REAL INSIGHT – Property Update – July 2013
PROBLEMS MOUNT FOR ‘BEST PRICE’ CLAUSES
The German Competition Authority is the latest body to investigate whether “best price” clauses infringe both domestic and EU competition law. These types of clauses, which are believed to be used within the UK retail and hotel sectors, prevent the product or service from being offered at a cheaper price elsewhere in the market.
The specific issue into which the German Competition Authority is looking is the use of a “best price” clause by the online hotel-booking website, HRS. The clause prevents hotels from offering their rooms at a cheaper price than is available via HRS. The clause also makes it difficult for competitors to offer lower prices.
This is the latest in a series of investigations by the German Competition Authority into restrictions affecting online sales. It is already looking into Amazon’s apparent policy of requiring products not to be sold cheaper on other platforms in Germany and is also looking into the distribution practices of Adidas and Asics.
If you have encountered “best price” or “most favoured nation” clauses in your business dealings and have concerns in light of the latest developments, we can help. For a no-obligation discussion, please contact Andrij Jurkiw or Sarah Houghton of Mishcon de Reya’s Competition Team.
THE FORECAST FOR FLOOD INSURANCE
The Government and the Association of British Insurers (ABI), whose members sell 90% of all insurance in the UK, recently agreed a memorandum of understanding to pave the way for “Flood Re”. This will be a new pooled reinsurance scheme designed to ensure that flood insurance remains available and affordable for residential occupiers facing the highest risk of flood damage.
While this looks like a positive step for affected homeowners, not everyone under threat from flooding will be accommodated by Flood Re in its proposed form. Commercial property will not be covered, nor will residential properties in the highest council tax band, H, or those built since 1 January 2009.
Under the Flood Re scheme, which is intended to be up and running by June 2015, flood insurance costs will be subject to caps based on council tax bands. Starting premiums of £210 pa have been suggested for bands A and B, rising to £540 for band G. All ABI members will contribute to a collective annual levy of £180 million, fixed for five years, which they will pass on through all home insurance policies they issue to homeowners. Critics are already highlighting the limitations of the scheme and posing the difficult question of who will cover the shortfall in an extreme scenario.
While the memorandum offers no comfort to commercial owners or occupiers, we can help you navigate these stormy waters. For more information, contact Simon Chadowitz.
Click here to view a recent Estates Gazette article by Philip Freedman CBE QC (Hon) and Simon Chadowitz.
LIGHTENING THE LOAD
Rights of light surveyors may sometimes recommend insurance to guard against the risk of rights of light claims on a development project. Such insurance can be a useful tool for minimising or transferring the risk of proceeding with a development, but it has its limitations and developers should consider certain key issues:
- Do not be afraid to negotiate the terms of the policy as initial drafts can be insurer-friendly. Particular pitfalls include “basis of cover” clauses which effectively convert pre-policy statements into contractual warranties, onerous duties of disclosure and wording that changes any obligation on the part of the insured into a condition precedent.
- Carefully consider the limit of cover as it will need to include (among other things) abortive costs, the costs of altering the building to comply with an order, the costs of applying for a new non-infringing planning permission, litigation costs and the difference in market value of the infringing and non-infringing development.
- If acting for a funder, you should try to ensure that the funder is a “composite insured” (effectively providing a separate policy so that if the developer’s policy is breached, it does not affect the funder’s policy) and there is a “first loss payee” clause.
- Remember that the policy provides a compensation pot to deal with claims and any court orders. It does not allow the development to proceed as originally envisaged if an adjoining owner is successful in obtaining an injunction. The development will either need to be “cut back” to avoid infringing the relevant rights of light or the developer should try to negotiate a payment with the adjoining owner.
- Finally, do not contact the adjoining owners! Once the insurance is in place, only contact them in accordance with the terms of the policy.
In summary, while rights of light insurance policies can be useful, ensure that the policy terms are carefully considered and negotiated so that they adequately protect the developer, funder and their tenants. Contact Ed Hughes-Power for more information.
TAKE A CHANCEL ON ME
The law relating to chancel repair liability is changing on 13 October 2013. From that date, the liability will cease to be an overriding interest and a notice will have to be registered if the liability is to bind new purchasers.
The position in relation to land acquired prior to 13 October 201 is, however, far less satisfactory, and may well leave landowners crying out SOS because:
- until it is sold, the burdened land will potentially continue to be affected; and
- if a notice is already registered, the land will permanently be bound.
The risks associated with chancel repair liability are not insubstantial. In a 2004 House of Lords’ case, the burdened landowners were ordered by the Court to pay the Parochial Church Council more than £95,000. Given these risks, expert advice should be sought on whether the liability is likely to be a problem in any given transaction.
If you have any queries/concerns, please contact Mark Reading to discuss the risks associated with the liability and/or to take steps to ensure that the Parochial Church Councils are not the winners that take it all, when it comes to chancel repairs.