Docklands Solicitor
Latest legal news from Docklands Solicitors, Kaslers Solicitors LLP.
Wednesday 29 June 2011
Exercising Break Clauses and the Usual Pitfalls
A break clause in a commercial lease allows either or both parties to end the lease prematurely i.e., prior to the expiration of the term.
There are a number of pitfalls for a tenant in the correct exercise of the break clause.
The clause is usually drafted to stipulate that the tenant can break the lease only if all the covenants under the lease have been complied with. Therefore, the landlord usually insists that the tenant must be in full compliance of the covenants of the lease at the time of exercise of the break clause. This means for example that if the tenant is in breach of the repairing obligation under the lease, the tenant cannot exercise the break clause.
The timing of the notice is another crucial factor in the correct exercise of the break clause. The courts have taken the view that time will be of the essence unless the break clause states otherwise. To this end the landlord may require a strict timetable and a specific method of service of the notice to break the lease.
The break clause usually stipulates that at the time of its exercise the tenant must give vacant possession of the premises. If the tenant is unable to do so, the landlord may insist that the lease has not come to an end. The courts have interpreted “vacant possession” in a narrow sense as “the property was empty of people and that the purchaser was able to assume and enjoy immediate and exclusive possession, occupation and control of it.” This means that the tenant cannot be engaged in repairing the premises after the tenancy has come to an end in accordance with the terms of the break clause.
Alireza Nurbakhsh: Commercial Property Solicitor 0845 270 2511
Labels: break clauses, business tenancies, meaning of "vacant possession"., valid exercise of break clause in commercial lease
Tuesday 28 June 2011
Please help if you can . . .
Please support Robert by donating http://tinyurl.com/6ggad6r
Donation target - £4,000. Currently at £1,912.50 the Bannatyne (Dragons Den doubles my total). In reality I am nearly there.
Donation target - £4,000. Currently at £1,912.50 the Bannatyne (Dragons Den doubles my total). In reality I am nearly there.
Sunday 26 June 2011
Buyers Should Inspect Premises Prior to the Exchange
It is not an uncommon problem for the seller to remove fixtures and fittings of a property and sell the property “in its present state and condition.” There have been cases where the seller removed all the light bulbs or even the waste disposal unit leaving no waste pipe in its place, so when the buyer turned on the tap in the kitchen the water came out on the floor!
Leaving the issue of fraud aside, the moral of such cases for the buyer is always to inspect the property immediately prior to the exchange of contracts and make sure that all fixtures and fittings are still in the property and the property is not damaged.
The importance of inspection immediately before the exchange became paramount in a recent court case. The buyer inspected the property over many hours and two weeks before the exchange took place. However, between then and the date of exchange thieves stole many of the fixtures causing about £300,000 damage.
The question before the court was who was liable for the loss: the buyer or the seller? The judge ruled that in the absence of fraud the contract placed the risk on the buyer. The buyer should have inspected the property immediately before the exchange to ensure all is in order.
Labels: Exchange of Contracts, Fittings and Fixtures, Inspection
Thursday 23 June 2011
Part 36 Offer – Time Limits
A Part 36 offer is a formal offer made by one party to the other ,either before or after proceedings are issued, with a view to settling a dispute. If the offer is accepted, that compromises the dispute. If the offer is declined, it will not be disclosed to the judge until after he has made his decision and then it may carry costs consequences
CPR Part 36 does not allow for a time limit to be set for the acceptance of an offer which purports to be a Part 36 Offer.
An offer to settle which purported to be made under Part 36 of the CPR included reference to the offer “being open” for 21 days from the date of the letter and to the costs effects of a failure to accept the offer within the “relevant period”. Almost a year later the offeree purported to accept the offer.
The Judge found that Part 36 did not allow for a time-limited offer. Offers made under Part 36 remain open for acceptance until withdrawn in writing. However the Judge accepted that the words “open for 21 days” could be read to mean that the offer would not be withdrawn within the 21 days and further they were a warning that after 21 days the offer could be withdrawn.
In this instance the Judge found that the offer had been made under Part 36 and attracted the costs consequences of that rule. However, care should be taken when drafting a Part 36 offer to ensure that the provisions of the rule are correctly applied otherwise the Court may rule that the offer was not made under Part 36 and that the costs benefits do not apply.
Labels: offer, open, Part 36, relevant period, time-limited
Monday 20 June 2011
Setting aside Judgment and dishonesty
An application to set aside judgment was refused by the Court on the grounds that the defendants had given inaccurate and dishonest explanations. The Judge allowed his findings as to dishonesty to cloud his view of the proper approach to the application and did not consider whether the defendant’s had a real prospect of successfully defending the claim.
On Appeal it was held that the judge was not entitled to rely on his finding of dishonesty to refuse the application to set aside. He should have considered whether the defendants had a good chance of successfully defending the claim. No matter how badly behaved the defendants, if their defence had a real prospect of success, judgment should have been set aside.
If thought necessary, the Court could reflect the dishonesty when dealing with costs, but the defendant’s should not be denied the chance of a fair trial.
Labels: defence, dishonesty, real prospect of success, Setting aside judgment
Friday 17 June 2011
Leaseholders Right to Manage
The Commonhold & Leasehold reform Act 2002 established a right for leaseholders to take over the management of their building, subject to meeting certain conditions. In situations where leaseholders or tenants of flats let on long leases are unhappy with how their building is being managed, they, together with their neighbours, may be able to take over the management of their building. In order to make it easier to assess if you and your neighbours are able to take over the management of their building, the Government has launched an online tool called “The Right to Manage Assessment Tool” which provides a simple online questionnaire which breaks down the eligibility criteria by way of a series of yes or no questions. To use the new tool, and see if you could take over the management of your building follow this link: http://righttomanage.cflabs.org.uk
For further information contact our Property Department who will be pleased to assist you.
Labels: Leaseholders, long leases, management, questionnaire
Tuesday 14 June 2011
Inheritance Tax and property valuations
The Revenue are increasing the number of challenges they make on property valuations in the administration of estates. They are concerned that beneficiaries/executors are undervaluing properties to save on Inheritance Tax.
Inheritance Tax is payable on the value of an estate worth over £325,000 at the rate of 40%. Therefore on an estate liable to Inheritance Tax if the property is undervalued by say £20,000 this means the Revenue lose out on £8,000 tax and they are seeking to recover such loses. If an incorrect valuation is submitted the Revenue can also fine the estate as well as claiming the additional tax payable.
Beneficiaries and Executors are therefore advised to get several valuations of the property before submitting the figures to the Revenue to calculate the tax.
Key words
Labels: inheritance tax, Property Valuations
Friday 3 June 2011
Assignment vs. Novation
When a party assigns its rights under a contract (“the assignor”) to a third party, he may do so without the consent of the other parties of the contract. However, the assignor will always remain liable under the original contract. This is another way of saying that with assignments of rights, the obligation under the contract remains with the assignor. For example, if Party A contracts with Party B to sell Party A's car to Party B for £10, Party A can later assign the benefits of the contract - i.e., the right to be paid £10 - to Party C. In such circumstances, C cannot sue B for breach of the terms of the contract between A and B and similarly B cannot sue C if the car turns out to be defective.
Unlike assignment, novation replaces the original party with a new party and therefore for a valid novation (a) all parties must assent to novation, (b) there must be previously valid contract, (c) the duties provided for in the contract be extinguished immediately, and (d) a new, enforceable contract need be created.
Not many businessmen appreciate the legal distinction between assignment and novation but it proved fatal in a recent case.
Mr Hall who operated through a limited company entered into an agency agreement with Mr Barnett who was trading as a partnership. Three years later, Mr Barnett for tax reasons, incorporated a company and continued its business through the newly formed company.
Mr Barnett then sent formal notices to all his clients and asked his clients to pay cheques out the company and he also changed the relevant stationary accordingly to show the proper name of the company. Mr Hall continued to pay Mr Barnett’s invoices under the agency agreement to the newly formed company of Mr Barnett.
Two years later Mr Hall found out that Mr Barnett was promoting his own products and sent a notice to Mr Barnett for breach of the agency agreement and gave him three months notice of termination. Mr Barnett then started a claim against Mr Hall for damages for compensation under the agency agreement in the sum of £190,000. The claimant in this case was Mr Barnett’s company.
In the hearing the judge agreed with Mr Hall that Mr Barnett has no standing to bring a claim, as Mr Barnett’s company was never the beneficiary under the Agency Agreement. The judge ruled although the benefit of Mr Barnett’s partnership was assigned to Mr Barnett’s company, the liability under the agency agreement still remained with Mr Barnett’s partnership.
In respect of the agency agreement, Mr Barnett should have substituted his partnership with his company by means of a novation agreement between three legal entities, Mr Barnett’s partnership, Mr Barnett’s company and Mr Hall’s company. Mr Hall’s consent would have been necessary for any novation agreement.
Labels: Assignment of Rights, Benefit under a Contract, Novation Agreement, Obligation under a Contract
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