Monthly Archives: September 2016

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.