[PPT] - a ~17~V~r // * 1 rket a TRANSPORT P~ ~~ fr~6GI~ ~ N f~TRucruaf PowerPoint Presentation

SLIDE 1

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SLIDE 3

Modernisation

"As

per the

existing lease

but subject

to

reasonable modernisation"

What

does

this mean?

What

guidance

has

the Court given

as

to

"reasonable modernisation"?

What
ther

guidance/strategy

can be used

to

secure

favourable

terms?

.:.~

.,

SLIDE 4

Term

Commencement

On

the

coming

to

the

end

f

the

current tenancy.

Length

Maximum

term

f

15

years

therwise

term must

be

"reasonable

in all

the circumstances".

Difficulty Landlord may

face

in re-letting the

Property

Length
f

current

tenancy

Tenant's continued 1954

Act

protection

Rental market

as a

whole and

possibility of falling rents

Landlord's

and

Tenant's plans

for

the Property

Limited evidence that

Tenants

forced to take longer leases than they

wanted

SLIDE 5

Term

Iceland

v Castlebrook (2013) Tenant

Needed

flexibility

Store

was

underperForming

and

in a

poor

location

Market

conditions

were

unsettled

Landlord

Short

term would adversely

affect

its reversionary

interest

Supermarket

leases

were

normally granted

for

longer

terms

Judge

Accepted

the Property

was

dated

with a limited life and market

Landlord produced poor

evidence

Tenant's

national trading performance

Ordered

a 10

year term

with no

break

SLIDE 6

Tenant Break

Option

Limited Case

Law

Company

Policy

not

an

acceptable reason

for

a

break

Relocation must

be "on

the cards"

r

a

"real possibility"

SL. h ..5

SLIDE 7

O'May

v-

City

f

London

Real

Property

Company

Limited

(1983)

In considering

the

terms

f

a

renewal lease

the

Court

must "have

regard

to

the

terms

f

the current

tenancy

and

to

all

relevant

circumstances"

Existing lease

not

petrified

It is

for

the

party

seeking

to

depart from the

current

lease

terms

that

must

show

that

the

change

is reasonable

and

fair

Can

the

ther

party

be compensated

for that

change.

} ~:

SLIDE 8

Other terms

Alienation

Landlord

and Tenant (Covenants)

Act

1995

Authorised Guarantee

Agreements

Pre-emption

Rights

Guarantors

Existing guarantors

New

guarantors

SLIDE 9

Other terms

contd.....

User

Widening
f

user clause

unlikely to be

accepted

New

restrictions

n

user

Keep

Open

Competition Law

Martin Retail

—v-

Crawley

Borough

Council (2013)

Landlord

looking to

impose

prohibition against

convenience

store

use

to protect

nearby convenience

store

Tenant

looking to

widen user

to allow

convenience

store

use

Court

held Landlord's

proposed

restriction anti-competitive

and

allowed the

Tenant

to

widen

its user

clause

n

basis

Tenant agreed

to pay additional rent

SLIDE 10

Other terms

contd.....

Repair

Responsibility for structure (short

—v- long lease)

Landlord's

right

to self-help

Property

already

ut
f

repair

Alterations

Centre

standard Service

Charge

Repair

and maintenance

f

the

Building

Soft

services

Costs

SLIDE 11

Other terms

contd.....

Rent

review

Party

looking to

depart from the

existing lease

must

prove

that

change

is fair

and

reasonable

Compensated

by

increase/decrease

in the

rent

Market

norm

Estate Management

SLIDE 12

Other Tools

available

to

Retailers

Code

for

Leasing Business Premises (2007)

Industry

sanctioned

collaboration between

advisors

to

Landlords

and

Tenants

Checklist

for New

Lease and Renewals as

to

what

is "fair

and

reasonable"

Lip

Service

to

date but worth

considering:

Impact
n

value

Disputes
Threat
f

Legislative Change

SLIDE 13

Other Tools

available

to

Retailers

contd.....

The RICS Code

f

Conduct

in Commercial

Service

Charges

"best

practice"

all regulated practitioners

should have regard

to

the

Code

Modernise

service

charge

n

renewal

Adjustments

should be

made

to

the

rent

Interaction with O'May

Green Leases

Court

sympathetic

to

removing

barriers to

environmental

improvements

Increasing burden
n
ccupiers

either

through

direct

bligations
r

service

charge

.~:~

~'

~'.1

SLIDE 14

Strategy

Consider

your

existing Lease to understand how

the

terms

sit with your

current

ccupational

requirements

Avoid

agreeing the term

and

rent without

first discussing

principles

f

modernisation

Consider

the impact

f

a

"Landlord

friendly"

Lease

n

rental

value

Use

f

model

sets

f

heads

f

terms

~~:

SLIDE 15

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SLIDE 16

J

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Lease Renewals

Mark

Barley

14 May 2015

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SLIDE 17

Introduction

Landlord

and

Tenant Act

1954

Procedure

regulating business

tenancy renewals

Need

for

issue

f

proceedings

Tight

timescales

c.f

dilapidations

claims

(12

years)

Early

resort to

the court process

c.f

Practice Direction: Pre-Action Protocol

.h

s

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SLIDE 18

Introduction

contd.....

1954 Act

procedure

—formalisation

f

negotiation?

Exchange
f

claim and

defence

Formal

exchange

f

travelling draft

leases

Schedule
f

unagreed terms

Witness

evidence

Expert

evidence

SLIDE 19

Introduction

contd.....

Steps

parties

would

take

anyway

if negotiating

H

OTs

Solicitors'

travelling drafts

Agents'

advice

n

rent levels

.~.,

::.:.~.

.., :::.~

SLIDE 20

Introduction

contd.....

Court

process

is costly

verlay
Need

to have

fall-back

procedure

But.....

Parties
bliged

to

enter

Court procedure

(and

its costs)

quicker than they

may

wish.

.:.,:

.

i

~.,~

SLIDE 21

Introduction

contd.....

Not

arguing

for

abolition

f

1954 Act

Stood

test

f

time

Well-known

process market

is used

to

working

to

Need

for

framework by

which unagreed issues

can be

resolved.

But.....

:

ti

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~:<:;

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::

.:.ti,.

SLIDE 22

Introduction

contd.....

How

can

time

and

costs

f

the process

be avoided?

For

Tenants

in a rising market,

time

is money

'•:5::

SLIDE 23

Introduction

contd.....

Four

possible strategies

1

Early

renewal

2 Calderbank/Part

36

Offers

3 PACT 4 Mediation

.: ;ti.

~~~ti

SLIDE 24

Early

renewal

Start

renewal process

ff

early

Say

two

years

prior

to

Lease

termination

1954

Act process cannot

start earlier

than

12

months

prior

to Lease termination

Possible to agree renewal

terms

before

need

to

submit

to

Court

arises?

SLIDE 25

Early

r e n e w a l

contd.....

Rising market considerations

T

i m e a n d

m

n

e y

for

Tenants

Valuation

d a t e

is date

f

t r i a l

Trial could be

12

m

n

t h s

after process

has

s t a r t e d

Rent

set

for

w h

l

e

term

Lower

r e n t

if Lease

agreed

e a r l i e r v..

: : : : . r

SLIDE 26

Early

renewal

contd.....

Possible

ADR

(PACT/mediation)

at early

stage

Downsides:

Un-co-operative

Landlord

Landlord

sees

process

as

'regear'

Extra

consideration

for early

renewal

No

Court process

=minds

not

focussed

n

agreement?

SLIDE 27

Calderbank/Part

36 Offers

Way

f

using costs pressure to

persuade

un-co-operative Landlord to

compromise

Threat

f

Landlord having to

pay

costs

if

ffer

not

later

beaten Part

36

marginally

more

powerful

Penalty

interest

Indemnity

costs

10%

bonus

costs

Only

fully works

if Tenant

is

claimant

.:~ti..

_

~~~:~..

~~::

.>::

SLIDE 28

Calderbank/Part

36 Offers

contd.....

Can

be

made

at

any

stage

Probably

inappropriate to be involved in proceedings without considering

such

ffers
Ideally
ffer

accepted

to bring proceedings to early

end and

curtail costs

At

least

may

provoke

further

discussions

towards

settlement.

SLIDE 29

PACT

Professional

Arbitration on

Court

Terms RICS/Law

Society

promoted

alternative to

Court process Stay

f

proceedings

to allow

PACT

to proceed

SLIDE 30

PACT

contd.....

Advantages

Lease

terms/rent

decided by

property expert

Likely

to be

quicker

More

flexible

Possible

at

any

time

(before/after

start

f

proceedings)

SLIDE 31

PACT

contd.....

Disadvantages

Possibly

more

costly

Still need

to prepare

like

for

the Court process

Pay

fees

f

third party

Difficulty of

agreeing

terms

f

reference?

SLIDE 32

PACT

contd.....

PACT

take u

p?

How

many

have been

involved in a

PACT

reference?

Is PACT

really

a

popular

ption?

~~.::.

SLIDE 33

Mediation

Mind-set
f

industry?

Result
f

not appreciating how mediation

works?

RICS

guidance

note

n

mediation

SLIDE 34

Mediation

contd.....

Mediation (generally) contrasted with

arbitration

Consensual

process

Structured negotiation
No

compulsion

No

end

decision

No

limit

n

possible

utcomes
Not

necessary

for

extensive preparation

Fewer

lawyers?!

SLIDE 35

Mediation

contd.....

Mediation

f

1954 Act

claims

Does

not prevent

need

for

proceedings

if time

limits

require

Start

well before

deadline?

Stay
f

proceedings?

Structure

for

the

negotiating process

Range
f

possible

utcomes
Specifically mentioned

in RICS

note.

Unlikely

to

get lease completed

n

the

day

.....

..:r.

SLIDE 36

Mediation

contd..... Why

not

tried more

ften?
Unfamiliarity
No

'brand'

awareness

like PACT

Possible

wasted

exercise?

Choose

right

time

to mediate

.

X.. 1

SLIDE 37

Conclusion

Some

process

must be gone

through

to

settle a

lease renewal

Time

is money in a rising market

Court

process

itself will incur

costs

and

take time

Consider

alternative strategies

What

about mediation??

SLIDE 38

I

.

~

Legal Tips

for Retailers

Renewing Leases

i n

a

Recovering Market

Mark

Barley

and

Nikki

Powell

14 May 2015

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