July 2010
- Two parties exchanged contracts for a building sale.
- The buyer arranged insurance with NFU and the seller continued to insure with HSBC.
- Fire damaged the building but the buyer completed the transaction.
- NFU paid out fully to the buyer but sought a contribution from HSBC.
- HSBC’s insurance contract contained a clause ceasing cover in the event of another party insuring the property.
The court found in favour of HSBC and they had no liability to NFU as their cover ceased under the terms of their contract.
It is not always realised by buyers that immediately upon exchange they have an equitable interest in the property and a need to ensure that the value of the asset is safeguarded, usually by means of insurance. The above case illustrates the necessity to establish and to disclose to insurers the detailed provisions of any insurance policies that relate to the property and overlap in time.
Personal liability for health and safety breach (H.M. Advocate v Discovery Homes)
This case is a reminder that damages can be and are awarded against directors as well as their companies for breaches of health and safety regulations. It is worth noting that the court arrived at the quantum of damages by reference to the financial circumstances of the company and separately assessed the financial circumstances of the director to determine the personal liability of the director.
Breach of planning enforcement notice (Basso v R.)
The defendant constructed a park-and-ride site and operated a successful business without planning consent. The local authority issued an enforcement notice which was ignored and the business continued to operate. Subsequently the enforcement notices were made subject to criminal confiscation orders. The orders were made in respect of the income of the business but limited to £760,000. At the appeal the defendants said that the activities had been otherwise lawful and innocuous and that the proceedings had been excessive and an abuse and that the amount confiscated should be related to the far smaller level of profits and not the level of income.
From the moment that Mr Del Baso had exhausted his rights of appeal against the enforcement notice, it was his duty to obey the law: he chose, deliberately, not to do so. The defendant had treated the breaking of the criminal law as “a routine business risk with financial implications in the form of potential fines or, at worst. injunctive proceedings.
Mr Baso had committed a crime and had received proceeds from the crime and the law provides that it is the proceeds of crime that are available to confiscate, that is the gross receipts.
This case is in stark contrast to the Discovery Homes case above where there were no proceeds of crime and it was profitability and other factors which were considered for determining the award.
Those who run operations in disregard of planning enforcement requirements are at risk of having the gross receipts of their illegal businesses confiscated. This may greatly exceed their personal profits. In this respect they are regarded as being in the same position as thieves, fraudsters and drug dealers.
VAT option to tax Grenane Properties Ltd v HMRC
May 2010
Tenants’ guarantors
Good Harvest v Centaur services
Many have been unclear on whether landlords could require tenants’ guarantors to enter into an authorised guarantee agreement (AGA) but many leases have been drafted to include this requirement.
In the above case the High Court concluded that unlike the statutory provision that allows for an outgoing tenant to enter into an AGA, there was no equivalent for tenants’ guarantors. The court considered that the act was meant to ensure that the tenant’s guarantor’s obligations ended with the tenant assigning the lease. If the guarantor was required to enter into a further guarantee when the lease was assigned then the act’s operation would be frustrated and the requirement for a tenant’s guarantor to guarantee an assignee is unenforceable.
Extreme delay on Rent review
Ideal view v Bello
In this case the tenant claimed that a rent review awarded more than 12 years after the review date was time barred. The court rejected this argument and established that for rent reviews time was not of the essence.
It is within the abilities of a tenant to make it a matter of time is of the essence by writing to the landlord accordingly.
Adverse possession over highways
Smith v Land Registry
Smith occupied a caravan and other structures on an unmetalled byway in Cambridgeshire for more than 12 years. Smith stated that his possession of the byway was undisturbed during that period. He said that he did not obstruct the byway and kept the hedges and verges trimmed on the area he occupied.
The land was unregistered and Smith applied to the Land Registry to register title by adverse possession – this allows a land title to be obtained based on exclusive possession with the necessary intention, but without the owner’s consent, in the case of unregistered land, for a period of at least 12 years.
There is a long held legal understanding that highways are a shared resource and the public is entitled to use them, except in the few cases where parliament has provided otherwise.
The Court of appeal found that the right to use the highway could not be terminated by action that affects only some members of the public, because the right belongs to them all and the public is an ever changing class.
Smith failed in his claim to acquire part of the highway by adverse possession.
Abandoned Goods
Robot Arenas v Waterfield
Despite lease provisions requiring tenants to leave premises in a clean and clear state, it is not unusual that some goods or items are left behind.
As a landlord it is not possible to just throw everything away. The Torts (Interference with Goods) Act 1977 sets down a procedure that a landlord has to follow in order to avoid a claim from the owner for damages in conversion.
Under the act notice must be given to the owner that the goods will be sold if not collected within a reasonable time. Until such time as the goods are collected they must be looked after and if sold all proceeds less deductions for the cost of the sale belong to the original owner.
January - 2010
Service charge consultation
Deejan Investments Ltd v Benson & Others
[2009] UKUT 233 (LC)
A landlord of residential property sought to recover £50,000 from each of five leaseholders who applied to the Leasehold Valuation Tribunal (LVT) for a review of their liability. The LVT held that each lessee was only liable for £250 because the landlords had failed to comply scrupulously with the statutory consultation obligations.
The landlord appealed to the Upper Tribunal who concurred with the LVT who it said was entitled to regard the breach as a serious breach, rather than a technical or excusable oversight.
The landlord was unable to recover £248,750 of expenditure simply because they did not adhere meticulously with the consultation requirements contained in sections 20 and 20ZA of Landlord and Tenant Act 1985.
Remediation works
Persimmon Homes (South Coast) Ltd v Hall Aggregates (South Coast) Ltd and
Cemex UK Properties Ltd
[2008] EWHC 2379 (TCC)
The issues raised by this case arise unexpectedly often and usually under building contracts in relation to building defects under a contract which contains provisions for a defects liability period.
In this case the obligation arose under a land sale agreement which required Cemex, as the seller, to carry out certain ground restoration works at its own expense.
The site required ground restoration and were to be undertaken by Cemex but to Persimmon’s reasonable requirements. Persimmon proceeded to undertake these works and Cemex was aware of the work being undertaken but did not make any representation to Persimmon.
Persimmon subsequently reclaimed the cost of the works from Cemex who resisted the claim.
The court found for Persimmon and they were entitled to recover the notional cost to Cemex of carrying out the ground restoration.
Property letting not a trade for CGT purposes
Jones & Another v HMRC
[2009] UKFTT 312 (TC)
The First-tier Tribunal determined that a property letting business, which had been taxed as a trade, was not a trade for the purposes of taper relief. Accordingly, the higher rate of taper relief available to business assets was not available.
Although taper relief has been abolished, the decision is relevant to claims for entrepreneurs relief because that relief is available on the disposal of business assets (assets used in a trade, profession or vocation).
Harwood Hutton is regularly represented at a local professional property club, where information is exchanged between senior figures within the sector. From time to time, we will reproduce these cases in our property news section appearing below.