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Friday, 22 July 2011

Austerity Chic and Office Envy


The RIBA Stirling Prize is the UK's most prestigious architecture prize. Every year it is presented to the architects of the building that has made the greatest contribution to the evolution of architecture in the past year. The prize is for projects 'built or designed in Britain'. Buildings are eligible if they are in the UK or European Union by an architect whose head office is in the UK.

The final six are An Gaelaras (Derry), The Angel Building (Islington, pictured above), Evelyn Grace Academy (Lambeth), Folkwang Museum (Essen), Royal Shakespeare and Swan Theatres (Stratford), and the Velodrome (the Olympic Village in the other Stratford).

There are also pictures of the shortlisted buildings on the BBC.

The winner of the prize will be announced on 2 October 2011.

Two of the entrants this year are retrofits – the Angel Building (from the 1980s) and the Shakespeare Theatres (from the 1930s). The award has never been won by a refurbished building, prompting Robert Booth in the Guardian to comment that the inclusion of these two buildings represents the emergence of “austerity architecture”.

The Angel building was stripped back to its concrete frame and re-clad as a speculative office block, shaving almost 15% off the cost of a new building and reducing carbon dioxide emissions by about a third, according to the designer, Simon Alford, who said:

"Refurbishment saves money and reduces the environmental impact of construction. It also shows that we should be paying more attention when we design new buildings to ensuring they are capable of being adapted for future uses which we can't yet imagine."

Peter Rees, chief planning officer for the City of London, says that applications to refurbish existing office blocks had increased - refurbishment projects were often cheaper, more environmentally friendly and provoked fewer objections than new buildings.

However, the Velodrome, which was the first major Olympic venue to be completed, is the favourite to win the prize, and is probably a shoo-in as 2012 fast approaches.

Meanwhile, if you’re fed up with life in a glass tower, a business park on the ring road or a scruffy gaff above the chippy – have a look at these 15 offices if you want to indulge in a bit of office envy (or decide you’re happy with your lot after all) – from a blog called Roxor and shared on twitter by @RollOnFridayWeb.

The usual suspects in groovy-dom are all there – facebook, twitter, google, yahoo – but I rather like the look of Selgas Cano office, which looks like it’s built into a forest, although in reality it might just be claustrophobic and make you feel like you’d turned into a mole. Some of the others look frankly horrendous to be honest, but each to his or her beanbag-hugging whacky-trousered own I guess. My inner kidult clearly surrendered some time ago to my inner old geezer!

I'm going to be away for a couple of weeks.

I’ll be back to deface the internet some more later on in the summer!

Thursday, 21 July 2011

Charge of the Light Brigade? Law Commission to Review Rights to Light

The Law Commission has revealed the 14 projects it will look into for law reform over the next three years.

One of these is my old favourite, rights to light.

The Law Commission exists solely to review the law and recommend reforms to make it fair, modern, accessible and cost-effective. Of course, those recommendations only become law if they are supported in parliament and eventually become an act of parliament.

The Law Commission is to assess whether the current law strikes the correct balance between the right to light against the right to develop land. It will also examine the relationship between the planning system and rights to light and whether the remedies available to the courts are reasonable, sufficient and proportionate.

This will please those who were disappointed that the recent Law Commission Report published on 8 June 2011, called Making Land Work: Easements, Covenants and Profits a Prendre, did not specifically deal with rights of light.

I referred to the Law Commission’s June report in my post Law Commission Blows the Cobwebs Out of Land Law. It turns out I was unduly pessimistic (or, to be more accurate, wrong) there when I said that a separate review by the Law Commission on light was likely to be some years off.

For more posts on rights to light generally see here and especially my post Right to Light Gets Heavy for a review of the recent decision in Heaney, where I commented that the shadow of an injunction will, in many cases, influence the design of a development and could potentially increase development costs.

Commission chairman Lord Justice Munby said each of the diverse range of law reform projects is important and highly relevant to our lives today and further commented:

“Each area of law we will examine in the eleventh programme has been identified as being flawed and at risk of creating confusion and injustice. Each demands review and reform.”

Many will agree with that assessment when it comes to rights to light issues.

However, it will be a long while before we can expect any change or clarification in the law.

The project will begin in early 2012, with a consultation paper planned for early 2013. Then, if both the Commission and the government agree that further work is appropriate (so they might not), the Commission aims to produce a final report, with draft bill, in late 2014 or early 2015.

So not so much a Charge of the Light Brigade, more a stroll through dense thickets  of decades of confusing and outdated law perhaps leading to change in the dim and distant future...but a welcome one nevertheless.

Wednesday, 20 July 2011

Future Shop – Not on a High Street Near You

Although we may soon all have to get used to knitting our own homes and foraging for nuts and berries, there is some encouragement today for those with an interest in retail property, albeit not in the high street.

A report in the Guardian today tells us that although the recession has exacted a great toll already on retail business in the UK, Land Securities is pressing ahead with new retail projects, including 92,000 sq ft shopping centre, Trinity Leeds and an expansion of its Buchanan Street centre in Glasgow, as well as putting a further £275m into seven smaller malls and retail parks.

And it’s not just Land Securities. Hammerson plan to build a 130-unit shopping centre in Leeds, Eastgate Quarters and retail makes up two thirds of British Land’s portfolio following recent acquisitions in Barnstaple, Basildon and Plymouth.

The decline of the ordinary high street has been all too apparent this year, but the big developers appear to be judging that shoppers are not only migrating to the internet, but also to retail parks and shopping centres.

Land Securities’ chief executive, Francis Salway, says:

"We're responding to growing demand from food and fashion retailers. Retailers are planning two to three years out; the stronger retailers got their balance sheets into good shape. We wouldn't be doing these developments on a wholly speculative basis. We are alive to the challenges in the retail sector but the important thing is we're doing business with the retailers who are taking more space, and our portfolio tends to be in the stronger locations."

One example of that is the company’s One New Change shopping centre, which opened in the City of London last year, and which is said to be trading soundly.

I have posted here before about the problems facing communities and landlords over empty shops in the high street. Business rates for empty properties have soared. Those high street premises that are not empty are increasingly being let to pound shops and charities. This year has also seen the creation of innovative schemes such as “meanwhile use”.

In the Guardian piece, Nick Bubb, Arden Partners retail analyst, says:

“The world is changing. It’s all about big schemes, bigger centres and online shopping”.

It seems that the high streets with the best chance of survival are those where ownership is concentrated in one investor, allowing it to redevelop in a way that creates the size and configuration of units major retailers now want (such as Buchanan Street in Glasgow or Marylebone High Street in London).

But there aren’t many of those. In most cases of course, ownership of high street freeholds is fragmented between many different investors of various types.

Salway says that whilst the average shop vacancy rate on the high street is 14%, it is only 4% at Land Securities’ shopping centres.

Could it be that developers are calling the bottom of the market and getting ready for a retail revival?

If so, when it comes, it doesn’t look likely to fill the gaps in the smaller high streets in the face of such competition.

These are very successful, well run companies so the fact that they are placing their faith in the future of retail property, or rather a particular type of retail property, is interesting.

Who knows when any sort of a recovery is likely to get under way which puts money back in people’s pockets?

(PS - If anyone does know, I’d be quite interested in finding out - please use the confidential contact button below!)

The Heat is On! Renewable Heat Incentive – Another Subsidy on the Horizon

And in other news...along with the upcoming release of Financial Meltdown 2 (in 3d – which in old money will be what the economy is worth)...something else to slip under the radar here in recent weeks is the Renewable Heat Incentive, which I want to mention briefly as it ties in with my previous posts on energy-related matters...and anyway, the weather might be making you think of putting the heating on.

The Renewable Heat Incentive (RHI) is billed as a world first financial incentive scheme for renewable heat generation.

For more detail, see the Ofgem site and there is also a useful summary by Manches here.

Regulations were laid before parliament on 22 June 2011 and the scheme is expected to open for applications on 30 September 2011. Meanwhile, Ofgem has issued two volumes of draft guidance for consultation, which closes on 5 August 2011.

The scheme appears on the face of it to be hugely bureaucratic and somewhat complex. In short it will provide periodic payments to the owner of installations for the generation of heat for use in buildings for the heating of water or of space, or for use in certain processes; and also in certain circumstances for the injection of biomethane into the gas grid.

The technologies supported are solid biomass (including biomass from municipal waste and biomass used in CHP); ground and water source heat pumps; deep geothermal; solar; biogas combustion (other than landfill gas) and the injection of biomethane to the national gas grid.

The payments will be made for 20 years following accreditation and will be increased in line with RPI. Initially the scheme will be limited to non-domestic properties only, although blocks of flats will be included.

Tariffs depend on the type of technology used and in certain cases will be capped.

Heat must not be wasted. The government was concerned to ensure that participants don’t just generate heat in order to claim higher subsidies. So, for example, the building must be wholly enclosed, other than doors or windows. You can’t just go out and buy a load of patio heaters to max out your subsidy.

It will be the owner of the installation who has the right to receive the RHI payments. Manches comment that there are detailed administrative provisions dealing with changes of ownership which place a significant record-keeping burden on participants and will pose an additional due diligence burden on buyers of a property that has the benefit of RHI payments.

At the moment I don’t know whether there are any plans for the standard pre-contract enquiries everyone uses to be updated to include specific enquiries on RHI. There will need to be standard enquiries dealing with this in future.

The RHI subsidy is separate from the Feed-in-Tariffs (FITs) regime, which subsidises the production of electricity, and the Renewables Obligation (RO), which is a larger scale subsidy for electricity generation.

Both FITs and RO are also administered by Ofgem.

And also don’t forget the Green Deal, relating to improvements such as insulation. The government expects to open the RHI to domestic properties to align with the Green Deal, which is intended to be introduced in October 2012 (though this will require further Regulations).

In the interim, the domestic sector will be supported by another incentive, called the Renewable Heat Premium Payment (RHPP), which is a separate, complementary grant scheme to the RHI. Further information on RHPP will be available later in the year from DECC.

Tuesday, 19 July 2011

The Only Way is Ethics

You have probably had enough moralising from me, following my post yesterday – Doing the Right Thing: Corporate Social Responsibility and the Phone Hacking Scandal.

But I will be taking a break from Digging the Dirt for a few weeks at the end of this week, so I’m in a self-indulgent pre-summer recess mode!

I’ve been thinking more about corporate social responsibility and what it means for an organisation to have a conscience. An organisation is reflected by its leadership and also by the individual actions of its members.

The commercial pressures under which many people are forced to operate can make doing the right thing a career ending decision in an environment where the end is thought to justify the means.

And innovation in the business world brings with it new temptations.

Aditya Chakrabortty writes an excellent piece in the Guardian , which is well worth a read, in which he examines corporate failure brought about by “ethical fading”.

Aditya Chakrabortty refers to a book called Blind Spots, by Max Bazerman and Ann Tenbrunsel, who look at how businesses, from Ford to Enron to subprime mortgage lenders, can end up mired in ethical disaster. They look at how people actually make decisions – under pressure from shareholders, bosses and colleagues, up against tight deadlines and often worried about their careers, or even whether their contracts are going to be renewed.

They describe a process of "ethical fading" in businesses where maximising returns is encouraged over fairness to fellow employees and customers. The result is that right and wrong go out of the window.

He concludes:

“Those two forces – greater market pressure and a novel way of doing business – have played a part in most of the big corporate ethical failures that I have seen in the past decade. Energy market liberalised and fancy accounting techniques? Enron. Low returns on investments and a new way of dishing out home loans? Subprime. And now this. In most cases, many managers, shareholders and staff didn't necessarily set out to do bad things. They simply got swept along on a culture of hitting targets – and not asking too many questions.”

Businesses need targets and goals to survive, but I guess what he is saying is that the ends do not always justify the means and those targets should be aimed at with integrity and ethically and we should not lose sight of basic truths in the face of novelty.

This is corporate social responsibility both facing outwards and facing inwards.

Anyway, I’m not a business guru and I’ve never even poked an MBA with a stick, so with that bit of moralising over, maybe I’ll retreat back to the comfortable mechanics of the law of real property.


Monday, 18 July 2011

Doing the Right Thing: Corporate Social Responsibility and the Phone Hacking Scandal

“The powerful need to show responsibility.”

The words of Ed Milliband at the weekend as he called for the Murdoch empire to be dismantled in the wake of the phone hacking scandal.

“The powerful” can be individuals and can also be companies. But what does it mean for a company to be “responsible”?

This question goes to the nub of what is meant by corporate social responsibility (CSR).

Beyond simply complying with the law, responsible companies have for many years now, to a greater or lesser degree, been concerned with the notion of CSR. But what does CSR mean?

Simply put, CSR means complying with an ethical code of conduct, acting responsibly, in a way which has a positive impact on an organisation’s “stakeholders” – an irritating term but one which has become common shorthand for meaning anyone on whom an organisation’s activities have an impact, and so beyond simply the interests of a company’s shareholders.

This contrasts with the view that a company exists solely to make a profit for its shareholders and that it should just be concerned with doing so within the law, which it is the role of government and the police to enforce.

In England & Wales, the Companies Act 2006 requires directors, when making decisions on behalf of their company, to have regard, amongst other things, to the impact of the company’s operations on the community and the environment. It also requires some of the largest businesses to make public these impacts in annual reports.

This highlights the connection between what constitutes the good of your company and a consideration of its wider corporate social responsibilities.

Companies ignore CSR at their peril.

Adrian Henriques, in a Guardian blogpost, argues that, in the phone hacking scandal, because the News of the World had published no social report of any kind and did not discuss such issues in public, it had built no social capital on which it could fall back when times got hard. He says:

“The fate of the News of the World shows that social responsibilities of companies are very real and important for their stakeholders. They can never be ignored. It also demonstrates how devastating it can be to ignore the core social impacts of a business. The scandal highlights the hollowness of protestations of virtue, on which the News of the World had been so keen for 168 years. Using CSR simply to get good PR was never appealing and now looks plain dishonest.”

I somehow doubt whether any social report could have built up enough goodwill on the part of the public to diminish the impact of a scandal like this one, although it might have made the task of apologising and attempting to rebuild a reputation a bit easier...perhaps.

For it to mean anything, though, CSR should be about more than simply “good PR”. As an individual, a truly responsible person does the right thing because it is the right thing to do, not just to make themselves more popular. Does this translate into CSR policies for many companies in practice?

In the field of sustainability, for example (to use a topic relevant to this blog), are companies are just paying lip service to CSR and ideas that are currently in vogue, or do they really mean it?

Many companies publicise sustainability policies on their websites, promoting a standard of behaviour to which they say they are going to adhere. Others go one stage further and set objective, measurable sustainability targets by which they can be judged by anyone interested at the end of the corporate year. And some say nothing at all.

In an area like sustainability, one could be cynical and say talk is cheap – at least without benchmarks against which a company can be judged.

How much does the public at large care about CSR?

Not a lot if last Wednesday’s Newsnight on BBC 2 is any barometer!

The producers filled the studio with a group of swing voters who, against the backdrop of a tumultuous fortnight of high octane media coverage embracing the press, the police and politics, did a good impression of shop window dummies when given the chance to air their views. You’d have got more of a reaction from the incumbents at Madame Tussauds.

Perhaps this doesn’t say so much about CSR, but more about how the public have grown weary of “hackinggate”. You can hype a story all you like, but most people at the moment, understandably, only care about the things that matter to them personally and immediately – jobs, crime, housing, health and many more issues which will trump phone hacking, and will definitely trump CSR, every time.

That doesn't mean CSR is a waste of time, or is just PR (leaving to one side the question of directors’ duties).

Many of the terms used in the CSR universe – “ethical” or “fair” trade, “sustainable” investment etc seem pretty elastic – they can mean whatever you want them to mean – see for example my post on “sustainable development”.

Those terms have to backed-up by actions if they are to be given substance.

And CSR can also be about reputation and risk management – valuable and worthwhile ends.

In the News International context, more honesty from staff might have reduced short term newspaper profits, but would surely have better served the bigger picture – in that case arguably getting control of BSkyB.

Reputation is a valuable commodity, hard won and quickly lost through incidents like a corruption scandal or an environmental catastrophe.

Managing risk and reputation is vital.

A corporation that embraces a culture of “doing the right thing” can help minimise risk as well as simply being seen to be one of the good guys.

Anyway, doing the right thing is the right thing to do.

And it might just avoid having to pay for full page ads in the national press promising to “put right what’s gone wrong.”


Friday, 15 July 2011

Heron Tower: Greetings and Thanks for all the Fish!

If you live or work in London, or have visited recently, you may have noticed a new tall building – Heron Tower.

As I’ve been taking a peek at London’s new (and not so new) skyscrapers over the last few weeks – see here and here – I couldn’t leave out the most recently completed addition to the City skyline at 110 Bishopsgate.

Here is a link to the tower’s official website if you want the full marketing spiel.

Heron Tower – designed by architects Kohn Pedersen Fox and developed by Heron International - was practically completed in March 2011; is 230 metres tall; comprises 46 storeys; and houses 40,836 sq m of commercial office space, along with a restaurant and sky bar, although the bar will not be open to the public until the end of 2011. Some tenants have already moved into the building.

The sky bar will eventually have to compete with the one that’s going to be at the top of the Shard, which will be taller, but nothing wrong with a bit of competition when it comes to attracting those with a head (and a wallet) for heights.

The building has an environmental and sustainability BREEAM rating of ‘Excellent’ and its south facade is clad with 3,000 sq m of solar photovoltaic cells.

This tower has been a long time in the making – 12 years from the original site acquisition in 1999. Following concerns from English Heritage about its impact on St Paul's and other historic views, Heron Tower was made the subject of a public inquiry. The inquiry ruled in favour of the developers, and the tower was approved on 22nd July 2002 by the Deputy
Prime Minister at the time, John Prescott.

I must confess I wasn’t sure about this one as it crept up on the London skyline. From a distance it does not seem particularly striking, especially when compared with its near neighbour, the Gherkin. However, perhaps unusually for a skyscraper, I think it looks more impressive when you get closer to it.

And then there’s the fish.

The reception area of Heron Tower is home to Britain’s largest privately owned aquarium.

You can’t fail to notice the enormous tank at the back of the reception as you walk past the building (you can see a photo of it here). The 70,000 litre aquarium has a 27cm thick glass and contains 1,200 fish of 67 different species including, appropriately enough given its location and the take-up of some of the space already by a law firm – sharks!

Now this might strike you as the height of decadence given the parlous state of the nation’s finances and the prominent role in that sorry state of affairs played by many of the people in close proximity to this building. It does look impressive though.

Londonist reported that the architects were coy on the price tag behind this adornment, admitting it “wasn’t a small cost”. The tank is cared for by two full-time fish attendants and divers clean the rockwork and windows twice a week – so at least it’s providing employment.

And as there are lawyers in the building, it can’t be too long before it’s restocked with piranhas – either as a negotiation ploy or an innovative method of reducing headcount.

Wednesday, 13 July 2011

Hacked Off: Media Scandal, EverythingGate and...er... eConveyancing!

The media is eating itself.

The tawdry deluge of revelations concerning the conduct of certain sections of the press has grown exponentially day after day, to the point where no human tragedy (in the West at any rate) of recent years appears to have been untouched by it – which led Charlie Brooker (@CharltonBroker) to quip amusingly on twitter yesterday that it had become so all-embracing we should just label it “EverythingGate”!

We can only speculate on when this sorry saga will reach its nadir – probably with the discovery of a time machine at Wapping filled with allegedly indiscreet comments by Jesus inscribed on vellum.

So desperate are the political classes to hydroplane over some clear water between themselves and their former best mates, that – as Simon Jenkins writes in today’s Guardian – they are falling over themselves in clamouring for inquiries, judges, commissions, regulators and statutes – “beyond anything thought appropriate after the Iraq war or the credit crunch”.

It’s not more regulation we need; it’s competent regulators.

Anyway, this is supposed to be a property law blog, so before I climb beyond the foothills of an uber rant on EverythingGate, let me drag myself back to a subject closer to the ground – and even about the ground – electronic or “e” conveyancing (and with that the readership reduced to zero...no, please bear with me!)

Against the febrile background of EverythingGate, it will probably not surprise or upset most people who care about such things to learn that the Land Registry has scrapped plans to use electronic transfers with e-signatures and to extend the use of electronic legal charges, following a consultation that concluded that customers were "unconvinced" by the process.

Here is a report of the Land Registry’s decision from the Law Society Gazette.

This issue has been talked about mostly in the context of residential conveyancing – for example see this entry on the Clutton Cox blog by Paul Hajek – but it would also be relevant in the context of commercial property.

The problem with e-conveyancing is how you deal with the change of the ownership register while at the same time preventing fraudulent changes. Can the system be protected from hackers?

The issue here is one of technological security in the face of blatant criminality – so it’s not too much of a stretch from EverythingGate.

The danger is that, when selling a property, a legitimate owner finds they are no longer the owner because the property has been sold or mortgaged sometime earlier without their knowledge – by someone who has hacked into the system.

Now that we have all seen how easy it is for supposedly secure systems to be hacked into, it is not hard to imagine how an electronic system of transfers could make this kind of fraud easier to perpetrate.

If that were to happen on a grand scale – again not too hard to imagine now – the consequences would be catastrophic for the system of land ownership and the state’s guarantee of the accuracy of the land register. That situation would be very expensive to rectify.

Indeed, as also reported by Paul Hajek in an earlier post, property title theft and fraud has already been increased by a combination of open access to the register and the abandonment of paper land and charge certificates. Older readers will recall the quaint practice of having to ask the seller’s (then “vendor’s”) solicitors for consent to apply for office copies of their client’s title before you were even allowed to see it.

The Land Register only became a document of public record as recently as 2006, with paperless certificates having been introduced from 2003.

I’m not advocating a return to the old days – too much of that and we’ll end up back with parchment paper, red wax, quills and a job for life with a pension at the end of it (oh...hang on!) – but it seems sensible to put a brake on e–transfers.

However, whilst people might not be too upset to learn that the e-transfer proposal has been dropped, they may feel inclined to venture into the foothills of their own rant when they learn that, in abandoning this project, the Land Registry has had to write off nearly £11m it has already spent on developing the scheme.

This is at a time when the Land Registry is already losing revenue (and shedding jobs) because of the falling number of property transactions.

According to the Gazette the Land Registry’s annual report shows that it is writing off £6.4m spent developing electronic charges, signatures and transfers, and a further £4.5m spent on software to support its planned e-services.

The march of technology has not been stopped altogether though; the Law Society’s Property Section chair Peter Rodd said Chancery Lane may revive its plan to introduce an electronic ‘dealing room’, available to members of its Conveyancing Quality Scheme (CQS), and consider working with the Land Registry to help develop electronic working.

I don’t do residential conveyancing, and so I don’t have any particular axe to grind, but I imagine there must be a lot of perfectly competent conveyancing solicitors who, for whatever reason, have chosen not to be a part of CQS, who might justifiably feel a bit hacked off by being excluded from the future.

Now, back to the Brave New World.

Maybe next time in an effort to spice up my blog I’ll contrive to find a link between Rebekah Brooks and riparian ownership...

Leasehold Management – Unlocking the Chain of Command

Leasehold management can be a complex business where there is a chain of landlords, often creating situations which require a degree of mental dexterity both to understand and to navigate them.

This is particularly true where a tenant, at the bottom of the chain, applies to its immediate landlord for consent to do something under its lease, such as to assign or sublet, or to carry out alterations or change the use.

In many situations the immediate landlord will be required to act reasonably in deciding whether or not to give its consent – either because that is what the lease says, or because statute imposes a duty to do so.

Where the immediate landlord is itself a tenant, it will also have to take into account what its obligations are under its own lease. Its own landlord might also be a tenant, and so on and so on until you get to the top of the chain – the owner of the freehold.

In those situations you have to look at each lease in the chain of command to see what is permitted.

You need to look at whether the proposal is prohibited absolutely or permitted and, if it is permitted, whether the landlord in question has an absolute discretion or is required to act reasonably (either by the lease or by statute).

What if a superior lease prohibits something absolutely?

This is fairly straightforward, because the immediate landlord will simply have to say no too, because it will be obliged to comply with the superior lease, even though the sublease might be silent on the point. In most cases if something has been prohibited in a superior lease, that prohibition will have been passed down in the sublease.

What if there is an absolute discretion under a superior lease?

There has been a case this year on this point - Eaton Mansions (Westminster) Ltd v Stinger Compania de Inversion S.A. [2011] EWCA Civ 607 – where the tenant of a flat applied for consent to install air-conditioning equipment on the roof of the block.

The landlord was itself a tenant and under the superior lease the freeholder had an absolute discretion whether or not to consent to the air conditioning (so too did the immediate landlord but in the circumstances of the case the immediate landlord had accepted an obligation to act reasonably).

The landlord argued that it was entitled to refuse consent, because installing the air conditioning would put the landlord in breach of the superior lease because the freeholder had not agreed to it.

Where the freeholder had declined to commit itself on whether what was proposed would amount to a breach of the superior lease, or that if it was, the freeholder would not object to it being done, the court decided that the landlord was "entitled to take a cautious line" regarding the attitude of the freeholder and could not be expected to "force the issue" or risk giving consent to something that might expose it to a claim for breach of covenant.

If the freeholder would have confirmed that implementing the proposal would not amount to a breach of the superior lease, or would have waived the breach, then (in the absence of any other reason for refusing consent) it would be unreasonable for the landlord to refuse consent.

But if the freeholder regarded the proposal as a breach, it would not be unreasonable for the landlord to withhold consent.

In this case, although the freeholder had not committed itself one way or the other, it had raised concerns about the size and visibility of the air-conditioning units and the possibility of opening the flood-gates to similar requests by other tenants – and so it was decided the freeholder would not have agreed to the work.

What about where the superior landlord and the landlord must both act reasonably?

This can pose difficult problems. Let’s assume you are the immediate landlord receiving an application from your tenant for consent to some alterations.

Here are some possible scenarios involving your own landlord (who I’ll assume is the freeholder), who is obliged to act reasonably under the superior lease.

·         Your landlord unreasonably refuses consent.

Can you hide behind the superior landlord’s decision and refuse consent unreasonably as well?

No.

Case law from as far back as 1958 says that if the superior landlord is acting unreasonably, then you, as the immediate landlord, cannot withhold consent in reliance on your superior landlord's refusal. You will not be at risk if you give consent, because your superior landlord is being unreasonable in refusing consent.

The key thing in this situation is for you to consider the application on its merits. But in reality that is not an easy position to be in.

·         Your landlord reasonably refuses its consent.

You consider that to give consent yourself would put you in breach of your own lease covenants.

Are you entitled to refuse consent?

Yes.

·         Your landlord is willing to consent to your tenant’s proposals, but you don’t want to consent to them.

Are you obliged to consent?

No. But you must still act reasonably and consider the application on its merits. You might still have a reasonable case for refusing consent for a reason which perhaps did not affect the superior landlord.

·         Your landlord refuses consent but you don’t know whether he is being reasonable or not and you want to give consent.

This can be very difficult. You are under a duty to respond within a reasonable time to your tenant’s request and so you may not have time to resolve the issue with your superior landlord. What can you do?

In that scenario you have to take advice and try and decide the application on its merits – which means forming a view on whether or not your superior landlord is being reasonable or unreasonable in refusing its consent. Then you have to make your own decision based on that assessment. That is going to be quite a tough call in many situations, and is highly subjective. But there’s no easy way round this.

The conundrums I’ve looked at become even more complicated where the chain of leases is longer, and each landlord takes a different approach.

Ultimately, these situations have to be dealt with in a systematic way and the tenant should be kept fully informed of what is happening higher up the chain.

Monday, 11 July 2011

CRC Energy Efficiency Scheme: A Classic Case of Split Incentives

DECC announced on 30 June outline plans to simplify the CRC Energy Efficiency Scheme (CRC).

I posted a summary of the changes which you can read here and later some reaction from the industry here. The DECC Next Steps document provides more detail.

Some people in the industry were disappointed that there had not been a return to the recycling payments, which would have provided a greater financial incentive to reduce carbon emissions – a carrot, rather than a stick.

Some people were even hoping CRC would be abolished altogether.

The plans announced by DECC will not make life easier for property lawyers who are grappling with how to deal with CRC costs when drafting new leases.

DECC does not propose to change the landlord/tenant rules which state that where landlords are responsible for supplies of energy to their tenants, the landlords are responsible (tenants are responsible if they arrange and receive the supplies themselves).

This is fine where the tenant is the bill payer, for example as sole occupier of a building, as it will be the tenant who will be responsible for CRC payments if the tenant’s organisation is big enough to be brought under the CRC umbrella – remember that CRC is assessed on organisations, not buildings.

The difficulty arises with multi-let properties.

With CRC payments looking like a carbon tax, landlords will want to pass them on to tenants. Tenants will be reluctant to pay, especially when (because it is an organisation based levy) the size of the landlord’s overall CRC contribution may be determined by buildings across the landlord’s entire portfolio and the energy use of other tenants as well as the landlord itself.

There is no mechanism in the rules for apportioning the cost on a building-by-building basis.

DECC, at paragraph 34 of Next Steps, says it recognises the split between landlords and tenants is a difficult area and calls it “a classic case of split incentives”.

I assume that by that they mean the tenant has no incentive to reduce energy use in, say, common parts where the landlord will foot the CRC bill. That might even be true in the tenant’s own premises where the landlord is the name on the bill for the building as a whole and the tenants reimburse the cost of the electricity through the service charge.

The landlord will want to try and include CRC costs in the service charge, but then we are back with issues of apportionment and timing.

I looked at some possible ways of dealing with this from a lease drafting perspective way back at the beginning of January, in my post CRC – How Do You Deal With it in New Leases?

As DECC has concluded, following the consultation, that it does not propose to change the landlord/tenant rules, then the suggestions I referred to in that post for drafting CRC provisions seem to me to be still appropriate, with the big caveat that CRC is still basically a work in progress.

The trick, from a drafting perspective, will be to come up with something sufficiently flexible to cater for legislative change and the way CRC evolves. It is unlikely that the CRC scheme will ever be cast in stone and so what is needed is wording that can survive and still work as the scheme develops.

My thoughts at the time, which I still hold, were that a stand-alone provision dealing with recovery of CRC costs might be the way forward (to include not only the cost of the allowances, but also the administrative cost of participating in the scheme). The tenant would be obliged to pay the landlord a “fair proportion” of such CRC Costs which are “attributable to the property”.

See my January post for more comments on drafting, some suggested tenant’s amendments and a warning about the possible effects of such drafting on rent review.

CRC is being ignored in a lot of new leases at the moment because in many cases people don’t really know what to do.

The outcome of the most recent consultation will not have done anything to change that.

The government has made one suggestion for change, but it is, in the circumstances, quite a bizarre one. It is considering revising the rules (it doesn’t say how yet) where a tenant builds a structure on land owned by a landlord, the landlord supplies the energy but the tenant is the sole occupant and is wholly responsible for maintenance.

I don’t know where that has come from as the scenario is pretty rare, so it seems an odd thing for the government to single out.

The work in progress goes on however.

Draft legislative proposals are expected to be available for consultation in early 2012.  In the meantime, the Government is inviting comments on the proposed amendments, prior to drafting the amending legislation, by 2 September 2011.

However, I sense a reluctance on the part of DECC to deal with the landlord/tenant issue. Instead, over time, the market will probably work out a settled approach.

But if you think that more changes should be made to CRC to try and deal with the landlord and tenant relationship – seize the moment!

Tell DECC what you think.

Thursday, 7 July 2011

Solar Sunrise in Cornwall

The UK’s largest solar farm has been switched on for the first time today on the site of a former tin mine in Cornwall.

This report from the BBC says the £4m complex on the historic Wheal Jane site near Truro has nearly 6,000 solar panels spread across 7 acres and will generate 1.4 megawatts of electricity a year, enough power for 400 homes.

This solar farm has got in under the wire before the 70% cut in feed-in-tariffs, announced by the government in June, will take effect in August – more on that in my posts DECC Slashes FITs for Big Solar and BPF Enters the Fray on Solar FITs Review.

In addition to solar, there are plans to develop on the site a biomass power and heat generating plant, a wind turbine and a geothermal unit utilising heat from the former mine shaft.

In a big week for Cornish solar, Business Cornwall also reports that a 1.15MW installation set to go live tomorrow at Hendra Holiday Park, near Newquay, and a 5MW farm is set to be turned on later this month near Summercourt.

However, the FIT subsidy party is nearly over.

No U-turn appears to be in sight on that policy yet. 

Wednesday, 6 July 2011

Spruced-Up Skyscraper in The Big Apple – 8 Spruce Street

I'm continuing the skyscraper theme on Digging the Dirt, following on from my posts on the Shard and the Gherkin, but now we go Stateside, for a shining, rippling example of how to transform the world’s most famous skyline – the new tower at 8 Spruce Street, by Frank Gehry.

This is Gehry’s first skyscraper, and it is featured by Jonathan Glancey in the Guardian.

8 Spruce Street is an $875m (£543.3m), 870ft, 76-storey residential tower clad in what Glancey describes as “heroic, sculpted folds of stainless steel.”

When completed, in 5 months’ time, it will house 903 rental apartments (none is for sale – which wouldn’t happen here). Rent ranges upwards from $2,630 a month.

Perhaps here we have found an exquisite example of an alternative to the wrap around glass form that Ken Shuttleworth, the Gherkin’s architect, has turned his back on (which I mentioned here). Although whether he would approve of the twisting waveforms of stainless steel – or consider them just more “crazy shapes” – I don’t know.

Glancey comments:

“Over the course of a day, 8 Spruce Street changes mood and colour with the sun and the sky. One moment it's pink, another gold; at others, it shines silver, or a broody pewter. Seen across the East River from Brooklyn, it animates Manhattan as no skyscraper has done since the Empire State Building opened 80 years ago, when Gehry was a toddler in Toronto. His father was then scratching a living as a slot-machine salesman.”

One side of the tower is flat stainless steel; the other sides rise in folds and pleats, made from 10,500 individual steel panels. Gehry says he took his inspiration from the unlikely source of books of fabrics drawn by Michelangelo and Bernini.

What is interesting from a design and build point of view is that the unusual design of waves and folds in the steel did not add to the cost. The three curved sides did not cost any more than the straight side, thanks to the use of 3D modelling. Gehry says:

“Fifteen per cent of construction cost is usually wasted in design changes on site, caused by the fact that architects are still doing 2D drawings for 3D buildings. We do 3D modelling that shows exactly how the whole building fits together, and we don't need many design changes. That way we've come in on budget."

So I’m not the only person who likes tall, oddly-shaped buildings after all.

Ghery again:

"I don't want to do architecture that's dry and dull. When you talk to New Yorkers, like the guys you met in the Irish bar across the way from 8 Spring Street, like my dad, you want to show them something like Bernini or Picasso, not some dumb thing that bores the pants off everyone...Do you think they'll let me have a go in London?"

What a great idea!

Let’s have a Ghery tower to compete with the Shard, Cheesegrater, and Walkie-Talkie.

In the Zone – 29 Bids for the Second Wave of Enterprise Zones

Back in March, the Plan for Growth, which accompanied the Budget, announced the setting up of 21 new Enterprise Zones (EZs).

See my post Enterprise Zones – Where, When, Why? for a list of the first 11 zones chosen.

At the same time the government also announced the launch of a competition amongst Local Enterprise Partnerships (LEPs) to identify the locations of the remaining 10 EZs in England by July 2011.

The Department of Communities and Local Government (DCLG) announced on 4 July that it has received 29 bids which will compete for the final 10 EZ spots.

The ten zones selected will benefit from simplified planning rules, super-fast broadband and  tax breaks to promote growth, including a full business rates discount, worth up to £275,000 per eligible business over five years.

DCLG says there are strict selection criteria in order to ensure that designated zones act as genuine catalysts for growth and encourage greater and faster business and job creation. There should be little or no business in the site already.

Applications will be assessed against three key criteria of success - ability to deliver growth and jobs; value for money; and implementation strategy.

The winners will be announced later this summer.

See the DCLG press release for a list of the 29 bidders.

As I wrote in March, the EZ concept is not universally popular, with some calling it a return to the policies pursued during the Thatcher era.

Where there are winners there are inevitably also losers and styling the selection as a “competition” only seems to emphasize this. It’s all very free market – until you’re lucky enough to be chosen as an EZ – thereafter the market is skewed in your favour.

I mentioned in March that one area feeling left behind was the South West. Perhaps it will get lucky this time as the list of bidders includes one from Cornwall & Isle of Scilly LEP (for Newquay AeroHub EZ) and two from the Heart of the South West LEP (one for Plymouth and one for a Low Carbon Energy EZ).

A big feature of winning EZ status will be that local authorities will be able to retain any increases in business rates in the zones for at least 25 years to support further economic development.

That is described as a key benefit by Beverley Firth of Mills & Reeve. She writes:

“For areas where a bid is successful, it is the LEP which will call the shots on how these monies are spent and how they can best meet the LEP's priorities. We may therefore see a "premier league" of LEPs emerging and a distinction between LEPs with real spending decisions to make, and those without.” 

Time will tell whether the policy of creating these EZs proves effective in promoting overall growth or instead becomes a distortion of the free market that basically pays businesses to move to one location over another.