Property Hot Topic - Prohibitions on Property Dealings
In this series of articles, VWV Property Litigator, Philip Sheppard, shares key property issues that often affect the healthcare sector including what to be aware of, the key warning signs and how to avoid problems.
In previous issues, we discussed the importance of keeping Land Registry records up-to-date and the need to properly document how a property is being used or dealt with. In this issue, Philip considers what can happen if that use or dealing is forbidden.
What Are Prohibited Dealings?
Property owners and occupiers are often restricted in how they use or deal with their property. They may be prohibited by the terms of their funding arrangements or mortgage, by the terms of a lease, or by a covenant on the land contained in the deeds.
For example, such restrictions may prevent the owner from using the property in a certain way, from sharing the property, or from transferring it to another party. Legislation may also prevent some dealings (such as assignments by tenants to their own guarantors).
Some dealings will be absolutely prohibited, which means they must never be done. Other dealings may be permitted in certain circumstances, subject to certain conditions, or permitted only to certain persons (for example, GP leases often allow assignment to other partners in the same practice). Others still may be subject to the landlord's consent.
Before making a decision affecting your property, it is important to check whether an act is permitted. You should also check whether any consents are required from a landlord, funder or local authority and also check the requirements for making a valid application for consent. If a consent is conditional those conditions must be identified and fulfilled usually before the act or dealing has been completed. The timescales for obtaining consent or complying with any conditions will need to factored into the transaction.
What Are the Consequences of a Prohibited Dealing?
The consequences of a prohibited dealing will depend upon the nature of the breach. However, the consequences of dealing without consent can be very serious.
It can lead to delays in transactions while consents are obtained or conditions are fulfilled. It can result in claims for monetary damages or claims for injunctions to prevent an ongoing breach. In some extreme cases, a transaction may be void or may cause a lease to be forfeit.
Given the sometimes onerous conditions on dealings, and the serious consequences of doing so without due consent, we would always recommend seeking legal advice at an early stage so that any prohibitions or conditions can be considered and addressed as a part of the transaction and planned use of the property.