Welcome to the first in our new series of quarterly newsletters, where we focus on new developments and hot topics in Employment Law.

 

In this issue, which marks the anniversary of the first lockdown, we look back and forward at the impact of the pandemic on employers, as well as updating you on what else has been happening in the world of employment law over the last 12 months.

It goes without saying that Coronavirus has had an enormous impact on businesses, the people they employ and how work is done.

We look here at where we are now and what businesses should be doing and considering as restrictions ease and workplaces re-open.

The Furlough Scheme

The furlough scheme has been extended all the way to 30 September 2021.  After various tweaks since its first inception, these are the key elements of the scheme in its current form:

  • The Government will contribute 80% to any workers’ salary, up to a maximum of £2,500 per month
  • Employers must contribute NICs and employer pension contributions to the furlough pay
  • To be eligible, the worker must have been on payroll between 20 March and 30 October 2020
  • Employers can still use flexible furlough, splitting a workers’ time between furlough leave and working time
  • The furlough grant can no longer be used for notice pay

Importantly, the grant is still only available where Coronavirus is affecting business operations. It cannot be used for non-Covid related reasons such as under-performance or unrelated sickness absence.

Working from home

Who would have thought 12 months ago that multi-day Employment Tribunals could be run from Barristers’ bedrooms and solicitors’ sofas?  From experience, we can tell you that they can, and they have worked incredibly well!

One question we have been asked is whether employers will be able to require staff to return to the office full time when the restrictions ease?  As a general rule, it is up to employers to determine where their staff carry out work.   However, we expect that employers will receive more flexible working requests from workers who can now show that they can work effectively from home. Employers may find it increasingly difficult to reject requests for flexible working. Unreasonably refusing requests can lead to claims of indirect sex discrimination.   There may also be some staff whose disability makes physically attending work every day difficult, so employers may need consider offering work from home as a reasonable adjustment.

Testing and vaccinations

Can employers compel staff to take Covid tests at work, or to be vaccinated as a pre-cursor to returning to work?   Only in very limited circumstances.

As well as various data protection issues, there may be many health or religious reasons why staff refuse to take tests or be vaccinated.   Making tests or vaccinations compulsory could lead to claims of discrimination, where the employer would need to show that the policy is justified.   It is hard to envisage many circumstances where it would be justified (in legal terms), save for cases where, for example, travel is a key part of the role and the individual cannot travel without having been vaccinated, or in certain care settings.  Whilst this might surprise some employers, it is worth noting that not even the NHS is making testing or vaccinations compulsory for its staff.

In order to encourage workplace vaccinations, the government is making testing kits available for free for companies with over 50 employees until 30 June 2021.  Businesses must register on the here by 12 April 2021 to take advantage.

Positive tests and self-isolation

Most employers will doubtless face situations where staff are required to isolate either because they have tested positive or because they have been told that they have to self-isolate by the Test and Trace system.

In these cases, if the worker can work from home, then you can ask them to work from home whilst they are isolating.   If they cannot work from home, they may be entitled to:

  • Statutory or company sick pay
  • Employment support allowance
  • Universal credit
  • A one-off isolation payment, payable by the government

Shielding

As of 1 April Public Health England will no longer advise people to shield.  This means that workers will no longer be entitled to statutory sick pay if they do not attend work due to shielding.  Like everyone else, those who have been advised to shield previously, should either return to work or work from home, where possible.

Returning from red-list countries

Some employees may have pre-booked holidays to ‘red-list’ countries which will require them to quarantine on their return.   Others may book trips to these countries knowing that they will need to quarantine when they get back.

If the employee can work whilst in quarantine, then employers can allow the individual to ‘work from quarantine’.   Where this is not possible however, what pay is the employee entitled to?  Assuming that they are not ill, then the employee may not be entitled to any pay whatsoever.

In order to minimise the potential disruption caused in these circumstances, it will be wise for employers to issue a notice to staff to advise them that they will not be entitled to any pay if they need to quarantine and cannot work after returning from a red-list country.

Top tips for return

Communicate!   Many employees will have been away from the workplace for over a year by the time things get back to some kind of normal, and some will be nervous about returning:

  • Carry out risk assessments of the workplace
  • Tell staff what Covid related safety measures are being put in place
  • Offer lines of communication for anyone who has concerns or questions

If you haven’t done so already, encourage staff to take some accrued holidays before they return, and to book future holidays as soon as possible:

  • Employers can require workers to take holidays on set dates – so long as they give double the notice of the amount of time to be taken off;
  • Employers may also allow some carry over if it is not possible for everyone to take all of their accrued days.

What else has been happening?

With Coronavirus dominating the news and keeping HR departments busy, it is easy to forget that there have been other important cases and developments since the pandemic hit.   Here are some of the key cases from the last 12 months

Uber and employment status

We reported recently on the Supreme Court’s decision that Uber drivers are workers for working time and national minimum wage purposes.   You can read our earlier article here.

Discrimination – Outdated Equality Policies

In harassment claims, an employer can run a ‘statutory defence’ that it took all reasonable steps to prevent the harassment from occurring.   This argument is often based on the fact that the employer has an Equality Policy that explains that harassment and any discrimination will not be tolerated.   In the case of Allay (UK) Limited v Gehlen the Employment Appeal Tribunal held that whilst the employer had such a policy, not enough was done to remind staff of the policy and the required standards, as evidenced by the repeated racial harassment suffered by the Claimant.   The statutory defence therefore failed and the Claimant succeeded in his case.

This case is a good reminder for employers to regularly review and update their Equality Policy, and to provide regular training to managers to minimise the risk of discrimination occurring.

Discrimination Part II – Are Vegans a protected group for discrimination purposes?

They can be…. In Casamitana v League Against Cruel Sports the Employment Tribunal held that the Claimant, an ‘ethical vegan’, who lives by a strict code based on his ethical views, was protected under the Equality Act on the basis that his philosophical beliefs relate to a substantial aspect of human life, have a certain level or cogency and importance, and are worthy of respect in a democratic society.

Whether a religion or belief is protected will depend on the facts of the case. In earlier cases, Scientologists and Rastafarians have been protected, whereas a Jedi was not protected (yes someone did claim that they were discriminated against because they are a Jedi!).   Interestingly, the same Judge from the ‘Vegan case’, held earlier in 2020 that a Vegetarian was not protected.

Gender Identity III

Gender reassignment is one of the 9 protected categories under the Equality Act.   In Taylor v Jaguar Land Rover, the Claimant, who identifies as gender fluid/non-binary, won £180,000 compensation in a landmark discrimination case, where, for the first time an Employment Tribunal held that a non-binary or gender fluid person is protected from discrimination.  The award here was extremely high owing to the level of harassment suffered and the future losses of earnings.  The Tribunal also made various recommendations to Jaguar Land Rover to prevent future discrimination.

What’s to come?

Aside from hopefully returning to something resembling normality in the next few months, here are some important developments that are definitely happening, and some we expect:

IR35

After several delays, the changes to the IR35 regime are finally due to come into force in April 2021.

For those of you who do not know what we are talking about, the IR35 regime was brought in in 2000 to identify businesses who do not pay the appropriate taxes for “disguised employees”, who work as self-employed contractors, often through intermediaries such as personal service companies (PSCs). At present, the responsibility to determine the tax status in the private sector lies with the party that pays the individual, usually a PSC.   Practically speaking, this has meant that many end user businesses have been able to avoid paying the correct Income Tax and National Insurance for contractors who should, if properly assessed, be classed as employees for tax purposes.

The IR35 regime reverses the responsibility.  From April 2021 the end user will be responsible for determining the tax status of contractors to make sure that the correct tax is accounted for.  This will not apply to small businesses, where the current regime will continue.

If you engage contractors and you have not already reviewed their employment status, you should do this without delay.  Our team will be happy to provide any necessary help and guidance along the way.

Carers’ Leave

After consultation in 2020, we expect new law to be passed to allow people with caring responsibility for vulnerable adults one week’s unpaid leave every year.  This will be in addition to the existing laws in respect of dependants leave.

Neonatal leave and pay

We also expect new law to allow parents up to 12 weeks’ additional leave to be added to maternity leave where their child has been in neonatal care.

Maternity and Redundancy

At present any employee who is on maternity leave and is selected for redundancy must be given first refusal of any suitable alternative employment.  It is proposed that this protection will be extended to cover the first six months after the end of maternity leave.

Health and Safety at Work

Under the current law, an employee can bring a claim in the Tribunal if they think that they have been subjected to a detriment because they reasonably believed that attending work would put them, or someone else (such as someone they live with), in imminent danger.   Claims of this nature were rare, until Covid happened.   As people gradually return to work and shielding support is removed, we anticipate more claims of this nature.    To add to the risk of claims for employers, from May 2021 the protection will extend to workers as well as employees.

Unfair Dismissal, Redundancy and Whistleblowing claims

More individuals are likely to bring whistleblowing claims flowing from the Coronavirus pandemic.  Countless workers will have raised health and safety concerns regarding the workplace and the risk of exposure to Coronavirus.  We expect many of these individuals will argue that they are ‘whistleblowers’ and attempt to join the dots between alleged whistleblowing and any subsequent bad treatment.

Given the enormous pressure that has been placed on businesses and the large number of redundancies that have been made over the last 12 months, it is almost inevitable that the Tribunal will have lots of cases where people challenge their selection for redundancy and claim unfair dismissal.

The last 12 months have thrown up lots of issues that our clients have not dealt with previously. 

We offer a variety of services to our clients, including helplines, insurance backed products for Employment Tribunal claims and other fixed fee services.   If you would like to discuss how we can help you and your business deal with Employment Law matters, please contact either Paul Stedman, Vicky Beattie, Neal Mellor or Sarah O’Brien on 0161 832 2500.

The BBS Law Corporate Team led by Dov Black and Rebecca Mills working closely with Lopian Gross Barnett Accountants has played a key role advising Frazer Durris, Dean Cockett and other shareholders of Businesswise Solutions on the sale of the company to Inspired Energy plc, the country’s largest Commercial and Energy advisors.  You can read more about the deal here.

 

The evolution of working practices over recent years has brought a flurry of litigation, as new technology-based working models have brought various complex legal issues to the fore; none more so than worker status.

This month the Supreme Court handed down one of the most significant employment law decisions of the tech era, finding that Uber drivers are “workers” for employment law purposes.

What was the issue?

Very broadly, there are three types of employment status:

  • Employee
  • Worker
  • Self-Employed.

Distinguishing employees from workers, and workers from self-employed contractors, can be very complicated; but the distinctions are significant.

Employees are fully protected by employment law, whereas the self-employed have little to no employment protection.  “Workers” sit in the middle.  Workers cannot bring claims for unfair dismissal, but they are, for example:-

  • Entitled to national minimum wage and holiday pay; and
  • Protected under the discrimination and whistle-blowing legislation.

What were Uber saying?

Uber contended that their Drivers are self-employed contractors.  They pointed to a number of arguments, notably:

  • The Drivers’ contracts specifically say that they are self-employed contractors.
  • That Uber is simply a booking agent that allows drivers to access private customers through its app.

There are also a lot of factors in the relationship that would normally point towards self-employment.  For example:

  • Drivers use their own cars and can use their own phones.
  • Drivers are responsible for their cars’ operating costs.
  • Drivers can decide when and where they work.
  • Drivers can work for competitors.

What the Supreme Court held

Despite the various arguments for self-employment, the Supreme Court’s decision fell on the amount of control that Uber have over the Drivers once they have logged on to the app and reported for duty:

  • Whilst, in theory, Drivers can choose when they work, once they are logged on to the app they can be penalised (logged off) if they refuse or cancel trips.
  • Where a Driver’s average customer rating falls below 4.4, they become subject to “quality interventions” and can be removed from the platform if they do not improve.
  • Drivers can be subject to financial penalties if they do not follow the recommended route.
  • The Driver has no control over what the customer pays for a trip, or, in turn, what they are paid by Uber.
  • Drivers have no say in the terms of their contract with Uber.
  • Whilst the drivers can use their own vehicles, the vehicles are subject to vetting by Uber.
  • Unlike minicab drivers, who have to find their own customers, Uber Drivers have their customers delivered to them via the app.

What does this mean for you?

Crucially, this decision means that Uber Drivers are entitled to:

  • National Minimum Wage for the time when they are logged on to the app, regardless of whether they are transporting passengers; and
  • Holiday pay.

This decision is far reaching and will apply to all similar business models, such as Deliveroo and UberEats, who connect customers to service providers via digital platforms.

This is definitely welcome news for the tens of thousands of people affected, but you can expect your next Uber trip (and takeaway) to be that little bit more expensive!

If you have any questions about employment status or the affect of this decision on your business, please contact the BBS Law Employment Team.

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.