Commercial Property Update – July 2023

Posted: 5th July 2023

Key Dates

21 June 2023 – Secondary Legislation comes into effect as a form of crackdown by Companies House on overseas entities in breach of their obligations to register to the UK’s new Register of Overseas Entities (ROE). This secondary legislation, in the form of The Register of Overseas Entities (Penalties and Dispositions) Regulations 2023 will give Companies House powers to impose financial penalties for offences relating to the ROE.

End of Summer 2023 – The Government plans to issues guidance following the draft affirmative Building Safety (Responsible Actors Scheme and Prohibitions) Regulations 2023 made under Sections 126, 128 and 129 of the Building Safety Act laid before Parliament. They establish a Responsible Actors Scheme which requires developer members to identify and remediate (or pay for remediation) of life-critical defects in residential buildings over 11m in height which they developed or refurbished in England between 1992 and 2022. The guidance is to be centred around local authorities on the operation of the statutory prohibitions.

Circulation of a new Certificate of Title Template

The City of London Law Society has published the Eighth Edition of the Certificate of Title. The Certificate was published in early May 2023 and so should now be used instead of the Seventh Edition (published in 2013).

The main changes reflect the market position on what lenders expect to see in a Certificate of Title. Arguably the changes are more focused towards the Borrowers solicitor who usually prepare the Certificate of Title and so they should be aware of these changes in order to make the necessary disclosures against the revised schedules.

The five main changes are outlined below:

  1. Liability Cap – the liability cap wording is not included in the Certificate where this was previously included in the guidance notes but not the Certificate as standard. The wording can still be negotiated depending on the Lender’s position to either remove the cap altogether or to agree a level of cap that would cover the full amount of the plan, plus interest and charges.
  2. Constructions – the Certificate now requires the report provider to disclose any construction works carried out at the Property in the last 12 years (previously 6 years). This 12 year period still reflects the usually liability period under a collateral warranty. Although Lenders may not require fresh warranties for works carried out more than 6 years again, the cautious approach would be to take security over the Borrower’s existing warranties.
  3. Valuer – all references to valuer and the report provider having sent the Certificate to the Valuer for ‘sign off’ has been removed. This is because in practice it is the Lender or the Lender’s solicitor who liaise with the Valuer rather than the Borrower’s solicitor. However, most facility agreements will still include a requirement for the Valuer to sign off on the Certificate and any other property reports as Conditions Precedent.
  4. Residential and Mixed-Use Buildings – the new Certificate includes a new section including statements about the Property being a residential and/or mixed-use building. These statements seek to determine whether the relevant legislation relating to any of the Tenant’s rights of first refusal, collective enfranchisement or right to manage applies.
  5. Searches – environmental and flood searches, coal mining and chancel repair searches are no longer listed as the standard searches relevant to all properties.

Recent Cases

London Borough of Merton Council v Nuffield Health Ltd (7 June 2023 UKSC)

The Supreme Court held that Nuffield is using the premises wholly or mainly for its charitable purposes and is therefore entitled to mandatory relief from non-domestic rates under section 43(6) of the Local Government Finance Act 1988. This resulted in the Nuffield being entitled to an 80% reduction in its rates bill.

Armstrong v Secretary of State for Levelling Up, Housing and Communities [2023] EWHC 176

This recent case has further clarified the scope of section 73 applications rejecting the notion that they can only be used to secure ‘minor material amendments’. Section 73 of the Town and Country Planning Act 1990 (TCPA) enables planning applications to be made for development without complying with conditions imposed by a previous permission. These applications are often referred to incorrectly as applications to vary an existing permission whereas they can result in a whole new planning permission that exists alongside the extant original permission. The case has confirmed that section 73 applications can be used to amend planning conditions only and cannot change the description of a development. However, they are not limited to minor material amendments and can secure material changes as long as they do not result in a fundamental alteration to the scheme.