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An update on developments in conveyancing throughout 2017 including:
Summaries of case law, decisions of tribunals, and statutory provisions.
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Contents...
January July
Rights of Way and Commercial Properties................................... 6 Conditional Contracts........................................................................... 44
1. The Overriding Principle.................................................................. 6 Issue 1: What Contractual Terms were there Regarding
2. User Limited to Existing Use at Date of Grant............................... 6 Provision of Information?.................................................................... 44
3. Right to Extinguish or Vary Route................................................... 8 Issue 2. Development Agreement –
3.1 Megaro v Di Popolo Hotels Ltd [2007] EWCA Civ 309............... 8 Right to Rescind if Minimum Price Not Achieved............................ 46
3.2 Hunte v E Bottomley & Sons Ltd [2007] EWCA Civ 1168............ 10 Issue 3: Was the Discount on the Purchase Price
4. Scope of Right of Entry to Carry Out Activities Conditional on the Grant of Planning Permission?.......................... 47
on Servient Land.................................................................................. 11
5. Restricted Hours............................................................................... 12 August
New Money Laundering Regulations & Clients
February who are Not Individuals – Part 1........................................................ 50
User Covenants in Commercial Leases......................................... 14 1. Key definitions.................................................................................. 50
Defining the Permitted User................................................................ 14 Definition of business relationship...................................................... 52
Keep Open Covenants...................................................................... 16 Meaning of beneficial owner: bodies corporate or partnership... 52
Narrow or Wide?.................................................................................. 16 2. Risk assessment by relevant persons............................................. 53
Use Classes........................................................................................... 17 Policies, controls and procedures..................................................... 53
Absolute or Qualified Covenant?..................................................... 17 3. Customer Due Diligence................................................................ 53
Other User Restrictions......................................................................... 19 4. Customer due diligence measures............................................... 55
Don’t Forget The ‘Deeds’................................................................... 19
September
March New Money Laundering Regulations &
Control of Asbestos Regulations 2012, SI 2012/632................... 22 Clients who are Not Individuals – Part 2......................................... 58
Who the Regulations Apply to........................................................... 22 5. Obligation to apply enhanced customer due diligence........... 58
Duty to manage asbestos in non-domestic premises: art 4........... 22 6. Application of simplified customer due diligence....................... 61
Asbestos Regulations Enforcement................................................... 25 7. Corporate bodies: obligations....................................................... 63
The HSE’s Asbestos Survey Guide, 2012 version............................... 26 8. Reliance............................................................................................ 64
Other Relevant Legislation................................................................. 26
Additional Matters to Consider for Property Lawyers...................... 27 October
Landlord & Tenant Act 1954 – Is Motive Relevant to .............
April Establishing Intention under Possession Ground (f)?................. 66
Side Letter: Lower Rent & Termination Provision.......................... 28 S Franses Ltd v Cavendish Hotel (London) Ltd [2017]
Vivienne Westwood Ltd v Conduit Street Development Ltd EWHC 1670 (QB).................................................................................. 66
[2017] EWHC 350 (Ch)......................................................................... 28 The Leases............................................................................................ 67
The Facts............................................................................................... 28 Unconditional Subjective Intention?................................................. 68
Issue (1): binding compromise of rent review at £125,000?........... 29 Objective Evidence of Intention?..................................................... 69
Issue (2): Penalty? Derogation from Grant?..................................................................... 69
Penalties: Key Legal Principles........................................................... 30 Works Falling Within Right of Entry...................................................... 70
Was the threshold test met? .............................................................. 30 Terms of Landlord Undertaking.......................................................... 70
Was There a Legitimate interest in performance?.......................... 31
Was the Termination Provision Exorbitant or unconscionable?...... 31 November
Conclusion............................................................................................ 31 The Regulatory Reform (Fire Safety) Order 2005......................... 72
Enforcement of the Fire Safety Order............................................... 74
May Examples of Enforcement Action...................................................... 75
Rent Reviews: Miscellaneous Issues................................................ 32 Insurance & Fire Damage................................................................... 76
(1) How Did the Key Assumption of the Hypothetical
Lease Affect the Open Market Value of the Rent?......................... 32 December
(2) Was the Arbitrator’s Award Wrong?............................................ 33 Recent Case on Grant & Exercise of Option................................ 78
(3) Was the Expert’s Certificate Valid?.............................................. 35 TCG Pubs Ltd (in administration) v Master and Wardens or ..........
Governors of the Art or Mystery of the Girdlers of London
June [2017] EWHC 772 (Ch)......................................................................... 78
Disclaimer of a Commercial Lease................................................. 38 The High Court’s Judgment................................................................ 80
Case Law on Disclaimer..................................................................... 38 (1) Could the option be triggered or proffered in a letter?........... 80
Case Concerning Section 315 IA 1986............................................. 39 (2) What was the effect of the 1989 legislation on the
The statutory provisions....................................................................... 40 option clause?..................................................................................... 80
Other Relevant Sections of the 1986 Act.......................................... 40 (3) Was the option letter sufficient to trigger the landlord’s
Submissions on Behalf of Dr Abdulla................................................. 41 rights under the clause?..................................................................... 81
The Court’s Conclusions...................................................................... 41 (4) Was the application letter an effective application
Effect of Disclaimer Not Being Applicable in This Case.................. 42 for licence to assign?.......................................................................... 82
(5) Was there a waiver of the buyback right?................................. 82
Key Lessons to be Learned from this Case....................................... 83
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First published January 2017
Rights of Way and Commercial Properties
1. The Overriding Principle
The scope of a right of way is determined by the construction of the words of

the easement granted or reserved in the context of the deed as a whole, the
surrounding circumstances, and the inferred intentions of the parties to the deed:
Risegold Ltd v Escala Ltd [2009] 1 EGLR 5, CA and Oliver v Symons [2012]
EWCA Civ 267.
Note: Therefore, each of the following cases needs to be considered in the light of
this overriding principle.
2. User Limited to Existing Use at Date of Grant
Newman v Greatorex [2008] EWCA Civ 1318
The respondents owned a covered passage that formed part of their residential
property. The appellant’s property enjoyed a right of way over this passage that was
used to gain access to the rear of his shop.
In 2005, the appellant obtained a liquor licence and converted his property into
a bar.
The right of way was originally reserved by a 1921 conveyance for the benefit of the
seller’s retained land (now owned by the appellants). The right permitted the seller,
successors in title and persons authorised by the current owner to pass and repass
from and to her retained land “as now used by her tenant Edward Collinson…”
At the time, Mr Collinson ran a fishmonger’s shop.
6
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Clearly, the scope of the right was determined solely by the use of the premises by
the tenant at the time of the conveyance.
The Court of Appeal refused to overturn the judge’s conclusion that, on the balance
of probabilities-
• The use of the passageway was limited to Mr Collinsons’ trade customers and
staff for the purpose of gaining access to the back of his shop.
• The passageway had not been used as an entrance or an exit for his
retail customers.
• His retail customers probably used the front entrance to his shop.
• Therefore, the right did not extend to use by his retail customers save in the
case of emergency, such as fire.
3. Right to Extinguish or Vary Route
3.1 Megaro v Di Popolo Hotels Ltd [2007] EWCA Civ 309
A transfer of part granted to the purchaser of a building the right, ‘in the case of
emergency only to cross the roof of the Retained land and to exit to ground level
with the external staircase of [the adjoining building], PROVIDED ALWAYS that the
said roof and external staircase still exist AND ALSO RESERVING to the owner of the
retained land from time to time the right in any event to change the route of the said
emergency exit.’
The servient owner claimed to be entitled to remove the staircase.
The Court of Appeal found that the servient owner did have this right for the
following reasons:
i) The parties to the transfer had contemplated the “obvious possibility” that
the seller might subsequently redevelop the retained land and that if it were
redeveloped, then other emergency arrangements might have to be made.
ii) The words “Provided always that the said roof and external staircase still exist”
were plainly intended to ensure that the right of emergency egress was
granted only for so long as the roof and the external staircase existed. When
those features no longer existed, the right came to an end.
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iii) The servient owner was not obliged to provide a substitute right in
circumstances where the original right has ceased to exist in accordance with
the terms of the provision.
The Court further held that for such time as the right existed, there was the further
qualification that the servient owner could vary that right.
3.2 Hunte v E Bottomley & Sons Ltd [2007] EWCA Civ 1168
The appellant, Bottomley, owned a large industrial complex and granted a lease for
a six-year term with a permitted use as a café.
The estate had northern and southern entrances that were linked by the internal
road. The café was situated just south of the middle of the complex.
The lease conferred on the tenant a right of way with or without vehicles over the
internal road, subject to a proviso that the tenant observed ‘all regulations of the
Landlord for the time being relating to the parking or unloading of vehicles or the
direction of traffic.’
Also, the landlord had covenanted to allow the tenant to enjoy quiet enjoyment.
The landlord sold off land on the south of the complex to a developer, and then
built a wall partitioning the retained northern section from the land transferred to
the developer. This has the effect of preventing anyone from gaining vehicular or
pedestrian access to the café.
The Court of Appeal held that a proviso allowing the landlord to make regulations for
the direction of traffic merely permitted the landlord to decide whether traffic was
to pass over the roadway in a clockwise or anti-clockwise direction. It did not entitle
the landlord to block the roadway and to deny any right of way over it. Moreover, it
did not in any way reduce the scope of the landlord’s covenant for quiet enjoyment,
which had been clearly breached by the blocking of the road.
10
4. Scope of Right of Entry to Carry Out Activities on Servient Land
Risegold Ltd v Escala Ltd [2009] 1 EGLR 5, CA
In a transfer of part of freehold industrial premises, a right of entry had been granted
for the benefit of land now owned by Risegold over adjoining land then owned
by Escala.
Risegold sought a declaration that it was entitled to enter upon the yard of the
adjoining land owned by Escala in exercise of a right of entry for the purpose of
carrying out proposed works of redevelopment, which comprised mainly of the
proposed construction of a multi-storey block on its freehold property in accordance
with a planning permission.
The right was “(exercisable upon prior notice of not less than forty eight hours notice
given to the owners and occupiers of the ...the Adjoining Property”) to …enter
(without vehicles) upon such part of the yard at the rear of [the Adjoining Property]
as is necessary for the purpose of carrying out any maintenance repair rebuilding
or renewal to the Property subject to the minimum disturbance and inconvenience
being caused to the owners and occupiers of the Adjoining Property, and to the
making good forthwith of all damage caused to the Adjoining Property in the
exercise of such right.”
The Court held that ‘rebuilding’, in the context of the grant, was to be given a broad
construction. Therefore, the provision would permit entry onto the Adjoining Property
“in order to preserve existing buildings on the Property, or to pull down the buildings
on the Property and (a) to put up no new buildings in their place, or (b) to put up
buildings similar to the demolished buildings, or (c) to put up different buildings in the
place of the demolished buildings...”
Equally, the proposed works would have constituted ‘renewal’ for the purposes of
the easement.
The exercise of the right was subject to important safeguards to ensure that Escala
was protected from inconvenience, nuisance and damage suffered by it. These
were the ban on vehicles, keeping disturbance and inconvenience to a minimum
and making good any damage forthwith.
11
5. Restricted Hours
Trustees Ltd v Papakyriacou and another [2009] EWCA Civ 1089
The claimants and defendants owned adjoining parcels of land. The defendants
enjoyed a right, exercisable also by their tenants, to use a small loading bay forming
part of the claimant’s land for the benefit of their business premises.
This right was exercisable:
“…only at such times and on such days as shall previously have been approved by
the Vendor the Vendor to be entitled from time to time at its discretion to alter such
times and days PROVIDED ALWAYS that the person exercising such right shall be
entitled to use the loading bay for a minimum of [50%] of the normal working week
and the normal working week shall be defined as between the hours of [9] in the
forenoon and [5] in the afternoon Monday to Friday inclusive.”
Another proviso prevented exercise of the right in such a way as to cause nuisance
or annoyance to the Vendor.
The Vendor was a company called ‘Balcombe’, which at the date of grant owned
the land now belonging to the claimant.
The claimant as ‘servient owner’ complained that the defendants and their tenants
had used the loading bay (i) outside of the prescribed hours and (ii) in a manner that
obstructed access to the entrance to its own land and interfered with its own use of
the bay.
As a result, the claimant imposed more restrictive time conditions for use of the bay,
until the dispute had been resolved; namely between 10.00am to 12 noon and
2.30pm to 4.30pm only.
The claimant then alleged that these time restrictions had been flouted.
The tenants had used the loading bay on occasions without any temporal
restrictions, not pursuant to a right granted to them by their leases, but with the
encouragement or permission of the landlord.
12
The Court of Appeal found that:
(i) The judge had been entitled to find that the defendants had not used the
loading bay outside the prescribed hours; and that, as regards any future use,
they would respect the temporal limitations imposed by servient owners.
(ii) However, the defendants’ tenants had continued to use the loading bay
outside the prescribed hours, with the defendants’ permission.
(iii) Once the respondents received the letter from the servient owner’s Solicitors
restricting the time of operation of the easement, they should have taken
steps to limit their permission to a use within the prescribed hours, but they
did not.
(iv) However, given that the defendants had since informed their tenants that
they were limiting their permission to use the loading bay to the prescribed
hours, the judge had been entitled to refuse to grant an injunction.
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First published February 2017
User Covenants in Commercial Leases
Stephen Desmond, Lecturer
Commercial leases generally contain restrictions on the use of the premises, which in
turn enable landlords to retain a degree of control over the activities carried out by
their tenants.
Tenant user covenants may also be used in order to protect the landlord’s
reversionary interest in the demised premises. In particular, certain uses could
devalue that interest, or depress the level of rent that the landlord could charge the
tenant at the outset of the lease or on rent review.
On the other hand, prospective tenants, assignees or under-tenants would want to

ensure that the permitted user is not so tightly defined that it would adversely affect
the marketability of their leasehold interest or tie them to a particular user that later
becomes unprofitable.
As a result, landlords may find that the imposition of a narrow permitted user clause
makes the property less attractive to prospective tenants and this in turn could
diminish the level of rent that such tenants would be willing to pay. The outcome of
negotiations is usually a compromise between both parties’ interests.
Defining the Permitted User
- A user clause can be stated in positive or negative terms. Contrast clauses

4(12)(a) and 4(19) taken from a lease that formed the subject of the dispute in
Co-operative Insurance Society Limited v Argyll Stores (1997) 3 All ER 297, HL.
Argyll Stores was the tenant of a shop situated in the Hillsborough shopping centre in
Sheffield under a lease demised for the term of 35 years from 4 August 1979.
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15
Clause 4(12)(a) contained a negative user covenant:
“Not to use or suffer to be used the demised premises other than as a retail
store for the sale of food groceries provisions and goods normally sold from
time to time by a retail grocer food supermarkets and food superstores…”
Clause 4(19) was a positive user covenant:
“To keep the demised premises open for retail trade during the usual hours
of business in the locality and the display windows properly dressed in a
suitable manner in keeping with a good class parade of shops.”
Keep Open Covenants
Keep open covenants can be particularly onerous for tenants, especially where the
tenant is trading at a loss from the premises. In particular, if the tenant fails to comply
with such a covenant, it can face a substantial damages award. See e.g. Douglas
Shelf Seven Ltd v Co-Operative Wholesale Society Group & Kwik Save Group, [2007]
CSOH 53 (a Scottish case heard in the Outer House of the Court of Session), where
damages of just under £600,000 were awarded for breach of a keep open covenant
by an anchor tenant.
Narrow or Wide?
A user covenant can also be drafted widely or narrowly.
“Not to use the demised premises otherwise than as offices of Accountants.”

This is a narrowly drawn clause because it limits use to a particular type
of business.
“Not to use the demised premises or any part thereof or suffer the same to be
used other than as offices.” This, by contrast, is a wider provision that does not
refer to one kind of profession or trade.
16
Use Classes
A user covenant can also refer to one or more use classes under the Town and
Country Planning (Use Classes) Order 1987 [‘the 1987 Order’]. For example, the
Permitted User could be Class A2, financial and professional services.
The parties should be aware that each use class has its own specific definition.
Hence, if the Permitted User is to be class A1, this would include any or all of the
following purposes provided the sale, display or service is to visiting members of
the public:
(a) for the retail sale of goods other than hot food,
(b) as a post office,
(c) for the sale of tickets or as a travel agency, and
(d) for the sale of sandwiches or other cold food for consumption off
the premises.
If the permitted user in a lease is Class A1 but the landlord does not want the
premises to be used as funeral directors, then this type of business must be
specifically excluded.
Also, the 1987 Order itself is from time subject to revision – see e.g. The Town and
Country Planning (Use Classes) (Amendment) (England) Order 2015. So, the
permitted user in a lease could be restricted to a particular use class as defined by
the 1987 Order as at the date the lease was granted. The effect of this would be to
disregard any amendments to the Order made after that date.
Absolute or Qualified Covenant?
User covenants are either absolute or qualified.
1. An absolute covenant imposes an absolute restriction on any change of use

during the term. Therefore, with such covenant the landlord retains total
control over the use of the premises and the tenant could only use the
premises for the Permitted User and no other use.
“Not to use the Demised Premises other than for the Permitted User is an
example of such a covenant.”
17
However, such clauses could make it difficult for tenants to assign its interest or to
create a sub-letting, particularly during an economic downturn. However, having a
wider permitted user could mitigate this effect.
2. A qualified covenant is a provision that obliges the tenant to obtain the

landlord’s prior consent to any change in the use of the premises. The lease
will usually stipulate that this consent usually has to be given in writing. Such
clauses would typically state:
“Not without the landlord’s prior written consent to use the demised premises
or suffer the same to be used other than as retail shop.” (Clause A).
However, there is no statutory implication with such covenants that the landlord’s
consent will not be unreasonably withheld or delayed. Consequently, the landlord
has absolute discretion as to whether or not to grant or withhold consent: Guardian
Assurance Co v Gants Hill Holdings (1983) 267 EG 678. That said, courts sometimes
imply a term that a power to withhold approval should be exercised in good
faith and that the approval will not be withheld arbitrarily: Lymington Marina Ltd v
MacNamara [2007] EWCA Civ 151.
3. A fully qualified covenant would include words that require “such consent not
to be unreasonably withheld or delayed”. For example, the clause A above
would read as follows:
“Not without the landlord’s prior written consent (such consent not to be
unreasonably withheld or delayed) to use the demised premises or suffer the
same to be used other than as retail shop.”
While a fully qualified user covenant wrests a degree of control away from the
landlord, it also tends not to depress the level of rents in the way that absolute and
qualified covenants are liable to do. It makes it easier for tenants to find prospective
assignees and undertenants willing to take leasehold interests in the premises.
Also, a tenant can challenge a landlord’s refusal to give consent on grounds of
unreasonableness, which it is unable to do if the lease contains an absolute or
qualified covenant. see Tollbench Ltd v Plymouth City Council (1988) 56 P & CR 194.
Note also section 19(3) Landlord and Tenant Act 1927, which applies to qualified and
fully qualified covenants. It states as follows:
18
“In all leases … containing a covenant condition or agreement against the
alteration of the user of the demised premises, without licence or consent,
such covenant condition or agreement against the user shall, if the
alteration does not involve any structural alteration to the premises, be
deemed, notwithstanding any express provision to the contrary, to be subject
to a proviso that no fine or sum of money in the nature of a fine, whether
by way of increase of rent or otherwise, shall be payable for or in respect of
such licence or consent; but this proviso does not preclude the right of the
landlord to require payment of a reasonable sum in respect of any damage
to or diminution in the value of the premises or any neighbouring premises
belonging to him and of any legal or other expenses incurred in connection
with such licence or consent.”
Other User Restrictions
Most commercial leases require the tenant to comply with planning legislation,
which for instance requires planning consents to be obtained for most material
changes of use.
The tenant is generally not allowed to reside or sleep at a commercial property,

unless there is separate accommodation that is included within the demise.
The tenant will usually be restrained from committing nuisance, and may covenant
not to discharge deleterious substances into the drains or other conducting media
serving the premises.
In appropriate cases, the tenant may be obliged to avoid overloading the floors of
the premises.
There may also be a covenant preventing the tenant from carrying on any noisome,
dangerous or offensive trade or business at the premises.
Don’t Forget The ‘Deeds’
Conveyancers for both parties should always check the landlord’s deeds to see
whether or not they contain restrictions on use that would prevent or restrict business
use. The widest form of such a clause would be:
19
‘Not to use or permit the Premises to be used for any trade, business or
manufacture of any kind,’
or
‘Not to use the Premises other than as private dwelling houses.”
Where the landlord is granting an underlease, there may be similar restrictions

contained in a superior title or in the head lease itself that have to be observed.
The Office of Fair Trading’s Report entitled ‘Land Agreements’, March 2011,
addresses the issue of whether user covenants in leases might breach competition
laws. The following conclusions were drawn by the OFT (which was subsequently
replaced by the Competition and Market Authority):
“4.11 … In most cases, permitted user and restricted user clauses are unlikely
to restrict competition. However, where a land-owner is also active in a
related market and seeks to limit the availability of its land to its downstream
competitors by restricting the use of its land for a particular purpose, this has
the potential to restrict competition.
“4.12 For example, a land-owner who operates a number of convenience

stores in a particular area may limit how a lessee of a particular site may use
the property, by stipulating that the lessee may not use the site as a
convenience store, or conversely by stipulating that it must be used for a
particular purpose other than as a convenience store. This has the potential to
restrict competition in the related market for convenience stores.”

20
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First published March 2017
Control of Asbestos Regulations 2012,
SI 2012/632
Note: The 2012 Regulations revoked the 2006 Control of Asbestos Regulations, but the
text of the two Regulations is very similar. However, one key change introduced by
the 2012 Regulations is that some types of non-licensed work with asbestos now have
additional requirements – notification of work, medical surveillance and
record keeping.
Who the Regulations Apply to
These Regulations apply to a self-employed person as they apply to an employer

and an employee and as if that self-employed person were both an employer and
an employee: art 3(1).
Duty to manage asbestos in non-domestic premises: art 4
Under this provision, “’the dutyholder’ means -
(a) every person who has, by virtue of a contract or tenancy, an obligation of

any extent in relation to the maintenance or repair of non-domestic premises
or any means of access or egress to or from those premises; or
(b) in relation to any part of non-domestic premises where there is no such
contract or tenancy, every person who has, to any extent, control of that part
of those non-domestic premises or any means of access or egress to or from
those premises,
and where there is more than one such dutyholder, the relative contribution to be
made by each such person in complying with the requirements of this regulation will
be determined by the nature and extent of the maintenance and repair obligation
owed by that person: reg 4(1).
22
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“Every person must cooperate with the dutyholder so far as is necessary to
enable the dutyholder to comply with the duties set out under this regulation”
: reg 4(2).
Note: The effect of reg 4(1)(a) is that the extent of a dutyholder’s obligation under
the Regulations in respect of tenanted premises is determined by the scope of their
liability for maintenance or repair under the tenancy agreement or lease. So, for
instance, in the case of a building containing both common parts and let units, it is
often the case that the landlord will be the dutyholder in respect of the common
parts and the tenants will be the dutyholders in respect of the premises demised by
their lease. Each landlord and tenant in such cases will also owe each an obligation
to cooperate with the other, pursuant to reg 4(2).
The dutyholder is subject to several other duties under regulation 4,

including obligations:
(i) To ensure that a suitable and sufficient assessment is carried out as to whether
asbestos is or is liable to be present in the premises: reg 4(3);
(ii) To consider the condition of any asbestos which is, or has been assumed to
be, present in the premises: reg 4(4);
(iii) Without prejudice to the generality of the duty under reg 4(4), to ensure that
account is taken of building plans or other relevant information and of the
age of the premises; and that an inspection is made of those parts of the
premises which are reasonably accessible: reg 4(5);
(iv) To ensure the assessment is reviewed without delay if -
(a) there is reason to suspect that the assessment is no longer valid; or
(b) there has been a significant change in the premises to which the
assessment relates;
(v) Where the assessment shows that asbestos is or is liable to be present in any
part of the premises to ensure that -
(a) a determination of the risk from that asbestos is made;
(b) a written plan identifying those parts of the premises concerned is prepared;
and
(c) the measures which are to be taken for managing the risk are specified in the
written plan: reg 4(8); and
(vi) Ensure that -
(a) the plan is reviewed and revised at regular intervals, and without delay if -
24
(i) there is reason to suspect that the plan is no longer valid, or
(ii) there has been a significant change in the premises to which the plan relates;
(b) the measures specified in the plan are implemented; and
(c) the measures taken to implement the plan are recorded.
Asbestos Regulations Enforcement
The Health and Safety Executive (HSE) maintains a Public Register of Convictions,
which records prosecutions and enforcement notices.
Successful prosecutions by the HSE have also included cases where the following
regulations were breached -
(i) Reg 6(1)(a): “An employer must not carry out work which is liable to expose
employees of that employer to asbestos unless that employer has made a
suitable and sufficient assessment of the risk created by that exposure to
the health of those employees and of the steps that need to be taken to
meet the requirements of these Regulations.”
(ii) Reg 8(1): “An employer must hold a licence … before undertaking any
licensable work with asbestos.”
(iii) Reg 10(1)(a): All employers shall ensure that adequate information, instruction
and training is given to every employee who is or is liable to be exposed to
asbestos, or who supervises such employees, so that those employees are
aware of eleven specified risk-prevention measures.
(iv) Reg 11(1)(a): “Every employer must prevent the exposure to asbestos of any
employee employed by that employer so far as is reasonably practicable.”
(v) Reg 15: The duty on employers to prepare procedures to deal with accidents,
incidents and emergencies related to the unplanned release of asbestos at
the workplace; and
(vi) Reg 16: Every employer must prevent or, where this is not reasonably
practicable, reduce to the lowest level reasonably practicable the spread
of asbestos from any place where work under the employer’s control is
carried out.
25
The HSE’s Asbestos Survey Guide, 2012 version
The HSE publication “Asbestos: The Survey Guide” deals with many key
issues, including:
(i) The purpose of an asbestos survey;

(ii) Key points of a survey, which include:
Ensuring that the appropriate survey is undertaken for the client’s needs;
Avoiding caveats;
Ensuring the survey is reported in a format that can be used to prepare an
asbestos register and building plan; and
Informing the client that the survey is not the end point in managing asbestos.
(iii) Competence and quality assurance procedures, in particular assessing the

competence of the surveyor to carry out the work required. So the Guide
continues by saying that -
“HSE strongly recommends the use of accredited or certificated surveyors for

asbestos surveys.
The dutyholder should not appoint or instruct an independent surveyor to carry out a
survey unless the surveyor is competent.”
(iv) Paragraphs 23 to 29 of the Guide explain how organisations and individual

surveyors can demonstrate that they are technically competent to undertake
surveys for asbestos-containing materials (ACMs).
“The competency enquiry should be carried out as a two-stage process:
- Stage 1: An assessment of the individual’s or company’s survey expertise and

also, their knowledge of health and safety ...
- Stage 2: An assessment of the individual’s or company’s experience and
track record ...”
Other Relevant Legislation
Other legislation and regulations also apply to major works carried out to a building
that contains asbestos. Two examples are –
26
Section 2(1) of the Health and Safety at Work etc. Act 1974 which states: “It shall be
the duty of every employer to ensure, so far as is reasonably practicable, the health,
safety and welfare at work of all his employees”; and
Section 3(1) of the Health and Safety at Work etc. Act 1974 which provides: “It
shall be the duty of every employer to conduct his undertaking in such a way as to
ensure, so far as is reasonably practicable, that persons not in his employment who
may be affected thereby are not thereby exposed to risks to their health or safety.”
Additional Matters to Consider for Property Lawyers
1. The onus will always be on a prospective purchaser or tenant to undertake

appropriate enquiries (including inspections and surveys) in order to
determine whether the building/premises in question contains or is likely to
contain asbestos.
2. The extent of a tenant’s obligations under the 2012 Regulations will be
influenced by matters such as whether the tenant is (a) subject to a full
repairing covenant, (b) liable to repair latent defects or (c) merely obliged to
keep the demised premises in no worse condition than is evidenced by a
schedule of condition prepared on or before the grant of the lease.
3. The HSE has also advised that – “Asbestos may be part of any commercial or
domestic building which was built or refurbished before the year 2000.”
4. If as part of the investigation of title on behalf of a prospective purchaser
or tenant it appears that the building might contain asbestos and no asbestos
assessment has been undertaken, the lawyer should advise the client –
(i) of the duties under the 2012 Regulations that the client might become subject
to with effect from completion of the transaction;
(ii) (where the landlord/seller will not be providing an asbestos assessment),
to consider seeking specialist advice on the likely costs of carrying out such an
assessment, and being mindful of the possibility that the final report
could contain a number of expensive recommendations that would have to
be implemented; and
(iii) A client who, as dutyholder, takes out public liability insurance in respect of
premises containing asbestos would not be covered in the event of an
asbestos-related claim; unless the duties to assess the risk under the 2012
Regulations have been complied, or any non-compliance has been disclosed
to the insurer and the insurer’s specific requirements are complied with.
27
First published April 2017
Side Letter: Lower Rent & Termination Provision
Vivienne Westwood Ltd v Conduit Street Development Ltd [2017] EWHC 350 (Ch)
The Facts
The Premises were demised for a term of 15 years from 18 November 2009 at an
initial Yearly Rent of £110,000 p.a., subject to ‘upwards only’ rent reviews to the open
market rent on 18 November 2014 and 18 November 2019. The lease made provision
for the appointment of an independent valuer if the landlord and tenant could not
reach agreement on the amount of the open market rent upon review.
In a ‘Side letter’ dated the same day as the date of grant of the lease, DER (the
original landlord) agreed, conditionally, that notwithstanding the terms of the lease
it would accept yearly rent at a lower rate from the Claimant. The reduced rent was
stepped from £90,000 p.a. in year 1 up to £100,000 p.a. in year 5; it was then capped
at £125,000 p.a. for the next 5 years of the term if a higher open market rent was
determined upon the first rent review. The agreement to accept a lower rent was
expressed to be personal to the Claimant and not by way of variation of the lease.
However, it was not expressed to be personal to the lessor. Accordingly, it was (rightly
in the Court’s view) common ground that the landlord covenants in the Side Letter
would bind successors in title to the lessor.
The Side Letter also included the following termination provision:

“If you breach any of the terms and conditions contained in this agreement or
any term of the Lease and/or any document supplemental to it…, we may
terminate this agreement with immediate effect and the rents will be payable
in the manner set out in the Lease as if this agreement had never existed…”
In 2013, DER sold its reversion, a long leasehold interest in the Premises, to B&AY
Properties Limited.
Before the rent review could be determined, B&AY sold its leasehold reversion to
Marisilver Investissement S.A. on 20 February 2015.
28
Marisilver’s agent sent an email to the Claimant on 17 March 2015 in respect of the
next quarter rent payment, attaching a draft invoice (which was expressed not to
be “a final invoice”) and side letter. The invoice was for a quarter’s rent in the sum
of £31,250 (which was equivalent to an annual rate of £125,000). The agent later
clarified that the (draft) invoice was for the quarter starting on 25 March 2015. No
further or ‘final’ invoice was sent and payment in full was made by the Claimant on
31 March 2015.
Subsequently, Marisilver granted a concurrent lease of the Premises to the

Defendant, making the Defendant the immediate reversioner and landlord of the
Claimant. The Defendant appointed the same agent as engaged by Marisilver
but when the agent then demanded rent from the Claimant, he failed to make it
clear that he was now acting as agent for the Defendant rather than for Marisilver.
Confusion was eventually clarified by further communications on 2 July. On that
same day, the agent notified the Claimant that a surveyor had been asked to assess
the market rent for the Premises for an overdue rent review.
The Claimant still did not pay the June rent to the agents. Consequently, by letter
dated 17 July 2015, the Defendant’s Solicitors wrote to the Claimant asserting a
breach of the terms of the lease. They said that, without prejudice to the validity
of the Side Letter, notice was given on behalf of the Defendant terminating the
agreement in the Side Letter with immediate effect. The Claimant then paid the rent
arrears in full, and the Solicitors accepted this as part payment only, on the basis that
a rent review was in course of being arranged.
On 2 December 2015, notwithstanding the prior appointment of an independent

expert surveyor, the Claimant agreed on the new rent of £232,500 p.a., albeit being
subject to its position that the rent review had previously been determined.
Issue (1): binding compromise of rent review at £125,000?
The High Court rejected the contention that the demand, payment and
acceptance of rent for the March 2015 quarter, at a rate that was not otherwise
payable under the lease or the Side Letter, was to be taken as agreement by
the Claimant and the Defendant that the yearly rent under the lease had been
reviewed to an annual sum of £125,000 p.a.
There had been nothing in the conduct of the agents that could be said objectively
to amount to an offer to settle the outstanding rent review at £125,000 p.a. No step
had been taken, formally or informally, to activate the rent review. Rent reviews are
29
not negotiated by submitting otherwise unexplained rental invoices for quarterly rent.
This invoice was not even a formal demand for rent, but a draft invoice.
The natural interpretation of the invoice was that the Defendant was offering to
accept rent at a higher rate than was strictly payable pending the rent review
because it was inevitable that the Claimant (and only the Claimant) would be liable
to pay at that rate following the rent review.
Issue (2): Penalty?
Penalties: Key Legal Principles
The Supreme Court in Cavendish Square Holding BV v Makdessi [2016] UKSC 67 had
previously confirmed (inter alia) that -
(i) In English law, a penalty clause can only exist where a secondary obligation is
imposed upon a breach of a primary obligation owed by one party to
the other.
(ii) A provision that in substance imposes a secondary liability for breach of a
primary obligation is penal if it imposes on the party in default a detriment out
of all proportion to any legitimate interest of the innocent party in the
performance of the primary obligation, or (using traditional language) which
is exorbitant, extravagant or unconscionable in comparison with the value of
that legitimate interest.
Was the threshold test met?
The High Court in the Vivienne Westwood case determined that the Side Letter
placed no primary obligation on the Claimant to pay rent at the higher rate
reserved by the lease (other than contingently, depending on non-satisfaction of the
conditions). The Side Letter obliged the lessor to accept the lower level of rent and
therefore gave the Claimant the right to pay at that lower rate, so it could not at the
same time have been obliged to pay rent at the higher rate. The primary obligation
was therefore to pay rent at the lower rate, with a default to the higher rate in
the event of (among other things) any breach of contract. To the extent that the
Side Letter purported to permit the lessor to impose a greater obligation upon the
happening of any breach of any obligation of the lease, that secondary obligation
was capable of being a penalty. The threshold test was satisfied.
30
Was There a Legitimate interest in performance?
The Deputy High Court Judge (Timothy Fancourt QC) then held that the Defendant
did not have a legitimate interest in the Claimant performing all its obligations
promptly. It merely had a legitimate interest in non-performance of the
Claimant’s obligations.
It was also the case that, under the Side Letter, the same substantial financial
adjustment applied whether a breach was one-off, minor, serious or repeated,
and without regard to the nature of the obligation broken or any actual or likely
consequences for the lessor. That was one of the hallmarks of a penalty.
Was the Termination Provision Exorbitant or unconscionable?
The Court further declined to imply into the termination provision of the Side Letter
the word “materially” before the word “breach”, though the Judge found it was
implicit that the Side Letter excluded a trivial (or de minimis) breach of covenant
from triggering the lessor’s right to terminate the Side Letter. It followed that the
lessor’s right to terminate the Side Letter arose on the occurrence of any non-trivial
breach by the Claimant of its obligations.
Moreover, the natural reading of the words “and the rents will be immediately
payable in the manner set out in the Lease as if this agreement had never existed”
in the Side Letter was that the termination of the Side Letter had retrospective
effect in that it would trigger an immediate obligation to pay the shortfall relating to
previous quarters.
Therefore, the Court was in no doubt that the obligation to pay rent at a higher rate
as from the rent commencement date of the lease, regardless of the nature and
consequences of the breach and when it occurred, was penal in nature.
That would have been the case, even if the termination provision had had only
prospective effect.
Conclusion
Since the termination provision in the Side Letter was in any event penal in nature,
the purported termination of the benefit of the Side Letter by the Defendant’s
Solicitor’s letter dated 17 July 2015 was unenforceable and the Claimant remained
liable and entitled to pay rent at the capped rate of £125,000 for so long as it
satisfied the conditions in the Side Letter.
31
First published May 2017
Rent Reviews: Miscellaneous Issues
(1) How Did the Key Assumption of the Hypothetical Lease Affect the Open Market
Value of the Rent?
Level Properties Ltd v Balls Brothers Ltd [2008] 1 P&CR 1 (Ch)
Level was the landlord under a lease made in 1993; the lease had been assigned to
Balls Brothers in 1996 by the original tenant. The rent was to be reviewed every four
years to the higher of the passing rent and market rent.
The first issue was whether the landlord could insist on the provision of a surety on
assignment even if it was unreasonable to do so; and the Court held that it could.
The second issue was whether the open market rent was to be determined on the
basis of a single letting; or, if it produced a higher figure, on the basis of two lettings,
one of the ground floor and one of the basement, the ‘open market yearly rent’
being the aggregate of the rents payable under those two lettings?
The High Court held that the definition of open market rent, read in isolation from the
remainder of the lease, appeared to assume a notional ‘letting in the open market’
of the whole demised premises “by a willing lessor to a willing lessee.”
However, the construction of the lease as a whole was consistent with the open
market rent being valued on the basis that the demised premises were capable of
being let as two separate units; even though the actual lease demised the whole
premises under a single letting.
Crucial to the Court’s finding was that in clause 1 a distinction was made between
certain words and phrases within the Lease whose definitions applied ‘where the
context so requires or admits’; and ‘Words importing one gender shall include
all other genders and words importing the singular shall include the plural and
32
vice-versa’; which did not depend on the context. Therefore, the open market rent
had to be construed so as to be based on a notional letting or lettings in the open
market by a willing lessor or lessors to a willing lessee or lessees.
The third issue was whether the parties were bound by the determination of the
Second Defendant in whole or in part.
The lease provided that, in the event of the parties not agreeing on the open market
rent, the reviewed rent should be determined by an independent surveyor acting as
expert. However, the expert so appointed had formed an erroneous view about the
first two issues and had given effect to that view in his determination.
The Court held that these provisions required the expert to have regard to closely
defined contractual criteria in arriving at the determination of the ‘open market
rent’. They did not confer upon him sole and exclusive power to interpret the Lease.
Consequently, the parties to the lease were not bound by the determination based
on his erroneous interpretation of the review provisions; and they had not agreed
to be bound by his determination even if he fell into error. However, they remained
bound by the determination where it was based upon matters other than an
erroneous interpretation of a provision of the Lease.
(2) Was the Arbitrator’s Award Wrong?
Campbell-Bell v Enterprise Inns plc [2009] EWHC 2733 (QB)
The lease of a public house required the rent review determination to disregard any
increase in rental value attributable to authorised tenant’s improvements.
The High Court –
1. Held that the application of the disregard is a matter of valuation practice.
2. In considering the situation where there is more than one available method of
valuation, cited Ross on Commercial Leases, where the author wrote:
“Valuers are not required to adopt any one particular method of valuation
in order to disregard improvements…The only principle which I think is
necessary to enunciate is thus the simple one, that any method of valuation
must properly reflect the intention of the parties expressed in the lease.”
33
3. Was satisfied that the surveyor, acting as arbitrator, had carefully considered
the submissions of both parties’ surveyors and the different methodologies that
they had adopted and given reasons for his decision. Therefore, there was
nothing wrong in law with the arbitrator’s approach.
Bromley Park Garden Estates Ltd v Mallen and another [2009] EWHC 609 (Ch)
Under the rent review provisions, the market rent depended in part of the
measurement of part of the demised premises, called Zone A. Originally, landlord’s
and tenant’s surveyors agreed the measurement of 1340 square feet. Subsequently,
the tenant’s surveyor made written submissions to the arbitrator that he had revised
his own measurement to 827 square feet. The landlord’s surveyor then asked the
arbitrator to order the tenant’s surveyor to supply him with certain documents, but
the request was denied and the arbitrator agreed with the 827 square
feet measurement.
The High Court held that the arbitrator was entitled to form the view that the
documents requested were of little relevance and that the landlord’s surveyor could
have made counter-submissions without seeing these documents. Furthermore,
bearing in mind that the landlord’s surveyor had seen his counterpart’s submissions
six weeks earlier, the arbitrator was entitled to impose a four-day deadline for the
provision of counter-submissions. If the landlord’s surveyor needed more time, he
should have asked the arbitrator for an extension of time.
Moreover, the arbitrator’s decision not to allow an oral hearing could be justified on
grounds that such a hearing would significantly increase the costs of the arbitration
and such a hearing in the circumstances would have no advantage over
written submissions.
Metropolitan Property Realizations Ltd v Atmore Investments Ltd [2008]

EWHC 2925 (Ch)
An underlease of a parade of shops with flats above them defined “(d) “the yearly
rent value of the demised premises” as being the rent agreed or failing agreement
the amount which the arbitrator opines represents “a fair yearly rent for the demised
premises at the relevant date having regard to rent values then current for property
let without a premium with vacant possession and to the provisions of this Lease
(other than the rent hereby reserved)”.
34
The High Court favoured the tenant’s subsequent argument that the arbitrator was
justified in assuming that a notional tenant would take a hypothetical lease on terms
that enabled it to make a profit from the aggregate rental income from the shop
units and residential flats. However, the matter was remitted to the arbitrator for re-
determination because he had failed in his original determination to take that profit
element into account in his calculations. This failure by the Arbitrator amounted to a
“serious irregularity” that caused substantial injustice to the tenant.
(3) Was the Expert’s Certificate Valid?
Homepace Ltd v Sita South East Ltd [2008] EWCA Civ 1
This case is more analogous because it did not a rent review provision.
The lease apparently granted mining rights to the tenant, who was liable to pay a
base rent. The base rent would cease to be payable if an independent surveyor
certified that the reserves of minerals were either exhausted or had become
economically irrecoverable with no reasonable prospect of them becoming
economically recoverable within the next ten years. A duly appointed surveyor later
issued an exhaustion certificate about the economic recoverability of the minerals,
but in preparing it he had failed to take into account the 12,000 tonnes of good
limestone that remained present on the land. The issue was whether the certificate
was a nullity because the surveyor had not carried out his instructions, having only
considered part of the minerals.
The Court of Appeal held that there were three questions that had to be answered:
(i) What did the agreement entrust to the expert?

(ii) Whether that is what he decided? And
(iii) Did he make a mistake which vitiated his decision?
The Court also observed that the surveyor would not have been obliged to respond
to any requests for clarification of his certificate or of the reasoning behind the
certificate. However, given that the surveyor had chosen to explain the basis
upon which he had proceeded, it then became open to the Court to look at his
explanations when considering the reasoning that led to him issuing the certificate,
and whether it was prepared on the right basis.
35
On the first question, the Court held that, despite the absence of the words ‘final and
binding’, the surveyor had exclusive power to determine the questions to which his
certificate is directed, e.g. about the exhaustion of all Minerals, as to their not being
economically recoverable, and with no prospect of being so within 10 years. If his
certificate did no more and no less than determine one or more of those matters, the
certificate could not be challenged.
With regards to the second question, the problem was that the lease had not
defined ‘the Minerals’, which opened up the possibility of the certificate being
invalidated by the surveyor proceeding on a wrong understanding of the term.
Indeed, he had misconstrued the definition of Minerals. The lease did not delegate to
him the task of defining the Minerals.
Thirdly, this error meant that he had not considered the issue of economic
recoverability by reference to the Minerals as correctly understood.
Consequently, his certificate neither bound the landlord nor the tenant.
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First published June 2017
Disclaimer of a Commercial Lease
Case Law on Disclaimer
1. Section 178(4) Insolvency Act 1986 provides:
A disclaimer under this section - (a) operates so as to determine, as from the date of
the disclaimer, the rights, interests and liabilities of the company in or in respect of the
property disclaimed; but (b) does not, except so far as is necessary for the purpose
of releasing the company from any liability, affect the rights or liabilities of any
other person’.
Note: Section 178 confers the power to disclaim onerous property on a liquidator of a
company that is being wound up. [The power of a trustee in bankruptcy to disclaim
pursuant to section 315 of the 1986 Act is considered later in this note.]
2. Shaw v Doleman [2009] EWCA Civ 279
The Court of Appeal held that disclaimer of the lease by the assignee’s liquidator
did not terminate the liability of the former tenant (as assignor) under her Authorised
Guarantee Agreement (AGA).
Her liability continued after disclaimer, even though the AGA itself stated that it was
to remain in force for “the period during which the Assignee is bound by the tenant
covenants of the Lease”.
The former tenant’s surety liability continued after disclaimer even though the
landlord had not required her to enter into a new lease upon disclaimer.
3. Where the lease is disclaimed by a liquidator due to the insolvency of the

tenant, the obligations owed by a guarantor of the tenant to the landlord survive
notwithstanding the disclaimer: Hindcastle Ltd v Barbara Attenborough Associates
Ltd [1996] 1 All ER 737, HL.
38
4. If the disclaimed lease contained rent review provisions that were not
activated, the rent under any new lease entered into at the request of the landlord
(e.g. by a surety of the insolvent tenant) will be the same as the passing rent under
the old lease at the date of disclaimer: RVB Investments Ltd v Bibby [2013]
EWHC 65 (Ch).
5. If a lease is disclaimed, the landlord could enforce any right conferred on the
landlord by that lease to require the guarantor of the tenant in liquidation to pay
rent in lieu of entering into a new lease: Scottish Widows plc and another v Tripipatkul
[2003] EWHC 1874 (Ch).
6. Where a landlord takes possession of the demised premises following

disclaimer of the lease, it is thereby prevented from subsequently calling on
a guarantor of the disclaimed tenant to take a new lease (in pursuance of a
guarantor’s covenant): Active Estates Ltd v Parness [2002] EWHC 893 (Ch). A further
consequence of this principle is that a landlord who takes possession of premises
demised by a disclaimed lease thereby deprives itself from claiming rent payments
from the guarantor: Active Estates Ltd v Parness [2002] EWHC 893 (Ch).
Case Concerning Section 315 IA 1986
Abdulla v Whelan (As Trustee in Bankruptcy of Amin) [2017] EWHC 605 (Ch)
Dr Abdulla was the husband of Mrs Amin (“the Bankrupt”). He claimed to be a

creditor of the Bankrupt, although her trustee in bankruptcy (“the Trustee” had not
yet reached a conclusion on the validity of that claim.
At the time of the bankruptcy order the Bankrupt was a joint tenant with a Mr Elhilali
of business premises (“the Property”). She and Mr Elhilali (together “the Tenants”) held
the Property under the terms of a contracted-out underlease dated 26 September
2003 (“the Underlease”) for a term expiring on 31 July 2018.
On 24 June 2011, the Trustee served a notice of disclaimer pursuant to section 315
Insolvency Act 1986, disclaiming “all my/our interest in Leasehold property under the
terms of [the Underlease] in respect of [the Property]”.
39
The statutory provisions
The power of a trustee in bankruptcy to disclaim any “onerous property” derives from
section 315(1) of the said Act.
The expression “onerous property” is defined in section 315(2) as:
“(a) any unprofitable contract, and
(b) any other property comprised in the bankrupt’s estate which is unsaleable
or not readily saleable, or is such that it may give rise to a liability to pay
money or perform any other onerous act.”
Section 315(3) provides that a disclaimer:
“(a) operates so as to determine, as from the date of the disclaimer, the rights,
interests and liabilities of the bankrupt and his estate in or in respect of the
property disclaimed, and
(b) discharges the trustee from all personal liability in respect of that property as
from the commencement of his trusteeship,
but does not, except so far as necessary for the purpose of releasing the bankrupt,
the bankrupt’s estate and the trustee from any liability, affect the rights or liabilities of
any other person.”
Other Relevant Sections of the 1986 Act
Section 283(1) of the Act defines what is comprised in a bankrupt’s estate. However,
section 283(3), so far as material, provides by way of exception that:
“Subsection (1) does not apply to –
(a) property held on trust for any other person…”
The bankrupt’s estate vest in the trustee in bankruptcy immediately on his

appointment taking effect: s 306(1).
40
Submissions on Behalf of Dr Abdulla
Counsel for Dr Abdulla argued that, by virtue of the disclaimer, the legal estate in the
Underlease had come to an end such that no rent was payable by the Bankrupt’s
estate after the disclaimer. This argument was based on the approach taken by
the House of Lords in Hindcastle Limited v Barbara Attenborough Associates Limited
[1997] AC 70; a case which concerned the effect of the disclaimer of a lease held
by an assignee on the liability of an original tenant or a surety.
Counsel relied upon what Lord Nicholls said about the purpose of the equivalent
provisions in the case of disclaimer by a liquidator of a company that is being wound
up [i.e. section 178 of the 1986 Act]. This is what Lord Nicholls said, as far as material:
“The fundamental purpose of these provisions is not in doubt. It is to facilitate the

winding up of the insolvent’s affairs. There is a further purpose in personal insolvency
cases. A bankrupt’s property vests automatically in his trustee. The disclaimer
provisions operate to discharge the trustee in bankruptcy from all personal liability in
respect of the property: see section 315(3)(b).
…
Disclaimer will, inevitably, have an adverse impact on others: those with whom the
contracts were made, and those who had rights and liabilities in respect of the
property. The rights and obligations of these other persons are to be affected as
little as possible. They are to be affected only to the extent necessary to achieve
the primary object: the release of the company from all liability. Those who are
prejudiced by the loss of their rights are entitled to prove in the winding up of the
company as though they were creditors.”
This was then followed by a submission that, so as to fulfil what Lord Nicholls called
the primary purpose of freeing the insolvent from all liability while doing the minimum
violence to accepted property law principles, the Court should hold that the Trustee
was able to disclaim the Bankrupt’s legal interest in the Underlease.
The Court’s Conclusions
Mr John Male QC (sitting as a Deputy High Court Judge) implicitly accepted the
submission of Counsel for the Trustee that what Lord Nicholls said in Hindcastle was
not relevant to the determination of this appeal.
41
He then identified the following relevant legal principles -
(1) The starting point was that the Tenants held the Underlease as joint legal
owners on trust for themselves. The legal estate in the Underlease was vested
in the Bankrupt and Mr Elhilali as trustees for themselves.
(2) The effect of section 283(3)(a) was that the legal estate in the Underlease
was excepted from the property comprised within the Bankrupt’s estate. It
therefore remained at all times in the names of the Bankrupt and Mr Elhilali.
(3) The exception in section 283(3)(a) was applicable. Therefore, the legal estate
in the Underlease did not vest in the Trustee.
(4) Under section 315 the Trustee can only disclaim that which is comprised
in the Bankrupt’s estate. As the legal estate in the Underlease was not vested
in the Bankrupt’s estate, it could not be disclaimed. A trustee in bankruptcy
cannot disclaim something which is not in his ownership.
(5) Further, and in any event, any step taken in relation to trust property, such as
a disclaimer in relation to the legal estate in the Underlease, would need to
be taken by the two trustees acting together, i.e. by the Bankrupt and Mr
Elhilali. Nor, of course, can a joint tenancy at law be severed.
(6) The above conclusions were supported by the fact that the obligation to
pay rent is a contractual, legal obligation which flows from the legal interest in
the Underlease and not from the beneficial interest. The Landlords’ relationship
is with the Tenants. Also, there is force in the point that if the Underlease
continues against Mr Elhilali, then it must also continue against the Bankrupt as
well. The Bankrupt and her co-owner are one joint legal entity.
Effect of Disclaimer Not Being Applicable in This Case
Mr John Male QC acknowledged that -
(1) If the disclaimer did not apply, the consequence was that the Landlords
retained their right to prove not only for the rent accruing for the remainder
of the term of the Underlease, but also for other amounts falling due under
the Underlease, such as service charge, insurance premiums and damages
42
for any breaches of repairing covenants. Accordingly, this exposed the
Bankrupt’s estate to a much greater potential liability than if disclaimer was
available. However, this “was simply a function of the way in which the
scheme of the insolvency legislation worked and of the exclusion of property
held on trust from a bankrupt’s estate.”
(2) Moreover, if disclaimer was not available, the implications for the bankruptcy
estates of debtors who are joint lessees are serious. Again though, it seemed
that this is a consequence of the scheme of the legislation and the exclusion
from a bankrupt’s estate of property held on trust.
(3) Accordingly, the lease in this case had not been disclaimed and Rent
continued to be payable to the Landlords.
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First published July 2017
Conditional Contracts
There have been many cases over the years that have arisen out of disputes
concerning a contractual condition, the satisfaction of which would make the
parties’ obligation to complete the contract unconditional, but if unmet would
entitle one or both parties to terminate the contract. This note considers three
examples of such cases.
Issue 1: What Contractual Terms were there Regarding Provision of Information?
Gregory Projects (Halifax) Ltd v Tenpin (Halifax) Ltd [2009] EWHC 2639 (Ch)
Under a conditional contract, Gregory was obliged to acquire the freehold reversion
or a long lease in a site, to develop the site and then to grant a lease to Tenpin.
Either party could terminate the contract if prior to 23 February 2009 (the ‘End
Date’) four conditions had not been satisfied. One of these conditions (the ‘Planning
Condition’) would be satisfied on “the obtaining” of a detailed planning permission
that was free from “Unacceptable Conditions” (as defined in the agreement).
Clause 2 of the agreement for lease was headed “Conditionality”. However,

cl 1.1.8 said that “The headings to the clauses and schedules shall not affect
the interpretation.”
Under Clause 2.6, Gregory was obliged forthwith upon receipt of any relevant
planning decision to forward a copy to the Tenant or the Tenant’s Solicitors “together
with a copy of any Planning Agreement … The Developer and the Tenant shall
within ten Working Days thereafter give written notice to the other or to the other
party’s solicitors of whether or not the Planning Permission is an Acceptable Planning
Permission and if either the Developer or the Tenant fails to give such notice within
such time period (time being of the essence) then the Planning Permission shall be
deemed to be an Acceptable Planning Permission.”
44
There was an express right under clause 4.1 for either party to rescind if by the ‘End
Date’ the Unconditional Date had not properly occurred. The Unconditional Date
was the date on which the four conditions were satisfied and consequently the
contract became unconditional.
Planning permission was granted in October 2008, subject to 39 conditions. Gregory

informed Tenpin that it had obtained a ‘clean’ permission with ‘no onerous
conditions’. However, it did not enclose a copy of the written decision.
On the End Date itself (23 February 2009) Tenpin purported to serve notice
of rescission.
It was then three days later (on 26 February 2009) that Gregory sent a copy of the
written decision to Tenpin.
The High Court held that:
(i) Where, as here, the contract says in terms that headings “shall not affect the
interpretation”, respect for party autonomy means that the headings cannot
be allowed to alter what would otherwise have been the interpretation of the
clause in question. (However, it is to be noted that Lewison J found the
heading in cl 2 to be inconsistent with the content of the clause).
(ii) The Planning Condition was satisfied, and the Unconditional Date fell, on
the day that the planning permission was “obtained”. This was the date on
which the planning permission was granted. Therefore, the agreement had
become unconditional before the End Date.
(iii) The mere service of notice under cl 2.6 would not have established whether a
planning permission was compliant with the planning condition. That would
not be known until any dispute is resolved, which may have been after the
End Date;
(iv) Read literally, the deeming provision in clause 2.6 meant that if one party
gave prompt notice that the permission was not acceptable but the other
party failed to give notice at all, the planning permission was deemed to be
acceptable. However, that would be an absurd conclusion. It was
appropriate to imply a term that the deeming provision would operate only
against the party who failed to serve notice in time.
45
(v) There was no longstop date for providing a copy of the planning decision.
There were no grounds for implying a contractual term that a copy of the
planning decision had to be given to Tenpin (the tenant) not less than ten
days before the End Date, and that unless this was done the Planning
Condition was deemed not to have been satisfied.
(vi) Therefore, Tenpin could not rescind the agreement.
Issue 2. Development Agreement – Right to Rescind if Minimum Price Not Achieved
Gold Group Properties Ltd v BDW Trading Ltd (formerly known as Barratt Homes Ltd)
[2010] EWHC 323 (TCC)
In a development agreement made between the parties in August 2007, the

defendant (Barratt) agreed to build a number of houses and flat, and the claimant
(Gold) as freeholder agreed to sell them on long leases. The parties agreed to
share the net sale proceeds. Each residential unit was to be sold at no less than the
minimum price set out in the agreement.
The minimum price for each unit was set out in the Fourth Schedule but could be
substituted from time to time by agreement of the parties.
Barratt did not commence the building works by the agreed date because it had
formed the view that it was a condition precedent to its commencement and
carrying out of these works that the properties would fetch the minimum prices set
out in the agreement. The post-contract fall in property values made the minimum
prices unachievable. Therefore, they were not obliged to start work and/or the
agreement was frustrated.
Barratt’s proposals to revise the minimum prices were rejected by Gold. Barratt then
wrote to Gold in terms that the contract was void and unenforceable.
The QBD, Technology and Construction Court held that:
(i) The minimum prices had been set for the purpose of apportioning risk and
benefit between the parties.
46
(ii) The agreement set out in advance the anticipated minimum revenue that
would be generated from the development of the site.
(iii) The minimum prices were not set in stone or incapable of variation.
(iv) The seller was not guaranteed to recover a fixed or minimum sum. The seller
had a share in the revenue and would have benefited if house prices had
risen. This also brought with it the concomitant risk that house prices might fall,
so that their own share would then be less. This risk was inherent in
the agreement.
(v) Equally, Barratt would have benefited from rising prices, but ran the risk that a
property might sell for a price below the minimum figure.
(vi) Achieving the minimum prices was not a condition precedent to the carrying
out of the building works.
(vii) The contract had not been frustrated by the fall in property prices because
such a drop was foreseeable to both parties. Despite the fall in prices, the
agreement was capable of performance.
(viii) On the fact of it, Barratt’s refusal to commence the building works was not
justified and amounted to a repudiation of the agreement. They wrongly
treated the contract as frustrated. However, it was unclear without further
evidence if Gold had accepted Barratt’s repudiation.
(ix) Nevertheless, Barratt was granted conditional leave to defend the repudiation
allegation, albeit solely on the basis of their contention that Gold was itself
in repudiatory breach of contract by refusing to negotiate. However, the
Court expressed the view that this argument did not have “a strong chance
of success.”
Issue 3: Was the Discount on the Purchase Price Conditional on the Grant of
Planning Permission?
Anglo-Continental Educational Group (GB) Ltd v Capital Homes (Southern) Ltd [2009]
EWCA Civ 218
47
The claimant was the registered proprietor of two adjoining properties. The properties
were subject to restrictive covenants that prevented the development of these
properties without a third party’s consent. Those covenants were noted on the
register of both titles. The defendant was interested in buying the properties in order
demolish them and to build no more than 14 flats thereon.
The claimant and defendant then entered into an agreement concerning the two
properties and conditional on the latter obtaining satisfactory planning permission
to build 14 flats within nine months. Either party could terminate the agreement if
the permission was not granted within nine months (subject to an extension if there
was an appeal). The defendant buyer also had the right to waive the condition for
planning permission in order to prevent the claimant from rescinding the contract.
The purchase price was “£862,000 ... less the amount (including covenantees’ fees
and costs) required to obtain a deed of release/variation of the covenants ... to
enable the Development to be implemented”.
The defendant’s planning applications for the erection 13 flats and 14 flats were
refused. In fact, it obtained planning permission to build 9 flats. It then waived the
condition requiring planning consent.
The main issue was whether the discount in the calculation of the purchase price
applied in this case.
The difficulty was that the agreement was not well drafted. The Court of Appeal
agreed with the judge that it was improbable that the parties to this agreement
would have agreed that there should be no discount for the costs of obtaining the
release of the restrictive covenants where the planning condition had been waived.
It was clear beyond doubt from the construction of the contract that the discount
was not conditional on planning permission. The discount was applicable whether or
not planning permission had been granted. Moreover, since the agreement expressly
contemplated that the buyer may waive the planning condition at any time; the
definition of Purchase Price had to work even though there was no
planning permission.
The discount at the date of completion must be an amount which was reasonably
required for the purpose of obtaining a release or variation of the applicable
restrictive covenants such as would enable the proposed development to
take place.
48
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49
First published August 2017
who are Not Individuals – Part 1
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on

the Payer) Regulations 2017 transpose the Fourth EU Money Laundering Directive
(Directive 2015/849/EU of the European Parliament and of the Council) into UK law,
with effect from 26 June 2017.
The 2017 Regulations (‘MLR 2017’) have also replaced the Money Laundering
Regulations 2007.
This article, which is written in two parts, highlights key aspects of the new Regulations
insofar as they are likely to be relevant to commercial property lawyers acting for
a UK-based client who is not an individual. This note does not consider the position
of a non-UK-based client, such as a body corporate constituted under the law of a
country or territory outside the United Kingdom.
The MLR 2017 are currently set out in full on http://www.legislation.gov.uk

which contains public sector information licensed under the Open Government
Licence v3.0.
1. Key definitions
Key definitions in reg 3(1) MLR 2017 include the following -
“beneficial owner” –
(a) in the case of a body corporate or partnership, has the meaning given by
regulation 5;
(b) …
(c) …
50
“body corporate” -
(a) includes –
(i) a body corporate incorporated under the laws of the United Kingdom or any
part of the United Kingdom, and
(ii) …;
(b) but does not include –
(i) a corporation sole, or

(ii) a partnership that, whether or not a legal person, is not regarded as a body
corporate under the law by which it is governed;
“officer”, except in Part 8 and Schedule 5 -
(a) in relation to a body corporate, means –
(i) a director, secretary, chief executive, member of the committee of

management, or a person purporting to act in such a capacity, or
(ii) an individual who is a controller of the body, or a person purporting to act as
a controller;
(b) in relation to an unincorporated association, means any officer of the

association or any member of its governing body, or a person purporting to
act in such a capacity; and
(c) in relation to a partnership, means a partner, and any manager, secretary or

similar officer of the partnership, or a person purporting to act in such
a capacity;
[This note does not consider the provisions of Part 8 or Schedule 5 of the
2017 Regulations.]
Note: A “relevant person” includes any law firm that by way of business provides
legal or notarial services to other persons, when participating in financial or real
property transactions”. See reg 3(1), 8(2)(d) and 12.
Note: The definition of “regulated market” is apt to include the London
Stock Exchange.
51
Definition of business relationship
Reg 4(2) MLR 2017 provides that –
‘A relationship where the relevant person is asked to form a company for

its customer is to be treated as a business relationship for the purpose of these
Regulations, whether or not the formation of the company is the only
transaction carried out for that customer.’
Meaning of beneficial owner: bodies corporate or partnership
Reg 5(1) MLR 2017 reads as follows –
‘In these Regulations, “beneficial owner”, in relation to a body corporate which is not
a company whose securities are listed on a regulated market, means –
(a) any individual who exercises ultimate control over the management of the
body corporate;
(b) any individual who ultimately owns or controls (in each case whether directly
or indirectly) … more than 25% of the shares or voting rights in the body
corporate; or
(c) an individual who controls the body corporate.’
[Reg 5(2) defines for the purposes of paragraph (1)(c) when an individual controls
a body corporate that is a company or a limited liability partnership or a subsidiary
undertaking of the individual.]
Reg 5(3) continues –
‘In these Regulations, “beneficial owner”, in relation to a partnership (other than a

limited liability partnership), means any individual who –
(a) ultimately is entitled to or controls (in each case whether directly or indirectly)
more than 25% share of the capital or profits of the partnership or more than
25% of the voting rights in the partnership;
52
(b) …; or
(c) otherwise exercises ultimate control over the management of the partnership.’
2. Risk assessment by relevant persons
Reg 18(1) MLR 2017 requires that –
‘A relevant person must take appropriate steps to identify and assess the risks
of money laundering and terrorist financing to which its business is subject.’
Policies, controls and procedures
Reg 19(1) MLR 2017 provides that: -
‘A relevant person must –
(a) establish and maintain policies, controls and procedures to mitigate and
manage effectively the risks of money laundering and terrorist financing
identified in any risk assessment undertaken by the relevant person under
regulation 18(1);
(b) regularly review and update the policies, controls and procedures established
under sub-paragraph (a);
(c)…’
Reg 21 requires a relevant person to establish specified internal controls where

“appropriate with regard to the size and nature of its business”.
3. Customer Due Diligence
Reg 27(1) MLR 2017 states that: -
‘A relevant person must apply customer due diligence measures if the person -
53
(a) establishes a business relationship;
(b) …;
(c) suspects money laundering or terrorist financing; or
(d) doubts the veracity or adequacy of documents or information previously

obtained for the purposes of identification or verification.’
Reg 27(8) and (9) further provide that –
‘(8) A relevant person must also apply customer due diligence measures –
(a) at other appropriate times to existing customers on a risk based approach;
(b) when the relevant person becomes aware that the circumstances of an
existing customer relevant to its risk assessment for that customer
have changed.
(9) For the purposes of paragraph (8), in determining when it is appropriate to

take customer due diligence measures in relation to existing customers, a
relevant person must take into account, among other things –
(a) any indication that the identity of the customer, or of the customer’s beneficial
owner, has changed;
(b) any transactions which are not reasonably consistent with the relevant
person’s knowledge of the customer;
(c) any change in the purpose or intended nature of the relevant person’s
relationship with the customer;
(d) …’
54
4. Customer due diligence measures
Reg 28 MLR 2017 provides that –
‘(1) This regulation applies when a relevant person is required by regulation 27 to

apply customer due diligence measures.
(2) …
(3) Where the customer is a body corporate –
(a) the relevant person must obtain and verify –
(i) the name of the body corporate;

(ii) its company number or other registration number;
(iii) the address of its registered office, and if different, its principal place
of business;
(b) subject to paragraph (5), the relevant person must take reasonable measures
to determine and verify –
(i) the law to which the body corporate is subject, and its constitution (whether
set out in its articles of association or other governing documents);
(ii) the full names of the board of directors (or if there is no board, the members
of the equivalent management body) and the senior persons responsible for
the operations of the body corporate.
(4) Subject to paragraph (5), where the customer is beneficially owned by

another person, the relevant person must –
(a) identify the beneficial owner;
(b) take reasonable measures to verify the identity of the beneficial owner so that
the relevant person is satisfied that it knows who the beneficial owner is; and
(c) if the beneficial owner is a legal person, trust, company, foundation or similar
legal arrangement take reasonable measures to understand the ownership
and control structure of that legal person, trust, company, foundation or
similar legal arrangement.
55
(5) Paragraphs (3)(b) and (4) do not apply where the customer is a company
which is listed on a regulated market.
(6) If the customer is a body corporate, and paragraph (7) applies, the relevant
person may treat the senior person in that body corporate responsible for
managing it as its beneficial owner.
(7) This paragraph applies if (and only if) the relevant person has exhausted all
possible means of identifying the beneficial owner of the body corporate and
-
(a) has not succeeded in doing so, or
(b) is not satisfied that the individual identified is in fact the beneficial owner.
(8) …
(9) Relevant persons do not satisfy their requirements under paragraph (4) by
relying solely on the information –
(a) contained in –
(i) the register of people with significant control kept by a company …;

(ii) the register of people with significant control kept by a limited liability
partnership …; or
(iii) the register of people with significant control kept by a European Public
Limited-Liability Company …;
(b) referred to in sub-paragraph (a) and delivered to the registrar of companies

… under any enactment; or
(c) …
(10) Where a person (“A”) purports to act on behalf of the customer, the relevant
person must –
(a) verify that A is authorised to act on the customer’s behalf;
(b) identify A; and
(c) verify A’s identity on the basis of documents or information in either case
56
obtained from a reliable source which is independent of both A and
the customer.
(11) The relevant person must conduct ongoing monitoring of a business

relationship, including -
(a) scrutiny of transactions undertaken throughout the course of the relationship

(including, where necessary, the source of funds) to ensure that the
transactions are consistent with the relevant person’s knowledge of the
customer, the customer’s business and risk profile;
(b) undertaking reviews of existing records and keeping the documents or

information obtained for the purpose of applying customer due diligence
measures up-to-date.
(12) to (17) …
(18) For the purposes of this regulation –
(a) except in paragraph (10), “verify” means verify on the basis of documents or
information in either case obtained from a reliable source which is
independent of the person whose identity is being verified;
(b) documents issued or made available by an official body are to be regarded

as being independent of a person even if they are provided or made
available to the relevant person by or on behalf of that person.’

57
First published September 2017
who are Not Individuals – Part 2
The Money Laundering, Terrorist Financing and Transfer of Funds (Information on

the Payer) Regulations 2017 transpose the Fourth EU Money Laundering Directive
(Directive 2015/849/EU of the European Parliament and of the Council) into UK law,
with effect from 26 June 2017.
The 2017 Regulations (‘MLR 2017’) have also replaced the Money Laundering
Regulations 2007.
This article, which is written in two parts, highlights key aspects of the new Regulations
insofar as they are likely to be relevant to commercial property lawyers acting for
a UK-based client who is not an individual. This note does not consider the position
of a non-UK-based client, such as a body corporate constituted under the law of a
country or territory outside the United Kingdom.
The MLR 2017 are currently set out in full on www.legislation.gov.uk, which contains
public sector information licensed under the Open Government Licence v3.0.
5. Obligation to apply enhanced customer due diligence
Reg 33 MLR 2017 sets out the following legal duties –
‘(1) A relevant person must apply enhanced customer due diligence measures
and enhanced ongoing monitoring, in addition to the customer due diligence
measures required under regulation 28 and …, to manage and mitigate the
risks arising –
(a) in any case identified as one where there is a high risk of money laundering or
terrorist financing -
(i) …
(ii) …
58
(b) to (e) [not cited]
(f) in any case where –
(i) a transaction is complex and unusually large, or there is an unusual pattern of

transactions, and
(ii) the transaction or transactions have no apparent economic or legal

purpose, and
(g) in any other case which by its nature can present a higher risk of money
laundering or terrorist financing.
(2) and (3) [not cited]
(4) The enhanced customer due diligence measures taken by a relevant person
for the purpose of paragraph (1)(f) must include –
(a) as far as reasonably possible, examining the background and purpose of the
transaction, and
(b) increasing the degree and nature of monitoring of the business relationship
in which the transaction is made to determine whether that transaction or
that relationship appear to be suspicious.
(5) Depending on the requirements of the case, the enhanced customer due
diligence measures required under paragraph (1) may also include, among
other things –
(a) seeking additional independent, reliable sources to verify information

provided or made available to the relevant person;
(b) taking additional measures to understand better the background, ownership

and financial situation of the customer, and other parties to the transaction;
(c) taking further steps to be satisfied that the transaction is consistent with the
purpose and intended nature of the business relationship;
(d) increasing the monitoring of the business relationship, including greater

scrutiny of transactions.
59
(6) When assessing whether there is a high risk of money laundering or terrorist
financing in a particular situation, and the extent of the measures which
should be taken to manage and mitigate that risk, relevant persons must take
account of risk factors including, among other things –
(a) customer risk factors, including whether –
(i) the business relationship is conducted in unusual circumstances;
(ii) the customer is resident in a geographical area of high risk (see sub-
paragraph (c));
(iii) the customer is a legal person or legal arrangement that is a vehicle for
holding personal assets;
(iv) the customer is a company that has nominee shareholders or shares in

bearer form;
(v) the customer is a business that is cash intensive;
(vi) the corporate structure of the customer is unusual or excessively complex

given the nature of the company’s business;
(b) product, service, transaction or delivery channel risk factors, including whether
–
(i) the product involves private banking;
(ii) the product or transaction is one which might favour anonymity;
(iii) the situation involves non-face-to-face business relationships or transactions,

without certain safeguards, such as electronic signatures;
(iv) payments will be received from unknown or unassociated third parties;
(v) new products and new business practices are involved, including new delivery
mechanisms, and the use of new or developing technologies for both new
and pre-existing products;
60
(vi) the service involves the provision of nominee directors, nominee shareholders
or shadow directors, or the formation of companies in a third country;
(c) geographical risk factors [which are not considered in this note]
(7) In making the assessment referred to in paragraph (6), relevant persons must
bear in mind that the presence of one or more risk factors may not always
indicate that there is a high risk of money laundering or terrorist financing in a
particular situation.’
(8) [not cited]’
6. Application of simplified customer due diligence
Reg 37 MLR 2017 provides that –
‘(1) A relevant person may apply simplified customer due diligence measures in
relation to a particular business relationship or transaction if it determines
that the business relationship or transaction presents a low degree of risk of
money laundering and terrorist financing, having taken into account –
(a) the risk assessment it carried out under regulation 18(1);
(b) …; and
(c) the risk factors referred to in paragraph (3).
(2) Where a relevant person applies simplified customer due diligence measures,
it must –
(a) continue to comply with the requirements in regulation 28, but it may adjust
the extent, timing or type of the measures it undertakes under that regulation
to reflect its determination under paragraph (1); and
(b) carry out sufficient monitoring of any business relationships or transactions

which are subject to those measures to enable it to detect any unusual or
suspicious transactions.
61
(3) When assessing whether there is a low degree of risk of money laundering and
terrorist financing in a particular situation, and the extent to which it is
appropriate to apply simplified customer due diligence measures in that
situation, the relevant person must take account of risk factors including,
among other things -
(a) customer risk factors, including whether the customer –
(i) to (iii) …;
(iv) is a company whose securities are listed on a regulated market, and the
location of the regulated market;
(b) ...
(c) geographical risk factors [which are not considered in this note]
(4) In making the assessment referred to in paragraph (3), relevant persons must
bear in mind that the presence of one or more risk factors may not always
indicate that there is a low risk of money laundering and terrorist financing in a
particular situation.
(5) to (7) [not cited]
(8) A relevant person must not continue to apply simplified customer due
diligence measures under paragraph (1) –
(a) if it doubts the veracity or accuracy of any documents or information

previously obtained for the purposes of identification or verification;
(b) if its risk assessment changes and it no longer considers that there is a low
degree of risk of money laundering and terrorist financing;
(c) if it suspects money laundering or terrorist financing; or
(d) if any of the conditions set out in regulation 33(1) apply.’
62
7. Corporate bodies: obligations
Reg 43 MLR 2017 provides as follows –
‘(1) When a UK body corporate which is not listed on a regulated market enters
into a relevant transaction with a relevant person, or forms a business
relationship with a relevant person, the body corporate must on request from
the relevant person provide the relevant person with –
(a) information identifying –
(i) its name, registered number, registered office and principal place of business;
(ii) its board of directors, or if there is no board, the members of the equivalent
management body;
(iii) the senior persons responsible for its operations;
(iv) the law to which it is subject;
(v) its legal owners;
(vi) its beneficial owners; and
(b) its articles of association or other governing documents.
(2) For the purposes of paragraph (1)(a)(v) and (vi), references to the legal
owners and beneficial owners of a UK body corporate include a reference
to the legal owners and beneficial owners of anybody corporate or trust
which is directly or indirectly a legal owner or beneficial owner of that
body corporate.
(3) Paragraph (1)(a)(vi) does not apply if no person qualifies as a beneficial

owner (within the meaning of regulation 5(1)) of –
(a) the UK body corporate; or
(b) anybody corporate which is directly or indirectly the owner of that UK

body corporate.
63
(4) If, during the course of a business relationship, there is any change in the
identity of the individuals or information falling within paragraph (1), the UK
body corporate referred to in paragraph (1) must notify the relevant person of
the change and the date on which it occurred within fourteen days from the
date on which the body corporate becomes aware of the change.
(5) The UK body corporate must on request provide all or part of the information
referred to in paragraph (1) to a law enforcement authority.
(6) to (8) [not cited]
(9) For the purposes of this regulation, a “relevant transaction” means a

transaction in relation to which the relevant person is required to apply
customer due diligence measures under regulation 27.’
8. Reliance
Reg 39 MLR 2017 contain more robust restrictions on reliance and includes the
following provisions -
‘(1) A relevant person may rely on a person who falls within paragraph (3) (“the
third party”) to apply any of the customer due diligence measures required by
regulation 28(2) to (6) and (10) but, notwithstanding the relevant person’s
reliance on the third party, the relevant person remains liable for any failure to
apply such measures.’
‘(3) The persons within this paragraph are –
(a) another relevant person who is subject to these Regulations under

regulation 8;
(b) to (d) …’
‘(7) Nothing in this regulation prevents a relevant person applying customer

due diligence measures by means of an agent or an outsourcing service
provider provided that the arrangements between the relevant person and
the agent or outsourcing service provider provide for the relevant person to
remain liable for any failure to apply such measures.’
64
Note: Paragraph (8) defines the term “outsourcing service provider”.
Reg 28 MLR 2017 was considered in Part 1 of this article. As a reminder, the customer
due diligence measures set out in regulation 28(2) to (6) and (10) are required where
the customer is a body corporate, the customer is beneficially owned by another
person or a person (“A”) purports to act on behalf of the customer.
LAW2019
WE LOOK FORWARD TO
SEEING YOU IN 2019
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65
the SOLICITORS group @SOLICITORSgroup #TSGLAW
First published October 2017
Landlord & Tenant Act 1954 – Is Motive Relevant to
Establishing Intention under Possession Ground (f)?
S Franses Ltd v Cavendish Hotel (London) Ltd [2017] EWHC 1670 (QB)
A county court judge dismissed the appellant’s tenant’s claim under the Landlord
and Tenant Act 1954 for a new tenancy of premises in London, on the basis that the
Respondent Landlord had made out its ground of opposition under s.30(1)(f).
Section 30(1)(f) provides:
“(f) that on the termination of the current tenancy the landlord intends to
demolish or reconstruct the premises comprised in the holding or a substantial
part of those premises or to carry out substantial work or construction on the
holding or part thereof and that he could not reasonably do so without
obtaining possession of the holding.”
Section 64(1) of the 1954 Act provides that –
‘In any case where –
(a) a notice to terminate a tenancy has been given under … Part II of this Act or
a request for a new tenancy has been made under Part II thereof, and
(b) an application to the court has been made …under section 24(1) or 29(2) of
this Act,” [i.e. seeking an order for grant of new tenancy or termination of
current tenancy] “as the case may be, and
(c) apart from this section the effect of the notice or request would be to
terminate the tenancy before the expiration of the period of three months
8beginning with the date on which the application is finally disposed of,
the effect of the notice or request shall be to terminate the tenancy at the expiration
of the said period of three months and not at any other time.’
66
Section 64(2) then identifies the date on which an application is finally disposed of.
[A landlord notice to terminate a tenancy is often called a section 25 notice and a

tenant request for a new tenancy is sometimes referred to as a section 26 request.]
Section 31(2), as far as material, provides:
“Where the landlord opposes an application under section 24(1) of this Act,
or makes an application under section 29(2) of this Act, on one or more of the
grounds specified in section 30(1)(d) to (f) of this Act but establishes none of those
grounds, and none of the other grounds specified in section 30(1) of this Act, to
the satisfaction of the court, then if the court would have been satisfied on any of
the grounds specified in section 30(1)(d) to (f) of this Act if the date of termination
specified in the landlord’s notice or, as the case may be, the date specified in the
tenant’s request for a new tenancy as the date from which the new tenancy is to
begin, had been such later date as the court may determine, being a date not
more than one year later than the date so specified –
(a) the court shall make a declaration to that effect, stating of which of the said
grounds the court would have been satisfied as aforesaid and specifying the
date determined by the court as aforesaid, but shall not make an order for
the grant of a new tenancy;
(b) …”
The Leases
The tenant occupied most of the ground floor and basement areas of the building
under two underleases. The rest of the building was used as a luxury hotel.
The ‘principal’ underlease contained a right of re-entry in the following terms:
“At all reasonable times during the daytime (or forthwith in case of
emergency) to permit the Landlord or its Surveyor or Agents or any person
authorised by it with or without workmen or contractors to enter the demised
premises for the purpose of examining the state of repair and condition
thereof and also for the purpose of executing any improvement it may wish to
execute or for the purpose of repairing, maintaining, cleansing, rebuilding,
altering or examining the demised premises or any adjoining or neighbouring
premises or the remainder of the said building …”
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The landlord admitted that its planned works would not be undertaken if the Tenant
left voluntarily, and that if the court ruled against the Landlord on ground (f) the
works would not be undertaken at all. It followed that the Landlord’s predominant
purpose in devising these works was to obtain vacant possession of the premises
underground (f).
Unconditional Subjective Intention?
The county court judge found, as a matter of fact, that –
“The Landlord’s current intention is in one sense conditional. It is conditional on

the termination of the current tenancy.”
The county court judge also construed the phrase “on the determination of the
current tenancy” to mean “within a short time of the tenancy terminating under s.64
of the 1954 Act” (i.e. he notionally included the 3 months and 21 days the parties
accept should be accounted for, and added to it a short time).
However, Jay J, the High Court judge, held that –
• Section 30(1)(f) requires that a landlord should intend to carry out the works
“on the termination of the current tenancy”. The effect of section 64 was that
the date of termination was 3 months and 21 days after the judge’s order.
• That intention must be honest and genuine, as well as being fixed, settled
and unconditional.
• As at the date of the hearing, it was clear that the Tenant was not going to
leave voluntarily. By that date, the Landlord had decided that it was essential
for its purposes to proceed with the planned works because there was no
other way of securing vacant possession. Its decision was conditional only in
the sense that the Tenant was adamant that it was staying put.
• Questions of motive are irrelevant to the issue posed by ground (f).
• Ground (f) mandates an examination of what the Landlord intends to do and

whether he intends to do it, not of why he may intend to do it. It further
requires the court to consider the nature and quality of the landlord’s intention
at the termination of the tenancy, including (by definition) the prolongation of
the contractual term by force of section 64.
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• The courts have interpreted ground (f) to include a period of reasonable
time after the end of the tenancy, and the court’s consideration of the
landlord’s intention must cover that period. The landlord’s intention is assessed
on the evidence available at the date of the hearing, but the court must also
be satisfied that the landlord will remain steadfast to that intention once he
obtains vacant possession, including any period of reasonable time thereafter.
• Therefore, the landlord had the requisite subjective intention.
Objective Evidence of Intention?
The county court judge was satisfied that the Landlord could reasonably expect to
proceed with the planned works within a reasonable time (12 months) of obtaining
vacant possession, with real prospects of overcoming such modest planning and
licence problems as there were.
Jay J was satisfied that the county court judge was wrong to hold that a reasonable
time for commencing the planned works was within 12 months of obtaining vacant
possession. He further observed that –
“In no other case has a court been so generous to a landlord as the judge has
been in the present case” …
Jay J then noted that section 30(1)(f) and section 31(2) are not necessarily looking at
the same period. The court’s power under section 31(2) is tied to the relevant notice
(be it a tenant’s notice or a landlord’s notice) and enables the period specified to
be extended. Section 30(1)(f) is looking at a different period, namely a reasonable
time after the termination of the tenancy.
Derogation from Grant?
Jay J held that the county court judge had correctly observed that the principal
underlease contained a wide right of entry and that the reservation of a right of
entry is limited by the principle that a landlord must not derogate from his grant
or breach the covenant of quiet enjoyment. The judge was further entitled to
conclude that the planned works would “objectively constitute a derogation from
grant and a breach of the covenant of quiet enjoyment”.
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Variation of Underleases?
Counsel for the tenant submitted that, for the purposes of deciding the ground
(f) question of whether the Landlord could carry out the planned works “without
obtaining possession of the holdings”, the judge should have considered whether the
alteration covenants of the underleases could have been varied under section 35
of the 1954 Act, permitting the Tenant to create partitions dividing the premises from
the space which could only be lawfully used for hotel use. If such a variation were
made, the Tenant could effectively repartition the premises so as to occupy them
separately from the hotel.
[Section 35 deals with determining the terms of any new tenancy granted by order
of the court under Part II.]
The High Court held that section 35 did not fall to be considered by the county court
judge because he was being required to determine a preliminary issue, namely
whether the Landlord had made out its ground of opposition underground (f).
Consideration of the terms of any new lease presupposed that the Landlord had
failed in making out its objection; and arose at a subsequent stage in the process.
Works Falling Within Right of Entry
The High Court held that the county court judge had failed to distinguish between
those aspects of the planned works which could have been effected under the right
of entry, and those which could not have been. The authorities confirm that the
works have to be apportioned or divided up to the extent necessary to determine
whether or not the Landlord needs possession of the holding.
Terms of Landlord Undertaking
A director of the Landlord had given the court a written undertaking to commence
the planned works “as soon as vacant possession … has been obtained and
thereafter [to] diligently proceed to complete these specified works”.
The judge was entitled to accept an undertaking which contained no effective

mechanism for monitoring compliance: effectively giving the Tenant reasonable
access to the premises to check. This was because Counsel for the tenant had
not expressly requested that her client should be given a right of access in order to
police the undertaking.
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the SOLICITORS group @LAWBizTechLDON lawbiztech.co.uk
First published November 2017
The Regulatory Reform (Fire Safety) Order 2005
The Regulatory Reform (Fire Safety) Order 2005 (‘Fire Safety Order’) imposes legal
duties on the ‘responsible person’ in relation to non-domestic premises.
The “responsible person” is defined by reg 3 as meaning –
(a) in relation to a workplace, the employer, if the workplace is to any extent

under his control; or
(b) in relation to premises not falling within (a) -
(i) the person who has control of the premises (as occupier or otherwise) in
connection with the carrying on by him of a trade, business or other
undertaking (for profit or not); or
(ii) the owner, where the person in control of the premises does not have control
in connection with the carrying on by that person of a trade, business or other
undertaking: art 3.
A key provision that is relevant to paragraph 3, above is reg 5(4), which provides
that where a person has, by virtue of any contract or tenancy, an obligation of any
extent in relation to –
(a) the maintenance or repair of any premises, including anything in or on

premises; or
(b) the safety of any premises,
that person is to be treated as having control of the premises to the extent that his
obligation so extends.
72
[Note: The ‘owner’ means “the person for the time being receiving the rackrent of
the premises in connection with which the word is used, whether on his own account
or as agent or trustee for another person, or who would so receive the rackrent if the
premises were let at a rackrent”: reg 2.]
The responsible person’s duties include:
• Making a suitable and sufficient assessment of the fire safety risks for the
purpose of identifying the general fire precautions he needs to take to comply
with this Order: reg 9;
• Making and giving effect to such arrangements as are appropriate, having

regard to the size of his undertaking and the nature of its activities, for the
effective planning, organisation, control, monitoring and review of the
preventive and protective measures: reg 11;
• Ensuring that risk related to the presence of dangerous substances in or on the

premises is either eliminated or reduced so far as is reasonably practicable:
reg 12;
• Where necessary, ensuring that the premises are, to the extent that it is
appropriate, equipped with appropriate fire-fighting equipment and with fire
detectors and alarms: reg 13;
• Where necessary, ensuring that routes to emergency exits from premises and
the exits themselves are kept clear at all times: reg 14;
• Establish appropriate procedures, including safety drills, to be followed in the

event of serious and imminent danger: reg 15;
• Where necessary, ensuring that the premises and any fire safety facilities,
equipment and devices provided in respect of the premises are subject to a
suitable system of maintenance and are maintained in an efficient state, in
efficient working order and in good repair: reg 19; and
• (Where one or more other responsible persons share, or have duties in respect
of, premises) co-operating with the other responsible person or persons
concerned so far as is necessary to enable them to comply with the
requirements and prohibitions imposed on them by or under this Order: reg 22.
73
As a rule, the local fire and rescue service is the enforcing authority: reg 25.
The enforcing authority may issue:
• An alterations notice requiring changes to be made to premises or to their use

for the purpose of removing a fire safety risk;
• An enforcement notice requiring the responsible person to take steps to

remedy the failure as may be specified in the notice; and
• A prohibition notice directing that the use to which the prohibition notice
relates is prohibited or restricted to such extent as may be specified in the
notice until the specified matters have been remedied.
The Fire Safety Order also created a number of offences for certain breaches of the
Order. In a number of instances, the defendant would have a defence if he could
prove that he took all reasonable precautions and exercised all due diligence to
avoid the commission of such an offence: see reg 33.
Enforcement of the Fire Safety Order
In the document ‘Fire and Rescue Service, Operational Statistics Bulletin for England
2007/08’ issued by the Department for Communities and Local Government, the
following observations were made:
“3.5 FRSs are required to prioritise audits (inspections) and enforcement action
according to the level of risk within individual types of premises…”
[Note: An FRS is the relevant Fire and Rescue Service.]
In the Department of Communities and Local Government’s “A short guide to

making your premises safe from fire”, dated June 2006, the section entitled ‘Enforcing
the order’ explains that fire authorities “will target their resources and inspections at
those premises that present the highest risk…If you do not meet the order, the fire
authority will provide practical advice or, if the risk is serious, a formal notice. Except
in the most serious cases, the fire authority will work with you to achieve a satisfactory
level of fire safety.” The guide also contains a brief overview of the appeals process.
74
Regarding the implementation of the ‘Fire Safety Order’, the Hereford and Worcester
Fire and Rescue Service says that:
“In carrying out a risk assessment, however, the responsible person may
decide that, given the nature of the premises or the people involved, they do
not have the necessary competence to discharge their duties under the FSO.”
In that case, they could choose to appoint one or more ‘competent’ persons to
assist him/her. The level of necessary competence is not prescribed in the FSO, which
recognises that the extent of competency will vary according to the nature and
complexity of the premises involved.”
“What happens if I share my premises with others?
“If you share a building with others, you will need to co-ordinate your risk
management plan with them.”
Examples of Enforcement Action
On 14th September 2011, a Camberwell building owner received a six-month

sentence suspended for 12 months after being found guilty of breaking a number of
fire safety laws. He was also sentenced to 150 hours of community service and told to
pay over £13,000 in costs.
The offences committed consisted of –
• Lack of a fire risk assessment

• Lack of an emergency plan
• No automatic fire alarm or fire detection system
• No emergency lighting
• The doors to all the bedrooms were not fire resisting and were not fitted
with self-closers
• The staircase from the ground to second floor was not fire protected
• There was no lobby protection on the first-floor landing
• There was no lobby protection between the second and third floors
• There was no alternative means of escape from the upper floors and the exit
discharged into the restaurant: source www.means-of-escape.com.
75
In July 2011, a Nottinghamshire publican and bogus fire risk assessor were jailed
for eight months when the latter (who lacked the required accreditation) illegally
carried out a ‘wholly inadequate’ fire risk assessment on two properties. The property
had inadequate fire doors, exit doors blocked or locked, no alarms or self-closing fire
doors in bedrooms and no alternative escape routes. Fire extinguishers at the hotels
had not been tested for three years.
In December 2010, Greggs the bakers were fined £50,000 and ordered to pay a
further £20,326 in costs after pleading guilty to serious fire breaches at one of its
stores. The contraventions included corridors that were partially blocked by plastic
crates, a fire exit that was locked by four padlocks, and a locked security door at the
other side of the fire exit.
Insurance & Fire Damage
Dalecroft Properties Ltd v Underwriters Subscribing to Certificate Number

755/BA004/2008/OIS/00000282/2008/005
The claimant company (Dalecroft) was the freeholder of a mixed commercial

and residential property in Kent. Dalecroft insured the property with the defendant
underwriters, under a property owner’s policy which covered a number of risks,
including fire. In May 2009 a fire caused severe damage to the property, leaving it in
such a state that it needed to be demolished and rebuilt. Dalecroft made a claim
under the policy: but the defendant underwriters purported to avoid the policy and
tendered the return of the premium.
The Queen’s Bench Division, Commercial Court ruled:
(1) On the evidence, the underwriters had been entitled to avoid the policy of
insurance in its entirety, and to refuse all of the claims. In doing so, the insurer
was entitled to rely on three misrepresentations made at renewal, namely:
(i) the property had been in a ‘good’ state of repair;
(ii) the property had no area of flat roof; and
(iii) the property had not been subject to malicious acts or vandalism.
76
(2) The underwriters had further justification to avoid the policy of insurance on
the grounds of Dalecroft’s failure to disclose that an Emergency Prohibition
Order dated 6 June 2008 had been served on the person responsible for
managing the residential parts of the property. The EPO, made under the
Housing Act 2004 s 43, prohibited the use of the residential parts of the
Property for any purposes whatsoever.
(3) Dalecroft’s breaches of the policy conditions also discharged the underwriters
from liability under the policy. More specifically, Dalecroft -
(i) was in breach of the Commercial Unoccupancy condition requiring the

empty commercial elements of the Property to be kept clear of all loose
combustible material; and
(ii) was in breach of the Commercial Unoccupancy condition requiring the

empty commercial elements of the Property to be secured against illegal
entry, with all windows and doors boarded or bricked up at ground and
basement level so as to prevent unauthorised entry and all letterboxes to be
sealed to prevent insertion of material.
In the circumstances of this case, there were no grounds for confining the effect of
Dalecroft’s breaches of warranty to the commercial parts only.
77
First published December 2017
Recent Case on Grant & Exercise of Option
TCG Pubs Ltd (in administration) v Master and Wardens or Governors of the Art or
Mystery of the Girdlers of London [2017] EWHC 772 (Ch)
The 40 year ‘pub’ lease (‘the Hop Poles lease‘) was granted in 1987 by the Girdlers as
landlord and ‘Watney’ as tenant. TCG took the lease by an assignment.
A proviso in the lease at Clause 3(12)(I) read as follows:
“(I) … PROVIDED NEVERTHELESS that Watney if they wish to assign or sublet

(other than sublettings pursuant to sub-clause (iii) hereof) the whole of the
demised premises during the said term to any other party must first grant an
option to the Girdlers Company (such option to be exercised within sixty days
of the date of receipt of notice by the Girdlers Company of application by
Watney to assign or sublet (save where pursuant as aforesaid) the whole of
the demised premises to such other party) to buy back the residue of the
said term at the then current open market value of the demised premises …
If such option is not exercised by the Girdlers Company as aforesaid Watney
may with the consent of the Girdlers Company such consent not to be
unreasonably withheld or delayed assign or sublet the whole of the
demised premises.”
Mann J referred to this this proviso as “the option clause”. [Sub-clause (iii) is not
covered in this note.]
Sub-clause (I) did not itself contain the usual express prohibition on assignment
without consent, but that came later in Clause 3.
After a Business Purchase Agreement (BPA) was entered into, TCG and Stonegate set
about procuring an assignment of various leases, including the Hop Poles lease.
78
On 7th October 2015 Solicitors on behalf of the administrators of TCG, wrote to
the landlord:
“We refer to the Lease dated 22nd June 1987 made between [Girdlers] and
[Watney] … TCG Pubs Ltd is the current tenant of the Property.”
In accordance with this Clause [Clause 12(I)], we have been instructed by the
Administrators to offer you the ability to purchase the Property at a proposed price
of £1,700,000.00. The Administrators have received an offer of £1,700,000.00 for the
Property which is considered to be the open market value of the Property. …”
This letter was referred to as “the option letter”.
This letter was followed the next day by a letter from Solicitors acting on behalf of
Stonegate, which the judge called “the application letter”.
The letter … goes on to say:
“Our client: Stonegate Pub Company Ltd (the “Buyer”)”
“As you may already be aware, the current Tenant under the Lease entered into
administration on 29th September 2015. …
The Administrators of the Tenant have entered into an agreement for sale of a
number of assets of the Tenant, including the Property, with our client, the Buyer.
In accordance with Clause 12(I) of the Lease … the Tenant has granted an Option to
the Landlord to buy the residue of the term at the current market rate… Accordingly,
please take this letter as our formal application for Landlord’s consent to the
assignment of the Lease to the Buyer.
….”
79
The High Court’s Judgment
(1) Could the option be triggered or proffered in a letter?
TCG’s case was that the requirement of the grant of an option could be fulfilled by
a letter making an appropriate offer. No other degree of formality was required.
The words in the proviso were capable of meaning that what was required was a
unilateral notice in accordance with the clause (short of a formal option document).
The Girdlers’ contended that what was required was the actual grant of an option -
a separate document, containing an option which the Girdlers could then exercise.
The words in the clause were carefully chosen and required a formal “grant” of
something which was appropriately described as the subject of a grant - “grant an
option”. “Grant” has an accepted and formal meaning, and it means a discrete
and formal act by which the property right is conferred. What the parties intended
was the grant of a formal option, which had the benefit of irrevocability
and assignability.
Mann J concluded that the Girdlers are right on this point. The wording used was
far more consistent with the grant of an option than with the process of giving
notice. The very words “grant an option” had a more obvious reference to a formal
transaction. Therefore, the prior offer of the premises has to be done by the grant of
an option. By contrast, an application to assign had to be done by notice.
(2) What was the effect of the 1989 legislation on the option clause?
At the date of execution of the lease [i.e. in 1987] the tenant could have fulfilled
the prerequisites for offering an assignment by the unilateral act of presenting the
landlord with an executed option document. This would have complied with section
40 Law of Property Act 1925.
However, s 40 LPA 1925 was then repealed and replaced by section 2 Law of
Property (Miscellaneous) Provisions Act 1989. Moreover, the Court rejected the
contention that the parties would not, or would no longer, consider a formal grant
was necessary in the changed circumstances [brought about by the 1989 Act]
where it could not be done without the landlord’s co-operation.
80
Mann J noted that -
‘Because the terms of section 2 of the 1989 Act require both parties to sign a
contract for the disposition of an interest in land (including an option), the
grant of an option under the option clause can no longer be achieved by the
unilateral act that the original drafting requires or assumes.
“2(3) The document incorporating the terms or, where contracts are exchanged,
one of the documents incorporating them (but not necessarily the same one)
must be signed by or on behalf of each party to the contract.”’
It was common ground in this case that that would apply to any option document
within the scope of the option clause (assuming a strict grant was required, which
the judge found to have been the case).
Mann J continued that -
‘47. I do not think that the 1989 Act suddenly exonerates the tenant from having
to proffer a formal option; nor do I think that the landlord comes under
some sort of duty to co-operate. … the answer seems to me to be that the
tenant proffers the same option as before, with an invitation to the landlord to
execute it. If the landlord does so, the option has been granted, and its
mechanism is worked through. That gives the landlord the benefit of the
option that the clause anticipates. If the landlord declines to execute it then
the tenant has done all it can and that, for these purposes, would be taken to
have fulfilled its obligations under the clause. The tenant can then move on to
seek permission to assign and the landlord could not resist that on the ground
that an option has not been granted. This does not impose an obligation on
the landlord... The landlord has a choice - it can take the benefit of the option
if it wishes to have it, or reject it by not executing. If it rejects it the option has
not been strictly “granted”, but the landlord has had its opportunity to have
one, which would be enough. …’
(3) Was the option letter sufficient to trigger the landlord’s rights under the clause?
The Court held that the option letter did not proffer a formal option, so it could not
comply with the pre-requisites to the tenant’s applying for licence to assign.
81
(4) Was the application letter an effective application for licence to assign?
Though not necessary to his judgment, Mann J then considered this issue, which
affected “when the clock started running for the landlord’s response to any request
for permission to assign for the purposes of the “reasonable time” allowed to a
landlord to respond under section 1(3) of the Landlord and Tenant Act 1988.
The Court was of the opinion that the letter on its face did not purport to be anything
other than a letter written on behalf of the proposed assignee. Accordingly as and
when received that letter did not amount to a letter which purported to be written
on behalf of the tenant, or written with the tenant’s authority.
However, the Buyer did have authority to make an application for consent to assign,
which was “clearly implicit” in the Business Purchase Agreement (“BPA”).
Moreover, the landlord sought confirmation that the application for consent was
made on behalf of the tenant by letter of 13th November and that was confirmed
by Stonegate’s solicitors by email of 17th November and the administrators’ solicitors’
email of 18th November. Accordingly, so far as relevant, the application
for consent to assign should be treated as having been made by the tenant from
18th November.
(5) Was there a waiver of the buyback right?
The Court then concluded there had been no waiver of the buyback right and in
doing so noted that that the option letter contained a misrepresentation in that it
stated, in effect, that the offer of £1,700,000 for the Property was “an offer in the
normal sense and that the Administrators considered it to be the open market
value.” The underlying suggestion was that there was some sort of arm’s length
negotiation for and marketing of the property. None of that was accurate though.
The £1.7m referred to was an apportioned part of a global consideration to be paid

for a large number of properties, that apportionment having been carried out by
Stonegate as purchaser for its own purposes and being one which did not in any
way coincided with market value.
82
Key Lessons to be Learned from this Case
(i) The onus is on the parties’ lawyers to ensure that any formalities agreed
or required for the valid exercise of an option are expressly set out in the
option agreement.
(ii) The grant of an option can no longer be achieved by the unilateral act by
one party (e.g. the grantee).
(iii) An application for consent to assign a lease must be made by the person
authorised by the lease to make it.
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