On 27 November Browne Jacobson hosted a training session for the Property Managers Association (PMA). This is the second successive year we have hosted such an event, which was well attended and which received great feedback from delegates. The session covered the following topics: Dilapidations – looking into some of the more complex aspects of a dilapidations claim. Heads of terms – are we speaking the same language? Lease renewals – concentrating on topical issues from our recent experience including interim rent, registration of proceedings and obtaining a break from the court. Case law update – a review of the past year’s decisions.

1. Welcome to the PMA event 2014

2. The results of the PMA survey
Kirsty Black

3. Market insight
• 70% of you are getting monthly rents most or some
of the time
• 72% said it was likely to be the same in 12 months
time this dropped to 33% in 5 years time

4. Market insight
• Upwards/downwards rent reviews got a lot of
comment in the survey
• Only 33% have managed to secure one
• How?

5. Market insight
• 42% prefer to have a shorter lease with no rent
review rather than concede upwards only or an RPI
rent review
• There is very much a feeling that the food sector
was driving up rents at the moment but this was
felt by some to only be a short-term trend

6. Market insight
• Preference is for a 10 year lease with a break right
• Services charges – suggestion that capping leads to
less challenges
• 76% found landlords to be helpful in answering
queries – but over 50% did not think the protocol
had any impact

7. What is the most frustrating thing
about the lease renewal process?
• “Time and cost”
• “Cost and time”
• “The time it takes”
• “Delays and legal costs”
• “Time”
• “Cost”
• “It is long and drawn out”
• ……

8. How do you think the renewal
process could be streamlined?
• “A single party being able to apply to PACT”
• “Keep them away from the courts”
• “Referral straight to PACT”
• “Use of PACT”
• If only rent is at issue “refer to PACT”
• “Keep lawyers out of it”

9. If you had a magic wand, what
would you change in the
marketplace?
• Abolish upwards only rent review
• Amend business rates
• “Take out a couple of competitors”

10. What frustrates you most about
lawyers?
• “Nothing – we get on well with our solicitors and
have worked with them for years”
• “The length of time it takes to agree a lease”
• Too cautious/advice too weighted to minimal
theoretical risks/sitting on the fence….

11. Dilapidations Claims
Tim Rayner

12. Introduction
• Part 1 - Jervis v Harris
– What to do if served with one
– Risks and potential defences
• Part 2 – Reinstatement
• Part 3- Settlement
– Recent update on costs
– ADR in dilapidations claims
– W/P, WPSAC and STC

13. General concepts
• Stage 1 – Identify the obligation
• Repair
• Decoration
• Reinstatement
• Statutory compliance
• Yield up
• Stage 2 - Breach

14. General concepts
• Stage 3 - Loss
– The most the landlord can claim is
the amount it’s interest has
reduced by virtue of the tenant’s
breach
 ‘referable only to tenant’s
breach’
 ‘limited to diminution in
landlord’s interest’
 S.18 LTA 1927 & ‘Supercession’

15. Jervis v Harris
• A powerful remedy or damp squib?
• Context
– Contractual claim
– Entitles landlord re-enter, carry out works and
recover costs as a debt
– Section 18 of LTA 1927 does not apply
– Loss? evidence of costs only- in theory

16. Jervis v Harris
• Potential challenges
– The notice
 Form (strict compliance)
 Content (breaches and remedy?)
– Risk of invalid notice
– Resisting re-entry
• In practice
– If defects exist engage with landlord to minimise risk
of claim

17. Reinstatement
• Obligation to reinstate on notice
• Notice ought to comply with lease
• Risk for landlord - if no notice or invalid notice
• Risk for tenant - uncertainty

18. Settlement - Cost issues
• Case update - How accurate must a Part 36 be?
Answer - Very!
Hammersmatch Properties (Welwyn) Ltd v Saint
Gobain Ceramics and Plastics Ltd and another
[2013] EWHC 2227 (TCC)
• Relevance to tenant’s facing dilapidations claims

19. Settlement - ADR
• Most applicable forms of ADR
– Expert Determination (Binding)
– Early Neutral Evaluation (Not binding)
– Arbitration (Binding)
– Mediation (Not binding)

20. Settlement - ADR
• Mediation
– Technical nature of claim a barrier?
– High success rate
– Flexible
– Cheaper than court if successful
– Narrow down issues in dispute or gain better
understanding of what’s driving the other side
– May not have any choice if offered by other side!
 PGF II SA v OMFS Company and another [2012]
EWHC 83 (TCC)

21. Settlement - W/P, WPSAC or
Subject to Contract - When to use?
• Without Prejudice
• Without Prejudice Save as to Costs
• Subject to Contract

22. Landlord and Tenant Act 1954
Pamela Shepherd

23. Landlord and Tenant Act 1954
Introduction
• Interim rent
• The registration issue
• Iceland Foods Limited v Castlebrook
Holdings Limited - 12 December 2013
• PACT
• Jackson costs reforms

24. Landlord and Tenant Act 1954
Interim Rent
When does interim rent run from?
• The earliest date that could be stated in the
notice, whatever date is stated
• The “appropriate day” (section 24B(1) LTA)
• The problem of date of service
• The difference between section 25 and 26 notices

25. Landlord and Tenant Act 1954
Interim Rent
Example one
• Lease expires contractually 30 May 2015
• Section 25 notice received with a termination date of 4
June 2015
• Notice served today
When does interim rent run from?

26. Landlord and Tenant Act 1954
Interim Rent
Example two
• Lease expires contractually 25 December 2014
• Section 26 notice served with a start date for the new
tenancy of 10 June 2015
• Notice served today
When does interim rent run from?

27. Landlord and Tenant Act 1954
Interim Rent
Two things to remember
• If you are more than six months before the contractual
term date it does not matter what termination date you
state in the notice - interim rent will run from the
contractual termination date;
• If you are less than six months before the contractual
term date then it does not matter what termination date
you state in the notice, but it matters how quickly the
notice is served – interim rent will run from 6 months from
that date
.

28. Landlord and Tenant Act 1954
Interim Rent
When do you need to make your application?
• Either party can make an application within six months of
the ‘termination date’ (section 24A(3) LTA)
• The ‘termination date’ will be the later of –
– section 25 – date stated in the notice/section 26 – day before
date stated in the notice;
– the extended date; or
– the date that is the termination of the tenancy after disposal of
the court application

29. Landlord and Tenant Act 1954
Registration Issue
Why the problem?
• The issue of proceedings concerning land is categorised
as a ‘pending land action’ (PLA) by the Land Registry
• PLAs are not ‘overriding interests’ through actual
occupation
• As lease renewals under the LTA were not excluded
from the regime, the argument is that in order to
protect the proceedings they need to be registered

30. Landlord and Tenant Act 1954
Registration Issue
• What is current practice?
• The issue has not been tested in court, so the
only way to be certain is to register
• The question will only apply if proceedings for a
new lease have been issued

31. Landlord and Tenant Act 1954
Registration Issue
What could be the argument by a landlord
if you do not register?
• Will not become an issue unless the landlord transfers
its reversionary interest after issue of proceedings
• If it does, the argument is that the new landlord will
‘take free’ of the lease interest
• This does not apply to land that is unregistered

32. Landlord and Tenant Act 1954
Registration Issue
• T (fashion client) had 20 year lease of high
profile store in London
• L served hostile section 25 notice on ground
30(1)(f) (redevelopment)
• T believed the landlord was using a hostile
notice to establish a negotiating position as L
had no known development expertise or
experience
• 19 June 2014, T issues proceedings to force
position
• 7 July 2014, proceedings protected by
registration
• 14 July 2014, overriding lease granted
L
Overriding lease to
competing retailer
with aggressive
development plans
T(our client)

33. Landlord and Tenant Act 1954
Duration of New Lease
Iceland Foods Limited v Castlebrook Holdings Limited
12 December 2013
• Examined the court’s duties and discretion under section 33
LTA regarding the duration of the new lease
• The court was to strike a balance between both parties’
interests
• Section 33 requires the court to decide a length of term
which is “reasonable in all the circumstances”

34. Landlord and Tenant Act 1954
Duration of New Lease
Iceland Foods Limited v Castlebrook Holdings Limited
12 December 2013
• The facts
• Court had to strike a balance and was not swayed by market
comparables.
• County Court decision

35. Landlord and Tenant Act 1954
PACT
• Professional Arbitration on Court Terms
• An alternative way of settling a lease renewal - particularly
with regard to rent and interim rent
• The court referral – stays the proceedings
– Agreement by parties to exclude the court’s jurisdiction
– Decide what terms to refer
– Arbitrator or expert?
– Costs
– What happens when PACT concludes

36. Landlord and Tenant Act 1954
PACT
• Advantages –
– Flexibility
– Speed?
– Possibly less costly
– Expertise
• Disadvantages -
– Not compulsory – you need agreement
– Cannot deal with complex legal issues
– Probably little costs saving?
• Recommendations?

37. Landlord and Tenant Act 1954
Jackson Reforms
• The reforms initially applied to all lease renewals
issued after 1 April 2013
• New rules were introduced meaning
– Only applies to unopposed renewals issued in court
between 1 April 2013 and 22 April 2014; and
– Still applies to all opposed renewals, whenever
issued

38. PMA general update
David Harris

39. Peel Land and Property (Ports No.3)
Ltd v TS Sheerness Steel Ltd
• Can T remove plant and machinery?
• High Court decision – focus on classification of
items
• Meaning and significance of tenant’s fixtures
• Court of Appeal decision – focus on breach of
alterations covenant
• Lesson to be learnt?

40. Jervis and others v Pillar Denton
Ltd and others
• T went into administration on 26 March without
paying March quarter’s rent
• Law at the time – administrators’ liability
depended on when rent fell due
• Court of Appeal decision - administrators pay for
period of use
• A victory for common sense

41. The Minimum Energy Efficiency
Standard Regulations (1)
• Consultation launched in July
• What leases do they apply to?
• What do they say?
• When will they start?
– new leases (1/4/18)
– existing leases (1/4/23)
• What if property below an E rating?
• The Green Deal and the Golden Rule

42. The Minimum Energy Efficiency
Standard Regulations (2)
• What if third party consents needed for works?
• How will the regulations be enforced?
• What are the penalties for non compliance?
• Where do we go from here?
• The thin end of the wedge?

43. Barclays Wealth Trustees
(Jersey) Ltd v Erimus Housing Ltd
• T in occupation and paying rent after expiry of
excluded lease
• High Court decision – periodic tenant
• Court of Appeal decision – tenant at will
• Significance of ongoing negotiations
• Why does this matter?
• Lesson to be learnt?

44. Tindall Cobham 1 Ltd and others
v Adda Hotels and others
• Background - 2011 House of Fraser case
• Here L had to consent to intra-group assignments
if:
(i) T gave L notice; and
(ii) G (parent company) also guaranteed A
• Court of Appeal (sensibly) struck out both provisos
• What if lease permits intra-group assignments without
consent?

45. K/S Victoria Street v House of Fraser
(Stores Management) Ltd (2011)
L
(G)AGA
T/G A/G

46. Siemens Hearing Instruments Ltd
v Friends Life Ltd
• Redundant wording from break notice omitted
• High Court decision – notice valid
• Court of Appeal decision – notice invalid
• Harsh, but correct?
• Blue paper, not pink!
• Lesson to be learnt?

47. Marks and Spencer Plc v BNP Paribas Securities
Services Trust Company (Jersey) Ltd and
another
• Law on break clauses conditional on paying rent
• T claimed refund of rent (and other sums) paid for
period after break date
• High Court decision – term requiring refund implied
• Court of Appeal decision – no term requiring refund
implied
• Lesson to be learnt?
• Can an apportioned rent ever be paid?

48. talk to us…
Sarah Parkinson | 0115 976 6575 | sarah.parkinson@brownejacobson.com
Mowbray House, Castle Meadow Road, Nottingham, NG2 1BJ
Kirsty Black| 0161 300 8043 |kirsty.black@brownejacobson.com
3 Piccadilly Place, Manchester, M1 3BN
David Harris| 0115 934 2019| david.harris@brownejacobson.com
Mowbray House, Castle Meadow Road, Nottingham, NG2 1BJ
Pam Shepherd| 0121 237 3937 |pamela.shepherd@brownejacobson.com
Victoria Square House, Victoria Square, Birmingham, B2 4BU
Tim Rayner| 0121 237 3949 |tim.rayner@brownejacobson.com
Victoria Square House, Victoria Square, Birmingham, B2 4BU

49. Thank you