Legal Practice Notes

Incorporated v unincorporated charities Charities commonly adopt a range of incorporated and unincorporated forms. Corporate forms eligible for charitable status include: a charitable company (almost always a company limited by guarantee) a co-operative society or community benefit society (formerly termed industrial and provident societies) charity trustees incorporated under Part 12 of the Charities Act 2011 ( CA 2011) a charitable incorporated organisation (ie the limited-liability model created by Part 11 of CA 2011), requiring registration solely with the Charity Commission a body corporate established by Act of Parliament or Royal Charter (eg the Official Custodian for Charities) Unincorporated charities take one of two forms: a charitable trust; or a charitable unincorporated association Charitable company A charitable company may enter into contracts, execute deeds and issue other documents in the same way as any company formed under the Companies Acts......

This Practice Note includes a link to our template replies to the various sets of Commercial Property Standard Enquiries (commonly called the CPSEs or, individually, CPSE1, CPSE2, CPSE3, CPSE4, CPSE5, CPSE6 and CPSE7). The CPSEs are industry-standard pre-contract enquiries for commercial property transactions, and the seller is responsible for addressing them in full. These template replies set out a framework of potential responses and are intended to make the seller’s task of replying easier and more efficient. Template replies to CPSEs 1 to 7 The Commercial Property Standard Enquiries ( CPSEs) are a suite of documents prepared by members of the London Property Support Lawyers Group ( LPSLG) and endorsed by the British Property Federation too......

Agricultural Holdings Act 1986 General position A landlord and tenant are free to make whatever arrangement they prefer concerning assignment, underletting or parting with possession. In practice, however, the tenancy will typically restrict such dealings. This will generally be because: the parties have expressly provided for the restriction, whether by an absolute covenant or one qualified by consent; or the tenancy agreement, whether oral or written, is silent on dealings, in which case section 6 of the Agricultural Holdings Act 1986 enables the landlord to apply to an arbitrator for a written agreement to be drawn up that incorporates the matters in AHA 1986, Schedule 1, including a covenant by the tenant not to assign, sub-let or part with possession of the holding, or any part of it, without the landlord’s consent in writing The effect of an absolute prohibition is tempered to some extent after the initial fixed term...

Negotiation Guide This guide forms part of the Practical lease negotiation collection. See also Practice Note: New starter guide—entering into new commercial leases. The purpose of a rent review is to reset the rent during the term so it reflects prevailing market conditions. In MFI Properties v BICC Group Pension Trust, Hoffmann J observed that a rent review clause addresses a clear commercial tension: the tenant’s desire for long-term security of tenure against the landlord’s wish, during inflation or a swiftly shifting property market, to avoid being fixed to the same rent throughout the term. There are several ways to approach this, yet every rent review clause sets out a mechanism or formula to determine the rent at a specified time (the review date). This Negotiation Guide looks at the principal features of an upwards only open market rent review clause that can be included in a...

Putting robust security in place is the initial move to strengthen a creditor’s standing. After that, it is essential to confirm the security ranks ahead of rival security interests over the same asset. The framework on how security interests take priority is covered in Practice Note: Priority between security interests. Further, if a secured creditor plans to provide further advances (that is, extra loans) under a facility, it must note extra priority pitfalls. In practice, further advances frequently arise with term loan facilities allowing multiple drawdowns and with revolving credit lines (see Practice Note: Overdrafts, term loans and revolving credit facilities). These issues are especially relevant where facilities contemplate later drawdowns and ongoing utilisation by the borrower. The Note explores them in depth to aid secured creditors considering additional lending under existing arrangements. This Practice Note explains the concept of ‘tacking’, then examines the...

This Practice Note explains the key considerations for a buyer and a seller where a freehold or leasehold property is sold subject to occupational leases and there are rent arrears under those leases. Its focus is commercial property, with brief acknowledgement of relevant residential points. It does not address arrears arising under a headlease; see instead: Due diligence—head lease rent arrears—checklist. For practical guidance and drafting pointers for buyers on common arrears clauses, see Practice Note: Buyer’s contract negotiation guide—arrears. When acquiring a property that is subject to leases, it is vital to determine whether there will (or might) be rent arrears under those leases as at the date of completion. If so, the parties must decide: who bears the risk of non-payment of the arrears, and who is responsible for attempting to recover them Risk of...

Regulated tenancies Regulated tenancies—often referred to as protected, statutory or fair rent tenancies—arise under the Rent Act 1977 ( RA 1977) and constituted the chief private residential tenancy type until 15 January 1989. Where a tenancy was granted on or after 15 January 1989, when the Housing Act 1988 took effect and assured tenancies became the prevailing private residential model, inclusion within RA 1977 is possible only in narrowly defined situations. Nevertheless, a considerable proportion of protected tenancies persists and, if they are not properly recognised, a purchaser acquiring property subject to a regulated tenancy may pay too much and be unable to achieve vacant possession. RA 1977 tenancies carry very strong security; in the majority of cases the landlord must await the tenant’s departure, though the parties may sometimes negotiate a surrender in exchange for a financial incentive. Be aware that, although several...

This practice note examines property disputes arising from negligence and trespass. For statutory liability connected to property and the law of nuisance, see Practice Notes: Property disputes in Scotland (delictual and statutory) and Property disputes in Scotland—common law and statutory nuisance. Negligence Negligence claims in property contexts frequently stem from inadequate property advice given by a professional—such as an architect, surveyor or conveyancer—or from substandard construction work undertaken by a contractor, for example a builder, roofer or plumber. Negligence creates liability for loss or injury caused by carelessness or a failure to exercise reasonable competence by the relevant professional or contractor. What is the test for negligence? Negligence is assessed by a three-part test considering whether: a duty of care exists that duty has been breached the breach of duty brought about the loss or harm complained of See further: The rise of the concept of duty of...

Guarantees and third party security from individuals Guarantees (see Practice Note: Guarantees) and third party security (see Practice Note: Third party security) provided by individuals are common forms of credit support in financing transactions. For example, in deals involving a corporate borrower, a lender may require the borrower’s directors to give guarantees or offer security. Where the borrower is an individual, the lender may instead seek a guarantee or security from a related family member, such as a spouse, civil partner or a parent... When taking a guarantee or security from an individual, a number of additional considerations arise beyond the general law on guarantees and security. The principal issues are explored in the following Practice Notes: Key issues in taking a guarantee from an individual in a commercial financing context Key issues in taking security from...

Joint venture The expression ‘joint venture’ has no fixed legal definition in UK law. It denotes a commercial arrangement in which two or more parties agree to combine their resources to deliver a proposed project (or other business activity) and to share the resulting gains. The term spans many scenarios, from structural arrangements that create or modify economic control of a legal entity—such as joint venture companies or partnerships—to non-structural set-ups including contractual joint projects and informal, undocumented collaborations. A joint venture can be established for a single project, a defined period, or as a continuing business relationship... they may not have the requisite knowledge, expertise, technology, resources and/or funding by splitting funding obligations, they can reduce financial risk they may gain access to new markets they can keep running their own businesses whilst also pursuing the...

Shares are frequently pledged as security for a loan. In commercial finance deals, they are often taken as security: as one part of a security package covering all of a company’s assets (see Practice Note: Key features of debentures) where the borrower is a special purpose vehicle and the lender wants the option to take control of the borrower and its entire business on enforcement (see Practice Notes: Security in real estate finance transactions, Security in project finance transactions and Taking security in acquisition finance transactions—overview), or for stamp duty or other tax-driven reasons (see Practice Note: What does stamp duty apply to?) This Practice Note sets out the main issues when taking security over shares. In particular, it looks at: the categories of shares that can be secured the forms of security typically used over shares key...

Introduction and background This Practice Note sets out the principal points to bear in mind when advising landowning clients and utility providers (distribution network operators ( DNOs)) on the negotiation of substation leases. It also flags matters affecting tenant occupiers where relevant. The statutory framework underpinning substation leasing is the Electricity Act 1989 ( EA 1989). Although the scope of that legislation sits beyond this Practice Note (see, instead, Practice Note: Electricity licensees: street-opening and necessary wayleaves - What are 'necessary wayleaves'?), its relevance is that it confers on DNOs a statutory entitlement to install and keep their apparatus notwithstanding any lease provisions agreed. For developers, securing an electricity supply can be administratively burdensome and protracted, with both cost and timetable influenced by what other power requests are being processed concurrently. As a result, the landowner may find themselves in a...

Introduction to subsidence Subsidence arises when the soil below a building cannot adequately bear its load effectively. It frequently follows loss of moisture and shrinkage in the ground, commonly after extended dry periods. Other forms of ground movement include ‘settlement’ (the normal compression of soil under a property), ‘heave’ (upward lift beneath a structure, often linked to flooding, escaping water or nearby trees near a property) and ‘landslip’ (sideways displacement due to erosion, frequently affecting coastal homes and properties). A range of triggers can set off subsidence and related ground instability issues. These include, among others: human disturbance (e.g. mines, mine shafts, old and disused wells, soakaways, former ice-houses, past storage or refuse pits) altered drainage regimes and patterns intense rainfall and heavy rain removal of groundwater and abstraction impacts of climate change (e.g. rain, drought, erratic...

On 1 June 2004, the second edition of the Standard Commercial Property Conditions came into effect, and those...

Side letters are commonly utilised in practice: to set arrangements and allow concessions (eg concerning the permitted use, the standards of repair or rent concessions), or to remove uncertainty, for instance on assignment or on rent review The provisions of such letters are ordinarily intended to be: legally enforceable personal to the parties to the letter or binding on successors in title temporary and/or capable of termination Successors in title—who is bound? A key issue is whether a side letter binds the landlord’s and the tenant’s successors in title. When preparing a side letter, it is crucial to state expressly if the successors of the original landlord and tenant are to be bound. If a side letter is expressed as personal to either party, it will not bind the successors of that party. If it is silent on this point, then it may bind successors......

This Practice Note sets out the requirements under common law and the Agricultural Holdings Act 1986 ( AHA 1986) in respect of notices to quit served in respect of an agricultural holding and the special grounds (or ‘ Cases’) under AHA 1986, Sch 3. Any notice given under the Agricultural Holdings Act 1986 ( AHA 1986) must, at the very least, meet the common law rules for notices to quit, except where altered by the tenancy agreement. Nevertheless, where the AHA 1986 imposes stricter obligations, those will take precedence over both common law and contractual provisions. In the vast majority of situations, an agricultural holding will be an annual periodic tenancy, either because it was originally granted on that basis or because it has been treated as such by the operation of AHA 1986, ss 2 and 3. The following common law and statutory rules...

This Practice Note explains the legal framework governing rent and rent review clauses in Scottish commercial leases. For disputed elements of rent and rent review, see Practice Notes: Rent arrears in commercial leases—recovering— Scotland and Commercial property rent review disputes— Scotland. Rent At common law, one essential requirement for a lease is the obligation to pay rent, even if only a token sum. Rent is typically due quarterly in advance on the Scottish quarter days; however, it is also frequent for leases where the landlord is an English property company or pension fund to specify payment on the English quarter days (see below) to maintain uniformity across the landlord's portfolio. After the 2008 recession, retail tenants increasingly sought to pay rent monthly in advance, and many landlords have been willing to consent to this. Such arrangements are generally personal to the original tenant and are...

Asset or share purchase agreements typically contain warranties and indemnities from the seller in favour of the buyer. A warranty is the seller’s confirmation that a stated fact is correct. For example, the seller may confirm that each property benefits from good, marketable title. In a share or asset purchase, property warranties usually appear alongside warranties on areas such as employment and tax or, alternatively, in a separate property schedule appended to the agreement; see Practice Notes: Warranties and indemnities—asset purchase and Warranties and indemnities—share purchase. An indemnity is a contractual undertaking by the seller to compensate the buyer for a specified liability that might arise in future. This Practice Note summarises the rationale for property warranties and indemnities in asset and share purchase deals, their features, practical considerations when acting for either party, and provides examples of property...

This Practice Note examines misrepresentation, misstatement and non-disclosure in property transactions. It outlines: a seller’s potential liability for answers provided to pre-contract enquiries; the buyer’s possible remedies for non-disclosure, misrepresentation and misstatement; and contractual provisions that may protect the seller if a claim is made. What is misrepresentation? In this context, a misrepresentation is a false statement of fact by one party to another that is not a term of the contract but persuades the other to enter into it. For liability to arise, the statement must be material and actually relied upon by the other party. If a seller gives an untrue answer in replies to enquiries (or elsewhere), the buyer relies on it when deciding whether to enter into the contract and then suffers loss by entering the contract, the seller will be liable for...

Practice Note This Practice Note examines pre-action behaviour in ordinary and commercial civil disputes in Scotland. For guidance on: pre-action steps in Scottish personal injury matters, see Practice Note: The Scottish Personal Injury Pre- Action Protocol other issues to weigh before raising a civil claim in a Scottish court, and how to commence and advance a claim, see Scottish DR: prescription and limitation—overview and Scottish DR: case management and evidence—overview respectively, which lead to more detailed guidance the closest comparable process in England and Wales, see Pre-action: general—overview and Pre-action protocols—overview, which in turn link to fuller guidance on various aspects of pre-action conduct in England and Wales Note: this Practice Note does not provide guidance on pre-action requirements in ordinary actions that are partly governed by statute; for example, where a lender seeks to enforce a qualifying standard security under the...