KK Time Out...Enter our competitionto win 1 of 5 prizes.Page 9

Arrears...What you needto know!Page 6

Manchester’sBooming and we’reall excited.Page 2

KKSolicitorsThompson

Autumn 2015

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MANCHESTERUK’s Fastest Growing City

Manchester’s Booming...and it’s exciting...

KKSolicitorsThompson

Welcome

About KK

Welcome to the KK Thompson newsletter, which we hope you find of interest.

We aim to produce a newsletter which is a mix of legal updates with practical insights in to the property sector. In this edition we look at Manchester, the fastest growing city in the UK and discover what’s making Manchester such an attractive market.

We also look at PACT and when it can be used as an alternative to lease renewal proceedings together with looking at the pros and cons of short term agreements.

Our key feature this month relates to landlords and the remedies available to them when pursuing debts. A valuable read as you never know when you might need to invoke one of the remedies.

Finally, if you fancy a bit of down time, turn to page 9 for KK Time Out.

If you have any queries relating to the topics raised in the newsletter please contact one of the Directors at KK Thompson. Alternatively, if you have any comments on the newsletter generally or could suggest some interesting topics for future editions, please contact Karl at team KK via karl@kkthompson.com

Karl ThompsonDirector

karl@kkthompson.com

KK Thompson is a niche firm specialising in Property Law. Our team has a wealth of experience in acting for a high number of large organisations based throughout the UK. Our policy is to work hard to ensure that we organise ourselves around our clients' business. We provide an exceptional level of service with a high level of personal contact and pride ourselves on being an approachable and accessible team.

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The growth of Manchester is gaining momentum and as a result is sparking much attention from property investors. The question is though should you take a closer look at the UK’s second city?

The UK’s fastest growing city is rapidly growing and interest from property investors is on the up but why and what’s making Manchester such an inviting market.

Growth, so where’s the evidence?Beyond the City, a report has predicted growth in employment at 3.8 percent in Manchester between 2015 – 2020, outperforming some of the world’s capital cities. Economists state that growth has been predominately in the professional sector with more jobs being made available in law, finance, management, consultancy and advertising which makes Manchester one of the fastest growing places for employment outside London.

It goes without saying that new jobs attract new people and the overall population of the city has grown in tandem with economic growth. As the fastest growing city another surge is predicted in the coming years.

Manchester, what’s the big attraction?You only need to dip your toe into the Manchester commercial scene to understand that business is booming and employment is flourishing. An interesting aspect of Manchester’s employment growth is the city’s post-graduate retention. This is driving the city’s population within the key young professional demographic demonstrated by a 40% increase in the city’sresidents being aged between 20-25 over the past two decades. Continued

Population520,200

Workforce213,705

Students70,875

source: www.manchester.gov.uk

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Castlefields, Manchester

Of course Manchester has fantastic cultural attractions that are a huge part of what’s drawing new residents to the city at such an unprecedented rate. With a music scene that’s both historic and progressive, world class sporting events coupled with outstanding nightlife and cuisine to rival some of the biggest cities it is unsurprising that growth in the city is rapid.

Manchester is also becoming increasingly well connected with the anticipated High Speed 2 which will bring the city closer to London. Manchester Airport is also Britain’s third busiest with direct flights to Hong Kong, Dubai and Washington with passenger numbers increasing year on year. What about the property market?Over the past couple of years the property market has had to play catch up in order to strive to meet demand and commentators are sceptical that such demands will be met within the next several years. As the demand continues to rise together with the city’s population, property prices will only track upwards.

So far as the rental market is concerned, it has also benefited from the pressure points driving demand on the sales market.

All in all, Manchester boasts an investment case that will make the city a prime location for investors over the next few years with the city already on the cusp of being recognised as a key world market for property. As the population continues to grow and more business enters the city the emphasis on property will continue to grow for the right reasons.

So there it is, Manchester, it’s growing, it’s exciting and we’re all part of it!

KK Q&AAs a commercial landlord with a signi cant property portfolio, am nding that the courts are often pressed when it comes to dealing with lease renewal proceedings. s there an alternative to lease renewal proceedings for settling the terms of protected leases?

This is an increasingly common question asked by both landlords and tenants and therefore parties have now got the option of looking to PACT as an alternative to the usual lease renewal proceedings which would be issued through the courts.

PACT stands for Professional Arbitration on Court Terms. It is run by The Royal Institution of Chartered Surveyors (RICS) and the Law Society, supported by the Incorporated Society of Valuers and Auctioneers.

PACT deals mainly with unopposed lease renewals under the Landlord and Tenant Act 1954 where a determination is required to settle the terms of the lease, or the rent, or both. The scheme allows for those terms to be decided by a surveyor or solicitor acting as either arbitrator or independent expert with the appointments being made by the RICS or Law Society in the absence of agreement.

The objective of PACT is to increase the effectiveness and flexibility of the legal system and to give a greater choice to both landlords, tenants and to their advisors through the lease renewal process.

A T and when it can be used

The use of PACT is only possible with the consent of both parties, however once that agreement has been obtained, it can be initiated in court and out of court.

In court means that PACT can be used where an unopposed s.25 or s.26 has been served, a court application has been made and all parties agree to appoint a third party to determine the issues in contention. The use of PACT out of court can be initiated in circumstances where an unopposed s.25 or s.26 notice has been served, but proceedings have yet to be issued. Here the parties can agree to appoint an independent third party who will determine the result which both parties will be bound by.

ssues that can be determined by A T

PACT is aimed at allowing the parties to be more flexible when it comes to resolving disputes over terms upon which commercial leases are renewed. For example, PACT is ideally suited to resolving issued such as:

• Rent • The duration of any new lease • Interim rent, and • Other terms such as repair, service charge, rent review, break clauses etc

Notwithstanding the above, if the dispute relates to legally related issues such as the validity/timing of the notices then court proceedings may be more appropriate, however, when it appears a satisfactory result can be achieved by simple resolution, PACT should certainly be the preferred option.

Piccadilly, Manchester

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Independent Third Party

If the parties agree to proceed with PACT then serious consideration should be given to the identity of the appointee. For instance the expertise of the independent third party will depend upon the issues to be determined. In some instances it may also be advisable to appoint two different people.

The third party will act as an arbitrator or an independent expert. An arbitrator is governed by the Arbitration Act 1996 together with the PACT agreement made between the parties. An independent expert is only governed by the agreement.

There are further differences between appointing an arbitrator or independent expert which have been summarised below.

Appointing an arbitrator

• Parties can agree how the process will run • The arbitrator will have discretion as to the rules of evidence to be adopted • The arbitrator will give reasonings surrounding the award unless agreed otherwise • Until payment, the arbitrator can refuse to release their award

Appointing an expert

• The expert independently decides the procedure unless otherwise agreed • The expert will decide the importance attached to certain information • No reasons will be expressed in support of the decision unless otherwise agreed with the parties • Experts do not have the power to withhold the decision without payment

PACT what are the advantages

The PACT process offers a number of clear advantages to both parties. The main advantage is that experts can be appointed to resolve the dispute in a field where they have valuable knowledge. Judges at the County Court sometimes do not have this specialist knowledge. Other advantages include:

Lower costs: Whilst appointing an independent third party contributes to the overall cost, the costs as a result of a foreshortened procedure are likely to lead to an overall saving.

Speed: Courts are experiencing greater pressures, therefore PACT means no waiting for a hearing date and third parties are usually able to proceed straight away.

Flexibility: The process is adapted to suit all parties.

New Lease

As soon as the PACT award or determination has been released then the parties can agree the form of the new lease and withdraw from the court proceedings (if they have already been initiated). If they cannot agree then either party can apply to court for an order under section 29 of the Landlord and Tenant Act 1954 for the grant of a new tenancy. At the point the order is given then the tenant will only have 14 days to apply for an order to revoke the order.

Overall, this procedure is becoming more and more popular, particularly given the recent rise in court fees. Whilst the procedure is not suitable in all circumstances, PACT is certainly worth considering as an alternative for both landlords and tenants in order to achieve a satisfactory resolve.

kkthompsonsolicitors.com

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Arrears - All you need to knowA common issue affecting many landlords relates to tenant debt. Whether that be unpaid rent, service charge or other costs associated with the lease. Arrears of any nature are a serious issue which can seriously affect a landlord s cashflow and as a consequence can have a negative result on the business as a whole.

The key in all instances where a tenant has fallen into arrears is communication, just because your tenant has paid late on one occasion doesn’t mean the relationship needs to breakdown. It is important to talk to your tenant to understand what has caused them to fall into arears and ascertain whether it is a one off occurrence. The approach of many landlords is to give tenants some breathing space and the opportunity to put things right, however at some point, landlords need to decide to move the matter onto the next stage if it is apparent the tenant is not playing ball.

In these instances, landlords need to know what the options are available to them. This article sets out the various remedies together with what circumstances each remedy is best used.

Assuming a typical modern lease has been used the following remedies can be invoked.

• Letter before action referring to court/insolvency proceedings • Statutory Demand • Forfeiture • Commercial Rent Arrears Recovery (CRAR) • Demanding payment from subtenant

The options available may not suit all circumstances therefore we explain each remedy further below.

Letter Before Action and County Court ProceedingsWe would always advise sending a letter before action in most cases, often a solicitor’s letter before action obtains some form of reaction even if that reaction isn’t exactly positive. Some tenants feel as if they can continue to delay payment by inventing spurious arguments and continuing to liaise direct with the landlord. Communicating direct with a solicitor in most cases tends to deal with the key issues linked to why payment is not forthcoming. If payment is not forthcoming there is the option then to issue proceedings at the County Court. County Court proceedings are more suitable where disputes are apparent and/or another form of enforcement is specifically sought.

Statutory DemandIn some cases a statutory demand could be prepared and served on the tenant. When pursuing a company tenant, a demand would only be suitable in circumstances where the debt exceeds £750 and the debt is not disputed. As of 1 October 2015 pursuant to the Insolvency Act 1986 (Amendment) Order 2015 when pursuing a tenant who is an individual the threshold allowing you to serve a demand and subsequently petition for an individual’s bankruptcy has increased from £750 to £5000. Therefore making it more difficult for landlords to recover unpaid sums from a defaulting tenant.

Whether pursuing an individual or a company, demands are usually an ideal remedy when recovering rent, as this is a set amount agreed between the parties that cannot be disputed. They may not be suitable however where there is unpaid service charge or insurance/management charges as the tenant may raise a dispute during the course of the proceedings. In considering any argument put forward by the tenant, the Court may order that the dispute is actually more suited to the County Court therefore before serving a demand Landlords must be confident that the debt is clearly owing and is not open to dispute.

Where a demand is served the tenant has 21 days to make payment in full. Following this, if the tenant is an individual a bankruptcy petition can be issued. If the tenant is a company a petition to wind up the company may be issued at court. Issuing a demand is often a preferred option for many landlords as it is a relatively inexpensive remedy which achieves a positive result. It is also a swift solution as there is no necessity to issue the demand with the Court.

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ForfeitureIf the tenant is in beach of the lease, providing there is a clause allowing the landlord to do so, they can forfeit the lease. However, a landlord should always consider this carefully before doing so For instance would forfeiture be commercially sensible. This will all depend on how re-lettable the property is, other liabilities such as empty rates etc. must be taken into consideration.

Once forfeiture has been effected the only way the tenant can regain possession is by obtaining relief i.e. paying the outstanding sums. If however they choose not to do so, the landlord’s claim is capped against the tenant as at the date of forfeiture.

Consideration should also be given as to whether any part of the demise is used for residential purposes or indeed even in breach of the lease the tenant is sleeping/residing at the property. In these circumstances forfeiture is not an option and the landlords must issue possession proceedings at court.

CRARThis remedy enables landlords or a certified bailiff to enter into a tenant’s property, recover goods and sell them so as to recover arrears of rent. Distress historically has proved popular with landlords as it offers them a swift, sharp solution when faced with a non-paying tenant without initiating court proceedings.

However, the common law position has now been replaced with a new statutory procedure known as Commercial Rent Arrears Recovery or better known as CRAR.

CRAR is only available to landlords with written leases to commercial premises. CRAR will therefore not be available to premises let or occupied on a residential basis. CRAR can only be used to recover rent, VAT and interest. However it cannot be used to recover sums such as service charges and insurance irrespective of whether or not they are reserved as rent.

The landlord must give seven clear days’ notice in writing of its intention to attend the premises and seize goods. The notice requirement is of course problematic as it essentially gives the tenant seven days in which to remove all their goods from the premises.

Landlords and managing agents should have a strategy when it comes to issuing notices under CRAR. They should consider the tenant and their payment history. Whilst serving the notice after the rent payment date will provide recovery at the earliest possible date, consideration should be given to the overall landlord and tenant relationship. The impact of a notice repeatedly served could be diluted.

Demanding payment from a sub-tenantIn circumstances where there is a sub-lease, the landlords could bypass the tenant and indeed serve the sub-tenant with notice under s.81 of the Tribunals, Courts and Enforcement Act 2007 to transfer to the landlord the right to receive rent from the subtenant under the sublease.

Only pure rent plus interest and vat can be claimed in these circumstances, however, assuming the sublease is for a similar rent this is a viable remedy as it would help to clear a significant chunk of the debt.

Decisions Decisions!You will note that there are various remedies available, all of which differand should be used dependant on the circumstances of each case.

The team at KK Thompson can guide you through the procedures anddecide with you what remedy is best suited to the case. The team alsooffer xed fees for all of the above procedures in order to give youclarity at the outset in terms of your overall cost exposure.

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8 Beetham Tower, Manchester

"the UK’s only proper skyscraper outside London"Financial Times

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All you need to do is identify the password and visit:www.comp.kkthompson.comThe correct password will enableentry into the competition.

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Across1. The extent of the premises included within a lease (6)5. Breach of tenants covenants in respect of repair, reinstatement of alterations and redecoration (13)9. Binding contact between landlord and tenant (5)11. A promise to engage in or refrain from a specified action (8)13. Tax on the occupation of commercial property (8,5)14. Gives the party the right to terminate the lease before contractual expiry (5,6)15. Requirements of both transacting parties in a property deal (5,2,5)

Down2. Tenant granting new interest in their property (10)3. Where the tenant is responsible for all repairs and for insuring (3)4. The most superior legal title to the ownership of property (8)6. Work undertaken by the tenant to modify the demise (11)7. Alternative procedure where these is a disputed lease renewal (4) Clue Page 48. Changing the locks (10) Clue Page 710. Determination of lease before contractual expiry date (9)12. Tenant transfers/sells its entire interest in a property for the unexpired term to another (10)

KK TIME OUT

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There may be occasions where as a landlord you may only wish to allow short term, flexible occupation of a property. On those occasions either a tenancy at will or a licence would be appropriate. However, there are certain aspects relating to both arrangements which landlords should be aware of.

Sometimes the time required in negotiating a full lease is not necessary particularly if the term of occupation is short, the rent is relatively low or the parties have yet to agree the period of occupation. In those circumstances, a tenancy at will or a licence to occupy may provide the perfect solution. However, landlords should proceed with caution as such agreements are not always as straightforward as they seem.

Short Term OptionsThere is a tendency in some situations to just allow occupation on an informal basis and therefore not involving lawyers. This is fine whilst the landlord/tenant relationship is running smooth however, problems may arise when the landlord wants the property back and the tenant wants to stay. This is why even with short term occupancies, time should be spent ensuring the relationship is properly documented, rather than spending the time and money trying to sort it out once the problems have occurred.

An important point to be aware of is that tenancies at will offer limited security to occupiers, opposed to a licence. A tenancy at will is usually an informal arrangement between the landlord and tenant. There is no necessity for formal termination requirements and either party can bring the tenancy to an end immediately. This can be just as unsecure for landlords as it is for tenants as their rent can stop without any such notice being served.

The Risk FactorThere are always risks in opting to use a licence in order to record short periods of occupation. The problem with such an arrangement is that the tenant may subsequently claim that what in fact they have is a lease. The courts position in such disputes is that it’s not what you call the title of the document it’s what the arrangement actually is. For instance, if a licence grants the occupier exclusive possession, for a fixed term, at a rent, then it is more than likely to be a lease.

Bearing that in mind, a fixed term licence that lasts for more than 6 months is likely to be interpreted as a lease which will then be protected by the Landlord and Tenant Act 1954.

SHORT TERM AGREEMENTS

Examples of when a licence (with no exclusive possession) may be suitable include: a concessionaire being given the right to operate a concession within a larger shop; an occupier having office-hours access to a serviced office space; and the future tenant under an agreement for lease accessing the property to carry out works while the landlord is completing works of his own.

Nevertheless, careful consideration must be made when drafting either a tenancy at will or licence to ensure that there is no ambiguity.

Removing the ambiguityIn order to remove any confusion one of the best things a landlord can do is use a short term lease for a fixed term which is expressly excluded from the Landlord and Tenant Act 1954. This gives the landlord certainty with regard to obtaining possession at the end of the term. Parties can also agree further flexibility by opting to have mutual break clauses throughout the term which will allow either party to bring the lease to an end early.

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Call us on 0333 011 8626 for an informal chat or to arrangea meeting to discuss your specific requirements

KK Thompson SolicitorsThompson House46 GlensideAppley BridgeLancashireWN6 9EG

Tel: 0333 011 8626Email: info@kkthompson.com

KK Thompson Solicitors are authorised and regulated by the Solicitors Regulation Authority.

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Kate Thompson

Karl Thompson

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The information and any commentary contained in this newsletter are for general purposes only and do not constitute legal or any other type of professional advice. We do not accept and, to the extent permitted by law, exclude liability to any person for any loss which may arise from relying upon or otherwise using the information contained in this newsletter. Whilst every effort has been made when producing this newsletter, no liability is accepted for any error or omission. If you have a particular query or issue, we would strongly advise you to contact a member of the team, who will be happy to provide specific advice, rather than relying on the information or comments in this newsletter.

If you have any queries about the matters raised in this newsletter,please contact: Kate Thompson or Karl Thompson.