Trick or treat! 5 property issues that haunted lawyers in 2015!

The experts

James Styles, real estate consultant at Stephenson Harwood

Ben Stansfield, environment and planning partner at Stephenson Harwood

Miri Stickland, property business support lawyer at Forsters

Brie Stevens-Hoare QC, barrister and mediator at Hardwicke

Joanna Bhatia, solicitor in the Lexis®PSL property team

What legal ghost from the past is still haunting you and just won’t go away?

James Styles: My ‘trick or treat’ topic would be exclusivity agreements—where sellers give buyers a window of time to do their due diligence, during which time the seller won’t negotiate with anyone else.

Commercially, exclusivity agreements sound like a no-brainer and should be easy to document. In reality, this is a trick, as sellers and buyers both want, and think they are getting, different things. Sellers think the buyer will definitely buy unless they discover something so fundamental that the property is unsellable (which they’re confident there won’t be because they’re sure their lawyers did a great job when they bought the property, right?). Buyers think they have a definite right to buy the property if they want to, but don’t want to be under any obligation to do so (because while the property looks good they haven’t decided whether they want to buy or if they’re really happy with the eye-watering price that they agreed to secure the deal). Therefore, in reality there is no meeting of minds.

Explaining to the parties that, instead of killing all the goodwill and wasting vast amounts of time (and money), the best thing to do is to simply set a tight timetable and get on with it is a treat. The cherry on the top is getting to an actual exchange in less time than it would have taken to agree the exclusivity.

(Editor’s note: For some further reading, check out our earlier blog post “Lock-out Agreements & Exclusivity - 6 key drafting points“)

Ben Stansfield: My ‘trick or treat’ topic is permitted development rights (PDRs)—the ability to undertake development with the express grant of planning permission from the local planning authority.

PDRs demonstrate just how political town and country planning really is. PDRs change frequently—I can’t think of any other statutory instrument which has been amended as often in the past five years. The trick posed by PDRs is the uncertainty surrounding them and the frustration that commercial developers have when trying to rely upon them. A few years ago, changing the use of a building from office to residential use became a PDR. There was a great deal of excitement in the market, until developers saw the residential use had to have ‘begun’ before the end of May 2016. The works to change the use did not need to have begun (like implementing a planning permission), but the use needed to have started ie someone had to be living there, eating rich tea biscuits and making cups of tea.

Fortunately, the political nature of PDRs means that changes can be effected speedily—earlier this month, the Housing and Planning Minister, Brandon Lewis, announced that office to residential changes become permanent PDRs and my ‘tea and biscuits’ test will never be tested. Hurrah for common sense. In addition, the cherry on the top with PDRs, is that there will now be a right to demolish offices to bring forward residential uses—no need to work with the constraints of a 1960s office block any longer.

(Editor’s note: For some further reading about the office to resit PDRs, check out our earlier blog post “It’s “office”ial! Office to resi permitted development rights here to stay“)

Miri Stickland: Although it is not entirely specific to property, I would say one of the key concerns is the sophisticated fraudulent activity that law firms are encountering—requiring further protections and procedures to be put in place at law firm level. The interplay between this and the Land Registry’s push to move to an entirely paperless registration system is an interesting one, with original documents no longer required to be submitted for the bulk of Land Registry applications.

While the Land Registry has already moved to put increased anti-fraud measures in place (such as the free property alert service which allows you to monitor significant activity that may result in a change to the register of up to ten properties) no doubt further steps safeguarding the security of the system will be required on an ongoing basis.

Brie Stevens-Hoare QC: Currently for me the scary bits of the legal framework in which property development takes place are:

• the growing reach of right to buy legislative provision, and

• the disparity between the need for housing that is actually affordable for ordinary working people and the shrinking provision for largely unaffordable ‘affordable housing’

I worry that our amazing vibrant capital city will be changed by too many flat-sized safety deposit boxes and not enough homes for the diversity of its residents.

Joanna Bhatia: One area that certainly puts the shivers up many a property lawyer is the law on former tenant and guarantor liability. The decision in K/S Victoria Street v House of Fraser (Stores Management) Ltd [2011] EWCA Civ 904, [2011] All ER (D) 262 (Jul) provided clarity to some extent, but the decision has affected business, particularly in relation to the assignment of leases between group companies. Unfortunately, while the proposals for The Law Commission’s twelfth programme of law reform suggested addressing the property sector’s concerns in this area, the issue did not make the ‘final cut’ and so is not part of the twelfth programme.’

Interviewed by Nicola Laver.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.