Real Estate Matters – April 2016
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Newsflash: Lords seek to limit Starter Homes proposals
In our earlier briefing we set out some of the key elements of the Housing […]
In our earlier briefing we set out some of the key elements of the Housing and Planning Bill 2015-16 (the Bill) including, in particular, the government’s proposals that one in five properties in new residential developments should be starter homes, made available to qualifying first-time buyers under 40 for at least 20% less than market value. Other key aspects include that the starter homes requirement should apply to sites of ten units or more (or 0.5 or more hectares); that a general exemption should apply where clear evidence proves that the requirement would make a development unviable; and that regulations will exclude certain types of developments (such as specialist care accommodation, custom-build and purpose-build student housing) and will provide that private rented sector developments and specialist older people’s housing developments may meet the requirement through off-site contributions.
The government’s starter homes proposals (which are currently the subject of a technical consultation open to developers, local authorities and other interested parties until 18 May 2016) are currently making their way through Parliament and are somewhat controversial.
The government has confirmed that it is committed to increasing home ownership and improving opportunities for first-time buyers, but concerns have been raised that the Bill “[carries] a risk that a crucial supply of new affordable rented homes will be displaced, and despite 20% discounts [starter homes] will still be out of reach for the majority of people in need of an affordable home” [1].
Earlier this month the House of Lords voted to introduce a minimum age of 23 years for qualifying first-time buyers, to prevent parents of higher education students from buying starter homes in their children’s names and using them as an investment opportunity. Also, to counter starter homes being used as a short term investment to be sold on a few years later at large gain, the Lords backed an amendment to require starter home owners to repay, on a sliding scale reduced by 5% for each year of ownership [2], the initial purchase discount when the property is sold.
Another aspect of the Bill to raise concerns is its inter-relationship with other affordable housing tenures and its proposal that the starter home requirement should take priority in viability negotiations. To try to address this, the House of Lords has voted in favour of a provision requiring local authorities to have regard to the provision of starter homes based on their own assessment of local housing need.
The starter homes proposals will be of significant interest to all those involved in the delivery of residential developments. Walker Morris will continue to monitor and report.
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[1] Source: Letter to the Guardian, 10 April 2016, Cllr David Hodge Leader of LGA Conservative Group, Cllr Sharon Taylor Deputy leader of LGA Labour Group, Cllr Marianne Overton Leader of LGA Independent Group, Cllr Gerald Vernon-Jackson Leader of LGA Liberal Democrat Group
[2] for a period to 20 years

The new protocol – will it alter applications for consent for the better?
In an attempt to avoid the, in their words, ‘squabbles’ that can often arise when […]
In an attempt to avoid the, in their words, ‘squabbles’ that can often arise when a tenant makes an application for consent to undertake alterations to their demise, the authors [1] of the Alienation Protocol, which we discussed in our article in December 2014, have issued a second property protocol, the Protocol for Applications for Consent to Carry Out Alterations (the Protocol). The new Protocol applies where a tenant wishes to make alterations to their demise but their lease places restrictions on their ability to do so. The aim of the Protocol is to assist landlords and tenants in avoiding unnecessary disputes and where issues do arise, to resolve them quickly through alternative dispute resolution without the need to resort to long-winded and costly litigation. The Protocol is accompanied by a guidance note which details some of the more frequently encountered issues relating to applications for consent to alter. The authors hope that the Protocol and its guidance note, together with the Alienation Protocol (and other documents which they hope to produce in the future) will set out what they believe to be best practice and thereby ‘smooth landlord and tenant relations’.
Background
In the absence of any provision in the lease to the contrary (subject to some very specific exceptions) tenants are free to alter their demise in any way they wish. As a result, leases of commercial premises generally contain covenants restricting alterations. It is common to see covenants which prohibit alterations to the exterior and structure of the premises, with internal, non-structural alterations being permitted subject to obtaining landlord’s consent.
The provisions of the lease do not, however, provide the whole story. The Landlord and Tenant Act 1927 (LTA 1927) gives tenants a number of additional rights, the most notable being that where any alterations that they wish to undertake can be construed as improvements, even in the absence of an express provision, a term is implied into the lease that the consent of the landlord to alterations is not to be unreasonably withheld. If section 19(2) of the LTA 1927 applies whether or not an alteration is an ‘improvement’ is viewed from the tenant’s perspective [2]. It should also be noted that whilst section 19(2) amends the scope of the restriction placed on the tenant, it does not impose a positive obligation on the landlord not to withhold consent unreasonably. Therefore whilst a tenant can apply to the court a declaration that consent is being unreasonably withheld, it cannot claim damages.
Should the landlord decide to withhold consent, then the principles laid out in the case of Iqbal v Thakrar [3] can be used to determine whether that refusal was reasonable. A detailed discussion of those principles is beyond the scope of this article however it is for the tenant to show that the landlord has unreasonably withheld consent. It is not necessary for the landlord to prove that the conclusions which gave rise to the refusal of consent were justified, provided that they were conclusions which may have been reached by a reasonable landlord in the particular circumstances. Consent cannot however be withheld on the basis of pecuniary loss alone as the correct response in such a situation would be for the landlord to ask for a payment by way of compensation.
A landlord is also entitled to attach conditions to the grant of its consent and section 19(2) specifies that certain conditions will be considered reasonable, namely:
- Payment of a reasonable sum for damage to or diminution in value of the property (or any neighbouring property owned by the landlord);
- Payment of expenses properly incurred in connection with the consent; and
- A requirement on the tenant to reinstate the property at the end of the term, albeit this can only be made a condition of the consent if the improvement does not add to the letting value of the premises and it is a reasonable requirement.
The Protocol
The Protocol aims to improve the communication between the landlord and tenant and to set out a timetable for the application and the landlord’s decision. It is not an exhaustive list of steps that must be taken, nor is it mandatory. Compliance with the protocol should ensure that tenants provide sufficient information in their application to enable the landlord to reach a decision as to whether to consent within a reasonable timeframe.
The application
The first substantive section of the Protocol deals with the tenant’s application for consent. Whilst the Protocol acknowledges that the content of each application will depend on the works to be carried it confirms that the application should describe the works, preferably by reference to detailed plans and specifications and refer to the relevant provisions of the lease and any statute. The content of the application should be sufficiently detailed to enable the landlord to determine whether the proposed alterations fall within the demise, whether they are structural or non-structural, the works for which consent is needed and those for which it is not and works that are absolutely prohibited by the terms of the lease. Ideally all information should be provided to the landlord in a single package and should be served on the landlord in accordance with the terms of the lease, with a copy being sent to the landlord’s solicitor or agent if the tenant is aware that the landlord has retained such advisors.
Landlord’s response
The next section deals with the landlord’s response to the application and confirms that the landlord ought to acknowledge receipt of the application within 5 working days. Should the landlord require more time to consider the application or further information then it should notify the tenant. If the landlord needs the consent of its own superior landlord to alterations then a copy of the tenant’s application should be passed on promptly. Where it is properly able to recover the same, the landlord should also set out its position on costs to the tenant.
There is no statutory duty on the landlord to respond within a reasonable period of time, albeit the landlord may be under a contractual obligation to do so pursuant to the terms of the lease. In any event a full response should be given promptly as an unreasonable delay may amount to the landlord being deemed to have unreasonably withheld its consent. Furthermore the landlord’s actions may be relevant to the apportionment of costs if the matter is subsequently referred to dispute resolution.
The landlord’s response needs to be sufficiently detailed to enable the tenant to understand the landlord’s position. The response should make it clear whether the landlord consents to the alterations, and if so what conditions are attached, withholds its consent due to a lack of sufficient information and therefore what further information is required or whether it is refusing consent and state its reasons. Whilst a landlord is under no duty to give written reasons for a refusal of consent, in any subsequent proceedings to determine whether consent was unreasonably withheld the landlord will be limited to those reasons that it can prove it held at the time it withheld consent. Providing its reasons in writing to the tenant will therefore give the landlord evidence that it can later rely on.
Costs
The terms of a lease will generally permit the landlord to recover its reasonable and proper costs incurred in connection with the application for, and grant of, consent. Even if the lease does not expressly provide for the recovery of costs, dependant upon the circumstances the landlord will not usually be deemed to have behaved unreasonably if it refuses to consider the application unless the tenant has agreed to pay its costs.
The tenant may therefore wish to consider whether it wishes to offer to provide an undertaking for costs (or money on account) as part of its initial application. A tenant may be unwilling to provide an open-ended undertaking so at the very least it may want to request an estimate of the landlord’s costs in its initial application in order that it can subsequently provide an undertaking limited to that amount. If, at a later stage, the landlord considers its costs will exceed the amount for which it has received an undertaking then they should notify the tenant promptly, with reasons, of any additional sum it requires. The landlord should not, however, delay its consideration of the application on the basis that negotiations are ongoing in relation to the increased amount of an undertaking.
Disputes
If the tenant is of the belief that the landlord has unreasonably withheld or delayed consent then the parties ought to consider whether a form of alternative dispute resolution, such as arbitration, expert determination or mediation, is appropriate as opposed to commencing litigation. If the matter subsequently ends up in court then the parties may be required to provide evidence that alternative methods of considering the dispute were considered.
Documenting consent
The Protocol confirms that it is good practice for ensure that a written record of the alterations is made. It is fairly standard practice for all but the most minor alterations to be documented by a licence for alterations setting out the alterations consented to, the position on reinstatement at the end of the term and also whether the alterations are to be disregarded on any subsequent rent review. In the absence of a formal licence the parties may wish to consider whether a letter licence is appropriate. Even where formal consent is not required, the Protocol advises that a written record of the work undertaken would be desirable in case of any later disputes.
WM Comment
As we previously commented in relation to the Alienation Protocol, the new Protocol does not seek to break any new ground in relation to applications for consent to alterations. Much of what is contained in the Protocol is good practice that the majority of tenants and landlords have been adhering to for many years. The Protocol does however provide a very helpful reminder as to how such applications should ideally be dealt with and compliance with its terms may help streamline the process of obtaining consent.
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[1] Guy Fetherstonhaugh QC and Jonathan Karas QC of Falcon Chambers and Nicholas Cheffings and Matthew Ditchburn of Hogan Lovells International LLP.
[2] Lambert v Woolworth & Co [1938] Ch 883.
[3] Iqbal v Thakrar [2004] EWCA Civ 592.

‘Healthy new towns’ proposed
The first ten sites have now been selected which are to comprise the country’s ‘healthy […]
The first ten sites have now been selected which are to comprise the country’s ‘healthy new towns’, with the hope they will form a creative and innovative way to deal with some of the key healthcare challenges faced in England during the 21st century. As part of the programme, it is expected that approximately 76,000 new homes will be built. But how will this work in practice? And in what way is it to link to the Government’s ongoing emphasis on providing affordable housing for all? Walker Morris’ Planning & Environment team consider the initiative.
Background
Launched in September 2015, the Healthy New Town Programme aims to ensure strong communities and healthy places to live are created as a way to narrow the country’s current main health gaps, including existing poor prevention measures and out-dated health and social care services. Specifically, the programme has three core objectives:
- to develop new and more effective ways of shaping new towns, neighbourhoods and strong communities, so that health and wellbeing is promoted, illness prevented and people remain independent for longer;
- to show that health and care services can be provided in a radically different way to how they are currently, particularly with services integrated in new ways to give better outcomes at the same / lower costs; and
- to achieve the two objectives above in such a way that they can be replicated across local and national areas.
As part of the initial project launch, expressions of interest were invited from sites across England where development was envisaged. Diversity was encouraged amongst the schemes, with different scales, stages of development, types of development (e.g. urban extensions, regeneration projects etc.), and varying communities or contexts (e.g. rural and urban) encouraged. Over 100 expressions of interest were made by local authorities, housing associations, developers and NHS organisations – all eager to be involved.
Detail
In early March 2016, the Government announced the first ten sites selected, outlining their approximate scale and extent. The planned garden city at Ebbsfleet in Kent is to form part of this initial tranche, where it is envisaged nearly 15,000 new homes will be created. At Whitehill and Bordon, Hampshire, 3,350 new homes are to be erected on a former army barracks. In addition, a new care campus is envisaged at the site where ‘care-ready homes’ will be located in one area that can easily be adapted to the needs of people with long-term health conditions. These will be alongside a nurse-led treatment centre, pharmacy and integrated care hub. In addition, ‘healthy new towns’ are proposed at:
- Barking Riverside, London – 11,000 homes;
- Northstowe, Cambridgeshire – 10,000 homes on former military land;
- Cranbrook, Devon – 8.000 new units;
- Darlington – 2,500 residential units across three linked sites in the Eastern Growth Zone;
- Whyndyke Farm, Fylde, Lancashire – 1,400 residential units;
- Halton Lea, Runcorn – 800 residential units;
- Bicester, Oxfordshire – 393 houses, part of the 1,300 hones planned in the Elmsbrook project; and
- Barton Park, Oxford – 885 residential units.
The various sites are expected to experiment with unique and ingenious ways to encourage healthy living and an active lifestyle amongst residents and visitors alike. Elements and design features suggested as part of this include:
- fast food-free zones surrounding schools;
- ‘dementia-friendly’ streets;
- greater numbers of cycle and walking routes;
- digitally-enabled local health service provision;
- safe and appealingly-designed green spaces;
- more numerous play areas;
- adaptable homes to allow older people to continue living independently wherever possible; and
- workplaces, schools and leisure facilities designed in ways to make the most of opportunities for physical activity, healthy eating and positive mental health.
However, these design features are being incorporated into developments already proposed as part of the Government’s initiative to ensure more housing across the country, including affordable housing. As announced at the end of 2015, there is the aim for one million new homes to be built by 2020. Simon Stevens, Chief Executive of NHS England, has indeed referred to the affordable homes initiative as a “golden opportunity”. He stated: “As these new neighbourhoods and towns are built, we’ll kick ourselves if in ten years time we look back having missed the opportunity to ‘design out’ the obesogenic environment and ‘design in’ health and wellbeing”.
Comment
It has long-been held that some of the most pressing challenges, such as obesity and mental health issues, can be influenced by the quality of the built and natural environment. For example, as stated by a director at Public Health England (Professor Kevin Fenton): “The considerate design of spaces and places is critical to promote good health…thinking and planning of everyday environments [can] improve health for generations to come”. The most recent announcement has been strongly welcomed by many bodies, including the Royal Town Planning Institute. Correspondingly, a report recently published by the Building Research Establishment estimated that there are 3.5 million homes in England with serious hazards such as damp and pests. The resulting health problems are thought to cost the NHS at least £1.4 billion annually.
When it is estimated that a quarter of British adults walk for less than nine minutes everyday and only 21% of children play outdoors (compared to 71% in their parents’ generation), it seems the ‘healthy new towns’ can bring nothing but an improvement. Yet many areas already promote health and wellbeing through ‘place-shaping’ and ‘place-making’. Better housing and urban design, good access to well-designed public spaces and local facilities, and improved cycle / pedestrian links are a key part of most local authorities’ core strategies and area development plans. In addition, developers, landowners and builders applying for planning permission are very much expected to demonstrate – as part of the application process – that their proposals encourage health and wellbeing.
Alongside the delivery of the 885 new homes on the ‘healthy town’ site at Barton Park, it is expected that there will be a landscape setting focusing on providing walking and cycling routes, a park with lakes and natural play spaces, two new civic squares, sports pitches and a pavilion for community use, and a two-form entry primary school that is to be used as a “community hub for residents both in the estate and in the local neighbourhoods”. Of the housing on site, 40% is to be affordable – thus linking with the Government’s requirement for a greater volume of affordable properties. It is envisaged that the NHS will bring together its clinicians with designers and technology experts on the Barton Park plans, as with the other nine demonstrator sites. This level of clinical / health involvement is certainly a new feature, but only time will tell how active the NHS role will be. Will it be any different from the existing role of local health authorities as statutory consultees? Similarly, will the ‘healthy’ features proposed on the respective sites differ in reality from what would usually be provided in any normal development situation?
It may be the case that the programme will bring new life to efforts to integrate resources; ensure collaborative working between public, private and voluntary organisations; and encourage provision for improved wellbeing. However, a further concern is whether the appropriate structures and governance (be it financial or legal) are in place for the necessary new partnerships, enterprises and projects to work together effectively. A challenge is also likely to be faced for developers in trying to ensure that there are sufficient residential units provided on sites (both affordable and otherwise), but space for all the ‘healthy’ elements to be incorporated, while ensuring the development overall remains viable. Divergent priorities are likely to ‘pull’ in different directions.
In addition, encouraging purchase of the properties may be difficult in some instances. Labelling a property as ‘healthy’ does not necessarily ensure sales. For example, Ebbsfleet is just not currently seen as desirable and housing uptake is poor – despite larger flats being on the market for as little as £150,000. Problems with too many empty and poorly-maintained existing properties will continue. Entirely new development schemes are not necessarily the best or only solution.
It will remain to be seen whether the ‘healthy new towns’ operate successfully in practice and have the desired effect, or indeed whether they diverge at all from existing new development proposals. For more information on the possible impact of the initiative and other changes proposed for the planning system going forward, contact the Planning and Environment team at Walker Morris.

A tenant cannot assign to its guarantor
In the case of EMI Group Limited v O & H Q1 Limited [1], the […]
In the case of EMI Group Limited v O & H Q1 Limited [1], the High Court considered the effect of an assignment of a lease by a tenant to its guarantor and concluded that such an assignment is prohibited by the terms of the Landlord and Tenant (Covenants) Act 1995 (the LTCA 1995). An assignment such as the one in question frustrates the purpose of the LTCA 1995 and is void by virtue of section 25(1). In approving obiter comments made by Lord Neuberger, the High Court has settled a point that has been outstanding since it was debated by the Court of Appeal in the case of K/S Victoria Street [2] in 2011.
Background
The LTCA 1995 came into force a little over 20 years ago on 1 January 1996. The Act implemented (with a number of significant amendments) the recommendations made by the Law Commission in its report ‘Landlord and Tenant Law: Privity of Contract and Estate (1988) and represented a significant change in the law relating to landlord and tenant liability. The LTCA 1995 was designed to address the issue of the continuation of liability of the parties to a lease long after they had disposed of their interests in the property to which that lease related. The LTCA provides that where a tenant assigns a ‘new’ lease (i.e. one entered into after commencement of the LTCA 1995):
- The benefit of landlord covenants and the burden of the tenant covenants pass to the assignee (section 3(2)(a) LTCA 1995);
- The outgoing tenant is released from future liability under all of the tenant’s covenants, save in relation to an excluded assignment (section 5(2) LTCA 1995); and
- If the assigning tenant is released from a tenant covenant as a result of the LTCA 1995 then any guarantor of the tenant is released to the same extent (section 24(2) LTCA 1995).
The LTCA 1995 also contains a general anti-avoidance provision at section 25(1), which renders void any agreement relating to a tenancy that would have the effect of excluding, modifying or otherwise frustrating the operation of the act.
The anti-avoidance provisions of the LTCA 1995 were considered in the case of Avonridge [3] in which the House of Lords confirmed that whilst section 25(1) should be interpreted widely, so as to give effect to the aims of the act, the statute was not intended to remove the ability of the parties to limit their liability under lease covenants in whatever way they may agree.
Possibly the most high profile case on the LTCA 1995, K/S Victoria Street, considered whether a requirement for an outgoing tenant to act as a guarantor of its assignee was void under section 25(1). Confirming the earlier decision of the High Court in Good Harvest Partnership v Centaur Services [4] the Court of Appeal decided that a tenant’s guarantor cannot agree to give, nor give, a guarantee for the assignee (albeit they can guarantee the outgoing tenant’s obligations under any authorised guarantee agreement). Although the court were not required to decide the issue in K/S Victoria Street, they also considered the point at question in the present case, namely whether the tenant’s guarantor could take an assignment of the lease from the tenant, or whether this would be rendered void because the effect was that the guarantor would not be released to the same extent as the tenant. Lord Neuberger, who gave the leading judgment, made the following obiter comment when considering the point:
“It would also appear to mean that the lease could not be assigned to the guarantor, even where both tenant and guarantor wanted it”.
Facts
HMV UK Ltd (HMV) occupied premises in Worcester by virtue of a lease dated 26 September 1996. The lease was a ‘new’ tenancy for the purpose of the LTCA 1995. EMI Group Limited (EMI) guaranteed HMV’s liabilities under the lease pursuant to a deed of guarantee also dated 26 September 1996.
HMV went into administration in 2013 and on 28 November 2014 the landlord, O & H Q1 Limited (OH) granted to HMV a licence to assign the lease to EMI. The licence to assign contained a standard covenant in favour of OH which obliged EMI to perform and observe the tenant’s covenants in the lease for the remainder of the term. The assignment of the lease completed on 28 November 2014 making EMI the new tenant.
On 18 December a letter was sent by EMI’s solicitors to OH’s solicitors stating that whilst the assignment was valid, the tenant’s covenants could not be enforced against EMI on the basis of Lord Neuberger’s comments in K/S Victoria Street. EMI proceeded to seek a declaration that although the lease vested in it as a matter of law, the tenant’s covenants were void and unenforceable against it. OH sought permission to bring a counterclaim for alternative declarations and by a consent order a trial of the following preliminary issue was directed, namely whether the court should declare that for the purposes of the LTCA 1995:
- As sought by EMI; the lease had vested in it by assignment and by operation of law the covenants were void and unenforceable;
- As sought by OH; notwithstanding the lease had vested in EMI the covenants were valid and enforceable; or
- As sought by OH in the alternative; the purported assignment was void and of no effect with the result that the lease remained vested in HMV and EMI remained bound as guarantor.
Decision
The High Court ruled that a tenant is precluded from assigning a lease to its guarantor and an agreement that sought to effect such an arrangement would be void. The whole purpose of the LTCA 1995 was to prevent the re-assumption or renewal of liabilities either on a tenant or guarantor. As a result, if a tenant and its guarantor were each liable for the tenant’s covenants under a lease then the guarantor could not, as a result of assignment of the lease to it, re-assume those same liabilities as the tenant.
The effect of an assignment is that the tenant and guarantor are released from the covenants under the lease by virtue of sections 5(2) and 24(2) of the LTCA 1995 respectively. Where that assignment is from a tenant to its guarantor, at the very same moment that the guarantor is released from its obligations as guarantor it then becomes bound as the new tenant as a result of section 3(2)(a) of the LTCA 1995. In practical terms there is therefore no release as the guarantor immediately re-assumes its liabilities [5]. This frustrates the operation of the LTCA 1995 and is therefore void under section 25(1) of the act.
The court held that the lease did not therefore vest in the guarantor and instead remained vested in the tenant with the guarantor remaining bound under the terms of its guarantee.
WM Comment
Whilst this case has affirmed earlier judicial comment and clarified a question that remained unanswered by previous case law, the decision is likely to be unpopular, particularly with businesses wishing to assign leases between group companies. However as the judge in the present case, Amanda Tipples QC observed “the fact that such a conclusion is unattractively limiting and commercially unrealistic is neither here nor there“. A guarantor, such as EMI cannot have their cake and eat it, they cannot pick and choose which parts of the lease survive an assignment so as to circumvent their obligations. Any attempt to undertake such an assignment will be struck down as void.
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[1] EMI Group Limited v O & H Q1 Limited [2016] EWHC 529 (Ch).
[2] K/S Victoria Street v House of Fraser (Stores Management) Ltd and others [2011] EWCA Civ 904
[3] London Diocesan Fund v Avonridge Property Company Limited [2005] UKHL 70
[4] Good Harvest Partnership LLP v Centaur Services Ltd [2010] EWHC 330 (Ch)
[5] Though a discussion as to the differences between guarantees and indemnities is beyond the scope of this article, in many cases the liability assumed by the guarantor as the new tenant would be identical to its original liability under the guarantee as most guarantees contain a provision making the guarantor primarily liable in respect of the tenant covenants of a lease as opposed to merely guaranteeing the tenant’s obligations i.e. being secondarily liable.

Dangerous but not defective: clarification of a landlord’s statutory liability for defects
A landlord’s liability to its tenant for the condition of premises is generally governed by […]
A landlord’s liability to its tenant for the condition of premises is generally governed by the provisions of the lease. The Defective Premises Act 1972 (DPA) can however, in certain circumstances, extend the contractual liability that the landlord owes to their tenant. The recent cases of Lafferty v Newark & Sherwood District Council, Sternbaum v Dhesi and Dodd v Raebarn Estates Ltd and others [1] consider the liability imposed by the DPA and provide some useful clarification on its interpretation.
Background
Under section 4(1) of the DPA a landlord owes, to all persons who might reasonably be expected to be affected by defects in the state of the premises, a duty to take such care as is reasonable in the circumstance to ensure that they are reasonably safe from personal injury or damage to property caused by a ‘relevant defect’. Section 4(2) of the DPA confirms that the duty is owed where the landlord knows or if they ought, in all the circumstances, to have known of the relevant defect.
A ‘relevant defect’ is defined in section 4(3) as being a defect in the state of the premises existing at or after the material time and having been caused by, or continuing because of, an act of omission of the landlord. That act or omission must constitute, or would have constituted if they had had notice of the defect, a failure by them to carry out their obligation to the tenant in respect of maintenance or repair of the premises.
The duty arises where the landlord is under an obligation to repair or maintain the premises. However section 4(4) of the DPA provides that the landlord is treated (for the purposes of sections 4(1) and 4(3)) as being under such an obligation where it has an express or implied right to enter the premises to carry out maintenance or repair.
As such by virtue of section 4(4), from the moment the landlord is, or has by notice, put itself in the position to enter a premises to undertake repairs or maintenance, the landlord will be treated has having an obligation to the tenant to carry out those works. The landlord will not however owe such a duty to the tenant in relation to a defect in the state of the property which has arisen, or is continuing, as a result of a tenant’s failure to comply with its obligations under the lease. As such the service by landlord of a notice pursuant to a ‘Jervis v Harris’ clause [2] would not lead the landlord to owe a duty to a tenant under the DPA however they could still owe such a duty to third parties.
It should noted that any duty owed by the landlord under the DPA does not extend beyond a duty to repair and maintain and does not therefore become a duty to make safe [3].
The cases
The first of the most recent cases to discuss liability under the DPA was Lafferty v Newark & Sherwood District Council. The facts of the case were somewhat unusual as they involved injury to a tenant who fell into a sinkhole caused by faulty drainage which opened suddenly whilst she was hanging out washing. The issues with the drainage would not have been apparent upon reasonable inspection of the garden.
It was held in this case that whilst the faulty drainage was a relevant defect for the purpose of section 4(3) of the DPA, as the drainage issue was not apparent on inspection it was a latent defect and section 4(2) was not engaged. As such, unless section 4(4) of the DPA could apply the landlord would not be held liable. The key point was therefore whether the wording of section 4(4) extended the landlord’s liability in the absence of fault, or merely served to confer the same obligation on the landlord as the duty under section 4(1) i.e. it would only be invoked if the landlord was culpable. The trial judge found that the duty under section 4(4) was equivalent to that under section 4(1) and, in dismissing a subsequent appeal, the High Court confirmed this decision.
The High Court confirmed that the duty arising under section 4(4) as a result of the landlord having a right to enter to repair is the same duty as applies under section 4(1) where it has an express or implied obligation to repair. Liability under section 4(4) is not strict [4], it is a deeming provision which extends the obligations in section 4(1) of the DPA to close a loophole in situations where it would not otherwise apply i.e. where there is no express of implied obligation to repair but a right to enter to repair exists.
It should be noted however that it appears that the claimant in this case has now applied for permission to appeal the decision of the High Court in the Court of Appeal.
The second case, Sternbaum v Dhesi involving the DPA concerned the definition of ‘relevant defect’. As stated above, a relevant defect is defined in section 4(3) of the DPA as a defect in the state of the premises existing at of after the material time and arising from or continuing as a result of an act or omission by the landlord which constitutes of would have constituted, if he had notice of the defect, a failure to carry out his obligations to the tenant in respect of repair and maintenance. The defect has to amount to disrepair in the strict sense and does not extend to putting the premises into a safe condition not remedying inherent defects that are not in the nature of repair.
In this case the Court of Appeal, in dismissing the claimant’s appeal, confirmed the first instance decision that whilst a staircase without a handrail was hazardous, it was not defective pursuant to the DPA. A lack of a handrail, although potentially dangerous, did not amount of disrepair and to oblige the landlord to fit a handrail would amount to requiring him to improve the premises and/or make them safe which is beyond the scope of the DPA.
The final case in this trio, Dodd v Raebarn Estates Ltd and others, also involved a staircase and arose as a result of the tragic death of Paul Dodd. Mr Dodd fell down a staircase, suffered a devastating brain injury and died two years later. Mr Dodd’s widow alleged that defects in the staircase, in particular the lack of a handrail, were responsible for her husband’s fall and that the landlord of the building was responsible for the defects.
The High Court reluctantly held that Mrs Dodd’s claim under the DPA failed. It was not in dispute that the landlord had a right to enter under the headlease to carry out maintenance and repair and therefore, in principle, owed a duty under the DPA. Furthermore Mr Dodd was clearly within the class of people to whom the duty under the DPA was owed. The failure to install a handrail however was not a ‘relevant defect’ under the DPA. A lack of a handrail is, as stated in the previous case, potentially dangerous and could amount to a defect in the state of the premises. However the landlord’s obligation extending only to repair and did not include an obligation to remedy inherent defects nor to putting the premises in a safe condition. Case law constrained the court to hold that the potential for a defect to be dangerous was not the correct test under the DPA. Despite the lack of a handrail it could not be said that the premises were not in good repair.
The court commented that they could not give a wide construction to the DPA as it would impose a substantial burden on the landlord over and above the statutory obligation imposed by the act.
WM Comment
It is clear from these cases that the courts are reluctant to give anything but the narrowest interpretation to the provisions of the DPA. The tenant cannot be put in a better position than they would have been if the landlord had complied with its obligations (whether expressed or implied) to repair the premises. The DPA cannot oblige the landlord to improve the premises nor render them safe and premises can be dangerous but still be in repair. If the landlord is not liable to repair, or does not have a right to enter the premises to remedy wants of repair, then no duty under the DPA arises.
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[1] Lafferty v Newark & Sherwood District Council [2016] EWHC 320 (QB), Sternbaum v Dhesi [2016] EWCA Civ 155 and Dodd v Raebarn Estates Limited and others [2016] EWHC 262 (QB).
[2] A ‘Jervis v Harris clause’ in a lease permits a landlord to enter the premises, on written notice, to inspect the state of repair. If a default in the tenant’s repairing obligation is discovered the landlord may then serve notice requiring remedial work to be undertaken and should the tenant fail to comply with that notice, the landlord may carry out the repairs and recover the cost of such repairs as a debt from the tenant.
[3] Alker v Collingwood Housing Association [2007] EWCA Civ 343.
[4] Strict liability makes a person legally responsible for damage/loss regardless of fault or culpability.

Build to Rent: ‘Generation Rent’ triggers investment in new housing sector
‘Build to rent’ (BTR) is being billed as the UK’s newest housing tenure and it […]
‘Build to rent’ (BTR) is being billed as the UK’s newest housing tenure and it is causing a stir amongst industry experts, institutional investors, local authorities and developers. Karl Anders highlights some of the key points to note.
Generation Rent
Regardless whether the EU referendum results in a ‘Brexit’, there is one area in which the UK seems to be moving towards a more traditionally European trend… that is, private home ownership is declining and the private rented sector (PRS) is on the rise.
Department for Communities and Local Government statistics [1] show that there are now nearly 5 million households in the PRS – a figure that has doubled since 2001. Residential mortgage lending is still significantly below where it was pre- the 2007/8 financial crisis [2] and numbers living within the PRS now exceed those living in social housing. As Chris Taylor, president of the British Property Federation, said: “There are profound demographic and lifestyle changes apparent in the UK. Young people want to live, work and play in cities, and the fact of the matter is that housing is not accessible or affordable to them” [3].
Many renters today are young and without dependents, yet difficulties with saving a deposit and stringent mortgage affordability checks mean that almost half of the UK’s renters believe they will never own their own home [4].
Like many of our European counterparts, the UK’s current generation is increasingly likely to consist of tenants as opposed to owner-occupiers.
Build to Rent: A housing tenure for the modern age
The demonstrative rise in the PRS, combined with government support to boost the sector [5] has piqued the interest of institutional investors, local authorities and other property developers in recent years, with the resulting emergence of the BTR sector. The largest housing associations are also using their spending power and expertise in property development to get involved via joint ventures with investors.
Unlike the majority of private rentals seen to date, BTR is a significantly scaled-up initiative. BTR schemes typically comprise large blocks of flats or houses that are purpose-built and professionally managed, often based within city centres and close to transport links.
BTR schemes offer regeneration and vibrancy to brownfield and similar sites, with the attendant socio-economic benefits for local authorities and communities; they contribute to housing supply and, in some cases, tick-off local authorities’ market rental and affordable housing requirements.
From the tenants’ perspective, BTR offers longer-term security; improvements and confidence in the quality and consistency of accommodation and management; and the ability for occupiers to personalise their home.
BTR Schemes are often backed by local authorities and/or investors directly and they can represent an opportunity for long term investment combined with a rental income stream, as well as diversification of investment within new housing supply. Developers can invest via offering rental stock assets in return for equity and rental income.
Ones to watch (and get involved?)
The BTR sector already boasts some success stories, including Thames Valley Housing’s Fizzy Living and Manchester City Council’s Matrix Homes. Many more schemes are already completed, under construction or in the pipeline [6].
If you would like any further information, advice or assistance in connection with any existing or potential BTR initiatives, please do not hesitate to contact Karl Anders.
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[1] English Housing Survey published 18 February 2016
[2] Council of Mortgage Lending, CML Regulated Mortgage Survey
[3] Financial Times, 5 December 2015
[4] Money Advice Service and Post Office Money
[5] The government set up a PRS task force in 2009, which now runs a £1 billion fund providing finance for BTR developments and offers state-backed loans for BTR ventures. Affordable housing requirements may also be relaxed in cases where they render BTR schemes unviable.
[6] See the British Property Federation’s BTR map of the UK.

Land Registration Act 2002: How will the proposed 2017 update affect you?
Times have changed since the Land Registration Act 2002 (the 2002 Act) came into force […]
Times have changed since the Land Registration Act 2002 (the 2002 Act) came into force on 13 October 2003. We have weathered a global economic crisis and faced a domestic recession. House prices have soared, dropped and then recovered, whilst at the same time mortgage fraud and incidents of fraud of registered land have increased.
A Consultation Paper, amounting to some 500 pages, has been produced by the Law Commission detailing proposed amendments to the 2002 Act. The 2002 Act currently governs 24 million registered titles in England and Wales. Erin Keating reviews the consequences of the proposed changes for mortgage lenders and conveyancers.
Protection of interests
The role of the Land Registry, and the purpose of land registration, is to maintain a balance between parties who own, and parties who have an interest in, a particular piece of land. This is recorded on a central register and, notwithstanding certain rights which are not currently required to be registered under the 2002 Act, a purchaser acquires land subject to any entries on the register. It is important to remember that not all interests in land are capable of registration, however notice of those interests may still be recorded against the register.
The 2002 Act allows for third party interests in land to be registered by way of a restriction, a unilateral notice or an agreed notice. Mortgage lenders will be well aware of what is commonly described as a “lender restriction” which limits the powers of a registered proprietor and chapter 10 of the Consultation Paper suggests that these restrictions will continue.
Under the current procedure a unilateral notice can be registered against the land without the need to provide evidence of the interest which is being asserted. This particular system is one which is subject to reform and it is proposed that evidence of the interest claimed should in future be produced at an earlier stage. Exactly what evidence will be required is not yet known, however mortgage lenders and their conveyancers, who rely on the priority and limited protection of a unilateral notice, should pay close attention to these proposals.
In accordance with the 2002 Act, the priority of an interest over land is determined by the order in which the interest was created. The majority of priority disputes seen by the Land Registry arise between the holder of a registered estate and the holder of an interest that cannot be registered. Under section 29, the purchaser of a registered estate is generally not bound by a pre-existing interest (other than an overriding interest) unless that interest is recorded on the register. Section 29 does not currently determine the priority between two competing interests which cannot be registered. The proposals consider whether notice of an interest that cannot be registered but has been recorded, has priority over an interest created earlier, which should have been registered.
Rectification and Indemnity
It is not simply enough for a register of land to be maintained. It is imperative that, for a reliable and effective system of land registration to exist, the register provides a guarantee that the information it holds is correct. That guarantee is currently given by section 28 of the 2002 Act and is reinforced by provision of an indemnity.
The 2002 Act allows for the register to be changed in some circumstances. These changes can be broadly divided into “alterations” and “rectification”. An alteration may simply be to update the correspondence address of a proprietor. Rectification is an amendment to correct a mistake which is prejudicial to the title of a registered proprietor. A party who suffers a loss as a result of a rectification may be entitled to claim an indemnity. The proposals surrounding rectification and the provision of indemnity include:
- Giving weight to the law to reinstate an individual to the register as proprietor whose name has been removed or omitted by mistake;
- Continuing to give weight to a registered proprietor in possession of the land;
- A long-stop period after which rectification of the register is no longer available; and
- Confining mortgagors to the receipt of an indemnity rather than allowing them to oppose the rectification of the register.
The 2002 Act does not differentiate between claimants for an indemnity, however that may soon all change. Proposals are in place which may limit the circumstances in which a mortgage lender can claim an indemnity. The Consultation Paper therefore asks for evidence to prove the significance of the existence of the indemnity scheme in lending decisions. Furthermore, the possibility looms that mortgage lenders may only be able to claim indemnity in certain circumstances and only when they can prove that they have met their statutory duty in verifying the identity of borrowers.
Fraud
Registered title fraud is a very serious concern. A significant proportion of indemnity has been paid by the Land Registry as a result of registered title fraud. The Land Registry continues to accept that it bears the burden of the transaction once it is registered, however by the time the Land Registry is involved it is often too late to detect the fraud. The Consultation Paper considers whether the financial consequences of fraud should instead fall on the minority of conveyancers and mortgage lenders who do not conduct their business appropriately. In addition, consideration is to be made as to whether conveyancers owe the Land Registry a statutory duty of care.
Identity fraud, which was tackled by the introduction of the Form ID1 and Form ID2, continues to be a hot topic and it looks likely that further checks will be introduced as part of the amendment to the 2002 Act.
E-conveyancing
Perhaps the most memorable and indeed the most ambitious proposal within the 2002 Act was the introduction of e-conveyancing. Whilst some progress has been made, in particular with the introduction of electronic discharge and latterly the Land Registry Portal, we still remain a long way from the simultaneous completion and registration that was envisaged. Consequently the new proposals seek to remove the requirement of simultaneous completion and registration with a view to instead looking to develop a more gradual introduction to complete electronic conveyancing.
WM Comment
The Consultation Paper proposes significant changes to the 2002 Act which will have a direct impact on mortgage lenders and conveyancers. Those who will be affected have until 30 June 2016 to submit their responses. Walker Morris is happy to provide advice to any party who has queries or concerns regarding the proposals.
The consultation can be viewed in full at http://www.lawcom.gov.uk/project/updating-the-land-registration-act-2002/.

Lease termination for ‘own occupation’: Court of Appeal clarification
The Landlord and Tenant Act 1954 (the Act) gives security of tenure protection to tenants […]
The Landlord and Tenant Act 1954 (the Act) gives security of tenure protection to tenants in occupation of premises for the purposes of a business. That effectively means that landlords can only recover possession of such premises if and when they can establish, at court if necessary, one or more of the statutory grounds for repossession which are set out in section 30 of the Act. Section 30 (1) (g) provides that a landlord may oppose the grant of a renewal lease, or make an application for termination of a protected tenancy without the grant of a new lease, if it intends to occupy the premises itself, for the purposes of a business carried on by it or as its residence.
In the recent case of Gulf Agencies v Ahmed [1], the Court of Appeal provided a useful reminder of some of the key principles underpinning the ‘own occupation’ ground for possession.
Establishing intention
For a landlord to successfully establish that it is entitled to recover possession of business premises from a tenant with security of tenure protection because it wishes to occupy the premises itself, it must prove the necessary legal intention. The following are essential elements of the requisite intention:
- The landlord must have a firm and settled intention to do that which he says he intends to do. His planned project must have moved “out of the zone of contemplation… into the valley of decision” [2].
- The landlord must have a reasonable prospect of bringing about the desired result.
- The first limb of the intention test is subjective and turns on whether the particular landlord and his plans are to be believed.
- If a court does not believe a landlord, it must make a clear finding to that effect and it must give a clear statement of the reasons for that finding [3].
- The second limb is objective and is concerned with whether the landlord’s intentions can actually be achieved. That will turn on, for example, planning permissions and permitted use, financial and factual feasibility, and the like.
- To determine the objective limb, the court will ask whether a reasonable man would, on the evidence, believe there was a reasonable prospect of the landlord carrying out the planned occupation; and whether there is a “real chance, a prospect strong enough to be acted on… as opposed to a prospect that should be treated as merely fanciful or as one that should sensibly be ignored by a reasonable landlord” [4].
- The intention “must not be fleeting or illusory… [and] must be more than short term” [5].
- What is short term will depend upon the facts of the case and whether or not occupying for a particular amount of time is commercially sensible is not a matter for the court (unless it serves to undermine the genuineness of a landlord’s subjective intention).
WM Comment
This case does not make new law, but it is a useful tool for landlords and practitioners alike because it pulls together much of the relevant case law and key legal principles with which a landlord will need to comply before it can recover possession of secure business premises to occupy for itself. In addition, the case clarifies that many of the same issues apply under section 30 (1) (g) of the Act, as apply in cases where a landlord seeks to recover possession in order to redevelop [6].
Armed with an understanding of these important legal principles, landlords would be well advised to build their case on intention to occupy (or, for that matter, on intention to redevelop) at the earliest possible stage when they contemplate terminating a secure business tenancy and/or objecting to a tenant’s request for a renewal lease. If a landlord can demonstrate, with evidence, that it has the requisite intention and means to carry out its plans, a tenant is more likely to accept the landlord’s word and to depart amicably, without the need for court proceedings.
If you would like any advice or assistance in connection with any business lease or lease termination issue, please do not hesitate to contact a member of Walker Morris’ Real Estate Litigation team.
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[1] [2016] EWCA Civ 44
[2] Cunliffe v Goodman [1950] 1 All ER 720; Fisher v Taylors Furnishing Stores [1956] 2 QB 78
[3] A finding of dishonesty is obviously a very serious thing for a landlord (or indeed for any person), hence the need for a clear and reasoned finding. In fact, it is also an issue for a tenant: a reasoned finding of dishonesty gives rise to the entitlement for a tenant to claim its costs of the litigation on the indemnity basis (i.e. not subject to potential reduction on grounds of ‘reasonableness’).
[4] Gregson v Cyril Lord Ltd [1963] 1WLR 41; Cadogan v McCarthy & Stone Developments Ltd [1996] EGCS 94
[5] Patel v Keles [2009] All ER (D) 141 (Nov)
[6] I.e. under section 30 (1) (f), the ‘redevelopment’ ground