Real Estate Focus – August 2019

Introduction

In this edition we take a look at the possible demise of ASTs; two disputes under the Electronic Communications Code; and new global guidance on the measurement of land.

Assured shorthold tenancies: RIP?

In April 2019 the government announced that it wants to “introduce a generational change to the law that governs private renting”. If proposals published for consultation in July 2019 come to fruition, it will certainly do so.

Most private sector residential tenancies in England are assured shorthold tenancies (ASTs). Currently, AST landlords can evict tenants giving two months’ notice once their fixed term contract has come to an end – this is under the fast-track “no-fault” procedure in section 21 of the Housing Act 1988. Anecdotal evidence suggests that landlords use the section 21 procedure as a default as it is faster and less cumbersome then regaining possession through the courts under the alternative section 8 procedure for terminating a tenancy on specific grounds, such as non-payment of rent.

The July consultation seeks views on getting rid of the section 21 “no-fault” option by abolishing the AST regime altogether. This would leave a choice between an assured periodic and an assured fixed term tenancy, with the landlord only able to regain possession under the section 8 procedure if one of the specified grounds applies.

Views are also sought on

• Whether such reforms should apply to both the private and social rented sectors.
• How existing grounds for possession can be used more effectively and what new grounds should be added – for example to cater for the landlord wanting to sell the property or needing it for themselves or a family member as their home.
• How courts could deal with applications for possession orders under section 8 more efficiently.
• Whether special provision should be made for some types of letting, such as student accommodation and holiday lets.

One of the main reasons why ASTs were originally introduced was to offer greater flexibility to landlords who wanted to let out properties for shorter periods. If these proposals are enacted the impact on the private rented sector - investors and social housing providers as well as private landlords and tenants – would be considerable, given its reliance on the AST model.

In view of the significance of the proposals, a relatively long consultation period has been given – responses are required by October 12, 2019.

“Senseless disputes” under the Electronic Communications Code

The current Electronic Communications Code, in force since December 2017, is “intended to facilitate the provision of telecommunications services without delay and limited cost”.

The disputes and apparent antagonism that have arisen in relation to the Code over the past months (see the December 2018 and March 2019 editions of Real Estate Focus) suggest that it has not yet achieved its aim. However, if Cornerstone Telecommunications Infrastructure Ltd v Central Saint Giles General Partner Ltd and another [2019] UKUT183 (LC) is anything to go by, the Upper Tribunal is losing patience with “senseless disputes”.

The claimant in this case is an operator for the purpose of the Code and applied to the two respondents as building owners for the right to enter the roof of their building to determine whether it was suitable for the installation of electronic communications apparatus. Negotiations were difficult and protracted with, on the one hand, the operator claiming Code rights in much broader terms than required and, on the other, the building owners making demands such as an indemnity of £10 million. An agreement on access was eventually reached and the Tribunal was asked to decide who should pay the costs incurred.

Given the subject of the dispute, the costs were staggering, amounting to over £100,000. The Tribunal was scathing:

“If those preparatory stages are allowed to become the occasion for preliminary trials of strength involving legal fire power on the scale deployed in this reference, there is a serious risk of the objectives of the Code being frustrated.”

The Tribunal decided that while the building owners were the successful parties and in principle entitled to their costs, the appropriate order was that the operator should pay only £5000 towards the costs of each of them, considering that to be a proportionate sum for the resolution of the issues in question.

The Tribunal concluded with a warning:

“The Tribunal wishes it to be known by other parties who refuse access to their land or buildings for surveys that, whatever the outcome, they cannot expect to recover costs on the scale incurred by the parties in these proceedings. Equally, the Tribunal wishes to make it clear to operators…. that they cannot simply demand unquestioning cooperation from property owners.”

Electronic Communications Code rights v. redevelopment

Disputes under the Electronic Communications Code continue. EE Ltd and another v The Trustees of the Meyrick 1968 Combined Trust [2019] UKUT 164 (LC) considers for the first time the tension between a landowner wanting to redevelop and an operator’s claim for Code rights.

Paragraph 21(5) of the Code enables the occupiers of land to resist the imposition of Code rights where they intend to redevelop land and cannot reasonably do so if Code rights are granted. The claimants in this case were mobile telephone network operators who occupied four mast sites on the respondents’ land under leases that had expired. Negotiations for new leases broke down so the claimants served a notice under the Code setting out the Code rights they wanted and, in the absence of agreement, commenced proceedings in the Tribunal. The respondents resisted the application on the basis that they planned to redevelop the site and invoked paragraph 21(5) of the Code.

Paragraph 21(5) of the Code is modelled on section 30(1)(f) of the Landlord and Tenant Act 1954, which gives a landlord a right to recover possession of business premises at the end of a tenancy if they intend to redevelop. The Tribunal held that while case law associated with section 30(1)(f) is not binding authority in the context of paragraph 21(5) the Code, the principles applicable to the 1954 Act should be adopted where they are relevant.

One such principle is that, to establish an intention to redevelop, a landowner must show (i) that it has the settled intention to carry out the redevelopment and (ii) that there is a reasonable prospect of being able to bring about that intention. The Tribunal also found that the test established by the Supreme Court in S Franses Limited v Cavendish Hotel (London) Limited [2018] UKSC 62 (see the December 2018 edition of Real Estate Focus) was relevant. In that case, the landlord admitted that its only purpose in carrying out the proposed redevelopment was to recover possession of business premises from the tenant. The Supreme Court held that a conditional intention to redevelop is insufficient: “the acid test is whether the landlord would intend to do the same works if the tenant left voluntarily”.

The Tribunal considered that there were two questions at the heart of this case: did the respondents have a settled intention to carry out the redevelopment and, if so, was their motive to prevent the claimants obtaining Code rights? If it was, that motive prevented the respondents from claiming the protection of paragraph 21(5).

On the evidence, the Tribunal concluded that the redevelopment plans were conceived in order to defeat the claim for Code rights. The plans comprised the removal of the operators’ existing masts and the respondents putting up their own in their place, which the operators would be invited to use. This would stop the operators acquiring Code rights as they cannot be obtained over electronic communications equipment, such as a mast. A landowner who provides their own mast cannot be subjected to Code rights, can demand whatever consideration they choose and impose whatever terms they wish.

This is another decision promoting the Code’s overall aim of improving electronic communications. It also gives welcome clarity to this previously unexplored issue.

A measured approach

The Royal Institution of Chartered Surveyors (RICS) has published for consultation the first edition of a new global guidance note on the measurement of land.

The guidance note is intended to provide an objective approach to the measurement of land for development and planning purposes. The focus is on the surface area of land on a horizontal plane and will need to be read alongside RICS Property Measurement (2^nd edition), which focuses on the measurement of floorspace within buildings.

The draft guidance provides clear definitions for those measurements which are widely used in the property and planning sectors, advocating consistency worldwide. The following core definitions are proposed

• Land Area: the legal title area of land.
• Site Area: the area of land used for planning application purposes.
• Net Development Area: the area from which financial value is directly derived, by virtue of either being income-producing or for sale.
• Plot Ratio: the ratio of gross external area (GEA) of a building at each floor area to the site area.
• Site Coverage: the ratio of a building footprint's GEA to the site area at ground-floor level.

The RICS states that the guidance will be pioneering and have far-reaching implications for development surveyors, planners, architects and government administrators around the world as the new standards become global best practice.

The consultation document is available on the RICS website and comments must be submitted by September 17, 2019, with formal adoption of the guidance expected by the end of the year.