Real Estate Focus: April 2020

Introduction

In this edition we take a look at the Coronavirus Act 2020 in the context of business leases and planning decisions; a warning to developers on rights of light; and new regulations in the residential private rented sector.

Business leases: Suspension of the right to forfeit for non-payment of rent

The Coronavirus Act 2020 is emergency legislation giving the government powers to contain the spread of COVID-19, including powers to issue directions in relation to events, gatherings and premises. It received Royal Assent on March 25, 2020 and the majority of its provisions came into force immediately.

Clause 82 provides that a landlord’s right of forfeiture or re-entry for non-payment of rent in a business tenancy cannot be enforced during the “relevant period”. Use of the word “rent” is slightly misleading as it includes any sum that the tenant is liable to pay under a business tenancy and so would include, for example, service charges.

The “relevant period” is defined as a period beginning on March 26, 2020 and ending on June 30, 2020, or such other date as may be specified in regulations. The right to extend that end date may be exercised on more than one occasion.

The suspension is retrospective in that it extends to situations where court proceedings had already started before the relevant period. For example, any order made by the High Court during the relevant period must ensure that the tenant does not have to give up possession of the property before the end of that period.

The timing is particularly significant given that March 25 was a quarter day on which a quarter’s rent is traditionally payable in advance. There are reports in the press of many tenants not paying their rent. This would clearly have a consequential impact on landlords, not least it may affect their ability to meet their obligations to their lenders.

Notwithstanding the inability of the landlord to forfeit a lease, there is nothing in the legislation to override either the contractual obligation in the lease to pay it or the standard requirement to pay interest on late payments where a tenant unilaterally withholds rent.

We are seeing a variety of approaches, with some landlords and tenants taking the pragmatic view that it is commercially sensible to collaborate by negotiating rent suspensions, rent reductions or a switch to monthly, rather than quarterly, rent instalments. Other landlords are being more aggressive and issuing statutory demands for payment, giving them the ability to threaten the use of insolvency legislation should payments not be made.

Developers: Ignore rights of light at your peril

Beaumont Business Centres Ltd v Florala Properties Ltd [2020] EWHC 550 (Ch) is likely to reignite developers’ concerns about rights of light.

The defendant obtained planning permission to develop its property in the City of London into an “apart-hotel”. It was established that the scheme would result in some loss of light to the lower floors of the claimant’s adjoining building, which was used as high-end serviced offices. Initially the defendant offered to settle any rights of lights claim but then disputed that a claim existed and proceeded with the development regardless.

The claimant made a claim in nuisance against the defendant for interference with its rights of light.

In a detailed and technical judgment the court held that:

• Most of the relevant parts of the claimant’s building had enjoyed access to light for 20 years or more without interruption and had therefore acquired a prescriptive right to light under Section 3 of the Prescription Act 1832.
• The reduction in light caused by the defendant’s development played some part in the reduction in the rents achieved by the claimant in relation to the affected parts of its building. This was enough to establish that there was a substantial interference with the claimant’s reasonable enjoyment of the property such as to amount to a nuisance.
• The claimant was entitled to an injunction ordering the defendant to cut back its development. This was because the latter had gone ahead with the development knowing of the risk that it was taking and had acted in a “high-handed, or at least unfair and unneighbourly, manner”.
• The legal burden was on the defendant to show why an injunction would not be appropriate and it had not done so.

This is a first instance decision and may go to appeal. It also does not technically extend legal principles. However it is a stark reminder of the risks to developers if they proceed with a development before resolving any rights of light issues – the fact that a development has been completed is no guarantee that damages will be awarded in place of an injunction.

Planning decision-making in a virtual age

On March 25, 2020, the Coronavirus Act 2020 received Royal Assent. Section 78 of the Act gave the Secretary of State the power to make regulations to enable local authorities to conduct committee meetings remotely rather than councillors attending in person.

On April 4, 2020, the Local Authorities and Police and Crime Panels (Coronavirus) (Flexibility of Local Authority and Police and Crime Panel Meetings) (England and Wales) Regulations 2020 were brought into force. These powers will be in place until May 6, 2021. The Regulations:

• Confirm that local authorities can hold public meetings remotely by video or telephone
• Remove the requirement for physical attendance at meetings
• Enable the public to continue to have access to public meetings through remote means

Local authorities are now considering how to implement these powers in their areas. There is considerable regional variation. Some local authorities have both the resources and the technology to switch to remote committee determinations immediately, whereas others are struggling even to validate new applications as they are not set up for remote working.

London Boroughs known to be embracing remote committee meetings are the Boroughs of Waltham Forest, Westminster, Hackney, Epping, Wandsworth and Richmond. Some have already announced the dates of their virtual committee meetings.

Having the power, the people and the technology is the first step, but many local authorities will be considering how they can ensure that the process that they adopt is nonetheless fair and minimises the risk of judicial challenge to their decision-making. The process chosen will need to be consistent with the authority’s constitution, unless amendments are also made to that. On a practical level, an authority may be considering the following, which will help to ensure robustness:

• Advertising the committee meeting, which may need to be done across multiple digital platforms to seek to ensure public awareness.
• Providing clear instructions on how the public can join the meeting and testing any embedded links across different browsers, with advice on how to troubleshoot access issues such as microphone settings, or using Chrome rather than Safari.
• Pre-briefing councillors on how the committee meeting will work and pre-testing their connectivity.
• Checking that the technology is working so that the public and participants can see and hear the meeting.
• Allowing promoters of, and objectors to, a planning application the same amount of time as they would have had if the committee meeting had been in person (unless the constitution is varied).
• Ensuring councillors and the public have the same access to the committee papers as they did previously.
• Having the meeting recorded and available on the authority’s website.
• Preparing minutes of the committee meeting in the normal way.

There are bound to be teething problems, of course, and where there is any suggestion that the public could have been prejudiced, the safest course will be for the meeting to be re-run and decisions taken again.

What is the solution for local authorities unable to embrace remote committee meetings? The simplest solution is likely to be that they change their constitutions so that planning decisions that were previously referable to committee can now be made under delegated powers. It is understood that the London Borough of Merton, and Windsor and Maidenhead Council have done just that.

Shifting some types of planning decision to determination under delegated authority (which is wholly consistent with working from home and requires no technological innovation) may be a sensible course of action for many local authorities in any event to reduce the virtual committee burden. To ensure robustness of decision-making for the largest schemes, it may be the case that constitutions need to be changed so that some types of delegated decision will require sign-off from more than just a Chief Planning Officer. It can be envisaged that perhaps the Chair of the Planning Committee, the Chief Planning Officer and a legal officer overview will be required.

Applicants will be keen to ensure that decisions on their development proposals are not delayed, and are robust. The planning system is facing a potentially huge back-log in proposals not being validated, processed or determined. The current system is somewhat antiquated and forcing technological revolution into decision-making is unlikely to be a bad thing in the long term. The development industry, which will have greater familiarity with digital platforms, connectivity and virtual decision-making, needs to step up and assist local authorities where possible to ensure that decision- making remains on track. This might include hosting web-based meetings, providing conference call dial-in details and allowing access to file-sharing platforms so that large emails don’t crash inboxes. Other assistance might include offering to do the first draft of conditions to be attached to a planning permission or preparing the first draft of a s.106 agreement.

Since we are all ‘in this together’ offering assistance in whatever form to local authority officers at this time to help them perform their functions is likely to be well received and remembered.

For further information, please contact Sarah Fitzpatrick, Head of Planning.

More regulations for the residential private rented sector

The residential private rented sector is already heavily regulated and there is more to come.

The Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020 will come into force on June 1. They will apply from July 1, 2020 to all ”specified tenancies” granted on or after the Regulations come into force and to all existing “specified tenancies” from April 1, 2021.

A "specified tenancy” is, with some exceptions, a tenancy of residential premises in England which grants one or more persons the right to occupy all or part of the premises as their only or main residence. The exceptions include: tenancies where the landlord is a private registered provider of social housing, student halls of residence and tenancies for a term of seven years or more.

The Regulations include obligations on private landlords to:

• Ensure that every electrical installation in the premises is inspected and tested at regular intervals (generally at least every five years) by a qualified person.
• Ensure that the first inspection and testing is carried out before the tenancy commences (or by April 1, 2021 in the case of an existing tenancy).
• Obtain a report from the person conducting that inspection and test and supply a copy to the tenant within a specified period.
• Carry out any investigative or remedial works specified in the report within 28 days or such shorter period as is given in the report.

The Regulations are enforced by local housing authorities and they have a power to arrange remedial action and to impose a financial penalty in the event of a breach, up to a maximum of £30,000.