Real Estate Focus – July 2024

King’s Speech 2024 – real estate highlights

The King’s Speech was a bumper one and included 40 Bills. Those with a real estate focus were widely anticipated and generally came as no surprise.

The Renters’ Rights Bill is likely to be similar in many respects to the Renters Reform Bill, which did not survive the prorogation of parliament in May. The Government briefing note on the King’s Speech indicates that the provisions of Bill will include:

• The abolition of section 21 ‘no fault’ evictions’;
• New clear and expanded possession grounds so that landlords can reclaim their properties when they need to;
• Strengthened tenants’ rights and protections, for example empowering tenants to challenge unreasonable rent increases and ending the practice of rental bidding wars by landlords and letting agents;
• A right for tenants to request permission to keep a pet, which landlords cannot unreasonably refuse;
• Applying a Decent Homes Standard to the private rented sector and setting clear legal expectations about the timeframes within which landlords must remedy serious hazards;
• The creation of a new digital private rented sector database to collate key information for landlords, tenants, and councils. Councils will be expected to use the database to target enforcement where it is needed most;
• A new ombudsman service for the private rented sector to support quicker and cheaper resolution when there are landlord and tenant disputes, reducing the need to go to court;
• Making it illegal for landlords to discriminate against prospective tenants in receipt of benefits or with children; and
• Strengthened local council enforcement powers.

The Leasehold and Commonhold Reform Bill will build on The Leasehold and Freehold Reform Act 2024 which did survive prorogation and was enacted in May. The Bill will be used to “bring the feudal system of leasehold to an end and reinvigorate commonhold” by:

• Modernising the existing legal framework for commonhold;
• Restricting the sale of new leasehold flats;
• Regulating ground rents for existing leaseholders;
• Bringing the injustice of ‘fleecehold’ private estates and unfair costs to an end;
• Ending the injustice of forfeiture so that leaseholders are protected against the loss of their home for potentially small unpaid debts; and
• Enacting remaining Law Commission recommendations to bolster leaseholders’ rights to extend their lease, buy their freehold, and take over building management functions.

The Planning and Infrastructure Bill was widely heralded and is perhaps the flagship Bill. The Government has stated that it will:

• Make improvements to the planning system at a local level, including modernising planning committees;
• Use development to fund nature recovery and deliver positive environmental outcomes;
• Accelerate housebuilding and infrastructure delivery by:
  • Streamlining the delivery process for critical infrastructure, including accelerating upgrades to the national grid and boosting renewable energy;
  • Simplifying the consenting process for major infrastructure projects and enabling relevant, new and improved National Policy Statements to come forward, with an opportunity to update them every five years; and
  • Further reforming compulsory purchase compensation rules to ensure that compensation paid to landowners is “fair but not excessive” where important social and physical infrastructure and affordable housing are being delivered.

There is as yet no indication as to timings although we suspect that we will not have to wait long for the Renters’ Rights Bill. Various aspects of the other two Bills require prior consultation, so are likely to take longer.

Discharges of sewage into a canal can be a nuisance and trespass

The key issue in Manchester Ship Canal Company Ltd v United Utilities Ltd (No.2) [2024] UKSC was whether the Manchester Ship Canal Company (the Canal Company) could bring a private law claim in nuisance and trespass against United Utilities Ltd (United Utilities) in respect of unauthorised sewage discharges by United Utilities into the canal whenever the network was overloaded. The Supreme Court held that it can.

The Canal Company threatened to bring a private law claim in nuisance and trespass against United Utilities, the statutory undertaker for north-west England, for discharges of sewage into the canal. United Utilities sought a declaration from the Court that no such private law cause of action was available to the Canal Company (absent an allegation of negligence or deliberate wrongdoing) on the basis that private law claims are impliedly ousted by the statutory enforcement mechanism contained in the Water Industry Act 1991 (WIA 1991) for breaches of duty by sewerage undertakers.

The High Court found that the Canal Company had no private law claim in trespass or nuisance against United Utilities. Applying Marcic v Thames Water (Marcic), the Court held that the discharges in question had occurred as a result of flooding caused by sudden heavy rainfall, which had caused the capacity of the sewage system to be exceeded. As United Utilities were not responsible for the discharges, any breach of duty was a breach of the duty under the WIA 1991 to make such provision as was necessary from time to time for effectually dealing with the contents of the sewers in the area. Consequently, enforcement powers under the WIA 1991 operated to exclude private tortious remedies. The Court of Appeal upheld the judge’s decision and found that it would be inconsistent with the WIA 1991 statutory scheme to hold the undertaker liable for trespass or nuisance for unauthorised discharges into the canal. The Canal Company appealed to the Supreme Court.

The Supreme Court unanimously allowed the Canal Company’s appeal and held that where sewage was discharged into watercourses, a common law claim for nuisance could be maintained, unless the polluter was acting within their statutory powers or had been granted some statutory immunity from suit. However, the WIA 1991 did not authorise sewerage undertakers to trespass or cause a nuisance by discharging untreated sewage into watercourses. Further, it neither expressly or impliedly ousted the common law remedies available to watercourse owners in respect of such trespass and nuisance.

The Court held that the WIA 1991 preserved watercourse owners' common law rights and remedies and prohibited sewerage undertakers from creating a nuisance while carrying out their statutory functions. It also found that common law remedies for nuisance were available in addition to any remedy provided for under the WIA 1991, as Parliament could not have intended to deprive watercourse owners of their common law rights of action.

The barrister representing the Canal Company is quoted as saying that the ruling “will apply to every sewerage undertaker’s discharge of sewage into every river, canal, lake and pond in England and Wales….”.

For further information please contact Environment Partner Lucy Bruce Jones.

Management of “higher-risk buildings” Part 1: What is a building assessment certificate and how is it obtained?

The Building Safety Act 2022 (BSA) ushers in the biggest swathe of regulatory changes to the UK built environment in almost 40 years.

A key element of the BSA regime is that it imposes extensive new legal responsibilities in relation to “higher-risk” buildings (HRBs). With some exemptions, a HRB is defined as a structure that has at least seven floors or is at least 18 metres in height and has at least two residential units. A building will qualify as a HRB if it complies with this definition even if it is not exclusively residential.

The new responsibilities apply not only during the initial phases of commissioning building work and participating in the design and construction process but also subsequently, when managing structural and fire risk in occupied HRBs. The “duty holders” under the new regime for the management of occupied HRBs are the Principal Accountable Person (PAP) and the Accountable Person(s) (AP(s)).

Existing HRBs that are occupied, or could be occupied, were required to be registered in a register maintained by the Building Safety Regulator (BSR) by 1 October 2023. It is now a criminal offence for a HRB to be occupied if it has not been registered. The next step is for the BSR to assess the fire and structural safety of each HRB that has been registered and identify whether it is being managed by the PAP and AP(s) in accordance with the duties and safety standards set out in Part 4 of the BSA.

The BSR will do this by directing the PAP to apply for a building assessment certificate. The PAP must only apply when directed to do so by the BSR. An application cannot be made pre-emptively. The BSR previously stated that it would start asking PAPs to make applications from April 2024 onwards, and it is anticipated that it will begin by focusing on HRBs with higher-risk profiles.

It has been estimated that it could take up to five years for the BSR to invite and review applications for all registered HRBs. However, once the BSR asks a PAP to apply for a building assessment certificate it must make the application within 28 days. A failure to do so without a reasonable excuse will be a criminal offence.

Fundamentally, preparing the information and the complex set of documents, including a Safety Case Report, that must be provided as part of the application for a building assessment certificate are all steps that PAPs and APs should already be taking. This is not only so that the PAP can comply with the application deadline, but also because obligations to comply with various duties in Part 4 of the BSA - such as preparing a Safety Case Report - are already in force for all occupied HRBs.

For further information please contact Caroline May, EMEA Head of Environment, Health and Safety  or Associate Andrew Swarbrick.

Management of “higher-risk buildings” Part 2: Who is the Accountable Person/ Principal Accountable Person?

The Building Safety Act 2022 (BSA) introduces a new regime for the management of occupied HRBs, with the aim of promoting accountability and transparency.

The “duty holders” under that regime, known as the Accountable Person (AP) and Principal Accountable Person (PAP), must take specific actions to ensure that any risks arising as a result of structural failure, or the spread of fire are identified and addressed.

The AP and PAP duty holder roles are the cornerstone of the BSA regime for occupied HRBs. It is therefore essential that organisations involved in the ownership and/or management of HRBs identify whether they are an AP and/or the PAP and, if they are, ensure they have the knowledge, competence, and experience required to comply with the onerous duties imposed on them.

An AP is any organisation or an individual that owns an HRB or has a legal obligation to repair any of its common parts. The common parts include the structure and exterior of the building and those parts that are used by residents, such as corridors, lobbies and staircases.

An AP can be a freehold owner, landlord, management company, commonhold association, or another type of organisation or association that satisfies the statutory definitions set out in section 72 of the BSA. A building can have multiple APs.

Each HRB must have one clearly identifiable PAP, which is the entity that has overall responsibility for its fire and structural safety. Where there is only one AP then it will automatically become the PAP. However if there is more than one, the PAP will be the entity that has the legal obligation to repair the structure and exterior of the building.

The BSA does not expressly require an AP to be a UK resident. As the definition of an AP is linked to ownership or repairing obligations, the residence of an individual/organisation is not a relevant consideration when determining whether such an individual/organisation is deemed to be an AP. Therefore, international companies incorporated or residing outside the UK could be found to be an AP for a HRB, if they own any of the common parts or have a repairing obligation for the same.

An AP and/or PAP cannot delegate responsibility to comply with its legal obligations. However, if it does not have the relevant competence, it can employ an organisation or individual with that relevant competence, for example a managing agent, to carry out the duties on its behalf. If it does so, it is important to remember that:

• The accountability for ensuring those duties are carried out and the liability for a building’s safety remains with the AP/PAP; and
• The AP/PAP should continually monitor and assess the third party’s competence and capacity.

Identifying APs and PAPs in complex building ownership and management structures can be a difficult exercise, especially where there are multiple leases that impose repairing obligations on different parties. Whilst disputes can be referred to the First-Tier Tribunal, parties should work together to agree upon the identity of the PAP and ensure they collaborate to enable both the PAP and all other APs to comply with their legal duties.

For further information please contact Caroline May, EMEA Head of Environment, health and safety   or Associate Andrew Swarbrick.