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Legal updates from BTMK

Trees – inspection

How often should a landowner inspect trees (in case they fall down and cause damage)? The Court of Appeal has recently given guidance, in the context of an Local Authority which had trees abutting the highway (i.e. a high-risk area). The Local Authority had introduced a fixed three-year period for inspections (largely because of budget cuts). However, the tree surgeon who inspected trees for them stated that his reports were valid for two years, and the Forestry Commission published guidelines saying that large trees next to main roads should be subject to more rigorous inspections due to the level of hazard they presented. This particular tree fell shortly before the expiry of the three-year period – but if it had been inspected every two years, the decay would have been discovered before the accident.  The Court of Appeal concluded that, taking into account the location, age and size of the tree, it should have been inspected at least every two years, and thus the Local Authority was in breach of duty.

Security – GDPR

Landlords should bear in mind that the installation of CCTV (eg in the common parts, or a carpark) may have GDPR implications.  Likewise, the installation of a swipe-card entry system which tracks the times T has entered and left the building would also be caught by GDPR (since it involves recording and processing personal data).  Landlords will be the data ‘controller’ and should ensure that data is kept ‘for no longer than is necessary’.

Lease renewal – EPC needed?

There has been much publicity given to the Minimum Energy Efficiency Standards (MEES), and we have covered them extensively within 4 Business.  In particular, the MEES (i) prevent Landlords from granting a new lease of commercial premises with an Energy Performance Certificate (EPC) of less than ‘E’, and (ii) from April 2023, they will prevent the continuation of existing leases with an EPC of less than ‘E’.  That much is well known, but how do MEES interact with the older EPC regime? One area of conflict is on whether an EPC is needed on a lease renewal. The EPC guidance is that no EPC is needed on a lease renewal.  However, the MEES guidance implies that an EPC will be needed on a lease renewal.  So, which prevails? The simple answer is that no one knows whether an EPC is needed on a lease renewal. Incidentally, this confusion as to whether an EPC is needed on a lease renewal applies also to domestic/residential lettings (i.e. it is not just a commercial property issue).

Insurance – ‘premises’ or ‘building’

When negotiating a lease on behalf of a Tenant make sure that the insurance obligation on Landlords extends to the whole building (if it does not, then try to agree a provision in the lease to limit Tenant’s potential liability for the rest of the building).  See Prezzo v Highpoint [2018] EWHC 1851 (TCC). Source: Simmons & Simmons.

Renewal lease – court’s approach

We include this case as an illustration of the court’s approach in a typical lease renewal situation; it decides nothing new, but shows the current attitude to such topics as rent-free periods for fitting out, and upwards-only rent reviews. A renewal lease applies when an existing LTA 1954 business lease is renewed.  The starting point will be the existing lease, but the court then has a discretion to amend the terms.  In this particular case, the property was close to the US Embassy in Grosvenor Square, which is clue for demolition.  Tenant argued that the potential disruption justified a short-term lease, with a flexible break option, and a reduced rent:

• Length of term: Tenant asked for five years, but the court gave Landlord ten years. This was on the basis that ten-year renewals were ‘loosely’ the normal practice in the market; the lease did allow for assignment (i.e. Tenant could assign if Tenant no longer needed the property – and the location should make it an easy property to assign); Tenant had produced no evidence to show that its future business needs would require it to occupy a different type of space.  The end result was that the court followed what it regarded as existing market practice.

• Rent review: there was no rent review provision in the old lease, but the court granted a five-year open-market review (not an upwards-only review).  In the circumstances, the court felt an upwards and downwards review would be acceptable to a willing hypothetical Landlord – but it would all depend on the circumstances, and those circumstances could justify an upwards-only review.

• Break clause: Tenant wanted a break clause to be exercisable at any time if redevelopment works became ‘intolerable’.  The court decided that was neither justified nor practical.  Major redevelopments are common-place in central London (and can be carried out with quieter building techniques than used to be the case).

• Rent level: Landlord relied on comparable evidence of other rent levels, whereas Tenant focused on the negatives (in particular the redevelopment).  The court disregarded Tenant’s opinion and followed the comparables.

• Fitting-out period: the court accepted the comparable evidence that a three-month rent-free fitting-out period was the market standard.

What does emerge from the judgment is the importance of having evidence in support – preferably, comparables.

Restaurant tips – cash or card?

If you leave a tip in a restaurant, does it go the individual who served you, or, does it go to the employer (perhaps to be paid into a tronc, with a percentage being distributed to all staff)? The answer lies in a criticised The Court of Appeal decision, Nerva [1996].  There, it was decided that there is an important difference between paying in cash and paying by card – cash belongs to the employee, but a credit card (or cheque) goes to the employer (and can be part of the employees’ minimum wage).  So, if you want the tip to go to the person who has served you, the best way of ensuring that happens is to pay it (or the whole bill) in cash, and decline to pay any optional or discretionary service charge.