commercial property 47 Get your heads straight


'Please renegotiate the terms agreed in the Heads of Terms for my lease. Now that you have explained them to me I cannot go ahead on those terms' This was a recent request from one of my clients, after I had explained the implications of the Heads of Terms, which he had agreed. Although not a binding contract, renegotiating terms agreed in the Heads can be difficult


Greg Humphreys, a partner at Gardner Leader Solicitors in Newbury, considers some points to bear in mind as a tenant, when negotiating Heads of Terms for a new lease of a commercial building.


Length of term and right to break the lease: What length of term suits the tenant’s business requirements? Longer leases may include a right to break the lease. Great care must be taken when agreeing a conditional break right. A recent case demonstrated the risk of accepting a conditional break right where this was lost, because the tenant failed to comply strictly with the conditions.


Security of tenure: The Landlord and Tenant Act 1954 provides tenants of business property, with a right to renew the lease at


the end of the contractual term. Tenants will want to retain the benefit of goodwill built up over years. Landlords granting shorter term leases will want to exclude the tenant’s right to renew.


Rent review: Do tenants accept that the reviews will be on an upwards only basis? In times such as these, where many rents are declining, tenants with upward only rent review provisions, are not able to obtain the benefit of reducing rents.


Repairing obligations: Repairing obligations should be commensurate to the term and other benefits obtained by the tenant. Tenants should consider seeking limitations on their repairing obligations. If there is an obligation to pay a service charge,


tenants should consider seeking to cap this to avoid fluctuations in cost.


Insurance: Tenants should consider whether the landlord is obtaining a competitive premium, and whether the risks against which the landlord is to insure, are acceptable.


Rent deposit: The tenant should seek to ensure that the rent deposit is held in an interest bearing account and that the interest paid is for the credit of the tenant.


Fitting out works: Consent must be obtained and the terms upon which the works are to be done and reinstated, must be agreed. Will the improvements be rentalised?


Returning to my client’s request, I have now had to enter into further negotiations with the landlord’s


Contaminated land – changes in the pipeline


The law on contaminated land is undergoing subtle but significant changes, and more may be in the pipeline. Landowners and developers need to keep up to date to ensure they manage their risks effectively, writes Richard Smith, managing partner and head of environmental law, and Deborah Caldwell, senior property associate


Much UK land is contaminated by past industrial use. Under the Environmental Protection Act 1990 (EPA) councils must identify contaminated land and ensure it does not threaten the environment or human health.


Councils have been slow to carry out site assessments, blaming lack of funding and expertise. Government blamed the guidance; DEFRA has revised this, to have effect from April 6, 2012.


The new guidance includes a new test of when land needs to be remediated. Councils should categorise land according to the risk posed to health, thus: -


• Category 1 - land posing an unacceptably high risk of causing significant harm if no action is taken.


• Category 2 – where there is a strong case for considering that land poses a significant possibility of significant harm.


• Category 3 – land that is not low-risk, but where authorities believe that intervention is not warranted.


• Category 4 – where land poses no, or only a low, risk.


THE BUSINESS MAGAZINE – THAMES VALLEY – APRIL 2012


Only categories 1 and 2 are deemed ‘contaminated’. There is concern that this may allow some sites now to be developed at a cost to human health; in particular as the test of impact on controlled waters has changed, making it less likely that land will be classed as contaminated through the risk of water pollution.


However, the EPA is just part of the picture. Tax relief encourages brownfield development, and over 80% of contaminated site clean-up results from planning conditions connected to development, rather than the EPA.


It is currently unclear whether the existing Planning Policy Statement on contaminated land (PPS23) will survive introduction of the National Planning Policy Framework, a 58-page document intended to replace over a thousand pages of existing policy.


The framework, finalised at the end of March 2012, has attracted widespread criticism, including from the public and a Commons Select Committee. Guidance on contaminated land runs to just three lines, stating that, as a minimum, land earmarked


for development should not be classified as contaminated under the EPA.


Looking further ahead, the Government believes red tape threatens economic recovery. Last year it launched its Red Tape Challenge, which runs until 2013, inviting public comment on regulations, grouped into six main themes, and promising to do away with any unnecessary rules.


Environmental law is one such theme, but sweeping change seems less likely. UK environmental law is comprised largely of regulations, but most derive from Europe. Government acknowledges that it cannot reverse regulations that are required by EU law; its ambitions in this field are restricted to ensuring there is no ‘gold-plating’ over and above EU requirements, and attempting to limit the burden of new EU regulations.


Details: 01865-722106 www.manches.com


solicitors, on the terms agreed in the Heads, in an effort to improve my client’s position, resulting in delay and increased costs.


Details: Greg Humphreys 01635-508080 g.humphreys@gardner-leader.co.uk


www.businessmag.co.uk


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