February

Lease Renewal
Commercial lease renewal procedures under the Landlord and Tenant Act 1954 were brought within the Civil Procedure Rules in October 2001.

This has forced a new approach upon both landlords and tenants in making Court applications under the 1954 Act. It is not acceptable under the Court's case management powers to allow these applications simply to lie dormant. The rules have been tightened to being them into line with other forms of litigation. For example, whilst either party can apply for and will usually be given a 3 month stay of proceedings to allow negotiations to take place further extensions will require the formal consent of the Court. Such consent is not necessarily a foregone conclusion.

Furthermore, the filing of evidence and the timing of the disclosure of it will be much stricter. Evidence will need to be exchanged usually within 14 days of the tenant indicating his desire to contest the terms proposed by the landlord. This evidence does not have to be fully comprehensive but will need to be sufficient to allow the Court to decide whether additional directions and/or evidence will be required.

Whilst the new rules are still being tested, what is clear is that both the landlord and tenant must be able to substantiate their proposed rent/interim rent/lease terms at a much earlier stage then before. The earlier that the parties instruct their surveyors the better!!

January

Financial Planning
With the start of a new year there is no better time to follow Scott Pheby's Top Ten Tips for Financial Health:-

1. Embrace the internet - with lower overheads the internet can offer some of the best banking and deals
2. Review your mortgage - almost anyone paying standard variable rate can save money by switching to a fixed rate or discounted or capped deal but avoid lock - in clause
3. Switch credit cards - if you are paying through the nose for credit, transfer your balance and cash in on preferential rates
4. Make a will - if you want to make sure your loved ones do not lose out if you die, write a will.
5. Review your life cover - financial experts recommend that you should have at least 12 times your annual income to cover the needs of your family if you die suddenly. Prices have fallen sharply so it's time to look for the best deal.
6. Shop around for car buildings and contents insurance - never renew your cover without checking the competition's rates first particularly if you insure buildings and contents through your mortgage lender
7. Start regular savings - if you do not already save, start feeding money into a savings account (for short term emergencies) or the stock market through a unit trust (for longer term needs)
8. Confront your debt - unopened bills will not disappear. If you cannot pay, call your credit provider and explain. They will prefer some payment to none at all. If you can only afford one payment, your mortgage should be your priority. Avoid consolidation loans which roll all your debts into one. These usually have high rates of interest and hefty fees.
9. Review your investments - many people still have PEP's running. Although no new investments are allowed, it is important not to leave savings languishing in poor performing funds. But make sure the performance merits the trouble and cost of changing.
10. Use tax - free allowances - married couples benefit from special rules on IHT (inheritance tax) and CGT (capital gains tax). Make sure both of your allowances are used each year when disposing of assets.

Contact us if you want an estimate of the legal costs of remortgaging or making a will.

December

Business law - Minutes matter
England is probably amongst the cheapest and easiest jurisdictions in the world in which to set up a limited liability company. An off the shelf private company can now be purchased for around £100 and provided that you appoint another person or corporate entity as secretary you can be the sole shareholder and director. With increasing talk of world recession and economic slowdown the concept of limited liability seems extremely attractive particularly when compared with sole trader status or a partnership.

However, such flexibility may come at a price. Under the Company Directors Disqualification Rules some 15,000 claims were brought by the state against directors last year for wrongdoing and this figure is likely to be higher in 2003.

Also, the English Courts take a dim view of those who don't comply with the stringent Companies Acts requirements for the day to day conduct of a limited liability company. In one case a director fixed a severance package for himself of £100,000 when he left the company. The company got into financial difficulties and the director paid himself the severance package. However, because the fixing of the severance package was not properly minuted in the company's records the court ordered that the money should be repaid for the benefit of all the company's creditors even though the director was the owner of the whole of the company's share capital.

So remember, keeping the books and records in order is as vital for your business as it is for a publicly quoted company.

November

Residential and Commercial Property - Contamination
In June 2001, the Law Society issued guidance to solicitors in England and Wales about the steps to be taken to warn clients about the potential hazards of buying or leasing land which could be contaminated. Until then it had been assumed that environmental investigations were only necessary for commercial or industrial transactions but as the relevant part of the 1990 Environmental Protection Act has now been brought into force it is clear that in commercial cases and in residential cases (if contamination is considered likely to be a risk) solicitors should make enquiries of statutory or regulatory bodies and undertake a full site investigation. This will mean obtaining a site report from a commercial company and depending upon the outcome of that report solicitors have to consider whether advising that insurance be taken out or even that clients should withdraw altogether !

Over the past 12 months we have increasingly been obtaining such site reports and have found that they are inexpensive (£39 for a residential report and £70 for a commercial report) and can provide information about wider environmental factors such as coal mining, subsidence, radon gas and (particularly relevant considering the problems at end of last year) flood risk.

The insurance market in this area is likely to grow rapidly and it will become commonplace for mortgage lenders to insist that environmental liability policies are taken out in appropriate cases (eg redeveloped "brown field" land) to cover purchasers' potential liability for clean up costs.

It is possible to obtain a site report in about 4 or 5 days and we would strongly recommend that, where relevant, clients consider carrying out this sort of search as early in the transaction as possible - in some cases even before an offer is made.

If you would like more details please contact us

October

Litigation
If the UK economy does go into recession, there is likely to be a sharp increase in the number of bankruptcies, liquidations and, of course, litigation in general.

However, don't fall into the trap of seeing litigation simply as an aggressive option to be pursued to obtain a tactical advantage over your opponent as in the US, for example. Since the last recession the Civil Procedures Rules have taken effect and have underlined the importance of achieving the so called "overriding objective" which means that as far as practicable the courts are to deal with cases justly.

Judges are to actively manage cases and they must:-

• ensure the parties are on an equal footing
• save expense
• deal with cases in ways which are "proportionate" to the money involved; their importance and complexity
• encourage parties to co-operate in the conduct of the proceedings
• help parties to settle the whole or part of a case and to use Alternative Dispute Resolution
• fix timetables and ensure compliance so that the case proceeds quickly and efficiently

The overall effect is that those litigants who say "see you in court" may be surprised by quite how quickly this occurs in practice.

September

Commercial Property - Service Charges
We can hardly believe it but yes there has been a recent case which was decided in the favour of the tenants of a commercial building when it came to the knotty question of whether landlords can always recover service charges.

Briefly, a building was in good condition but the landlord wanted to "rebrand and refurbish" for £2.1 million now and £3.2 million over the next 20 years. There was no history of serious breakdowns in the services which were in good condition including the air conditioning. As is very common the tenants were unhappy because they all had leases that ended no later than 2006.

In what is being seen as a landmark decision by commentators the proposed £2.1m bill was reduced to £300,000 by the court which placed great reliance on the length of the remainder of the lease terms saying that the landlord cannot overlook the fact that the tenants only had a "limited interest". If he wanted to carry out repairs which extended beyond those for which the tenants could fairly be expected to pay then he had to pay for them himself !!

This is really important because

• landlords must look at refurbishment from the perspective of a reasonable tenant
• tenants cannot be expected to pay for wholesale refurbishment for which they will see no benefit in the life of their lease
• landlords will need to justify refurbishment works with detailed reports from independent professional advisers who look at the length and terms of the tenants leases; maintenance records for plant and machinery and whether there are cheaper alternatives

So if you have been hit by a large service charge demand which you think is unreasonable the law may protect you