In this alert we look back at the last 12 months and pick out some of the legal highlights for English real estate. If you are also interested in legal developments in Scotland, please click here.
January 2019 – a new year and a new approach to the Landlord and Tenant Act 1954 (1954 Act)
Although decided in December 2018, the impact of the Supreme Court decision in S Franses Ltd v. The Cavendish Hotel (London) Ltd [2018] UKSC 62 only really began to sink in during early 2019. The court ruled that, in order to rely upon ground (f) of section 30(1) of the 1954 Act to oppose the grant of a new tenancy, a landlord has to show that it has a firm and settled intention to undertake works which is independent of the tenant's statutory claim for a new tenancy. So if a landlord would not intend to undertake the works if the tenant left voluntarily, then it will not satisfy ground (f).
February 2019 – Brexit not enough to frustrate a lease
In February 2019 the High Court handed down its decision in Canary Wharf Limited v. European Medicines Agency [2019] EWHC 355 (Ch) confirming that Brexit did not frustrate (i.e. bring to a premature end) the lease in question. This case is likely to grow in significance now that it seems almost inevitable that the UK will leave the European Union at the end of this month. The decision provides some reassurance to landlords that it would be very difficult for tenants, particularly those with alienation provisions in their leases, to argue that Brexit will have the effect of frustrating their leases. As for the effect of Brexit on commercial real estate in 2020, the impact will be felt more in terms of the reaction of the market rather than significant legal changes to underlying property law, since this is largely domestic in origin.
March 2019 – SDLT changes
For the majority of transactions with an effective date on or after 1 March 2019, the SDLT filing date was reduced in 2019. Whereas previously returns had to be submitted and tax paid within 30 days of the effective date, for the transactions affected by this change the deadline was reduced to 14 days. There was also some discussion in March 2019 of introducing a 1% SDLT surcharge on non-UK residents purchasing residential property in England – there was no mention of this in the recent Queen's Speech so we wait to see whether this will be pursued in 2020.
April 2019 – new UK service charge code comes into effect
The new commercial service charge code professional statement (Code) produced by the Royal Institute of Chartered Surveyors (RICS) became effective on 1 April 2019. The Code contains certain mandatory requirements for regulated firms and RICS members. It also sets out 24 core principles, numerous best practice guidelines and guidance on service charge handover in the event of a sale. While the Code cannot override the terms of existing leases, RICS advises that if existing leases are read in conjunction with the Code this should enable users to identify the best way forward in interpreting that lease to ensure effective management of services. The Code applies across the UK subject to some tweaks in the different jurisdictions.
May 2019 – proposals to abolish "no fault" evictions
In May we reported that the government had issued its response to the consultation on overcoming barriers to longer tenancies in the private rented sector in England. One of the key proposals to come out of that was the announcement that the government intended to put an end to "no-fault" evictions by repealing section 21 of the Housing Act 1988. This is to be pursued in 2020 as part of the Renters' Reform Bill which was announced in the Queen's Speech in December 2019.
June 2019 – the Tenant Fees Act 2019 comes into full force
The Tenant Fees Act was enacted in March 2019 but only came into full force on 1 June 2019. It applies to certain tenancies of housing in England and abolishes all payments to landlords and letting agents save for the "permitted payments" which are set out in Schedule 1 of the Act. For example, refundable tenancy deposits are now capped at no more than five weeks' rent for tenancies with an annual rent of less than £50,000 and refundable holding deposits are capped at one week's rent.
July 2019 – leasehold reform
Plans for residential leasehold reform in England continued to gather pace in 2019 with the government issuing another response in July. There are two key proposals. Firstly, to ban the creation of any new residential long leases (i.e. leases in excess of 21 years) over houses in England. Secondly, to legislate to restrict ground rents in future residential long leases of properties in England to a peppercorn. Although draft legislation has yet to materialise, it is clear that these proposals remain firmly on the agenda. In the notes to the Queen's Speech the government confirms that it is "taking forward a comprehensive programme of reform to end unfair practices in the leasehold market" with both of these proposals being specifically mentioned.
August 2019 – transparency of ownership
In August 2019 we reported on the government's response to the House of Commons and House of Lords Joint Committee's report on the draft Registration of Overseas Entities Bill (which has yet to be laid before Parliament). The Bill sets out a legal framework for establishing a public register of the beneficial ownership of overseas entities that have interests in land in the UK. This will be a significant change for overseas entities that have invested, or are intending to invest, in UK real estate. The government remains committed to pursuing the register (confirming this in the notes accompanying the Queen's Speech) although it is questionable whether it will be able to stick to its previous plan of launching the register in 2021.
September 2019 – electronic signatures
In September 2019 the Law Commission issued its report on electronic signatures. Unfortunately the use of electronic signatures in registrable real estate transactions was specifically excluded from the ambit of the Law Commission's consultation. As such, last year we issued a detailed note on the status of electronic signatures for real estate transactions in the UK. In England and Wales the position remains that the Land Registry will not accept electronically executed deeds purporting to effect registrable dispositions. However, the hope is that this will change in the near future as the Land Registry pushes on with its own project looking at electronic signatures and conveyancing.
October 2019 – relief from forfeiture for a licensee
In October 2019 the Supreme Court handed down its decision in The Manchester Ship Canal Company Limited v. Vauxhall Motors Limited [2019] UKSC 46. The court confirmed the decisions of the lower courts in granting relief from forfeiture to a licensee. It had previously been thought that relief was only available in respect of proprietary rights over land and only extended to possessory rights where they concerned personal property. The court confirmed that relief was available in respect of possessory rights over land (such as those under a licence) in certain circumstances. It will be interesting to see whether this decision generates much case law in 2020.
November 2019 – minimum energy efficiency standards (MEES) consultation
The Non-Domestic Private Rented Sector Minimum Energy Efficiency Standards: Trajectory to 2030 consultation was issued in November 2019. In it the government recommended significantly tightening minimum energy efficiency standards. Under the current minimum energy efficiency standards regime, landlords are, subject to certain exemptions, prohibited from granting new leases (including renewals and extensions) of non-domestic privately rented property with an EPC rating below E. From 2023, landlords will be prohibited from continuing to let such properties if they have an EPC rating below E. In the consultation the government confirms that its preference is to raise the standard so that the prohibition on letting or continuing to let non-domestic private rented property will apply to all properties with an EPC rating below B by 2030. If implemented, this would be a significant change for landlords.
December 2019 – more decisions on the Electronic Communications Code (ECC)
Throughout 2019 we saw numerous decisions on the ECC which reached its second anniversary in December 2019. Among those decisions was the Court of Appeal judgment in Cornerstone Telecommunications Infrastructure Limited v. Compton Beauchamp Estates Limited [2019] EWCA Civ 1755, which clarified that only occupiers of land can confer rights pursuant to the ECC and, further, that operators in situ cannot confer ECC rights on themselves. As the demand for better electronic communications infrastructure grows we can expect to see yet more cases on the ECC as we progress through 2020.
Looking ahead to 2020
Later this month Dentons will be hosting its annual predictions events in London and Glasgow, at which industry experts will be discussing (among other things) the key themes they anticipate will be grabbing the headlines in 2020 and the asset classes to watch over the next 12 months. Shortly thereafter we will be issuing our annual Predictions Video and accompanying report.
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