Courtesy of Thames Valley Business Magazine April 2013
The Energy Act 2011, which was given Royal Assent on 18 October 2011, is intended to improve energy efficiency in homes and businesses, in particular through the Private Rented Sector Regulations (PRSR). The Green Deal came into effect at the end of January 2013. Further regulations affecting the private rented sector will come into force between now and 2018.
In particular the Act provides for regulations to be effective from no later than April 2018 to restrict property owners from letting properties which are below a minimum energy efficiency rating by reference to the building’s Energy Performance Certificate (EPC). The current proposition is that the threshold will be an E rating, meaning landlords with buildings with an F or G rating (estimated to be 18% of rented non-residential buildings) will not be able to legally let them unless sufficient efforts have been made to reduce the rating to the lowest possible level. The market is likely to quickly factor in a discount for properties likely to need significant expenditure to bring them up to the required standard.
The Green Deal may provide some comfort to landlords. It allows private firms to lend finance to businesses and consumers to fund energy efficiency improvements to their properties, so that landlords bear no upfront cost for installing improvements. The lender will recoup payment through a charge on the energy bill of the property. The ‘Golden Rule’ is that the incentive only applies where the expected financial savings are equal to or greater than the costs attached to the energy bill.
- Landlords are advised to review their portfolios now and consider what action they should take. At the very least, knowing the current EPC rating of buildings held or occupied is critical. Landlords should review potential options for improving the energy rating where necessary to ensure properties’ lettability in 2018 onwards or they may wish to consider disposing of poorly rated stock in favour of that with higher energy efficiency.
- Other factors for landlords to consider are whether they have necessary access rights under their lease to carry out the works and the issue of recovery of costs of such works to the common part via service charges. Both landlords and tenants will have to consider service charge provisions in leases carefully in this respect.
- Landlords should be aware that as from April 2016 they will not be able to refuse consent to a tenant’s request to make alterations for energy efficiency reasons. Landlord may wish to consider incorporating provisions in leases to the effect that a Green Deal plan cannot exceed the term of the lease. This would prevent the landlord being responsible for the charges during a void period and having to market the property again with a Green Deal charge.
- Other issues for tenants include being aware that a low EPC rating could restrict their ability to sublet a property after 2018. In addition, if a tenant is carrying out the works, it should ensure they are recorded in a licence for alterations which provides that they are disregarded at rent review and that the tenant does not have to remove such works at the end of the lease term.
- Landlords and tenants should consider seeking legal advice on the incorporation of “green” clauses into their leases which require better environmental management of a building.
- It seems reasonable for lenders to question how significant expenditure on improvements will be funded during the loan term, whether that be through the Green Deal or otherwise. For example, lenders should be asking if the cost has been factored into the borrowers’ business plan. Conversely, those lenders who have considered the point may be faced with customers who do not appreciate the scope of the problem.
- From 1 January 2015, it will be illegal to use any HCFCs to service refrigeration and air conditioning equipment, given the effect on the ozone layer including the commonly used R22 coolant. Aged air conditioning plant can be a major factor in driving EPC ratings into the lower F and G categories. Landlords may wish to upgrade the air conditioning plant in a building if it covers the common parts and lettable areas. This will affect the whole building, being for the long–term benefit of its occupiers, but savvy tenants of new leases are already attempting to remove any liability on their part to pay for upgrades to achieve improved energy performance. Contracting parties therefore need to consider the problem now, not in five years.
November 1st, 2012
Courtesy of Thames Valley Business Magazine October 2012
The level of service is ‘exceptional’ at Pitmans, where the lawyers have ‘a very good understanding of the market and the specific needs of the client’. Work highlights included advising Maple Leaf Bakery UK on the partial sale of its bakery business, and assisting with various matters relating to Tesco’s acquisition of shares in Blinkbox Entertainment. Andrew Peddie is an ‘excellent corporate specialist with great expertise and experience’. Philip Weaver recently advised the shareholders of Thames Travel on its sale to Go-Ahead.
With a team including a number of former City litigators, Pitmans has seen an increase in shareholder matters, guarantee claims and misrepresentation disputes. Practice chair Sue O’Brien handles complex commercial litigation, often with an international element, and is also and ADR-accredited mediator. Tim Clark is recommended for his experience in IT-related matters and company and shareholder disputes.
Pitmans is highlighted for its ‘excellent success rate’ in sectors including technology, construction and retail. Team head Suzanne Brooker is ‘readily available, sharp and commercial’.
The ‘excellent’ Pitmans has a ‘longstanding, loyal team of trusted advisers’. Highly rated practice head Patrick Long concentrates on corporate banking transactions and advises banks and corporate borrowers on refinancing and restructuring issues. The team is on the panels of 10 major banks.
‘Fast-moving and forward-thinking’ firm Pitmans houses an ‘excellent’ team which is ‘quick to grasp important issues’. Department head Suzanne Brooker has an ‘outstanding level of knowledge, and is one of the best in the business’. The team experienced a rise in both personal and corporate insolvency instructions in 2011.
Recognised for its strong technology-sector expertise, Pitmans recently assisted Toshiba TEC Europe Retail Information Systems in relation to an application for union recognition by Unite. Mark Symons leads the team, which includes the recommended Richard Devall. The firm also stands out for its niche practice in business immigration.
The ‘responsive and helpful’ Pitmans advises defined benefit schemes on issues such as scheme appointments and the switch from RPI to CPI. Recent work includes advising the trustees of CitiFinancial Europe on the merger of its occupational schemes into a larger parent scheme. ‘Clear, analytical’ department head David Hosford leads a team that includes two solicitors dedicated solely to pensions-related litigation.
Ferhat Choudri’s team at Pitmans gained several new clients in 2011, and acted in a multimillion-pound indemnity case.
Pitmans is highly regarded for its work advising housebuilders on acquiring development land, and recently handled two multi-million-pound site purchases for Bewley Homes in Reading and east Challow. Other clients include Banner Homes, Coutts & Co, Urban Outfitters, and Porsche. Team head Andrew Davies and Paul Murray are recommended.
Pitmans recently acted in three cases relating to property contamination.
Pitmans’ client base is largely made up of housebuilders, but the firm also acts for international banks and retail clients. It advised Banner Homes on over 20 sites in the South East.
Pitmans’ lawyers have a ‘very good understanding of the market’, and provide an ‘exceptional’ service. The IT team is now four partners strong following Philip James’ recent arrival from Lewis Silkin LLP. The lawyers divide their time between London and Reading.
Pitmans is noted for its ‘rapid response times and creative commercial solutions’, and recently acted for Live Nation in a European Court of Justice trademark appeal. Practice head Jeremy Summers is recommended, as is Sally Britton; both divide their time between London and Reading.
This article was first published by Solicitors Journal on 3 July 2012, and is reproduced by kind permission.
When companies fail, Landlords are often one of the largest creditors. Not only that but they may be unable to re-let in the short term or, worse, prevented from re-letting their premises whilst office holders seek a buyer for or wind down the business.
Prior to the judgement in Goldacre (Offices) Limited –v- Nortel Networks UK Limited it had long been considered that the payment of rent by Administrators was a matter within the discretion of the Court, usually considered in the context of an application for permission to forfeit a lease. The fact that the payment of rent falling due, whilst premises are being used for the purpose of an administration, is not discretionary was put beyond doubt in Goldacre. However, Goldacre did not determine all questions relating to such payment of rent and the Courts continue to clarify the position in cases such as MK Airlines Property Limited (In Administration) –v- Katz decided in May this year.
In Goldacre, the Administrators of the company had been using a relatively small part of the leased premises for the more efficient conduct of the administration. Other parts were occupied by subtenants rent was being paid by the subtenants directly to the Landlord, such that the Court was not concerned with the Administrators’ occupation of those parts of the premises.
Rent had been paid for the period of the administration but the Landlord sought the Court’s direction as to whether future rent fell to be paid by the Administrators as an expense of the administration under Rule 2.67 of the Insolvency Rules 1986. This would have the effect of giving rent payments priority over (amongst other claims in the administration) the Administrators’ own remuneration.
The Lundy Granite principle had developed in relation to liquidations, following the 1871 case by that name, which provided that, where property is retained for the purpose of advantageously disposing of it or it continues to be used in a liquidation, rent ought to be regarded as if it was a debt incurred for the purpose of that process, even though it was incurred pursuant to an obligation entered into by the company before the process commenced and ought to be paid as an expense of the liquidation. Since Rule 4.218 of the Insolvency Rules 1986 came into force, which sets out categories of liquidation expenses, it has been considered by the Courts to have the effect same effect.
In Goldacre, the Court found that this principle applied equally in administrations notwithstanding that the Insolvency Rules contain less clear wording in relation to administration expenses.
The Court went further and found that, once an Administrator makes use of or decides to retain rented premises, rent falling due on the next quarter date (and indeed any other contractual payment date) would be payable by the Administrators as an expense, in full and without apportionment where such use or retention comes to an end before the end of the quarter. The Court did not consider itself bound to follow the approach of the Court of Appeal in Sunberry Properties Limited –v- Innovate Logistics Ltd  in which it had thought that such matters were within the discretion of the Court, affording it flexibility in its approach in order to achieve a fair outcome. The Court in Goldacre considered that this was not a matter of discretion but a matter prescribed by the Insolvency Rules and rent for each payment period would be payable with no regard to the amount recovered through the use of the property, for example, under the terms of any licence to occupy the premises granted by the Administrators.
The Court, in Goldacre, acknowledged that there was no immediate right to payment since the Administrators must first determine that there are sufficient funds available for payment to be made, having regard to other claims with the same or greater priority. The Court did not, however, clarify where, in the order of priority determined by Insolvency Rule 2.67 (a) to (j), the expense fell to be paid, saying that if it was not under sub paragraph (a) then it fell to be paid under subparagraph (f).
Since Goldacre, Administrators have to factor into their strategy for an administration the effect of using the company premises and ensure that there are sufficient funds available to pay all expenses of the administration, including rent, so that they do not risk having insufficient funds available to pay their own remuneration at the end of the administration. They may time the administration appointment to fall after a rent payment date to give them time to decide on strategy, finish off contracts that can be completed quickly and, if appropriate, vacate the premises prior to the next rent payment date. Where the purchaser of the business and assets of a company in administration is allowed to continue to trade from the premises, for example, under the terms of a licence then Administrators are well advised to ensure that the terms of the licence require payment, in advance of occupation, of at least rent due in any quarter during which the licence will continue. Administrators are also well advised to inform the landlord once the use or retention of the premises has come to an end and make it clear to the landlord that consent will be given to forfeiture of the lease or a surrender will agreed.
Landlords have taken every opportunity to use Goldacre to their advantage. Unfortunately not all matters relevant to any such entitlement were decided in Goldacre, leaving the door open for claims which may go beyond what was intended and leading to disputes between Landlords and Administrators. Some of those disputes have come before the Court in recent cases. In Leisure (Norwich) II Limited –v- Luminar Lava Ignite Ltd, decided in March 2012, the Court confirmed that, where rent fell due for payment prior to the administration, it would not be payable as an expense even if the Administrators were using the premises for the purpose of the administration during the rent period. Where rent for a period fell due for payment, in advance, after the Administrators had elected to use the premises, then rent would be payable as an expense for the whole period. However, where rent is payable in arrears, it is payable only for the time during which the premises are being used.
In May this year, the Court handed down a judgment in the case of MK Airlines Property Limited (In Administration) –v- Katz. MK Airlines had been subject to a number of insolvency process including a provisional liquidation. The Court had to determine whether rent payable during the period of the provisional liquidation should be treated as an expense of the liquidation. Further, if it did, the Court needed to determine the point in time from which rent would be so payable.
Provisional liquidators are appointed before there is any winding-up in relation to a company to look after the company’s assets and no more. It was therefore argued that a provisional liquidator could not be motivated to retain or use the premises for the convenience of the winding-up. The Court considered that rent was payable as an expense on the grounds that: it would be anomalous if the position differed between an administration, liquidation and provisional liquidation; expenses incurred by a provisional liquidator are expense in the liquidation under the Insolvency Rules; the circumstances would determine in each case whether rent was an expense based upon whether the provisional liquidator had retained the premises for the purpose of advantageous realisation or it or its continued use.
The Court made it clear that, if the provisional liquidators had done nothing in relation to the premises, neither using them nor retaining them for the purpose described, then rent would not fall to be payable as an expense.
In MK airlines, the provisional liquidators had been appointed two days before a rent quarter date. They had then considered what urgent action they needed to take to protect the assets, having determined that they were in jeopardy and that immediate action was required to protect them. The assets were therefore secured at the company’s rented premises. At a later date the provisional liquidator had considered whether to remove the assets from the premises. However, removal would be expensive (they included aircraft and a flight simulator) so it was concluded that the assets should be left at the premises until the liquidation of the company.
Following the authority of Re Oak Pits Colliery  the Court decided that merely retaining and securing property situated on the premises was not a use sufficient to engage the principle that rent should be paid as an expense. Accordingly, rent falling due on the first quarter day after the appointment of the provisional liquidators was not payable as an expense. However, it was considered that at some later date, before the next quarter date, the provisional liquidators had made a decision to retain the premises and not seek to disclaim the lease, to benefit of the liquidation. The Court said that it was possible to treat each quarter differently depending upon the motivation of the provisional liquidator as at the rent payment date. However, the Court did not consider that it would be appropriate to apportion the rent between the time before and after the decision to retain the premises had been made.
Landlords that have premises occupied by companies that go into an insolvency process should open a dialogue with the office holder immediately, in writing, in order to ascertain the Administrator’s intention. If it is the intention that the premises be used or retained for some purpose then Landlords should seek confirmation that rent will be paid for that period as an expense.
At such time the office holder notifies the Landlord that the premises are no longer required there will no obligation upon the Landlord to take back possession of the premises, though the Landlord may wish to seek a surrender or consent to forfeiture or find out if a Liquidator intends to disclaim the lease. Landlords may be able to avoid paying rates, if the premises are empty and may not wish to retain possession for this reason but merely obtain access for the purpose of marketing the property.
Landlords may wish to consider granting (or amending) leases to provide that rent is payable more frequently than quarterly so that they do not have to wait so long before rent becomes an expense of an insolvency process.
July 6th, 2012
Re-published from the Pitmans Times 2012
One third of all property in the UK is currently owned by people over 60. And during the next 25 years, the number of over-75s is going to increase by 95 per cent, while the number of over-85s is going to increase by 184 per cent. People are living longer and are healthier than ever before. The possibility exists that you might spend as much of your adult life retired as you did working. This trend is profoundly affecting housing wants and needs.
Growing awareness of this changing demographic has resulted in a rapid expansion of the provision of assisted living. Assisted living is very much a marketing term referring to a generalised care model rather than a specific form of care delivery. It is an attempt by the industry that offers these services to bring a disparate number of service providers under the one umbrella.
Assistance can include administrative, supervision of medication, or personal care services provided by trained staff. Assisted living as it exists today emerged in the 1990s as an alternative to the continuum of care for people for whom independent living was no longer appropriate but who did not need 24 hour medical care provided by a nursing home.
The leading provider of assited living in the UK is McCarthy & Stone, a client of Pitmans, who have obver 700 successful developments in the UK alone. In a construction market that has largely atrophied in the last 4 years McCarthy & Stone have been successful in the expansion of their business due to the fact that assisted living meets a need evident from the demographic and also because their product ticks a number of national and local boxes from a planning and care provision perspective, these being:-
- The provision of high quality residential developments
- The developments address the demand for specialist housing for the frail and elderly
- Such developments provide a boost to the local economy, as resident of extra care accommodation tend to rely on and support local shops and services for their everyday needs
- Provide a passive residential development that generates extremely low levels of traffic
- They provide developments that are designed to reflect the outcome of community consultation.
June 13th, 2012
Re-published from the Pitmans Times 2012
Cancer care across the UK is benefiting from work undertaken by the Pitmans’ Property team. Partner Andrew Taylor has worked with Bupa for many years and is currently helping to support them in the cancer care and other health related services they provide to the community.
The increased costs associated with cancer care will in the future need other options beyond treatment in hospital to be considered. Once patients are well enough to be discharged, community and home-based treatment may well become an important part of future planning for cancer sufferers. Most patients wish to spend as little time in hospital as possible, with tangible financial benefits to the NHS of this approach.
Bupa has recently published a report – ‘Cancer Diagnosis and Treatment; a 2021 projection‘ – which details proposals and ideas for such community and home treatment. Andrew Taylor says: ‘With the cost of cancer care in the UK projected to jump by more than 60% in the next two decades, different treatment solutions need to be considered, including the community and home-based approach which is often what patients also want. The best care delivered as close to home as possible – and even at home itself – may form a large part of cancer care in the future.’
Courtesy of Thames Valley Business Magazine April 2012
A recent report by property research company, The Local Data Company, highlighted the gathering storm in Britain’s high streets and predicted a rise in the number of empty shops, in 2012.
We need hardly be reminded of the reasons, given the economic backdrop, nor some of the high profile casualties including Peacocks, Barratts, Thorntons and Past Times.
But the default or potential default, of a tenant occupier, whether of retail, offices, or any other commercial property, can sometimes result in unpleasant and unexpected consequences, for a former tenant/occupier, notwithstanding a sea change in the law in that respect, enacted some 16 years ago. In an environment where landlords are increasing looking at their options to recover rent arrears, it is perhaps timely to remind ourselves of the broad principles of the law in that respect.
‘Old’ and ‘New’ tenancies
Before the Landlord and Tenant (Covenant) Act 1995 came into effect on 1 January 1996, a tenant who assigned his lease to a third party, invariably remained liable for any future non-payment of the rent or other breach, by his assignee, or indeed any future assignee who subsequently took over the lease. He could, in short, often be required, (under what the Act terms an “old tenancy”) to pay rent or other arrears or make good other breaches of the tenancy obligations, perpetrated by a successor to his lease. A landlord could often choose which, of more than one, potentially liable parties to pursue – usually the one remaining solvent or with the deepest pocket.
The 1995 Act sought to largely remove the perceived injustice which resulted, by providing that, with some exceptions, a tenant who assigns a lease entered into after the Act took effect (a “new tenancy”), is automatically released from his obligations (and with him, his guarantor, if any) leaving the actual current tenant/defaulter responsible for any landlord’s claim.
The principal exception is that, as the price of his consent to the assignment, a landlord of a new tenancy, may require the outgoing tenant to enter into an “Authorised Guarantee Agreement” – an arrangement under which, in brief, the outgoing tenant in effect guarantees performance by his immediate assignee (but not any subsequent assignee, should the lease be assigned further).
All may not be lost
But for the unfortunate former tenant who receives a demand for payment from the landlord, perhaps many years after he assigned the lease, all might not be lost.
It is not unknown for lease documentation to fail to fully reflect the provisions of the Act and clauses or obligations which, on the face of it seek to hold the former tenant liable, may not be effective, as the 1995 Acts contains stringent anti-avoidance measures which can render even apparently straightforward language, void and unenforceable.
It is also not always the case that a former tenant, even under an old tenancy, remains liable post assignment of his lease – much depends upon the provisions of the actual documentation, and the history of the lease.
Further, in certain circumstances there are also time constraints which may prevent a landlord claiming arrears from a former tenant, who has not been notified of a potential claim within 6 months after it first arose, a requirement which applies to old and new tenancies.
Assuming, of course, that such parties remain solvent, he may also be able to claim an indemnity for his losses from the party to whom the lease was assigned (it also does not follow that that party will always be the current tenant/defaulter).
If you are unfortunate to be on the receiving end of a claim by a landlord in respect of rent arrears or other beaches of a lease, accrued or perpetrated by an assignee, the best course is to seek expert advice as soon as possible. Inaction may not only be a worry, but just might also prejudice your position and it will often be incorrect to assume that there is no escape from liability or that there is nothing you can do to limit any losses that might result. The law in this area is particularly complex and there are a number of significant further details and exceptions to the outline above.
For those who are considering assigning a lease, including perhaps in the context of the disposal of a business, it is also as well to look closely at the issue, since the documentation entered into with the landlord at that juncture, will dictate the risk of there being a claim against you later and a landlord may not always be able to insist upon there being an authorised guarantee agreement.
February 20th, 2012
Award-winning law firm Pitmans LLP has acted on behalf of Class Telecommunications Limited on the acquisition of R.C.G. Global Networks Limited for an undisclosed consideration. The transaction was led by Pitmans’ Corporate Partner, Adam Dowdney, and assisted by Corporate Solicitor Carolyn Butler, Employment Solicitor Amanda Dorling and Commercial Property Director Bhaminee Sharma.
Class Telecommunications have been operating since 1989, offering a range of managed telephony solutions including fixed line, broadband & data services, mobile phones and telephone systems and support.
R.C.G. Global Networks provides business customers with telecommunication services, including the provision and rental of exchange lines, carrier pre-selection, broadband connections and associated services, and the supply and sale or rental of telecommunications equipment and materials.
Commenting on the transaction, Julian Miller, Managing Director of Class Telecommunications said “This is the first acquisition we have undertaken and I am very grateful to Adam and his team for leading us through the legal process which enabled us to complete on time and within budget. Their tenacity, professionalism and commitment gave me the reassurance that our interests were in safe hands and secured the result we wanted”.
Adam Dowdney, Pitmans’ Corporate Partner said “We were delighted to act for new client Class Telecommunications on this acquisition which is of considerable strategic importance to their development. As always, the deal required input from various departments which exemplifies our ability to provide a quick and commercial full-service offering. We are sure that this acquisition will prove to be of great importance to Class and look forward to working with Julian and his team again soon.”
July 12th, 2011
Award winning law firm Pitmans LLP has acted on behalf of Maudesport Limited, one of the Uk’s leading mail order suppliers of sports and leisure equipment and team wear, on the sale of their company to DEMCO UK Limited for an undisclosed consideration. The transaction was led by Pitmans’ Corporate Partner, Philip Weaver, and Corporate solicitor, Carolyn Butler. They were assisted by Property Partner, Sally Sharp.
Maudesport limited supplies 60 Local Authorities with equipment for their schools, colleges and other establishments. It also supplies HM Prisons, NHS and MOD establishments as well as Youth Centres, Special Needs Units, leading fitness and leisure companies and the general public.
Commenting on the transaction, John Maude, the Owner and Managing Director of Maudesport Limited said “I was most satisfied in the manner that my corporate and legal advisors brought this sale to completion. Although intense as the final stages played out, Pitmans kept me informed and helped me through a process with which I was unfamiliar. In particular property issues, a difficult hurdle to overcome, were negotiated through to both parties satisfaction.”
Philip Weaver, Pitmans Corporate Partner added: “We were very pleased to bring this sale to a successful conclusion. Although the purchaser was a UK company, the decisions were made by its parent. We had noted from previous transactions (and this sale proved to be no exception) that US purchasers are often more concerned about some areas than a typical UK purchaser, such as environmental concerns.”
DEMCO UK Limited supplies materials, including laboratory equipment, chemicals and consumables to the eductation sector. The company also owns Technology Supplies Limited and Timstar Laboratory Supplies Limited (which it acquired in July 2009). DEMCO UK Limited is ultimately owned by Wall Family Enterprise Inc in the United States, a family-owned group of eight independent businesses that generates annual revenues of more than $200 million (£125 million).
Pitmans are proud to have acted on a pro bono basis on behalf of Red Balloon Learner Centre Group in the acquisition of premises to provide a new centre in Reading, Berkshire.
Red Balloon Learner Centre staff and unpaid volunteers work exceptionally hard to provide a ‘first class’ education for some of society’s most vulnerable and isolated children. The new centre will provide education for children who are no longer in mainstream schooling due to severe bullying in the Reading area.
The Red Balloon Charity was established by Carrie Herbert, an educational consultant, in 1996 in order to provide a safe haven for children who had dropped out of school because of bullying. There are now a number of Red Balloon Centres around the country. It is hoped that this centre will offer a service to pupils throughout the Thames Valley.
Carrie Herbert, founder of Red Balloon said “Thank you so much for all that you have done for us in seeing through the purchase of the property at King’s Road. I know it will make a marvellous Red Balloon”.
January 2nd, 2011
Leading law firm Pitmans is delighted to have assisted restaurant operator Zing Leisure Ltd in its acquisition of three restaurants from Burger King including flagship stores at Leicester Square and Queensway in central London.
Burger King were represented by their in-house team led by Debbie Waddell and by Clarke Wilmott.
Tim Clark comments: “Pitmans were delighted to assist Zing Leisure in their acquisition of three restaurants from Burger King. These flagship stores are situated in London’s consumer catering hubs and both deliver whopping footfall. It is illustrative of the astute commercial acumen that Zing Leisure possess in running their business that they have purchased these stores. ”