Insight

Virtual building surveys: 6 things you need to know

High quality visualisations produced by virtual building surveys are a powerful tool for investors, occupiers and other project stakeholders. We use them to save time when reviewing multiple buildings’ worth of information, or to communicate complex issues to non-technical specialists.

Here, we highlight the potential and limitations of the technology.

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Virtual building surveys can have many applications across a building portfolio and construction projects. For instance, Technical Due Diligence, Dilapidations, Neighbourly Matters, Rights of Light and Project Management can all be enhanced by virtual surveying capabilities.

But for all its uses and increasing familiarity with the technology, the simple facts can be unclear.

Who needs it? How does it work? And is the cost worth it?

As with all innovation, we want to help our clients understand where technology can be leveraged across the building lifecycle – and where its limits lie!

Here are six things you need to know about virtual surveying:

1. Virtual surveys can save time and money

The great advantage of virtual surveying is the speed of information sharing. When investors, lawyers, asset managers and other stakeholders are required to visit sites and inspect details in person, the time and financial costs can mount.

Our high-quality visualisations are delivered along with a surveyor’s report within days of an inspection, providing all the necessary information for decisions to be made more swiftly.

2. Virtual surveys are easy to access and navigate

The surveyor completes the imaging process as part of their complete physical survey. Then the client receives a link to access the visualisation within a matter of days. That can be opened on any device from anywhere with an internet connection, with relatively little data load as the visualisation is hosted remotely. The experience is just like Google Street View – simple, flexible and highly informative.

3. Production is cost-effective and scalable

Imaging costs are a fraction of your building surveying fees, and these scale based on time spent taking the images. These aren’t tied to cost per square foot, but factors such as quantity of buildings or large, complex sites will take more time to photograph.

These rates are easily offset by savings on the resource required for investor clients, asset managers, project teams or lawyers to travel to the site physically. The larger the set of stakeholders who will be involved in seeing the building or acting on some aspect of the investigation, the more effective that small investment will be.

4. Virtual surveys reduce the need for (and risks of) travel

We face a long period of uncertainty about international travel and even some domestic trips might be disrupted in the event of local lockdowns. Virtual surveys can help off-set the risks of travel disruption for building transactions or other time-sensitive projects by relaying information quickly and accurately.

5. They can contribute to a powerful building record

Recording the building layout, fit-out and condition accurately can enhance Schedules of Condition reports. With a detailed visualisation and the surveyors’ report, occupiers and landlords can be certain of the state of a property at lease start and have a clear comparison with its condition at lease end.

Comparing a more up to date inspection to these previously recorded visualisations could make the dilapidations process more clear-cut for all parties.

6. There is no replacement for a full physical survey

The biggest misconception of virtual surveying is that surveyors or clients can make decisions solely from the visualisations it produces. This is not the case because physical investigation is a major component of any thorough survey.

For instance, we may need to scrape off paint to understand the material beneath it, take core samples of cladding or open up plant machinery to see its condition. Technology is some way off delivering that level of insight, and historic visualisations can miss out on recent unauthorised works, material deterioration and other deviations in the building.

Get in touch

Would you like to discuss the possibilities for virtual surveying across your portfolio? We’re happy to share our experiences and insights with you to understand how the technology could help you.

Contact Seth Love-Jones to find out more. 

Dilapidations and demised premises: Where’s the rest of it?

Ben Sercombe makes the case for all parties to better document the contents of Demised Premises in their leases, to help reduce the expense, time and frustration which can result from dilapidations negotiations.

The question of Demised Premises can be sticking point between landlords and tenants at lease end.

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The decision in the case of Capitol Park Leeds PLC v Global Radio Services has generated interest as one of few recent cases in the world of dilapidations.

For those who missed it, the decision involved a lease break and the usual understanding of Vacant Possession was somewhat side-stepped. The provision of Vacant Possession allows the landlord to use the building without being impeded by the previous tenant’s occupants, chattels (and possibly tenant’s fixtures). However, in this case the tenant stripped out too much, so the Demised Premises was not all physically returned to the landlord. Unfortunately for the tenant, their lease break was therefore found to be invalid.

This begs the question: why not routinely document the constituent parts of the demise at the outset of a lease?

This is a formality for Assured Shorthold Tenancies, and many of us recall from early renting days – often as students – the ominous checking of the inventory by the landlord and pursuit of our rental deposit. In commercial leases there is usually a property definition, prepared by the solicitors. However, this is often generic and refers to ‘land and buildings’ or, in the case of internal repairing leases, sufficient detail to define the internal extents of the demise. It will be full of legal phrases such as ‘walls severed medially’.

It is almost unheard of for a solicitor to inspect the property for this purpose, let alone to find a detailed description, inventory, or photos within a lease for the purpose of identifying the elements in a building. A photographic schedule of condition can pick up on this to a degree, but it is prepared specifically to limit repairing liability by recording condition.

The very nature of dilapidations is a negotiation, and landlords and tenants who have been through the dilapidations process will know that it can be expensive, time consuming, and frustrating. This is particularly true when parties cannot agree on the definition of the Demised Premises or when they demand evidence from lease commencement.

Let us take carpets as an example. Were they demised? Do they belong to landlord or tenant? Are they chattels or fixtures? Who installed them? Who paid for them?

Providing evidence to answer these questions is difficult, particularly at the end of a 10-year lease term. This will inevitably lead to dispute. The significant work carried out by the RICS on their Dilapidations Guidance Note, and the creation of the Dilapidations Pre-Action Protocol have made great progress to reduce expensive litigation and court cases, as shown by the scarcity of recent dilapidations case law.

It makes sense, in further pursuit of concord at lease end, to fully document at lease commencement the elements that comprise the Demised Premises.

How should you document the Demised Premises?

Call a Dilapidations surveyor! They have the perfect combination of technical building knowledge and an understanding of the subtleties of dilapidations.

When should you compile a Demised Premises document?

For a new build:  A detailed description can be prepared by the landlord when construction is complete, ready to attach to a future lease.

For an occupied premises:  Once the existing tenant vacates, and after any dilapidations works are carried out (by either party), but prior to the new tenant’s occupation/fit-out works. A quick turn-around on the document may be required, but inspection timing is most critical.

Clarify funding responsibilities

The other issue would be where the landlord is funding repairs or alterations that the tenant carries out. The tenant may well do these concurrently with their fit-out making the distinction between landlord and tenant works complex. In a usual lease these works would be separately documented, so as long as this was clear, the same ends are achieved. (i.e. The lease would have a document attached showing who did and paid for what works).

If you have further questions on dilapidations for commercial property, including how you can get started with documenting your Demised Premises, contact us to find out more.

What issues face the Building Safety Fund (BSF) and its recipients?

The government has announced an additional £3.5 billion extension to its Building Safety Fund. This provides additional support to rectify cladding on at-risk buildings over 18m tall. Many have pointed out that a key issue with the fund is that it won’t address the full range of fire safety issues in buildings. But is the funding enough to address unsafe cladding?

Based on TFT’s ongoing work supporting applications for these funds for building owners and developers, market forces pose a risk to an overall programme of re-cladding. Achieving swift and effective improvements to at-risk buildings may require additional funding and extended deadlines.

The Building Safety Fund is set up to support the replacement of unsafe cladding

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TFT’s project management specialists help mitigate our clients’ exposure to supply chain risks. However, fundamental supply issues will nonetheless lead to increased costs and timings for all involved with re-cladding buildings. In a worst case scenario this could lead some to compromise on the quality of the remedial work.

TFT currently provides project management and quantity surveying services covering 35 high rise buildings across the UK, supporting applications for the BSF grant fund. Our role is to manage a programme that fulfils the safety needs of each building, while also managing costs and timelines. The capital expenditure for TFT’s programme portfolio is over £100m.

Whilst the additional funding is welcome for the extensive scope of works required to make these buildings safe, the below issues give cause for concern:

Supply chain capacity: fire engineering services and cladding material

These works require specialist services, engineering advice and construction works. We have found increasing demand for key services over the last six months, including specialist fire engineering advice, façade engineering advice as well as construction services. This creates a bottle-neck in the market.

The result is that suppliers are challenged to deliver fully and to preferred deadlines. Pricing for these services is rising as one would expect in a market-place where demand outpaces supply, well beyond those which have been benchmarked over a year ago.

Material suppliers are also squeezed. There is limited stock of suitable insulation materials which have similar thermal properties, at the same physical thickness and which have a suitable fire rating. The limited availability of these materials is limited and there may be a lag while the market adjusts and increases the supply of these specialist materials. Otherwise, there are further issues around how buildings may be re-designed and detailed with thicker external walls.

The scale of the problem is becoming more fully understood as leaseholders and freeholders undertake investigations of their high risk buildings and understand the remediation solutions. There is a real risk of these costs spinning out of control and this additional funding again being insufficient.

How TFT manages demand

Our teams work together to manage market demand and avoid creating bottle-necks in resource or specialist service supply chains.

A collaborative online programme management approach allows us to share data between projects and balance the supply chain and demand, ensuring that no contractor or supplier is overburdened. We do this using online project management tools and data collection to ensure our analysis can be undertaken in real time and provide clients and the project teams access to all this information, as required.

While these measures help to manage TFT’s impact on suppliers, the wider market effects are still significant and will put pressure on all parties in the future.

Costs and priorities of fund allocation

As well as managing these escalating costs, building owners must be able to support a full and proper application for grant funding or risk rejection. Thousands of applications have already been turned down.

Whilst pre-tender support is available, there may be delays in commencing projects whilst this support is applied for and received. If building owners and leaseholders have forward funded these initial design and investigation costs, it’s not clear that they would get this money back in the event of a rejected application. There are significant costs just to gather the information to secure funding and meet the funding deadlines. This will challenge all but very large developers or funds to support the works.

In addition, it’s not clear how the fund prioritises funding and how the highest risk buildings are categorised. The current terms suggest a first-come-first-served system. More clarity on the priorities assigned to tall blocks, or those with limited fire protections, would be useful for applicants and for wider public information.

Using data and building records to avoid a repeat scenario

Once the funds are secured and supply chain issues navigated, the last thing building owners and residents will want is to repeat the process years down the line. Quality control on how the works will be monitored and certified as complete will be of the utmost importance.

In addition, we must ensure accurate record-keeping on the building and the works undertaken. This includes updating existing building operations and maintenance manuals. It may sound obvious, but in our investigations data on wall composition was inconsistent and leads to complications identifying risks and taking the right steps to fix these issues.

What should be done?

The process of removing and replacing cladding on at-risk buildings across the UK is a huge exercise for procurement and project management.

As project manager, TFT can mitigate clients’ exposure to market risks and the demands on specific supply chains. However, the government will need to consider additional costs and lengthened deadlines for all parties involved with re-cladding buildings, if there’s a risk that not doing so will lead to sub-standard work done this time, requiring additional improvements in the near future.

Dilapidations Q&A: Your questions, our advice.

Are you a landlord or a tenant looking for dilapidations advice? Start here with our list of commonly asked questions. For more details and advice for specific cases, head over to TFT Dilapidations to get in touch with our expert team who’ll be happy to help!

What is dilapidations?

Dilapidations relates to disrepair and other breaches of non-financial lease covenants during or at the end of a commercial property lease. 

What is the role of a dilapidations expert?

Dilapidations experts are specialist surveyors trained to understand buildings, to interpret leases and to understand the associated dilapidations law. They provide sensible advice to landlords or to tenants on the tenant’s breaches at lease end (if any). This informs negotiation of a beneficial settlement of the dilapidations dispute. 

In addition to this, some surveyors are appointed as ‘expert witnesses’ or ‘single joint experts’ and specially-trained dilapidations specialists can also act as ‘independent experts’ to resolve dilapidations disputes.

At TFT, we have what we consider to be the most respected dilapidations experts who are available to take on any of these expert roles.

What is dilapidations law?

The law of dilapidations is complex and can be uncertain. There are different legal systems in England and Wales, in Scotland and in Northern Ireland and so dilapidations law and procedure varies throughout the UK.  TFT has published an accessible and readable guide to dilapidations called ‘The TFT Purple Book: A Guide to Dilapidations in the UK’. 

What is dilapidations supersession?

Supersession is an undefined legal concept which effectively means that a landlord should not claim for the remedy of a tenant’s breach, because the landlord is proposing to do something else to the building which would supersede the need for the tenant to remedy their breach. TFT has developed a two step approach to supersession based on considering (i) mitigation and then (ii) causation.

What is the law relating to dilapidations fixtures and fittings?

The law relating to fixtures and fittings (or chattels/moveable items) is complicated and uncertain. Certain common law rights and/or obligations flow from the classification, which can be varied by contract. Generally speaking, loose items are classified as chattels (or moveable items in Scotland) and fixed items are classified as fixtures, although these presumptions can be varied. Fixtures can then either be classified as ‘landlord’s fixtures’ (‘heritable fixtures’ in Scotland) or ‘tenant’s fixtures’ (‘trade fixtures’ in Scotland). It can be important to understand the classification of items, particularly when dealing with conditional break options.

When should tenants seek dilapidations advice?

Commercial property tenants should always take dilapidations advice before signing a lease. Specialist dilapidations surveyors can assist tenants prior to signing the lease, during the lease term and, most commonly, before and after the end of the lease term when a landlord makes a dilapidations claim against the tenant. It is usual for a dilapidations surveyor to be able to reduce the settlement figure against that originally claimed by the landlord, often substantially.

Do you want advice on a specific issue? Get in touch with TFT dilapidations and dispute resolution expert Jon Rowling.

In dilapidations, what is vacant possession?

There is an implied obligation that a tenant will leave at the end of their lease term, and provide ‘vacant possession’ for the landlord to enjoy. There can often also be a contractual obligation to achieve vacant possession if a tenant wants to break their lease term early. The definition of vacant possession is a legal question but there is an expectation that the tenant will achieve certain conditions, including having moved out and removed certain items from the premises. The law around understanding what has to be removed, what can stay and what should not be removed has become complex in recent years.

What is a dilapidations break clause?

A break clause gives the parties (usually the tenant) the option to end the lease term early.  Often certain conditions, including some builders’ works are required to be completed by a tenant before the break date in order for the break option not to be invalid. Specialist dilapidations surveyors can assist tenants by advising what works need to be completed, or assist landlords by advising what the tenant has failed to do. This is a contentious and specialist area of advice.

Feeling a bit overwhelmed by dilapidations terminology? Never fear, we’ve created a dilapidations glossary to help with that. Find it here.

What is dilapidations expert determination and who does it?

This is a form of alternative dispute resolution which leads to a binding determination. It is not governed by statute (as arbitration is), rather by contract law; the two parties and the independent expert have a contract to facilitate the determination. The expert should use his or her own expertise (as well as any information provided by the parties) to come to a binding determination. There is very little scope for appeal. Generally, expert determination is considered to be best suited to specialist commercial disputes, such as dilapidations. At TFT, we can accept appointments to act as the independent expert, or to help parties who are engaged in the process.

What is the dilapidations dispute resolution scheme?

Published by RICS, the Scheme is designed specifically for end of lease commercial dilapidations disputes. The dispute is settled by an independent expert with both parties given the opportunity to provide submissions to the expert.

What is dilapidations reinstatement?

As part of a dilapidations claim, the landlord might require the tenant to reinstate alterations the tenant has made to the property, or to remove the tenant’s fixtures. Often, the landlord is required to serve a notice on the tenant in order to trigger the obligation. An obligation to reinstate can also be found within a licence to alter.

What is the dilapidations protocol?

The Dilapidations Protocol is a document published by the Ministry of Justice, relevant only in England and Wales. It tells the parties within a commercial property dilapidations dispute what the court expects them to have done before getting to court.

Are dilapidations provisions subject to VAT? 

Commercial property dilapidations settlements in the UK are damages payments so are not subject to VAT. However, an allowance for VAT can be included within the settlement figure if the landlord will incur VAT and not be able to recover it from HMRC.

Dilapidations: Glossary of technical terms

Absolute compliance: A term used to describe a (rare) condition to a tenant’s break option.  An absolute compliance obligation indicates that there can be no outstanding breaches of any obligations whatsoever. 

Break option: An option agreed between the parties which allows the tenant (and/or the landlord) to end the lease term early.  Conditions usually need to be complied with such as the serving of notices, payments of rent or other sums due, and those relating to the condition of the premises. 

Chattel: A loose item (or perhaps an item which is fixed slightly and/or so it can be enjoyed for its intended purpose) which does not satisfy classification as a fixture. 

Dilapidations Protocol: A document published by the Ministry of Justice which identifies what the courts of England and Wales expect the parties to have done before issuing legal proceedings in an end of lease dilapidations case relating to commercial property. 

Diminution in value:  This means a reduction in value.  Usually, the context is that a claimant landlord is, in some circumstances, limited to claiming the diminution in value of the property caused by the tenant’s breaches rather than the cost of the works necessary to remedy those breaches. 

Expert determination:  A form of ADR which provides a binding conclusion to the dispute in the form of a Determination.  The process is private (unlike litigation) and offers very limited opportunities to overturn the determination.  The independent expert is not limited by evidence presented by the parties and can use their own expertise and evidence to inform their decision.  There is no statutory framework. 

Fair wear and tear:  A term to define damage or deterioration which has occurred because of (i) natural weathering and/or (ii) the use of the premises in the manner in which the parties intended. 

Fitting: A word usually associated with fixtures (i.e. fixtures and fittings) but which has no defined legal meaning in this context.  Fitting might mean ‘chattel’, or ‘tenant’s fixture’, or something else, depending on the context. 

Fixture: An item installed in the premises which does not satisfy classification as an integral item or chattel. 

Interim schedule of dilapidations:  A colloquial description of a schedule of dilapidations sent to the tenant during the lease term and not in anticipation of the end of the lease term. 

Jervis v Harris clause:  A lease clause which introduces a mechanism whereby the landlord can require the tenant to remedy breaches, and if the tenant fails to do so the landlord is granted a right to enter the premises to carry out the works and recover the cost of those works from the tenant as a debt, rather than as damages. 

Landlord’s Fixture: An item fixed to the premises which the tenant does not have a common law right to remove and is either provided by the landlord or, if provided by the tenant, would lose its amenity on removal. 

Landlord and Tenant Act 1927, s18(1): This section limits a landlord’s claim for damages from a tenant for breaches of the obligation to repair.  It is generally accepted that s18(1) has two parts (‘limbs’); one relating to diminution in value and one relating to the consequences of the landlord’s intentions. 

Law of Property Act 1925, s146:  This section identifies the procedure for serving notice on a tenant during the term of a lease in order to make a claim for breach of contract. 

Licence for alterations: A document which grants the tenant consent to undertake works which would otherwise be in breach of the terms of the lease.  Licences for alterations usually contain a covenant requiring the tenant to remove the licensed works at the end of the lease term. 

Payment clause:  A clause in a lease which purports to allow the landlord, at lease end, to claim from the tenant the cost of the dilapidations works (plus potentially any other sums identified in the clause) as a debt rather than as damages.  These clauses (where they refer to the cost of works rather than the value of the schedule of dilapidations) have been enforced in Scotland. 

Quantified demand:  A document prepared in compliance with the Dilapidations Protocol which identifies the claimant landlord’s likely loss as a consequence of the tenant’s breaches, together with basic details of the claim(s) being made.  A schedule of dilapidations might typically be appended to the quantified demand.  See also: Dilapidations Protocol.

Reinstatement / removal notice: A notice served by a landlord which triggers a tenant’s obligation to reinstate alterations or to remove additions or tenant’s fixtures.  Failure to serve a reinstatement / removal notice when it is required to be served would mean the landlord’s right of action for reinstatement / removal falls away.  The timing of the service of removal / reinstatement notices is important. 

Repairs notice: A notice served by a landlord to support the Jervis v Harris process.  The Notice will usually include a schedule of breaches (or a variant thereof).  See also: Jervis v Harris clause.

RICS Dilapidations Dispute Resolution Scheme: A form of ADR designed specifically for end-of-lease dilapidations disputes.  Ultimately, the dispute is concluded by the publication of a binding determination; an interim stage is offered in the form of a neutral evaluation, with opportunity for the parties to settle based on the content of the evaluation. 

Schedule of condition:  A record of the state of the premises at the start of the lease term, which is referred to in the repair clause (and potentially in other clauses) so as a limit on the tenant’s obligation to repair (and potentially on other obligations).  See also: repair.

Schedule of dilapidations: A document which identifies breaches of the lease, appropriate remedial works and (usually) the cost of those remedial works.  A schedule of dilapidations is usually prepared by a landlord and sent to a tenant (but in a service charge context a tenant can prepare a schedule of dilapidations to be sent to the landlord). 

Scott schedule:  A document used by the parties’ surveyors to respond to each other’s statements.  The tenant’s surveyor usually responds to the landlord’s schedule of dilapidations in the form of a Scott schedule and returns the Scott schedule to the landlord’s surveyor for further ‘rounds’ of discussion. 

Standard of repair: The bar below which the state of the property has to fall before there is a breach of the repair obligation.  The standard is judged by reference to the age, character, location and general condition of the premises at the start of the lease term. 

Supersession: A legally undefined term which describes a restriction on what a landlord can claim from their tenant, in circumstances where the landlord carries out works other than those which the tenant should have completed. 

Tenant’s fixture: An item fixed to the premises by or on behalf of the tenant which the tenant has a common law right to remove.  On removal, the item would retain its amenity. 

Terminal schedule of dilapidations:  A colloquial description of a schedule of dilapidations sent to the tenant near to the end of the lease term and/or in anticipation of the end of the lease term. 

Vacant possession:  A legal term used to describe an obligation on the part of a tenant to remove themselves and their items (plus any other encumbrances to the landlord’s occupation) from the premises at the end of the lease term.  Vacant possession is a common condition to a tenant exercising a break option.

Click here to view the full TFT glossary of building, real estate and other industry-related terms.

Vacant Possession just got more complicated for tenants

TFT dilapidations specialist Jon Rowling explains a new concern for commercial property tenants trying to achieve ‘vacant possession’ for a lease break. They may have been careful not to leave too much behind, but now they also need to be careful not to take too much away.

Tenants wanting to exercise a lease break option always have to be cautious, because the conditions are interpreted strictly and precisely by the courts. With one false move, the lease term continues.

Having to provide vacant possession (VP) is still a common hurdle. Whilst there is case law supporting its definition, uncertainty remains as to what tenants need to do to achieve it. 

Since Riverside Park Ltd v NHS Property Services Limited [2016] EWHC 1313 (Ch), there has been some uncertainty as to whether tenants only need to remove chattels, or whether fixtures also need to be removed. An additional complication arises if the break clause condition calls for the tenant to be “not in occupation”, because it’s not always clear what that means. 

Surveyors have been hoping for some new case law to help us guide our clients. Unfortunately, the recently reported case of Capitol Park Leeds plc v Global Radio Services Ltd [2020] EWHC 2750 (Ch) does not help!

Here’s why:

In this case the tenant had to provide vacant possession of the “Premises” (as defined). The court held that the tenant failed to do so, and therefore the break failed. It failed because the tenant failed to yield up the Premises. In fact the question of VP doesn’t seem to have been necessary to consider because the decision seems to have made based on the definition of the Premises.

The tenant knew they needed to remove their own fit out and did so.  However, they also removed (or had previously removed) significant elements of the landlord’s building including air conditioning, ceilings, fire barriers, radiators, lighting, floor boxes, small power etc.

The definition of the “Premises” included:

“… all fixtures and fittings at the Premises whenever fixed, except those which are generally regarded as tenant’s or trade fixtures and fittings…”

Essentially, because the tenant had removed landlord’s fixtures, it had not yielded-up the Premises. Too much of the Premises was missing.

Tenants who have to achieve VP have always been cautious about leaving too much behind, but now they also need to be cautious about taking too much away. Potentially, the fact that the items removed by the tenant in this case were so substantial might mean that other tenants who remove just a little bit too much could draw a distinction between their case and Capitol Park v Global Radio?

The case is also interesting, particularly for surveyors, because it raises further commonly encountered issues:

  1. That ‘agreements’ with your opposite number should be recorded in writing, to avoid the uncertainty and expenses of an estoppel argument
  2. That some surveyor-to-surveyor correspondence, and surveyor-to-client correspondence can be seen by the court
  3. That tenants preparing for a conditional break, where building works are required to be completed, should press ahead with that work until such time as a financial agreement and surrender is agreed between the parties. Don’t stop work in anticipation of a settlement being reached
  4. Riverside v NHS was mentioned in the judgement, but we still don’t know whether tenant’s fixtures also need to be removed to achieve VP
  5. The case didn’t consider what the phrase “not in occupation” means.

Capitol Park Leeds plc v Global Radio Service Ltd considered whether the removal of landlord’s fixtures was enough to frustrate a VP condition to a break, or whether the removal of the landlord’s fixtures should be considered as part of a dilapidations claim, after the successful exercise of the break. The judge preferred the former option, but leave to appeal has been granted.

Are you a landlord or a tenant of commercial property with queries about a lease, dilapidations or dispute resolution?

Contact Jon Rowling to discuss your case and the best way forwards.

Commercial property tenants remain uncertain about ‘vacant possession’ definitions after a recent case between Capitol Park Leeds plc v Global Radio Services Ltd

Combustible material and residential balconies: new Government advice

The Government has urged building owners to remove combustible materials from residential balconies. This follows a number of significant balcony fires in London in the past 12 months and is an acknowledgement that balconies constructed from combustible materials can promote rapid external fire spread.

Timber has become increasingly popular in recent years to provide balcony decking, solar shading and privacy screens. Amendments to the Building Regulations in December 2018 specifically prevent the use of combustible material such as timber for balconies on certain residential buildings over 18m in height, but the new Regulations do not apply retrospectively. However, the latest Government advice relates to existing buildings, particularly residential properties with multiple dwellings and includes low-rise buildings under the 18m threshold.

Building owners need to establish what materials have been used, assess the risks, keep residents informed and advise the fire brigade if urgent concerns exist.

The Government Advice Note states that: “the clearest way to prevent the risk of external fire spread is to remove and replace any combustible material with one that is non-combustible (classified as A1 or A2-s1, d0)”.

TFT has experience of coordinating external wall/fire safety investigations and overseeing remedial works.

Please contact Simon Young MRICS if you have any concerns.

UKGBC, TFT and partners produce new Circular Economy guidance

Many people will be familiar with ‘the circular economy’, as the concept and terminology rises up the political and business agenda. But how can we turn thought into action in our own industry? UKGBC and TFT teamed up with stakeholders across the industry to publish new guidance to do just that.

Circular economy principles can have different implications across different industries, products or services – but The Ellen MacArthur Foundation identifies these three key traits of a successful circular model:

  • Design out waste and pollution
  • Keep products and materials in use
  • Regenerate natural systems

It’s hard to name an industry which is doing all these things, but as we face more strain on resources of all kinds, it’s incumbent on everyone to improve models which generate waste and pollution for sustainability.

“…the quantity of reused materials in construction has actually decreased since 1998. At the same time, the rates of extraction of materials in our fast-developing world are already way beyond planetary capacity.”

Sunand Prasad, Founder Penoyre & Prasad and Trustee of UKGBC

We face a big challenge to employ circular principles across the built environment and the supply chain which feeds it, due to the systemic change which is needed. Closer coordination is one way to achieve this.

To that end, TFT partnered with UKGBC and a range of construction industry stakeholders to formalise the steps to meet an industry-wide circularity objective.

The first output of this work is a guidance document, focusing on RIBA stages 1 & 2 (Preparation & Brief and Concept Design, respectively). Looking closely at setting a project up for circular success, the guidance provide practical steps to realise the commercial value of circular construction, from ensuring supply chain effectiveness to informing project management and mitigating risks along the way.

If you’re interested in learning how the guidance can be applied to maximise the long term value of your building project or your wider portfolio, contact Helen Newman.

The full guidance can be downloaded from UKGBC, here.

The rise of the contractor ‘Brexit clause’

Predictions from the UK property industry on the likely impact of Brexit continue to change and develop as negotiations progress. One of the more immediate concerns which face projects underway now and commencing soon is a possible trend towards contractors adding a ‘Brexit clause’ to the terms of their contract.

This clause relates to limiting the level of risk which contractors are willing to accept with respect to procurement and delivery of materials. Where contractors would normally take on the risks associated with importing materials, the ongoing Brexit discussions make for an unpredictable future process in which supply chains might be blocked or delayed beyond contractors’ control.

In cases where a Brexit clause is added to a contractor’s terms, the contractor is expecting the client to accept the risk involved in the form of project delays or cost fluctuations (as a result of tariffs or storage costs for example).

TFT is currently aware of a few instances of these amended Brexit clauses to date and advises clients that these are likely to become more common as uncertainty of the UK’s relationship with the EU continues, particularly if ultimately a “no deal” outcome is reached.

Our further advice to clients is to understand the supply chains for construction products and materials at an early stage to identify areas of risk. As an example, whilst a product may be produced by a UK manufacturer, it may have components from elsewhere all over the globe (or more importantly in this instance, from one of the 27 remaining EU countries). This level of scrutiny of the source of origin for products and materials will be beneficial from a risk perspective and may also be of benefit for sustainability reasons.

Additionally, it is worth clients and their advisors undertaking further due diligence during the contractor selection process to understand what contingency plans they have for managing some of the risks around importing of materials. For example, some contractors are already putting in place holding facilities either side of major ports such as Dover and Calais. With such facilities in place and with careful consideration of lead-in times, this will help to alleviate possible effects to programmes caused by importing delays.

Some contractors are also forward purchasing Euros to the value of supply chain commitments for goods and services from EU member states, to avoid the impact of currency fluctuations. In addition to the above, some contractors are looking to amend contract terms where if, following Brexit, there are more onerous changes to statute in the UK which were previously covered by EU legislation, the contractor is looking to push that risk back to the Employer.

If you have further questions relating to the nature of these Brexit clauses and next steps to resolve supply chain issues, please contact Dan Henn, Partner and Head of Development and Project Consultancy.

Manchester’s Beetham Tower in disrepair: Lessons from a “Draconian” remedy

Beetham Tower, Manchester. Source: Craig Sunter.

A new disrepair case has been reported, relating to Manchester’s tallest building: the iconic Beetham Tower in Manchester (you know it; that new glass one with the top half larger than the bottom half). Here we explore the ramifications and lessons to learn from an unusual case.

In Blue Manchester Limited v North West Ground Rents Ltd [2019] EWHC 142 (TCC), the judge heard about three issues including potential disrepair to the cladding.

The Landlord had obligations to the hotel-operator Tenant to keep the retained parts of the building (including the cladding) in repair.  Problems had been found with parts of the cladding installation and, prior to the hearing, a temporary solution had been implemented.  More particularly, the bond provided by the structural sealant of the insulated ‘shadow box units’ was failing in some cases.  The temporary remedy was to screw-stitch pressure plates to the frame profiles, to hold the panels securely in position.

The question for the judge to consider was whether, at the time of the hearing, the cladding was in disrepair.  He found that it was in disrepair.  In so doing, he relied to a very large extent on the 5-stage analysis of disrepair published within Dowding and Reynold’s dilapidations text book.  He also took the aesthetics of the building into account.

To the observer, informed only by the facts as reported in the judgement, it seems relatively clear-cut that the cladding would be found to be in disrepair.

For the defendant landlord though, this appears to have been a problematic case for three particular reasons:

  1. They are a ground rent company and may have had little expectation of having to get involved with works of this scale, the recovery of the cost of which might be restricted by the terms of leases with the various tenants.
  2. Matters were also complicated somewhat by the demise of Carillion and by both parties holding warranties against the cladding sub-contractor.
  3. The claimant tenant was (unusually) asking the judge to award the remedy of ‘specific performance’ as well as damages.

It is the granting of an order for specific performance which perhaps elevates this case to the unusual.

That remedy was awarded despite the judge describing it as ‘draconian’ and also despite the tenant having an alternative contractual remedy akin to a Jervis v Harris process.

It is more normal for specific performance not to be granted in England and Wales, because the terms of any order can be difficult to draft, such that it would be difficult for the party obliged to comply with the order to know whether it was doing so in an appropriate manner.  In this case the judge allowed what he considered to be a reasonably generous time frame (of 18 months) for the landlord to comply, and also allowed the landlord to apply to the court for further guidance under certain circumstances.

The Tenant was also awarded damages for any continuing loss it may suffer as a consequence of the landlord’s various breaches.

It is not known whether leave to appeal will be requested or granted, or any appeal made or won.

Lessons to learn:

  1. Parties to a lease (or indeed any contract) should understand the potential implications of the obligations they are signing up to. It sounds as though the landlord might have difficulty recovering all of the cost of the works through the service charge, and this in circumstances where their 999 year interest will have meant that any opportunity to claim against the development team would expire (relatively) quickly, because the warranties would not be for an equivalent 999 years.
  2. Don’t assume that specific performance will not be granted. It just might; going to court is an uncertain business.
  3. Inspect cladding installations regularly and frequently, even if they are ‘new’.