Site at Mayfields Park

Memorandum

Rival buyer

This will be a purchase of the site without planning permission. As such, the plans and the value of this site will be subject to whether or not a planning permission could be secured. What will be appropriate to secure a commitment from the seller is to sign a conditional agreement with the seller. This condition can make the sale complete only when the planning permission is obtained. The client must ensure that the terms are drafted property to release itself from the contract without risk in case the planning permission is not obtained. In this case, since there are numbers of development projects happening already in the new suburb, securing the permission may not be a problem. Thus, the owner will be willing to sign the contract in case getting the planning permission is fairly secured. 1.1. Time limit. It must be noted that the client will need to apply for the planning permission within a certain timeframe. Section 91 of the TCPA 1990 provides for a default time limit of three years for a full planning permission. This section requires that the development must begin within three years from the date the permission is or deemed to be granted. 1.2. Overage clause. Given the potential of increase in the price of the property, it will present a challenge to estimate the value of the property. In this case, it is advisable to have an overage clause. This clause has a definite length of time. This clause will require the client pay the vendor an additional sum after the planning

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1. Robert M. Abbey, Robert Abbey and Mark Richards, A Practical Approach to Conveyancing (Oxford University Press 2014) 368.
permission is obtained. This clause will benefit the client to pay in instalments.

1.3. Purchase price. Through the conditional contract, the price can be a fixed amount. Alternative situation would be when the seller asks for a share in increased value of the property after obtaining the planning permission. This is relevant with the overage clause. See Crest Nicholson (Londinium) Ltd v Akaria Investment Ltd [20010] EWCA Civ 1331 that emphasised on overage clause as basis upon which the profit payments are to be calculated. Given the benefits of overage clause, the client will be able to purchase the property at its current value without the planning permission. Thus, fixing the purchase price will be read with whether or not the planning permission will be obtained and will therefore depend on the negotiation between the parties. 1.4. Exclusivity clause. This matter will require the client to invest time, effort and money to apply for and obtain planning permission. The client must also ensure the seller agrees to exclusively deal with the client until the sale is complete or the planning permission is obtained. In case the seller sells the property to a third party, they must reimburse the client’s fees and costs. 2. Planning Permission The TCP(UC)O 1987 (as amended and effective on 1 September 2020) sets out 'Use Classes' categorising uses of land and buildings. As amended, the old factory building will fall under the class B2 General industrial. Planning permission will be required to convert this building into offices, which fall under Class B1a. 2.1. Permitted development. The change of use from B2 to B1a will constitute permanent changes of use. Such change will be covered by the ‘permitted development’. This means that the planning permission is deemed to have been granted. The TCP(GPD)(E)O 2015, Sch. 2, Part 1, Class I provides for this permitted development. TCPA 1990, s55(1) defines development as including engineering, mining or other kinds of operations or making material change in the use of building or the land. Section 55(1A) define operations as including demolition, rebuilding, structural alterations, additions to

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2. Robert Megarry et al., The Law of Real Property (Sweet & Maxwell 2012) 625.
3. Planning Portal, ‘Planning Permission’ accessed on 5 January 2021 .
4. Ibid.

buildings, and other operations undertaken by a builder. Section 57 requires that development work must take planning permission before the work is undertaken. However, Section 55(2) provides that development work does not include maintenance, improvement or alteration of the building that affects only the interior of that building or does not materially affect the building’s external appearance. The work required by the client falls under section 55(2). Such building work will be covered by the 'permitted development' rights. As per Sch. 2, Part 2, all minor operations come under the permitted developments rights. Thus, if the client’s work in question comes under Part 2, the client does not need to apply for planning permission. 2.2. Listed Building. Permitted development may be restricted if the proposal of change of use to office in question may affect a Listed Building. If the property is a listed building, the client needs to apply for a Listed Building consent. 3. Construction Defects Collateral warranty is also known as collateral contracts or duty of care agreements. They are collateral to the main appointments of building contractors. The duty is towards the third party

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5. Ibid.
6. Ibid.

to maintain the Construction all risks (CAR) insurance policy in force. The privity of contract requires that the only the parties to the contract can enforce the contract. It excludes any third party from benefitting from the contract. This means that in a construction contract, the benefit of duty of care of skill of a contractor cannot be extended to tenants or to purchases of the developments. The way to extend the benefit is either to join such third party to the contract or executing a collateral warranty. Collateral warranty, thus, extends the benefit of care and skill of the contractor towards the tenants. The rights and benefits of the third party are recognised in the C(RTP)A 1999. As per s1, a tenant as a third party can enforce the terms of a contract in which they are not a party. The condition, as per s1(a), is that the contract must expressly provides so. Alternatively, as per s1(b), the contractual terms confers them the benefit. However, as per s2, s1(b) will not apply if the construction contract does not intend a third party to enforce. As per s1(5), the tenants, as third parties, will be able to enforce remedy for breach of contract, such as damages, specific

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7. Roger ter Haar, Anna Laney and Marshall Levine, Construction Insurance and UK Construction Contracts (Taylor & Francis 2016) 250-251.
8. Robert Merkin, Privity of Contract: The Impact of the Contracts (Right of Third Parties) Act 1999 (Taylor & Francis) 2013.
performance injunctions, and other applicable reliefs
Collateral warranties, thus, must be associated with another primary contract. It ensures a duty of care towards the third party by one of the parties in the primary contract. They create a direct privity between the tenants and the contractor ensuring that tenants, as third parties, could enforce the contract as applicable to them. The sample warranty contract in question identifies it to be collateral to the primary building contract dated 21 March 2020 between Kurran Property Limited and the Contractor. Clause 1 of the sample contract suffices the purpose of s1 of C(RTP)A 1999. The duty of care is provided for and imposed on the contractor towards the Bank, which is the third party. Clause 2.1. of the sample is an example where the benefit of duty of care of skill of a contractor is extended to a third party. Using products or materials in conformity with the British Standards or Codes of Practice or good building practice is a benefit for the employer. The sample agreement shows that this benefit is extend to the Bank. Likewise, indemnity insurance under clause 3.1 is another example. The enforceability of the contract by having access to contractual remedies of breach is also provided in the sample agreement. Examples are clause 4 where the Bank can assign the contract and clause 5 that provides for action on breach of the contract. Given the existing legal principles, the client needs to make a few amendments, namely: a) take out indemnity insurance such as Construction all risks (CAR) insurance policy; b) the construction contract must incorporate s1 terms to enable tenants can enforce the contract. The current sample identifies the construction contract, but does not expressly provide for the collateral warranty; and c) add an indemnity clause. I hope I am able to provide the appropriate responses to the queries. If you have any questions, please let me know. Yours sincerely A Trainee Our ref. no: ABC Solicitors (insert address) Ash Judd Estates Manager Archia Space Limited 95 Belvoir Street Leicester, LE1 6TB Dated: 6 January 2021 Reference: Queen’s Road Den and Glenfield Den Dear Ash, Thank you for sharing with me the necessary information about the matters in question. We have set out our legal advice for your situation in this letter. We are able to consider the legal issues involved and steps that could be taken to resolve the same.

Unit 5 Queens Road Den

We have drafted a break clause notice. It is attached at the end of this letter. Please be informed that this notice must be served in duplicate. The notice must be served at the registered address as provided in the lease. The landlord must be asked to sign and return the duplicate as an acknowledgment of receipt. According to the lease dated 1 September 2015, the Break Date is 1 September 2021. As per the Break clause 29, this notice must be served at least three months before this date. Accordingly the notice must be served atleast before or on 31 May 2021. Please comply with clause 36 of the lease, which requires you to send the notice by recorded delivery. To make the Break Date effective, please make sure that Annual Rent and any applicable taxes are not due. You must vacate the premise before the Break Date. You must ensure that you do not breach any of the lease terms. Considering the technicalities involved in serving this notice, please be informed that we would serve the Break notice on your behalf. This will ensure the notice is serviced property and the termination of the lease occurs without any legal complication.



Queens Road Den

2.1. Assigning the lease. Archia Space must get the consent for assignment from Hamilton Hargreaves. This requirement is also provided under clause 20 of the lease date 9 June 2014. Hamilton Hargreaves will not recognise the Gee Estates as new tenant if the assignment is without the landlord’s consent. In such case, Archia Space will be still liable for the provisions of the lease. Archia Space must send Hamilton Hargreaves or its agents an application for consent to assign. Archia Space will be liable for the costs incurred by Hamilton Hargreaves whether or not Hamilton Hargreaves approves the application. Archia Space may pass on this cost to the Gee Estates after the assignment is completed. Archia Space may be required to produce further documentation or information about the potential assignee to enable Hamilton Hargreaves take informed decision. Hamilton Hargreaves may request three years audited accounts for Gee Estates. It may request up to date management accounts and trade references and references from professional advisors. It may request reference from existing landlord of other premises regarding rent payment and lease compliances. Failure on the part of the Gee Estates may lead to refusal of the consent. Hamilton Hargreaves may refuse consent if the Gee Estates cannot provide good references or has no previous trading history. Hamilton Hargreaves cannot unreasonably withhold its consent. This means Hamilton Hargreaves owes Archia Space a duty to deal with the consent application within a reasonable time. It must give Archia Space a written notice of its decision whether or not to give consent. Hamilton Hargreaves can withhold its consent based on reasons, which it must specify. The reasons may include an existing breach of covenant by Archia Space or that Gee Estates will use the premises for business not permitted by the lease. Archia Space may also pursue legal action in case Hamilton Hargreaves does not allow assignment without a valid reason. Hamilton Hargreaves may also give a conditional consent. It may require Gee Estates to obtain a guarantor or enter into a rent deposit deed. Hamilton Hargreaves may do this secure its rent payment. After obtaining the consent, Hamilton Hargreaves’s solicitors will prepare a Licence to Assign document. The formal transfer of the lease to Gee Estates will be complete when Hamilton Hargreaves signs this Licence. A deed of assignment/transfer between Archia Space and Hamilton Hargreaves will also be entered covering various obligations of both the parties. 2.2. Continuing liability. The lease dated 9 June 2020 provides for assignment of the whole lease with the consent of the landlord. However, clause 2.4 also provides that the assignment is subject to the condition that Archia Space enters into an Authorised Guarantee Agreement with Hamilton Hargreaves. This agreement covers all the tenant covenants during the entire term Gee Estates would be bound by the lease. This Agreement serves as a pre-condition to the assignment. Accordingly, Archia Space provides a guarantee that Gee Estates will perform the covenants in the lease. Accordingly, in the event of breach of the covenant by Gee Estates, including non-payment of rent by Gee Estates, Archia Space will incur ongoing liability. 3. Finance for Glenfield Den If Archia Space signs the Negative pledge clause, it means it undertakes to Titan Bank that Archia Space will not create or permit to subsist security or encumber in regard its assets to another lender without the prior written consent of Titan Bank. The draft debenture has defined “Mortgaged Property” as “covering all leasehold and freehold property owned by AS”. Therefore, the prohibition stipulated by the negative pledge clause will apply to all the leasehold and freehold property owned by Archia Space. 3.1. Purpose and effect. By inserting the clause, Titan Bank prevents Archia Space from pledging its assets to another creditor so that Titan Bank’s security is not jeopardised, particularly in the event Archia Space goes to bankruptcy. Accordingly, this pledge will prohibit Archia Space from creating a lien, security interest or permit any form on encumbrances to another creditor that would give other creditors priority on Archia Space’s assets or properties. The current draft clause also used the language “permit to subsist any encumbrance”. This reference means the prohibition to pledge covers both existing and future security. Considering the current draft debenture for a term loan, Archia Space will be prevented from taking on any future debt. This also means that in case a particular asset is pledged, it cannot be pledged again. The breach of this negative pledge clause can constitute a default on the loan and defaults procedures can commenced against Archia Space. 3.2. Difficulty to future plan Clause 6 Negative pledge provision will create a barrier to Archia Space’s future plans in Leicester. The project in the Glenfield area of Leicester requires finance for the construction work and creating many other “Den” sites. Signing the debenture agreement with the Negative pledge clause will prohibit Archia Space from using any of its all leasehold and freehold property as security to raise and secure finance. The negative pledge clause will altogether restraint Archia Space from pledging its assets and property to any other creditors or lenders. Non-compliance will make Archia Space a loan defaulter and will expose Archia Space to loan default proceedings This letter has outlined all the necessary legal aspects and procedures that would be involved in the matters related to the three properties. We hope that this advice has helped you understand your legal positions and would enable you to make informed decisions. If you have any further questions or need further clarifications, please approach us and we will do our best to clarify those for you.

Sincerely yours Clare Wylde ABC Solicitor

Break notice

6 January 2020 Innesquare Plc 18 Bathgate, Linlithgow Scotland EH49 6AD

Subject: Notice of exercise Break option - Unit 5 The Den

Dear Mr./Ms, This letter, dated 6 January 2021, shall constitute a written notice in accordance with the provision of the Break clause 29 of the lease dated 1 September 2015 of the property Unit 5, The Den. Accordingly, this lease will be terminated effectively on the Break date, 1 September 2021. If you have any questions, please let us know. Sincerely yours Mr./Ms… Title Archia Space Limited

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