AUTUMN 2012 PROPERTY LAW UPDATE BATES WELLS & BRAITHWAITE

AUTUMN 2012 PROPERTY LAW UPDATE BATES WELLS & BRAITHWAITE

IN BRIEF Squatters who enter a residential property will now be committing a criminal offence from the moment of unlawful entry. But the legislation does nothing to address the concerns of owners of non-residential property. Lesley Robinson, Head of our Property Dispute Resolution department, gives the legislation a mixed welcome. Page 5 CONTENTS INTRODUCTION 3 SQUATTING 4 CRC UPDATE 6 GUARANTEE AGREEMENTS 7 BREAK RIGHTS 9 STAMP DUTY 11 VAT UPDATE 13 ROUNDUP: CASE LAW 14 Changes in the Carbon Reduction Commitment Energy Reduction Scheme (CRC) mean that it is now potentially a cost to all participants in the scheme. This may enable landlords to pass on the costs to tenants, finds Oliver Stacey. Page 7 Tenants considering exercising their break rights should be aware that they must take extreme care to meet all the conditions of the break clause if they are not to be bound to the lease. William Scott highlights recent cases. Page 9 Stamp Duty Land Tax rates have now increased for properties above 2 million. Thomas Adams and Siobhan McGoay outline the new rates in force. Page 11 COMMENTS Please contact us with any comments or suggestions. Previous updates are available at: www.bwbllp.com/updates Let us know if you would like to add a name to the distribution list for this or other departmental updates; if your contact details have changed; or if you would prefer to receive our update by post/email. Contact Marketing Department at marketingdepartment@bwbllp.com Bill Lewis, our specialist tax consultant, provides an update on the proposal to remove the VAT zero rate for certain alterations to listed buildings and hopes that the Government will reconsider. Page 13 In our roundup of recent case law, Joanna Stokes looks at the eviction of the Occupy London protestors; break clauses; issues with planning permission and rights of way; and the rights of landlords to charge fees to tenants for underletting. Page 14

INTRODUCTION INTRODUCTION In July Lord Hodgson published the report of his review of the Charities Act 2006, which makes interesting reading for any charities that own or occupy property. Lord Hodgson argues that charities should be given more control and freedom over how they are run. Amongst the many We also produce updates in other departments. If you would like to subscribe to any of our other departmental updates, please email marketingdepartment@bwbllp.com suggestions made by Lord Hodgson is a recommendation that the safeguards that charities must comply with when disposing of property or taking out mortgages should be removed. BWB has produced a response to Lord Hodgson s report in which we argue that, although the restrictions currently imposed on charities when disposing of or mortgaging property are inappropriate, using this as a reason to remove all restrictions is not advisable. Our full response to the report can be found on our website at www.bwbllp.com/publications. Elsewhere, for owners and occupiers of residential buildings there have been several developments in recent months. Many owners will be pleased to hear that legislation has been passed to criminalise squatting in residential buildings, which will take effect on 1 September 2012 (see article on page 4). Already in effect are changes to the Stamp Duty Land Tax rates for residential properties, primarily relating to properties worth over 2 million (see article on page 11), and there have also been changes to the residential tenancy deposit scheme, which affect both landlords and tenants. PROPERTY LAW UPDATE AUTUMN 2012 3

SQUATTING IS CRIMINALISED Squatters who enter residential property are now committing a criminal offence. This may deter some squatters, but will not address the concerns of non-residential property owners. Lesley Robinson gives this new legislation a mixed review Lesley Robinson Partner Lesley heads our Property Dispute Resolution team and acts for commercial, charity and not-for-profit clients as well as individuals advising on all aspects of disputes connected to property. She is an acknowledged leader in this area of law and is recommended by both Legal 500 and Chambers UK, which says she is popular with sources, who find her very businesslike and easy to deal with. In times of economic crisis such as now, housing, especially affordable housing, becomes a valuable commodity in short supply. These factors tend to lead to an increase in the numbers of break-ins and trespassers obtaining entry onto empty residential properties, as they often have nowhere else to live. Amid much media hyperbole and following a consultation process, a new criminal offence of squatting in empty residential property has received Royal Assent as part of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 ( the Act ), which will become law on 1 September 2012. The new offence in section 144 of the Act will apply to all residential property irrespective of the nature of the legal owner, so companies as well as individuals will be able to rely on the offence if trespassers enter into any property that is used for residential purposes. A property is residential for the purposes of this offence, if it is a building that is designed or adapted as a place to live in before the trespasser took up occupation. A criminal offence will be committed where a person does all of the following: Is in occupation of a residential building as a trespasser, having entered without permission; and Knows or ought to know that he or she is a trespasser; and Is living or intends to live in the building for any period of time. The offence will be retrospective in effect and will apply to any trespasser or squatter in occupation of residential property even though the occupation or trespass may have started before section 144 comes into force. If convicted, the crime will be punishable by up to 51 weeks imprisonment or a fine not exceeding 5,000 or both. The offence will not apply to tenants or licencees or anyone who had permission when they first entered onto the residential property or to those who inadvertently enter residential property or land but had no intention to trespass. The new offence will apply to residential buildings only, not to any building or land used for non residential or commercial purposes. Owners of commercial buildings lobbied hard for the new offence to be extended to non-residential property to no avail. The Government decided to adopt a balanced compromise. It has said this new offence will not be extended to commercial property as it would be disproportionate to criminalise those who are using dilapidated buildings that are not in use! Instead the new offence will be of benefit to a narrow group of homeowners who do not occupy the property themselves. Questions have been raised whether there was any need for a new offence. It is already a criminal offence under the Criminal Law Act 1977 if a trespasser fails to leave residential property when asked to do so by a displaced residential 4 PROPERTY LAW UPDATE AUTUMN 2012

occupier or an intended occupier. The police also have powers of arrest especially if it can be shown that entry was forced, irrespective of whether the property is residential or not. However, as most owners of non-residential property will know, the police are increasingly reluctant to use these powers, preferring instead to leave owners to rely on their civil remedies. With cut backs and reduced resources this reluctance is only likely to increase. The new offence seeks to make it clear that unlawful occupation of residential property, even if empty, will not be tolerated. A criminal record for squatting, which is automatically committed at the moment of unlawful entry, may deter professional squatters as they will now get a criminal record as soon as they enter rather than just when they refuse to leave when asked. It may also deter those who are trespassing in order to make a claim for adverse possession as they would also get a criminal record. Another potential downside is that in limiting the offence to residential property only, a well-informed squatter may decide to target only commercial premises in the future. The new offence will not apply to empty commercial buildings even if there is planning consent for change of use and conversion to residential as section 144 will apply to buildings designed or adapted for residential use before the trespasser moved into occupation. The new offence will, therefore, do nothing to address the concerns of owners of non-residential property where the civil process for recovering possession is already a long, slow and expensive process. The police are increasingly unlikely to act and a fine or threat of imprisonment is unlikely to deter those who are in need of somewhere to live and who cannot afford to pay any fine in any case. Although 1 September 2012 is the date when section 144 will become law the Ministry of Justice was still working on an implementation plan and consulting with interest groups, which are expected to include Citizens Advice, Crisis and other homeless charities, local authorities and the Association of Police Officers. FIND OUT MORE You can find information on dealing with squatters on the Direct Gov website www.direct.gov.uk/en/homeandcommunity/ WhereYouLive/Derelictbuildingsand squatters/dg_10022452 although at time of going to press this had not been updated with information about the new legislation. We have a strong track record in dealing with squatting issues and gaining vacant possession of buildings for our clients. For advice on any issues to do with squatters, please contact your usual BWB advisor. The new offence will do nothing to address the concerns of owners of nonresidential property where the civil process for recovering possession is already a long, slow and expensive process PROPERTY LAW UPDATE AUTUMN 2012 5

CRC UPDATE The Carbon Reduction Commitment Energy Efficiency Scheme (CRC) has now been in operation for more than two years. Now that it has become a cost to all participants, landlords are increasingly seeking to recoup this cost from tenants. Oliver Stacey looks at the impact on landlords and tenants as the CRC bares its teeth Oliver Stacey Solicitor Oliver trained at BWB and joined the Property department after qualification in September 2010. He now advises a variety of commercial and charity clients on all aspects of commercial property transactions. FIND OUT MORE We have covered different aspects of the CRC and its implementation in previous issues of our Property update. You can download previous issues here: www.bwbllp.com/updates/default.aspx? Location=2&ID=9 The mandatory emissions trading scheme for large businesses and public sector organisations known as the Carbon Reduction Commitment Energy Efficiency Scheme (CRC) has now been in operation for more than two years. It is clear that the government is not afraid to start forcing compliance on the scheme s participants. The Environment Agency recently published details of the first civil penalties that have been imposed on participants in the CRC. Those organisations being penalised had failed to comply with the deadlines for submitting footprint and annual reports for the 2010/11 compliance year. The penalties range from 10,000 to 41,000 and are the aggregate of a fixed penalty and a daily rate for an ongoing breach. The Environment Agency has discretion, albeit limited, to waive or modify penalties if a participant can show that it took reasonable steps to comply with the CRC or rectify the failure as soon as it came to the participant s attention. Notwithstanding the penalties being meted out, the government is in the process of making significant changes to the CRC in order to simplify it. Currently, under the terms of the CRC, responsibility for the emissions relating to energy procured by a landlord for its tenants lies with the landlord. The government is of the view that landlords are better placed than tenants to implement the most costeffective energy efficiency measures. The only exception to this is where the landlord owns the land only and the structures built on the land belong to the tenant. In such cases the landlord supplies the energy but the tenant is the sole occupant of the building and is wholly responsible for its maintenance and so can control its energy performance. As a general rule, it is landlords that have an obligation to report on, and surrender allowances for, the associated carbon dioxide emissions of a property. Since the inception of the CRC the property industry has spent time considering whether existing leases provide landlords with the ability to pass on any costs they incur under the CRC to their tenants. Following an industry wide consultation, the consensus was that as the CRC was revenue neutral to the government (i.e. not a tax, rate or levy), the costs associated with the scheme would not be covered by the outgoings or service charge clauses in existing leases which usually refer to rates, taxes or charges payable in respect of a property. In actual fact, many landlords had already decided not to seek to recoup their CRC costs from their tenants as the associated costs in renegotiating the terms of existing leases would be likely to outweigh the cost of complying with the scheme. However, the current Government announced in its Spending Review that the revenue from the sale of allowances will now be used to support the public finances (including spending on the environment), rather than being recycled back to participants in the scheme. Thus the CRC has become a cost to all participants, since there is no possibility of receiving a revenue payment that might 6 PROPERTY LAW UPDATE AUTUMN 2012

have exceeded the costs incurred by the participants in the scheme. The consequence of this change in policy is that landlords are now more inclined to try to pass on the costs of allowances to tenants by seeking to classify the CRC as a tax. If it is possible to do so, then existing leases would already permit landlords to pass on landlords CRC costs without needing to amend the terms. In light of the penalties imposed by the Environment Agency on those failing to comply with the CRC, landlords will be increasingly keen to comply with the requirements of the scheme and therefore any tenant negotiating a new lease should consider addressing CRC implications with its landlord as part of the Heads of Terms negotiations, to avoid any unexpected costs in relation to the CRC being payable at a later date. CHARITIES AND AUTHORISED GUARANTEE AGREEMENTS Any charity that has found itself locked into a lease without a break clause will be aware of the challenges a charity faces when seeking to dispose of this lease. In such situations, the only options available are a surrender of the lease, subletting and assignment (transfer of the lease to another party). Often the last of these is the most commonly found in a lease and is only permitted when a landlord has given its consent which usually it may not unreasonably withhold. There has been recent consideration by practitioners regarding the requirement of landlords that the assigning charity enter into an authorised guarantee agreement, effectively guaranteeing the obligations of the party to whom it transfers the Lease (but no others). Such commentators have drawn comparisons between authorised guarantee agreements and parent company guarantees given to trading companies. Such a comparison suggests that trustees would be in breach of their duty if they allowed the charity s assets to be applied as a result of such a guarantee. Such an interpretation of the requirements of a guarantee would seem to entirely miss the point of authorised guarantee agreements and would potentially lock charities into leases for premises for which they have no purpose and for which they have a continuing liability for rent and other sums due. Jamie Huard discusses the challenges and risks charities may face with authorised guarantee agreements Jamie Huard Solicitor In addition to providing general property advice, Jamie provides pro bono advice to the South West London Law Centres and will making services to patients in extremis. Some commentators have looked to Charity Commission guidance in relation to giving guarantees and have referred to the possibility that such a guarantee will be unenforceable against the charity and may expose trustees to personal liability as a result of a charity agreeing to meet the obligations of a third party whom it would not be within its charity s objects to benefit. This interpretation also entirely misses the reasoning for authorised guarantee agreements and the advice that charities are required to seek on disposals as a result of sections 117 to 121 of the Charities Act 2011. PROPERTY LAW UPDATE AUTUMN 2012 7

FIND OUT MORE In our regular Property department professional updates, we aim to cover all issues that impact on landlords and tenants, lf you have missed a previous issue, you can download the previous updates on our website at: www.bwbllp.com/updates/default.aspx? Location=2&ID=9 Purpose of Authorised Guarantee Agreements Authorised guarantee agreements were introduced by statute to avoid the situation of continuing original tenant liability (where any original tenant, including a charity, was responsible for the entirety of a Lease term no matter the number of times a lease was transferred). To deal with this, the practice of making a chain of indemnity covenants between transferring parties and the beneficiary of a lease developed, but this often resulted in a situation if the chain broke as a result of a company becoming insolvent or being wound up that a party the original tenant would be chased by a landlord and be unable to recover the liability. disposals of charity land as a result of statutory safeguards on disposals of property. Under sections 117 to 121 of the Charities Act 2011, on an assignment a charity must obtain the advice of a qualified surveyor in relation to the terms of that assignment. This advice would consider whether the disposal is in the best interests of the charity and whether it is on the best terms reasonably possible for the charity. Any such advice would include whether it is reasonable for the charity to provide an authorised guarantee agreement, which is a standard requirement of landlords in the commercial property market. The compromise came in the shape of authorised guarantee agreements, where assignors only guarantee one assignment. This has become standard practice now in the commercial property market on the assignment of leases. Trustees are required to consider this advice and on the basis of the advice pass a resolution confirming they are happy to proceed with the disposal on the basis of the terms and the advice provided by the surveyor. Any suggestion that charities could not provide such a guarantee would restrict the market for charities as landlords would either not be willing to grant leases to charities or only grant them with large rent deposits or for very short periods. Advice required for disposals under Sections 117 to 121 of the Charities Act 2011 The interpretation that charities cannot enter into authorised guarantee agreements ignores the fact that charities are required to take advice on any Conclusion In summary, it appears that some commentators on guarantees are taking a very specific and limited view in relation to the commercial property market for charities. If the interpretation presented in relation to guarantees is correct, charities would find a very restricted market for leases of property and landlords would be very unlikely to agree to any assignment where they are not able to provide an authorised guarantee agreement. 8 PROPERTY LAW UPDATE AUTUMN 2012

A TENANT S RIGHT TO BREAK Case law on the exercise of tenants break rights has not always been consistent, but makes it very clear that tenants must exercise great care in complying with all the conditions of their break clauses. In the past couple of years, there has been a number of cases concerning the exercise of tenants break rights. While the resulting case law has not always produced a consistent narrative, it has underlined, in no uncertain terms, that tenants must pay extremely close attention to the specific wording of their break clause, as they must comply strictly with all its requirements in order to exercise their rights. The majority of recent Court decisions have been in the landlords favour, which is not entirely surprising given that the landlords will have drafted the break clause in the first place. That said, tenants need to be aware of the full extent of their obligations when exercising the break right, some of which are not entirely obvious at first glance. Avocet Industrial Estates LLP v Merol In the Avocet case, the preconditions to the valid exercise of the break right were: that 3 months prior written notice was given; and the tenant had paid the annual rent and all other payments due under the lease. Having given at least three months notice the tenant tendered the rent by cheque the day before the break date. As the tenant could demonstrate a history of paying the rent by cheque the Court accepted this as valid payment, despite the fact the cheque would not have cleared by the break date. been paid. The landlord contended that due to historical late payments of rent some contractual interest had not been paid. The Court accepted this argument, despite the fact the landlord did not demand the interest be paid, as it had accrued and continued to do so on daily basis. As such the tenant had failed to properly exercise the break right and the lease was continuing. Following on the issue of the payment of rent, it is common for a break clause to include as one of the preconditions to the break that the tenant must pay the rent up to the break date. Often the break date is not on the last day of a rental period and as such tenants want to apportion the rent and only pay for the period up to the break date. Landlords on the other hand want the full rent paid up to the next rent payment date. PCE Investors Ltd v Cancer Research UK This case confirmed that, if the lease states the tenant must pay the rent due up to the break date, this means that the tenant must pay the rent for the whole period in which the break date falls; the tenant will not have the right to apportion the rent to the break date itself. For example, if the rent is payable quarterly in advance and the break date is on the quarter day, the whole quarter s rent must be paid, regardless of the fact the tenant will only be in occupation for one day of that quarter. Hotgroup PLC v Royal Bank of Scotland William Scott highlights recent cases requiring a tenant to carefully consider the implications to their legal right to break William Scott Associate William acts for commercial, charity and private clients, advising on all aspects of disputes connected to property. He is recommended by Legal 500, which says he takes a real interest in the individual needs of clients. Where the tenant fell down was that not all the sums due under the lease had When it comes to the exercise of a break right tenants can be tripped up on what PROPERTY LAW UPDATE AUTUMN 2012 9

If the lease states the tenant must pay the rent due up to the break date, this means that the tenant must pay the rent for the whole period in which the break date falls appear to be obvious points. In the Hotgroup case, the tenant was required to serve the break notice on both the landlord and the landlord s agent. The tenant failed to serve the notice on the landlord s agent and, despite the landlord receiving the notice, the Court held this did not amount to valid service. MW Trustees Ltd v Telular Corporation By contrast, in this case, the tenant was required to serve the notice either by special delivery or by hand on the landlord. Prior to the exercise of the break the landlord s agent notified the tenant of the sale of the reversion. The tenant served the break notice on the old landlord who directed the tenant to the new landlord s agent. When the new landlord s agents responded to the tenant s enquiry as to whom they should serve the break notice on, the agent simply acknowledged receipt of the notice, rather than answering the tenant s specific enquiry. The new landlord subsequently tried to argue that service was ineffective as the tenant had never actually served notice on the landlord. Despite this being a matter of fact the landlord was stopped from relying on this argument as a result of its agent acknowledging receipt of the notice. In another case, the tenant thought they were doing the right thing by remaining in occupation past the actual break date so that they could finish off the repair works required pursuant to the dilapidations schedule. As vacant possession was a precondition to the valid exercise of the break, the Court held they had failed to comply and the lease continued. Sometimes, however, the landlord s careful drafting works against them. In one recent case it was a pre-condition to the exercise of the break that the tenant paid the amounts the landlord may from time to time expend in insuring the premises. By the break date the tenant had not paid the insurance charge and the landlord contended the lease was still continuing. As it happened the landlord had not paid the insurance premium either. The Court found for the tenant as it held that on the wording of the lease the landlord could not legitimately demand money he had not incurred himself. In light of these recent cases it is evident a tenant must carefully consider the implications of each pre-condition to the break and think around the issues to make sure that all possible avenues of dispute are covered. Failure to do so could result in the tenant being bound to the terms of the lease beyond the break date. FIND OUT MORE William Scott s article on break notices in our Spring update, focuses in particular on the requirement for vacant possession. You can download a copy of the article here www.bwbllp.com/articles/break- Notices-by-William-Scott-Property-Law- Update-Spring-2012.html?a=a or download a full copy of any of our previous updates from our Property pages at www.bwbllp.com/departments/ Property.html 10 PROPERTY LAW UPDATE AUTUMN 2012

STAMP DUTY LAND TAX RATES New Stamp Duty Land Tax (SDLT) rates now in force significantly raise the costs of purchasing property over 2 million. The 7% rate From 22 March 2012 SDLT will be charged at 7% for properties worth over 2 million purchased by individuals. Prior to this change the maximum rate was 5% for properties worth over 1 million. This bloated SDLT rate has been introduced for the sole purpose of plugging what the Chancellor considers to be a major source of abuse. This abuse was the practice of using overseas companies to buy residential property to avoid SDLT. Thomas Adams and Siobhan McGoay clarify the new SDLT rates in force The linked transaction rules and the mixed use regime apply to the new rate. Two or more property transactions between the same parties are considered to be linked for the purpose of calculating SDLT. The SDLT is payable on the total consideration of all linked transactions and where this total consideration exceeds 2 million for linked residential transactions the 7% rate will be applied. In respect of mixed use, if you can show that the transaction does not consist entirely of residential property, SDLT will be charged at a lower rate of 4%. This will be regardless of whether the chargeable consideration exceeds the 2 million threshold. The 15% rate From 21 March 2012 SDLT will be charged at 15% for properties worth over 2 million purchased by corporate bodies. The corporate bodies that are caught by the increased rate are companies, partnerships and collective investments schemes. The budget introduced Schedule 4A to the Finance Act 2003 to deal with the application of the 15% rate. The new rules under Schedule 4A begin by defining higher threshold interest as an interest in a single dwelling worth more than 2 million. Where the subject matter of a transaction consists entirely of a higher threshold interest the transaction is a high-value residential transaction and is chargeable at 15%. The Schedule specifically disapplies the linked transaction rule by explicitly stating that these transactions will not be linked to any other transaction for the purpose of obtaining the correct rate of SDLT. Mixed use and the 15% rule Where the subject matter of a transaction includes higher threshold interests and other chargeable interests the new rules apply an unfamiliar procedure. Any higher threshold interests are ring fenced from other chargeable interests in a single transaction and charged at 15% SDLT. The remaining chargeable interests will have their SDLT charged separately from the high value single dwelling. The rules treat the two as separate chargeable transactions. A mixed use transaction containing a higher threshold interest will have that Siobhan McGoay Solicitor Siobhan acts for commercial charity and private clients in all aspect of transactions involving commercial property. Thomas Adams Paralegal Thomas is a paralegal in the Property department, where he assists with a range of casework. PROPERTY LAW UPDATE AUTUMN 2012 11

residential property ring fenced and taxed at 15%. If that same residential property was worth just under 2 million then the whole transaction would be considered mixed use and taxed at 4%. Exemptions from the 15% rate There is an exemption for property developers, acquiring property for the sole purpose of development and resale, who have carried on a development business for at least two years prior to the acquisition of a high-value property. The new rules also contain an exemption for companies acting in their capacity as trustees of settlements. Existing contracts If contracts are exchanged before the operative dates of the 7% and 15% regimes the old 5% rate will apply. However the contract must have been unconditional and cannot be altered on or after the operative date. Future changes Annual SDLT Charges The Chancellor has announced plans to introduce an annual tax charge on highvalue residential properties owned by certain non-natural persons that are worth over 2 million. Plans are to introduce these annual charges in 2013 following consultations. The 7% rate will be payable where either of these exclusions apply. Charity Property Conference 15th October 2012 Nick Ivey, William Scott and Jamie Huard will be speaking at this year s Charity Property Conference. The conference aims to update charity leaders on all aspects of property relating to charities. Sessions include: State of the Nation: An insider s overview of the current state of the UK property sector Strategy Planning and Construction issues with Farrar & Co. Moving a charity HQ? Nick Ivey and Jamie Huard of Bates Wells and Braithwaite review the key legal issues and provide an essential checklist for any charity considering a move. Roundtable sessions and a drinks reception to conclude. Venue: Grand Connaught Rooms, 61-65 Great Queen Street, London WC2B 5DA For more information, please visit the Civil Society website. www.civilsociety.co.uk/events/conferences/ content/11558/charity_property _conference_2012 To book your place, please email seminars@bwbllp.com. 12 PROPERTY LAW UPDATE AUTUMN 2012

VAT UPDATE Government plans to cancel the VAT zero rate will have significant long-term consequences, if implemented. The Government announced in the 21 March budget that they will be cancelling the VAT zero rate available on approved alteration works on certain listed buildings with effect from 1 October 2012. unaffordable or will place a major burden on fundraisers and those paying the bills for the works. So, they argue, the government s intervention is likely to do more harm than good. Bill Lewis hopes that the Government will reconsider their plans. Contracts entered into before budget day will be protected and still eligible for the VAT zero rate, but only for supplies made up until 20 March 2013. The zero rate applies to works that require listed buildings consent on scheduled monuments, dwellings and residential homes, and properties used by charities otherwise than in the course of a business. Under European VAT rules, once a zero rate is abolished it is gone for good; the Government cannot reimplement it. The Government has been guilty of several tax blunders in recent months and has had to backtrack from its original intentions. I do wonder about the quality of the advice they are receiving concerning tax measures and their judgement in listening to it. Hopefully there will be another back track on this measure before 1 October. Bill Lewis Consultant Bill is a tax consultant who specialises in all aspects of taxation affecting charities, including gift aid, PAYE and VAT. The government have advised that this VAT zero rate is an anomaly, and is being cancelled because they believe that many listed buildings that only need repair works are having more major works carried out on them than are necessary, purely to benefit from the VAT zero rate. As a result, they argue that the VAT zero rate is harming listed buildings rather than doing them good! Under European VAT rules, once a zero rate is abolished it is gone for good; the Government cannot reimplement it However various bodies such as English Heritage disagree profoundly with the government s conclusions. They have presented substantial evidence to show that, in the main, those seeking consent for approved alterations do not do so simply to benefit from VAT relief. They have also given the government evidence to show that given the increase in cost due to the VAT addition a large number of necessary alterations will now either be FIND OUT MORE Bill contributes a regular update on tax issues affecting charities to our Charity & Social Enterprise updates www.bwbllp.com/updates/default.aspx? Location=2&ID=1 PROPERTY LAW UPDATE AUTUMN 2012 13

ROUNDUP Roundup: Recent Case Law Joanna Stokes Solicitor Joanna assists with a wide range of work for commercial and charity clients. Occupy London protesters fail to prevent their removal from St. Pauls City of London Corporation v Samede [2012] The Occupy London protest, which involved hundreds of people camping outside St. Paul s Cathedral, culminated in a court battle over a possession order. The City of London went to the High Court to obtain an order directing the protesters to vacate the camp that had sprung up on the City of London s land. The protesters had argued that their rights to freedom of expression and freedom of assembly meant that they should be allowed to remain on the land. The High Court, however, found that the highway had been substantially obstructed and that the protesters presence interfered with (amongst other things) the right of the public to use the highway and to worship at St. Paul s. The case, whilst unusual by virtue of the location and visibility of the protest, illustrates the balance that the courts must strike between the right of people to protest publically, and the rights of the remainder of the public to use highways without interference. Careful language is needed when drafting break clauses Gemini Press Ltd v Cheryl Lindsay Parsons [2012] A recent case has highlighted the fact that careful attention should be paid to the language used when drafting break clauses, as it can be crucial in determining whether the break clause be exercised only by the tenant to whom it was initially granted, or by their successors in title as well. The case concerned a break clause which was granted in a deed of variation to a tenant who was being assigned a lease. The deed defined Assignee as including the successors in title of the assignee. However, the specific clause which gave the assignee the right to break the lease referred to the assignee by name (Ashdown Company UK Limited), and did not use the definition of Assignee. When a later successor in title attempted to exercise the break clause the matter ended up in court, and the judge held that the language in the break clause was deliberately different from that in the rest of the deed it was the only place in which the assignee was specifically named and therefore that the right was personal to the assignee and had not been assigned to its successors in title. The successor in title was therefore not able to break the lease. The case provides an illustration of the fact that careful attention should be paid to the language and definitions used in break clauses. Planning permission to redevelop Sir Arthur Conan Doyle s previous home is quashed R (Gibson) v Waverley Borough Council [2012] The High Court has quashed a council s decision to grant planning permission and listed building consent for the redevelopment of a property at which Sir Arthur Conan Doyle lived for several years. The property was grade II listed because of its special historical interest, due to the Conan Doyle connection. As such, the council were required by statute to notify English Heritage of any application for planning permission. The council received an application by the owners of the property for planning permission and listed building consent to divide and extend the property into multiple dwellings. A letter was sent to English Heritage notifying them of the application, but the council heard nothing back and never checked that the letter had been received. Despite the fact that an application for planning permission which would have used the property as a single dwelling was subsequently received from a potential buyer, the council approved the application by the owners. A judicial review claim was made, and the High Court found that the council had not properly considered the optimum viable use of the property. For heritage properties, the optimum viable use is that which has the least harmful impact on the significance of the heritage asset, and in the case at hand the court held that the optimum viable use of the property was as a single dwelling. By not taking this into account, and by failing to establish whether English Heritage had been notified, the council had not acted properly and the planning permission was quashed. The case provides a useful demonstration of the way in which planning permission applications relating to heritage properties should be treated, and of the importance of ensuring that those who must, by statute, be notified of an application are notified correctly. Rights of way may not extend to vehicles of all sizes Oliver v Symons [2012] In a recent case concerning a right of way over farmland, it was held that a right of way extended only as far as the width of the track, and did not provide a right to transport vehicles whose upper parts extended further than the width of the track. The easement in question gave the farmer the right to pass along a track with or 14 PROPERTY LAW UPDATE AUTUMN 2012

ROUNDUP without motor vehicles and other agricultural machinery. The owner of the land subsequently erected gates which prevented certain types of farm vehicles from using the track, as they removed the necessary swing space needed for bulky machinery to get past. The farmer took the owner of the land to court, but the High Court decided that the right of way was limited to the width of the track, and did not allow the farmer to use machinery that swung out to a further extent than the track. The decision was reached on the basis of the wording in the grant and the circumstances surrounding the grant. It was held that for the right to be construed as extending further than the width of the track, the evidence would have to show that this was necessary to achieve the parties intentions. As this was not the case at the time of the grant of the right, the agricultural machinery being used would have been able to fit down the track with the gate the easement could not be construed in such a way. This demonstrates that while vehicles and machinery have grown larger over the years, rights of way will not necessarily be construed so as to cover their usage. paid constituted an unreasonable withholding of consent, contrary to the Landlord and Tenant Act 1927. The Leasehold Valuations Tribunal agreed that the tenants should not have to pay the charges in order to gain consent. However, on appeal the Upper Tribunal (Lands Chamber) held that the 1927 Act did not preclude a landlord from charging the tenant a fee for his consent, so long as the fee is reasonable. This was the case even though the majority of the leases in question did not contain express provisions for the landlord to charge a fee for consent to an underletting. This case acts as a reminder that a landlord who withholds consent to an underletting on the basis that its costs have not been paid may well be acting reasonably, and so will not be found to have unreasonably withheld consent to the underletting. Landlords can charge a reasonable amount for the costs of consenting to underletting Holding and Management (Solitaire) Ltd v Norton [2011] and Bradmoss Ltd, Re 10 Meadow Court [2012] In two recent cases the courts have confirmed that a landlord is entitled to charge tenants a reasonable fee to cover its costs in granting consent to an underletting. In both cases the lessees had taken their landlords to the Leasehold Valuations Tribunal, arguing that the landlords refusal to grant consent until the charges had been PROPERTY LAW UPDATE AUTUMN 2012 15

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