Property Litigation weekly update - 9 April 2020
It's time for another weekly round-up including legal updates on rent concessions, telecoms, squatters and a recent Right to Manage case. Keeping in touch in new ways, we remain on hand to assist with any property-related legal issues.
Rent concessions - considerations for commercial landlords
In light of the closure of 'non-essential' businesses, an increase in remote working and the decision to 'furlough' employees, it is not surprising that there has been a surge in commercial tenants requesting rent concessions. The types of concessions requested vary and include: rent deferrals, changes from quarterly to monthly rent payments and temporary rent reductions.
When contemplating granting a rent concession, landlords should first check the terms of any loss of rent insurance and seek insurer's approval for any proposed concessions to avoid waiving their ability to claim under any relevant policy. The following key points should also be considered:
- whether interest is to be payable on any deferred payments;
- whether the concession relates to service charges as well as rent;
- (if applicable) how 'turnover rent' is to be dealt with;
- agreeing a clear payment plan for repayment of deferred rent;
- the length of the rent concession agreement;
- whether a reciprocal benefit can be sought by the landlord, such as removing a tenant break right, using a deed of variation, or agreeing a further period of occupation on expiry of the current lease by way of a reversionary lease.
Legal advice should be sought as there are a number of potential pitfalls when it comes to agreeing and documenting rent concessions, including but not limited to: avoiding unintended lease variations or the concession amounting to a contractual penalty (as seen in Vivienne Westwood Ltd v Conduit Street Development Ltd) and whether the repayment plan is a form of credit requiring FCA authorisation.
We have been advising many of our landlord clients in respect of rent concessions and have been documenting various specific agreements. If you would like any assistance please do not hesitate to contact the team on the details below.
The deployment of telecommunications infrastructure and the Covid-19 outbreak
In response to the outbreak of Covid-19, the Government has introduced regulations to ensure that works to telecommunications networks are allowed to continue. With the majority of us now working from home and isolated from friends and family, not to mention the need to support the critical work of our emergency services and hospitals, connectivity has never been more important.
The regulations recognise and reiterate the Government's commitment to ensuring the availability of and access to electronic communications services in the public interest. The telecommunications sector is therefore identified as a critical sector and those working in the sector are now considered key workers (including, but not limited to, field engineers and those involved in network operations). As a result, works of repair and maintenance to telecommunications networks are permitted to continue in the current climate, although it is presently unclear whether operators will have the capacity to progress these works at the same rate as before the outbreak, particularly where key workers are required to self-isolate.
Landowners should take particular note of the following:
- Operators must be able to continue to rely on emergency access rights agreed with a landowner or occupier of property, for example where a need arises to rectify a network outage promptly.
- If agreements are in place between an operator and a landowner or occupier of property, the parties must continue to abide by its terms, including obligations to provide the operator with access to inspect, maintain, adjust, repair or upgrade its electronic communications equipment.
Both operators, landowners and occupiers should ensure they continue to comply with the guidance issued from time to time by the Government and other relevant bodies, including guidance on social distancing where access to property is required during the current climate.
Leasehold Portfolio Review
Is now a good time to review your portfolio? Some are seeing a slow down in the pace of work and communications since the lockdown, due to lack of site visits, access and restrictions on work. In this time, a review of leasehold assets may be of benefit, the key points being, duration, break rights, rent review, alterations and maintenance obligations in leases.
Putting key dates and obligations in the diary can benefit planning, ultimately lower costs and protect your assets.
Right to Manage and estate services
Firstport Property Services Ltd v Settlers Court RTM Co Ltd & Ors  UKUT 243 (LC) considered a conflict over recoverability of estate charges, for which the management company named in the leases was obliged to perform, whilst the extent of management responsibilities over the estate obtained by the new RTM company were unclear. Agreement between the old and new management companies for the division of management of estate services is preferable as the legislation does not define the areas the RTM company takes on with any detail. In light of surrounding decisions, agreements to retain entitlements to manage estate areas are expressly permitted by s.97(2) of the Commonhold and Leasehold Reform Act 2002. The most practical solution is usually to divide management by agreement between old and new management companies, so as to avoid future conflict. The legal remedies post acquisition of management are unclear under the legislation.
It will come as no surprise that the current circumstances are leading to an increase in squatters gaining access to empty properties. Our latest update is available here.
Insights from across the firm
Insurance Covid-19 - business interruption cover
The Coronavirus Act 2020 - what does it mean for your business?
Coronavirus Job Retention Scheme: Furloughing public sector employees
- Neighbours in Witheridge, North Devon, came to their front doors this week to sing 'Happy Birthday' to a local man who turned 100 last weekend. Happy Birthday Gordon!
- New Shadow Chancellor, Anneliese Dodds, demonstrated the joys of working from home when her three year old daughter decided to join her for her first live TV interview.
- Devon's 60-piece Philharmonic Orchestra are staying in touch and rehearsing online, available on Facebook.
- A nurse returned to his car following a shift at Royal Stoke Hospital to find his catalytic converter stolen. After being quoted up to £800 for a replacement, a local manufacturer offered to replace it for free.