Real Estate Matters – Summer 2017

Welcome to the latest edition of Real Estate Matters from Walker Morris.
We also provide advice on: Recent case law on easements, restrictive covenants and knotweed constituting nuisance – all of which should be of interest to landowners and developers. We also provide up-to-date advice for property owners and lenders on short-term lets and the sharing economy, as ‘Airbnb’-style arrangements proliferate, and on the new Business and Property Courts.

Easements: What does “necessary” mean?
The recent case of Shaw v Grousby [1] is a useful reminder of the importance […]
The recent case of Shaw v Grousby [1] is a useful reminder of the importance of careful consideration when drafting easements, particularly when rights are granted within the context of a property transfer or lease, where the terminology of the easement may not be the main focus of the parties’ attention.
What is “necessary” access to property?
Shaw v Grousby concerned the extent to which an easement may be limited by being granted so far as “necessary” – in this case in the context of a right of way over a shared driveway. In reaching its decision, the Court of Appeal acknowledged that a property’s needs can evolve over time, which can alter what would therefore be deemed to be necessary at any given point.
What are the parameters of an easement?
The make-up of an easement can generally be categorised by the following:
- physical extent (such as the width of a right of way)
- purpose and manner of use (for example a right of way to gain access to a single property) and
- any limitations on use (for example with or without vehicles, or specified permitted hours of use).
Each of these elements should be considered when granting or reserving rights over land to ensure that the easement is capable of being fully enjoyed by the benefitting land, whilst being duly limited so as not to interfere with the use of the burdened land. Being as comprehensive and as clear as possible in the express written grant itself leaves the right much less vulnerable to any future disagreement and dispute.
Case
Three properties had been built in the grounds of a manor house, one of which was the subject property in this case (Property A). The transfer of Property A included a right of way over a driveway from the public highway to the manor house, which remained part of the manor house title. The right of way was granted over “so much of the driveway… as is necessary to obtain access… subject to the proviso that the Buyers shall contribute a fair and reasonable proportion of the cost of maintaining the same… to the extent of the user of the driveway by the Buyers.”
Part of the boundary of Property A abutted the driveway. At the time of grant, a wooden fence was erected along the boundary between Property A and the driveway, with a gap in the fence providing access to Property A. Subsequently, the owners of Property A removed the fence and built a wall in its place, but in doing so they sealed up the gap constituting the access. Instead, they installed gates in a location some way further up the driveway.
The manor house owners claimed that the right of way limited access to the point which had existed at the time of grant of the right – namely, the point where the gap in the fence had been; however the now-owners of Property A argued that the right of way permitted access at each and every point at which Property A abutted the driveway, therefore allowing the use of the new gated access.
Decision
The Court of Appeal found for the now-owners of Property A and confirmed:
- The extent of a right of way is a matter of construction of the relevant deed.
- The plan annexed to the transfer of Property A included the entire driveway (from the highway to the manor house), indicating the maximum extent over which the right of way could be exercised.
- “Necessary” should not be construed by reference to a fixed point in time – the way properties are used can evolve over time and what is necessary can therefore change as such usage is varied.
- The court considered the argument made by the manor house owners that “necessary to obtain access” inferred the point of access that is shortest from the public highway, but disagreed, noting that the grantor was protected by the right being subject to payment towards maintenance costs according to user. Changing the access point (and thereby using more of the driveway) would be reflected in that subjection.
- If the intention had been to impose limitations (such as to fix the access point), then the transfer should have expressly said so.
WM Comment
This case is a reminder of the importance of fully considering the parameters of any rights that are being proposed and ensuring that any required limitations or allowances are expressly drafted in the easement itself.
The Walker Morris transactional Real Estate Department has a broad spread of experience in drafting and negotiating easements for a wide range of projects and can advise on the proper and appropriate scope of rights being granted or reserved.
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[1] [2017] EWCA Civ 233

After ‘Airbnb’: The sharing economy and short-term lets
The sharing economy In the ‘sharing economy’, owners (who are frequently individuals or small businesses) […]
The sharing economy
In the ‘sharing economy’, owners (who are frequently individuals or small businesses) rent out to others something that they are not using themselves, usually via a third party website which operates a rating or review system. The owner generates some income from its otherwise unused asset and the renter saves money by not having to rent elsewhere from a more expensive traditional supplier. As we have reported previously, however, the 2016 case of Nemcova v Fairfield Rents Ltd [1] highlighted legal and practical issues arising from this ‘Airbnb’ short-term holiday/business lets model.
Airbnb – a reminder
Ms Nemcova owned a leasehold flat in London. She was often absent herself and so, using a sharing economy reservation website, she advertised and let out her flat several times on a number of very short-term lets. Ms Nemcova’s lease did not contain any relevant prohibitions against sub-letting, short-term letting, holiday letting, business or commercial use and nor did it require that she occupied the flat herself or as her principal residence. Ms Nemcova therefore resisted her landlord’s assertion (made as a pre-cursor to a claim for possession via forfeiture of the lease), that she was in breach of her covenant not to use the flat for any purpose whatsoever other than “as a private residence”.
The Upper Tribunal (Lands Chamber) (UT) held that whilst the covenant did not require that the flat be used as the private residence of the leaseholder or any occupier (as a person may have more than one private residence at any one time), nevertheless it did require that the occupier for the time being must use the flat as his or her private residence. The UT decided that when a person occupied for a matter of a few days only (such as during short-term business/holiday lets) that constituted a breach of the lease. Ms Nemcova’s lease was, therefore, vulnerable to forfeiture.
Advice
Walker Morris is seeing an increased awareness of the Airbnb issue on the part of landlords, along with an increased appetite to seek enforcement of lease covenants, which will culminate in forfeiture action (and the landlord’s recovery of possession) if the leaseholder/borrower fails to remedy the breach. Loss of the leasehold asset is obviously a concern for any leaseholder, but it is also a significant concern for lenders who face losing their security.
Landlords, tenants, lenders and legal representatives alike should note the following traps and tips.
- Freehold deeds; leases; residential letting/management regulations; mortgage conditions; home insurance policies; planning laws, residential letting legislation and the terms of and conditions of sharing economy reservation services are all likely to contain covenants and requirements that are likely to impact upon a party’s ability to lawfully proceed with an Airbnb-type letting.
- Lease covenants to watch out for, in particular, include:
- to be used as a private residence only (as per the Nemcova/Airbnb case)
- not to be used for trade or business
- to maintain adequate insurance at all times (this covenant will be breached if the relevant home insurance policy does not cover use of the property under a short-term let)
- not to cause or permit any nuisance;
- not to sublet (other than by way of an assured shorthold tenancy and/or with the landlord’s consent)
- the compliance with laws provision (especially any compliance with planning laws provision).
- A failure to consult and comply with all relevant commercial, contractual and statutory provisions (including a failure to make any necessary notifications to lenders and insurers and to obtain any necessary consents), could result in a short term letting being unlawful.
- An unlawful subletting could leave the host vulnerable to complaints; compensation claims; loss of their asset as a result of lease forfeiture or breach of mortgage conditions; voided insurance policies; and poor reviewer ratings and/or removal from the letting platform. .
- A failure to properly consider and manage all risks associated with high occupier turn-over and repeated short-term lets – especially holiday lets where occupiers might not treat the property or neighbours with care and respect – could also cause nuisance for other occupiers of multi-let buildings and deterioration of the property, with high repair and maintenance costs.
- A lack of proper understanding of relevant residential lettings regulations and legislation could also mean that a host puts occupiers at risk (for example, if proper safeguards are not put in place, such as gas safety and electrical certificates) and/or could leave the host with problems or even criminal convictions when it comes to dealing with occupiers who do not necessarily pay up as they should or vacate the premises when they should [2].
- Lenders and leasehold conveyancers may wish to consider amending their processes to enquire whether Airbnb-type lets are likely, and to adapt their approach and advice accordingly if so.
WM Comment
We are seeing an increased awareness of this issue on the part of landlords, along with an appetite for them to seek enforcement of lease covenants, ultimately culminating in forfeiture action.
Whether you are a landlord concerned about the use to which your tenant is putting your property, or you are a lender who feels on the ‘back foot’ as your security is threatened by your borrower’s breach, please do not hesitate to contact Karl Anders or another member of the firm’s Housing Litigation and Management Department for further information or advice.

Legal and procedural wrangles: Restrictive covenants and res judicata
Landowners, developers and property professionals will be aware that section 84 (1) of the Law […]
Landowners, developers and property professionals will be aware that section 84 (1) of the Law of Property Act 1925 (LPA) provides for the modification or removal, in certain circumstances, of restrictive covenants affecting land both in a freehold and leasehold context; and that section 84 (2) LPA provides for the determination of the nature, extent and enforceability of such a covenant. They might not be aware, however, of the subtle but crucial distinction that, whereas the Lands Tribunal is afforded jurisdiction under section 84 (1), only the Civil Courts are afforded jurisdiction under both sections. This distinction can have practical implications when it comes to the determination of disputes between parties in relation to the enforceability of restrictive covenants.
Restrictive covenants and res judicata
The Upper Tribunal (Lands Chamber) has the power to modify or remove restrictive covenants but only the Court has jurisdiction to determine a covenant’s validity and enforceability. This means therefore that any determination made or view expressed by the Upper Tribunal (Lands Chamber) regarding the validity or enforceability of a covenant is not binding on the Court. This was precisely the issue that arose in Doberman v Watson [1].
There is a fundamental principle that there should be finality to litigation, also known as res judicata. It is in the public interest that parties should not face repeated litigation in respect of the same set of circumstances and the Court therefore has the power to strike out claims which amount to an abuse of process. Although there is no specific definition of ‘abuse of process’, this can arise where attempts are made to re-litigate and/or where cases or issues are advanced in a way that is inconsistent with an earlier judgment.
In Doberman v Watson, the Claimants sought a declaration from the Court, under section 84 (2), that their land was no longer affected by a restrictive covenant because the covenant was purely personal and there was no longer any party who was capable of enforcing it. The Defendants applied to strike out the claim on the grounds of res judicata because, in fact, the Upper Tribunal (Lands Chamber) had previously refused an application made by the Claimants’ predecessor in title for removal of the very same covenant under section 84 (1) and, when doing so, had proceeded on the basis that the covenant was one of which all owners of property within the relevant estate enjoyed the benefit, by virtue of an enforceable building scheme.
Outcome
The court refused the Defendants’ application to strike out the claim. Section 84 draws a clear distinction between the functions of subsection (1) and subsection (2) (and, respectively, between the functions of the Upper Tribunal (Lands Chamber) and the Court in determining disputes). The current claim did not therefore amount to re-litigation or advancing a case in a manner inconsistent with an earlier judgment. This was principally because the Upper Tribunal (Lands Chamber) did not have jurisdiction over the subject matter falling within section 84(2). Even if it had been taken to have made a decision on such matters, such decision was not final and it made no determination upon a question raised in later litigation – it had simply proceeded on a particular footing (that is, that the covenant was enforceable by anyone owing property within the relevant estate), but this bound no one including the Court. As such, it was not an abuse of process, nor had any estoppel arisen.
WM Comment
The Doberman case and a close analysis of Section 84 demonstrate how a thorough knowledge of all relevant legal and procedural provisions is essential to ensure that any strategy in relation to the enforceability or modification or discharge of restrictive covenants is appropriate to the particular circumstances.
Martin McKeague and David Manda at Walker Morris are experts on restrictive covenants [2] and on real estate litigation and dispute resolution generally. If you have any queries in relation to this article or indeed any real estate ownership, occupation or development dispute, please contact Martin or David, who will be very happy to help.
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[1] [2017] EWHC 1708 (Ch)
[2] See Martin’s earlier article on restrictive covenants and unlocking value in leasehold land.

New Business and Property Courts: An Update
Walker Morris has previously reported the introduction of The Business and Property Courts, a new […]
Walker Morris has previously reported the introduction of The Business and Property Courts, a new umbrella specialist business dispute resolution jurisdiction comprising the specialist civil courts (including the Commercial Court, the Technology and Construction Court and the courts of the Chancery Division dealing with financial services, intellectual property, competition and insolvency).
The judiciary initially announced that the newly named courts would take effect as from June 2017 but we have now been informed that the launch has been postponed due to the general election and that the Business and Property Courts will now come into effect in October.
The new Business and Property Courts will preserve the familiar practices of the existing courts (so no immediate procedural changes are anticipated), but will allow for greater flexibility in the cross-deployment of judges with specialist expertise. There will be Business and Property Courts in Birmingham, Manchester, Leeds, Bristol and Cardiff (with expansion to Newcastle and Liverpool also likely), enabling greater connection between work undertaken in the regions and in London.
The judiciary has stated that the new structure will enhance the UK’s reputation for international business dispute resolution. It is to be hoped that the increased flexibility, the closer working and the enhanced regional connection may ultimately result in increased efficiency and improved service delivery for business court users.