1. SOME RECENT L&T CASES 2016 Paul Clark

2. TOPICS BREAKS (Supreme Court 2015)  Refund of rent after a break APPLYING FOR LICENCE (Scottish Case 2015)  Information required LEASE GUARANTEES (Court of Appeal 2014)  Making sure they stay in place COMPETITION (County Court 2014)  The end of tenant-mix policies?

3. BREAKS Refund of rent

4. BREAK CLAUSES M&S v BNP Paribas (Supreme Court) BACKGROUND  Clun’s case 1613  Rent in arrear  L died mid-quarter  T not liable for rent up to L’s death  Apportionment Acts  Ellis v Rowbotham 1900  Rent in advance  Lease forfeited mid-quarter  T not entitled to rent refund  Apportionment Act 1870 cannot apply

5. BREAK CLAUSES M&S v BNP Paribas (Supreme Court)  4 leases in a Paddington office block  2006 for 12 years, breaks at 2012 and 2016  Broke on 24 January 2012  All conditions met: break premium, no rent arrears  Landlord asked for rent only up to 24 January  M&S paid the full quarter’s rent at 25 December  Asked for refund for 25 January-24 March

6. BREAK CLAUSES M&S v BNP Paribas (Supreme Court) TRIAL  M&S argued  restitution – but where payment is indivisible, restitution is possible only for a total failure of consideration  express term: “proportionately for any less term than a year” but case law against it (a 1979 forfeiture case)  implied term – what L&T would have expected  Judge implied a clause that rent was payable just for the term, so any overpayment was to be refunded  I believe that was the right decision

7. BREAK CLAUSES M&S v BNP Paribas (Supreme Court) COURT OF APPEAL  Court of Appeal agreed the legal principles  AG of Belize v Belize Telecom [2009] (Privy Council)  Implied terms part of the interpretation process  Term implied if needed to achieve the result the parties intended, in the light of what they knew at the time What did L&T know in 2006?  Court did not ask for any evidence  Earliest mention EG October 2008

8. BREAK CLAUSES M&S v BNP Paribas (Supreme Court) SUPREME COURT  Conveyancers knew about rent in advance  Cannot be apportioned  All payable up front  Cannot therefore imply what cannot be done  Needs express term  We MUST now include a refund of rent clause when acting for a tenant (does not help existing tenants)  Except.. in the M&S lease there was an express term?

9. APPLYING FOR LICENCE Information required

10. APPLYING FOR LICENCE Homebase v Grantchester (Scottish)  Homebase assigning 25-year Falkirk lease  L’s consent not to be unreasonably withheld  L asked about any “deals” - as unit over-rented  Homebase refused to answer  Lease did not require it  L refused licence to assign. Lawfully?

11. APPLYING FOR LICENCE Homebase v Grantchester (Scottish) DECISION  L receives application for licence to assign  carries out a two-stage process 1.Is the proposed assignee suitable?  No? Then L can refuse consent.  Does not have to be “reasonable”.  Yes? 2. L must not unreasonably refuse consent.

12. APPLYING FOR LICENCE Homebase v Grantchester (Scottish) Was the landlord reasonable?  L cannot seek a collateral advantage  Such as preserving rental value of nearby units  Refusal must relate to the demised premises  Potential diminution in its value WAS a lawful factor  A payment from T to assignee MIGHT reasonably affect L’s decision  L entitled to know all the facts  So ASK for all the facts

13. LEASE GUARANTEES Keeping them in place

14. DISCHARGE OF LEASE GUARANTOR Topland v Smiths News Trading (CA) 1981 lease to WH Smith Do-it-All in Morecambe  35-year term guaranteed by WH Smith  1987 licence to add a garden centre  G not a party to the licence  The last tenant – Payless – insolvent, owed £280,000  L sued G (now called Smiths News Trading)  for arrears of rent  and required it to take up a new lease  G claimed the 1987 licence discharged it from its guarantee, as it was not a party to it

15. DISCHARGE OF LEASE GUARANTOR Topland v Smiths News Trading (CA) Guarantee clause included these exclusions  Guarantor not released by  landlord’s neglect or forbearance in obtaining payment when due, or enforcing covenants and conditions  any time given to the tenant  that the tenant may have ceased to exist  These exclusions did not help the landlord  A modern lease says G not released by ANYTHING  except a written release Why is a guarantor automatically released?

16. DISCHARGE OF LEASE GUARANTOR Topland v Smiths News Trading (CA) Holme v Brunskill (1878)  234 acre farm let with 700 sheep, whose return was guaranteed  7-acre field surrendered for £10 rent reduction; G did not know  Sheep not in good condition – some had died. Claim against G Decision (based on centuries of law) 1. No discharge if G consents to a change to the contract 2. No discharge if it is obvious without enquiry that the change is (a) “unsubstantial” or (b) for G’s benefit 3. The court will not enquire into the subject “the surety himself must be the sole judge whether or not he will consent to remain liable notwithstanding the alteration, and that if he has not so consented he will be discharged."

17. DISCHARGE OF LEASE GUARANTOR Topland v Smiths News Trading (CA) DECISION  L had to show the change was “unsubstantial”  G signed up to some changes (eg rent review)  G knew T could do works with L’s consent  But G could not be saddled with the consequences of ANY change to the property, whatever it might be  Failure to involve G in the 1987 licence meant the lease had not been guaranteed since then!

18. DISCHARGE OF LEASE GUARANTOR Topland v Smiths News Trading (CA) COMMENT  Modern leases exclude Holme v Brunskill entirely  ONLY works for the lease guaranteed  NOT for new agreements, or licences L could refuse Examples  Supplemental lease  Licence to install plant outside the demise  Licence to do structural work in a multi-let building Always best to involve the guarantor

19. COMPETITION LAW The end of tenant-mix policies?

20. COMPETITION  Law changed on 6 April 2011  ALL land agreements now subject to competition law  Prohibited agreements that  affect trade within the UK and  have as their object or effect the prevention, restriction or distortion of competition within the UK  Examples: agreements that  fix price  control markets  apply dissimilar conditions to equivalent transactions (which estates have the same form of lease throughout?)

21. COMPETITION  Self assessment needed: penalties are severe  injunction  damages up to 10% of worldwide turnover of each party  disqualification of directors  offending terms not enforceable  One exemption (rarely applies): the agreement  improves production or distribution or promotes technical or economic progress AND  allows consumers a fair share of those benefits AND  impose no restrictions beyond those that are indispensible to achieving those aims AND  does not totally eliminate competition  CMA Guidance – land unlikely to be affected?

22. COMPETITION Martins v Crawley BC (County Court) Crawley BC landlord of 11 suburban parades  Tenant mix policy gives each tenant local monopoly Martins next door to a local supermarket  Martins wished to sell products the supermarket sold  Argued that to prevent it was anti-competitive

23. COMPETITION Martins v Crawley BC (County Court) DECISION  Convenience store served a local pedestrian market  Each shop had a local monopoly  The restrictive user clause was anti-competitive  Exemption did not apply. Distribution not improved or economic progress promoted by a model imposed by the landlord, rather than the result of market forces Letting policy eliminated competition and was prohibited

24. COMPETITION Martins v Crawley BC (County Court) COMMENT  The Council’s letting policy was keeping local business alive: the parade was fully let  Competition law is aimed at the consumer (but, ironically, if a national chain drives out local competition the consumer could be worse off)  Decision not binding – but seems legally correct  Restrictive user clauses, tenant-mix policies and exclusivity agreements may be vulnerable

25. SOME RECENT L&T CASES 2016 Paul Clark