Trowers' property litigation weekly update – 29 April 2022
This week the team report on Royal Assent for the Building Safety Act 2022, further guidance on the new arbitration scheme in respect of protected rent arrears brought in by the Commercial Rent (Coronavirus) Act 2022 together with a recent case in the Upper Tribunal regarding dispensation from the section 20 consultation requirements.
Building Safety Act 2022 receives Royal Assent
The Building Safety Act 2022 has received Royal Assent and is expected to come into force over the next 12-18 months. The Act represents a landmark reform of the entire building safety regulatory system, implementing the 2018 recommendations of Dame Judith Hackitt.
Following a tumultuous period of legislative scrutiny during its passage through Parliament, the Act will contain significant provisions limiting the ability of landlords to demand a service charge in respect of building remediation costs, in an attempt to ensure that developers and landlords pay for remedial works instead of leaseholders.
Alongside the Act, a growing list of developers have signed a pledge committing to remediate life critical fire safety works in buildings over 11 metres that they have played a role in developing or refurbishing over the last 30 years in England. Developers making this commitment have also agreed to reimburse any funding received from government remediation programmes in relation to buildings they had a role in developing or refurbishing.
Commercial Rent (Coronavirus) Act 2022 – updated Code of Practice and new Guidance to Arbitrators
The Government has published a revised Commercial Rent Code of Practice Following The COVID-19 Pandemic to accompany the Commercial Rent (Coronavirus) Act 2022 (the Act).
The Code now includes a summary of the arbitration process and an example referral form and explains the moratorium on enforcement action in relation to protected rent debts.
The Government has also issued its statutory guidance to arbitrators in the exercise of their functions in the Act which (among other things) covers what indicators and evidence should be looked at when assessing the viability of a tenant's business. These include:
- Full bank account information
- Profit forecasting
- Evidence as to working capital and whether it is sufficient to meet day-to-day demands
- Assessment of whether debt commitments have been met
- Balance sheet strength and profitability
Upper Tribunal (Lands Chamber) offers guidance on dispensation applications in relation to the section 20 consultation requirements in cases of urgency
In Marshall v Northumberland & Durham Property Trust Ltd  UKUT 0092 (LC), the Upper Tribunal (Lands Chamber) (the UT) has ruled on how the First-Tier Tribunal (the FTT) should exercise its statutory discretion to dispense with the consultation requirements under section 20 of the Landlord and Tenant Act 1985 in cases of urgency.
Facts: The landlord undertook urgent works to replace two boilers and ancillary works to a block of 16 flats in November 2019 without first having fully complied with the statutory consultation requirements. A subsequent application for dispensation was made to the FTT and was opposed by a leaseholder, alleging prejudice by the lack of consultation. The FTT allowed the application and granted the landlord unconditional dispensation finding that it had started the consultation process and kept the leaseholders informed until the works became so urgent they had to be carried out without waiting for the consultation process to complete.
The appellant appealed.
Findings: The UT found that the FTT's approach was wrong in principle in three important respects:
- The FTT did not systematically identify the steps which the landlord had taken and those which it had omitted and for which it required dispensation;
- It did not ask itself what was the consequence of those steps not having been complied with;
- It did not say whether it considered that leaseholders had been caused prejudice by the failure of consultation.
The UT allowed the appeal and re-made its own decision on the application, finding that the appellant leaseholder had been consciously excluded from the consultation process and therefore his evidence was entitled to a sympathetic reception. Accordingly, the UT held that it was reasonable to dispense with the consultation requirements but only on the following terms:
- the cost of the works be reduced by 15%, on the assumption that if the landlord had properly consulted then the appellant leaseholder's preferred contractor would have submitted a lower quote, which would have enabled the landlord to negotiate a cheaper price from the contractor who undertook the works; and
- the landlord pay the appellant's reasonable costs, comprising Counsel's fees and Tribunal fees.
This case serves as a reminder that where landlords apply for dispensation from the consultation requirements, even in cases of urgency there is a significant risk that the FTT will take a sympathetic approach to the evidence of prejudice put forward by leaseholders, resulting in a reduction in the costs recoverable.
Insights from around the firm
We have been working with the Social Market Foundation on an initiative looking at the impact of positive social outcomes on investment decisions, bringing views from investors and other leading voices across the real estate sector.
- The Global Rewilding Alliance and Open Forests have launched an online map to showcase rewilding projects around the world. The idea behind the scheme is to highlight the progress that has been made and hopefully inspire others to get involved.
- Canary Wharf Group has teamed up with the Eden Project to create a new "green spine" through the Docklands estate. The partnership, which Canary Wharf said is the first of its kind, aims to create a model of how biodiversity can thrive in urban environments and will provide the Eden Project with a London base.