Real Estate monthly digest – December 2019

Supreme Court confirms relief from forfeiture may be available for breach of a licence

The Supreme Court recently held that relief from forfeiture was available in respect of a valuable perpetual licence to discharge surface water and trade effluent into a canal, which had been terminated for non-payment of the licence fee. Although the Court noted that relief would not be available for every property licence, the case usefully highlights that in relation to land relief from forfeiture can extend beyond landlord and tenant situations.

Full details of this case are here.

The Manchester Ship Canal Company Ltd v Vauxhall Motors Ltd [2019] UKSC 46

Electronic Communications Code - 3 recent cases

As it approaches its second birthday, three more significant decisions for those dealing with rights under the Electronic Communications Code (the Code):

Operators have a right to access potential sites to undertake surveys

In good news for operators under Code the Court of Appeal has confirmed:

• The right to undertake a preliminary survey so that an operator can determine a site's suitability for the installation of electronic communications equipment is a Code right.

• The list of Code rights at paragraph 3 of the Code is a menu of rights which operators can choose from. An operator can therefore request access to undertake a preliminary survey as a standalone Code right. If an occupier refuses an operator can make an application for the imposition of this right.

• The operator can apply for an access to undertake a preliminary survey as an interim Code right (which requires a lower standard of proof than a permanent Code right). Applications for interim code rights are likely to be cheaper and quicker.

• It is not necessary for an operator to be seeking permanent Code rights in order to ask for an interim Code right. A freestanding application for an interim Code right to undertake a preliminary survey can be made.

In this case the University of London had initially refused to allow Cornerstone Telecommunications Infrastructure Ltd (CTIL) access to inspect a building's suitability as a site for electronic communications equipment.

The University of London v Cornerstone Telecommunications Infrastructure Ltd [2019] EWCA Civ 2075

Upper Tribunal could not impose a Code agreement on a landowner who was not in occupation of a site

A second Court of Appeal decision will be viewed less favourably by operators. In, Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd [2019] EWCA Civ 1755, the Court of Appeal confirmed that the Upper Tribunal did not have jurisdiction to impose a Code agreement on a landowner who was not in occupation of a piece of land and therefore not in a position to grant rights. In the case there was already a Code operator in occupation of the land where the new operator was seeking Code rights.

As Code rights may only be conferred by the occupier of the land, the Court of Appeal suggested that, in the case before it, the practical way forward was for the existing occupier/operator, Vodafone, to enter into an agreement with the new operator CTIL. Under the Code, CTIL could then try and obtain the landowner's agreement to be bound by this new agreement with Vodafone. If the landowner refused, CTIL could then seek an order of the Court to bind the landowner. Any additional rights needed beyond those which Vodafone could provide (eg which related to land where the landowner was the occupier) would need to be agreed with the landowner or failing that an order sought by the Court imposing them. Vodafone has a 50% stake in CTIL and intended to give up its rights once the agreement to CTIL was in place. However, this will be a more convoluted route than was expected in order for CTIL to become the operator at the site.

Further points of note:

• The Court of Appeal held that the Upper Tribunal had been correct to hold that 'whether a person is an occupier for the purposes of the Code is "a question of fact rather than legal status; it means physical presence on and control of the land."'

• In commenting on the Code rights listed at paragraph 3 of the Code, in line with the view that the rights listed are a menu, the Court of Appeal also noted the Code does not provide for the rights that an operator must have, noting it instead that the list of rights sets limits to the rights the operator may have under the Code with the agreement of the occupier.

• Importantly, the Court of Appeal highlighted that the renewal or variation of rights by an operator in situ will principally be governed by part 5 of the Code which covers termination and modification of agreements and not part 2 (which deals with the conferral of Code rights and their exercise) or part 4 (which deals with the power of the Court to impose an agreement).

Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd [2019] EWCA Civ 1755

Telecoms operators holding over sites under existing protected tenancies must first deal with renewal of those agreements under the Landlord and Tenant Act 1954 and not the new Code

In a third case, CTIL was holding over under a 1954 Act protected tenancy which had been granted in 2002, prior to the new Code coming into force. CTIL argued it should have the choice either to seek a new tenancy under the Landlord and Tenant Act 1954 (the 1954 Act) or to apply to the Tribunal for the imposition of a Code agreement under Part 4 of the Code. This was the first time the Upper Tribunal had to consider the relationship between the new Code and the 1954 Act.

It was held that the Upper Tribunal did not have jurisdiction under part 4 of the Code to impose a new Code agreement on an operator and a landowner where the operator was already in occupation of the land under a subsisting agreement. This case was heard after the Court of Appeal judgment in Cornerstone Telecommunications Infrastructure Ltd v Compton Beauchamp Estates Ltd and the UT applied the Court of Appeal's finding that the renewal or variation of rights by an operator in situ will principally be governed by part 5 of the Code.

However, in this case, the Upper Tribunal found CTIL could not use the Code to renew its tenancy at all, but rather it should renew under the 1954 Act procedures as it was an existing 1954 Act protected tenancy. This is because the transitional provisions in relation to the new Code provide that part 5 does not apply to subsisting agreements which have the protection of the 1954 Act. The Upper Tribunal noting 'the existence of the Code and the consideration settled in the open market for new and old Code agreements will all be matters capable of being taken into account by the Court when determining the terms and rent for tenancies renewed under the 1954 Act (although rents agreed in the shadow of the o-network assumption might be of limited assistance). Apart from that, the operators' continuing exposure to the less favourable regime of the 1954 Act is simply a consequence of Parliament's acceptance of the Law Commission's recommendation that the new Code should not apply retrospectively.' It also noted that if, following a renewal under the 1954 Act, the tenancy was no longer one to which the 1954 Act could apply (because its primary purpose was to grant code rights) then the deeming provisions of the Code will see the tenancy become a Code agreement. The Upper Tribunal concluded that when that new tenancy is close enough to its contractual termination the operator may give six months' notice under paragraph 33 and seek renewal under Part 5 of the Code.

Cornerstone Telecommunications Infrastructure Ltd v Ashloch Ltd and another [2019] UKUT 338 (LC)

Queen's speech - key announcements affecting property in England

Following the Queen's speech the Ministry of Housing, Communities & Local Government has issued a press release highlighting:

• Plans to implement a lifetime deposit scheme which will see a tenant's deposit move with them from property to property.

• Confirmation the Government will proceed with plans to abolish no fault evictions. However, this will be combined with new powers to 'strengthen the rights of landlords to gain possession of their property through the courts when they have a clearly valid reason to do so'.

• A continued focus on affordable housing including plans to allow councils to use housing developers' contributions to discount homes by at least 30% for local people and key workers. The discount will be secured through a covenant so the homes will remain discounted in perpetuity.

• Confirmation the Government will proceed with leasehold reform including legislation to ban leasehold houses and reduce ground rents to zero. It will look to reinvigorate commonhold and Right to Manage.

• Reform of building safety laws and a New Home Ombudsman to be introduced.

• A commitment to a fundamental review of business rates.

• A Planning White Paper will be published.

• An English devolution white paper will be produced.

Further detail on these proposals is set out in the background briefing notes to the Queen's speech.

A landlord exercising CRAR will waive the right to forfeit a lease

Commercial rent arrears recovery (CRAR) replaced the common law remedy of distress in April 2014. In this case, the Court of Appeal confirmed that just as levying distress would have waived a landlord's right to forfeit a lease, so will a landlord's exercise of CRAR.

T was the tenant under a 21 year lease of a shop in Teddington. The lease was granted in 2013 at a rent of £15,000 per annum. In 2015 T fell into arrears. The landlords instructed enforcement agents to exercise CRAR and they attended the property to do so on 1 February 2016. The amount owed was paid by T to the enforcement agents on 4 February 2016. On 12 February 2016 the landlord purported to forfeit the lease by peaceable re-entry.

T then issued proceedings against the landlord and obtained a declaration that the landlord's purported forfeiture of the lease was unlawful and an order for damages for trespass and breach of covenant.

The matter found its way to the Court of Appeal where the Court had to decide whether the landlord's exercise of CRAR waived its right to forfeit the lease for the outstanding arrears of rent. The Court concluded it did, finding:

• CRAR in principle amounts to an unequivocal act confirming the landlord's decision to affirm the continuation of the lease, just as the levying of distress at common law had done. The Court of Appeal noted that waiver of forfeiture is a common law principle, the conditions of which had not been altered with the statutory introduction of CRAR. In short, a landlord has a choice whether to forfeit a lease or affirm it.

• The landlord could not rely on the fact it had incorrectly followed the procedure for CRAR, to argue there was no CRAR and therefore no waiver. Objectively, the entry of the enforcement agents and seizure of T's goods were consistent only with an intention on the part of the landlord to treat the lease as continuing. The Court noting the landlord's plainly intended to exercise CRAR.

• s.210 Common Law Procedure Act 1852 provides the landlord with a statutory defence to a claim of waiver where there is six months or more rent in arrear, should the landlord bring proceedings for possession under that section. The Court rejected the landlord's argument that it did not matter whether the landlord actually intended, at the time of exercise of CRAR, to bring proceedings for forfeiture pursuant to that section. The Court noted that such a reading would abolish waiver of forfeiture in relation to the exercise of CRAR in all cases where six months or more rent was in arrear at the date of the exercise of CRAR and in effect substantially re-write the section.

Brar v Thirunavukkrasu [2019] EWCA Civ 2032

Brexit: the tax implications

An overview of the possible tax implications of Brexit can be found here.

Election analysis

What sort of PM will Boris Johnson be now that the numbers are in his favour? Martin Shah and Andy Hartwilll explain more in a video from our election series on LinkedIn.