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  • 07/11/2017 Selling real estate - Planning ahead is key

    The old saying really is true: “by failing to prepare, you are preparing to fail”. You’ll be surprised how much preparation can be done on a property sale before you’ve even found a buyer or agreed commercial terms. You could be saving yourself time and money down the line by planning ahead.

    The old saying really is true: “by failing to prepare, you are preparing to fail”. You’ll be surprised how much preparation can be done on a property sale before you’ve even found a buyer or agreed commercial terms. You could be saving yourself time and money down the line by planning ahead.

    Here are our top tips for planning ahead:

    1.    Ask your solicitor to review the title to your property

    There may be outdated entries such as expired leases that need to be removed, unknown covenants and easements noted on the title that can be mitigated with indemnity insurance or even redeemed mortgages that need to be discharged.

    If your land is unregistered then your solicitor can review the deeds to ensure you have good title to the property and then prepare an ‘epitome of title’ that can be sent to a buyer’s solicitor to streamline the buyer’s due diligence process.

    2.    Obtain any consents

    If your land is charged, you will need your lender to consent to the sale and to release their legal charge on completion. Liaise with your lender as early as possible to obtain their consent in principle and an estimated redemption figure. 

    There may also be restrictions on your title that require third party consents to a sale. Often, this will involve negotiating and agreeing documentation that needs to be entered into as a condition of that consent. Early action will prevent potential delays down the line once a buyer is found.

    3.    Plans

    When dealing with transfers of part or unregistered land, accurate plans are crucial. Instruct a surveyor to prepare a Land Registry compliant plan which your solicitor can then send to the Land Registry for approval.

    4.    Planning and building regulations

    Buyers will likely require details of the planning history of the property to ensure that (i) it can be used for their intended use and (ii) there are no breaches which the buyer may be on the hook for after completion.

    Ensure that you have copies of planning permissions, section 106 agreements, evidence of discharge of any planning conditions and building regulations completion certificates. If you are missing anything then copies should be obtainable from the local planning authority. This may not be a quick process and so sellers would be wise to not wait until a buyer is lined up to do this.

    5.    Tenants

    If your property is occupied by third party tenants and you are selling with vacant possession, you should ask your solicitor to check the terms of their occupation to ascertain how to obtain vacant possession on completion. 

    If you are selling the land subject to a lease than make sure your management information is up to date and can be easily provided in a readable format to prospective buyers. Now may also be a good time to deal with any problem tenants that may put off potential buyers.

    6.    Sales Pack

    Finally, ask your solicitor to prepare a sales pack that can be sent out to a buyer’s solicitor as soon as a deal is agreed. A sales pack should include, amongst other items, full title to the property, full replies to Commercial Property Standard Enquiries (which your solicitor can help you prepare in advance), details of the planning history of the property, a plan of the property being sold (if applicable), any indemnity policies affecting the property, details of any lettings including management information and any consents in principle to the sale.

    Whilst some may baulk at the idea of going to such efforts (and cost) before they even have a buyer lined up, the benefit of following these steps in advance is invaluable. Not only will it ensure that a sale, once agreed, progresses as quickly as possible, you could also be saving money in the long run. Planning ahead will avoid the buyer’s solicitor raising rafts of enquiries and could also avoid the buyer, at best, seeking a price reduction for any issues and the delays they will most likely cause or, at worst, pulling out of the sale.

    If you would like assistance with preparing for a forthcoming property sale, with a sale on which terms have already been agreed, or any other commercial property matters then please contact Alexandra Kirkwood (alexandra.kirkwood@howespercival.com) or another member of our commercial property team.

     

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  • 07/11/2017 Inappropriate Behaviour in the Workplace

    Harassment and bullying in the workplace is not a new problem for employers. Many have had policies and procedures in place for years and believe that they are doing everything necessary to comply with their legal obligations. However, with the recent media attention surrounding allegations of harassment against high profile employers and individuals; employers have received a hard-hitting reminder of the serious and potentially damaging implications of becoming complacent and failing to properly manage inappropriate workplace behaviour. 

     

    Harassment and bullying in the workplace is not a new problem for employers. Many have had policies and procedures in place for years and believe that they are doing everything necessary to comply with their legal obligations. However, with the recent media attention surrounding allegations of harassment against high profile employers and individuals; employers have received a hard-hitting reminder of the serious and potentially damaging implications of becoming complacent and failing to properly manage inappropriate workplace behaviour.

    Implications for failing to address inappropriate behaviour

    These stories serve as an important reminder to employers as to what behaviour is and isn’t acceptable in the workplace, the importance of training employees on equality, diversity and harassment issues, the importance of dealing appropriately with allegations of inappropriate behaviour (and not brushing them under the carpet) and generally reviewing policies and procedures to ensure that there are appropriate procedures by which employee complaints can be dealt with. 

    Under the Equality Act 2010, employers are liable for acts of discrimination (including harassment) committed by their employees in the course of their employment unless the employer has taken all reasonably practicable steps to prevent the discrimination/harassment complained of.  Therefore, not only will the employee who has committed any acts of discrimination be personally liable, employers will also be liable.  Compensation in relation to discrimination claims is uncapped and therefore discrimination claims can be costly.

    Other claims could also result from acts of harassment and other inappropriate behaviour in the workplace, including claims of constructive dismissal, claims under the Protection of Harassment Act and potential personal injury claims.

    In addition to the cost of legal claims and adverse PR risk; there will inevitably also be other implications for employers including potentially the cost of sick leave (if a harassed employee is signed off work due to stress), the cost of replacing staff, lost productivity, and lost time of managers and employees dealing with a complaint or investigation.

    What is Inappropriate Behaviour?

    Inappropriate behaviour in the workplace can take an array of forms. Whether it be harassment related to sex, race, religion or belief, sexual orientation, age, disability, gender reassignment for example or sexual harassment or bullying. 

    The important thing to understand is that when dealing with allegations of harassment it is the perception of the recipient that is important; provided that perception is reasonable.  It is therefore the effect that the behaviour has on the victim, as opposed to whether the perpetrator intended his/her behaviour to have that effect, which is key. 

    It is therefore vital that, if an employee raises concerns about an employee’s or third parties behaviour, the employer takes the allegations seriously and deals with them appropriately.

    Appropriate Action

    If inappropriate behaviour is detected or reported employers need to act swiftly, consistently, and in accordance with their policies.

    In the first instance appropriate action may take a number of forms. Depending on the severity of the allegations, it may be that the matter can be dealt with informally. However if the alleged misconduct is serious, the employer will need to deal with the matter formally and commence a full and thorough investigation. 

    If after investigation, it is considered that there is a case for the alleged perpetrator to answer, then the matter should be dealt with via the disciplinary procedure.  In serious cases, it may be that the matter can be treated as gross misconduct and it may be that there are sufficient grounds to terminate the employee’s employment summarily without notice or payment in lieu of notice.  

    Pro-Active Management

    The best approach to ensure that people behave appropriately at work and to minimise claims and adverse PR for employers is to adopt a preventative strategy. Steps for employers to consider include:

    • Ensuring that you implement or review your policies and procedures including anti-harassment & bullying procedures, grievance and disciplinary procedure, and equality and diversity policy and procedure and any and all other relevant policies.  Make sure that these are robust and up to date.   Make sure that staff are aware of the expectations on them and what behaviour will not be tolerated, both in the workplace and outside of work at work related events (such as Christmas parties etc.)
    • Ensuring that staff are inducted and trained on your policies and procedures on a regular basis. 
    • Regularly reviewing your complaints and grievances records: patterns of behaviour in particular departments or by particular employees that you can pro-actively address may become apparent.
    • Encouraging employees to come forward by ensuring that you have appropriate complaints mechanisms in place: many victims of bullying and harassment are apprehensive to report inappropriate behaviour.
    • Regularly reviewing your policies, procedures, training and complaints to ensure that you are doing all that you can to prevent discrimination, including in relation to third parties who may come into contact with your employees.

     

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  • 30/10/2017 E-Signatures in Property Law

    E-signatures are seen as a new, accessible and fast way to conclude deals. Property law, however, is a minefield of statutory requirements, making it important to know where and how e-signatures can be accepted during property transactions so that you are not caught out.

    E-signatures are seen as a new, accessible and fast way to conclude deals. Property law, however, is a minefield of statutory requirements, making it important to know where and6 how e-signatures can be accepted during property transactions so that you are not caught out.

    An e-signature is defined as;

    'data in electronic form which is attached to or logically associated with other data in electronic form and which is used by the signatory to sign'.

    This may be satisfied by many different forms, such as typing a name into a contract or email, clicking an 'I accept' button, pasting an image or using a web-based electronic signature platform.

    Current Law:

    The EU issued a directive in 2000 to implement the use of e-signatures in legal documents. Each country had discretion over the use and application and so inconsistency was rife, making cross-border business difficult. In 2016, the EU then replaced the Directive with a Regulation for the provision of e-signatures. Most documents in property transactions will be submitted to the Land Registry, making them the judge in these scenarios.

    We can pinpoint the difficulties more easily by considering the process involved in various land transactions:

    • Contracts:

    To be valid, a contract for the sale or other disposition of an interest in land must be:

    1. In writing;
    2. Signed; and
    3. Contain all the provisions of the contract.

    If we look more closely, we start to understand why property law makes it more difficult to use e-signatures:

    • 'Writing' is widely defined, making electronic contracts valid.
    • 'Signing' is defined as the signatory 'making a mark'. An accepted case of 'making a mark' includes the method used was intended to indicate authentication. So far, no court has confirmed that e-signatures satisfy this, but they also have not confirmed otherwise.
    • Property law becomes difficult with 'containing all the provisions'. In commercial transactions, the signatory page can be printed and signed or an e-signature can be inserted into an electronic copy and returned electronically. This will not satisfy the property law, the 'full contract' must be included as well as the execution page. The best approach is to send the whole contract which needs to be printed, signed and scanned in full or insert their e-signature at the end of the full electronic version.
    • Property Deeds:

    Most documents looking to create or transfer a legal estate or interest in land must be made by deed (with a few exceptions).

    Deeds must be in writing, signed and delivered. This normally involves signature in the presence of a witness who then confirms the signature.

    Many will argue that the same definitions used for contracts should apply to deeds. However, the Land Registry currently takes a cautious view in this regard. Many are conscious that it is hard to witness and attest an e-signature.

    Further stunting the progression of e-signatures in deeds are lenders, who tend to insist on wet ink signatures on physical copies of the deed.

    Pros and cons:

    In an ever growing digital world, it seems that the positives of e-signatures outweigh the negatives:

    Pros:

    • Time efficient.
    • Usually documents are sent as email attachments or downloads.
    • Signatories too far away from a solicitor's office to come in and sign documents.
    • Transactions usually rest on electronic contracts.
    • Ultimately less costly (consider printing etc).

    Cons:

    • Witnessing signatures is difficult.
    • Fraud is easier.

    Future:

    A consultation by the Land Registry this year tried to settle the issue. It found that while they appreciate the need to embrace e-signatures in the future, they will not go as far as endorsing or accepting them currently. In the meantime, it seems we must abide by current practice, which usually means that deeds, leases and registrable transfers are signed as physical documents, while contracts can be electronically signed.

    It is unlikely that e-signatures will be fully incorporated into the law surrounding all property documents soon, but hopefully this area will be the subject of reform at some point.

    If you would like any advice on any property related matters or transactions, please contact a member of the property team.

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  • 30/10/2017 Exorcising Break Clauses - Tenants beware

    Six of the most common horrors facing tenants exercising break clauses

    With Halloween just around the corner, let’s take the opportunity to expose some of the potential horrors facing tenants who are thinking about exercising a break clause. Below are six of the most common:

    A change of landlord 

    To be valid, a break notice must be served on the current landlord. Land Registry office copies and rent demands can provide some certainty. 

    The right to break the lease is personal to the original tenant

    If a tenant has taken a lease by assignment, they must make sure that the benefit of the break clause has also been assigned. In some cases, this right is granted to the original tenant only. 

    Calculating the break date

    Is the break date set out clearly in the lease? If not, careful calculation might be required to establish exactly when the lease can be terminated (and by association, when the break notice must be served). 

    Onerous break conditions

    The tenant may be required to comply with onerous lease conditions (repair, vacant possession etc.) on the break date. Even more significantly, a tenant may need to comply with some lease conditions on service of the break notice. A tenant must leave enough time to comply with these conditions, otherwise the break notice may be invalid.

    Sub leases

    Has the tenant sub-let the property? If so, the subtenant’s lease may also need to be terminated by the break date. This might require the tenant to serve a landlord’s break notice on the sub-tenant.

    Service of the notice

    There may be onerous conditions relating to the service of the break notice. Is there a minimum notice period? Has the landlord changed address? 

    What a tenant should do:

    If a tenant is thinking about exercising a break clause, they should ensure that they leave enough time to deal with any onerous lease conditions and to serve the break notice in good time. 

    How Howes Percival can help:

    We investigate the terms of the lease, to alert the tenant to any onerous conditions and provide advice on how best to comply with these. 

    We diarise important dates to ensure that notices are served on time. 

    We ensure that the break notice is served on the correct person, at the correct address. 

    For further information, please contact Bill Trow on 01603 580039 or by email to bill.trow@howespercival.com  

    © Howes Percival LLP  Howes Percival LLP is a limited liability partnership registered in England and Wales with registered number OC 322781 and is regulated by the Law Society.

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  • 19/10/2017 Navigating the Litigation Maze: Partnership Disputes

    Our new step-by-step guide helps business partners navigate disputes over the direction of a business.

    The third in our series of FREE helpful flowcharts for Directors and Owner Managers of businesses provides guidance on the best way to manage partnership disputes without damaging the company or dissolving the partnership, showing the route that companies need to take at any stage of a dispute.

    You can download the helpful flowchart here.

    If you would like further information and guidance on supplier contracts and orders, please contact Alison Kirby or Satnam Chayra.

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  • 11/10/2017 The Law of Overages – don’t leave the drafting down to chance

    Landowners are often keen to incorporate an overage agreement when selling land to a developer to make more money from their land, however, a recent court case highlights the need to negotiate these agreements carefully to avoid uncertainty and misinterpretation.

     

    It’s no secret that developing land is often a good way to increase its value; however, not every landowner has the expertise or the finance to carry develop themselves. A developer with this expertise and money is able to buy the land cheaply, carry out the works and sell individual developed units for a significant profit. Landowners may feel they are getting a raw deal in these circumstances; however, there is no need to take on the project in order to benefit from this uplift in value.

    What is an overage agreement?

    An overage agreement requires a developer to make a payment to the original landowner if they secure the grant of planning permission or development on the land within a pre-agreed time period. The landowner can incorporate an overage into a wider deal with a developer, enabling the landowner to claw back some of the increase in value as a result of the development.

    The terms of the agreement are a matter for negotiation between the parties, and the agreement can be as complex or straightforward as the parties wish to make it. Provisions can be included to cover situations where only part of the land is developed, and the parties can agree that the overage provisions will not apply to certain transactions or in certain situations. Although flexible, the overage payment will usually be a percentage of the increase in value of the land as a result of the planning permission or development, and will usually be payable following the subsequent sale of the land. However, whatever has been negotiated, it is important that the agreement is drafted to reflect this.

    Sparks v Biden

    The importance of a carefully drafted agreement was highlighted in the recent case of Sparks v Biden. Mr Sparks owned a bare piece of land and agreed with Mr Biden that if Mr Biden was able to obtain planning permission to develop the land, Mr Biden could purchase the land to do so. Mr Biden successfully obtained planning permission for 8 houses, and purchased the land from Mr Sparks.

    As part of the deal, Mr Biden entered into an overage agreement, whereby Mr Biden would make a payment to Mr Sparks following the sale of the houses he had built on the land. Mr Sparks had assumed that Mr Biden would want to sell the houses as soon as possible after they had been constructed, and there was no clause in the agreement which required Mr Biden to market and sell the properties after completing their construction.

    In an attempt to avoid paying Mr Sparks, Mr Biden moved into one of the houses himself and let the remaining properties on short term rental arrangements. Mr Biden argued that he did not have to pay the overage amount as he had not sold the houses, and that he could delay making the overage payment for as long as he liked, until he eventually sold the houses.

    As the terms were missing from the agreement, Mr Sparks had no choice other than to take Mr Biden to court to get his overage payment. He argued that Mr Biden should be required to market and sell the properties within a “reasonable time” of completing them. Whilst the court is often reluctant to interfere with the terms of a heavily negotiated agreement, in this instance the court agreed with Mr Sparks. It stated that the arrangement did not make business sense unless Mr Biden was required to sell the properties once constructed.

    Lessons to take away

    Although the court stepped in to correct the omission in this case, had the agreement been better drafted, the parties could have avoided court altogether.

    It can be difficult to predict the future, but care should be taken to consider how the parties’ circumstances may change over the life of the agreement, and the agreement should be drafted to take this into account. As well as saving the time and money of court proceedings, a properly negotiated arrangement also provides certainty for the parties.

    If you would like some assistance in negotiating an overage agreement as part of a wider deal, or if you have an existing agreement upon which you would like advice, please contact scott.smith@howespercival.com or another member of our commercial property team.

    © Howes Percival LLP

     

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