Letting agents and private landlords will be concerned by the proposal for new obligations to check the immigration status of individuals before entering into a lease.

At this stage, few details of how this system is intended to operate have been released.  Commentators have noted that landlords are not Immigration Officers and that this proposal will create an unnecessary and unwelcome additional burden and cost on all landlords, especially private individuals.  Tenants will end up seeing an increase in rents, as landlord and lettings agents look to cover the costs of additional checks.  Commentators have also noted that the new legislation will come into force before changes to the rights of Bulgarian and Romanian nationals take effect. 

For many years now, employers have been required to carry out immigration checks on their staff before offering employment.  These obligations first came into place in 1997 and cause particular difficulties for employers.  Employers who take on illegal workers can be fined up to £10,000 per illegal worker and can face prosecution and imprisonment.  The fines are imposed by the UK Border Agency, following a spot check visit, and can only be appealed in the High Court, which causes significant cost and stress for employers.  The new Immigration Bill announced that these fines will increase. 

Employers have a further cause for concern, because of race discrimination legislation.  It is important that employers do not treat staff differently on the grounds of their nationality or race.  Race discrimination legislation also applies to applicants for jobs, so employers who get this wrong, can face claims from individuals that they have not even employed.  Claims for race discrimination can result in unlimited compensation, awards for injury to feelings, aggravated damages, stigma damages, interest payments and recommendations from an Employment Tribunal about how an employer should change its recruitment policy.   

It is likely that it is this sort of regime that the Government intends to apply to the Commercial Property sector.  Landlords and letting agents are likely to be obliged to carry out these kinds of checks, before entering into a lease, or face potential fines and imprisonment.  It is likely that the UK Border Agency will have powers to turn up at letting agents’ premises to verify that the proper checks have been carried out, and to impose fines where illegal immigrants are identified.  Landlords and letting agents will be affected by race discrimination legislation when providing services and will need to think about whether they want to take these kinds of risks, or “be on the safe side”. 

The added difficulty for letting agents will be that they will be checking the right to reside in the UK.  This right is a much more complicated issue than being allowed to work.  Bulgarian and Romanian nationals, as well as all EU nationals, already have the right to live in the UK.   Current statistics show that 21% of the UK population were born overseas and in some towns and cities this proportion will be far higher.  Are letting agents and landlords going to be required to check the immigration status of asylum seekers?  Furthermore the immigration status of dependents and spouses, as well as visitors to the UK, are really complex issues for a private individual to have to police, without falling foul of race discrimination laws. 

Most letting agents already use third party referencing companies to vet potential tenants, but this is less of an option for private landlords.  The referencing companies, it is hoped, should be able to include checks for immigration as part of their service, but the concern is that this would only work if support is available from Government agencies, such as the UK Border Agency.

Further, letting agents and landlords will have no control where lettings are to corporate entities, who then allow employees or staff to reside in the properties.  Will letting agents and landlords be liable in those circumstances? 

One further issue of concern, is the Government’s proposal to tighten up the provision of NHS services to migrants.  The right to receive free NHS care depends on whether or not a person is permanently resident in the UK.  One of the tests which NHS officials already carry out, is to ask for proof of a lease to establish whether or not a migrant is permanently resident in the UK.  We may therefore reach a position that the NHS is relying upon the lease which the landlord has granted, to establish that someone has the right to receive free care.   Are landlords and letting agents going to want this level of responsibility and potential liability if they get it wrong? 

We will provide further commentary on this issue as it develops.

Debra Wetters is a solicitor in the Employment Department advising businesses and individuals on all aspects of the employment relationship. This commentary has been produced jointly with James Cottrell, a commercial real estate lawyer at our Luton office.

However, carefully drafted contracts and staff handbooks can provide the business with valuable protections and flexibility.  The opportunity to achieve these benefits can be lost when a business falls into the habit of issuing the same documentation to all employees without consideration of matters such as:

• Is the confidential information of the business adequately protected? Unless the contract contains clear provisions, only trade secrets of the business will be protected.

• Are the circumstances in which employees are entitled to receive benefits clear? Any ambiguity is likely to be resolved in favour of the employee.

• Will the business be affected when staff leave?  If you want to restrict the activities of staff after termination of employment, the contract must contain clear and reasonable restrictive covenants.

• What will employees be required to do during the notice period? If you do not want employees to work their notice periods then it is important to include provisions relating to pay in lieu and/or garden leave in the contract.

• Can you monitor your employees email/telephone communications if necessary? As a general rule, monitoring will only be lawful where the business’ policy on monitoring has been brought to the attention of the employee.

• Have you complied with the relevant immigration rules? It is sensible to set out the business’ approach to immigration checks in a written document.

• Does your handbook contain clear and relevant policies?  The policies in your handbook not only assist the business with dealing with a variety of employment scenarios effectively but they also provide evidence of the manner in which particular matters are dealt with and will be taken into account by the employment tribunal. 

During May and June 2013 we will be running a series of free workshops at our Luton office during which we will be discussing what should be in an “ideal” contract of employment and staff handbook.  If you would like to ensure your contracts, policies and procedures are robust then please visit our Events page where you can read more and reserve your place on-line.

Nicola Smyrl is an employment solicitor at our Luton office, advising both employers and employees on a wide range of employment related issues.

At the heart of this case is the sad truth that, in today’s digital age, there are risks in dealing with people you don’t know are genuine.  

Most people would find it incredible that homebuyers are left exposed in these circumstances.  Why wasn’t the firm of solicitors checked out by the solicitor acting for the buyer?  The answer is they did check but in this instance the records of the Solicitors Regulation Authority were found to be wrong!

In the past conveyancing would largely be dealt with by trusted local firms of solicitors where buyers and sellers could visit their offices and meet with the solicitor face to face.  The buyer’s solicitor would know the seller’s solicitor and vice versa. 

Nowadays, lured by the prospect of cut price conveyancing on the internet, buyers sometimes never even speak to a solicitor, let alone visit them and meet them face to face.  They rely on email communication and what they are told on a website.  Often these conveyancing operations are not locally based so it is never possible to check out their credentials other than through the SRA records, which, as can be seen from this case, are not guaranteed to be accurate. 

So, how then can you avoid this nightmare scenario arising?  Whilst there are no doubt reputable firms operating on the internet, it is best to instruct a solicitor on the basis of personal recommendation.  If the solicitors firm is local, then you can always visit their offices to check that they exist! 

The Law Society recently introduced a quality kite-mark for conveyancers known as Conveyancing Quality Scheme whereby all solicitors who participate have to be vetted and checked thoroughly before gaining the accreditation.  For peace of mind therefore, always check that your chosen solicitor has been awarded the CQS quality kite mark for conveyancing.  Furthermore, insist on having the other side fully checked out and if they are not accredited CQS members’ further checks should be made to safeguard your money. 

Whilst instances of fraud in the conveyancing process are not huge, the Moneybox programme alluded to nine similar cases to that reported having occurred since July 2012.  Clearly, homebuyers need protection against this sort of fraud and taking a few simple precautions when choosing your solicitor can help avoid these disasters.

Richard Atkins is a partner in our Residential Conveyancing team and based at our Harpenden office.

These objectives can often only be achieved by departing from good employment practice thereby exposing the business to the risk of protracted claims.  In this article I have summarised key issues to consider before deciding how best to dismiss a senior executive:-

1.         The reason for the dismissal

It is important when formulating your strategy that you identify the reason for the proposed dismissal and the potential claims that the employee may be able to bring at the outset. 

If the reason for dismissal is gross misconduct then the business may be able to dismiss without breaching the contract of employment and paying notice.  However if a proper procedure is not followed there is still the risk of an unfair dismissal claim.  

Poor performance or a clash of personalities is unlikely to provide the business with a reason to justify summary termination.  The business would need to pay notice pay and if a proper procedure is not followed there is also the risk of an unfair dismissal claim. 

2.         The risks of other claims 

At the outset you should determine whether there are risks of other claims in addition to claims for wrongful dismissal, breach of contract and unfair dismissal:- 

• Is there a risk that the business may face a discrimination claim if it terminates the senior executive’s employment?  There is no limit to the amount of compensation that the tribunal can award in a discrimination claim therefore businesses should pay particular attention to any prior grievances raised by the senior executive.  If there is a risk of a discrimination claim then the business should carefully consider the documented reasons for dismissal and the procedure it adopts in effecting the dismissal.

• “Whistleblowing” claims – is there a risk that the senior executive may be able to argue that they are being dismissed because they raised a “protected disclosure”?  If so, there is no limit to the compensation that the tribunal can award.

• Is the senior executive also a director and/or shareholder of the company?  The business should take advice as to whether or not the senior executive could bring a claim against the company in his/her capacity as either a director or shareholder of the company.  This would involve a careful consideration of the Articles of Association of the company, any shareholders agreement as well as the provisions under the Companies Act protecting minority shareholders.

Shareholder approval of a termination payment payable to a director may also be required. 

3.         Restrictive covenants 

Senior executive’s employment contracts usually include restrictive covenants and that the business will wish to rely upon those restrictions.  If the business dismisses the executive in breach of contract then the executive will be released from the restrictive covenants.  You could consider a business decision to dismiss with notice to avoid this argument.

Alternatively, you could seek to re-impose such restrictions or impose new restrictions via a negotiated Compromise Agreement however employees would expect to be substantially compensated for doing so. 

4.         Other issues 

Senior executives usually take legal advice at the outset of a dispute therefore you should prepare before embarking upon this course of action.

In terms of settlement, a senior executive will be looking for the payment to be paid in a tax efficient manner.  Where an employee is given full notice and either works their notice or is put on garden leave then pay and benefits payable during that period are fully taxable in the normal way.  If the contract of employment contains a pay in lieu of notice clause (PILON) then a payment in lieu of notice is also likely to be fully taxable in the usual way.  

If there is no PILON clause HMRC usually take the view that sums paid are damages and up to £30,000 can be paid as a tax free sum.  However, HMRC can seek disclosure of without prejudice correspondence and documents and may be able to challenge the tax free payment. 

A detailed strategy is the key to avoiding protracted disputes and the lingering effects of the former executive. 

Heather Cowley is a partner and Head of Employment Law based at our Luton office.

In the world of commercial property quarter days are important and stretch back to medieval times. Traditionally these have been days when accounts are settled, and typically with commercial properties these are the rent days. In England, Wales and Ireland the quarter days are actually four religious festivals falling on March 25, June 24, September 29 and December 25.

The recent case of PCE Investors Limited –v– Cancer Research UK has highlighted the need for tenants to carefully consider the conditions attached to any break clause when exercising the break.

Having a break clause is hugely useful to any tenant as it gives them the flexibility to terminate a Lease at an early stage if business isn’t going well, or move to larger premises should they wish to expand. This recent case illustrates the need to be extraordinarily careful in observing all the conditions necessary to exercise the break. The break in this particular lease was conditional upon “all rents reserved and demanded being paid up to the termination date”. 

Under the terms of the Lease, the Tenant was required to pay the annual rent in equal quarterly instalments. The break notice was served but before the break date the Landlord issued a last minute rent demand for the full quarter’s rent which would have been due for payment on 29 September 2010. The Tenant paid the rent up to the break date of 11 October 2010. It was only after the break date that the Landlord notified the Tenant that it should have paid the full quarter’s rent (for a period long after it would have vacated the property) and therefore the break was invalidly exercised and the tenant was still liable for the remainder of the lease term.

The Courts have been notoriously unfair to tenants in cases such as this. Their view is that the wording of the Lease takes precedence and that only full payment of the full quarter’s rent would discharge the tenant’s duties and enable it to break the Lease. Deemed apportionment is simply not possible under English law. 

Landlords are not obliged to inform the tenant that the notice to exercise the break has been served incorrectly nor are they obliged to ensure the correct money has been received. In a separate case the landlord defeated the break notice because even though a cheque was hand delivered a day before the expiry of the notice, the lack of time to clear the funds resulted in interest accruing which had not been paid. Tenants should always ensure there is sufficient time for the landlord to clear the funds. 

The moral of this story is that it is absolutely essential that advice is sought prior to exercising any break clause. They can be a huge advantage to any tenant but, if exercised incorrectly, they might as well not be in the Lease.

Ian McLoone is a Commercial Real Estate partner based at our Luton office.

Divorce or the early death of a spouse often results in family wealth being quickly disseminated due to the pressure of conflicting loyalties on those who remarry or survive. As a result, family wealth, which would once have been kept within the tight nucleus of immediate family members, is suddenly spread across a more extended family.

For anyone involved in a second marriage or civil partnership it may be important for the person preparing a will to provide for their new spouse or partner and at the same time ensure that the children of their previous relationship(s) are still the main beneficiaries of their estate. Interestingly, the Office of National Statistics shows that the divorce rate of the over-60s is on the increase. Given this age group are more likely to be “cash-rich”, having had longer to pay off their mortgages and accumulate assets from their parents, it is even more important to ensure that their wills are drafted to ensure that the assets which they have spent a lifetime accumulating pass in the direction they would want them to on their death.

Where an early death has occurred, it may have been a concern of the deceased that their husband or wife would go on to remarry and have a second family. The deceased may have been worried that his or her estate would not be ring-fenced for the benefit of the surviving spouse and the children of their marriage and could in the future be used for the benefit of their widow or widower’s new family. 

If you are concerned that your spouse could remarry in the future were you to die prematurely or that he or she may not be financially responsible by frittering away your assets so there is nothing left for your children, a life interest trust is a useful instrument to include in your will. A life interest trust will allow you to make provision for your surviving spouse but still ensure that the bulk of the estate is ring-fenced for the benefit of your children. 

Under a life interest trust, any income generated by the trust assets is paid to the surviving spouse. The spouse therefore has an outright entitlement to the income but not to the capital of the trust fund. Consequently it needs to be considered if there is sufficient income for the surviving spouse to live on, if this is what is intended. If a property also forms part of the assets of the trust, the spouse is entitled to continue to occupy the property for the remainder of his or her lifetime (or, if the will is drafted in such a way, until remarriage or cohabitation with another person). 

If desirable, powers can be granted to the trustees of the trust so that they can release capital sums to the spouse outright when deemed necessary.  This means that the trustees have the flexibility to respond to unforeseen circumstances which require the surviving spouse to have access to capital sums. In hand with this, if these powers are included in the drafting of the life interest trust arrangement, it would be advisable for the person making the will to also prepare a “letter of wishes” setting out guidance to the trustees about the circumstances when they would want the trustees to consider releasing capital to the surviving spouse. Who you choose as trustees could be crucial; you need to ensure that you appoint individuals who you trust to follow your wishes. 

Clearly life interest trusts are a useful way of retaining some control over your assets after death and ensuring that the bulk of the assets eventually pass outright to the beneficiaries that you wish to inherit them. There are however some disadvantages to their use. 

Life interest trust without the inclusion of powers to appoint capital to the surviving spouse are inflexible and may result in harsh consequences for the surviving spouse. This is often seen as exerting control from beyond the grave. 

Some surviving spouses may be very unhappy about only being entitled to income and a right to occupy the property. The spouse may resent the long-stop beneficiaries (most commonly the children of the deceased) who will eventually be entitled to the assets without restriction. 

Nevertheless, in order to retain some control over the assets which you have spent a lifetime building up, the inclusion of a life interest trust within your will would be a sensible arrangement to consider. With the option of including powers to release capital to the surviving spouse, life interest trusts represent a good way of providing for a spouse whilst still ring-fencing assets for the benefit of your children.

Katie Khakpour-Smith is a Private Client solicitor at our Harpenden office.

By writing a Will you can not only make the right provision for your family and friends, you can also organise your estate so you pay less inheritance tax. You can appoint guardians and make provision for your live-in partner. You can name your executors, stipulate your funeral wishes and record any particular wishes you may have. Ultimately your estate can be wound up more quickly, saving money and possible squabbles over property. 

If you have a Will in place already, is it up to date? You should review a Will when you have children or if your spouse or other beneficiaries die. Your financial position may have changed or your children have become adults. 

Some people make their own wills, but poorly drawn wills can be worse than having no will at all and can lead to long and expensive court cases. Making a will can be quick and simple and enables you to provide protection for your family and loved ones and gives you the peace of mind of knowing that your affairs will be left in order. 

Not only can you mitigate the amount of inheritance tax you have to pay through Wills, you can also do so during your lifetime with careful planning. 

Problems can also arise during your lifetime if you have not planned ahead. If for any reason you were unable to manage your own affairs due perhaps to a lack of mental or physical capacity then your bank accounts and investments would be frozen and your partner or children would require a lengthy court process to release funds. 

Fortunately there is a straight forward legal way to make matters easier in these circumstances, or indeed to cover the eventuality of our abilities simply declining as we get older. This is known as a Lasting Power of Attorney or LPA. This document allows you to give another person the ability to make decisions about your finances and/or your future care and medical treatment through a Property and Financial Affairs or Health and Welfare  LPA.   

It is usual to prepare the documents well in advance since one can never predict when and how urgently they may be needed, however they can only be used once registered at the Office of the Public Guardian.  Therefore you can create the document and continue making your own decisions for as long as you feel able whilst still having made provision for your future.

Alex Drake is a Private Client partner at our St Albans office.

Since 1999 it has been a tenet of the system that determination by the Court should be the last resort. This has been coupled with the promotion of alternative forms of dispute resolution such as mediation and the inclusion of a series of powers given to the Judges to penalise those parties who should have tried harder to settle their disputes. 

Traditionally the sticks used have been centred on the question of costs recovery but as from April 2013 a new, bigger, stick is being added to the armoury. The Rules are being changed to provide for penalty damages against Defendants (or Claimants facing a Counterclaim) who put their principles before commercial sense. 

From April, a party who makes a formal offer to settle their claim under changes to Civil Procedure Rules Part 36 can (if they do better than the offer) be awarded a windfall in damages. The new rules will provide that where the Court awards damages up to £500,000, the Court can penalise a party who should have accepted an earlier Part 36 Offer by awarding additional damages at the rate of 10% of the damages awarded. If the damages are fixed at between £500,000 and £1m then the additional award will be 10% of the first £500,000 and 5% of the amount awarded above that figure. If the award is over £1m then the uplift will be 7.5% of the first £1m and 0.001% of the amount awarded above that figure. 

If a Claimant is therefore awarded damages of £700,000 (having made a Part 36 offer to accept £500,000) the Defendant (who ignored that offer) will find that it actually has to pay an addition damages payment of £60,000 as well as the basic damages awarded of £700,000. This is in addition to the existing penalties provided for in CPR Part 36. 

The intent is to encourage Claimants to make reasonable offers at an early stage and these changes will also see an increase in Claimants making tactical offers. On the other side of the fence Defendants will be put under considerable pressure and it is likely that the changes will result in many cases settling as a consequence of economic pressure rather than necessarily on the merits of the claim.

What is clear is that those with principles and an intent to stand by them will potentially also need deep pockets.

James Carpenter is a partner in our Commercial Litigation and Dispute Resolution department and based at our Luton office.

This can mean the difference in some instances between being able to fund the purchase and not.

The sale of property can be regarded as a transfer of a going concern if:

• it is transferred as part of the sale of a whole business; 
• the property is a business in its own right, such as an investment business where a rental income is generated from the land  

Purchasers should take advice from their solicitors and accountants when agreeing heads of terms. If a purchaser is not VAT registered then they would need to be so, but this can be a lengthy process. It is therefore best to start the registration process as soon as possible.

It is always advisable that purchasers take specialist advice at the earliest opportunity when considering the acquisition of a commercial investment subject to existing leases.

James Cottrell is a commercial real estate lawyer at our Luton office. 

The problems encountered by football clubs are symptomatic of those facing many other service sector businesses and the pitfalls placed in the path of football club directors threaten other directors too. A scan of court papers for insolvency shows that 2012/13 has been another poor one for those involved in local football clubs.

In the last year over 10 clubs have announced their involvement in insolvency proceedings. Like lots of other businesses, many clubs are hanging on by their finger nails. The clubs, many of them small to medium size enterprises, have been squeezed by rising costs, poor credit and even worse cash flow. 

Football is most defiantly in the sharp focus of HMRC’s gimlet eye. Having lost its case against the Football Association concerning the “Football Creditors” rule – the reason football creditors usually end up with a better recovery than “ordinary” creditors (such as HMRC), it now seems keener than ever to ensure that clubs never build up any unpaid tax debt. 

Directors, whether lovers of the game or not, should pay particular attention to the following recent developments: 

1.  Peter Ridsdale, the former chairman of Leeds United, Barnsley and Cardiff City football clubs, has been disqualified from acting as a company director for 7½ years. Ridsdale is barred from acting as a company director and from managing or controlling a company until 2020, after breaching duties as a director of W H Sports Group Limited (WHSG). 

Sophie Victoria Ridsdale, 45, Ridsdale’s wife and co-director of WHSG, has also been disqualified for 3½ years. The action follows an investigation by the company investigations team inManchester, which forms part of The Insolvency Service, the government agency. WHSG traded from 2003 to 2007 and was used by Ridsdale to provide sports and leisure consultancy services to football clubs.

The company went into liquidation on 22 April 2009 with assets of £22,592 and liabilities of at least £478,698. This included £442,353 owed to HMRC. In signing an undertaking agreeing to the ban, Ridsdale effectively admitted that he breached several directorial duties. For example, WHSG charged Cardiff City £347,000 for consultancy services.. However, Ridsdale was also chairman of this football club and the £347,000 was paid into his personal accounts. These payments were detrimental to WHSG and its creditors. 

Ridsdale also failed to disclose the transactions to the liquidator of WHSG, who did not become aware of them until July 2010, when information was provided by Cardiff City. WHSG also failed to pay corporation tax, PAYE, national insurance contributions (NIC) and VAT when payments were due. At liquidation, WHSG’s liabilities included £166,421 in unpaid corporation tax, £102,279, in unpaid PAYE and NIC, and £173,653 of VAT.

Ridsdale also failed to ensure that WHSG filed accounts with the Registrar of Companies by due dates for three successive periods.

Claire Entwistle, director of company investigations North at The Insolvency Service, said: “As someone who has had many directorships, Mr Ridsdale ought to be aware of the responsibilities that come with such a position. The protection of limited liability is available to those who comply with their obligations as company directors. If those obligations are ignored, the protection will be withdrawn, as Mr Ridsdale has found to his cost.” 

2. A recent Freedom of Information request has shown that the Government has paid out more than £1 million in rewards for information on tax cheats since the start of the financial crisis. It is reported that HMRC handed over nearly £400,000 last year as part of little known “bounty payments” for reporting on tax evasion. The amount paid for information ranged from around £50 to tens of thousands of pounds, depending on how much tax is recouped as a result of the information provided. 

Typically informers are ex-business partners, former spouses and employees, as well as people reporting “someone bragging in the pub” and “warring neighbours”, according to HMRC. 

An informer’s identity is generally kept confidential, although it may have to be disclosed in certain legal proceedings. There are no up-to-date figures for the level of tax recovered as a result of information from paid informants, but a total of £42 million of unpaid tax was recovered between 2005 and 2009 as a result of information received from members of the public, according to HMRC.

3. HMRC is using collection agencies to collect unpaid tax. It is reported that more then £130 million of unpaid tax was collected by those agencies last year. The anticipated fees for those agencies over a two year contract is £70 million.

As every reader of this article knows, the fortunes of businesses and football teams are constantly evolving. The three points above emphasise the evolution of both the tracking and prosecuting of errant directors. Those that don’t take advice to evolve  risk a “rough tackle” in the near future.

Guy Thomas is an Insolvency Partner in our Corporate team and based at our Luton office.