As part of this, the government has sought to find ways to encourage the uptake of renewable sources by both businesses and consumers alike. Whether that is Solar panels (or even a heat pump) for a person’s home or opening a solar farm (or renting land for a solar farm). There are many opportunities.

Whilst we cannot, and will not, advise on these opportunities as investments, we can give a little insight into what these are and some of the legal aspects around them.

Business

Incentives  

As part of the move to encourage businesses towards a more carbon neutral approach, part of the Government’s plan to hit their net zero targets, opportunities for businesses to benefit, especially in periods where energy prices have affected them, have been rolled out.

The smart export guarantee – a replacement for feed in tariffs, provide a guaranteed rate for electricity produced by small business sources such as a business that has solar panels on the roof of its premises or on land that it owns to sell excess energy to the national grid (or energy company). Previously feed in tariffs operated, similar in nature to the Smart Export Guarantee however the rates were considered too high.

Solar Farm – owned and operated by the business  

In some cases, businesses may choose to set up their own solar farm or similar source of energy not just for their own use but also for the purposes of selling energy back to the grid.

The installation of a solar farm often involves a contract known as an EPC contract (Engineering, Procurement and Construction).

The actual installation of a solar farm can be rather quick, although like any contract it can have its own issues, such as immigration laws affecting the workers utilised in installation. There are several stages that are likely to occur, such as assessing irradiation levels for the solar farm, in some cases this is required by investors backing the project. The 4 key stages are the land, planning, grid and the generation assets.

Once the Farm is up and running, contracts will need to be negotiated with the energy companies that the business wishes sell the electricity to and also ensure that your farm is compliant with the necessary health and safety laws and standards for such an operation and if a separate manager is brought in for the farm, the agreement with that manager.

Solar farm – leasing the land to the operator  

It is also possible for land owners with sufficient space to lease out land to solar farm companies or even wind farm companies to install their equipment and operate.  As part of this, the tenants may seek to put in place an option agreement between the landlord and tenant to enable the tenant to have the option to purchase the land they are renting in certain circumstances (such as the landlord proposing to sell the land to another person or entity). Lease agreements can be complex, like all leases, to reflect things such as responsibilities for repair and upkeep. Option agreements may require negotiations as to the valuation of the land when the option is being exercised and on the scenarios in which the option may be triggered.

Consumers

For Consumers, there are many ways that they can be involved in renewable energy, whether that be buying their electricity and gas from suppliers that utilise only renewable sources or purchasing their own solar panels or heat pumps.

Consumers are able to benefit from the smart export guarantee as well as other incentives such as subsidy schemes to install heat pumps.

In the past the solar panel installation side of the renewable energy sector suffered some knockbacks due to several smaller companies becoming insolvent causing those that paid up front to lose their monies. To combat this and to help increase consumer confidence in this sector, the government has created a consumer code for installers and suppliers to follow as well as schemes to protect the deposits paid by consumers and restrict the amount (in percentage of the cost) that the supplier/installation business can take from their customers.

The encouragement of consumers into obtaining solar panels and battery systems forms part of the overall strategy to boost the Energy Security of the country, to enable us to rely less on foreign supplies of energy which influence the prices we pay.

There can be different influences on whether these incentives will benefit a household including whether permission is needed from a landlord, local authority and even regulators where applicable.

For further advice on the legal aspects of the above, please contact our Corporate / Commercial or Commercial Property teams.

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A local authority will need to decide as to whether or not a vacant premises (i.e. one being vacant for at least 366 days in the last two years) should be subject to a rental auction. To “auction” the property, the local authority would need to take the following steps:

• Serve an initial letting notice on a landlord preventing it from letting the premises whilst the notice is in force without the local authority’s consent unless the landlord has previously entered into a contract with a proposed Tenant.

• The local authority may give consent where a tenancy agreed by the landlord is for at least one year and the local authority is satisfied that it will lead to the premises being occupied by regular presence of people.

• If the premises have not been let within 8 weeks of the initial notice, the local authority can serve a final letting notice on the landlord, but this has to be before the initial notice has expired.

• The final letting notice will expire at the end of a maximum 14 week period if it has not been revoked or withdrawn on appeal.

• During the final letting notice period the landlord will not be able to let the premises or carry out works to the premises without written consent from the local authority and the local authority can arrange rental auction of the property.

Once a successful bidder is found by the local authority, the landlord would not be involved in any contract negotiations and the tenant would sign a contract / agreement for lease however the landlord would not be required to do so. The contract / agreement for lease is expected to set out the terms of the tenancy and could contain an obligation on landlords and/or tenants to carry out works. The contract would state that any lease would be excluded from the Landlord and Tenant Act 1954.

The intention of the proposal is to increase investment into high street premises and regenerate towns and city centres however forcing the landlord to enter into a contract with a tenant they would not have ordinarily considered could lead to, amongst other things a strained landlord and tenant relationship.

The UK government has launched a consultation in relation to the proposed initiative which closes on 23 June 2023 after which finer details will be incorporated/ set out. There has been strong industry objection and the aim of the consultation is to seek the opinion of commercial landlords who will undoubtedly be concerned with the impact the process will have on their investments.

For further advice on the above or any other Comercial Property issues, please contact us

Article written by Commercial Property Solicitor, Bejul Lakhani-Lever

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Below is a note of key matters tenants should also consider, ideally before terms are agreed with the landlord and certainly before the lease is signed. The list is not exhaustive.

 Planning Use

The lease may authorise that the use of the Property, but this does not mean that the Property has the correct planning use. Tenants are advised to investigate whether the property has the planning use that they need it to have to operate their business. If it does not, the tenant will need to agree with the landlord that it can apply for planning to change the use and an agreement for lease should be entered into the agreement for lease would be conditional on planning so that if planning is not granted the tenant is not compelled to enter into the lease. Tenants are advised not to enter into leases until the planning use is clear.  Having an incorrect planning use can lead to enforcement action being taken by the local authority thus preventing a tenant’s desired use of a Property yet a liability to pay rent.

End of the Term

The most common way a lease will end is on the contractual expiry date whereby, the tenant will vacate the property. However, the Landlord and Tenant Act 1954 is legislation which gives a tenant, occupying a property for business purposes, a statutory right to renew their lease on similar terms to their existing lease. The landlord can request that the lease is contracted out of the Landlord and Tenant Act 1954, so it is important that you consider your rights as a tenant prior to entering into a lease. If, for example, you have plans for growth expansion and future sale of your business a protected tenancy is the more attractive option to a proposed buyer.

Stamp Duty Land Tax and Registration:

A grant of a lease may trigger the payment of SDLT and/or as registration. This will depend on the length of the lease, the amount of the rent or premium.

The amount of SDLT can increase if VAT is payable on the rent. HMRC will calculate SDLT on the amount of rent including VAT. This may be additional expense which a tenant has not factored in.

Where a lease is for a term of more than 7 years it will be compulsorily registerable at the land registry. The obligation to register also applies to reversionary leases even where the term is less than 7 years, where the term start date is more than three months after the date of the grant of the lease.

Rent Review

Where there is an open market rent review clause in the Property, rent will be reviewed on the various assumptions and disregards which should be reviewed by your surveyor.  Improvement works that you carry out should be disregarded on rent review as the landlord should not benefit from an increased rent as a result of the Tenant making improvements to the Property. Furthermore, any alterations should also be disregarded. The assumptions and disregards should be drafted on the basis that they are fair to the Property they refer to as at the date of grant.

Repair

Leases are often drafted on a “full repairing basis”. This means the landlord can ask you to return the Property in a better state than it was in at the time of the grant of the lease. You and your surveyor should inspect the Property to ascertain the state and condition of the Property and where the Property is in an inadequate state of repair, a schedule of condition recording the state of repair should be included in the lease. This will limit your repairing obligation and thus you will not have to return the property in any better state than evidenced by the schedule of condition. Landlord’s will try and resist this point but where required it should not be conceded.

EPC Rating:

Tenants ought to ensure that the Property has a minimum energy efficiency rating of E. As of 1 April 2023 all commercial premises (unless exempt) need to have a minimum E rating in order for the landlord to be able to lawfully let the property. It is envisaged that the minimum standard by 2023 will be at level C and level B by 2030. Tenants should therefore ensure that there are clauses in the lease stating that improvement works in relation to the EPC ratings are carried out at the Landlord’s cost and not the Tenants.

Sharing occupation of a leased property

A commercial lease should clearly set out a tenant’s ability (if any) to sell its lease to someone else, sublet or share occupation of the property with a third party. Unless this is a key part of your business model you may not give it much thought when signing up to the lease however, circumstances can change over time and it is advisable to clearly understand your options to assign, sublet or share occupation of the property.

Break clauses

Break clauses allow you to terminate a lease at a certain time during the term provided you have given notice as required by the Landlord. Break clauses often come with tight restrictions so you must ensure that at the Break date you are able to comply with those restrictions. For example, the requirement to deliver with vacant possession is extremely difficult to comply with. There is extensive commentary and case law surrounding this.  It is essential that a break clause contains a requirement for the landlord to refund any overpayment of rent from the Break Date to the next Rent payment date to ensure you are not out of pocket.

End of the Term

The most common way a lease will end is on the contractual expiry date whereby, the tenant will vacate the property. However, the Landlord and Tenant Act 1954 is legislation which gives a tenant, occupying a property for business purposes, a statutory right to renew their lease on similar terms to their existing lease. The landlord can request that the lease is contracted out of the Landlord and Tenant Act 1954, so it is important that you consider your rights as a tenant prior to entering into a lease.

Our advice to any potential tenant is to give a great deal of consideration to terms of the lease and matters highlighted above before entering into the lease. A lease is a liability which will run for a number of years so it is important that the terms are acceptable and correct for all parties. Please contact our experienced Commercial Property team.

Article written by Commercial Property Solicitor Bejul Lekhani-Lever

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As of 1st April 2023 it will be unlawful for Landlord’s of commercial premises to continue letting a property with an EPC rating lower than minimum standard E (a sub-standard property).  The following circumstances are exceptions to this rule:

• Where the landlord has registered an exemption on the Private Rented Sector Exemptions Register; or
• All relevant works have been carried out, but the property still remains substandard and an exemption to this effect has been registered.

Commercial landlords are therefore advised to review their property portfolios and carry out improvement works to sub-standard property as a matter of priority. It is envisaged that by 2027 MEES must be at a minimum C standard and by 2030 minimum B standard.

Where a landlord continues to let sub-standard property, financial penalties of up to £150,000 (calculated on the rateable value of the property in question) can be imposed. Non-compliant landlord’s may also be named.

There are permitted exemptions available to landlords, but they are only effective for 5 years and must be reapplied for after expiry. Exemptions cannot be transferred to successors in title. The permitted exemptions are:

• Consent: where consent to the works cannot be obtained from a third party or such consent is subject to unreasonable conditions. The onus is on landlords to show they have made reasonable endeavours to obtain this.
• Diminution in value: where the works would reduce the market value of the property by more than 5%. A surveyor must certify this.
• New landlord: grace period where a property is purchased by a new landlord with a tenant in situ and that property is sub-standard.
• 7-year payback rule: where the cost of the works exceed the energy savings over a period of 7 years.
• Wall insulation exemption: a copy of written opinion from a relevant expert stating that a property cannot be improved to an E rating because the recommended wall insulation measure would have a negative impact on the property (this mainly applies to listed buildings).  

The MEES do not apply where:

• Leases are of a term in excess of 99 years
• Short term tenancies of no more than 6 months (assuming the lease is not renewable under the Landlord and Tenant Act 1954 and provided the tenant has not previously been in occupation for more than 12 months), licences and tenancies at will.
• Buildings not required to have EPC’s e.g.: agricultural farm buildings, listed buildings.
• Buildings where the EPC is over 10 years old or there is no EPC. The grant of any new lease however will trigger the regulations coming into effect. There is a question mark over renewals.

Landlords are advised to act now and bring sub-standard property up to standard not only to avoid fines but to continue to let their properties, protect their investments and have the ability to raise finance where necessary. The government seem intent on increasing the threshold and standards and MEES are a key part of the Government’s drive towards net zero. Whilst this timetable to achieve the C and B rating may appear generous, early planning is essential, and many landlords will be concerned as to the financial and administrative burden placed on them by the new rules.

For further advice on this matter, or any information on buying, selling, or leasing commercial premises and you would like to talk to a specialist solicitor, then please get in touch with us.

Article written by Commercial Property Solicitor Bejul Lakhani-Lever

The post MEES – The next chapter appeared first on Brindley Twist Tafft & James.

Bejul joins us from a local firm where she was a senior associate, before commencing maternity leave. She has years of experience in Commercial property.

Outside of work Bejul enjoys walking, yoga, cooking and spending time with her little boy.

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A former newsagent, the shop has been trading in the village of Bishops Itchington for over 20 years however when local residents Orlaith and Bee purchased the freehold and took the reins last October, they wanted to develop its offering. 

Following an extensive renovation, the shop which still operates as a newsagent delivering 400 papers a day, has increased its offering massively to include a deli, café and gift shop.  It also has an alcohol licence and local artists even have the opportunity to display and sell their work.

Whilst both Orlaith and Bee have always been actively involved in the community, running a shop is a far cry from their existing careers.  Orlaith has been a Social Worker for the last twenty-five years and Bee was a mother and baby foster carer with a history of working in sales and marketing.

So, getting the right advice for their new venture was absolutely vital.  Not only were they purchasing both a property and business, they also were entering into a partnership each of which were individual transactions which had to be managed in tandem to ensure the process was seamless.

Alex Khan explained: “In the purchase of any business there are a number of different elements to consider and processes to conduct.  These include due diligence of the current business, checking accounts and appropriate warranties and indemnities – a factor which is often overlooked.  The preparation of the sales and partnership agreements is also key to ensure they included the necessary elements to protect both properties.  Equally important was the property purchase to ensure the business could continue to trade as planned.”

Knowing that BTTJ had recently moved to Southam, just 10 minutes from Bishops Itchington, and had a strong commercial expertise, they turned to us to assist them in ensuring the transaction ran smoothly.

Orlaith commented: “We knew we required a commercial service but also wanted to use a local firm, so they were close at hand and provided the personal touch.  BTTJ fit the bill perfectly and the fact that they had the necessary commercial expertise and were on our doorstep made them an obvious choice.

“Both Senior Partner Samantha Wright, Partner Alex Khan and their respective teams supported us throughout the transaction, which had the added challenge of being conducted in lockdown.  Nevertheless, we completed on time, and they provided us with the necessary advice throughout to ensure the acquisition process was seamless.  We couldn’t have asked for a better partner.”

Orlaith and Bee are now looking to the future with plans in the pipeline to hold private events. Further job opportunities are also available for a variety of roles including one permanent, three-four casual staff and another delivery driver to support the business as it continues to grow.

Samantha Wright, Senior Partner of BTTJ & Commercial Solicitor stated: “It is so gratifying to see a business like The Village Store grow and prosper and we are delighted to have played a part in their success.”

Orlaith continued: “We are delighted with the way The Village Store has taken shape.  It is beginning to thrive and becoming a social hub within the community which was one of our primary objectives.  We are still brimming with ideas and are just so grateful to BTTJ for providing us with the advice and support which has made this all possible.”

Our expert Commercial Property & Corporate / Commercial team can assist with all aspects of Commercial work, contact us for more information

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Landlords or Tenants (as the case may be) may be reliant on successfully exercising a break clause to protect their future business interests. In either case, the parties to a lease may be alarmed to discover just how difficult it can be to successfully exercise a right to break, with, break clauses often being a source of many disputes between Landlords and Tenants. As such, we cannot stress more highly the importance of seeking timely expert advice before serving, or upon receiving, a break notice.

The right to break may arise on one or more specified dates, or it may be exercisable at any time during the term of a lease on a rolling basis. Whenever a right to break is exercised, care needs to be taken to avoid the problems which can be caused for landlords or tenants who risk losing their right to bring their lease to an end by failing to validly exercise their right to break.

Break clauses often come with conditions and it is important any such conditions are complied with when exercising the option to break. Such conditions could include;

• The tenant must have paid all the rent (or all payments due under the lease).
• The tenant must have performed all its covenants under the lease.
• The tenant must not be in material breach of its repairing covenants.
• The tenant must give vacant possession.
• The landlord must have an intention to redevelop the property.

A right to break can be lost because of a breach of a condition, or in not ensuring a condition is satisfied at the appropriate stage whether it be prior to the notice being served, or on the break date – care must be taken.

The requirements as to the form and service of the break notice must also be strictly complied with. Generally, a notice sent by the wrong person, or to the wrong person, will be invalid and therefore careful attention must be given to who has the entitlement to send or receive the notice. The break clause may include a particular form of notice which must be used and by not doing so, an alternative form of notice which would otherwise be valid, could be rejected by the receiving party. Where no form of notice is provided it is vital that the form of notice used is properly drafted.

Sometimes mandatory notice provisions setting out how the break notice must be sent to the other party, and when it will be deemed to have been received, will apply. In other cases, the general notice provisions in the lease will apply. Again this is something which needs to be carefully considered.

Whether you are tenant or landlord exercising or at the receiving end of a right to break, seeking expert legal advice in dealing with any aspects of a break clause at the earliest opportunity can help ensure the right to break is successfully exercised and that any lengthy and costly disputes are avoided. For further advice or assistance, please contact a member of our Commercial Property team on 024 7653 1532.

Imelda Kavanagh

About the author

Imelda Kavanagh joined Brindley Twist Tafft & James in Coventry in 2015.  She is a solicitor in the Commercial team and deals with a wide range of commercial property matters.

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This new procedure, called the commercial rent arrears recovery (CRAR) procedure, only applies to rent arrears relating to commercial property, and is set out in the Tribunals, Courts and Enforcement Act 2007 and Taking Control of Goods Regulations 2013. This means that as of 6^th April 2014, the common law right of distress was abolished and replaced by the CRAR procedure.

The CRAR procedure is much stricter than the old common law right of distress, and there are criteria to be met before the procedure can be used.

Although the procedure applies to all tenancies of commercial premises, the tenancy must be in writing. Furthermore, the procedure cannot apply where part of the premises are used for residential purposes, unless the use of the premises for the same are in breach of the terms of the lease or any superior lease

CRAR can only apply to the main rent, and VAT and interest on the same. It does not apply to sums in respect of rates, outgoings, services, repair, maintenance, insurance etc, even if the lease expresses them as ‘rent’.

The Tenant must be in arrears of rent before notice of enforcement is given, and the amount of arrears must be certain, or capable of being calculated with certainty. The net figure of unpaid rent must equal or exceed a minimum amount. Currently the law states that the minimum amount of net unpaid rent must be equal to 7 days rent. The Tenant must be in arrears of this net unpaid rent when the control of goods is taken as well as before the notice of enforcement is given.

The CRAR procedure can only be exercised by an enforcement agent, who exercises the procedure on behalf of a Landlord. The Landlord must instruct the agent in writing, and the instruction must contain certain information.

There is a strict notice procedure to follow if the Landlord intends to follow the CRAR procedure, which must be adhered to before the Landlord gives instructions to the enforcement agent. This notice must be given at least 7 clear days before the CRAR procedure is exercised and the notice must contain specific information and be served in the correct manner.

There are also rules about which goods the CRAR procedure can be exercised against, including those goods which are exempt, and rules as to inventories and the valuation of the goods.

By using the CRAR procedure, the Landlord waives the right to forfeiture provisions contained in the lease, which needs to be given some careful thought.

This article is a summary and intended to be for information purposes only; it is not intended to be used as any form of advice. Please do not hesitate to contact our Commercial Property Team if you have any enquiries arising from the article, wish for us to draft a lease, or provide advice on your rights and obligations under an existing lease.

Nicola Godfrey-Dunne

Solicitor

Brindley Twist Tafft and James

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