18 minute read
Legal
LEGAL MATTERS
Whether you’re buying or building, renting or renovating – when it comes to property, it’s crucial to get the legalities right. In this section, our industry experts consider subjects ranging from recent changes in Guernsey law to how to make UK contracts work for local projects.
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Certificates of Lawful Use
A number of home owners have applied for Certificates of Lawful Use since they were introduced into Guernsey’s planning system in May 2019. Here, Carey Olsen planning law specialist Rachel Jones provides an update on their uptake in the residential market.
The effect of a successful application for a Certificate of Lawful Use is to regularise an historic, unlawful change of use of land without having to obtain planning permission.
An application can be made when the land has been used contrary to its current, lawful planning use continuously for either:
• four years from the date the Development and Planning Authority (D&PA) first knew about the change in use (if the D&PA is aware of the unlawful use); or
• 10 years from the date of the change from the lawful use to the current unlawful one.
22 applications have been decided since the regime was introduced. Of these, 17 have led to Certificates being granted (eight for commercial and nine for residential uses). Those granted for residential purposes have concerned various different uses:
• Two have concerned the use of wings of properties. In each case, the wings were part of the main dwelling house and sufficient evidence was submitted by the applicants to demonstrate they had been occupied as independent residential dwellings continuously for more than 10 years. This meant Certificates could be granted certifying the new lawful use of the wings as independent dwellings.
• Two have been granted for properties that were self-catering units. These Certificates were granted for two separate sites but together they concerned 17 units. The Certificates certify the new lawful planning use of each of the 17 units as independent residential dwellings.
• Two have been granted to regularise the use of land as domestic garden. In each case, the land had been used unlawfully as gardens continuously for the required period of time.
• A Certificate has been granted to certify the use of part of a detached building as a single dwelling. • A Certificate has been granted for land that was agricultural land but had been used for the required period of time as a driveway and parking ancillary to a dwelling.
• A Certificate has also been granted in respect of two dwellings that had been used for the required period of time as single dwellings.
There is an understandable appetite from property owners to use the Certificate of Lawful Use regime to their advantage to formally regularise an unlawful change of use. The granting of Certificates means owners may enjoy the existing use of properties free from the concern of enforcement action by the D&PA. The Certificates also offer additional benefits for homeowners with any wider flexibility in the planning process attaching to the new certified lawful use being extended to the land. For example, regularisation of a former self-catering cottage as a residential dwelling opens up the prospect of a number of permitted developments that householders can carry out to dwellings without the need for permission, such as certain extensions.
The Certificates will also be beneficial on selling a property when prospective purchasers routinely apply for an Immunity Certificate, which advises the prospective purchaser of the lawful planning use of the property.
It should be noted that in determining an application for a Certificate of Lawful Use, the D&PA requires robust evidence to demonstrate, on a balance of probabilities, that the current use of land has been carried on for the required period of time and throughout that time the use must have been continuous. The onus is on the applicant to submit sufficient evidence to support their application. It is not sufficient to simply provide a letter or statement setting out how the land has been used. Evidence to support the application may include affidavits (legally sworn statements) from the owner and possibly from other people who can corroborate how the land has been used, photographs (if possible dated), historic Digimaps, bills/invoices and any other factual documentary evidence.
What next for Guernsey’s property market?
Ogier’s Guernsey property expert, Advocate Martyn Baudains, considers the factors influencing the local market in both the commercial and residential sectors.
No-one can predict the future, and it is foolhardy to try, but after nearly two years of the strangest of times, conversations are taking place among those in the construction and property sectors. We want to know if things are going to be different and, if so, for better or worse.
Working from home – here to stay?
For some businesses, the shift to the whole office working from home (WFH) was almost seamless, with high-end IT and an ability to pick up a telephone call wherever there was an internet connection. For others, the change to WFH was not so easy. If you were working in cramped conditions, with flaky IT and frequent interruptions, then you may have been glad to return to the office.
The willingness, or desire, to work remotely will ultimately affect the demand for office space, and therefore affect the value of those investments.
Immediately after lockdown some office-based businesses, having seen that productivity and efficiency were not adversely affected by homeworking (or may have actually improved), told staff they could continue to work from home if they wanted. As we get further away from the lockdowns, I wonder if some of these businesses may give this further thought - perhaps moving towards a hybrid model of home and office working to enable employees to combine the flexibility of WFH with the advantages of office working, such as closer contact with colleagues and the training and mental health benefits this brings. Other employers have faced even more significant challenges with long-term WFH, both bigger picture and practical, such as data protection, ensuring the health and safety of their employees and setting up workstations, which are more easily managed in an office-based environment.
Another important factor for Guernsey businesses is the short commute to the office. For most it will be less than a 20-minute walk, ride or drive to enjoy the company of your fellow workers. I think that alone will mean that we will see a big difference in the take-up of WFH compared to the UK.
Unlike some places, I think we will continue to see good demand for office space and that working from the office will be the norm, but we will spend a bit more time WFH.
Residential property – will the boom continue?
Without a doubt the residential property sector (both local and open markets) has been busy. So busy there is a lack of property on the market. The lack of choice is making sellers cautious about advertising properties. Somewhat perversely perhaps, those looking to sell are worried that their property will sell too quickly. That will leave them needing to buy something and, with prices high and a lack of properties listed for sale, they are opting to stay put.
It also seems that the rental sector is having its own problems, with reports of a lack of rental property and high prices. There was a belief that investors from outside of the island were buying up properties to rent out. We have not seen that at Ogier, though it is quite possible. However, if that was happening in numbers sufficient to reduce the stock of properties for sale, then the lack of rental properties is a puzzle.
The reasons for the spike in property sales – a desire for a separate space to WFH, space to live with family for long periods and more outdoor space – will drop away as we return to offices and get further away from the risk of another lockdown. As the world opens up we will see people using more of their income on holidays and other reasons, and less on property. There will be a return to a more normal, steady, residential property market, but with the banks happy to lend and offering some attractive deals, and with high employment, the market should remain active for a while.
Signing up to a new lease in Guernsey
Alison Wood and Laura Bougourd of Mourant’s property law team examine the issues to consider when entering into a commercial property lease.
As lockdown restrictions have eased, demand for commercial property in Guernsey has shown that, despite the rise in working from home and online shopping, traditional bricks and mortar still has an important part to play in our economic recovery.
So what are the issues to consider when granting or taking on a lease in Guernsey?
Often a prospective tenant will have a good idea of which premises they wish to occupy. However, before agreeing terms, a landlord and tenant would each be advised to appoint both a commercial property agent, who can provide advice on market conditions as well as the suitability and value of any potential premises, and a lawyer who can work with the agent to assist in the negotiation of the terms at the outset.
Once the right premises have been found, certain due diligence investigations are carried out on behalf of the tenant to confirm that there are no restrictions on the permitted use and the condition of the premises.
Depending on the extent of the liability the tenant will be taking on under the lease they may also wish to have a survey conducted of the premises and/or to check title.
LEASE TERMS
When it comes to the terms of the lease, both parties should carefully consider their requirements. These include areas such as:
Term
How long should the lease run for? In Guernsey, unlike in England, there is no security of tenure for commercial tenants on the expiry of the lease term and therefore the terms of a new lease are a matter of negotiation between the landlord and tenant.
Rent and rent review
What is included in the rent? What about rates and taxes? If taking a lease of part of a building it is likely that a service charge will also be payable – have the parties considered what this will cover and how much it is likely to be? In relation to rent reviews, what is to be the basis of any rent increase? This is also a matter of negotiation as to whether it is a review to market rent and/or in line with the Retail Prices Index.
Deposit or guarantor?
Landlords are increasingly looking for either a deposit or a guarantor to secure the tenant’s obligations under the lease. Does the tenant have either available, or is the landlord satisfied with the tenant’s financial covenant?
Alienation
The key way for any tenant to dispose of its interest during a lease is to either assign it or pass on its obligations by way of a sublease. Often these provisions cannot be exercised without the landlord’s consent but the extent of any restrictions should be negotiated.
Alterations and rent-free period
It is likely that a tenant will want to make alterations to the property before commencing trading, whether it’s to alter the lay-out, put up signs or even install heating or air conditioning units.
As most leases will contain restrictions on alterations, a tenant should seek to obtain the landlord’s consent to proposed alterations prior to entering into the lease.
The length of any rent-free period for fittingout purposes under the lease should be negotiable between the parties, together with the terms of the yielding up provisions and any licence for alterations to document the terms of the landlord’s consent to the alterations.
CONCLUSION
There are key matters for all parties to consider when negotiating and entering into a lease in Guernsey. If these are dealt with at the outset, with advice and assistance from the appropriate professionals, it can prevent time-consuming and costly issues from being uncovered at a later date.
Construction contracts and conflict
Chartered architect Esther Male of CCD Ltd is also a member of the Chartered Institute of Arbitrators. Here she looks at how disputes can be dealt with.
Construction projects may have a reputation both for taking longer and costing more than expected. However, this really is far from the truth - people may relish (and embellish!) stories when things do not go quite to plan, but as chartered architects and surveyors at CCD we find that the vast majority of projects are delivered to satisfied clients on time and on budget. As an established practice in the island, celebrating our 40th anniversary this year, we have many repeat clients, as well as consultants and builders with whom we work regularly. It’s a good indication that most building projects achieve the desired end result.
However, just as in any other part of life, things are not always rosy in the construction world. It is therefore best at the outset to consider how a problem could be resolved should one rear its ugly head.
As chartered architects and surveyors, CCD would normally advise both parties – client and builder – to sign up to a standard form building contract. These have been developed to provide a fair balance for both parties, and can cover all sorts of issues, including how often payment should be made, what happens if awful weather stops building work, and even what happens if the States orders a lockdown! Another important clause in a contract is what to do if something goes wrong, and the parties end up in conflict. This type of clause is included because if the parties are arguing about something it is very unlikely that they will be able to agree on how best to resolve that argument. Far better to have a dispute resolution process set out in advance just in case it becomes necessary.
A dispute can be taken to court to be settled, but this can be costly, time-consuming and also public. There are two main types of alternative dispute resolution that are used in building contracts locally, with these being mediation and arbitration.
Essentially, mediation is used to bring to parties together and allow them each to present their side of the story. A mediator will encourage both parties to listen to each other and try to come to a resolution that they both can live with. The mediator does not make any decisions but helps and supports the parties in coming to a settlement. Of course, this may not always work as sometimes the parties just cannot agree.
If mediation is undesirable or unsuccessful there are two other routes for settling the dispute – either the matter can go to court for a decision or the parties can refer it to arbitration. Arbitration is generally regarded as being faster and cheaper than using the court system, and also has the benefit of being private between the parties. The decision is final and binding, and therefore brings closure to the matter for both parties. The benefit of including an arbitration clause in a building contract means that, if there is a dispute, either of the parties can automatically ask for an arbitrator to resolve it.
Architects and surveyors can advise on inclusion of a dispute resolution clause when construction contracts are being drawn up; at CCD we also offer dispute resolution services for those times when the project does not go as smoothly as hoped. All that may be required is to help the parties have realistic expectations of the scope of work set out in the contract, and understand the other party’s point of view – so often disagreements come about from a lack of clear communication. If this does not resolve matters then mediation or arbitration can be useful options, so it makes sense to consider this at the outset when putting contracts in place and while everyone is on good terms!
Construction and contracts
When undertaking construction projects, it is crucial that expectations are clearly laid out from the outset. In many cases, that need is best met through the use of standardised contracts. Steve Moores, surveying director at Rihoy & Son, explains how his firm ensures all parties have clarity on their roles and responsibilities to ensure a smooth delivery of the project.
At Rihoy & Son, we predominantly use the Joint Contracts Tribunal Ltd (JCT) suite of contracts, which are the main recognised contracts for use on construction projects of most types.
The contracts are widely used throughout the industry and JCT is recognised as the leader in the field. It has been producing standardised contracts since 1931 and there are many books, papers and guidance notes dealing with every issue that may occur during a building contract and how issues are to be resolved.
There is also extensive case law that can be reviewed, to assist in understanding any potential outcome of an issue. As the contracts are so widely used, professionals within the industry know and, hopefully, understand the JCT ‘rules’.
While the contracts are very familiar to us and others in the industry, we do still need to be careful when using them. As a main contractor, there are many areas of the contract that need to be carefully checked by us. These include: the level of insurance cover required, and who is to take out and maintain this insurance (including adjoining properties insurance if required); the level of liquidated damages to be imposed on the contract; and any design responsibilities that are to be met by the contractor.
Additionally, any amendments that are made to the standard JCT contract need to be reviewed carefully to ensure that the contractor, employer and any third parties can fulfil the requirements of those amendments and understand their implications.
As the JCT contracts are drafted for the UK market, we do need to make some amendments so that they are suitable for use in Guernsey. Our experience in using JCT contracts in the local market means we are able to engage with that ‘Guernsification’. The differences between Guernsey law and that of England are recognised by replacing all references to law of England with law of the island of Guernsey. One major difference is the removal of the adjudication process from the standard contracts, as it does not apply in Guernsey. Once amended, the contracts are suitable for a very wide range of projects in the island, and our clients should be advised at an early stage by their architect, employer’s agent or project manager on the type that will suit their needs best.
Those needs can include the level of specification and design input the client wants to maintain throughout the project, whether they want or need to secure any financial risk prior to commencement, and their general level of involvement during the construction design development.
The client needs to consider whether they want to retain total control and risk retention for the project (which means the use of standard JCT contracts) or minimum risk, where the budget and completion dates are key factors and control is handed over to the contractor (which means the use of a JCT design and build contract). Whichever they choose, the use of these contracts means that all parties have clarity on their roles and responsibilities to ensure a smooth delivery of the project.
WHICH JCT CONTRACT SHOULD BE USED?
Where there is no design responsibility required by the contractor, either Minor
Works Building Contract, Intermediate
Building Contract or StandardBuilding Contract (with or without quantities).
Where the contractor is to take on limited design such as mechanical and electrical works, curtain walling etc, we would use either a Minor Works
Building Contract with Contractors
Designor an Intermediate Building
Contract with Contractors Design.
Where the contractor carries out both design and construction, a Design and Build Contract would be entered into.
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