COVID-19 – What is the immediate future for property lawyers and are there potential opportunities for us in the short to medium term?
We are still in the early phases of the coronavirus COVID-19 pandemic in the United Kingdom. The pace of events and breaking news is so fast that most analysis is out of date shortly after it is published. It is perhaps worthwhile pausing to reflect on the position property lawyers currently find themselves in, what interim measures we can all put in place to ensure service continuity as much as possible, and what opportunities might arise in the future.
This information was current as at 9am on 27 March 2020.
HMCTS are providing rolling updates with advice and guidance for all court and tribunal users at https://www.gov.uk/guidance/coronavirus-covid-19-courts-and-tribunals-planning-and-preparation.
The latest review of court arrangements due to COVID-19 was announced on 23 March 2020 at https://www.judiciary.uk/announcements/review-of-court-arrangements-due-to-covid-19-message-from-the-lord-chief-justice/. For civil court users, this was brief, referring to guidance already given about the use of remote hearings, at https://www.judiciary.uk/announcements/coronavirus-covid-19-message-from-the-lord-chief-justice-to-judges-in-the-civil-and-family-courts/. Hearings requiring the physical presence of parties and their representatives should only take place if a remote hearing is not possible and if suitable arrangements can be made to ensure safety.
On 26 March 2020 HMCTS announced it would suspend all ongoing residential possession claims for an initial 90 day period, which may be extended.
For other matters, the expectation is a shift to video and phone hearings instead of assembling in county courts and the High Court’s two main London buildings. This has been reinforced by a message from HHJ Johns QC to the Chancery Bar Association that the senior judiciary have decided that no hearings which required people to attend are now to take place in the County Court until further notice, unless there is genuine urgency and no remote hearing is possible. All cases currently being heard will be adjourned part heard so that arrangements can be made to conduct the hearing remotely.
In practical terms, for County Court work, anecdotally this has meant adjournments on a large scale. Warrants will not be enforced. Block listing of possession claims has been abandoned. For many, in spite of HMCTS assurances regarding court hygiene and cleanliness, there remain concerns about attendance and the ability of some buildings to ensure social distancing can be properly observed, where cases are urgent and must still take place in person. There are also concerns about the resources of the County Court and whether they are sufficient to cope at present with the demands of mass telephone and/or video hearings. Most County Courts do not have adequate video conferencing facilities in every hearing room for instance. Tribunals generally have no such facilities.
HHJ Johns QC has confirmed to the Chancery Bar Association that insofar as Central London County Court is concerned, all face to face hearings are being adjourned to a date to be fixed, so attendance is not required. The position is not yet clear in relation to other County Courts, although many larger centres have begun to issue their own guidance. The advice from practitioners must be, if anything, that the most important thing the Courts can do is to communicate with Court users both what is happening but also for the Court to be as contactable as possible during this time.
The First-Tier Tribunal (Property Chamber) has issued guidance for users during the pandemic with its plans. These are that:
- No face to face hearings or mediations will be carried out until further notice. Hearings will be carried out remotely using Skype or phone.
- No inspections will be carried out for at least 6 months.
- Hearings listed until the end of May have been postponed and may be relisted for remote hearing or consideration on documents alone.
- Communication with the Tribunal should be done by email to the generic email addresses, not to specific individuals. In London that is firstname.lastname@example.org, in the southern region it is email@example.com. For Land Registration cases the email is firstname.lastname@example.org
- Parties should seek to comply with directions already made where possible.
- Time limits and procedure for seeking permission to appeal have not changed, but the application should be made by email.
Whatever the eventual solutions, there will clearly be some lag in such systems coming online and then a backlog of adjourned hearings to deal with once it does. Remaining positive, this presents the Courts and Tribunals with a once in a generation opportunity to upgrade its systems to manage its workload more efficiently. One such innovation (for the Civil Courts and Tribunals) would be a proper electronic document case management and filing system. This would enable remote hearings to take place more effectively and for all court users (including the judge) to see what the Court has on file, its orders, its listing, who has been served etc. The paper case files the Civil Courts work from must be consigned to the past, where they belong.
Impact on work and opportunities
On 25 March 2020 the Coronavirus Act 2020 received royal assent, having quickly passed its way through all parliamentary stages from its first reading in the House of Commons some six days earlier. For landlord and tenant practitioners sections 81 to 82 and Schedule 29 are relevant. In summary they provide that:
- Landlords of business premises (whether contracted out of Part II of the Landlord and Tenant Act 1954 or not) are prevented from forfeiting for non-payment of rent until at least 30 June 2020. Possession orders in current proceedings may be made but possession cannot be ordered until at least that date.
- Business tenants who fail to pay rent (until 30 June 2020) are protected in renewal proceedings from landlords relying on such default as opposition to renewal based on persistent failure to pay rent (section 30(1)(b) of the 1954 Act).
- The notice periods for residential tenancies are also extended: section 8 Housing Act 1988 ground 8 notice periods before proceedings from two weeks to three months; and section 21 notice periods from two to three months).
In the past few days several legal articles and commentary have appeared, offering analysis and insight into the impact of COVID-19 on property work. The situation is still fluid. Events are moving very quickly, and probably too quickly, to provide any meaningful consideration on any impact, but themes have included the following. In all cases, practitioners should be reasonably assured that their clients will continue to look to them for advice and guidance on their existing and future rights, duties and obligations in relation to their property interests.
Leases – performance and termination
Withholding rent or obtaining possession. The March quarter day is upon us. Leases do not generally allow tenants to withhold rent, except in exceptional circumstances, such as where premises are destroyed or damaged. That may include an uninsured risk, with the potential to cover COVID-19, but it seems unlikely that closure for cleaning, for instance, would amount to damage. It will depend on the lease provisions. If tenants do not pay, landlords need to be cautious about regaining possession in the months to come. They may not be able to re-let. They will be liable for business rates (assuming no announcement for rates relief). They will have to consider the practicalities of securing premises and bailee obligations towards former tenants.
Reliance on force majeure clauses. Is it possible to bring a lease to an end (or refuse to enter into a new one under an existing agreement for lease) on the basis of force majeure? Such clauses are rarely found in leases and on current authority COVID-19 is unlikely to be considered the occurrence of a specific events giving rise to operation of such a clause, but it remains to be seen.
Frustration. This sets a high bar, and is unlikely to work for tenants to argue that their lease has been frustrated during the pandemic, especially where it is temporary. It is not clear that government imposed closures would be significant enough to set aside a lease, and there is no current authority in support of frustration in this case, but again, it remains to be seen.
Break clauses. Such clauses may be of some assistance, particularly if closure is anticipated for an extended period. As ever, the wording of the clause and manner in which it is to be triggered should be considered carefully.
Derogation from grant/breach of quiet enjoyment. If a landlord closes premises form which a tenant operates a business, for example a shopping centre, it might be said that the tenant could make a claim for derogation from grant and/of breach of the covenant for quiet enjoyment for loss of income. The question though is whether such a claim can be established if the landlord’s actions are as a result of government advice.
Enhanced cleaning and other services. Landlords and tenants will have to review their leases for what provision there is for enhanced cleaning or other measures taken as a result of the pandemic. Landlords will be keen to ensure they are providing good estate management (and indeed, whether such services fall within this and/or they are obliged to provide them) while also being able to recover the additional costs from their tenants.
Property transactions generally. In the immediate term questions arise for those having exchanged but not yet completed. Government guidance and advice being reported early on 27 March 2020 is that people should delay their home moves if possible and not to allow new viewings, and to urge buyers and sellers to “adapt and be flexible” to agree new moving dates. The legal obligation to complete will nonetheless remain. Completion can (and generally does) take place remotely but in chain transactions the ability to instruct removers and give up vacant possession may prevent the chain from working.
Future working – lessons in connectivity and remote working
Most businesses and individuals are, and have been for some time, alive to the need for and opportunities that arise from online resources, working electronically, and working remotely. COVID-19 can only accelerate this development, and that is to be encouraged.
There is of course video conferencing for training and meetings, online spaces to enable document sharing and collaboration (beyond simple cloud document services), and ever present email (keeping us all entertained with multiple attachments and Russian doll like levels of emails within emails). But we can all think more creatively than this.
Those in ADR circles are already trialling remote mediations with virtual break out rooms. The key to the success of these solutions is the willingness of all participants to engage but with the option to resort to more traditional methods if they wish, the disincentive to the cynical being the wait they will have to endure for it. The team at Hardwicke are doing the same.
The possibilities and opportunities for property practitioners are only limited to the extent our imaginations and willingness to engage allow. A positive message from the COVID-19 situation must be that the steps being taken now for remote working should, even once it is over, be considered normal rather than exceptional.
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