The case of Goldman Sachs International v Procession House Trustee 1 Limited and Procession House Trustee 2 Limited [2018] EWHC 1523 (Ch) is a further reminder of the care needed with break clauses in commercial leases.

The tenants break option in the lease was conditional upon the tenant being able to yield up the premises with vacant possession with a second provision referencing clause 11 of the lease.

Clause 11 of the lease was the yield up provision and required amongst other things, for all alterations and additions made to the premises to be removed, and for the premises to be reinstated to the original layout and condition.

The annual rent was £4,000,000.00 per annum, and while the break date was not until 2020, the tenant brought a claim for interpretation of the correct construction of the break clause.

It was agreed between the parties that the tenant had to give vacant possession of the premises to exercise the break clause. What was not clear was whether the obligations in clause 11 also had to be complied with, therefore requiring the tenant to undertake substantial work.

The Court held that the natural and ordinary meaning of the clause was to impose a single condition of yielding up the premises with vacant possession. While clause 11 did have to be complied with, it was not deemed to be a condition that needed satisfying in order to validly exercise the break clause.

The Court took into account the fact that some wording was in brackets, which indicated that it might be of lesser importance, and the reference to clause 11 was intended to serve more as a reminder, than to impose a fresh obligation.

Like most break clause cases, decisions will largely turn on the facts involved and the specific wording used. However, this case further emphasises the importance of clear drafting in break clauses to avoid a dispute in the first place.

This may not be the last we hear on this matter, as the landlord was granted permission to appeal.

Simon Tennant

Partner

The Government has just announced that it intends to publish draft legislation which when passed, will require all overseas companies that own or buy property in the UK to provide details of their ultimate owners.

The draft legislation is expected to be published this summer with the register going live by early 2021.

The plan to set up such a public register of UK property owners has been under discussion for some time. However, it remains to be seen what a company will need to provide in order to satisfy the test for the ultimate owners under any new legislation, and what impact this will have on the property market.

Simon Tennant

Partner

The Digital Economy Act 2017 received royal assent in April 2017 which includes a new Electronic Communications Code “New Code”. The Act contains powers for the Secretary of State to bring into force the New Code, and this is expected to happen in December 2017.

The New Code will mean the security of tenure provisions of the Landlord & Tenant Act 1954 will not apply to telecommunications leases. It will also make void attempts by the landlord to restrict assignment or prevent site sharing rights.

From a rental perspective, the New Code seeks to limit the rental levels by excluding the value attributable to the proposed use and enhanced rights that benefit a telecommunications tenant. While a significant amount of commentary has focused on a reduction in rent, it remains to be seen how this will play out.

The mechanism to terminate agreements has also been altered with landowners now required to give 18 month’s notice (or longer if the agreement requires) to terminate the agreement and they must still satisfy the criteria for possession.

The New Code on the face of it appears to be more friendly to the operators than landowners and the consequences of which remain to be seen. It is possible that operators will take a “wait and see” approach to the New Code resulting in fewer transactions immediately after the New Code comes into force.

If you wish to discuss the rights benefiting telecommunications tenants or you are looking redevelop land that currently has telecommunications equipment on site please call Simon Tennant.

Simon Tennant

Partner

We summarised the key points of the up and coming Energy Efficiency (Private Rent Property) (England and Wales) Regulations 2015 (“Mees Regulations”) in an earlier article on the subject Are You MEES Ready?

The first part of the legislation concerning new lettings commences on the 1st April 2018.

The Department for Business, Energy and Industrial Strategy has now published their guidance for landlords on how the Mees Regulations will apply to future lettings of non domestic property.

The guidance confirms that if a premises due to be let has a substandard EPC rating (currently F or G but will no doubt be increased over time) the landlord is expected to undertake all energy efficiency improvement works where the benefit of the resulting energy efficiency pays back the cost of the works within 7 years. Even though the “pay back” is likely to benefit the occupational tenant who is paying the energy bills and not the landlord.

If despite all these works the energy efficiency of the premises cannot be improved to permit the letting, there is scope to apply for an exemption. Without improving the energy efficiency or obtaining the exemption, the landlord cannot let the premises.

Landlords need to start making contingency plans now to ensure that future lettings will not be delayed or prevented because of the poor energy efficiency of their premises.

If you would like further advice on whether the Mees Regulations will prevent future lettings please contact Simon Tennant.

Simon Tennant

Partner