commercial property autumn 2008 when is a lease created? Tenants have significant rights compared with those who occupy premises by virtue of a licence, so it is important to be sure of the basis of occupation and to be aware of the fact that tenants’ rights can be created in some circumstances when a formal lease has not been signed. This is because the Law of Property Act 1954 (Section 54) provides that a lease can come into being without the need for the preparation of a written lease. There are certain conditions which apply in such circumstances, which are, in simplified terms, that: n the lease cannot exceed three years; n the term starts when the lease is put into effect (i.e. not later); and n the rent is the market rent for the premises. Recently, an appeal was heard from tenants who were occupying premises paying a rent of approximately one third of the market rate under a one-page agreement which was not properly executed as a lease, but which they claimed was sufficient to constitute a lease under Section 54. They claimed that as a result, they had security of tenure when a new purchaser of the freehold of the unit they let sought to evict them from the premises. The case went to the Court of Appeal, which concluded that the tenants did not have a lease under Section 54 as the requirement that the rent payable was equivalent to a market rent was not met. Accordingly, the arrangement could be terminated on demand. Had the rent paid by the tenant been closer to the market rent, the decision may well have gone the other way. Making informal arrangements for property use is fraught with risk for both landlord and tenant. If you are letting out or seeking to rent a property, we can assist you to ensure that your interests are protected. WHISKERS SOLICITORS 6 Mitre Buildings, Kitson Way Harlow, Essex. CM20 1DR Tel 01279 439439 Fax 01279 439100 e-mail: enquiries@whiskers.co.uk www.whiskers.co.uk rates change may alter landscape landlord wins unfair terms case The decision in a widely reported case, in which a tenant successfully sued its landlord using the unfair contract terms legislation, has been reversed in the Court of Appeal. In the case in point, the tenant was left with offices which were so hot as to be unusable because the landlord had failed to repair the air conditioning over a lengthy period. Because of the problems, the tenant withheld their payments and then vacated the premises. The landlord sued for the unpaid rent and the tenant counterclaimed for their losses and expenses connected with their relocation. The Court of Appeal found that the landlord had been negligent in not repairing the air conditioning. However, it did not agree that the exclusion clause in the lease prevented the tenant from obtaining a remedy for its loss. The remedy was a claim for the difference between the value of services the landlord had contracted to provide and those actually provided. The exclusion clause was therefore reasonable. We can advise you on any problems relating to your lease. in brief is twice the size materially bigger? The Court of Appeal recently ruled that a council was wrong to grant planning permission for an application to demolish a house and replace it with one which was two and a half times the size of the original building. The planners had concluded that the footprint of the new property was similar in scale to the previous premises. However, the correct test was: ‘Was the new property materially larger?’ not ‘Did it make a material impact?’. barrier plans defeated The owners of properties adjacent to a private road have successfully prevented the local council from erecting a code-operated barrier in order to prevent the road being used as a ‘rat run’. They argued that the barrier would prevent many authorised visitors from gaining access and were granted an injunction to prevent the council from going ahead with its plan. commercial property downturn expected to continue Commercial property prices are set to fall by 12 per cent over the next three years in the aftermath of the credit crunch, according to a leading economics consultancy. Earlier this year it was revealed that several big insurers had acted to prevent withdrawals from their commercial property investment funds in order to prevent small investors from removing their money. This newsletter has been prepared for general interest and it is important to obtain professional advice on specific issues. We believe the information contained in it to be correct at time of print. While all possible care is taken in the preparation of this newsletter, no responsibility for loss occasioned by any person acting or refraining from acting as a result of the material contained herein can be accepted by the firm, the authors or the publishers. The recent change in the laws governing rate relief for empty properties may be about to cause a change to the UK’s industrial landscape, reminiscent of the last recession, warns the Royal Institute of Chartered Surveyors (RICS). Previously, unoccupied industrial buildings have benefited from 100 per cent relief against non- domestic rates. Other unoccupied commercial buildings were exempt from liability to rates for three months and received a 50 per cent reduction thereafter. On 6 April, the position changed. Now, empty industrial properties have exemption from rates for six months only and non-industrial commercial properties for three months. After the exemption periods, full rates are payable. It has been estimated that approximately 7 per cent of such properties are empty at any time. According to RICS, some of the UK’s largest commercial property owners are threatening to remove the roofs from properties which remain unoccupied and to advance plans to demolish empty properties. It is also likely that new developments which are not pre-let will be left as shells without roofs.