Jeremy’s Jottings – Like London Buses

A little bit like London buses you wait for ages and then two pieces of legislation come along one after the other, both of which may have a significant impact on the direction of travel.

MEES is the acronym for the Minimum Energy Efficiency Standard. Introduced under the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 I’ve no doubt that we’re going to hear a lot more about these in the next few years. Why? Well, from 1st April 2018 it will not be lawful to grant or renew existing leases of substandard commercial buildings until either sufficient energy efficiency improvements have been made or landlords can show that either MEES do not apply or that they fall within an exemption. In April 2023, the requirement (subject to some exemptions) will be extended to all leased buildings. For the purposes of the Regulations “substandard” means buildings that have an Energy Performance Certificate rating of F or G.

Is it something to be concerned about? For a number of reasons, yes, not least of which is that from the way in which the Regulations have been drafted, it would seem the intention is that landlords are expected to meet the cost of seeking to improve the energy performance of non-residential premises from their own resources. Despite coming into force in less than three years time clarification is awaited upon this and other aspects.

I think I should make it clear that MEES applies to residential property. Please be-aware the Regulations for residential property are though different to those for non-residential. If you’re a residential landlord and are not aware of MEES but believe they may apply I strongly recommend you seek professional advice.

As to the second piece of legislation which may impact on the direction of travel there is the Heat Network (Metering and Billing) Regulations 2014. In summary these apply to all businesses and individuals that supply and charge for heating, cooling or hot water via a liquid distribution system. The deadline for compliance is 31st December 2015. If you believe the Regs may apply I believe you may find www.gov.uk/heat-networks beneficial.

As an individual I’m all for recycling, saving energy, taking only photographs and leaving only footprints etc. But, at this stage the regulations, appear to me to be bureaucracy gone mad. As an example, does the Government think that such regulations are going to change mind-sets when you still have tenants who open windows rather than turn down (or off) a central heating system. And this isn’t a rarity, 4 tenants come to mind without having to think about it!

Jeremy’s jottings do not constitute advice on any specific matter. Lawson Commercial recommends you seek professional advice before taking action. No liability can be accepted by us for any action taken or not taken as a result of the jottings.

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Jeremy’s Jottings

If its too good to be true…… You are no doubt familiar with “if it’s too good to be true it probably is”. Earlier this year a client took a lease of retail accommodation. Despite being advised to the contrary, the client decided to take-up an offer of very competitively priced conveyancing that was too good to be true. Due to a change of circumstances the client now needs to assign the lease. However, this is drafted in such a way as to significantly limit the use of the property. The landlord would be within its rights to refuse the request for an assignment unless the use remains the same. Alternatively the landlord could hold the tenant to ransom for a change of use. Several weeks have been lost as a consequence and its inevitable more time will have to be spent to resolve the problem. To put this into context if the client had been prepared to spend an additional £150, possibly £200 this shouldn’t have happened. AND there’s more….. It’s come to light that when the client took the lease there were no pre-contract enquiries. The client is now trying to answer around 30 pages of questions quite a few of which there’s little prospect of being able to give an answer. The assignment hasn’t yet been completed. On this occasion it looks as though the client may be lucky. In this instance there’s no doubt that if it’s too good to be true it probably is. Whether a landlord or a tenant, a large or small business, looking to take occupation of your 100th or 1st business premises I wouldn’t expect you to know what you should consider, things you should look for, understand some of the legal jargon or to necessarily be aware of the long term liabilities you might be entering into. If you have doubts or concerns and feel that free no obligation advice may be beneficial by all means give me a call to arrange an appointment. Jeremy’s jottings do not constitute advice on any specific matter. Lawson Commercial recommends you seek professional advice before taking action. No liability can be accepted by us for any action taken or not taken as a result of the jottings.

Food For Thought

Despite the title this jotting isn’t anything about recipes or cooking but hopefully may make you think about the opportunity to make savings. On being instructed to manage a property all too often I’ve been assured by the client everything is fine, straightforward, and there’s nothing to worry about. But, on commencement of management this has proven to be far from the case. So, whenever instructed, whatever the property I insist upon undertaking due diligence. In some instances this can take just a couple of days, in others collation of all relevant data and working out how it all fits together can take months.

Due diligence can take many forms. These include tenure, facilities, service charges and financial. It’s the financial aspect I touch upon here. I’m currently undertaking financial due diligence on commercial premises. This has highlighted the landlord hasn’t been reimbursed the insurance premium by the tenant for a number of years. In similar vein the process has identified incorrect billing for water going back many years. How or why this arose is lost due to the passage of time. The outcome is a £750 year on year saving. When reimbursed the landlord should be around £10,000 better-off.

Circumstances such as the above aren’t freak one-offs. Just the other day I was asked about securing reimbursement of a long outstanding insurance premium from a tenant. In this instance it’s only around £200. Just think what you could do with in effect a £200 windfall. And, it’s not just about rent and insurance. There are many opportunities to make savings. For instance, what standing charge do you pay for gas and electricity if you have vacant property? An example from inspecting a property just this morning where I noted maize growing in a gutter. Whilst it may cost to have it removed now how much is the property owner going to save in the long term by reducing the risk of water over-flowing the gutter possibly leading to deterioration of decoration, bargeboards and possibility brickwork?

I could go on to mention a £3,000 annual rates saving. I’m not going to as hopefully the above has left you with the appetite to take the opportunity of seeing and making savings for yourself. If you’re not sure and believe we may be able to assist whether you’re a Landlord or a Tenant by all means contact me for free no-obligation advice. You never know what you might save!

Jeremy’s jottings do not constitute advice on any specific matter. Lawson Commercial recommends you seek professional advice before taking action. No liability can be accepted by us for any action taken or not taken as a result of the jottings.

Jeremy’s Jottings

The energy game changer.

During my career I have experienced some significant changes to property legislation. Frequently experts have claimed the impact would be the introduction of a two tier market. Inevitably this didn’t turn out to be the case. In previous jottings I have highlighted the introduction of the Energy Act to non-domestic properties In July the Department of Energy & Climate Change issued a consultation on the “Minimum Energy Efficiency Standard Regulations for non-domestic properties in England and Wales” (“MEES”). The consultation document is some 40 pages. Having taken time to consider the document, for the first time in my career, I’m of the view MEES is highly likely to lead to a two tier market. On this occasion the experts, at present, are silent.

In addition to being of the view MEES is highly likely to lead to a two tier market, dependent upon the economic cycle between 2018 and 2023, MEES has the potential to significantly impact upon the construction industry. Publication of MEES is anticipated early in 2015. An editorial I have seen suggested that if publication is delayed until after the election, dependent upon the make-up of the new government, the Regulations might be scrapped along with other “Green” initiatives.

Due to the relatively short timescale prior to implementation I am of the view it is likely to be better planning sooner rather than later. In my naivety I had assumed MEES was only to apply to lettings after 2018. For this reason it came as a surprise to find that Government is proposing a backstop date of April 2023 by which time all tenanted commercial property would have to be compliant. From the Energy Act I had understood MEES was to apply to the sale of non-domestic property. This does not appear to be the case. In essence, by introducing MEES, the Government is proposing to outlaw lettings of commercial properties with an energy performance certificate (EPC) rating of F or G from 1st April 2018.

Government believes this may affect as many as 18% of non-domestic property. Having said this there are an array of proposed exemptions. The consultation document is readily readable and I encourage you to do so. The document is at www.gov.uk/government/consultations/private-rented-sector-energy-efficiency-regulations-non-domestic. The consultation closes 11.45 p.m. Tuesday 2nd September.

In the meantime I leave you with the following questions: Green Deal finance is not yet available for commercial properties. Government’s expectation is that finance providers will come forward to meet demand. If you are a landlord would you be willing to fund improvements for no commercial return? The obligation to undertake work to improve energy performance rests with the landlord. If you’re a tenant how are you going to feel about the disruption whilst work is undertaken? Whether you are a landlord or a tenant how are the Regulations to interact with the security of tenure provisions of the Landlord & Tenant act 1954 Part II (as amended)?

If your property has not already got an EPC should you seek one now or is this an instance of ignorance may be bliss? To achieve UK’s legislative targets, CO2 emissions from all buildings must be close to zero by 2050. This implies in the longer term buildings will need to reach energy efficiency standards of close to an A EPC rating. How long will it be before the Government proposes to outlaw lettings of commercial properties with an energy performance certificate rating of say C, D or E? If you have proposals to improve and or refurbish your portfolio does it make economic sense to consider this now?

I could go on – when you read the consultation I think you’ll see why. It’s the intention to update clients as MEES become clear. If you would like to be included if you let me have your email address I will be happy to do so. In the meantime, if you would like free no obligation advice regarding your portfolio by all means give me a call to arrange an appointment.

Jeremy’s jottings do not constitute advice on any specific matter. Lawson Commercial recommends you seek professional advice before taking action. No liability can be accepted by us for any action taken or not taken as a result of the jottings.

Jeremy’s Jottings

When working in the City of London I was privileged to be responsible for the asset management of high value buildings. Prior to undertaking any work contractors would be required to make available their health & safety policy, method statements, details of accident records and insurance. If a contractor claimed an accident free record in the previous three years they weren’t considered any further. When work was in hand contractors were subject to random inspections to ensure compliance with terms and conditions and health & safety.

So, one sunny day I was in the office, the windows were open, I had heard a number of emergency sirens (but this want unusual) and shortly afterward I began to wonder why the air ambulance was buzzing around. There were six telephones in the office and all started to ring within a few seconds of each other. It was a member of the facilities team who worked for me who thought I should know an employee of a contractor had fallen off a roof whilst carrying a bucket of hot tar. The tar bucket missed the employee and bouncing off a couple of walls on the way down probably saved the employee’s life – his days of working in the building trade were though at an end.

Being able to provide the Health & Safety Executive with method statements, Health & Safety policies and demonstrate reasonable precautions had been taken when engaging the contractor meant my employer was found to be in the clear. The HSE didn’t prosecute the contractor, but the investigation lasted around 6 months, the contractor lost work and none of this did anything for the contractor’s reputation. With the aid of crutches and something like of 21/2 years later the employee had a degree of mobility.

To my mind Health & Safety is too often used as an excuse either not to do something or to be overly cautious. On the other hand when inspecting property the number of tenants unaware of say the Regulatory Reform (Fire Safety) Order 2005 bearing in mind this is now 10 years old is truly unbelievable – and it’s not just the fire regulations I could list many others. If you’re not aware or aren’t sure where to begin then I find the HSE website can be a good starting point. In addition why not look around and address the simple obvious things like the files on the floor which people have a habit of tripping over or say make sure the fire exits aren’t obstructed before……oh too late.

Jeremy’s jottings do not constitute advice on any specific matter. Lawson Commercial recommends you seek professional advice before taking action. No liability can be accepted by us for any action taken or not taken as a result of the jottings.

Jeremy’s Jottings

Easy come easy go. I hope the following two examples give food for thought.

If my car goes wrong I take it to a garage to be repaired. If say I want a website then I will go to someone with knowledge and understanding of building and maintaining websites.  So, why should I expect someone whose business is say website design be expected to know land law, understand building construction and have the contacts to be able to service and maintain plant and machinery and run their business. From the number of calls we receive where tenants seek clarification as to rights and responsibilities this is a common problem. Is there an answer?

For in excess of 10 years I managed (hands-on and strategically) light industrial premises of up to 10,000 sq. ft. (929 sq. m. approx.). All tenancies were by way of a licence with one month’s rent deposit and rent paid monthly in advance. There were no references taken, if someone liked the look of accommodation and they seemed genuine as long as they had the money they could sign the 3 page licence there and then. The tenant’s responsibilities were to keep clean, pay the rates and meet the cost of electricity and gas. The landlord funded everything else via the service charge. If a tenant didn’t pay the rent and or misbehaved he/she knew the consequences. At times getting the rent could be difficult but tenant’s knew if they genuinely fell on hard times if they were honest with us we would try and find ways to get them through.

The tenant was able to concentrate on running its business. He / she knew that if there was a problem with their property all they had to do was make a single call and someone would respond.

Was the 54 Act relevant? In all the years I was associated with something in the order of 100 units at no stage did any tenant seek to claim the rights available to them under the Landlord & Tenant Act 1954. I suggest that speaks for itself.

I was contacted the other day by a tenant via email informing me that a smoke detector had gone wrong. As the tenant was responsible for all repairs under the terms of his lease he had to attend to the problem. I wonder how much time he spent in getting an engineer to attend and how much this cost him in lost profit? If the alarm had been the landlord’s responsibility it might have taken me 5 minutes to give an instruction plus a couple of minutes to process the invoice when it came to hand. I suspect the latter option would have been the more cost effective for the tenant. There would have been no cost to the landlord, this would have been factored into the service charge. Further by adopting a model along these lines the landlord has control over the situation as to what is undertaken and by whom.

In the USA, Canada and some European countries the landlord and tenant relationship is far more one of partnership. A model along these lines requires greater sharing of the risk. But if there is an enhanced return does this really matter?

Jeremy’s jottings do not constitute advice on any specific matter.  Lawson Commercial recommends you seek professional advice before taking action.  No liability can be accepted by us for any action taken or not taken as a result of the jottings.

Jeremy’s Jottings

Going back to the days of typewriters a lease was probably around 20 pages. Text would be in Times Roman 12 point or similar. You could probably read it in 15 minutes and be satisfied it was comprehensive.

At random I have just looked at a lease dating from 2012 and this is 40 pages long. A lease of 50 pages is by no means uncommon.

I have nothing against a lease of 50 or so pages. But if say the telephone rings or I am distracted in some other way for safety’s sake it’s not uncommon for me to have to start again. When possible to avoid this leases are now bedtime reading. You can probably imagine that goes down well.

As leases have grown in size so, in my view, they have become increasingly difficult to understand. If I’m of this view how is a tenant, say the proprietor of a café, supposed to be able to understand such a document. And if it’s not easily understandable how can he / she be expected to comply without having to engage professionals to interpret such documentation? My next jotting returns to this theme.

As something of a tangent one thing we’ve noticed is that as a combination of increased size and word processing it’s not unusual for terms to disappear, become accidentally deleted!

Are leases of today more or less adequate than in times gone by? For me a key factor is inspection. I was taught to walk round a property noting and taking as many photographs as possible. If two of you can do this all the better. Why? Well, when I inspect something I focus on certain elements. Another person will focus on other elements. If you are able to persuade your solicitor to walk around all the better. He or she will almost certainly see things from another dimension. With this level of focus so I believe you are likely to be able to determine if those 50 or so pages cover all the aspects they really should.

Next jotting – Is the Landlord & Tenant Act 1954 still relevant at the age of 60??

Jeremy’s jottings do not constitute advice on any specific matter. Lawson Commercial recommends you seek professional advice before taking action. No liability can be accepted by us for any action taken or not taken as a result of the jottings.

Jeremy’s Jottings

Expecting the unexpected.

I am used to expecting the unexpected. Storm damage, burst pipes, personal injury claims. But, once in a while there are relatively large scale events which still make me draw breath. First hand examples include contractors falling from a building, fire, flood and on one occasion closing the South Circular Road when scaffolding collapsed.

On encountering such circumstances my role is to ensure property is fit for re-occupation as soon as possible thereafter. What I have seen and quickly learnt is that businesses directly affected by such events struggle to recover and fail from a significant incident or crisis. A crisis need not be as a result of say the damage it could be an incident such as IT failure.

Whatever the event, successful recovery depends not only on the provision of insurance (if available) but also on a prompt and well-executed response. Time is of the essence and this is where a Business Continuity Plan (BCP) helps to avoid delay, confusion and maximises resources.

BCP’s need not be complicated. As an example if you had to contact say 25 staff how long would this take? Should other matters take priority whilst doing so? The answer is probably yes. A simple practical solution I’ve experienced in a number of organisations is cascading information. Who contacts who is predetermined based upon the business organogram with no one person contacting more than 5 people.

A plan may also deal with areas such as:

Staffing numbers dependent upon the situation including arrangements for remote working or relocating.

Communication with staff, customers, suppliers, stakeholders and the press after the event.

Telephone, email, website, post, electronic files and documents storage / retrieval.

Damage assessment and salvage from the premises, as well as its ongoing security.

Which team members are responsible for actioning the specific aspects of the plan.

Business Continuity Plans can be as large or small as complex or simple as you consider necessary. They do though need to be living documents, if possible rehearsed. A full scale exercise isn’t essential. Just consider something along the lines of what if the internet and email were unavailable for a period of time? How would you / your business fair? I suggest it’s seriously worth thinking about.

I sincerely hope the unexpected doesn’t happen, but if it does, perhaps you will have a plan so that it’s expected.

Jeremy’s jottings do not constitute advice on any specific matter. The information is provided for the purposes of general information and interest. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements. It does not constitute advice and does not provide a substitute for it. No liability can be accepted by Lawson Commercial for any action taken or not taken as a result of the jottings.

Jeremy’s Jottings

When I began my career life was so simple. An average lease was around 20 pages long, I used to know all my tenants and if a tenant couldn’t be coaxed into clearing arrears an informal visit from the bailiff would usually lead to monies becoming available.

Now as a rule leases are at least 50% longer, I don’t know all my tenants and from April 2014 the right to recover arrears of rent for commercial premises is to be replaced with Commercial Rent Arrears Recovery (CRAR).

I have already mentioned one of the key points of CRAR in that it only applies to rent arrears due under lease of commercial premises. CRAR cannot be used for premises that are either occupied or let as a dwelling, which may include premises in mixed use.

CRAR will only apply to a “tenancy” as evidenced in writing. As it appears extremely rare to come across tenancies which are not in writing this would not appear to be an issue.

CRAR will only be available in respect of arrears of “basic” rent, together with VAT and interest on the basic rent. I have to admit I am very surprised to find and consider it illogical that CRAR will not be available for service charge arrears, insurance charges or rates even if these sums are reserved as “rent” in a lease. This raises the question where does this leave inclusive rents?

Something I find really strange, if not baffling, is that landlords will be required to serve a “notice of enforcement” on the tenant before sending in enforcement agents. Seven clear days notice will need to be given. Landords will be able to apply to a court to ask that the notice period is reduced if they believe that there is a serious risk of tenants removing the goods. It’s going to be interesting to see how many applications are made asking that the notice period is reduced and how the courts will consider such matters. With the element of surprised lost how many times are enforcement agents going to be instructed to attend only to discover the tenant has either moved all his goods of value or disappeared altogether?

The final key change is that only an enforcement agent authorised in writing by the landlord can seize goods, landlords themselves will no longer be able to carry out the distraint.

Where does all of this leave us? If nothing else I suggest CRAR is likely to lead to landlords increasingly demanding rent deposits and for those deposits to cover service charge arrears, insurance rent and rates for up to 6 months. I also suggest landlords are increasingly going to demand more than one personal guarantor.

A positive or retrograde step toward the age old problem of recovering arrears – I leave you to decide. Is CRAR a positive move for prospective tenants and commercial lettings generally – for the moment I should like to reserve judgement

Jeremy’s jottings do not constitute advice on any specific matter. The information is provided for the purposes of general information and interest. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it. No liability can be accepted by Lawson Commercial for any action taken or not taken as a result of the jottings.

Jeremy’s Jottings

When buying or leasing property how many times and how long do you spend looking around and asking questions before committing yourself? From my experience prospective tenants or purchasers come to a decision within minutes of walking over the threshold. There is nothing necessarily wrong in this. I do though suggest there are a considerable number of questions you should be asking. Just some you may wish to consider are:

  • What are the physical boundaries to the property and are these the same shown on the  title deeds / lease plan?
  • You may think that in today’s technological world of course drawings will accord with  the physical boundaries. This is by no means the case. We were recently asked to value a  property with a view to putting it up for sale. I don’t know if this was by chance or not  but unusually a title plan was provided. The boundaries of the property and the title  bear little relation to each other.
  • Look to see if a third party has a right to pass across the property or indeed if there is a right to cross over neighbouring properties. This may impact on a property’s value and have privacy implications.
  • What is the overall state of repair externally and internally including items such as the windows, the fixed electrical system and the boiler? How much is it going to cost to bring the property to a condition where you are happy and in compliance with any lease terms? If there are repairs and decoration you can’t do, do you know someone who can?
  • If a property is leasehold:
  1.  Is there a service charge? What does the service charge cover and is it value for money?
  2. What are the landlord’s fixtures and fittings and are these documented?
  3. If the landlord is insuring the property and has a right to recover the premium is the cover reasonable and on what basis is the premium apportioned?
  4. What is the user covenant? If restrictive might this limit the opportunity to assign at a later date?
  5. If everything goes wrong can you afford to meet all outgoings until the lease can be broken?
  • Is the property assessed for rates? If so is the assessment reasonable and is this likely to rise or fall at the next revaluation?
  • What is the planning consent for the property? Does the consent have conditions such as times of operation?

The above should not by any means be considered as exhaustive. You can no doubt think of many more. If you read my last jotting I suggest you might wish to consider just one more question. Is this the time to spend to save?

Next jotting – Commercial Rent Arrears Recovery and could it effect you?

Jeremy’s jottings do not constitute advice on any specific matter. Lawson Commercial recommends you seek professional advice before taking action. No liability can be accepted by us for any action taken or not taken as a result of the jottings.