Planning, Infrastructure and Regeneration Close. Public Law Close. Real Estate Close. Restructuring and Insolvency Close. Laura Vasili Senior Associate.
Share on Linkedin Share on Twitter. The key terms of the leases were: the permitted use of the premises was as a cinema. The lease expressly stated that there was no warranty on the part of the landlord that the premises could be used for the permitted use; there was a keep open covenant requiring the tenant to keep the premises open for trading during certain specified hours, so far as this is permitted by law; there was a tenant covenant to comply with legislation and indemnify the landlord against any liability in this regard; rent was to be paid by equal quarterly payments in advance on the quarter days, such payments to be without any deduction whatsoever; and the tenant was required to pay additional rent equal to the cost of insuring against certain specified insured risks.
Rent and service charge were suspended if the premises could not be used because of damage by an insured risk.
The tenant sought to defend the application on the following basis: terms should be implied into the leases providing that payment of rent and service charge should be suspended during any period when using the premises as a cinema was illegal or the attendance would not be at the same level as that anticipated when the leases were entered into; and there was a partial failure of basis; the payments due under the lease were for the use of the premises as a cinema and so no payments were due for periods when the premises could not be used as a cinema.
The High Court found that the obligation to pay rent even though the premises could not be used for the intended use as a result of unforeseen events did not deprive the lease of commercial or practical coherence Obviousness test — for the same reasons as above the High Court found that the implied terms did not satisfy the test of such terms being so obvious that they go without saying. The focus of the investigation has been the ground rents charged under new build leases, where in many cases the rents double every 10 years creating a potentially onerous burden.
These rents have in some cases meant that properties have become un-mortgageable. They have increased the value of the freehold retained by the developers or sold onwards to third parties, with a freehold purchase by the leaseholder in some cases unaffordable. On 23 June and 15 September the CMA updated their investigation to confirm that developers have committed to amend granted leases to remove clauses causing ground rent to double every 10 or 15 years together with clauses converted to RPI-based rent increases and will no longer sell leases with such terms.
The commitments also seek to deal with the situation where the freehold has been sold on to a third party.
This is for the benefit of leaseholders, whose ground rent will now remain at the amount payable when the leases were first granted and the ground rent shall not increase over time. Future ground rents are being legislated against in the Leasehold Reform Ground Rent Bill which was published on 13th May on which we reported here. If you would like further information or advice about ground rents and the reforms, please contact William Bethune.
That offer included a proposal to clear all of Caffe Nero's rent arrears, subject to the CVA vote being delayed. The offer was rejected and the CVA vote went ahead as planned. The Court disagreed and, in July , Caffe Nero's strike out application was rejected.
In reaching this decision, the High Court indicated that Caffe Nero's nominees had "acted in good faith, in accordance with their professional duties and reached a perfectly reasonable decision that it was not in the best interests of the creditors to postpone the CVA Process…Balancing all the relevant factors and the risks involved, under considerable time pressure and without any clear route for postponing an electronic voting procedure, the conclusion that the nominees came to was well within the range of what a reasonable nominee could have come to in those circumstances".
This case underlines that nominees and directors must consider a wide range of factors in any decision making but a last minute offer will not automatically mean that a CVA vote must be delayed. Positive news. Use of cookies We use cookies to enhance your experience of our website.
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