Commercial Property Blog
Commercial Property Blog

Commercial Property

News, Comments and Legal Aspects



Archive for the ‘Tenant’ tag

What a bind!

without comments

When a deal is done in relation to property there will be a contract. What distinguishes property transactions from simple contracts is the ability of one party to bind future owners of the property. Malcolm Poynter, a commercial property specialist with law firm, Charles Lucas & Marshall discusses an example of this, restrictive covenants.

Malcolm Poynter

Malcolm Poynter – Partner

Properly drafted, a covenant on a property will bind each owner of that property. There are many examples of restrictive covenants, such as not to sell alcohol, not keep pigs and not to use the property for business.

The covenant must be restrictive ie say what you cannot do. If it is positive, such as to contribute to the maintenance of something or to keep something in repair, it is not directly enforceable against successors of the freehold. It is for this reason that flats tend to be dealt with by lease because each tenant is bound by the terms of the original lease in which the covenants will be set out.

Covenants that restrict building can obviously cause problems if you are proposing to develop your land. The wording of these covenants needs to be looked at very closely to decide what may not be done. For example, there was a case where a developer wanted to build a roadway which had to be adopted by the Highway Authority as a public road. A covenant not to erect anything on the land did not prevent the roadway being built but did prevent lamp posts being erected which meant the road could not be adopted and was therefore, in effect, prevented.

Some covenants allow building if ‘the Transferor’ approves the plans. Does this mean the original Transferor or the current owner of the land which has the benefit of the covenant? Difficulties can also arise if the person to give consent cannot be found or has died.

When faced with covenants restricting development sometimes you can establish that the covenants are invalid and may therefore be ignored.

Sometimes there are grounds for applying for the covenant to be modified or discharged by the Upper Tribunal (Lands Chamber). There are a variety of grounds upon which an application may be made.

Compensation may be payable but how is it calculated? The loss of the covenant may have a small effect on the value of the property with the benefit but, on the other hand, the person with the benefit may have been able to extract a significant payment from the developer for the covenant’s release. There is no rigid formula how compensation is to be calculated and, as the Courts love to say, each case depends on its own facts.

Further details please contact Malcolm Poynter on 01635 521212 or malcolm.poynter@clmlaw.co.uk

Written by Malcolm Poynter

April 10th, 2015 at 10:38 am

Landlords – Resolve Tenants’ Issues Before Sale

without comments

Landlords should ensure any outstanding issues with tenants are resolved before they exchange contracts on the sale of a property.

Mark Sarnowski

Mark Sarnowski

Mark Sarnowski, a property specialist with Charles Lucas & Marshall, says tenants in dispute with the landlord, can jeopardise the sale by registering a notice against the title of the property.

In a recent case where he was acting for the landlord, the tenant had been in dispute with his client who was withholding the tenant’s deposit because of damage to the property and subsequent repairs which needed carrying out.

The property was put on the market and a sale agreed but days before contracts were due to be exchanged, the tenant registered a notice against the property with the Land Registry.

“Once that happens, a process begins automatically, even if there is no legal justification and the notice is a spurious one,” says Mark Sarnowski. “Obviously these notices can be challenged but that takes time – and that can be critical when you are selling a property.

Mark Sarnowski advised his client to take a firm line with the tenant and warn him that if the sale of the property was delayed or fell through, the tenant would be liable for all the losses incurred to date.

“In the end an agreement was reached,” he added. “My advice though would be for landlord and tenant to resolve any outstanding issues before getting close to the exchange of contracts.

“There are procedures tenants can use against landlords which gives them a strong hand, irrespective of whether they are legitimate or not.”

For further information contact Mark Sarnowski on 01488 682506 or mark.sarnowski@clmlaw.co.uk

 

Written by Mark Sarnowski

November 27th, 2012 at 7:57 am

Is the tenant getting a fair deal?

without comments

Hemant Amin, a commercial property specialist with law firm, Charles Lucas & Marshall, argues that tenants are often at a disadvantage when negotiating a commercial lease.

It has been widely recognised that the tenant is often at a disadvantage when negotiating lease terms. As a result, The Code for Leasing Business Premises in England and Wales 2007 was introduced in 2007. It makes several recommendations as to achieve a fairer balance between the landlord and the tenant and greater flexibility in commercial lease terms.

Typically a tenant will negotiate lease terms with a landlord’s agent. This immediately places the tenant at a disadvantage as negotiation takes place before the tenant’s solicitor becomes involved.

Ancillary to the Code is ‘Leasing Business Premises: Occupier’s Guide’. Its purpose is to give the tenant information which will assist at the negotiation stage of the transaction. From the tenant clients I have acted for, I have yet to hear of anyone who has used the Occupier’s Guide when negotiating lease terms with the landlord’s agent.

In July 2009 the Department of Communities and Local Government published a report on the Code. It concluded that awareness of, and advice in the Code was limited and that it played only a minor role (if any at all) in negotiations.

There still exits a view that negotiations on lease terms are flexible and fair and that the Code was unnecessary. From a tenant’s perspective, it is a shame more is not done to promote the Code and Occupier’s Guide.

Time and time again, tenants who fail to take advice are blissfully unaware of the full implications of taking on a fully repairing and insuring lease. By the time the tenant has agreed the terms of the lease with the landlord’s agent and the heads of terms have been circulated, it is difficult for the tenant’s solicitor to renegotiate terms.

Current market conditions favour the tenant and this has certainly helped the tenant’s negotiating position – rather than the Code. In fact, given the current market conditions, it could be argued that the tenant should expect even more favourable terms than those recommended in the Code.

However, market conditions do change and as the market recovers from the recession we may see a return to the bargaining position which prompted the release of the Code. The Code and Occupier’s Guide could act as a good starting point for negotiations, regardless of market conditions.

One issue raised in the Report was that solicitors do not get involved early enough in a transaction to influence terms. My recommendation would be to discuss the terms proposed with a solicitor, prior to agreeing the terms with the landlord’s agent and the issue of heads of terms.

If you are considering taking on a commercial lease in the near future or are currently negotiating on lease terms contact Hemant Amin of Charles Lucas and Marshall for advice on 01635 521212 or hemant.amin@clmlaw.co.uk

Written by Hemant Amin

June 15th, 2010 at 2:52 pm

Posted in News

Tagged with ,