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

This post was written by Catrin Phillips, Lynsey Ellard and Siobhan Hayes

Break clauses are often incorporated into leases as a way for the tenant and occasionally, but less frequently, the landlord to maintain flexibility.  In the present market they are often exercised by tenants.  But exercising break rights and even the clauses can cause problems for the unwary tenant and great care must be taken to ensure that the break is exercised successfully - recent caselaw has highlighted some of the potential difficulties.

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The ability of landlords to recover the costs of taking action against tenants for dilapidations or indeed any breach of covenant can be fraught. Far from being an automatic entitlement, it will depend upon the wording of the lease. Costs clauses in leases are many and varied - some rather better than others.

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This post was written by Siobhan Hayes and Indeg Kerr.

In earlier postings on our environmental update blog we have introduced the UK’s Carbon Reduction Commitment (Energy Efficiency) Scheme (“CRC”). From 1 April 2010 the CRC Regulations will apply. Property investors, even those who fall outside the CRC themselves, will have to supply their buyers with information on their buildings’ carbon emissions. Lack of information could wreck the timetable for the deal.

This posting is designed to give you a brief idea of what you will need to disclose on the sale of an investment property once the CRC comes into force on 1st April this year.

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This post was written by Mark Hargreaves, Emma Parsons and Catrin Phillips.

Following on from our original blog on the Bribery Bill there have been some changes to the Bill during its speedy passage through Parliament. We have no doubt that this Bill will be enacted before the General Election. Agents, investors and developers do need to be aware of the new law and will be required to review internal procedures and contracts with those supplying services to them to ensure they minimise any risks of a criminal sanction.

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This post was written by George Brown,  Mark Hargreaves and Emma Parsons

Can the Bribery Bill, which we are told will become law before the General Election, affect property investors, agents and buyers?

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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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