This briefing note is only intended as a general statement of the law and no action should be taken in reliance on it without specific legal advice.

REAL INSIGHTS - Property Update - February 2015
27 February 2015

REAL INSIGHTS - Property Update - February 2015


MIPIM, the annual international real estate trade show, takes place between 10 and 13 March in Cannes. For details of the team attending from Mishcon de Reya, please click here. Real Estate Partner Susan Freeman will be reporting on the behind the scenes action in her daily MIPIM blog for Estates Gazette. We will be posting regular updates on our MIPIM webpage.


Not that you would know it from the thousands of listings for holiday lets in the capital, but since 1973 Londoners have been unable to let out their homes (or even a room in a home) for use as "temporary sleeping accommodation" thanks to a little known provision of the Greater London Council (General Powers) Act 1973. With the threat of a £20,000 fine for offenders, the rules have prohibited letting a room or residence in the capital for less than 90 consecutive nights without the householder applying for a change of use through a planning application.

The Housing and Planning Minister Brandon Lewis criticised the current situation as being "outdated" and "inconsistently enforced". The government is committed to helping boost the economy by allowing people to rent out their property on a short term basis, providing income to hard-pressed Londoners and freeing up thousands of potential bed spaces for visitors and short term workers.

The Deregulation Bill currently progressing through parliament would allow people to rent out their home or rooms for up to three months per year.  It is not clear yet how this period would be calculated and whether any gaps between short term lets would be included in the total number of days, but the news has been warmly welcomed by short let operators such as Airbnb and Onefinestay.

Naturally, some London councils are unhappy at the move, citing concerns over residential properties becoming de-facto hotels and the reduction in the number of long term tenancies available for those in the capital.

The Bill won't come into effect for a while and may be delayed if a series of regulations are required.  Householders and landlords stand to gain most as the latter would be able to do one short term let per year to tide them over between tenancies should they require it.

Rob Atkin-House is a Solicitor in our Planning Group.


New draft regulations published this month are likely to have a major effect on landlords. From April 2018, it will be unlawful to let property with a low energy rating. This is part of the government's drive to improve the energy efficiency of rented properties.

Here we are looking at commercial properties. Slightly different rules apply to domestic properties which we will summarise in next month's Real Insights.

New rules in a nutshell

From 1 April 2018, a landlord cannot grant a new lease (including a sub-lease) or a renewal lease of premises with an EPC rating of F or G.

From 1 April 2023, a landlord cannot continue to let property with an F or G rating. In other words, even when an existing lease was granted years ago, it will be unlawful to continue to be the landlord of that lease after 2023 unless the energy rating is improved to E or higher.


There are two key exemptions:

  • where the improvements are not cost-effective (there are detailed rules for calculating this); or
  • where the landlord cannot obtain consent from the tenant or a third party whose permission is required, such as a superior landlord.

These exemptions only last for 5 years, are personal to the current landlord, and will have to be noted in a public register. Other exemptions include listed buildings and certain other properties; short leases of 6 months or less; and long leases of 99 years or more.

If a lease is renewed under the Landlord and Tenant Act 1954, or if a landlord buys a non-compliant property after 2023, the landlord has 6 months to comply unless an exemption applies.


A landlord in breach will face a civil penalty notice of up to £150,000. There will also be a "name and shame" register.

What this means in practice

The new rules are three years away, but it takes time to retrofit a property so landlords need to bear the regulations in mind when buying, redeveloping or managing properties. Existing EPC records suggest that around 18% of commercial properties have an F or G rating.

The regulations do not say who is to bear the cost, but in most cases it will be the landlord.  While landlords' lawyers may insert clauses in new leases making tenants responsible, most tenants are unlikely to accept this.

Energy improvements may be costly but should make properties more attractive to tenants such as the large technology companies, who are increasingly calling for eco-friendly properties.

The government are expected to widen the net beyond F and G rated premises in the future, so the best approach may be to make properties as energy efficient as the budget can stand. As an added benefit, "going green" will be a good PR opportunity for many property companies.

Lucy Smith is a Professional Support Lawyer in our Real Estate Department.

Construction documents key to maximising returns

Where a landlord has incurred significant expenditure on major redevelopment or refurbishment works, it will be seeking a return on its investment and pressing to exchange agreements for lease as soon as the ink has dried on the heads of terms.

However, where major works have taken place, a well-advised tenant will want to undertake full due diligence on the landlord's suite of construction documents, particularly if the tenant is to be responsible for repair of any inherent or latent defects which may appear during the term of the lease. This remains the case even if the tenant is to be provided with a suite of collateral warranties, as ultimately the protection offered by a warranty is only as robust as the underlying contract documentation.

Accordingly, these transactions can often become quite protracted, so it is important to give the tenant a full set of copy construction documents at the outset of the transaction. This would normally comprise:

  • a copy of the completed building contract and any relevant schedule of amendments.
  • copies of the appointments of any specialist consultants employed in connection with the works (e.g. architect or structural engineer).
  • details of any sub-contractors engaged by the main contractor.
  • evidence of the PI insurance cover held by each party.
  • draft forms of the warranties (or third party rights) to be provided. These would usually be from any party with design responsibility and from the person responsible for certifying practical completion.  A tenant would usually expect to approve the form of these warranties in advance and have them delivered at lease completion.

A tenant who is unable to get comfortable with the construction documentation may insist on a carve-out of defects from its repairing obligation and a reciprocal landlord's obligation to remedy any defect. This would clearly impact upon investment value, so from a landlord's point of view it pays to think about construction matters at heads of terms stage and in advance of the transaction commencing.

Matthew Bowles is an Associate in our Real Estate Department who specialises in asset management and development work for both landlords and tenants.