Public Sector property update Tuesday 3 rd July 2018 Newcastle | - - PowerPoint PPT Presentation

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Public Sector property update Tuesday 3 rd July 2018 Newcastle | - - PowerPoint PPT Presentation

Ward Hadaway Guest WiFi Email: guest@wardhadaway.com Password: F1rew0rk$ Public Sector property update Tuesday 3 rd July 2018 Newcastle | Leeds | Manchester 2 Housekeeping Ward Hadaway Guest WiFi Email: guest@wardhadaway.com Password:


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Newcastle | Leeds | Manchester

Public Sector property update

Tuesday 3rd July 2018

Ward Hadaway Guest WiFi

Email: guest@wardhadaway.com Password: F1rew0rk$

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Newcastle | Leeds | Manchester

Housekeeping

2 Ward Hadaway Guest WiFi Email: guest@wardhadaway.com Password: F1rew0rk$

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Compulsory Purchase Update – reform agenda and case law

Frank Orr, Consultant

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Compulsory Purchase Update » Ongoing reform of system » Boland – living in a no-scheme world. A brief case study: what does the cancellation assumption mean? » Case Law Update » Khan » Bishop » Why » Sharp » Cronin

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Compulsory Purchase Overview » Compulsory acquisition of land or rights over land by Acquiring Authority » Sources of law » Enabling statutes contain powers to acquire for specific purpose » Compensation Code »Statute (LCA 1961, CPA 1965, LCA 1973, ALA 1981, TWA 1992) »Case Law » Guidance on Compulsory Purchase and Crichel Downs Rules (October 2015) » Process/procedure – prescribed forms and process » Challenge to confirmation - S 23 ALA 1981 » Implementation » Compensation – Upper Tribunal Lands Chamber

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Reform agenda changes effective from September 2017 Neighbourhood Planning Act 2017 ("NPA") » Statutory basis for "no-scheme" rule » Second-bite compensation » Disturbance compensation » Model compensation form Changes re "no-scheme" principle and disturbance apply to all CPOs confirmed on or after that date. Statutory footing for Pointe Gourde or no-scheme assumption. More to follow re Boland case and the no-scheme world

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Reform agenda changes effective from September 2017 Second bite compensation » Repeal of Part 4 LCA 1961. Claimants no longer entitled to additional compensation where planning permission approved within 10 years of compulsory acquisition. » Prospects of obtaining planning permission should have already been taken into account when assessing compensation as part of the application. » Disturbance compensation » Previously odd situation in that parties with a minor interest in land (eg licence) Licensees potentially entitled to more compensation than one with tenancy since it was assumed tenant's interest would immediately be terminated. » Now prospect of continuation or renewal must be taken into account.

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Reform agenda changes effective from September 2017 Model claim form and guidance » AAs advised to send form to potential claimants at earliest opportunity » Claimants advised to complete and return asap » Not final statement – can be updated, supplemented or amended » Costs implications if accurate information not provided in timely manner » Practical effect

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Reform agenda – changes effective from 6 April 2018 Housing and Planning Act 2016 ("HPA") Timetable for confirmation of CPOs New s14B ALA – requires Secretary of State to publish timetable in relation to steps to be taken when confirming a CPO Guidance updated to include target timescales Confirmation by Inspector – changes apply to any CPOs submitted on

  • r after 6 April 2018

Claims for compensation Allows further regulations to be made in relation to the specific information that must be provided by a claimant when giving notice of a claim for compensation

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Reform agenda – changes effective from 6 April 2018 Advance payments of compensation Previously AA had to make payment within 3 months but no penalty for non-payment. Now AA must within 28 days of request decide if it has sufficient information to estimate compensation payable. If not, must request it. Advance payments must be made by the date of service of a notice of entry or GVD – or within two months of a request from a claimant if later. That is, payment more quickly and before possession is taken. If possession not taken – repayable. Potential for introduction of penalty rate of interest to be applied to any late payment

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Yet to be introduced Temporary possession of land » Powers provided in NPA 2017 but yet to be introduced » Presently arranged by agreement with landowner » Or permanently acquired land returned » Already in force for DCOs » Practical benefits

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No-scheme world » Simple hypothesis: compensation for land or interests compulsorily acquired cannot include an increase (or indeed decrease) in value which is entirely due to the scheme underlying the acquisition. » That is, assess compensation on the assumed "state of affairs which would have existed, if there had been no scheme of acquisition" » Pointe Gourde Rule » Law Commission report in 2003: "the most difficult subject we have had to address in this project; the complex and intractable problems arising from the so called Pointe Gourde (or no scheme) rule"

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Section 6 Land Compensation Act 1961 » Waters case: Section 6 "fraught with complexity and obscurity" » Law Commission: » "section 6 (with the First Schedule) has been subject to particular criticism: the convoluted wording was difficult to interpret; the section applied to "other land", but made no equivalent provision for the subject land; and the statute failed to indicate whether or not the new rules were intended as a complete no-scheme code, or simply as a supplement to the judicial rule"

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No-scheme principle » Amendments to LCA 1961 inserted by NPA 2017 » S6A(2) - the no-scheme-principle is that » (a) any increase in the value of land caused by the scheme for which the authority acquires the land, or by the prospect of that scheme, is to be disregarded, and » (b) any decrease in the value of land caused by that scheme or the prospect of that scheme is to be disregarded » S6A(4): Rule 1: it is to be assumed that the scheme was cancelled on the relevant valuation date (ie usually the date of entry per S5A) » The cancellation assumption is therefore now in statute. Boland case determined on previous statutory basis but still on cancellation assumption.

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Boland v Bridgend CBC 2017 RVR 243 » Mr and Mrs Boland owned land at Pen-y-fai near Bridgend. » In 1991 Mr Boland merited a mention in Hansard when the local MP criticised his actions – "right up to the very edge of the law" – which had caused widespread anger in the local community. This involved using p.d rights to build agricultural roads that were "so extensive that it looked as though a motorway was under construction" » When in 2005 Bridgend CBC made a CPO to acquire 6,500 sq metres of pasture land belonging to the Bolands for the purpose of a new primary school, unsurprisingly Mr and Mrs Boland objected and thus began a legal saga that lasted 12 years.

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» In fact there were two CPOs : » (Order A) School site itself » (Order B) the School's drainage and traffic access needs » Order B amended when it was appreciated that the right to lay pipes did not carry with it the right to discharge into a watercourse. » Public inquiries at which Bolands argued there was a more suitable site from both traffic and flooding perspective. » The CPO was confirmed in August 2010 by the Welsh Ministers. » Judicial Review sought.

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Boland v Bridgend CBC 2017 RVR 243

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Judicial Review » Judicial Review on following grounds: » Wednesbury irrationality » Failure to take into account material considerations/taking into account irrelevant material » Failure to comply with requirements of natural justice » Failure to give reasons » Making decision on factual matter at odds with findings of Inspector » All rejected

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Boland » North Wales Daily Post » 21 June 2012 » A LONG and bitter fight for a new fit-for-purpose primary school in Penyfai ended in triumph last week. » Children at Penyfai Church in Wales Primary School have been learning in dilapidated 50-year-old portable cabins due to the crumbling state of their school building while the council have been locked in an ill-tempered legal wrangle for almost 10 years over the compulsory purchase of adjacent land needed to build the new facility.

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Boland v Bridgend CBC 2017 RVR 243 Compensation » Boland decided on law as it stood prior both to Localism Act 2010 and Neighbourhood Planning Act 2017 but nonetheless instructive. » Bridgend Council argued that, absent the school scheme, the land had

  • nly agricultural value.

» Bolands argued that there was an expectation that planning permission would be obtainable and valuation should be on that basis. » S5 LCA 1961 : open market value subject to the various disregards of actual or prospective development (S6 and schedule 1).

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Boland v Bridgend CBC 2017 RVR 243 » Bolands applied for a S17 LCA 1961 Certificate of Appropriate Alternative Development – method of establishing what planning permission would have been granted. » What is the proper approach to planning assumptions when valuing land for compensation purposes? » Fletcher Estates decision – favoured the cancellation assumption over the no-scheme assumption » What does that really mean?

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Boland – the Development Plan » Planning permission for residential development on the Boland land was refused on appeal in 2005. » The local development plan began its statutory process in 2007 and was adopted in 2013 » Policy COM10(3) allocated the Order land for educational purposes. » It also moved the settlement boundary outwards to bring the school land within the settlement. » Crucially moving the settlement boundary also brought within the settlement boundary some Boland land

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Proposals Map

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Boland – S 17 Certificate » In 2015 the Bolands applied for a s17 Certificate. » Planning Officer considered it on a no-scheme basis: » No CPO » No specific policy allocating land for educational purposes » No re-drawing of the settlement boundary » The Council argued that the allocation for educational purposes and re- drawing of the settlement boundary to that extent were inextricably linked and the boundary had only been changed to facilitate educational use. » On this no-scheme approach the land was outside the settlement boundary and therefore a negative s17 certificate was issued.

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Boland S 17 Certificate » The Upper Tribunal disagreed. » When considering a s17 Certificate – one must assume that the relevant scheme for development is cancelled, so far as the land that is the subject

  • f the proposed compensation assessment is concerned, at the date of the

notice that it is proposed to acquire the land compulsorily. » If the school scheme had been cancelled then it was necessary to disregard the acquisition and the policy which allocated the land for educational purposes and which had no purpose beyond the acquisition scheme. » "Axiomatic" that CPO and policy should be disregarded

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Boland S17 Certificate » Was the settlement boundary change from a planning point of view, necessary for purposes of proposed new school scheme? » Court concluded that it was not necessary. Policy COM10(3) was sufficient to ensure that, from policy point of view, Boland land was excluded from restrictive policies that apply to countryside. » Council argued that focus should be on, not what was legally necessary, but what in fact caused settlement boundary change.

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Boland - "Underlying Proposal" » Whether a policy in a development plan falls within "underlying proposal"

  • f a scheme is essentially a question for the relevant decision-maker.

» It is a question of fact and planning judgment. (See Lord Nicholls in Waters -v- Welsh Development Authority 2004 UKHL19). » Construction of policy itself is a matter of law. » In Bridgend Plan, settlement boundary has broad policy significance: important which side of boundary line one is on and had been tested through rigorous statutory process required for Development Plans » . » UT: nothing in Development Plan to suggest that the significance of settlement boundary once re-drawn was any different from the broad policy significance of any of the settlement boundary.

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Boland - Settlement boundary » As part of development plan process the broad issue of whether changes to the boundary should simply facilitate future school expansion was raised, and the Inspector recommended that no modification to the plan be made. » Prior to the new school scheme being permitted if planning permission had been sought for residential development. It would have been granted. » Tribunal accepted that it was common practice for a settlement boundary in a Development Plan to be drawn or re-drawn to include land that is the subject of a specific policy that would or might be otherwise outside the settlement.

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Boland – specificity or general application of policy » Also recognised that when land is allocated for a specific scheme that the policy by which settlement boundary is fixed might properly be disregarded – "because it might properly be said that the policy – so far as the inclusion

  • f the allocated land within the settlement is concerned – has no function

beyond the scheme". » But in this case re-drawing the settlement boundary had effect of including the north field within the settlement. Accepted by the Council that it was not part of the underlying scheme. It could have been developed for housing even if new school scheme did not go ahead. » Council then argued that the only part of the policy that must be disregarded is that which applied literally around the Land subject to the reference to the Tribunal: rejected as "legalistic and uncompelling"

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Penyfai School

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Further recent case law » Khan v Stockton-on-Tees Council 2017 UKUT 432 » Loss of rental income – must be direct causal link between compulsory acquisition and the loss in question » Shun Fung principles apply » Reasonable pre-reference costs in shadow of CPO permissible (but could not be claimed absent evidence and claim on written representations basis) » Basic loss payment – 7.5% per S33A LCA 1973 – applies to market value of property excluding reinvestment costs and fees

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Further recent case law » Bishop v TfL 2017 UKUT 405 (LC) » Scrap metal business on brink of liquidation » No attempt to claim value of leasehold interest, diminution in value of retained freehold land or disturbance » Applying Shun Fung tests: » Causal connection » Remoteness » Reasonable steps to eliminate loss » No loss caused to CPO, business going under in any event

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Further recent case law » R (Sharp) v North Essex Magistrates Court » Powers of Entry under Water Resources Act 1991exercisable by Environment Agency : » Associated with CPO powers (s154) » Associated with CWO powers (s168) » General powers of entry for other purposes (172) » Sharps – 365 acres affected by Chelmsford Flood Alleviation Scheme. Sharps refused access. Magistrates Court granted warrant for entry under s172. » Sharps applied to Mags Court to state a case. Refused – application was "frivolous" within meaning of S111(5) MCA 1980.

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Sharp v N Essex Magistrates High Court – two key points: » Detailed exegesis of WRA 1991 »"maintaining existing works" (S165(6)) »"undertaking new works" (S165(6)) »Middle ground – operating existing works, improving existing works etc » Sharps case amounted to requirement to use CPO powers if EA undertook any new works, however minor. Upheld EA's powers of access on basis of general power but conscious of careful need to strike balance between public and private interest » Magistrates' Court wrong to consider application "frivolous"

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Further recent case law » Why –v- Cheltenham BC 2017 UKUT 208 (LC) » Property in poor condition » Mr Why "disappeared" » In his absence Council made reference to LC » Valuation reflected condition of property as at date of valuation – plus deductions for » Local Land Charges registered by Council » Further cleaning and clearing costs

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Further recent case law » Cronin v De Hamel » Miss Honor Ruth Alastair Aspinall left the Brindle Estate to her nephew Mr de Hamel » In the mid 1990s various parcels of the estate was acquired by means of CPO for the M65 » Interim compensation payments made but at time of Miss Aspinall's death substantial sums outstanding » Who was to get the money? » Mr de Hamel (nephew) (as sole beneficiary)? » Messrs Aspinall (cousins) (as residual beneficiaries)?

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Further recent case law » "A rare case of ademption" » Ademption is "the process by which specific testamentary gifts fail because the subject matter of the gift has ceased to be part of the testatrix's property at the time of their death" » Obvious cases: "My favourite parrot", now an ex-parrot » Less obvious cases: post-will, testatrix contracts to sell part of estate » Judge applying an objective test held that as a matter of construction (wording, not roads) "the Brindle Estate" could no longer be said to include land that had for 15 years been used as a motorway.

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Further recent case law » But "indirect" ademption could be said to occur » Did the formal statutory steps and notices preceding compulsory acquisition (Notices to Treat, Notices to Enter etc) amount to a contract? » De Hamel argued no true or objectively identifiable agreement because no

  • ffer plus corresponding acceptance as to price. No "meeting of minds".

» What was effect of the language "subject to contract"? Judge made a distinction between the expression as used by an experienced lawyer and a non-lawyer district valuer. It was part and parcel of valuation negotiation in respect of land upon which entry had been effected 10 years previously. » M65 not part of the Brindle Estate - found in favour of the cousins

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And finally… » Kuznetsov v SoS CLG 2017 EWHC 2713 - failure to publish notices » Swish Estates Ltd v SoS CLG – 2017 EWHC 3331 – "planning merits" challenge not legal or procedural » R (Charlesworth) v Crossrail Ltd 2018 EWCH 915 – Crichel Down Rules » Yazdiha v LB Brent 2018 UKUT 74 – disturbance to investment owners » Kendon Packaging Ltd v GLA 2015 UKUT 354 – relocation losses » Glasspool v Southwark LBC 2017 UKUT 373 – compensation for alternative premises

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Any questions? Frank Orr Consultant | Property

frank.orr@wardhadaway.com 0191 204 4163

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Contractor Insolvency – how to protect yourself and lessons to learn from Carillion

Neil Williamson, Associate

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Carillion » If the UK's second biggest construction firm can become insolvent, it can happen to anyone » Sales of £1.5 billion (2016) » 43,000 employees » 30,000 businesses owed £1 billion

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Initial Considerations » Check the contractor's financial position » Which company is entering into the building contract? » Contract terms regarding insolvency » Performance bond and/or parent company guarantee? » Collateral warranties and step-in rights » Retention or advance payment bonds » Vesting certificates » Consequences of non-provision of documents » Project bank account?

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Early Warning Signs (1) » Decrease in labour » Slow-down in progress » Plant, equipment or materials disappearing from site » Increasing number of defects » Contractor seeking early payments or change in arrangements » Spurious claims or contra-charges » Contractor seeking assignment of the benefit of the building contract » Late filing of accounts

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Early Warning Signs (2) » Unsatisfied court judgments » Subcontractors not being paid » Rumours in the press or elsewhere » Unusual visits to site (e.g. from senior management) » Aggressive behaviour » Parent company displaying above signs

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If the Contractor is in Suspected Financial Difficulty » Closely monitor financial and on-site performance » Ensure that all bonds and guarantees have been obtained » Ensure that all collateral warranties have been obtained » Audit of on-site plant, equipment and materials » Obtain copy documents » Review payment position (consider payment notices) » Involve third parties? » Review the building contract!

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If Contractor Insolvency Occurs (1) » Confirm that insolvency has actually occurred » Secure the site and audit plant, equipment and materials » Ensure adequate insurance and health and safety arrangements are in place » Stop any further payments pending a more detailed review » Secure off-site materials? » Ascertain cost of completing works » Termination?

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If Contractor Insolvency Occurs (2) » Calls on bonds/guarantees? » Arrangements to complete the works » Direct payment to subcontractors or exercise step-in rights? » Take legal advice!

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To Terminate or Not To Terminate? » Automatic termination? » Automatic consequences? » Required in order to complete works with another contractor? » Terminate employment under building contract only » Grounds for termination » Follow contractual procedures (including notice provisions) » Risk of repudiatory breach » Consent of others required? » Accounting process following termination of works » Other options

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Performance Bonds and Parent Company Guarantees » Performance bond » From third party surety » Defined expiry date » Usually 10% of contract sum » On demand or performance guarantee » Parent Company Guarantee » Only available if there is a parent company » Covers all building contract obligations » Same limitation period as building contract » Primary obligation » Financial position of parent company?

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Any questions?

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Neil Williamson Associate | Construction & Engineering

neil.williamson@wardhadaway.com 0191 204 4239

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MEES Regulations

Joe Phelan, Solicitor

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Overview » What are the implications? » EPCs and DECs. » Exemptions. » Penalties for non-compliance. » Questions

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What are the implications? » Brought about by the Energy Act 2011 – requirement to introduce minimum energy standards. » The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (SI 2015/962).

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What are the implications? » Unlawful to let "sub-standard" buildings from 1 April 2018 subject to exceptions – i.e regulations don't apply to sales » Unlawful to continue letting "sub-standard" buildings from 1 April 2023 (or 1 April 2020 for domestic properties) if lease was already in existence on 1 April 2018. » Non-domestic – any property let on a tenancy which is not a dwelling (s42 Energy Act 2011).

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What are the implications? » "Sub-standard" means a building with a EPC rating of F or G. » Domestic – apply to any property let on an assured tenancy. (Certain lettings in the social housing sector excluded). » Non-domestic - do not apply to business leases for 6 months or less, or 99 years or more. » Certain lettings in the social housing sector are also excluded » Leases will not be invalid, but the Landlord will be subject to a penalty.

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EPCs » EPCs and recommendations reports are required when "buildings" are constructed, sold or rented out. » The EPC must be made available at the earliest opportunity – commissioned before marketing a property for sale or rent, but must use reasonable endeavours to do so within 7 days. Further 21 days grace is available. » On newly constructed buildings, a Building regulations completion certificate shouldn't be given until EPC is produced.

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EPCs » Valid for 10 years unless the building is modified to have more or fewer parts – (consideration should be made in leases) » Must be displayed in commercial premises larger than 500m² which are “frequently visited by the public” where an EPC has been previously issued.

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EPCs » Does the building qualify as a "building" » “a roofed construction having walls, for which energy is used to condition the indoor climate and … reference to a building includes reference to a building unit in that building”. A “building unit” means a section, floor or apartment within a building which is designed or altered to be used separately. » The building may have electricity and/or hot water, but is energy being used to condition the indoor environment? If not, an EPC is not required.

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EPCs » Is the building exempt? Exemptions are available for: » small stand-alone buildings (less than 50m2 total useful floor area); » temporary buildings with a time of use of 2 years or less; » industrial sites, workshops and non-residential agricultural buildings with low energy demand; » buildings used as places of worship and for religious activities; » residential buildings which are used or intended to be used for less than four months of the year, or for a limited annual time of use and with an expected energy consumption of less than 25% of what would be the result

  • f all-year use; and

» protected buildings

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EPCs » Where it is reasonable to believe the buyer intends to demolish. (If the building is a dwelling, relevant consents must have been obtained). » Government guidance - transactions not considered to be a sale or a

  • letting. These include lease renewals or extensions, CPOs, lease

surrenders, share sales. » Note - listed buildings not automatically exempt

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DECs » Regulation 14 of the EPB Regulations - Display Energy Certificates (DECs) to be displayed in buildings occupied by public authorities and frequently visited by the public. » The duty applies to the occupier, not the owner. » The building must have a total useful floor area of over 250m². (Before 9 July 2015, the threshold requirement was 500m²). » For larger buildings (where the total useful floor area of the building is over 1000m²), a DEC is valid for 12 months only. However, in other cases, the DEC is valid for 10 years.

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DECs » The certificate must be displayed “in a prominent place clearly visible to members of the public who visit the building”. » Occupiers to have in their possession (but not display) an advisory report containing recommendations for the improvement of the energy performance of the building (unless there is no reasonable potential for energy performance improvements compared to the energy performance requirements in force).

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MEES - Exemptions for EPC requirement » Exemptions are available. However: » The conditions for the exemption must apply; » The exemption must be registered on the PRS Exemptions Register; and » Supporting evidence must be uploaded. » The exemptions? » That there are no relevant energy efficiency improvements to be made. » An inability to obtain a consent to improve. » That improvements will devalue the property. » The tenancy is granted in special circumstances (or the landlord “continues to let” by acquisition).

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Penalties - EPCs » Trading Standards Officers responsible for enforcement » Domestic – up to £5,000 » Non-domestic » Fewer than three months – 10% of the property's value subject to minimum of £5,000 and maximum of £50,000 » More than three months – 20% of the property's value subject to minimum of £10,000 and maximum of £150,000. » Both – publication penalty

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Penalties - DECs » DECs – » A local authority can issue a penalty charge notice of £500 for failing to display a DEC at all times in a prominent place clearly visible to the public, and £1000 for failing to possess or have in their control a valid advisory report.

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Any questions?

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Joe Phelan Solicitor | Public Sector Property

joe.phelan@wardhadaway.com 0191 204 4159

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How to distinguish between a Licence and a Lease

Jeremy Hardy, Associate

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How to distinguish between a Licence and a Lease » What the agreement is called is, generally, irrelevant. » You nee to look at what the actual basis of occupation is.

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How to distinguish between a Licence and a Lease » London College of Business LTD v Tareem Limited » The College occupied premises under a succession of agreements all described as "Licences". » The Court confirmed the approach to be taken in deciding the legal basis of the College's occupation as follows: »The Court' objective is to establish what the intention of the parties was at the time the agreement was entered into. »In order to decide whether an agreement creates a licence or a lease you need to establish whether the occupier is granted exclusive possession.

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How to distinguish between a Licence and a Lease »The wording in the agreement reflected a licence, including a landlord's right of entry "for the purposes of exercising management and control". »Notwithstanding this the Court was of the view that the College had exclusive occupation of the premises and that it therefore occupied under a lease. »What is exclusive occupation?

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How to distinguish between a Licence and a Lease » What are the implication of it being a lease rather than a licence? » A licence is personal to the parties and does not give any statutory rights of

  • ccupation.

» A lease of premises for the purpose of a business falls within the Landlord and Tenant Act 1954 and attracts statutory rights including a right to a new lease. » This may cause difficulties for a landlord wanting to get possession of the premises.

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How to distinguish between a Licence and a Lease » What if there is no written agreement? » You still need to consider the basis upon which the premises are occupied i.e. is there exclusive possession and are they used for the purposes of a business? » If there is exclusive possession and a rent is paid it is likely to be a business tenancy under the Landlord and Tenant Act 1954 with statutory protection.

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Any questions?

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Jeremy Hardy Associate | Property

jeremy.hardy@wardhadaway.com 0191 204 4135

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Thanks for joining us

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