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Monday, 14 May 2012

Best Foot Forward: Reforming Public Rights of Way

Defra has today launched a consultation on reforming public rights of way.

They are seeking views on a proposed package of changes to the processes for recording, diverting and extinguishing public rights of way. 

The consultation covers England only, and is likely to be of interest to all people who have an interest in public rights of way, including landowners, local authorities, rights of way user representative bodies, and conservation bodies.

Public rights of way remain the main way of gaining access to the countryside. A process to try and record the many thousands of rights of way so they didn’t become lost forever began in 1949, but it proved so difficult it was never completed.

How to reconcile the many historic rights of way with current land uses is a main focus of this consultation, together with how changes to the rights of way network could be better integrated into the planning process in the light of the Penfold Review.

The consultation also looks at the possible survival of rights of way beyond the 2026 cut-off date introduced by the Countryside and Rights of Way Act 2000.

The consultation document contains a useful summary of rights of way history and law.

The consultation runs for 12 weeks, ending on 6 August 2012.

Photo by Kapungo via flickr

Thursday, 10 May 2012

Lease Break Clauses: Not Always Set in Stone

Lease break clauses are not always set in stone.

Sometimes a break clause will be for the benefit of the named tenant only, usually the original tenant.

In Gemini Press Ltd –v- Cheryl Lindsay Parsons (2012) QBD (Cooke J) the High Court ruled on 24 April 2012 that where a lease had specifically named a party in a break clause, that clause was not assignable to future tenants.

So anyone taking an assignment of a lease with a break clause benefitting only the named tenant will not be able to exercise the break clause.

I’ve not seen the judgment, so I don’t know the history of this matter or why it came to court.

The headline point about personal break rights not benefitting successors in title will not come as much of a surprise though, and you may have read my post last year – This Time it’s Personal – which also looked at this issue.

Leases sometimes contain personal rights or benefits that the landlord might have been willing (or forced) to concede to the first tenant but which he wouldn’t necessarily want to benefit anyone taking an assignment of the lease.

Alternatively, they can be introduced into a lease when an assignment takes place at a later date, when they might be added to the lease for the benefit of the one assignee only.

Either way – they are a only personal benefit, as opposed to more standard break clauses that can be operated by whoever happens to be the tenant at the relevant time.

Another way of dealing with such personal concessions is to deal with them in a side letter rather than in the lease itself.

There’s less likely to be any doubt about who benefits if a side letter is used.

If you already have a personal break right, rather than assigning your lease, you could think about subletting the premises instead – see This Time it’s Personal for more about this suggestion.

Other breaking news...

I’ve amended my post from last year on landlords' break clauses – When is a Landlord’s Break Clause Effective? - it’s been one of the most popular posts on this blog, perhaps surprisingly in the current market, so I’ve updated it.

More importantly – the controversial break clause case of late 2011, Avocet Industrial Estates LLP –v- Merol Ltd [2011] EWHC 3422 (Ch) (described in my posts Banana Skins & Humpty Dumpty – Time to Take a Commercial View? and Skating on Thin Ice) is being appealed by the tenant.

The appeal is due to be heard by the Court of Appeal imminently.

Watch this space!

Tuesday, 8 May 2012

Stop Gap Tenants Mean Shorter Lease Terms

Lease terms are getting shorter.

The average lease term has fallen to a new low of 4.8 years.

That’s the message from the annual study by the British Property Federation (BPF) and Investment Property Databank announced by the BPF today.

The survey, the largest of its kind in the UK, looked at more than 100,000 retail, commercial and industrial leases.

It shows many occupiers opting for short “stop gap” periods, rather than medium term leases.

Here are some stand-out statistics from the report.

·         Average leases lengths have fallen from 6.2 years in 2007 to 4.8 years in 2011

·         Lettings to SMEs are even shorter, at 4.1 years

·         76% of new leases signed in 2011 were under five years in length.

·         78.3% of new leases granted to SMEs in 2011 were under five years in length, 19.2% for up to 10 years and only 2.1% up to 15 years.

·         High streets retail units saw a further reduction in lease lengths, falling from 7.7 to 7.6 years (in 2007 they were 9.7 years).

·         Rent free periods are quite commonplace, even in relatively short leases – they are given in 32.9% of retail leases under 5 years, and 35.5% of industrial leases of the same duration.

Many occupiers, especially start-ups, will welcome the flexibility of short-term lets.

Those retail and office occupiers who are more certain of their future will hope to get a good deal in return for long-term commitment.

The long term implications for UK property values and the funds which rely on them, such as pensions, are more complex and uncertain.

Thursday, 3 May 2012

Lease Break Clauses – Paid In Full

Here’s another recent tale from the courts of how a tenant can get ambushed when trying to exercise a conditional break clause.

The lease in question required rent of £190,000 per annum to be paid by equal quarterly payments in advance on the standard quarter days (25 March, 24 June, 29 September and 25 December) – nothing unusual in that.

The lease contained a break clause allowing the tenant to bring it to an end on 11 October 2010 (“the termination date”) by giving at least 6 months’ prior written notice to its landlord.

One of the conditions of the break clause required payment of the rents reserved and demanded by the lease “up to the termination date”.

The tenant served the break notice.

So how much rent did the tenant have to pay on 29 September 2010?

The tenant argued it only had to pay rent for the period from 29 September 2010 to 11 October 2010.

Sadly for the tenant, that was the wrong answer.

Because the lease contains an obligation to pay a quarter’s rent on each quarter day, the tenant should have paid for the whole quarter on 29 September 2010.

There’s no common law right to apportion the rent if the termination date falls in the middle of a quarter, like it did in this lease; you have to pay the quarter’s rent in full.

This will seem monstrously unfair to many people, because the tenant is paying for a period after the termination date when the lease has ended and it’s left the premises.

Unfair it may be, but it’s the law.

As we’ve seen in other recent cases, getting this wrong can be very expensive.

By apportioning the rent in this case, the tenant was trying to save itself just over £39,000.

Instead, the court found it had not complied with the break clause condition.

As a result, the lease continues until it expires on 27 September 2014, making the tenant liable for the full rent of £190,000 per annum plus all the other associated charges under the lease until the expiry date (and possibly the landlord’s costs of the litigation to boot).

That could amount to more than half a million pounds.

It’s yet another lesson that when seeking to exercise a break right, you must comply strictly with any conditions in the break clause.

What can you do to improve your position when agreeing a new lease?

Ideally, make the break clause unconditional.

However, if there has to be a condition requiring payment of rents reserved by the lease up to the break date, limit it to the principal rent only (to avoid any arguments about service charge for example) and include an obligation for the landlord to reimburse the tenant on the break date for any rent paid for a period after the break date, plus interest if there’s a delay in payment.

You still have to pay the quarter’s rent in full, but at least you’ll be entitled to have some of it paid back to you once the lease has ended.

Here’s a link to previous break clause posts on this blog.

Photo by 401K via flickr