Property Disputes—Lexis®PSL comments on key developments in 2018 and 2019

17 Dec 2018 | 14 min read

In this year’s end of year comment, our Lexis®PSL Property Disputes team consider what their standout legal development was in Property Disputes in 2018. Our Lexis®PSL team also preview the anticipated talking points for Property Disputes in 2019.

First published on Lexis®PSL on 12 December 2018.

What was the standout legal development in your area this year?

The new Electronic Communications Code (Schedule 3A Pt 1 to the Communications Act 2003 (CA 2003)) (the ‘new Code’) came into force on 28 December 2017 and replaced the previous Electronic Communications Code, set out in Schedule 2 of the Telecommunications Act 1984 (TA 1984).

The aim of the new Code is to strike a balance between the competing interests of landowners/occupiers and the telecoms industry and its customers, who desire greater access to electronic communications services. One of the most significant changes under the new Code, is that operators have the right to freely assign Code rights without requiring prior consent and to upgrade or share apparatus where certain conditions are satisfied. In addition, the powers of the court to impose agreements where the parties are unable or unwilling to agree terms are increased.

How has this impacted on practice in your area?

Market insight would suggest that both landowners and operators have initially held back from progressing cases through the new Upper Tribunal (UT) procedure in respect of imposition, modification or termination of a new Code agreement. This appears to be mainly due to fear of creating precedents in respect of ‘no scheme’ rental levels (ie valuation of consideration payable under a court-imposed agreement, which does not take the proposed use of the land into account) and/or compensation.
 

However, the first decisions in respect of cases under the new Code are starting to come through, including two regarding interim rights, and one in respect of compensation:

  • Cornerstone Telecommunications Infrastructure Ltd v The University of London—which related to interim Code rights under paragraph 26 of the new Code for access in order to investigate whether or not a rooftop location owned by the University of London would be a suitable site for electronic communications apparatus for the area, raising an important point of principle as to the jurisdiction of the UT in respect of imposing an agreement allowing access to determine site suitability, as opposed to imposing a Code agreement. The UT held that:
    • there is no reason why new Code rights should not be conferred and exercised contingently on the outcome of a preliminary survey and accordingly, such a right is a new Code right within paragraph 3(a) or 3(d), and in the alternative, such a right should be implied into the new Code
    • an application for interim rights under paragraph 26 can be made without at the same time seeking permanent rights under paragraph 20 (a specific distinction was drawn between the drafting of the new Code provisions in respect of interim rights under paragraph 26 and temporary rights under paragraph 27, which makes it clear that temporary rights can only be sought ‘parasitic’ on a request for permanent rights)
    • in the circumstances, the claimant had made out a ‘good arguable case’ for the imposition of interim rights as required by paragraph 26(3)(b)
  • EE Limited and Hutchison 3G UK Ltd v Mayor & Burgesses of London Borough of Islington—in which the claimant operator had their apparatus on a nearby property rooftop site (Leroy House), but was required to move their apparatus to facilitate a development. The UT decided that there was nothing in the case which was incapable of being adequately compensated in money, and that the public benefit in network coverage outweighed any prejudice to the respondent proposed site provider. Accordingly, the UT imposed interim Code rights under paragraph 26 on the proposed site provider of the new proposed site (Threadgold House) which were conditional upon the landlord of Leroy House being granted planning permission for its redevelopment. In the event that planning permission was not granted, the claimant operator would not be required to vacate Leroy House and find an alternative site and accordingly the public benefit could no longer be said to outweigh any prejudice caused to the proposed site provider.
    Both the cases of Cornerstone and EE demonstrate the weight given to the public interest element of the Code. Martin Rodger QC, Deputy Chamber President, presiding in both cases, commented in EE that:
    ‘The whole premise of the Code is that there is a need, in the public interest, to impose agreements on unwilling parties in return for consideration which Parliament has deemed to be adequate notwithstanding that it may be significantly lower than would result from an unrestricted commercial negotiation.’
  • Elite Embroidery Ltd v Virgin Media Limited—which concerned a purported claim for compensation under Part 14 of the new Code. The UT held they did not have jurisdiction to decide the case on the basis that no agreement under the old or new Code was asserted, and the operative provisions of Part 14, paragraphs 84 and 85 in respect of compensation had no application in those circumstances. Furthermore, there was no basis to accept an argument that accrued rights to compensation provisions under paragraph 16 of the previous code under TA 1984, Sch 2 had been superseded by the new Code. In fact the transitional provisions at paragraph 14 of Schedule 2 to the Digital Economy Act 2017 make specific provision to the contrary

See News Analysis: Exploring the first cases under the new Electronic Communications Code (EE, Cornerstone and Elite Embroidery).

There was also a county court case under the old Code, PG Lewins Ltd v Hutchison 3G UK Ltd & EE Ltd, in which it was held that the operators were not automatically exonerated from a breach of contract for failure to comply with contractual lift and shift provisions as a consequence of their statutory powers under the old Code. While the case related to the old Code, the principle is equally applicable to the new Code by virtue of the relevant provisions from the old Code, which preserve the supremacy of the contractual agreement conferring the Code rights being repeated in the new Code. Paragraph 100(1) of the new Code provides that the Code does not affect any rights or liabilities arising under an agreement to which an operator is a party, and paragraph 12(1) of the new Code provides that a Code right is exercisable only in accordance with the terms subject to which it is conferred. For further information, see News Analysis: Court ruling heralds rise of the lift and shift clause (PG Lewins Ltd v Hutchison 3G UK Ltd & EE Ltd).

In a further potential future development in this area, the Department for Digital, Culture, Media and Sport (DCMS) is seeking views on proposals to make it easier for commercial and residential tenants to access high quality and reliable broadband, following the announcement in the Budget 2018. The proposals include one to amend the new Code to place an obligation on landlords to facilitate the deployment of digital infrastructure when they receive a request from their tenants. The consultation closes on 21 December 2018. See: Ensuring tenants’ access to gigabit-capable connections.

What Lexis®PSL content would you recommend to find out more about these developments?

You will find comprehensive coverage of the new Code in our Electronic communications subtopic, including:

What do you think will be the key development(s) next year?

The Supreme Court decision in S Franses v Cavendish Hotel (London) Ltd, which has been eagerly anticipated by Property Disputes practitioners, was handed down on 5 December 2018 and is likely to have implications for opposed business lease renewals going forward in 2019. The case relates to the ground of opposition to the renewal of a business tenancy pursuant to ground (f) of section 30(1)  of the Landlord and Tenant Act 1954 (LTA 1954 ). Save for the case earlier this year of Santander v LPS Estates Ltd  (in which the court considered whether ground (f) would be satisfied where works were to be carried out by a third party under a building lease), there have been few reported cases involving ground (f) for a number of years.

The Cavendish Hotel (London) Ltd is the long-lessee of a hotel in Jermyn Street, London. S Franses Ltd is its sub-tenant, occupying a retail unit on the ground floor and basement. The landlord made no attempt to hide the fact that it wished to regain possession from the tenant to allow it greater freedom in the event that it decided to undertake a more extensive redevelopment of the hotel as a whole in the future. In its evidence, the landlord accepted that much of the scheme of works it relied on for refusing a new tenancy on ground (f) was being undertaken because it wished to carry out works which would satisfy LTA 1954, s 30(1)(f) , but served no other commercial purpose.

The High Court previously held that the landlord had made out its intention to carry out substantial works to the property at the end of the relevant tenancies and that it would be impossible to do so without obtaining vacant possession. It confirmed that it did not matter that the scheme of works was artificial and purely a device to satisfy the relevant ground—the court was only concerned with the landlord’s intention to carry out the works, not its motive in doing so. See News Analysis: Business tenancies—motive behind ground (f) works immaterial (S Franses Ltd v Cavendish Hotel).

The claimant tenant was subsequently granted permission for a leapfrog appeal, by-passing the Court of Appeal.

The Supreme Court allowed the tenant’s appeal, finding that the landlord had not satisfied the requirements of ground (f). It held that the landlord’s intention was not of the nature or quality required by ground (f), as it only intended to carry out the works in order to obtain possession from the tenant. If the tenant agreed to vacate, the works would not be carried out. Lord Sumption commented at para [19]:

‘the landlord’s intention to demolish or reconstruct the premises must exist independently of the tenant’s statutory claim to a new tenancy, so that the tenant’s right of occupation under a new lease would serve to obstruct it. The landlord’s intention to carry out the works cannot therefore be conditional on whether the tenant chooses to assert his claim to a new tenancy and to persist in that claim. The acid test is whether the landlord would intend to do the same works if the tenant left voluntarily.’

What do you think this will impact and how do practitioners find out more?

The Supreme Court decision will have implications for landlords who are proposing to redevelop premises, and may mean it is increasingly difficult to prove that they have the requisite intention to carry out the proposed works. Further litigation could ensue as a result, where courts are asked to determine whether a landlord has satisfied the requirements of ground (f). The decision may also impact upon other cases where intention is relevant, for example where a landlord opposes the grant of a new tenancy based on ground (g) in LTA 1954, s 30(1), where it intends to occupy the holding.

Other developments of interest

We will also be watching with interest:

  • assured shorthold tenancies (AST)—regarding the new section 21 procedure under the Housing Act 1988 (HA 1988) in respect of statutory periodic tenancies arising out of tenancies granted prior to 1 October 2015, following the end of the transitional period under section 41 of the Deregulation Act 2015 on 1 October 2018
  • an important Court of Appeal decision in two related cases concerning property fraud and the liability of solicitors and estate agents was handed down this year: Dreamvar v Mishcon de Reya/P&P Property v Owen White Catlin  cases.In both cases, the court was asked to consider the liability of solicitors and estate agents in cases involving identity fraud. A fraudster had posed as the owner of a registered property and instructed solicitors and agents to act for him on the sale of the property. Genuine purchasers were found, who instructed their own solicitors. Contracts were exchanged and completed in accordance with the Law Society Code for Completion by Post (2011). Following completion, but before registration of title, the frauds were discovered, but the fraudsters and the purchase monies had disappeared.
    The Court of Appeal determined that lawyers representing fraudulent sellers should share responsibility with those acting for buyers for any losses incurred. This means that lawyers acting for potential sellers must bear the responsibility for carrying out sufficient checks on their clients. This would appear, on face value, to be fair—the court itself acknowledged that purchaser’s solicitors will not be in a position to carry out their own due diligence and could reasonably expect the vendor’s solicitors to have carried out the necessary anti-money laundering checks.
    See News Analysis: Court of Appeal gives judgment in property fraud cases—bad news for vendors’ solicitors (P Property Ltd v Owen White & Catlin, Dreamvar (UK) Ltd v Mishcon De Reya)

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Brexit

As the UK prepares to withdraw from the EU in March 2019, Brexit will continue to be essential reading for all legal practitioners. See: Brexit—Lexis®PSL comments on key developments in 2018 and 2019.

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