In a rising market with good commercial property becoming harder to come by on favourable terms, there is a temptation to complete a lease quickly without the benefit of legal advice to avoid losing the property or suffering an increase in the rent.  All too often we are asked to advise on matters where tenants have entered into leases without fully understanding the wider reaching implications of doing so and it’s only when there is a sudden downturn in business, or their circumstances change, that they realise they are contractually bound and there is little that can be done to get them out of it.

In the majority of cases, a commercial property deal will be one of the most valuable transactions you will complete in your lifetime and it is therefore imperative that you are fully advised before jumping in with both feet.

So why is it important to obtain proper legal advice before committing yourself to taking a lease of a commercial property and what sorts of things do we look for when advising our clients?

Franklins Solicitors LLP have an experienced team who can guide you through the negotiation of a new lease and assist you with completing the same.  Should you have any queries in relation to the grant of a new lease or any other type of commercial property transaction, please contact Jo Pusey and her team on 01604 828282 or 01908 660966 or e-mail jo.pusey@franklins-sols.co.uk .

 

The year 2024 is poised to bring about significant changes to property law in England and Wales, with the introduction of reforms set to impact residential and commercial property owners, landlords, and tenants alike. In this article, we will explore some key developments expected this year.

Leasehold and Freehold Reform Bill

King Charles III’s announcement in November signalled the government’s intent to reform the procedures for enfranchisement and lease extension. The subsequent introduction of the Leasehold and Freehold Reform Bill to parliament aims to simplify and reduce the cost of enfranchisement and lease extensions for tenants.

Current legislation grants leaseholders the statutory right to extend their lease by 90 years at a peppercorn rent for a premium. The proposed changes give the tenant the right to extend their lease by 990 years and removes the two-year ownership requirement on the tenant.

The bill is also expected to include measures that require more transparency over service charges and a possible ban on the creation of new leasehold houses.

The timeline for the passage and implementation of this legislation remains uncertain at present.

BSA 2022 Implementation

The Building Safety Act 2022 has already brought much-needed reforms to the building safety regime. However, due to its size and complexity, the Act is being gradually implemented. Provisions related to high-risk residential flats and information storage for high-risk buildings are already in force. This year is expected to witness the implementation of provisions concerning the new New Homes Ombudsman and additional building safety measures.

As the industry adapts to the new building safety regime, an increase in litigation related to the Building Safety Act is anticipated.

Reform of security of tenure provisions for business tenancies

Commercial leases currently benefit from ‘security of tenure’ provisions, ensuring that a qualifying business tenancy does not automatically end upon the expiration of its term. Landlords can contract out of these provisions by following the procedures outlined in the Landlord and Tenant Act 1954. To contract out, the landlord must serve a warning notice on the tenant and the tenant must make either a declaration or a statutory declaration (if within 14 days of completion). In 2023 the Law Commission announced that there would be a consultation on the Landlord and Tenant Act 1954 which is due to start early this year.

Other expected changes include:

In summary, 2024 promises crucial property law reforms in England and Wales. From extended lease rights to heightened building safety measures, staying informed is essential for successfully navigating these upcoming changes.

 For further advice and assistance please contact our Commercial Property team on 01604 828282 / 01908 660966 or email info@franklins-sols.co.uk

Tenants who are not happy with how their Landlord is managing their building are potentially able to collectively force the Landlord to transfer their management functions to a special company set up by the tenants under the Commonhold and Leasehold Reform Act (CLRA) 2002 and subsequent regulations. This kind of company is known as a Right to Manage (RTM) Company. There is no need to prove wrongdoing or mismanagement on the part of the Landlord or current Management Company in order to force the transfer of their management functions.

The term ‘management functions’ includes but is not limited to:

The RTM provisions will only apply if the following conditions are met:

In order for a Tenant of a flat to be a qualifying tenant they must own the flat under a long lease i.e. one that was granted for a term greater than 21 years.

If the tenants meet the above criteria, they have the right to request the transfer of the management functions of their landlord to a RTM Company.

Our Bespoke and Commercial Property team, headed up by Jo Pusey, are able to advise on your eligibility to force the management functions to a RTM Company and draft and serve the appropriate notices. Our Corporate Department are able to assist you with the formation of the RTM Company.

For further advice and assistance please contact our Commercial Property team on 01604 828282 / 01908 660966 or email info@franklins-sols.co.uk

Andrea Smith is an equity Partner at Franklins Solicitors and heads up our Business Services Department. In this blog she explains why she has chosen to progress her career within Franklins and what her role entails…

I joined Franklins Solicitors nearly 21 years ago as a Trainee Solicitor and was offered a position post qualification, working alongside Simon Long, who is now our Managing Partner. I worked very hard and became a salaried Partner (referred to within the firm as a Level 2 member). I continued to work diligently and was invited to join Level 1 as an equity Partner. I now own the Firm equally with Simon Long, Scott Wright and Lee Holmes, who have all been with Franklins for many years and progressed their careers within the Firm.

In my role as Partner I head up the Business Services offering and oversee the Corporate, Commercial, Employment and Commercial Property departments that provide services to the Firm’s corporate clients.

There is no “typical” day for me. In addition to my role as Head of Business Services, I also look after HR, Marketing and I am the Trainee Supervisor so in addition to speaking to clients in relation to a sale or an acquisition of a business I can be making decisions about marketing or recruitment.

I love the fact that my job is very diverse. I get to be involved in many things in relation to the running of the business and speak to lots of people. I’m also able to do what I enjoy most which is corporate transactions.

The biggest challenge is fitting everything into the working day that I need to complete. I would also say that recruitment and staff retention is becoming increasingly challenging because recruiters are constantly calling our employees and trying to entice them to new pastures. In many respects, this is an opportunity to ensure that our offering to employees remains competitive.

People sometimes ask me why I have chosen to stay with Franklins for over 20 years. I’ve worked with many people over the years who have left and discovered the grass is not always greener. I like the work that I do and the people that I work with. Many people that I have trained have stayed with the Firm and it is rewarding to know that you are contributing to the growth and success of the business.

When I’m outside of work, I enjoy running. Although I recently slipped two discs so I’ve been out of action but I can’t wait to get back to marathons again. These days I spend time in the pool doing hydrotherapy exercises. I also spend time with my children and my puppy Woody.

For further advice and assistance please contact our Business Services Team on 01604 828282 / 01908 660966 or email info@franklins-sols.co.uk

Holly Threlfall joined Franklins in 2013 and has since worked her way up to becoming a Corporate Partner in our Business Services Department. Here she explains what the work involves and what she enjoys about her role.                                                                   

Being a Partner in a law firm has its ups and downs like any other job. It can involve long hours, tight deadlines and stressful situations. However, it can also involve great clients, exciting deals and an extremely variable ‘day at the office’.

No two days are ever the same. I have been at Franklins for nearly 9 years and I can comfortably say that every day brings something new. My clients come from different backgrounds, from retail through to construction, manufacturing, professional services and even aerospace. This certainly keeps me on my toes, as every piece of work needs to be tailored to each of my clients and their industry needs. The nature of work that I undertake also varies from day to day. One day, I may be focused on drafting a Share Purchase Agreement which can involve several hours of technical drafting, the next I may be reviewing due diligence documents to advise on the risks of acquiring a business and then I may be into a completion meeting or conference with clients to talk through their business needs before working into the evening to finalise points discussed throughout the day. These long, and sometimes intense, hours however are all worth it for a happy client and can be alleviated by working with a great team.

One of the best parts of my job is the people that I work with. We have a team of Partners here at Franklins each with their own expertise to support our clients with their various needs. Then there are the other solicitors, trainees and support staff, all of whom play an essential role to look after our clients. I wouldn’t be able to do my job if I didn’t have the support of my assistants, the reception and compliance team, accounts team, marketing and other members of the firm all of whom work together to deliver our services. That is not to say that we are always perfect (although we do try!). We will always do our best to look after our clients and keep the firm moving forwards.

Of course, as a Partner one of the key parts of my role is supporting my team and training the next generation of lawyers. I work closely with newly qualified solicitors, trainees and paralegals to pass on the knowledge I have gained from my own experiences. From technical understanding and advice, through to transaction and case management and essential skills such as communication skills, much of my days can be spent working with the junior team to help them grow and develop into the next generation of solicitors.

But it’s not just the team at Franklins that I work closely with. One of the most rewarding parts of my job is working not only with some great clients, but also other professional advisors who are essential in ensuring our clients’ interests are best served. It’s not unusual to have several calls a day with the same clients and advisors over several weeks as a deal intensifies. You get to know everyone personally and these relationships only grow over time which makes it even more rewarding when a deal completes. There is no better feeling than a grateful client, happy with the outcome of their transaction and ready to move onto the next chapter of their journey, be that growing their business or retiring to enjoy the fruits of their labour!

Despite the many roles I fill, busy days and sometimes long hours required, life as a Partner does not mean that my work is my life! I have a great work-life balance, which is supported and made possible by my team and other partners. I can squeeze a run or swim in before work, play badminton on a regular basis and bake celebration cakes for my friends and family (or just because I want to!) when the need arises. Baking is a particular passion of mine and I do love to challenge myself to come up with new and creative cake flavours and designs – something which often surprises many people when they discover that I am a corporate lawyer!

Whilst corporate law can have a reputation of being ‘dry’, my experience as a solicitor and Partner at Franklins is anything but. My day is filled with a variety of challenges; my life enhanced by the variety of relationships and friendships that I have formed throughout my career.

To contact Holly or a member of the Business Services team, please call 01604 828282 or 01908 660966 or email info@franklins-sols.co.uk.

A Leaseholder of a residential property is entitled to extend your Lease providing certain criteria are met including the following:

  1. They have owned the property for no less than 2 years;
  2. The original Lease was granted for a period of no less than 21 years.

As a Leaseholder this right is important because the more the term of the Lease decreases, so does the property value.

Whilst many Leaseholders are successful in agreeing an extension with the Freeholders amicably either informally or following service of a Section 42 Notice, unfortunately disputes or circumstances can arise where an application to the First Tier Tribunal Property Chamber (“the Tribunal”) becomes necessary. For example if the parties are unable to agree on the premium payable or the Freeholder simply fails to co-operate or engage in the process.

Once an application to the Tribunal has been made, the Tribunal will either decide the terms of any new Lease, including the premium payable, on the papers filed, or a final Hearing will be listed in order for both parties to present their case.

After considering each party’s case and providing the Tribunal is satisfied that the Leaseholder meets the criteria required to entitle them to an extension, it will grant an Order setting out the terms upon which the new Lease is to be granted. If either party then fails to complete the new Lease incorporating these terms within two months of the Order being granted, a further Application can be made within 2 months to the Tribunal to enforce the Order.

If you have been unable to agree an extension with your Freeholder please contact our Dispute Resolution Department for information about our fixed fee services for Tribunal applications on 01604 828282 / 01908 660966 or email litigation@franklins-sols.co.uk.

The United Kingdom and the rest of the World continues to deal with the COVID-19 pandemic, with different countries using various techniques to not only take control but keep their economies as stable as possible. Whilst the UK Government has passed emergency legislation on a number of measures including the Business Interruption Loan Scheme, many businesses are either struggling to access this through their lender or have their reservations about using it.

One of the main issues for companies is maintaining their cash flow whilst the economy is virtually remaining on hold for the foreseeable future with no certain timeframe for things getting back to normality. If you or your company has cash tied up in its assets such as property, then there are a number of ways that you can release this cash to help get you through this intense and uncertain time.

Selling property

Whilst most of the residential conveyancing market is on hold due to the issues of moving families during the lockdown period and lenders appearing to withdraw most of their higher percentage mortgages, many investment companies will still be looking to increase their portfolio with more buy-to-let properties. These companies commonly have interest only mortgages which require a much greater percentage of the purchase price to be deposited by the company before the mortgage offer is granted. There is still a market available for these types of purchasers.

Alternatively, if you have enough equity in your property and the buyer does not have enough disposable cash to be a cash buyer, you could sell the property at the market value and take the percentage of cash available from the buyer with the remainder being protected by way of a legal charge over the property for a negotiated period. This would then give the buyer time to seek a mortgage or bridging loan whilst allowing the sale to proceed and improve your cash flow at the same time.

Re-financing or additional security

Whilst many institutional lenders are restricting their availability of products, a number of finance companies are still offering mortgages or bridging loans. Whilst these are likely to be more short term and have higher interest rates, they may allow you to release the cash tied up in your property allowing you to get through this period of economic uncertainty. You may then be able to access a better product and remortgage once the economy has settled. If you have enough equity in the property, a finance company may be willing to take a second legal charge over the property subject to your primary lender giving consent to the same.

Sale of freehold with leaseback

If you own the freehold of a commercial property then you can potentially release any cash available from the equity in the property by selling the freehold reversion to an investor. There are still a number of investment companies with monies readily available such as a pension investment schemes. The freehold can then be sold with a simultaneous lease back of the premises to your company. This allows the company to receive the monies from the sale of the freehold yet still have the occupational benefit of the property. Terms of the leaseback would need to be negotiated with the buyer and further advice should be taken on this to ensure that you are adequately protected.

These options will vary depending on your circumstances and so will the implications of the same. You should take advice from your Accountant or Financial Advisor before proceeding to ensure that you do not have any unwanted tax consequences and that it benefits your business as a whole.

If you need any advice or assistance in relation to these transactions then Franklins are here to help. Please contact Reece Chapman, Solicitor in our Bespoke and Commercial Property team on 01908 660966 / 01604 828282 or by email at reece.chapman@franklins-sols.co.uk.

What’s a ‘Break Clause’

A break clause is effectively a ‘get out clause’ allowing a tenant to terminate its lease before the expiry of the contractual term.

It’s important for a tenant to secure a break clause within its lease, as it’s difficult to predict the position of a business years down the line. It could also give a tenant the opportunity to re-negotiate on more favourable terms.

Timing

The lease will stipulate a notice period by which you must serve notice on your landlord. This is usually 6 months in advance, however it may be longer. It’s advisable to consider your options a year before the break date, to allow yourself ample time. My advice would be to diarise the break date, the latest possible date by which notice must be served and a countdown to that date.

The lease may also specify a certain form in which notice must be served and failure to comply will invalidate the notice.

When serving notice, remember to allow sufficient time, especially if your landlord is based abroad.

commercial premisesBreak Conditions

Break clauses usually have specific pre-conditions which must be satisfied for a break to be effective.

A landlord may attempt to include onerous conditions, which a tenant is likely to find difficult to comply with, in turn leaving its break invalid. An example of this would be the requirement to give ‘vacant possession’. Failure to comply with these conditions will result in a tenant being tied into the lease for the remainder of the term. A break clause with difficult pre-conditions defeats the commercial objective of the clause and should be resisted.

The Lease Code 2007 stipulates that the only pre-conditions to a tenant’s break clause should be for the main rent to be up to date, giving up occupation and leaving behind no continuing subleases. Whilst the Lease Code is only a framework and provides recommendations, it attempts to achieve a fair balance between the parties and a tenant could refer to this in early negotiations, when heads of terms are being drawn up.

It’s important that break conditions are negotiated, as they are strictly construed by the Court and tend to arise as a main dispute between landlords and tenants. It’s therefore advisable to seek legal advice before entering into a lease, to ensure the option to break can be exercised, should you so wish, later down the line.

If you would like to discuss a Bespoke or Commercial Property issue or require additional information about leases or break clauses, please contact the team on 01908 660966 / 01604 828282 or email commprop@franklins-sols.co.uk.

Following the instruction from our Prime Minister yesterday that we must all stay home to stay safe; never has it been so evident that health and wellbeing is paramount. We take our duty of care to our clients and staff seriously and as such we have adapted our working practices following the outbreak of COVID-19. However, rest assured that our Business Services’ Team of expert-solicitors are still available to support you, your business and customers through this difficult time.

Fortunately, we live in a connected world and with the support of technology we are able to continue to provide you with the high-standard of service and care that our clients expect of us. Although regrettably we cannot offer face-to-face meetings at this time we are of course happy to advise you via Face-Time, Skype or other means of video-conference. As many of our new clients are aware, our on-boarding process is entirely remote and does not require you to attend at our office or leave the safety of your home. Therefore, whether a returning or new client we can still assist and provide you with the quality legal services that you need.

As you may expect we have been putting in place a contingency plan over the past weeks and the majority of our teams are now working remotely. In this digital age many of our services are already provided electronically therefore there will be minimal disruption to your matter with us. However, unfortunately there may be some unavoidable disturbances as we overcome new challenges and adjust to a new way of working, but please bear with us as we will rise to the challenge and move forwards as must we all. Although our doors may be closed, we are open for business and willing, ready and able to assist you.

If you have any queries or concerns then please don’t hesitate to contact me directly on 07879464500.

Thank you once again for your patience. Please stay home and stay safe.

Andrea Smith,

Head of Business Services

Whilst many would agree that the Brexit process has been a protracted and frustrating one, it would appear that in the context of a lease entered into prior to the referendum, Brexit cannot be considered a frustrating event.

In the recent case of Canary Wharf (BP4) T1 Ltd v European Medicines Agency [2019] EWHC 335 (Ch), the European Medicines Agency (“EMA”) served notice on the Defendant that as and when the UK leaves the European Union, it would treat its 25 year lease, entered into in 2014, of its London headquarters as frustrated.

The doctrine of frustration is well described by Lord Radcliffe in Davis Contractors Ltd v Fareham UDC to state “Frustration occurs wherever the law recognises that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract”. The question before the court was whether Brexit had this effect on the EMA’s lease.

The High Court took a dim view of the challenge of the EMA. The EMA retained its power as conferred upon it by the EU to acquire and dispose of property whether within or outside of the EU, and the EMA had the right under the terms of its lease to assign or sub-let the premises. Furthermore, it was a decision taken by the EU itself to relocate the premises of the EMA from London to Amsterdam, which was considered by the court to amount to ‘self-induced frustration’. There was nothing to prevent an EU institution from maintaining headquarters in a country outside of its member states.

The case serves as a demonstration that Brexit will not be classed as a supervening event of sufficient gravity to frustrate a contract, unless it is specifically provided for within the said contract. The fact that a party is left with a bad bargain or that performance of their obligations has become more difficult is not sufficient to frustrate the contract. The importance of having a well drafted break clause within a lease is also highlighted by the case.

Leave was granted by Marcus Smith J to appeal and the result is eagerly awaited.

If you have questions in relation to leases and how they may be affected after Brexit, please contact our Commercial Property team on 01604 828282 / 01908 660966.