By Matthew Owen

Retail Prices Index (RPI) linked rent review clauses have become more common in recent years, adopted in residential long leases following a pushback against fixed ground rent increases and in commercial property leases as a welcome alternative to provide some rental growth.  With Covid19 likely to depress values particularly in the retail sector many landlords will be looking at RPI increases to create some assurance of steady rent increases.  However, this week could spell the end for RPI.

RPI is a measure of inflation utilised throughout the UK.   However, the ongoing Government consultation may mark the beginning of the end of the RPI liked rent review.

A House of Lords report into the RPI highlighted concerns with the way that the UK Statistics Authority (UKSA) calculate RPI, specifically that the divergence in the rates between RPI and Consumer Prices Index was resulting a difference of 1% per annum. The report contained the following proposals:

  • The publication of RPI should cease; and
  • During the period which the legislation is being negotiated RPI should be aligned with the Consumer Prices Index including owner occupiers’ housing costs (CPIH).

In response to the publication of this report, the Government announced a consultation with UKSA, which commenced on 11 March 2020, to review the proposed alignment with the CPIH and other technical matters concerning the implementation of the proposal.  The result of the review is due this week and it is likely that the RPI will be discontinued.

Clearly any changes to the way RPI is calculated would have wide-reaching consequences for property rents potentially reducing the increase in property rents by 1% annually.

Abolishing RPI will cause serious legal concerns potentially resulting  in some rent review clauses becoming redundant.  It is certainly not too early to try and do something about it.

While the implementation for the alignment of RPI with the CPIH index is targeted to take place between 2025 and 2030 it is important to ensure any index linked rent review clauses are drafted with the change in mind. Properly drafted leases should include the replacement of the index where RPI is abolished or a material change in the calculation of the index. Another complimentary approach where an alternative index is going to be adopted would be to introduce a “cap and collar”- which dictates the minimum and maximum increase, which would prevent Landlord losses in the event that RPI is significantly reduced.

Despite the RPI alignment causing apprehension in respect of existing leases, it may well be beneficial in new leases for alternative interest indices, such as CPIH, to be adopted to replace RPI for index-linked rent reviews.

With a first rent review in a commercial lease likely to be five years’ away it is worth paying some attention to the basis of review when negotiating your terms.

Matthew Owen is a solicitor in our Commercial Property team.  If you wish to discuss this article or any aspects of commercial property transactions you can contact Matthew by email or phone (0161 302 8399).  You can download a PDF of this article here.

Following the Prime Minister’s announcement on 31 October, additional financial support is being made available to individuals and businesses, including an extension to the furlough scheme, which will now remain open until December. 

Vicky Beattie and Neal Mellor of our Employment Team provide a useful summary of the latest changes

  • Employers of any size are eligible for the extended furlough scheme, which will continue for a further month.
  • Employees can be furloughed full time or can come back to work on a part time basis.
  • All employers with a UK bank account and UK PAYE schemes can claim the grant. The employer does not need to have previously used the furlough scheme.
  • Employees need to have been on an employer’s PAYE payroll by 23:59 30 October 2020 to be eligible for extended furlough. This means a Real Time Information (RTI) submission notifying payment for that employee to HMRC must have been made on or before 30th October 2020.
  • Employees can be on any type of contract to be eligible.
  • Employers will be able to agree any working arrangements with employees they are claiming for.
  • Employers can claim the grant for the hours their employees are not working, calculated by reference to their usual hours worked in a claim period. Such calculations will be broadly similar to the current furlough scheme.
  • In order to claim the grant for furloughed hours, employers will need to report and claim for a minimum period of 7 consecutive calendar days.
  • Employers will need to report hours worked and the usual hours an employee would be expected to work in a claim period.
  • For worked hours, employees will be paid by their employer subject to their employment contract and employers will be responsible for paying the tax and NICs due on those amounts.
  • For hours not worked by the employee, the government will pay 80% of wages up to a cap of £2,500. Employers will pay for the NICs and pension contributions. The grant must be paid to the employee in full.
  • Employers can choose to top up employee wages above the scheme grant at their own expense if they wish.

The Job Support Scheme (JSS), which was due to commence on 1 November, has been postponed until the extended furlough scheme ends.  

It is expected that further guidance and details, including how to claim under the extended furlough scheme through an updated claims service, will be provided shortly.

If you have any queries in relation to this or any employment issue, please contact Vicky Beattie or Neal Mellor by email or telephone – vicky@bbslaw.co.uk / neal@bbslaw.co.uk 0161 832 2500.

BBS Law’s commercial property team has recently acted on the sale of a highly sought-after retail parade in Swindon. 

Lead by Senior Associate, Eoin Murphy the team exchanged on the sale of Sussex Place in Swindon within weeks of instruction.  The parade includes units with notable national occupiers including Subway, Barnardo’s and Rowlands and is anchored by a Co-operative convenience store.  PK3 were the agents representing the Seller.

The BBS Law London property team led by Avi Barr and Craig Mullen has acted for (med)24 on its Lease of its flagship facility in Paddington.

(med)24 is a newly established private membership health service which will offer a revolutionary approach to healthcare. Its one-stop shop facility in prime central London will enable its members to receive first class primary medical care, from GP appointments and health assessments to online consultations and specialist referrals. With state-of-the-art technology and an inspiring interior to match, its members will benefit from an unsurpassed customer experience.

Commenting on the Lease transaction itself, Avi Barr, Partner in the BBS London office, said:

”It has been a pleasure working with the management team at (med)24 including Jonathan Kron and Ahmad Al-Hamad. Their aspiration to create a high level of service matched with our desire to provide a similarly specialist approach allowing us the opportunity to add value to (med)24 by working on its behalf to ensure that its objectives for the premises were met in a timely manner”.

By Avi Barr (Property and Secured Lending Partner)

The Government has just introduced new rules allowing blocks of flats to be extended upwards by two storeys to create new homes without the need for planning permission. The changes come into force on 1 August.   With the ability to develop airspace without the need for planning permission, opportunities will arise for many property owners and developers.

This article looks at some of the important elements to be considered when undertaking airspace development.  (You can click here for a downloadable version.)

  • Summary of the recent changes
  • What makes airspace developments different?
  • Planning
  • Construction considerations
  • Thinking about the services
  • Overview of legal issues
  • Checking the lease
  • Tenant’s rights of first refusal
  • Enfranchisement

Airspace development is not simply the domain of institutional property owners, as freehold owners of multi-occupied properties (whether owners of a building subject to long leases, or indeed residents in blocks of flats with shared ownership) are also increasingly finding ways to exploit value in their properties.  Many developers and block owners will be looking at this new opportunity to convert unused airspace above existing blocks into something more valuable.

What are the recent changes?

The rules state that the right is restricted to buildings of three storeys or more in height and the extended building must not be more than 30 metres in total height. Meanwhile, the height of the extension cannot be greater than seven metres compared to the highest part of the existing roof, while any new storeys must be individually no more than three metres in height.

The new homes must also be flats, the instrument states, while the right only applies to buildings built after 1 July 1948 and before 5 March 2018 and excludes those within a site of special scientific interest.

Development is only permitted subject to prior approval. Conditions for local authority consideration include: transport and highways impacts; air traffic and defence asset impacts; contamination and flooding risks.

Airspace development; the same but different

The basic requirements for airspace developments are not that dissimilar to any development: the necessary components of land (or in this case airspace over land), services, funding and the actual construction are all there. However, what makes airspace developments different is the obvious potential design and technical difficulties in building up increased services provision and the actual legalities relating to other occupier or tenant rights, such as access and rights of light, party walls. All these additional considerations may make construction a little more challenging and funding that little bit more difficult to obtain.

Planning

There has been a marked increase in enthusiasm from local authorities towards airspace developments and now with the change to permitted development rights (contained in the The Town and Country Planning (Permitted Development and Miscellaneous Amendments) (England) (Coronavirus) Regulations 2020), opportunities to develop will be increased.  It is worth emphasising that the new PD rights do not apply to all buildings and a Certificate of Lawfulness will still be required.

For those developments, where planning is required, the main opposition is likely to come from long leaseholders within a block who will be concerned about the impact of the building on their own units.

Construction considerations

Each development will be different but when considering whether an airspace development is feasible an obvious first step is a comprehensive assessment of the suitability of the building to be built upon.

The loading capacity of the existing building designated to support the proposed development is the most important consideration when determining the development’s feasibility. It is unlikely the original structure will have been built with a loading capacity for any significant increase and the building’s ultimate capacity to take additional loadings will depend upon the actual type of the structure.

An appraisal will also need to take into account the structural capability of the building but also an assessment of access requirements for the build, fire protection (particularly considering any cladding issues in light of the Grenfell tragedy), maintenance, acoustics, provision of services (including internet sustainable technology) and possible construction methods.

Pre-made, modular structures that are built off-site and installed almost fully formed are a popular construction method for airspace developments, reducing the need for on-site labour as prefabricated units can be constructed virtually entirely off-site before being lifted on-site. Access routes for cranes to deliver the units and crane them on top of the building are therefore fundamental to secure.

Not every roof works financially. The kind of construction required is costly and as a result air space development is so far mainly taking place where values are high and profits can be made. The engineering solution arrived at to accommodate the additional structure will be key to the success of the whole project.

Services

Although the existing building will have the benefit of services and infrastructure, it is vital to consider the actual capacity requirements needed for the increased number of units in the building once it is developed. Capacity checks will therefore be required at an early planning stage to assess the impact of the proposed development and develop a workable solution with each service provider. This may involve separate service facilities or an extension to those existing. If it is possible to extend the use of existing services (in particular for foul water drainage systems) this will lessen the cost but developers will need to be careful not to exceed the capacity for any of the services for the building.

Designing alternative layouts and connections into existing service routes and layouts should be carefully considered as new systems and locations add further complexities, not limited to the siting of such systems potentially outside the building and potentially outside the land title.

As I mention below, many blocks have plant and service equipment including lift equipment sited in roof voids and on the roof itself.  All of this infrastructure will, as a result of any potential build, need to be relocated or re-routed elsewhere.

Although these are all considerations applicable to all developments, often the design requirements and practicalities are more challenging in the case of airspace development.

Legal issues and practical solutions – existing tenants and their leases

Not surprisingly, a roof top development scheme may well be met by resistance from resident tenants and neighbouring property owners who will have concerns as to the noise and disruption caused and possible effect on the enjoyment of their property, availability of amenities such as car parking, and the effect on value.

One of the sweeteners could be the offer of a newly refurbished building exterior and communal areas including lifts and staircases and of course a new roof – all undertaken outside of the service charge regime. Whatever arrangement is arrived at needs to be documented with the party responsible for the maintenance and repair of communal areas, which could be the freeholder, management company or the tenants themselves.

Offering to extend the leases for the existing tenants and even a profit share with the leaseholders are other incentives to leaseholders which a freeholder or developer may be able to offer. Whatever the deal there are legal constraints which need to be understood and correctly dealt with. In the case of neighbours, as with any development, restrictive covenants, rights of light and party wall legislation need to be taken into account and managed at an early stage.

Checking the leases

The starting point is that from a leaseholder’s perspective, the building owner has a right to develop its building unless there are very specific restrictions on development (it is worth having a look at the judgement of judgment of Bernard Livesey QC in Hannon v 169 Queen’s Gate Ltd which involved a challenge to an airspace development).  Similarly, a tenant’s right to quiet enjoyment cannot, so long as the development is undertaken in a considerate manner, be used as an argument to prevent the development taking place (Goldmile Properties Ltd v Lechouritis [2003] was a Court of Appeal case where a tenant ran the quiet enjoyment argument and lost).  Developers would be wise to consider hours of working, the length of time the development takes and even the location of scaffolding to ensure the leaseholders have no opportunity to challenge an airspace development.

It is though important to check the lease carefully as it may create further points to consider, the first being who owns the roof space and air above it? Although a fairly basic point, the fact that the roof space had already been demised to tenants in a building enabled them to stop an airspace development in a 2014 case, H Waites Ltd v Hambledon Court Ltd. Consideration will also need to be given to any rights in favour of the leaseholders (easements) in the leases as these rights can prevent development. Look out for an express or implied right over the roof.

An added factor to consider is that the majority of services are found in roof voids together with things like air conditioning, lift plant, ventilation, chimney shafts and flues, smoke detection systems, aerials and satellite dishes etc, all of which will, as a result of any potential build, need to be relocated or re-routed elsewhere.  Again, the developer will need to be clear on whether it controls those areas and that the lease provides sufficient flexibility for relocating equipment.

Tenants’ rights of first refusal

It is really important that if the freeholder is considering transferring the airspace by way of a lease or a sale of the freehold to another party, that it properly considers whether the transfer is a relevant disposal within Section 4 of the Landlord and Tenant Act 1987.  If it is a relevant disposal, the leaseholders will have a right of first refusal meaning that any proposed lease (or opportunity to buy the freehold) must first be offered to the requisite majority of qualifying tenants (generally long leaseholders) on the same terms and at the same price as it was to be offered to the developer.

A failure to comply with the Act is not only a criminal offence but the anti-avoidance provisions mean that if the landlord fails to comply, the leaseholders can compulsorily acquire the lease from the purchaser direct for the price it paid.

Where the Act applies the qualifying leaseholders need to be given a minimum of two months’ notice prior to any sale which can seriously affect the commercial viability of the development. There are ways of working around the legislation and legal advice can help identify a correct approach but this is certainly not an issue to ignore.

Collective enfranchisement

Whereas the rights of first refusal are triggered on a sale, enfranchisement under the Leasehold Reform, Housing and Urban Development Act 1993 effectively allows the leaseholders to force through a sale at any time. Under the legislation they are required to purchase the whole of the building and the cost normally makes it an unattractive proposition for leaseholders. The legislation states that their entitlement is to a purchase of an ‘interest reasonably necessary for the proper management or maintenance of those common parts’ and this entitlement can therefore often catch roof space. The risk to the developer comes if the tenants are able to argue that the value of the rooftop space is as amenity space rather than potential development space (it will be interesting to see if the relaxation to PD which we discussed earlier will benefit the freeholders in this scenario as the freeholder will be able to argue that the space should be valued based on its development value).

Enfranchisement is another important issue to consider at an early stage to mitigate any risk of losing the block at a price below its value to a developer.

A PDF version of this article is available here.

Avi Barr is a partner in the Property and Secured Lending team at BBS Law.  Avi acts for a number of airspace developers and lenders within this sector and is happy to be contacted if you have would like to discuss anything within this article.

By Kerry Blackhurst

In a word, yes.

The authority of the Executors to deal with the property comes from the Will and then is confirmed by the Grant of Probate. Where there is no Will, or valid appointment of Executors, then the authority comes from the Grant itself.

But there are some important considerations

  • Although you can exchange without the Grant of Probate, you will need the Grant to register at the Land Registry so any exchange should therefore be conditional upon Probate being granted and the contract should stipulate a completion date for a set number of days after the Grant of Probate has been issued.
  • As with all conditional contract situations you should consider other relevant issues. For example, a Grant of Probate may take a lot longer to receive than anticipated so the parties ought to include a suitable backstop date in the contact. The buyer will have considerations about its mortgage expiry and even valuation expiry which need to be factored into any time period provided for the Grant to be obtained.
  • Remember also that where a deposit is paid on exchange, where completion is delayed, that deposit will be tied up and may prevent the buyer being able to pursue other property transactions.
  • Exchanging subject to a Grant of Probate is unlikely to work where the buyer is in a chain as a fixed date for a completion is not going to be achieved.

It is also worth noting that in some limited circumstances there is an exemption for some or all of your SDLT where a property is purchased from Personal Representatives.

So, in summary, yes you can exchange before you receive a Grant of Probate is received, but plan ahead.

Kerry Blackhurst is head of our Private Client team.  Kerry works closely with our property team and provides advice to clients on a variety of estate planning matters.

By Aron Heywood

On 25 March 2020, the Coronavirus Act 2020 received royal assent and was passed into law. The Act alters the notice periods where Landlords are seeking possession of residential property under either Section 8 or Section 21 of the Housing Act 1988.

The new Act takes effect by temporarily amending Sections 8 and 21, so that the notice period, in relation to both, is now three months.

Prior to the new Act, where a Tenant was more than two months’ in arrears of rent, a Landlord could serve a Section 8 Notice giving the Tenant two weeks to pay the arrears, failing which possession proceedings could be issued.

Under the new Act, in relation to Section 8, the date stated in the Notice (as being the earliest date when possession proceedings can be commenced) must now, for all grounds under the Housing Act, must be three months.

In relation to Section 21 Notices (which give a Tenant notice to end the tenancy regardless of any breach), prior to the Act the notice period was two months. This has now also increased to three months.

Landlords should be aware that the new notice period of three months may be increased by statutory instrument, albeit up to a maximum period of six months.

The changes to the Notice periods only affect Notices served during the period 26 March 2020 to 30 September 2020 (the key date being the date of deemed service), however, again this period may be extended.

Whilst the new Act does not affect Notices served prior to 26 March 2020, the Courts have currently adjourned indefinitely all possession hearings including those relating to Notices served prior to that date. Adjourned cases will apparently be relisted as a priority once the restrictions relating to Covid 19 are lifted.

The new Act also makes amendments to the relevant forms that need to be served. The forms are altered to reflect the changes made by the Act and Landlords must now ensure that any Section 8 or Section 21 Notices are prepared on the updated forms, failing which the Notices are deemed invalid – this would significantly delay the time for obtaining a possession order.

All of these changes are going to lead to significant delays for Landlords who wish to recover possession of their properties, even if a Notice had been served prior to the key date of 26 March 2020.

Our Commercial Litigation team have extensive experience in advising Landlords on residential property matters and can provide commercial and up-to-date advice as to how to deal with these matters considering this ever-changing landscape.  Do not hesitate to get in contact with  Andrew Haffner, Roger Rubin, David Bondt or Aron Heywood if you need any help.

 

 

By Kerry Blackhurst

The current COVID-19 situation has understandably led to many people wishing to make or update their Wills, with reports indicating a 30% surge in client enquiries nationwide.  BBS Law are very happy to assist in these times and this summary will be helpful in reminding you on what the requirements are for a valid Will and how we can help you with the formalities.

The difficulty (aside from the fact that most solicitors favour face-to-face meetings when taking instructions for preparing a Will) is that there are very strict formalities required to make a valid Will – not least the need for two witnesses to be present at the time when the Will is signed.

Whilst the Ministry of Justice, Law Society and other key parties are debating whether the formalities relating to the preparation of Wills can be relaxed, it is important for our clients to know that by adapting and innovating, we are still able to provide the service they require.

What are the Requirements for a Valid Will? 

The law relating to Wills is set out in the Wills Act 1837. A Will must be executed in accordance with the provisions of this law in order to be valid. If a Will does not comply with these requirements, it will be held to be invalid and means that the deceased’s estate will have to be administered as an intestacy. This can bring unintended and unacceptable consequences for the original beneficiaries.

The relevant requirements are that the Will should be:

  1. In writing, and signed by the testator, or by some other person in their presence and by their direction
  2. The testator intended by their signature to give effect to the will
  3. Signed by the person making the Will (the testator) in the presence of two independent witnesses (who must be present at the same time).
  4. The witnesses must each sign the Will in the presence of the testator

During the current time it would be very helpful if the requirement for testator and witnesses to be “present” could extend to a virtual presence, for example over Zoom. Unfortunately, this has not happened and the requirement remains to be that testator and witness must be physically in each other’s presence.

How Does COVID-19 Affect the Making of a Will?

The key impact is that the requirements or recommendations of social distancing, especially for elderly or vulnerable clients, make it difficult to arrange for witnesses to be present at the time of signature, as it is likely that any members of their household are beneficiaries of the Will and therefore should not also be witnesses.

The law is very clear that witnesses of a Will should be independent and should not be beneficiaries of the Will. Indeed, any gift to a Witness would be held to be invalid.

How Can BBS Law Help?

Whilst our solicitors are working from home for the time being, we are regularly speaking to our clients to take instructions over the telephone or by video conferencing (WhatsApp and Zoom are especially popular). We are therefore fully able to advise upon and draft Wills to meet our client’s needs.

For our clients in the London or North West England we offer all manner of solutions to arrange for the signature of Wills, as we are able to provide two witnesses who will undertake a home visit. We have witnessed Wills through windows, in cars and in gardens, all safely observing current requirements for social distancing, and resulting in valid Wills being executed.

For clients elsewhere, we are able to provide final versions of Wills with full instructions for the signing of the same. We can also be present over the telephone or by video call to supervise the signing of the Will by testator and Witnesses to ensure that this is completely in the correct manner.

BBS Law continues to be open for business and meeting our client’s needs, so please do not hesitate to contact Kerry Blackhurst who heads our Private Client team on 0161 832 2500 to discuss your own circumstances.

By Roger Rubin

Some key take-aways from the new Corporate Insolvency and Governance Bill 2020 which emerged yesterday, almost a month after the intention to provide some assistance was first announced.

It contains some “meat on the bones” in relation to the headlines previously promoted, as well as a few novelty points.

I highlight the following:

  1. Companies not individuals – Restrictions on presenting Winding Up petitions will cover, not merely hamper landlords of commercial tenants, but ALL creditors. The position for individuals is not yet addressed.
  2. Retrospective – The new provisions will be retrospective and will even affect Orders already made, in certain circumstances – rendering certain winding up orders already made, void.
  3. No advertisements – Any active petition cannot be advertised unless and until the court has determined key questions relating to the relationship between the debt and Covid-19. Plenty of litigation ahead as to the meaning of the creditor’s “reasonable grounds for believing” the circumstances it relies upon as to nature and scope of the liability. Another layer of cost and delay – with great uncertainty for months ahead, I suspect.
  4. Further Court tests – Even if a creditor passes that hurdle, the Court can still refuse to make an Order if the court is satisfied that the facts by reference to which that ground applies would have arisen even if coronavirus had not had a financial effect on the company”. Another hurdle, with plenty of scope for argument!
  5. Wrongful trading There are rules effectively setting aside the “wrongful trading” provisions on Directors, in certain circumstances- although this won’t affect other statutory and other duties of directors of struggling companies.
  6. Moratorium for restructuring – There is to be a new moratorium to allow for certain “restructuring”.

The provisions are detailed and all the consequences are being considered. This is the first text of the Bill, and it doesn’t necessarily follow that the Final statute will look the same.

We are keeping a very close eye on developments, so our advice and assistance, is accurate and up to the minute!

For  sensible, practical and  detailed up to date and accurate advice, delivered in a user friendly and down to earth manner feel free to contact Roger Rubin who is a Senior Consultant in our Commercial Ligitation Team.

 

By Paul Stedman, Partner and Head of the BBS Employment Team

 

You can download a PDF of this article here – Updated Guidance for Employers 15 May 2020

There have recently been various developments in respect of the Government’s Coronavirus Job Retention Scheme (“CJRS”).

How is CJRS working in practice?

The Government portal for claiming grants opened on 20th April 2020.  From what we have heard, the system has been operating surprisingly well.

The Government has issued guidance on how to make claims through the portal.  Details are in this link: https://www.gov.uk/guidance/claim-for-wages-through-the-coronavirus-job-retention-scheme

There is also a useful YouTube video explaining the system: https://www.youtube.com/user/hmrcgovuk

How long is the scheme open for?

As it stands, the CJRS in its current form is available until 31st July 2020.

The Government announced on 12th May that the Scheme will be extended further, until the end of October 2020, although it is suggested the employers may need to contribute to furlough pay from 1st August 2020.   We expect further information on how the scheme will operate after 31st July shortly.

How often can employers submit a claim?

Employers can only submit one claim during a “claim period” for each PAYE scheme it operates.

“Claim period” is not defined, but the portal allows employers to set their own claim period when submitting claims.  The end date for any claim period cannot be any more than 14 days in advance.

“It is vitally important that employers ensure that all of their furloughed workers are included on the claim when it is submitted.   It is not possible to make changes retrospectively.”

When are payments made?

Payments should be made within 6 working days of submission.

What else is new?

Furlough and holidays

Accrual

Annual leave does accrue during furlough leave.    Employers can ask furloughed workers to agree that only statutory annual leave accrues during furlough leave, although workers may be unlikely to accept this, and it could lead to complicated calculations of accrued leave entitlement when the worker returns to work.

Carry Over

Legislation has been passed that allows workers to carry over up to four weeks annual leave if they are unable to take their holiday allowance in a leave year because it was not ‘reasonably practicable’ to take annual leave ‘as a result of the effects of the coronavirus (including on the worker, the employer or the wider economy or society)’.

This is similar to the law regarding workers who are unable to take holiday because of illness and is likely to apply in the main to workers who are self-isolating or shielding for prolonged periods.

As most employers’ leave years run January to December, or April to March, this will hopefully not have a big impact if people are able to return to work in the not too distant future.

Can furloughed workers take holiday, and if so, what should they be paid?

We finally have clarification from the Government that YES furloughed workers can take annual leave when on furlough.  

Statutory holidays (5.6 weeks) should be paid at the normal rate, rather than the reduced furlough rate.    This means that employers need to ‘top up’ salary for days taken as holiday during furlough leave.

Employers can seek consent to pay contractual holiday, over and above 5.6 weeks, at the lower rate; although this will not apply to many workers as very few will have used their statutory allowance yet.

Can employers require workers to take holiday when on furlough?

The guidance does not give clear specific guidance on this, but the likely answer is yes, so long as the employer complies with the requirement to give double the notice of the amount of leave to be taken.   For example, an employer would need to give 2 weeks’ notice to require a worker to take 1 week’s leave.

Where an employee is shielding or self-isolating, the employee may have strong grounds to say that they are unable to take holiday on the basis that they cannot rest and relax.  We would encourage clients not to require employees who are shielding or self-isolating to take annual leave – remembering of course that the employer can require them to take annual leave when they are no longer shielding or self-isolating.

Maternity, Paternity and Adoptive Leave (etc) Pay

The snappily titled ‘Maternity Allowance, Statutory Maternity Pay, Statutory Paternity Pay, Statutory Adoption Pay, Statutory Shared Parental Pay and Statutory Parental Bereavement Pay (Normal Weekly Earnings etc.) (Coronavirus) (Amendment) Regulations 2020’ confirm that pay for anyone taking any leave from the long list in the title will be calculated based on their normal full pay, rather than the reduced furlough rate.

Confirming/agreeing furlough status

After significant confusion, where the Regulations stated that the furloughed worker had to agree in writing that they would not carry out any work when on furlough leave, new guidance has been issued to make it clear that employers simply need to have a record that they have written to the worker confirming that they will not carry out any work for at least three weeks.  Strictly speaking, there is not therefore a requirement for the worker to confirm their acceptance in writing.  We do nonetheless advise clients to try and get email confirmation where possible.

Record Keeping

All employers must keep a record of the letters sent furloughing workers, for five years.  We expect that HMRC will be out in force undertaking audits of companies who have furloughed workers to uncover any foul play.  HMRC has not set out what penalties may be imposed for abuse of the system, but it likely that there will be.

Can workers get another job when furloughed?

The Government is keen to ensure that the country keeps running and it has made it clear that furloughed workers can carry out work for other employers, where permitted by the employer that has furloughed them.   Furloughed workers cannot however carry out work for associated or linked companies.

Workers will usually require the consent of their employer to carry out any work when furloughed.  We encourage our clients to be flexible. So long as any new work is temporary and will not interfere when the worker returns to full duties, this should not be a problem in most cases.

Can you furlough workers who transferred under TUPE after 28 February?

 Yes.  Again, the updated guidance has addressed this point.

What we still don’t know?

Notice Pay for furloughed workers

Inevitably, some furloughed workers will lose their jobs as a result of the downturn.  It is not yet clear whether employers should serve notice based on the reduced furlough rate or on the contractual full pay.

Where an employee has the statutory minimum notice period (one week for each year served), the notice pay will have to be paid at the full rate.

Where somebody has a contractual notice period that is greater than the statutory minimum, the starting position is that notice pay is paid at the rate that the individual is being paid at the point at which notice is served.  In the case of sickness absence for example, this often means that people on long term sick only get statutory sick pay during their notice period.

On that interpretation, furloughed workers who are served notice because their job is redundant, could only get notice pay at the reduced furlough rate.

However, many commentators expect that employment tribunals will find ways of ensuring that furloughed workers are not further disadvantaged and that their notice pay is paid at their full rate.

We expect developments and litigation in this area moving forward.

Life after furlough

With the gradual relaxation of lockdown employers will soon be asking their staff to return to work from furlough leave.

There are likely to be cases where people refuse to return to work and/or are unable to return to work because they are shielding.

Where people refuse to return to work due to health and safety concerns, employers may find themselves faced with whistleblowing or health and safety related claims if those workers are disciplined or forced to work against their will.

If you need advice regarding the CJRS, about bringing employees back to work, or about potential redundancies, we encourage you to contact the Employment Team on 0161 832 2500 or 0204 505 8080.