered.  Nor will they have ever been involved in the grant of what we now call an “old tenancy” – although they may have encountered quite a few since then.  Another scary thought: there cannot be many rack rent “old tenancies” left now (although there must be hundreds of thousands of “old tenancies” of flats that will be around for another couple of generations at least).

Back to the Land Registration Act 2002.  It came into force on 13 October 2003 and you would need to be 37 now to have been in practice at the time.  It made some pretty significant changes, including abolishing land and charge certificates, which we oldies still think are a pretty good way of establishing ownership and deterring fraud.  (For some reason the Land Registry disagrees – probably because fraudsters were simply claiming they had lost their certificates and applied for new ones.)

It’s not just statutes.  Stamp Duty was replaced by Stamp Duty Land Tax in 2003 – replacing a tax on documents with a tax on transactions.  That was 12 years ago as well, so anyone under 37 will not have experienced sending off a document with a cheque and receiving it back festooned with impressed stamps.  And don’t even get me started on the thrill of applying to the county court (or the Mayor’s and City of London court in the City) to contract out a lease under the now-repealed section 38(4) Landlord and Tenant Act 1954.  That procedure ended in 2004 when the ludicrous (equally ludicrous, some might say) notice and declaration procedure was introduced.

This isn’t an issue that just affects formal teaching.  It’s relevant to everyone who supervises colleagues.  It’s easy to assume that everyone has had the same experiences as you have had.  But it’s salutary to remember that younger people will not have had many of those experiences (although they will of course have had others that you have not had).

There is a delightful postscript to this article.  I was sitting in the Law Society Library (yes there still is one) yesterday between engagements, and the tranquillity was shattered by a visit from a rather deaf retired lawyer who was, I think, reliving his past (possibly to show the library to his friend).  Being deaf, he spoke rather loudly, and the whole room learned that he had received his admission certificate from the Master of the Rolls in 1951.  I was well impressed.  That was not just seven years before I received mine, but seven years before I was born.  I wonder what law he would be writing about that I had never experienced, had he been writing this article.  “Then they passed this law that gave security of tenure to business tenants.  What a waste of time.  Scottish tenants manage perfectly well without it …”.  And then a few years later, in 1969 “Now they have passed a law that says that landlords and tenants can contract out of security of tenure by going to the court to get an order.  What a ludicrous procedure.  What possible protection is the tenant getting if the court is just going to rubber-stamp the parties’ application?”

Plus ça change …

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Supreme Court upholds an orthodox approach to contractual interpretation 11 June 2015

The Supreme Court yesterday upheld the Court of Appeal’s decision in Arnold v Britton [2015] UKSC 36 – meaning that the landlord’s interpretation of the service charge clause has prevailed, absurd though it is.  Lord Neuberger reminded us:

“… while commercial common sense is a very important factor to take into account when interpreting a contract, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight. The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed.”

Background

The case concerns a series of leases of holiday chalets at a park in South Wales, for a term of 99 years from 1974.  There are a number of different versions of the lease but, in brief, the most pernicious of them requires the tenants to pay annual sums to the landlord that increase by 10% annually (from a starting point of £90).  The sums are expressed to be payable in respect of “… a proportionate part of the expenses and outgoings incurred by the Lessors in the repair maintenance and renewal of the facilities of the Estate and the provision of services hereinafter set out …”.

The startling impact of an annual increase of 10% was explained in my blog article on 20 January 2015 entitled “The danger posed by geometric progressions”.  By the end of the lease, the annual sum will exceed £1 million.  Surely this cannot be what the parties had intended when they entered into the leases, for two reasons.  First, the sum itself is absurd; secondly the sum bears no relation to the amounts that the landlord is likely to expend in providing the services.  This was the dilemma that the Supreme Court had to address.  Is the provision to be read literally, or is it permissible to interpret it in a more sensible way, which does not require the tenant of each chalet to be required to pay such improbable sums?  (For simplicity I will refer to “the tenant” in the singular, although there were a number of tenants under a number of leases.)

The role of the court was explained by Lord Carnwath (who delivered the dissenting judgment) as follows:

“… we must inquire (sic) ‘what a reasonable person would have understood the parties to have meant, that person being one who had ‘all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract’, and who would have also taken into account ‘the practical consequences of deciding that it means one thing or the other’.  Where necessary the reasonable observer can be invited notionally to take on the more active role of ‘officious bystander’, in order to interrogate the parties as to their common intentions.”

It is important to understand that when a court interprets a document, the parties’ actual intentions are irrelevant.  What matters is what they have actually included in the document.  To be honest, sometimes the two approaches can be difficult to distinguish.

The tenants faced two difficulties that ultimately even their experienced counsel (Timothy Morshead QC) was unable to overcome.  First, four of the five Supreme Court Justices did not accept that the disputed clause was ambiguous on the face of it.  Once a clause becomes ambiguous, it becomes permissible for the courts to move away from a purely natural interpretation.  Lord Neuberger explained (at [18]):

“… I accept that the less clear [the words] are, or to put it another way, the worse their drafting, the more ready the court can properly be to depart from their natural meaning.”

Secondly, in respect of some (although not all) of the leases, there was a conceivable explanation for the annual 10% increase: inflation in the 1970s and early 1980s was running in double figures (and peaked at 24% in 1975).  That meant that it was not entirely impossible that the parties had intended to include some form of inflation adjustment, and might conceivably have settled at 10% for simplicity.

The Supreme Court’s decision

Ultimately, the Supreme Court came down 4-1 in favour of the landlord’s interpretation.  One of the majority was Lord Neuberger, who gave the main judgment (on behalf of himself, Lord Sumption and Lord Hughes).  As would be expected, Lord Neuberger expressed “considerable sympathy” with the view that the tenant’s appeal should succeed – but did not believe that the tenant had demonstrated that its reading was the correct one.  The tenant’s interpretation was that the 10% increase annually in the service charge should be treated as a cap on the annual increase.  He said that the tenant’s interpretation would involve “departing from the natural meaning of [the clause], and it involves inserting words which are not there.”

The tenant may take some comfort – but, in the circumstances, probably not very much comfort – from the fact the one of the Justices, Lord Carnwath, agreed with the tenant’s interpretation.  He took the approach that I had mentioned in the last paragraph of my blog article – that the purpose of the clause was to enable the landlord to recover its actual costs of providing the services.  The two parts of the clause were mutually inconsistent, and the part that should take precedence was the requirement to pay the landlord “a proportionate part of the expenses and outgoings incurred by the Lessors in the repair maintenance renewal and the provision of services hereinafter set out”.

Accordingly, Lord Carnwath accepted the tenant’s interpretation of the clause: that the 10% increase in the service charge was to be treated as a cap on the annual increase rather than as a formula for calculating the annual payments.

Conclusions

One has to sympathise with the tenants in this dispute.  They are saddled with a contract under which they are required to pay increasingly large sums every year, effectively receiving nothing in return, for the residue of the term of 99 years.  There is no possibility of their coming up with those sums.  Fortunately it appears that the landlord has said, through her counsel, that she is willing to negotiate a variation of the leases to substitute (among other changes) an adjustment linked to CPI instead of the 10% fixed sum (although the extent to which this relieves the tenants does depend upon what they will be asked to concede in return, and also what sum is to be taken as the base figure – the payment in 2012 is said to have been over £3,000).

I was hoping that the Supreme Court would find a solution to the tenants’ difficulties, but it was not to be.  It is obviously unsatisfactory that two Supreme Court Justices can find two entirely opposing meanings to the same clause.  Pondering the judgment overnight, I have decided that it is difficult to identify which of the two Justices has taken the braver approach: Lord Carnwath, differing from his four colleagues in an attempt to do justice between the parties, or Lord Neuberger, persisting with an orthodox approach to a dispute over interpretation despite (I am assuming) an instinctive distaste on his part for the outcome that this has produced.

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At all times and for all purposes 4 June 2015

A is a farmer, who enjoys an easement over a track owned by B in the following terms:

“at all times and for all purposes … in common with all other persons having the like right …”

A decides to diversify, and obtains planning permission to create a campsite and caravan park for 200 pitches, accessible only by using the track.  B objects, since the use of the track has vastly increased.  A responds by pointing to the words “at all times and for all purposes” in the easement.  Who is right?

A question of this kind came up for discussion at my Ten Important Pointers: Easements course when I presented it for the first time earlier this week.  Surely the phrase “at all times and for all purposes” must mean what it says?  Actually, no.  The facts above are those in Jelbert v Davis [1968] 1 WLR 589.  In that case, Lord Denning emphasised the wording “in common with all other persons having the like right”, saying:

“In my opinion, a grant in these terms does not authorise an unlimited use of the way.  Although the right is granted “at all times and for all purposes”, nevertheless it is not a sole right.  It is a right “in common with all other persons having the like right.”  It must not be used so as to interfere unreasonably with the use by those other persons, that is, with their use of it as they do now, or as they may do lawfully in the future.  The only way in which the rights of all can be reconciled is by holding that none of them must use the way excessively.”

Accordingly, B was entitled to prevent A’s visitors using the track to reach the campsite and caravan park.

This decision will come as a surprise to many people.

Next week: I will consider another case, decided very recently, in which a court ruled that a statutory provision does not mean what it says.  Isn’t law difficult?

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