Real Estate Legal Update : UK Real Estate Lawyer & Attorney : Reed Smith Law Firm : Corporate Property, Planning Law

This post was written by Katherine Campbell and Siobhan Hayes.

Tenants exercising break clauses in their leases are creating plenty of work in the property disputes field at the moment. Many tenants who have the opportunity to break the term of their lease are seizing it, and landlords in return want to find any way possible to challenge the validity of those notices. This posting identifies some of the topics arising on lease breaks.

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Welcome to The Real Estate Legal Update from Reed Smith's Real Estate Group based in London!

We know that some of you are clients of Reed Smith, and have been pointed to the blog because the lawyers with whom you work suggested it would be of interest. We hope this is a useful resource for you, and if you have ideas for the blog that would help you, then please do contact us.

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However you found us, we hope you will find our updates useful. We plan to update this blog regularly with our latest thoughts on the impact of changing real estate law in England and Wales on the commercial property market. We will review case law, statute, and regulation from the perspective of landlords, tenants, owner occupiers, lenders and developers.

Please go ahead and browse, and as we said, don't hesitate to drop us a line with suggestions about how we can make this site more useful to you.

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This post was written by Siobhan Hayes and Richard Nicoll.

Landlords/investors involved in selling or refinancing tenanted properties may need to carry out intensive environmental tests to satisfy the buyer/lender.  Can landlords do these without the tenant’s co-operation, for which a tenant may seek a high price?  Leases of commercial property reserve specific rights of entry for landlords.  Can these be exercised to allow an intrusive environmental investigation during the lifetime of a lease whilst a tenant is in occupation?  Without an express reservation, it is highly unlikely that any commercial property lease would be interpreted to permit an environmental survey that would disrupt the tenant from carrying out its normal business.

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This post was written by Siobhan Hayes and Richard Nicoll.

This is a hot topic in that a number of developments are currently being delayed/called into question by claims that the site is common land or is a town or village green. Developers need to take care when they plan to develop land that has been used by the public for their recreation.

Why? That land may turn out to be a town or a village green that cannot be built on in perpetuity. The land that the town or village inhabitants have been using for their sports and pastimes is regarded as belonging to that community for the benefit of that community.

‘Sports and pastimes’ can include informal activities like dog walking and frisbee throwing. Sites particularly at risk are areas of unfenced open land close to communities that have been using the land without permission.

The Commons Act 2006 regulates greens and common land, and is slowly being brought into force. It will not operate in a way to make life any easier for developers. It is replacing the Commons Registration Act 1965.

Common land is not particularly controversial, but the new laws for town and village greens are already proving troublesome for developers. Land owners hoping to sell for development and potential developers need to be aware of a number of risks arising for land that has been used for recreation by the locals.

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This post was written by Siobhan Hayes and Richard Nicoll.

The duty on investors and other owners to notify building insurers and keep them updated of all material circumstances should not be under-estimated.  Failure to do this may result in cover being prejudiced.

An unusual case that reached the Court of Appeal earlier this year made us think about whether property investors have got more to disclose to their buildings insurers in this market.  They probably have.

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Effecting a lease break can be vital to a tenant’s business plans.  There are a vast number of reported cases on the question of whether notices have been validly served.  There are many more property lawyers’ files where the operation of a break is challenged.  Tenants need to take great care and seek legal advice to ensure they have exercised their break-right correctly.  Failure to do so may result in the tenant having to pay rent on a surplus property until lease expiry or until the next break date.

In the most recent case on the subject – Orchard (Developments) Holdings PLC v Reuters Ltd (2009) – some bad luck and an unusual break clause meant that the tenant was bound to its lease for a further five years.

• The bad luck was that the person who served the formal notice on behalf of the tenant posted them through the wrong letterbox!
• The unusual break clause allowed for informal service of notice by fax if receipt was acknowledged.  The landlord did not acknowledge receipt until the litigation started.
• The break notice was held by the Court of Appeal not to have been validly served.

What can tenants do to avoid break notice pitfalls?

• Review all of the terms of the lease relevant to the break and the termination of the lease well in advance of the break date.  This will be particularly important to check if the break is conditional on any matters – see below.
• Check the notice provisions in detail (again in plenty of time) and comply with all the details
• Check who the landlord is (e.g., by reference to the Land Registry title), and where and how notices may be served.  If the investment was sold to an offshore investor, service may be difficult and may take a week or more.
• Never leave any decisions to the very last minute so that there is time to serve a break notice and get confirmation of receipt (re-serving if necessary)
• Take legal advice early as it could save a fortune later.  If break clauses are conditional on compliance with, e.g., the tenant’s covenants in the lease, a new set of issues will have to be dealt with, and these will be the subject of other postings.

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