Covenant for indemnity did not extend to own legal or surveyor’s fees

Where the only relevant tenant’s covenant (clause 4.1) is an obligation “to indemnify the Lessor against all actions proceedings costs claims and demands in respect of any breach non-observance or non-performance” of the tenant’s obligations under the lease and a tenant fails to pay a £50 instalment of ground rent is the landlord entitled to charge a further £50 for a letter demanding payment of the arrears?

In Fairhold Freeholds No.2 Ltd v Moody [2016] the Upper Tribunal (Lands Chamber) said “no”:

“The essence of a contract or covenant of indemnity is that it is a promise by A to protect B from B’s liability to C. For a liability to arise under a covenant of indemnity the party to be indemnified must have come under an obligation to a third party, to meet a claim or demand or to answer some action or proceedings or incur some costs. The question in any case where it is sought to rely on such a covenant is whether the lessor has come under an obligation to make a payment to someone else “in respect of’ some breach of obligation owed to the lessor by the lessee: has A’s breach given rise to B’s liability to C? If the lessor has come under such an obligation the covenant requires the lessee to indemnify the lessor against the cost it has incurred in meeting that obligation.

…………..The “costs” in question are of the same type i.e. the costs of a third party as a result of the lessee’s breach, for which the third party is entitled to look to the lessor for reimbursement. A covenant of indemnity is not the same as a covenant to reimburse the lessor’s own costs incurred in taking steps to enforce the lessee’s obligations……..

I am therefore satisfied that clause 4.1 does not enable the appellant to levy a £50 administration charge or to recoup the costs of its own solicitors in preparing to enforce the respondent’s obligation to pay the ground rent. To the extent that the appellant was under any obligation to make payments to its agent or solicitor as a result of those steps being taken such obligations were not the result of the respondent’s failure to pay the ground rent, but of the appellant’s own instructions.”

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Very short term lettings breached “private residence” covenant

A long lease contains a covenant “not to use the leased property (or permit it to be used) for any purpose whatsoever other than as a private residence.”

If the long leaseholder advertises the property (a flat) for short term lets and grants a sequence of such lettings, is the leaseholder in breach of the covenant?

In Nemcova v Fairfield Rents Ltd [2016] the United Kingdom Upper Tribunal (Lands Chamber) said to avoid breaching the covenant, there must be a connection between the occupier and the residence such that the occupier would think of it as his or her residence albeit not for ever. “The occupier for the time being must be using it as his or her private residence.”

If the occupier is in the property for a matter of days (rather than weeks or months or years) that is a material pointer to the fact that the occupier is not using the property as a private residence.

To be used as the occupier’s private residence, there must be a degree of permanence extending beyond “being there for a weekend or a few nights in the week.”

Where a person occupies for a matter of days and then leaves the property it cannot be said that whilst occupying they were using the property as their private residence.

The occupation there would so transient that the occupier would not consider the property they were staying in as being their private residence even for the time being.

Each case is depends on it’s facts, relying upon the interpretation of the particular covenant against it’s factual background.

Based on the context in which this lease was granted, and the nature of the proposed relationship between the long lessor and long lessee and taking account the obligations entered into, the appellant had inevitably breached the private residence covenant by granting very short term lettings (days and weeks rather than months).

The tribunal said it was not possible to give a definitive answer to the question posed at the beginning of this piece save to say that ‘It all depends’.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Contribution towards element of composite development was lawful planning consideration

Planning law recognises the possibility that an application for planning permission may be for a development which includes a number of elements, a composite development. Here, the advantages of one element can be balanced against the disadvantages of another.

In Campaign To Protect Rural England (CPRE), R (On the Application Of) v Dover District Council [2015] China Gateway International (CGI) Limited (“CGI”) applied for planning permission for an extensive development on two sites on the western fringe of Dover. Namely:

(a) outline planning permission for:

(i) a very large residential development at Farthingloe;
(ii) a much smaller residential with hotel and conference centre development at Western Heights; and
(iii) pedestrian access and landscaping work between the two sites;

(b) full planning permission for:

(i) the conversion of existing buildings on both sites for a variety of purposes; and
(ii) the conversion of the Drop Redoubt at Western Heights into a visitor centre and museum.

Landowners agreed in a Section 106 Agreement to make a total payment of £8,132,499 towards a variety of purposes.

Objectors challenged a £5 million “heritage contribution” to be expended on the refurbishment of the Drop Redoubt and it’s conversion to a visitor centre and museum. It would not cover the whole costs.

Payments of £825,000, to assist making a countryside access area between the two sites, and £27,000, to afford a paved footpath between them, were also agreed.

CPRE said the heritage contribution of £5 million was unlawful and so should have been disregarded by the planning committee when determining CGI’s application for planning permission.

At all times material to this case the lawfulness of a planning obligation under section 106 fell to be determined by regulation 122 of the Community Infrastructure Levy Regulations 2010 which provided:

“(2) This regulation applies where a relevant determination is made which results in planning permission being granted for development.

(3) A planning obligation may only constitute a reason for granting planning permission for the development if the obligation is —

(a) necessary to make the development acceptable in planning terms;

(b) directly related to the development; and

(c) fairly and reasonably related in scale and kind to the development…..”

CPRE said where the planning obligation under a section 106 agreement was to make a payment of money for a specified purpose, “development” in regulation 122(2) meant that part of the development, for which planning permission is sought, which funds the contribution. Here it was the development of the Farthingloe site which would fund the heritage contribution for the Western Heights site. So it was unlawful and should have been disregarded.

Disagreeing with CPRE the High Court said “development” in regulation 122(2) meant the development in respect of which a “relevant determination”, namely the grant of planning permission under section 70 of the Town and Country Planning Act 1990, is made.

Planning permission here was granted for a composite development of the Farthingloe and Western Heights sites, and access land in between.

The lawfulness of the planning obligation to fund the heritage contribution must therefore be judged by reference to the development for which planning permission was granted; in other words the whole development, not solely or principally the Farthingloe site.

“Treated as a composite development, the questions posed by regulation 122 answer themselves. The heritage contribution was necessary to make the development acceptable in planning terms. Without it, the advantage which went a considerable way to balancing the disadvantage of development on an area of outstanding natural beauty could not be achieved. It was directly related to the development. It was to be expended on a part of the development for which planning permission was given, the restoration of the Drop Redoubt and the creation of a visitor centre and museum. It was fairly and reasonably related in scale and kind to that part of the development — at least that sum was required to fund it — and also to the development as a whole, which was understood, rightly, by all to be a major scheme.”

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Retrospective planning consent too late for DIY Builder VAT refund

Section 35 of the Value Added Tax Act 1994 (“VATA”) says a person constructing a building designed as a dwelling can claim a refund of VAT from HMRC provided that the work undertaken is “lawful and otherwise than in the course or furtherance of any business”. To be “lawful” the work must have been carried out in accordance with “statutory planning consent” that has been granted in respect of that dwelling (note (2)(d) Group 5 schedule 8 VATA).

The refund claim must conform to regulation 201 of the Value Added Tax Regulations 1995 (“VAT Regulations”) which, insofar as relevant to the case that follows, provides:

“A claimant shall make his claim in respect of a relevant building by—

(a) furnishing to the Commissioners no later than 3 months after the completion of the building [the relevant form for the purposes of the claim] containing the full particulars required therein, and

(b) at the same time furnishing to them—

…………………….

(iv) documentary evidence that planning permission for the building had been granted”.

In the First-tier Tribunal (Tax) case of Reynolds v Revenue and Customs [2016] a proposed dwelling with only planning permission for an extension and extra storey was in fact required by the building inspectors to be demolished and restarted from scratch because the foundations would not be adequate.

The tribunal said the legislation had to be construed strictly and:

– the demolition and rebuilding of the property was not in accordance with the planning permission then in force and

– the retrospective planning permission for the more extensive works which actually occurred, was not provided to HMRC within three months of completion of the property as specified by regulation 201 of the VAT Regulations.

“…..the legislative requirements for claiming a VAT refund are strict and HMRC are allowed no discretion to accept something less than the prescribed documentation, neither can they extend the time limit. Equally it is not open to us to waive or modify these requirements, even if they lead to what appears to be an unfair result. As a Tribunal created by statute the FTT, unlike the High Court does not have an inherent jurisdiction, rather its jurisdiction is defined and limited by legislation and it does not extend to the power to override a statute (or supervise the conduct of HMRC).”

This blog has been posted out of general interest and does not replace the need to get bespoke legal advice in individual cases.

Landlord Development permitted despite conflict with RTM Company’s Functions

Can a landlord develop an additional flat on an apartment block roof where the management of that roof has been transferred to a “right to manage company” (“RTM Company”)?

In a recent county court case the court found that the proposed development would conflict with the RTM Company’s management functions under Part II, Chapter I of the Commonhold and Leasehold Reform Act 2002 but said that the proposed development was permissible so long as the landlord took all reasonable steps to minimise that disturbance both during and after the development.

The RTM Company has been allowed to appeal to the Court of Appeal.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Planning: Failure to identify development as inappropriate to area

In Lensbury Ltd, R (On the Application Of) v Richmond-Upon-Thames London Borough Council [2016] a development at Teddington Weir, Teddington Lock, Teddington was in an area designated as Metropolitan Open Land (“MOL”).

The London Plan 2015 applied – in particular policy 7.17 which provided as follows:

“Policy 7.17 Metropolitan Open Land

Strategic

A. The Mayor strongly supports the current extent of Metropolitan Open Land (MOL), its extension in appropriate circumstances and its protection from development having an adverse impact on the openness of MOL.

Planning decisions

B. The strongest protection should be given to London’s Metropolitan Open Land and inappropriate development refused, except in very special circumstances, giving the same level of protection as in the Green Belt. Essential ancillary facilities for appropriate uses will only be acceptable where they maintain the openness of MOL.”

On appeal the Court of Appeal said in granting planning permission the Council had:

“gone badly wrong in its consideration of the planning merits of the application for development in this case. It failed to identify the development as inappropriate development in an area of MOL requiring the strongest protection against such development. It failed to consider whether, notwithstanding the inappropriateness of the development, “very special circumstances” exist to justify the grant of planning permission, and it is far from obvious that they do. On the materials available before the court.”

Policy 7.17 said without “very special circumstances”, planning permission should be refused:

“to safeguard important open areas from “death by a thousand cuts”, by a series of planning permissions being granted for developments each apparently reasonable in itself but having a serious cumulative detrimental effect on the important public interest in the continuing openness of MOL and the Green Belt.”

Accordingly, “the Council failed to appreciate that the planning application was for development which was inappropriate in the context of MOL and therefore failed to ask itself the critical question, whether very special circumstances existed which justified the grant of planning permission.”

Nor was it appropriate for the court to execise its discretion not to quash the decision:

“In light of the strictness of the policy in policy 7.17 and the importance of the public interest it protects, I do not think that it can be said that it is highly likely that the outcome for the Appellant would not have been substantially different if the conduct complained of (i.e. failure to understand and apply policy 7.17 correctly) had not occurred.”

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Unremoved minor tenant’s works frustrated break notice

Where a break clause is conditional on the tenant providing vacant possession to the landlord on the break date the property must be returned without any chattels left there by the tenant which might substantially interfere with the beneficial occupation of the property.

The rule applies with equal force to fixtures and fittings that have become part of the property itself, where they formed part of alterations or additions and the tenant is obliged to the landlord, whether by licence for alterations or otherwise to remove them, in time for the break date.

So in the recent Leeds High Court case of Riverside Park Ltd v NHS Property Services Limited [2016] at the break date there were left:

A large amount of partitioning

Kitchen units

Floor coverings

Window blinds

An intruder alarm and

Water stand pipes within a large meeting room.

These were not there when the Lease was granted and had been brought into the property by the tenant under a Licence for Alterations made between the landlord and the tenant and dated the same day as the Lease.

Also a number of key fobs issued to the tenant at the start of the Lease had not been returned by the tenant and that the intruder alarm had not been deactivated by the break date.

The court said:

“an alarm and kitchen units have been held to be fixtures but in each case it is a question of fact. The kitchen base units are free standing and are easily removed. The wall units are fixed only by screws to the perimeter wall. In both cases the degree of annexation is negligible. I am persuaded that these are chattels ….. my view is not changed by the fact that the kitchen units are served by a water supply. That presumably emanates from pipe work under the raised floor. The expert makes it clear that the base units are easily removed, I believe that I am entitled to conclude from that that the water supply will therefore be capable of being capped without injury to the Premises. If it were otherwise it is difficult to see how the base units could be easily removed. As for the stand pipe in the meeting room, this too is seen by the expert as a free standing arrangement removable without difficulty.

As for the alarm, it is apparently a second alarm installed by the Defendant to supplement one actually installed by the Claimant. It is difficult to see such an alarm as affording a lasting improvement to the Premises. It seems to me to be an instalment for the specific convenience of the Defendant……….

on the assumption that the Works do not form part of the Premises, the Claimant has established that vacant possession was not given and that accordingly the break clause was ineffective………

…..even if I had found that the Works and particularly the partitions were not chattels but fixtures or otherwise formed part of the Premises, I would have found that there was an obligation to remove them arising out of the fact that the licence to erect them had ceased to have effect and that their presence in the Premises on the date of purported termination of the Lease meant that vacant possession of the Premises was not given.”

Many large retailer tenants will not accept the words “vacant possession” in a break clause. We can see why.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice individual cases.

Mortgages prevented lease surrenders which were basis of guarantor release

The Co-Operative Bank Plc v Hayes Freehold Ltd & Ors [2016] was a preliminary hearing in respect of a striking out/summary dismissal application. Here a head lease was granted out of a freehold which was now mortgaged to The Coop Bank. The mortgage prohibited the mortgagor accepting a surrender of a lease without the Coop Bank’s consent.

An underlease had been granted out of the head lease. The underlease was also mortgaged to The Coop Bank so it could not be surrendered without the Bank having released it from that mortgage.

There was a composite deal in which both the head lease and the underlease were purportedly surrendered without the consent of The Coop Bank.

Clause 6 of the surrender of the underlease purportedly released the undertenant and it’s guarantor from further compliance with the underlease.

The High Court ruled that both surrenders were ineffective as the Bank’s consent had not been obtained.

The court also said that the fundamental assumption behind Clause 6 was that the surrender package would be effective. That assumption being disappointed the underlease guarantor remained bound by the guarantee in the underlease.

The Coop Bank therefore had an arguable case in support of it’s interests that must go to full hearing.

The blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

World Heritage Site Planning: Council did not breach duty to notify Government

Sub-paragraph (2) in paragraph 18a-036 of the Planning Practice Guidance requires information to be provided to enable the Government to comply with it’s obligations, under the 1972 World Heritage Convention, to warn the World Heritage Committee of any proposals which may have an adverse effect on a World Heritage Site’s Outstanding Universal Value.

In Save Britain’s Heritage, R (On the Application Of) v Liverpool City Council & Anor [2016] the applicant said the respondent had failed to do this in breach of the above and the World Heritage Committee’s Operational Guidelines. The site lay within the buffer zone of the World Heritage Site and included The Futurist Picture House.

The main issue before the Court of Appeal was whether the city council was, or was not, required, to notify the Department for Culture, Media and Sport of the proposal, or at least to consider doing so, in the light of the guidance in paragraph 18a-036 of the Planning Practice Guidance.

The applicant said the city council was required by that guidance to at least consider referring the planning application to the Department for Culture, Media and Sport (“the DCLG”), and, through that department, the World Heritage Committee, as a proposal that “may affect” the Outstanding Universal Value of the World Heritage Site. The applicant said the words “may affect” must mean “may affect in a negative, neutral or positive way”, not merely “affect adversely”.

The court said the words “may affect the Outstanding Universal Value” meant “may have an adverse impact on the Outstanding Natural Value” – the kind of harm to a World Heritage Site or it’s setting that is contemplated in the second part of paragraph 18a-036.

To interpret the words “may affect” as meaning “may affect in a negative, neutral or positive way” would not reflect:

– the concept of effects requiring “appropriate solutions to ensure that the Outstanding Universal Value is fully preserved”, or

– the policies for the conservation of heritage assets, including World Heritage Sites, in the National Planning Policy Framework (“NPPF”)

and it would be at variance with the equivalent previous guidance in paragraph 7.12 of the document “The Protection & Management of World Heritage Sites in England” published by English Heritage and the two government departments in 2009 in response to paragraph 172 of the World Heritage Committee’s Operational Guidelines – which in turn referred to “an adverse impact on Outstanding Universal Value”.

Whether a particular proposal “may affect” Outstanding Universal Value so as to justify informing the World Heritage Committee was a matter for the Government, with the advice of Historic England. But such a discretion for the Government did not imply an obligation for a local planning authority to consult Historic England and the DCLG on any proposal that the authority considered might affect Outstanding Universal Value whether harmfully or not.

Where the guidance referred to the action that local planning authorities can take, it was not in mandatory or even directory terms, but encouraging or, “advisory”.

If a local planning authority did not do what was “very helpful”, it could not be said to have breached any requirement in the guidance or any relevant policy in the NPPF.

There was a sufficient paper trail to show that the City Council had considered the position.

By consulting Historic England first in March 2015 and then in June, the city council enabled them to consider, at a sufficiently early stage, whether the proposed development would have an effect on the Outstanding Universal Value of the World Heritage Site, and, if necessary, to bring the proposal to the attention of the DCLG so that a view could be taken on referral to the World Heritage Committee.

Historic England either had no concerns or were insufficiently concerned about the application so as to advise the DCLG to call it in. In deciding not to call-in the application the Secretary of State must have considered any effect on the World Heritage Site or it’s setting.

There was nothing to suggest that the DCLG would have onward referred the application in any event. Not every proposal for development, that could have an effect upon Outstanding Universal Value, could be referred to the World Heritage Committee.

The fact that the city council did not:

– directly consult the DCLG, or indeed notify it of the proposal, until 25 August 2015, was not a material failure to follow the guidance in paragraph 18a-036;

– refer to the guidance in paragraph 18a-036 in it’s correspondence with Historic England and the two government departments did not mean that it acted inconsistently with that guidance. The question was:

“not whether it explicitly or even consciously followed the guidance, but whether it failed to act in accordance with the guidance in such a way as to vitiate it’s decision on the application for planning permission. In my view it plainly did not. I should add that there is no evidence to suggest that it was unaware of the advice in paragraph 18a-036. But in any event, whether knowingly or not, it acted consistently with that advice.”

……. I reject the concept that the effect of new development on the setting of a World Heritage Site must necessarily be an adverse impact, or indeed an impact of any kind, on it’s Outstanding Universal Value. That concept is not to be found in government policy in the NPPF, or in the Planning Practice Guidance. ……. development in the setting of a heritage asset, in this instance development in the buffer zone of a World Heritage Site, will bring about some physical and visual change within the setting. Such change may potentially affect the “significance” of the heritage asset, in this instance the Outstanding Universal Value of the World Heritage Site. I emphasize “potentially”. There might or might not be an impact on Outstanding Universal Value, and the impact might or might not be adverse. Whether the impact, if harmful, is such as to militate against the grant of planning permission is ultimately a question for the decision-maker to determine in the light of relevant policy, including policy in the NPPF. This will be a matter of fact and judgment in every case.”

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Liability under the Environmental Liability Directive

The case of Seiont, Gwyrfai And Llyfni Anglers’ Society v Natural Resources Wales [2016] required the Court of Appeal to consider the meaning of the concepts of “damage” and “environmental damage” in Directive 2004/35/EC on environmental liability as it applies to the prevention and remedying of environmental damage (“the Environmental Liability Directive”).

The anglers said the Environmental Liability Directive imposed liability “not only for pollution that makes the existing environmental situation worse, but also for pollution, such as continuing emissions [whose effect] is to retard or prevent the natural recovery of the environment from damage previously inflicted upon it.”

The court said this was impossible to reconcile with the unmistakeable purpose of the Environmental Liability Directive, which embodied the “polluter pays” principle.

“…the obvious intent and effect of those provisions is to require an operator not to cause the condition of the environment to fall below the condition it would have been in at the time of, and but for, his action or failure to act – its “baseline condition”. They do not require the operator to go further, by taking steps to remedy pre-existent damage to the environment – whether damage to natural resources or damage to natural resource services – or by ensuring or securing the improvement of such natural resources or natural resource services from their “baseline condition”. They do not bite upon the acts or omissions of an operator the effect of which is merely to cause the environment not to improve or improve as fast as it otherwise would, or – as [the anglers’ barrister] said in argument – to slow its “potential” improvement.”

“…. the concept of “damage” in article 2(2) of the Environmental Liability Directive, … means a measurable deterioration in the existing state of the “natural resource” or the “natural resource service” in question. Both a measurable “adverse change” in a “natural resource” and a measurable “impairment” of a “natural resource service” involve a measurable deterioration to that “natural resource” or “natural resource service”, as the case may be, from its “baseline condition”, as defined in article 2(14). Where the “impairment of a natural resource service” is concerned, this concept of “damage” applies, through the definition of “natural resource services” in article 2(13), to any “impairment” to “the functions performed by a natural resource for the benefit of another natural resource or the public”. The concept of “environmental damage” in article 2(1), where it concerns “(a) damage to protected species and natural habitats …” and “(b) ‘water damage'”, imports and depends upon that concept of “damage”. This, I believe, is the only interpretation of the concepts of “damage” and “environmental damage” compatible with the other relevant provisions of the Environmental Liability Directive.”

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.