Legal Practice Notes

Choosing the joint venture vehicle A joint venture is not recognised in English law as a separate legal form. Rather, it is a commercial arrangement in which two or more parties agree to combine resources to deliver a defined project or other business activity. The term spans a wide range of scenarios, from structural solutions that establish or shift economic control of a legal entity—such as joint venture companies or partnerships—to non‑structural approaches, including contractual joint projects and informal, undocumented collaborations. A joint venture may be set up for a single initiative, a set timeframe, or as an ongoing business relationship. Parties considering a joint venture have several structural routes open to them, and the most suitable model will turn on their particular circumstances. Commonly used structures include: Corporate joint venture—creating a separate limited company in which each party holds shares Joint...

Dissolution If a company governed by the Companies Act 2006 (or any earlier Companies Acts) is dissolved, all property it owns at the moment of dissolution—together with any rights vested in it or held on trust for it, but excluding assets it holds on trust for another—vests in the Crown as bona vacantia (that is, ownerless property) under CA 2006, s 1012(1). Where the company’s registered office lies within the Duchy of Cornwall or the Duchy of Lancaster, the bona vacantia instead passes to the relevant Duchy. Be aware that freehold land situated within the Duchy of Cornwall vests in the Duke of Cornwall on dissolution regardless of the location of the company’s registered office. Note: the Duchy of Cornwall is held by the Duke of Cornwall under a 1337 charter (which grants the dukedom to the monarch’s eldest son and heir to the...

Practice Note This Practice Note sets out the rule prohibiting derogation from grant and the situations in which it operates in the context of leases. It also considers the covenant of quiet enjoyment, its interplay with derogation from grant, and highlights common drafting issues alongside other matters for consideration. The rule against derogation from grant functions in addition to any quiet enjoyment obligation and is not displaced by an express quiet enjoyment covenant. Although there is considerable overlap between the two, a crucial distinction exists. The obligation not to derogate from grant runs with the land. Thus, if a landlord lets one property and sells the neighbouring one, the purchaser is not liable to the adjoining tenant under the quiet enjoyment covenant, since they are not, and have never been, that tenant’s landlord. However, the purchaser is liable to the tenant in respect of the...

Default position Bilateral surrender—termed renunciation under Scots law—describes how a tenant relinquishes rights arising under a lease. This may occur by express agreement between the parties, or through the landlord’s acquiescence, which carries an implied discharge of claims against the tenant. The framework applies to both residential and commercial leases. For Agricultural tenancies, see Practice Note: Resumption of agricultural holdings in Scotland and partial notices to quit. Under Scots law, neither party is able to renounce unilaterally. Renunciation is distinct from: abandonment where the tenant justifiably rescinds the contract owing to a material breach by the landlord (see: Rescission or abandonment: Stair Memorial Encyclopaedia [200]) abandonment where the tenant unjustifiably repudiates the contract and deserts the subjects (see: To Remain in Possession: General: Stair Memorial Encyclopaedia [175]) Where renunciation does not arise by agreement but instead amounts to abandonment, the landlord is presumed not to have...

Real estate finance is a type of secured lending. Some motivations for taking security in a real estate finance deal mirror in practice the general benefits of security seen in commercial lending (see Practice Note: Difference between security and quasi-security— Why take security and/or quasi-security?). However, security assumes heightened significance here because the borrower is commonly a special purpose vehicle ( SPV) (also referred to as a special purpose company or SPC) incorporated solely for the contemplated transaction (that is, to acquire, or to acquire and develop, a property). Consequently, the borrower will lack an operational track record and its assets will be limited to the property itself and, where relevant, the development of that property. See Practice Note: Introduction to real estate finance—the lending structure— Borrower entities in real estate finance transactions. Due to the SPV structure, a lender’s assessment of the...

The Standard Conditions of Sale ( Fifth Edition—2018 Revision) ( SCS) comprise the typical terms underpinning most agreements for buying and selling residential property in England and Wales. For more detail on the SCS, refer to Practice Note: Standard Conditions of Sale ( Fifth Edition—2018 Revision)—a guide to the principal provisions. This Practice Note explains how the SCS deal with payment of completion monies and the issues that commonly arise. It sets out the SCS approach to completion funds and flags recurring practical points. It also addresses matters to bear in mind where a mortgage needs to be discharged. How much is payable?......

Secure tenancy This Practice Note outlines the tests in section 79 of the Housing Act 1985 ( HA 1985) that must be satisfied for a tenancy to be secure, and then examines each test in detail. It considers whether the accommodation constitutes a dwelling, whether the dwelling is the tenant’s principal home, the landlord requirement, the tenant requirement, and the Schedule 1 HA 1985 exceptions where a tenancy or a licence cannot be secure. It also explains how a secure tenancy can be varied and highlights the additional rights available to secure tenants. Secure tenancies are the tenancy form most commonly provided by local authorities ( LAs). The definition of a secure tenancy, and the rights afforded to secure tenants, are derived from Part 4 of the Housing Act 1985 ( HA 1985)......

Why are the SDLT anti-avoidance provisions important? The stamp duty land tax ( SDLT) anti-avoidance regime contained in section 75A of the Finance Act 2003 ( FA 2003) first appeared in the Pre- Budget Report 2006 and was later put on a statutory footing as primary legislation by the Finance Act 2007 in an expanded form, being FA 2003, ss 75A–75C (referred to collectively in this Practice Note as 's 75A'). The measures were brought in to deter the apparently substantial volume of SDLT planning arrangements deployed across both commercial and residential land transactions in the United Kingdom. They have effect for disposals occurring on or after 6 December 2006, subject to transitional provisions. Instead of closing SDLT planning arrangements one structure at a time through amendments to particular parts of the SDLT code, the chosen policy was to adopt a 'mini general...

Where a solicitor is engaged to prepare and negotiate an agreement that provides for overage, the retainer carries, expressly or by necessary implication, a duty to build in mechanisms safeguarding the seller’s right to those sums, which may not crystallise for several years. A buyer’s positive covenant to pay overage will not of itself bind successors in title, because the burden of a positive covenant does not run at law or in equity. Relying solely on a contractual promise will not secure recovery against successors in title. If adequate protection is not put in place, the practitioner risks a negligence claim, with damages assessed on a loss‑of‑opportunity basis. Protection by legal charge One recognised – and relatively common – method is to secure the overage by a legal charge over the land being disposed of and subject to the overage. The charge secures any overage...

Overage Overage (also called ‘clawback’ or ‘deferred consideration’) allows a seller to share in any later increase in the land’s value—for example once planning permission is secured or when completed units are sold—after the initial disposal. The right to overage is purely contractual, and any clause will be read narrowly against the party relying on it, so precision is vital. First, decide if overage is the right tool: your client might be better off with a conditional sale contract rather than an outright sale with an overage mechanism. Keep proportion when bargaining; overage can prolong talks and inflate costs, and you may need to manage your client’s expectations on timetable and fees. Sellers, particularly in the public sector, commonly require overage to avoid later embarrassment if the buyer develops and/or disposes of the land at a significant profit. However, from the seller’s angle, overage...

This Practice Note explores the different categories of lease covenants that either bar alterations outright or make them conditional upon the landlord’s consent. It also considers when withholding consent could be reasonable, the granting of consent on conditions, and practical points to bear in mind. Without explicit or implicit permission, a tenant is not allowed to carry out alterations beyond the demised premises; any such access or works will amount to trespass—see Practice Note: Alterations outside the demise. The guidance that follows applies only to works within the demised premises. For help on negotiating an alterations clause in a commercial lease, see Practice Note: Negotiation guide—alterations clause—commercial leases. For guidance on granting a licence for alterations, see Practice Note: A practical guide to dealing with licences for alterations. See also: Licence for...

Direct tax treatment of leases—other transactions For the direct tax analysis of landlords and tenants on the grant of leases, see Practice Note: Direct tax treatment of leases—grant of a lease. This Practice Note addresses the direct tax position of landlords and tenants for other dealings concerning leases, chiefly assignments, surrenders and variations of existing leases. The VAT and stamp duty land tax ( SDLT) consequences of these transactions are also crucial in determining the parties’ overall tax position; see the following Practice Notes: VAT issues for new and ongoing leases VAT issues for lease assignments and terminations SDLT chargeable consideration—leases SDLT—common lease transactions Consistent with the approach to lease grants, the tax treatment of transactions affecting existing leases depends on a range of factors, including the parties’ tax status, the term of the lease and the purpose for which the transaction is undertaken. The legal mechanics of...

Introductory observations Claims for knowing receipt (sometimes termed ‘unconscionable receipt’) and dishonest assistance are often grouped as ‘accessory liability’ because they target a defendant implicated in causing the claimant’s loss in an ancillary or secondary capacity. Liability may arise by dishonestly helping another to breach a trust or fiduciary obligation owed to the claimant, or by receiving trust property with knowledge that it follows a breach of trust or fiduciary duty. In this way, the defendant’s potential responsibility is secondary to the principal wrongdoing of the breach. That said, Lord Burrows in Byers v Saudi National Bank considered that a personal claim in knowing receipt is materially different from the accessory nature of a dishonest assistance claim ( Byers is discussed further below). Dishonest assistance and knowing receipt claims frequently emerge where there has been some fraudulent or wrongful conduct in which the...

This Practice Note sets out the distinct stamp duty land tax ( SDLT) provisions that arise where a stake in land is moved into a partnership by one or more partners, or by individuals connected to them. It also covers transfers made when the partnership is first established. SDLT no longer applies to any land transaction concerning interests in or over land situated in Scotland from 1 April 2015. From that date, land and buildings transaction tax ( LBTT) governs those transactions, subject to transitional rules. For more information, refer to the LBTT subtopic. Likewise, SDLT stopped applying to any land transaction involving interests in or over land in Wales from 1 April 2018. From that date, land transaction tax ( LTT) applies to those transactions, again subject to transitional provisions. For additional detail, see the Wales: LTT subtopic......

Practice Note This Practice Note outlines the general SDLT treatment of partnerships, clarifying what qualifies as a partnership for SDLT and how such bodies sit within the wider SDLT framework. It also addresses transfers of interests in a partnership. It explains: which entities and arrangements are treated as partnerships for SDLT the SDLT treatment applicable to partnerships how SDLT operates where a partnership buys a chargeable interest in land from an unconnected party who must file returns and pay SDLT together with any associated liabilities Separate Practice Notes cover what the SDLT legislation terms: special transactions (that is, acquisitions from and disposals to connected persons or partners of a partnership), see Practice Notes: SDLT and partnerships—transfers to a partnership and SDLT and partnerships—transfers from a partnership anti-avoidance rules and reliefs, see Practice Note: SDLT and...

This Practice Note Sets out details of stamp duty land tax ( SDLT) anti-avoidance provisions and SDLT reliefs that apply specifically to partnership transactions. It explains: how anti-avoidance rules of general application may operate for partnerships which additional anti-avoidance rules are aimed at partnership dealings, and how general reliefs work for partnership transactions In broad terms, SDLT anti-avoidance rules and reliefs apply to partnerships as they would to the constituent partners. However, some general provisions are modified and there are extra rules targeted at partnerships, including: rules governing transfers of interests in property investment partnerships are, in essence, anti-avoidance measures where a chargeable interest moves from a corporate partnership to a partner, the usual treatment may instead require a claim to group relief to eliminate the SDLT charge, and a withdrawal of value by a partner can trigger an SDLT...

This Practice Note examines harm caused by tree roots, covering the neighbourly duty, issues of foreseeability and causation, practicable steps to avoid or reduce damage, and available remedies. Liability The leading authority on property damage from intruding tree roots is Delaware Mansions v Westminster City Council. The House of Lords held that responsibility is assessed by applying nuisance principles: reasonableness between neighbours—both literal and figurative—and reasonable foreseeability. The court stressed that attaching the label ‘nuisance’ or ‘negligence’ is of little significance; the common law instead concentrates on working out the fair and just content, and incidents, of a neighbour’s duty, rather than fixing a label and inferring the scope of the duty from it. In practice, liability turns on these questions: What obligations exist between neighbours in relation to trees? Did the tree’s roots cause damage to the adjoining property? Was that harm reasonably to be...

Drafting — Perpetuities and Accumulations Act 2009 Under the Perpetuities and Accumulations Act 2009 ( PAA 2009), the rule against perpetuities no longer applies to easements created on or after 6 April 2010. As a result, a drafter does not need to set a perpetuity period within which the right must vest (i.e. take effect). Even so, many grantors still include a specified vesting period to secure the comfort of knowing the easement will cease to be relevant if it does not vest within that timeframe. Any conditions within the grant itself that regulate how the easement is exercised will, of course, remain in force. Due diligence — future easements The perpetuity rule continues to govern easements granted before 6 April 2010. The rule causes no difficulty where the subject matter of the right exists at the date of grant. For instance, a right to use...

Concurrent lease In the setting of residential block arrangements, a concurrent lease is a lease of the reversion granted by a developer, typically to a management company, after it has already granted the separate flat leases to the respective purchasers of those flats. It is, in effect, an intermediate lease that stands between the developer (as freeholder, or as holder of a superior leasehold interest) and the flat tenants. For additional guidance, see Practice Note: Concurrent leases. This type of lease is sometimes also described as an ‘overriding lease’. That usage, however, risks confusion with the lease available to a former tenant or guarantor under section 19 of the Landlord and Tenant ( Covenants) Act 1995 ( LT( C) A 1995). For that reason, it is preferable to use the term ‘concurrent lease’ in this residential flats context......

Although this Practice Note focuses chiefly on commercial property issues, it also addresses certain residential points. On any sale of property, both expenditure and any receipts must be apportioned between seller and purchaser for the relevant period. On the grant of a new lease, one must work out the rent due from the tenant for the interval from the start date to the next scheduled rent payment date. If a lease ends before its contractual expiry (for example following the exercise of a break clause), the parties should consider whether any advance rent requires repayment and, if so, determine the correct amount. ( In these circumstances, a tenant is entitled to a rent rebate only where the lease contains clear language to that effect ( Marks and Spencer v BNP Paribas). For more detail, see Practice Note: Break clauses and...