Finers Stephens Innocent

Finers Stephens Innocent landscape Issue 4 2002/03 PLUS OUR LATEST DEALS WHAT’S ON AND LOTS MORE… No.1 WEST INDIA QUAY PLANNING FOR A GREENER FUTURE FSI JOINS MERITAS AND OTHER KEY LEGAL PROPERTY UPDATES landscape Issue 4 2002/03 EDITOR’S INTRO This edition of Landscape follows an eventful period for the property industry in which we’ve seen significant stamp duty changes and proposals to make major changes to the Planning system. We look at those issues as well as other topical areas concerning secured lending, commonhold, and aspects of property trading. Our team of experts is ready to assist you with any of these matters as well as general and specialised commercial property advice. 2 RECENT PROPERTY DEALS See for yourselves some of the work in which we’ve been involved and some of the notable new property clients that we have secured during the last 2 years. 3/4 For further information or copies of this magazine or any other FSI publication please contact our marketing department at: PLANNING FOR A GREENER FUTURE Archana Hogarth, Head of Planning at FSI, reviews the comprehensive changes to the planning system through the Government’s Green Paper. 5 NO.1 WEST INDIA QUAY David Battiscombe, Head of Property, gives an overview of this exciting and complex development in the heart of the Docklands. Finers Stephens Innocent 179 Great Portland St London W1W 5LS Tel: 020 7323 4000 Fax: 020 7580 7069 marketing@fsilaw.co.uk www.fsilaw.com 6 PELICAN BRIEF Our involvement in the purchase of The Pelican and BrightReasons Groups from Whitbread Plc. MERITAS GLOBAL FSI becomes the new UK member of Meritas, the international law firm alliance. 7 2002 CHANGES TO STAMP DUTY Brian Slater, Head of Tax at FSI, explains the importance of keeping abreast of changes to stamp duty. SECURE LENDING? LIFE AFTER ETRIDGE Martin Smith, Head of Property Finance at FSI, discusses the importance of the Etridge guidelines. www.fsilaw.com for details of: our people our legal services our latest news 8 TRADING IN PROPERTY Sam Charkham, Head of Property Trading at FSI, highlights the legal traps to avoid when trading in property. COMMONHOLD/LEASEHOLD REFORM Sal Mamujee, solicitor in the FSI Property Trading team, presents an update on commonhold/leasehold reform. This information has been prepared by the Firm as a service to our clients and should not be reproduced without our permission. As it is a general guide we recommend that you seek professional advice before taking or refraining from taking action. No liability can be accepted by the Firm for any action taken or not taken as a result of this information. 9 FREEDOM TO SUBLET Carolyn Street, solicitor in the FSI Property Retail & Leisure team, discusses the code of practice for Commercial Leases 10 THE FSI PROPERTY DEPARTMENT Turn to this page for contact details for all the members of the FSI Property Department, plus upcoming property events. 001 RECENT PROPERTY DEALS MARYLEBONE WARWICK BALFOUR GROUP PLC Acting on the £100,000,000 development funding and construction of Number 1 West India Quay (see page 5). This is a high class multi-storey tower block comprising luxury international hotel with associated service departments, residential apartments and underground car parking. The FSI Team is led by David Battiscombe, Head of Property, working with James Harvey, Head of Construction, Paul Millett, Head of Corporate & Commercial and Sara Wax. A bulk forward sale of 42 luxury apartments for a price in excess of £26,000,000 has already been achieved and a separate bulk sale of 18 luxury apartments for a price in excess of £12,000,000 was concluded earlier this year. The FSI team is led by David Battiscombe. Complex development deal with overseas Hotel Group at Royal Victoria Dock involving construction of two new hotels and retail elements with development values exceeding £15,000,000. The FSI team is led by David Battiscombe. Property funding aspects of a £50,000,000 luxury hotel and retail development in Central Glasgow. The FSI team is led by Paul Millett assisted by Sara Wax. Sale of two development sites at Royal Victoria Dock to Barratts, the national house builder, for £20,000,000. The FSI team is led by David Battiscombe. £17 million sale of Teeside Leisure Park in Stockton. The FSI team is led by Stephen Lewis working with Brian Slater. BEAVERBROOKS THE JEWELLERS LTD We act for this well known jewellery chain in respect of their total property portfolio. This includes acquisitions, lease renewals, investment and property management. During the last 12 months we have supported their roll-out programme which has acquired units in Romford, Basingstoke, Maidstone, Chapelfield, Peterborough and Oldham with two further units in progress. We are also pleased to be providing our employment and trust services. The FSI team is led by Stephen Lewis working with Nicola Kravitz. PROPERTY INVESTMENT Our Property Investment team led by Melvyn Orton has undertaken a number of confidential land sales relating to substantial regeneration/redevelopment projects. These have involved complex planning issues on which our Planning Group has advised. UNIVERSITY OF EAST LONDON Advising UEL on major property projects involving part of its land holding and also acting on substantial development and construction at its Docklands campus. The team is led by Michael Kutner working with James Harvey, Brian Slater and Archana Hogarth. INTERNATIONAL FSI has just been instructed on a major international overseas leisure project, the details of which are currently confidential but will be reported on fully in the next edition of Landscape. BOLT BAY LIMITED Site acquisition and development of a large multi million pound scheme and construction of large distribution centre for Dixons. The FSI team is led by Head of Property Development, Michael Kutner working with Ailsa Lawrence, James Harvey and Richard Shaw. GREATER LONDON ENTERPRISE LIMITED Dealing on several developments covering all aspects from site acquisition to construction and subsequent development, funding and disposals. The FSI team is led by Michael Kutner, assisted by Ailsa Lawrence and Victoria Fletcher. PIZZA HUT (UK) LTD We are acting for Pizza Hut (UK) Ltd who have officially opened their 500th restaurant at Elk Mill Retail Park in Oldham. The unit which sits on the front of a well established retail park has been trading at circa 125% of its required sales ,for the last 4 weeks since opening. The newly designed unit includes a barrel roof design, taking Pizza Hut away from the old "red roof" style with which it has become recognised across the UK. Obviously a success with their customers! ST GEORGE PLC Residential use development of Putney Wharf London. The FSI Team is led by Michael Kutner, assisted by Ailsa Lawrence and Louisa Lowe . LA FITNESS PLC Acting on LA Fitness Plc on a national roll out programme involving the acquisition of numerous new health clubs through pre-lets and business purchases. Advising on individual and portfolio sale and lease back disposals to fund further acquisition. The team is led by David Battiscombe working with Julian Hindmarsh, Katherine Miller and Nicola Kravitz. VIRGIN We act for Virgin on all of their property requirements and over the last year have dealt in particular with the sale of Our Price Limited to an Australian music retailer Brazin the transfer of 120 V Shop properties into Ablegrand Limited and various disposals. We have also acquired units for Virgin in Manchester, Brixton and most recently a new Virgin Megastore in Fulham Broadway. The FSI team is led by Stephen Lewis working with Nicola Kravitz. PELICAN GROUP LIMITED Purchase from Whitbread Plc by a management by-in team: see page 6. 002 PLANNING FOR A GREENER FUTURE ARCHANA HOGARTH, HEAD OF PLANNING AT FSI, REVIEWS THE COMPREHENSIVE CHANGES TO THE PLANNING SYSTEM THROUGH THE GOVERNMENT’S GREEN PAPER. The Government’s Green Paper, “Planning: Delivering a Fundamental Change” was described by the then Secretary of State as the biggest shake-up in the planning system in more than half a century. This set out the Government’s vision of delivering a faster, fairer planning system which engages the community. It was supported by consultation documents on major infrastructure projects, section 106 obligations, the Use Classes Order and compulsory purchase. After a six month public consultation which attracted 16,000 responses, the Deputy Prime Minister announced in July 2002 the Government’s plans for comprehensive changes to the planning system. He said a culture change is needed in planning to deliver major improvements. Some of the key decisions of the Planning reform paper are: Development Control and Planning Applications • Business Planning Zones - This proposal will proceed. No planning permission will be necessary for development within these zones if it complies with strictly defined conditions. • Delivery Contracts - This proposal is being considered further. Essentially the developer and local authority agree an enforceable contract setting out a timetable, failure to comply with which would entitle the developer to a ‘fast track’ decision by a Planning Inspector. • Increased Use of Delegated Powers - Will proceed with target of 90% of decisions to be delegated to planning officers rather than being decided by committee. • Statutory consultees - Will introduce a statutory deadline of 21 days to respond to pre-application requests and review whether consultation list can be reduced. • Duration of planning permissions reduced from 5 to 3 years - the intention is to bring forward land for development more quickly. • ‘Statement Of Development Principles’ - Might eventually replace outline planning permissions. • “Twin-Tracked” Applications - Will be banned (but will not be bought into effect immediately). • Appeal process - reduction of appeal time limit from 6 to 3 months; prescribed timetable for called-in and recovered appeals. Development Plans and National Policy The ‘plan-led system’ is to remain but under a completely new planning framework: • County Structure Plans - to be abolished. Local Plans and Unitary Development Plans - to be replaced with new single tier Local Development Frameworks (LDFs), which can be jointly prepared between districts or with counties and will include a Proposals Map. • Regional Planning Guidance (RPG) - will be abolished and replaced with statutory Regional Spatial Strategies (RSS), which will have comparable s.54A status to Local Development Plans. • Simplify National Planning Guidance - all PPG’s are to be reviewed over the next three years. They will be shorter and clearer. • Planning Obligations - Reforms were proposed to s.106 agreements to make them more transparent. The controversial standardised tariff scheme will not now proceed but new guidance will be issued on how Planning Obligations will work. The success of the reforms will be dependant on proper local authority resourcing. It remains to be seen whether the injection in the Spending Review of £365 million (over 3 years) into the planning system will produce a speedier and more reliable system. 003 NEW PLANNING LAWYER JOOINS FSI Finers Stephens Innocent is delighted to announce the appointment of a new Head of Planning, Archana Hogarth who joins from Mayer, Brown, Rowe & Maw in May. Hogarth has over ten years planning experience, the last five of which were at Mayer, Brown, Rowe & Maw, where she was the firm's main planning lawyer. She has handled the full range of town and country planning matters for a broad range of clients, including major plc developers, institutional investors, large industrial groups, public authorities, construction companies and major corporates. Melvyn Orton, Head of Property Investment at FSI says "Archana will provide an invaluable support to our growing property department. Many of our major clients require high level planning work and Archana has both the technical and client care skills required to contribute to growth in this area. She will be a great asset to us". Hogarth's extensive experience ranges from drafting and negotiating complex section 106 planning agreements to advising on the planning, infrastructure and compulsory purchase aspects of large redevelopment projects and PFI transactions. She has also handled numerous planning inquiries and appeals. Of her move to FSI Hogarth comments "I am very impressed with the quality of clients the firm has and the firm's commercial approach. It is an environment where I believe I can contribute positively to the growth of the practice". Archana has extensive planning experience gained from involvement in complex town and country planning matters. She has applied this knowledge to a broad range of clients during her professional career. 004 No.1 WEST INDIA QUAY Finers Stephens Innocent is the principal legal adviser on number 1 West India Quay which is a £180m development comprising a 301-room hotel, 47 serviced apartments and a total of 158 apartments for sale. The development is undertaken by Marylebone Warwick Balfour Group PLC in joint venture with The Manhattan Loft Corporation with MWB owning 66% of the JV company. The hotel and serviced apartment element has been pre-let to Marriott International through a 20 year operating and management agreement. Ring-fenced construction finance totalling £135m is in place and provided by BHS Bank and Hamburgerische Landesbank. This scheme represents the third phase of the highly successful and profitable one million square foot development at West India Quay. The first phase comprised 107 apartments together with a range of restaurants, bars and other leisure facilities created out of an extensive early 19th century quayside warehouse complex. Finers Stephens Innocent dealt with all aspects of the scheme and all the apartments were sold for £34m while the leisure element, including the second phase of the multiplex cinema and parking, was fully let and sold in November 1999 for £34m. The FSI team comprised members of the firm’s property, construction, corporate, tax and banking departments. “THIS HAS BEEN ONE OF THOSE EXCEPTIONAL PROJECTS WHERE A COMBINATION OF DYNAMIC DEVELOPER, GREAT ARCHITECTURE AND AN INNOVATIVE LEGAL TEAM HAS PRODUCED A TRULY STUNNING BUILDING. FINERS STEPHENS INNOCENT HAS NOW ACTED ON THE DISPOSAL OF OVER 1,000,000 SQUARE FEET OF PRIME DEVELOPMENT IN THIS LOCATION BUT NO.1 WEST INDIA QUAY HAS TO BE THE ICING ON THE CAKE” DAVID BATTISCOMBE, HEAD OF PROPERTY AT FSI. 005 PELICAN BRIEF In May 2002 Finers Stephens Innocent acted on the purchase of The Pelican Group Limited and BrightReasons Group Limited from Whitbread PLC by a management buy-in team backed by private equity firm ECI and with bank finance from Barclays. The cash consideration was £25 million. FSI acted for Tragus Holdings Limited (the MBI vehicle) which purchased the Pelican and BrightReasons groups. The groups comprise 153 operating restaurants including the Café Rouge, Bella Pasta, Mamma Amalfi, Abbaye, Leadenhall Wine Bar and Oriel brands. The purchase follows Whitbread’s review of its restaurant division in October 2001. Tragus plans to invest in and develop Café Rouge and Bella Pasta as leading family brands in the burgeoning dining-out and pizza / pasta sectors. Plans include the development of all-day dining menus at Café Rouge and broadening the appeal of the Bella Pasta brand. The other restaurants will continue to be operated as niche brands. Paul Millett, Head of corporate at FSI, commented: “Having acted for the MBI team on the sale of the Aroma and Whitecross chains we are delighted to have been able to work with the team on their new venture. Our strong end user team greatly assisted us in completing our work within a tight timetable. The FSI team drew on members from the following departments of the firm: corporate, property, banking, tax, IP, licensing and employment. MERITAS GLOBAL Meritas, is a worldwide alliance of 200 law firms in 60 countries with an annual combined turnover of member firms of over $1 billion. Finers Stephens Innocent (FSI) was admitted to Meritas membership following an extensive UK recruitment programme to find a London based firm. Anthony Barling, FSI’s Managing Partner comments:“We are incredibly pleased to have joined Meritas. This is a high point in our international strategy. Our international activities and client base have developed and grown substantially in recent years and our strategic alliance with Meritas will give us access to leading law firms throughout the globe. This will facilitate the implementation of a bolder international growth programme than local office expansion would ever have allowed.” The addition of FSI, a top rated firm for media, IT and IP, advances the Meritas strategy of offering New Economy clients a new model for international legal advice. The Meritas alliance provides predictable, high quality worldwide legal service, supported by specific technology tools for simple, efficient work coordination. Meritas’s European Managing Director Michael Faulkner comments on the new membership:“FSI is a perfect fit for our strategy; they are dynamic, open and democratic; they have a superb international client base in our key business sectors; and they are team players. I am delighted they have joined us. We wanted a London firm that fitted our international model: independent firms bound by guaranteed quality and common standards, not by merger. The Meritas difference is our quality control works without financial integration, and we avoid the woes of most mega firms. The ultimate beneficiary is the client.” Meritas member firms practice independently and are not in a relationship for the joint practice of law. 006 2002 CHANGES TO STAMP DUTY KEEPING ABREAST OF CHANGES TO STAMP DUTY CAN GIVE YOU LONG TERM SAVINGS AS BRIAN SLATER, HEAD OF TAX, EXPLAINS. Introduced in 1694 as a “temporary” tax, Stamp Duty is a tax on documents and this has enabled successful avoidance schemes. A fundamental modernisation of Stamp Duty is heralded by the Finance Act 2002 and an Inland Revenue Consultative Document; "Modernising Stamp Duty on Land and Buildings in the UK". Finance Bill 2002 These measures are temporary, pending the new regime expected in 2003. The changes largely counter current Stamp Duty avoidance schemes: Relief given for intra-group transfers of assets and certain company reconstructions is clawed back if the transferee company leaves the group within two years of the date of transfer. The reduced rate of 0.5% on reconstructions is denied completely if arrangements are in place for the consideration shares to be acquired by certain persons. This stops a scheme for selling property as part of a reconstruction. The penalty for late stamping of documents executed outside the UK runs from 30 days after execution instead of 30 days after the documents are imported into the UK. An uncompleted contract for the sale of land in excess of £10m (including VAT, if applicable) will attract ad valorem duty. This is to stop a stamp duty avoidance scheme involving “resting” on an uncompleted contract. Consultative document For transfers of land/buildings, Stamp Duty will no longer be a tax on documents. A liability to notify and pay Stamp Duty will be triggered by value passing under a contract in addition to a legal transfer. The liability will be expressly that of the purchaser (or lessee), which currently is not generally provided. The Land Registry will check electronically that Duty is paid before registering a transfer. The Duty on the grant of new leases will more closely approximate to the Stamp Duty on a transfer of property of a similar value. The transfer of substantial shareholdings in companies (United Kingdom or foreign) owning mainly UK land will be chargeable at the rates for land/buildings and not shares. This is to prevent substantial properties being “enveloped” in companies to gain the 0.5% stamp duty rate on shares. The difficulty will be in defining these companies so as not to trawl in genuine trading companies with substantial property interests. Most £5 fixed duties on documents will disappear. SECURE LENDING? LIFE AFTER ETRIDGE MARTIN SMITH, HEAD OF PROPERTY FINANCE AT FSI, DISCUSSES THE IMPORTANCE OF THE ETRIDGE GUIDELINES. We circulated a briefing note a few months ago reporting on the RBS v Etridge decision, the latest in a long line of decisions on the thorny issue of undue influence in, typically, situations where a wife agrees to a charge over the matrimonial home to guarantee the husband’s business debts. Recent cases have seen the rules laid down by the House of Lords in that decision applied rigorously by the courts. The line of cases which led to the statement of principals in Etridge have always been intended to have application beyond merely husband-wife relationships, as illustrated by a recent case, National Westminster Bank plc v Amin, which saw the Etridge guidelines being applied to a situation where a mother and father charged their home to guarantee their son’s business. This case was also interesting in its analysis and application of the Bank’s knowledge. Specifically, the court held that the Bank could not demonstrate that they had discharged their duty to ensure independent legal advice had been given to the parents (who spoke only Urdu) when the confirmation that was the case was made by a solicitor the Bank knew did not speak Urdu. UCB Corporate Services v Williams involved a wife who had remortgaged the jointly owned marital home to support the husband’s garage business. The wife subsequently alleged undue influence. In attempting to counter this the lender, whom the judge found had not followed the Etridge guidelines, argued that the wife would have proceeded with the remortgage regardless of any legal advice she might have received. The Court of Appeal rejected that argument - she had not been properly advised in accordance with Etridge, and that had removed from her the opportunity to make an informed choice. It might have an impact on the calculation of any claim for damages, but did not relieve the lender from its duty to follow the Etridge guidelines. The conclusion is this, whilst taking additional security over unconnected assets in divergent ownership is fraught with problems, the message from the courts is clear: if lenders and their legal advisors co-operate together, to ensure that knowledge is shared, and the requirements of Etridge followed, such lending can be conducted safely and effectively. 007 WITHHOLDING PAYMENTS FROM CONTRACTORS (CONTINUED) RICHARD SHAW, SOLICITOR IN THE FSI PROPERTY CONSTRUCTION TEAM, GIVES AN UPDATE ON WITHOLDING PAYMENTS FROM CONTRACTOR PAYMENT APPLICATIONS. In the last edition of Landscape, I wrote that failure to give the appropriate notices under the Housing Grants Construction and Regeneration Act 1996 may lead to a developer being railroaded through an adjudication with the likely result being that the sum claimed by the contractor (irrespective of its correctness) will be awarded to it. The problem lies in the interpretation of the various notice clauses particularly section 110 and section 111. Since I wrote the above, these matters have been the subject of further deliberation by the Courts and some further clarity has been added to how the sections work. Section 111(1) states “a party to a construction contract may not withhold payment after the final date for payment of a sum due under the contract unless he has given an effective notice of intention to withhold payments.” The cases of SL Timbers Systems Limited v Carillion Construction Limited and Millers Specialist Joinery Company Limited v Nobles Construction Limited are authority for the proposition that failure to serve a withholding notice does not in itself make the amount claimed a sum due under the contract. In other words, according to these cases, when considering a situation where there has been a failure to serve a section 111 notice, an adjudicator should not simply rubber stamp the amounts claimed as due but must turn his or her mind to the sum actually due under the contract before making an award. Purchaser could find himself with a blighted property and the possibility of a lengthy negligence action against the Search Agents or their Agent’s Professional Indemnity Insurers. • Contractual Clauses A prudent Vendor’s Solicitor will always incorporate a clause preventing the Purchaser from insisting that the Vendor can transfer the property to a third party at anything other than the Contract price. There are several “tricks of the trade”, which have been designed specifically to ensure that properties can still be traded even though the purchase Contract contains such a provision. Each word of such a clause, and its position in the sentence, must be examined carefully to protect the Purchaser from, at the very least, an unnecessary payment of stamp duty and Land Registry fees. • Title In the days before the Land Registry opened up its facilities to the public, a Purchaser intending to sell on was usually able to hide the identity of a registered owner from his ultimate Purchaser. Now that the vast majority of land in England and Wales has a registered title, and most such titles are available for inspection on the Land Registry computer, it can be much harder to keep a Sub-Purchaser and owner apart. Where such a danger is apparent, a combination of Confidentiality and Lock-Out Agreements is clearly the most prudent route to take if one is concerned about a deal being “stolen”. • Section 110(5) Land Registration Act 1925 This statutory provision provides that “notwithstanding any stipulation to the contrary” a Purchaser of registered land is not required to complete the purchase of a transaction unless the property is transferred by the registered proprietor. This means that a Purchaser wishing to sell on must ensure that his purchase Contract enables him to procure a transfer of the property direct from the registered proprietor to the Sub-Purchaser, which he is often unable to negotiate, or that he must complete the purchase himself to enable the Transfer deed to be stamped and registered at H.M Land Registry. This could involve unnecessary financial outlay and expense. Several “devices” have been created by imaginative Solicitors to avoid the bite of these statutory provisions but there is little doubt that, if tested in Court, these devices or “penalties” might well be deemed to be unenforceable. • Leasehold The most obvious problem with trading in leasehold property is that of Licences to Assign. A meaningful percentage of leasehold flats require the Landlord’s consent to assignment of the Lease, not to be unreasonably withheld. This, inevitably, produces administrative headaches in how a Purchaser buying to sell on can persuade his Vendor to accept a reasonable delay in submitting references for the ultimate Purchaser, especially when the Vendor (as is usual) has no idea of the Purchaser’s intention. TRADING IN PROPERTY SAM CHARKHAM, HEAD OF PROPERTY TRADING AT FSI, HIGHLIGHTS THE LEGAL TRAPS TO AVOID WHEN TRADING PROPERTY • Local Searches The time taken to obtain Local Searches has led to a proliferation of “subject to searches” clauses and the growth of an entirely new industry of Search Agents. Both of these can lead to problems. A conditional clause in a purchase Contract must always ensure the Purchaser’s ability to rescind if the Local Search discloses any matter which materially and adversely affects the value of the property. The legal test will be one of reasonableness but, in the event of disagreement, an independent Surveyor’s valuation/assessment would be required to persuade a Vendor or, if necessary, the Court that the value of number 36 Roundwood Road would be adversely affected by a Crossrail tunnel being excavated fifteen metres below the foundations of the property. The use of Search Agents to produce a speedy Local Search Result is common. However, if any of the critical answers to the Search prove inaccurate, either due to non-disclosure by the Local Authority or negligence by the Search Agents, a 008 FREEDOM TO SUBLET CAROLYN STREET, SOLICITOR IN THE FSI PROPERTY RETAIL & LEISURE TEAM, DISCUSSES THE CODE OF PRACTICE FOR COMMERCIAL LEASES. The recent case of Allied Dunbar Assurance plc and Homebase signifies an important development in the tenants freedom to sublet its premises. The facts are that Homebase held a 25 year full repairing lease of a unit subject to 5 yearly upward only reviews. The lease contained a covenant not to underlet any part of the unit without the prior consent of the landlord, such consent not to be unreasonably withheld. The covenant was subject to certain provisos: (i) not to reserve a rent less than the full market rent reasonably obtainable without taking a fine or premium; and (ii) covenants by the underlessee in the same form as those given by the tenant; and (iii) to provide that the rent payable by the underlessee would be reviewed on an upwards only basis upon the same dates as that of the lease “to the intent” that a market rent would be obtained. Homebase found it difficult to sublet the unit due to its inconvenient size and location, and a deal was struck with a potential subtenant. The underlease was drafted in accordance with the terms of the lease but an accompanying collateral deed expressed to be personal to the subtenant provided that the tenant would indemnify the subtenant in respect of part of the rent and with complying with certain repairing obligations. The Landlord withheld its consent on the ground that the underlease did not comply with the provisos. The judge at first instance held that the rebate in the collateral warranty could not be ignored, the provisos under the lease were not met and found for the Landlord. Homebase appealed and lost. The Court of Appeal were of the view that the collateral deed and the underlease were interdependent and had to be read together as one document. This case highlights that the Landlord is entitled to see both the underlease and the side agreement which modifies its terms, both agreements will be read as one in order to clarify the deal reached by tenant and prospective undertenant. Even if the tenant and undertenant conceal the existence of the side letter from the landlord it would be prudent to have a contingency plan should the Landlord become aware of its existence and takes steps to enforce the terms of its lease covenants It is worth noting that at the time of writing this article Homebase have petitioned the House of Lords with a view to appeal the decision and their case for an appeal will be considered by the appeal committee shortly. COMMONHOLD/LEASEHOLD REFORM SAL MAMUJEE PRESENTS AN UPDATE ON COMMONHOLD AND LEASEHOLD REFORM. At long last on 1 May 2002 the Commonhold and Leasehold Reform Bill received Royal Assent. Part I of the Bill deals with the introduction of the concept of “a commonhold unit” and “commonhold association” whereby unit-owners will have a stake in the management of their estate and common parts. However, the Bill also contains various provisions relating to leasehold reform some of which came into force on 26 July 2002. The Bill provides for, inter alia: 1. The introduction of a right to manage if leaseholders wish to take over management from the landlord using a “RTM” (right to manage) company. 2. The removal of some of the obstacles relating to collective enfranchisement under the Leasehold Reform Act Housing & Urban Development Act 1993 by: (a) simplifying the eligibility criteria e.g. abolishing the residence test; (b) reducing the number of leaseholders that must participate to 50%; (c) abolishing the low rent test; and (d) changing the valuation principle so that marriage value is shared equally between the landlord and leaseholders and providing for the marriage value to be fixed at nil where the unexpired term of the Lease is more than 80 years. 3. The simplification of the procedure for extending Leases under the Leasehold Reform Housing & Urban Development Act 1993 again by using the model changes for collective enfranchisement (i.e. abolition of low rent and residence tests etc.) 4. Changes to the Leasehold Reform Act 1967 to make it easier to enfranchise by abolishing the residence test and low rent test. 5. Changes to insurance arrangements for long leaseholders of houses to protect them from excess charges. 6. Prevention of unscrupulous landlords’ abuse of rights in relation to forfeiture e.g. the demand for landlords’ “expenses” for recovery of payment of ground rent sums at an extortionate level. For example, a landlord will only be able to serve notices in 3 situations: (a) Where the tenant has admitted the breach; (b) Where a leasehold valuation tribunal has determined that breach has occurred; or (c) Where the fact that a breach has occurred has been determined by a Court in any proceedings or by an arbitral tribunal. 7. More stringent accounting obligations on landlords in respect of service charge funds. At the time of writing, the provisions relating to the changes to the 1993 Act and 1967 Act had already been brought into force. In addition, a consultation paper on the on the revised procedures for consulting service charge payers about service charges was published in August 2002. A further consultation paper relating to the Commonhold provisions is due to be published in October 2002. The Land registry have also published consultation questionnaires relating to the registration process for commonhold documents. 009 OUR PROPERTY TEAM 001* Sam Charkham, Partner & Head of Property Trading T: 020 7344 5504 Chris Parkinson, Partner & Head of Intellectual Property T: 020 7344 5227 Sara Wax, Solicitor, Corporate Finance T: 020 7344 5573 Paul Millett, Partner & Head of Corporate & Commercial Department T: 020 7344 5516 002* Melvyn Orton, Partner & Head of Property Investment T: 020 7344 5508 Brian Slater, Head of Tax T: 020 7344 7698 John Hewitt, Partner & Head of Property Dispute Resolution T: 020 7344 5554 Elizabeth Carne, Trainee 003* James Harvey, Partner & Head of Construction T: 020 7344 5597 Carolyn Street, Solicitor, Retail & Leisure T: 020 7344 5533 David Battiscombe, Partner & Head of Property T: 020 7344 5531 Archana Hogarth, Solicitor & Head of Planning T: 020 7344 5512 004* James Fry, Solicitor, Property Development T: 020 7344 5319 Lucy Thomas, Solicitor, Property Dispute Resolution T: 020 7344 5589 Julian Hindmarsh, Partner & Head of Retail & Leisure T: 020 7344 5312 Michael Kutner, Partner & Head of Property Development T: 020 7344 7673 005* Martin Smith, Partner & Head of Property Finance T: 020 7344 5596 Victoria Fletcher, Solicitor, Property Development T: 020 7344 5322 Joanna Marsh, Solicitor, Retail & Leisure T: 020 7344 5539 Stephen Lewis, Partner, Retail & Leisure T: 020 7344 7672 006* Philip Eder, Partner, Property Investment T: 020 7344 5540 Richard Shaw, Solicitor, Construction T: 020 7344 5583 Nicola Kravitz, Partner, Retail & Leisure T: 020 7344 5513 Sal Mamujee, Solicitor, Property Trading T: 020 7344 5315 007* Alex Davies, Partner, Property Development T: 020 7344 5514 Michael Green, Consultant T: 020 7344 5502 Ailsa Lawrence, Solicitor, Property Development T: 020 7344 7675 Amit Patel, Solicitor, Property Investment T: 020 7344 5548 008* Katherine Miller, Partner, Retail & Leisure T: 020 7344 5572 Samantha Hook, Trainee Geoffrey Silman, Consultant, Retail & Leisure T: 020 7344 7659 Louisa Lowe, Solicitor, Property Development T: 020 7344 5305 If you would like to contact any of the team by email please use the following formation; initialsurname@fsilaw.co.uk For example:- scharkham@fsilaw.co.uk 001* 002* 003* 004* 005* 006* 007* 008* MIPIM 4th - 7th March 2003 Finers Stephens Innocent will be at MIPIM 2003, the premier property exhibition in Cannes, France. We are sending a team of our top property partners and are looking forward to meeting our clients and contacts as well as new professionals involved in the property sector. PROPERTY EVENTS MAPIC 20 - 22nd November 2002, Palais des Festivals, Cannes MAPIC is a unique event for negotiating commercial real estate projects and our annual attendance is an indication of our commitment to the premier international retail property exhibition. This year is the 8th MAPIC exhibition and more than 5000 retail real estate professionals from all over the world converge for 3 days to make contacts, create partnerships, meet their customers, develop new business and update on the latest trends in the sector. This year the Pizza Hut team along with the Finers Stephens Innocent Property Retail and Leisure Law Group will be represented by a combined team of nine. We are hosting a series of receptions aboard our yacht so please contact us at events@fsilaw.co.uk if you would like to join us. 010 FINERS STEPHENS INNOCENT INTERACTIVE http://www.fsilaw.com THE LEGAL 500 2002 RECOMMENDS THE FSI PROPERTY DEPARTMENT IN:COMMERCIAL PROPERTY INVESTMENT DEVELOPMENT CONSTRUCTION RETAIL OCCUPIERS PROPERTY LITIGATION Designed by navajo media > www.navajo.co.uk