1. What are the key things that employers have to consider in relation to social distancing in the workplace, e.g. open plan or spacing of desks, use of shared equipment, limited access to communal facilities, canteen / restaurant, etc.?
The government's COVID-19 Secure guidance:
- requires that two metres of social distancing is maintained in the workplace wherever possible, or 1 metre with risk mitigation where 2 m is not viable. This requirement must be observed in all aspects of work, including while arriving at and departing from work, while in work, and when travelling between sites; .
- says that where social distancing is not possible, businesses should consider whether the particular activity needs to continue for the business to operate and, if so, take mitigating action to reduce the risk of transmission between staff.
The Scottish government's guidance recommends similar measures to those above, though a requirement for 2 metre social distancing, and 1 metre in hospitality settings, is currently in place in Scotland. Given the above guidance, employers should try to reconfigure workplaces to accommodate social distancing. Issues to consider include staggering arrival and departure times; maximising workplace entry and exit points; reviewing layouts to keep workers further apart; using protective screens and distance markings; using one-way flow around the workplace; reducing maximum lift occupancy; and generally trying to anticipate and prevent large gatherings of people in the workplace.
All staff should be given relevant information and guidance before coming back to the workplace, to ensure they understand any measures implemented to enforce social distancing.
There are certain groups of employees at higher risk from COVID-19, such as people with underlying health conditions and pregnant women. Additional provisions should be implemented to protect these categories of people, including facilitating working from home or possibly moving to an alternative role. Employees should always be consulted through this process to obtain their agreement and to avoid any discrimination concerns.
2. What key hygiene and/or infection prevention measures will employers have to take to ensure a safe workplace e.g. provision of adequate handwashing facilities, regular deep cleaning of offices, etc.?
The government's COVID-19 Secure guidance recommends various hygiene measures, including:
- before a closed workplace reopens, deep cleaning should be carried out and ventilation systems checked for servicing/adjustment;
- frequent cleaning of work areas and equipment, and of objects/surfaces touched regularly;
- cleaning workspaces and removing waste at the end of a shift;
- using signs/posters on good handwashing and hygiene techniques; and
- providing hand sanitiser in multiple locations, including washrooms.
Other measures could include curtailing hot-desking, keeping staff canteens closed and limiting the number of workers allowed in common areas at any one time.
Government guidance also suggests employers should encourage digital transfers of material where possible, avoid employees working face-to-face, and provide regular announcements reminding staff to follow social-distancing advice.
3. Are there any specific obligations, liabilities or duties of conduct imposed on landlords, tenants or visitors with respect to the use or re-use and decontamination of premises; care, cleaning and maintenance of the exclusive and common areas; reporting requirements and/or measures in case of identified infections; health and safety issues - e.g. recommissioning water systems to avoid virus, installation of plexiglass screens, moving desks to comply with distancing. remodulation of fire prevention strategies (entrance/exit routes)? Is any distinction made between asset classes?
Since the introduction of the lockdown measures on 23 March 2020, the UK government has announced various changes for England. The government says it will keep these measures under review, so it's important to stay up to date with government guidance as it changes. It should be noted that a number of different lockdown measures have been introduced across the UK where varying degrees of restrictions have been imposed. The specific guidance relating to those areas in lockdown or under restriction should be reviewed.
In some areas there are restrictions in place, including preventing individuals from leaving home without a reasonable excuse (going to work where they cannot reasonably work from home would constitute a reasonable excuse) and some hospitality businesses are only able to serve takeaways. To understand which rules apply in which areas, the government website should be consulted.
On 11 May 2020, the government published guidance setting out measures for working safely in England. The guidance focused on workplace health and safety and, as the situation has evolved, the guides have been updated and more guides have been published covering different workplace settings. Any employer (which could include a landlord or tenant, depending on the circumstances) should comply with any relevant guidance. In some cases, more than one of the workplace guides may need to be factored in to an employer's workplace risk assessment.
As well as having a legal duty of care under the Health and Safety at Work etc. Act 1974 to ensure the safety of their own employees in the workplace, businesses/landlords also have duties to ensure the way a building or property is managed does not have a negative impact on the safety and health of others occupying it.
This includes tenants, members of the public and contractors. In almost all cases, it will be for the tenant to consider any threat to the health and safety of its employees.
Health and safety risks require assessment and need to be recorded if the business has five or more employees. The UK Health and Safety Executive points to government guidance, its guide for employers, and specific advice for decontamination in non-healthcare settings. The risk assessment is specific to the property and its characteristics, out of which the employer's business operates. Therefore, the measures that would be reasonable will vary from property to property.
An employer must consult all workers on health and safety. It is a two-way process, allowing workers to raise concerns and the opportunity to influence decisions on managing health and safety. In a small business, an employer might choose to consult workers directly. Larger businesses may consult through a health and safety representative, chosen by their workers or selected by a trade union. An employer cannot decide who the representative will be.
COVID-19 is a biological agent, so the Control of Substances Hazardous to Health Regulations 2002 (COSHH) may be relevant. These provide a framework to control the risks from a range of hazardous substances. Whether such obligations towards tenants exist under COSHH largely depends on the level of control a landlord has over the property, which will be determined both by the terms of the leases granted and the physical characteristics of the property.
For example, if a landlord has granted a long lease of the whole of a building and has no ongoing maintenance or services obligations towards its tenant, then the landlord is unlikely to have any responsibility under COSHH or other more general health and safety legislation, as referred to above.
If, however, a landlord has granted a lease of just one floor in a multi-let office block, with shared air conditioning and other common services and areas, and it retains responsibility for maintaining and providing them, its obligations may be more extensive. The Health and Safety Executive has issued guidance relating to air conditioning and ventilation during the coronavirus pandemic.
If a landlord does have obligations under COSHH or other health and safety legislation regarding the premises it lets, it should assess the risks of COVID-19 and may need to take preventive measures (e.g. more frequent cleaning of lavatories, eating areas, door handles and handrails).
In a confirmed case of COVID-19, however, measures will primarily be dictated by Public Health England (PHE) or Health Protection Scotland (HPS), and following these will be the best way to comply with health and safety obligations.
Indeed, regardless of the diagnosis of a case of COVID-19, guidance from PHE, HPS or the government should be followed regarding cleaning and so on (to the extent that this is the landlord's responsibility under contractual provisions).
Care should be taken to ensure that, for example, suitable handwashing facilities are available if these are part of the landlord's responsibilities under the lease. Landlords must also ensure that they stay up to date with PHE, HPS and government advice.
Though there is currently no explicit legal obligation on commercial landlords to provide extra cleaning services to prevent COVID-19 spreading in their premises, many are taking pragmatic steps. In particular, commercial landlords responsible for common parts are providing more frequent and thorough cleansing of those common parts, particularly frequently touched surfaces (e.g. door handles, elevator buttons and toilets). Supplying these extra cleaning services will have cost implications, and commercial landlords should check the service-charge provisions in their leases to ensure such charges are recoverable.
Most service-charge provisions contain a sweep-up provision allowing the landlord to recover reasonable costs incurred in line with the principles of good estate management. Some service-charge provisions will also allow costs incurred as a result of complying with "applicable laws" to be recovered – though whether a landlord can rely on this type of provision will depend on whether the government imposes prescriptive measures. In each case, the recoverability of a landlord's costs for such enhanced cleaning measures would be subject to any tenant-negotiated service-charge cap or specific exclusions in the list of services contained in the lease.
Arguments may arise as to whether the landlord is required to provide certain services (whether by contract or by law) and, where the landlord has discretion to carry out services, whether that discretion is exercised in accordance with the contractual provisions.
Further debate could arise on the interpretation of what constitute reasonable costs. For example, if COVID-19 becomes more widespread, would providing a hand sanitiser to every occupier that comes onto the premises be a cost that is recoverable as service charge or otherwise?
The Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013 (RIDDOR) requires the notification of certain workplace accidents, occupational diseases and dangerous occurrences to the HSE by the affected person's employer.
The HSE has updated its guidance on when a report under RIDDOR relating to COVID-19 must be made, to include instances when a worker dies as a result of occupational exposure to coronavirus.
The three situations in which a RIDDOR report must now be made regarding COVID-19 are as follows:
- Where an unintended incident at work has led to someone's possible or actual exposure to coronavirus by virtue of circumstances that result in (or could result in) the virus' release or escape. This must be reported as a dangerous occurrence. An example of a dangerous occurrence is given as a lab worker accidentally smashing a glass vial containing coronavirus, leading to people being exposed.
- Where a worker has been diagnosed with COVID-19 and there is reasonable evidence this was caused by exposure at work. This must be reported as a case of disease under RIDDOR.
- Where a worker has died as a result of exposure to coronavirus from their work and this is confirmed as the likely cause of death by a registered medical practitioner. This must be reported as a death due to exposure to a biological agent without delay, and a report of the fatality must be sent within ten days of the incident.
Wider regulatory issues regarding any steps taken (such as cleaning or surface disinfection) by a commercial landlord or its managing agents should also be considered.
For example, planning permission for commercial premises may contain conditions that restrict the hours of servicing. This could possibly catch enhanced or additional cleaning, for example. Planning authorities can take enforcement action against activities that breach a planning condition, particularly if disturbance is caused to neighbouring occupiers.
However, Ministers in England, Wales and Scotland have advised planning authorities to be pragmatic in enforcing planning conditions which limit, for example, timing of deliveries (including those to supermarkets) during the outbreak. The government in England has confirmed that this would remain the position until 31 March 2021 at the earliest. Planning authorities are expected to take a reasonable, flexible approach where businesses are taking steps to respond to the coronavirus outbreak, even if these constitute “technical” breaches of planning requirements – the impact of those steps on neighbours (e.g. noise nuisance, or vehicle movements at unsociable hours) will be a key factor.
In England, planning authorities have been urged to take a positive and flexible attitude to enforcing planning conditions that would otherwise restrict the hours of operation of construction sites during this time. In addition a fast track application process has been put in place where amendments to such conditions are required. In addition, the English government has urged flexibility during December 2020 and January 2021 when considering enforcement of planning conditions restricting retail opening hours (Monday to Saturday).
Building or premises managers should ensure, if possible, enhanced measures are carried out in compliance with restrictions on servicing or access arrangements. This may mean scheduling work or allowing access at specific times, and could require collaboration with tenants and occupiers. Collaboration may also be required to allow tenants to take advantage of flexibilities with regard to retail opening or construction hours.
Scotland has introduced its own regulations and guidance, which implement similar measures to those introduced by the UK government. Guidance on the Scottish measures can be found here. The easing of restrictions in Scotland was originally phased in during the summer of 2020 under a “Routemap” published on the Scottish government's website. However, a new “Strategic Framework” for control of the virus (based on a five tier “local protection level” approach numbered levels zero to four) has recently been introduced. Under this approach, one of the five different protection levels (imposing restrictions on business, travel, and other activities) has been set for each of the 32 Scottish local authority areas. The application of the different levels of restriction to different local authority areas is subject to constant review and can be monitored on the Scottish government's website here. Up-to-date guidance on the current COVID-19 measures in Scotland and how they affect different sectors including retail, leisure and hospitality, and the construction sector, is available on the Scottish government's website.
4. Are there any rent suspension measures and/or stay of recourses and actions (including eviction) or any government support initiatives such as a furloughed building grant scheme (if so, maybe only a part of the building should be re-occupied)? When rent suspension measures are available, what is the usual payment mechanism and timing agreed to by the parties?
There are no legislated rent-suspension measures.
- Withholding of rent/forfeiture: the Coronavirus Act 2020, which became law on 25 March 2020, suspended a landlord's ability to take forfeiture action for business tenancies in England and Wales, so that business tenants who cannot pay their rent (which is defined to include all sums payable under a lease) will be protected from forfeiture. These measures, effective from 26 March 2020, mean no business tenant can be forced from their premises in the period up to 31 March 2021 if they miss a payment. Equally, during this period, no action by a landlord (other than giving an express waiver in writing) will be regarded as waiving a right of re-entry or forfeiture for non-payment of rent.
- The Coronavirus Act 2020 merely suspends a landlord's ability to forfeit a lease during the suspension period. It does not prevent rent and other sums due under the lease from accruing. These sums, and interest, remain the liability of the tenant, so the Act merely offers breathing space for tenants. It does not waive the tenant's liability to pay.
- Rent concessions: there is no legal requirement for rent concessions to be offered, but a number of tenants are approaching their landlords with proposals for sharing the rental risk and reaching voluntary arrangements about rental payments. Where the landlord receives a benefit from agreeing to a rent concession there can be tax consequences for both parties, so early legal advice is recommended.
- Secondary legislation has been introduced to provide tenants more breathing space to pay rent by preventing landlords using the CRAR (commercial rent arrears recovery) procedure unless they are owed at least 276 days' unpaid rent (where notice of enforcement is given on or before 24 December 2020) or 366 days' unpaid rent (where notice of enforcement is given on or after 25 December 2020). Previously the requirement was seven days or more.
- Force majeure and the law of frustration: leases generally don't contain force majeure clauses, and the doctrine of frustration is a high bar: a contract will be frustrated if an event occurs that renders it impossible to perform an obligation, or the obligation is radically different to that originally envisaged when the contract was made. There are no reported cases in England and Wales where a lease has been held to be frustrated. There is an increasing line of thought that, as the current situation continues, there may be (remote) scope for frustration arguments where:
- there is a short term of the lease remaining,
- the user provisions are restricted; and
- there is an inability to assign or sublet the balance of the lease term due to lack of market demand.
There is currently no furloughed space grant scheme.
The British Property Federation (BPF), in conjunction with a number of occupier bodies, has been lobbying for a code of conduct to apply to landlords, occupiers and, hopefully, lenders. In response, the government has published the Code of Practice for commercial property relationships during the COVID-19 pandemic (the Code), developed with industry leaders to help commercial landlords and tenants in mapping out their plans for economic recovery. However, the Code is voluntary, there are no sanctions for non-compliance, and it does not alter the underlying relationship and obligations between landlord and tenant governed by the lease and supplementary documents.
The Corporate Insolvency and Governance Act 2020 implements the measures announced by the UK government on 23 April 2020 to “safeguard the UK high street against aggressive debt recovery actions” during the COVID-19 pandemic. This has resulted in a temporary blanket ban on the use of statutory demands and restrictions on the use of winding-up petitions where COVID-19 has had a financial effect on the company. Please see our separate note here for the implications of the Act on the landlord and tenant relationship, and for property owners and occupiers generally.
In Scotland, the Coronavirus (Scotland) Act 2020 (the Scottish Act) was passed on 1 April and came into force on 7 April. The purpose of the Scottish Act is to complement measures already implemented in the UK-wide Act.
The majority of provisions in the Scottish Act were originally due to expire six months after coming into force. However, most of the provisions (including those relating to irritancy described below) have now been extended for a further period of six months to 31 March 2021, and may be extended again to 30 September 2021.
The Scottish Act introduces a moratorium on irritancy (the Scottish equivalent of forfeiture) by lengthening (from 14 days to 14 weeks) the minimum period of notice a landlord must give to a tenant to pay arrears of rent (or other payments due under a lease) before the landlord can initiate court proceedings to terminate the lease for non-payment. As with forfeiture under the Coronavirus Act 2020, the Scottish moratorium does not apply to delay irritancy where the ground for irritancy is the tenant's breach of a non-monetary obligation in the lease.
5. Are there specific tax reliefs on payment or collection of rent instalments? Do they apply subject to actual payment or regardless? Do they apply generally or only to specific asset classes?
There are no current tax reliefs on payment or collection of rent payments.
Due to the raft of concessions being given in connection with the current circumstances, the International Accounting Standards Board have amended IFRS16 relating to leases, in relation to accounting periods beginning on or after 1 June 2020 – although companies may also apply the standard to earlier financial statements not yet authorised for issue at 28 May 2020.
The changes provide tenants with an exemption from assessing whether a COVID-19-related rent concession is a lease modification, so that they should instead account for such concessions as though they were not lease modifications.
The amendment to IFRS16 applies only to tenants. The position for landlords remains unchanged, though the British Property Federation had made representations asking for the same flexibility for landlords.
On 16 March 2020, the government announced a business rates holiday for the 2020-21 tax year for business and venues in the retail, hospitality or leisure sectors. Businesses in these sectors are also eligible for cash grants up to GBP25,000 per property (the amount dependent on the rateable value of the property; businesses with rateable values of over GBP51,000 are excluded).
The Scottish government has put in place its own package of measures worth GBP2.2 billion to support Scottish businesses. Measures in this package include a GBP1 billion Business Support Fund, and 100% rates relief for the Scottish retail, hospitality, leisure and aviation sectors for the whole of 2020-21. Guidance on support for businesses is available on the Scottish government's website.
6. Are there any measures regarding relief from the performance of real estate-related contractual obligations?
None that supersede the contractual relationship. The terms of a contract, whether a lease or otherwise, will govern the parties' legal obligations. However, the government issued guidance on 7 May 2020 encouraging parties to contracts in England (in both the public and private sectors) to act responsibly and fairly in performing and enforcing contracts where there has been a material impact from COVID-19 and the Code between landlords and tenants, although guidance is intended only to supplement this. Parties are encouraged to be reasonable and proportionate in responding to performance issues and enforcing contracts, act in a spirit of cooperation, and aim to achieve practical, just and equitable outcomes. This guidance is not statutory, but the government “strongly encourages” parties to follow it for their collective benefit and the long-term benefit of the UK economy.
Tenants may request a reduction in rent or a re-gearing of the lease terms from their landlord to take the pandemic into account. However, there is nothing in either English or Scottish law that would require the landlord impliedly to act in good faith and entertain that request in a commercial lease scenario.
This is evolving case-law when it comes to pure commercial contracts. There is no absolute legal obligation on landlords to renegotiate lease terms – but there may be reputational and commercial pressure to do so, and it may be in their interests to come to some accommodation with tenants. The impact of stamp duty land tax (and similar taxes in Wales and Scotland) should also be borne in mind. Any arrangement that involves the extension of a lease term should be carefully structured and appropriate tax advice taken, as otherwise the tax payable can outweigh the rent saving the tenant is hoping to achieve.
When considering rent concessions, parties may agree that landlords can draw down on rent deposit funds to alleviate tenants' cashflow issues. Appropriate provisions extending the date by which the account has to be topped up would need to be included.
Tenants may request a reduction in rent or a re-gearing of the lease terms from their landlord to take the pandemic into account. However, there is nothing in either English or Scottish law that would require the landlord impliedly to act in good faith and entertain that request in a commercial lease scenario. This is evolving case-law when it comes to pure commercial contracts. There is no absolute legal obligation on landlords to renegotiate lease terms – but there may be reputational and commercial pressure to do so, and it may be in their interests to come to some accommodation with tenants. When considering rent concessions, parties may agree that landlords can draw down on rent deposit funds to alleviate tenants' cashflow issues. Appropriate provisions extending the date by which the account has to be topped up would need to be included.
Any accommodation should be reflected in a letter in clear terms reflecting what has been agreed and including provisions requiring any government assistance given to the tenant to be declared to the landlord, with reimbursement to be made where relevant. We have developed a rent concession letter tool to help landlords and tenants document any concessions
7. Are there any credit facilities in place to mitigate loss of income for landlords?
None specific to landlords. But for small and medium-sized businesses (those with an annual turnover of up to GBP45 million), the Coronavirus Business Interruption Loan Scheme provides loans up to GBP5 million in value, with the interest and fees paid by the government for the first 12 months. The government will provide lenders with a partial guarantee of 80% on each loan.
For large businesses, the new COVID-19 Corporate Financing Facility means that the Bank of England will buy short-term debt from companies.
8. Is there any relief from loan repayments / enforcement of loans secured against properties?
No emergency legislation has been put in place in the UK to create a moratorium on enforcement action relating to non-payment or other forms of debt service. The Prudential Regulation Authority (PRA) has provided some guidance to regulated lenders, particularly regarding capital requirement regulations and IFRS 9, which points to a pragmatic approach to borrowers who require some form of forbearance.
In practice, some lenders and borrowers have been entering into arrangements whereby interest payments may be capitalised, principal/amortisation payments reprofiled, and temporary waivers given in relation to financial covenants that may be breached as a result of COVID-19 and lockdown-related issues.
9. Are public services necessary to complete the sale, acquisition or other operation of real estate assets or companies or to establish the right to open for business (planning authorities, notary public, Land Registry, Companies' Registry, etc.)?
Before completing a transaction involving land, parties usually carry out due diligence that requires making searches of different public authorities, including the Land Registry and local authorities.
Many dealings with land require registration at the Land Registry, including a transfer of land, the grant of an easement, the registration of a charge over land and the grant of many leases, including those granted for a term of more than seven years and reversionary leases (where the term starts more than three months from the date of grant of the lease, regardless of how long the term is).
Many dealings with land also result in an obligation to pay tax, such as stamp duty land tax (and similar taxes in Wales and Scotland), that require the submission of a form to the relevant tax authority.
If charges are granted over land, they generally require registration at Companies House.
Guidance on whether businesses are able to open for business is being issued by the government.
10. Are there any specific processes or protocols available to consummate real estate operations enabling them to comply with any required social distancing (e.g. electronic signature, etc.)?
From 4 May 2020, the Land Registry (of England and Wales ) will accept documents signed using the “Mercury” PDF signing approach: a PDF signature will suffice for registration purposes, and the original wet-ink version of the document is not required.
For land registration purposes, a signature page must be signed in pen and witnessed in person (not by a video call). The signature will then need to be captured, with a scanner or a camera, to produce a PDF, JPEG or other suitable copy of the signed signature page. Each party sends a single email to their conveyancer, to which are attached the final agreed copy of the document and the copy of the signed signature page. Plans may also be signed with a “typed in signature.”
The legal requirement for execution of deeds in England and Wales permits signature by a director in the presence of a witness. Provided the witness is not a party to the deed then a spouse, civil partner or other adult family member can act as a witness. The witness must be physically present, though this can be done through glass (e.g. window/car).
The Land Registry (of England and Wales) will also accept documents signed using an electronic signature platform as long as the Land Registry's own requirements are met; for example, that any signatory (including a witness) must receive a one-time passcode.
The Coronavirus (Scotland) Act 2020 temporarily amends existing legislation to permit submission by electronic means of scanned copies of signed paper deeds to the Land Register of Scotland. These measures came into effect on 27 April 2020.
11. Are contractors who were carrying out works within the premises obliged to resume them? Can building sites reopen when they were closed down? Are there any specific provisions in relation to certain asset classes authorising continuation / resumption of works (e.g. healthcare structures)?
The government has made it clear since early April that works on construction sites may continue, and this remained the position following the announcement of new national restrictions coming into force from 5 November 2020. The government's guidance for the building industry, “Working safely during COVID-19 including construction and other outdoor work,” gives advice on managing risk and carrying out works safely for those involved in working outdoors. The Site Operating Procedures produced by the Construction Leadership Council supplement the government guidance and set out in some detail how construction sites and activities need to be planned and managed to minimise the risk of infection transmission and comply with social distancing.
For those sites that were closed, whether they may now reopen, and whether contractors are obliged to resume works, will be governed by their ability to comply with the relevant government guidance and the Site Operating Procedures. For those sites operational or that wish to resume operations, they must ensure that they are protecting their workforce and minimising the risk of spread of infection. This includes considering how personnel travel to and from site. The health and safety requirements of any construction activity must not be compromised at this time. If an activity cannot be undertaken safely, it should not take place. Organisations must have in place effective arrangements for monitoring and reviewing their compliance with government and industry guidance. Construction sites that fail to adequately protect their workforce may be breaching health and safety law.
The Health and Safety Executive has said where it identifies employers not taking action to comply with the relevant public health legislation and guidance to control public health risks, it will consider taking a range of actions to improve control of workplace risks. These actions include the provision of specific advice to employers and issuing enforcement notices to help secure improvements with the guidance.
Following a Ministerial announcement on 22 June 2020, various measures have been introduced to assist the construction industry to return and continue to work, as follows:
- Planning permission usually expires if work has not started on site. Sites with consent that have an expiry date between 23 March 2020 and 31 December 2020 will have consent extended to 1 May 2021 (subject to additional application requirements in some cases).
- New measures also permanently grant the Planning Inspectorate the ability to use more than one procedure – written representations, hearings and inquiries – at the same time when dealing with a planning appeal, allowing appeals to happen faster.
- From 28 July 2020 builders are able to access a fast-track procedure to agree more flexible construction site working hours with their local council. This procedure is available until 1 April 2021. This will make it easier to follow public health guidance onsite, and by staggering builders' arrival times public transport will be less busy, and the risk of infection will be reduced.
These provisions were brought into force by the Business and Planning Act 2020.
On 6 April 2020, the Scottish government issued guidance to the construction industry that construction work in non-essential sectors (the definition of which includes domestic housing, office buildings and other commercial properties, leisure and retail) should cease in Scotland until further notice. The guidance states that construction work may continue only on "essential" projects, and only then where social distancing and health and safety guidance may be complied with. Essential projects include:
- those to create or repurpose facilities that will be used directly in COVID-19-related activities;
- projects to create or repurpose facilities that will be used to accommodate key workers, or free up space in facilities to be used directly in COVID-19-related activities;
- projects that are considered essential public services; and
- the repair and maintenance of critical infrastructure.
On 21 April 2020 Scottish social distancing regulations were extended to cover all workplaces, including construction sites.
On 21 May, the Scottish government published a “route map” setting out plans for a gradual easing of lockdown restrictions in four identified phases. For the construction sector, there are six planned phases for its return to work:
- Phase 0: Planning
- Phase 1: COVID-19 Pre-start Site prep
- Phase 2: “Soft start” to site works (only where physical distancing can be maintained)
- Phase 3: Steady state operation (only where physical distancing can be maintained)
- Phase 4: Steady state operation (where physical distancing can be maintained and/or with PPE use)
- Phase 5: Increasing density/productivity with experience
The construction sector was able to implement phase one of its restart plan on 29 May. Work on phase 2 of the restart plan started from 11 June, and it was announced that work on phase 3 could start on 22 June, followed by phase 4 on 15 July 2020.
It is unlikely that phase 5 will be achievable until the virus is under better control whether as the result of the rollout of the vaccine during the coming months or other measures.
12. Are there remedies or contractual arrangements available to address impossibility or delay for a party to handover premises to another which are/were to be constructed or refurbished, or for such other party to take over those premises?
Many international and domestic construction contracts contain force majeure clauses to give relief in these circumstances. The purpose of a force majeure clause is to avoid the legal and commercial uncertainty of events that would otherwise frustrate the performance of the contract and that were not contemplated when the parties entered into the contract.
It's possible that if there is such a clause in a contract it will cover the current COVID-19 situation. Contracts vary, however, and the operation of the force majeure clause may differ in each case; specific legal advice should be sought.
Under the JCT form of contract, force majeure is a "relevant event" entitling the contractor to claim additional time for completion of the works, but it is not a "relevant matter" that would allow the contractor to claim loss and expense. Force majeure does not have a precise meaning under English law and is not defined in the JCT contract, but the current coronavirus COVID-19 situation is likely to be considered such an event.
The NEC contract provides that an event stopping the contractor from completing the works may be a compensation event entitling the contractor to additional time and money. Such an event must be one that neither party could prevent, and that the contractor would have judged at the start of the contract to have such a small chance of occurring that it would have been unreasonable to have allowed for it. This would cover any events – whether disruptions to supply chains and labour resources, or government action – that prevent the contractor from completing the works. This provision can be relied on by contractors who entered into contracts before the outbreak of the virus, but possibly not for contracts entered into after the outbreak, if the impact is something the contractor could reasonably have made allowance for.
What about contracts being negotiated now? Force majeure-type provisions may not be of assistance in contracts being agreed at the moment, depending on how the provisions are drafted, because the existence of COVID-19 is known, though the full impact and likely duration of measures in response to it are not, and may be beyond the control of either party.
A more prudent approach is to agree specific drafting to provide relief from the effects of COVID-19, whether this is disruption to supply chains and labour resources, or the impact on the works of needing to comply with social distancing and other measures aimed at reducing the risk of transmission of the infection. The exact requirements may depend on the precise nature and location of the project, and will require careful consideration.
On 7 May 2020 the Cabinet Office issued a guidance note on responsible contractual behaviour in the performance and enforcement of contracts affected by COVID-19. It strongly encourages parties to contracts to act responsibly and fairly, support the response to COVID-19 and protect jobs and the economy. The note is targeted at all individuals and businesses (including funders) and public authorities. This has been reinforced by Best Practice Guidance published on the same date by the Construction Leadership Council intended to minimise contractual disputes.
13. Has the duration of validity of administrative authorisations pertaining to development/construction of real estate assets (in particular planning authorisations) been extended?
There are three principal changes aimed at extending the flexibility or validity of planning permissions and obligations:
- extension of the time within which development authorised by a planning permission must be commenced;
- proposed relaxation of the approach to collection/enforcement of community infrastructure levy and planning obligation requirements; and
- introduction of new permitted development rights to authorise developments and the use of premises in ways that would not otherwise be allowed.
The approach taken by the respective governments in England, Wales and Scotland differs.
Extension of time: Under normal circumstances, a planning permission must be commenced (i.e. work must start on the authorised development) within a fixed period specified in the planning permission decision notice. If it is not, the planning permission expires or lapses and can no longer be relied on.
Scotland: if a planning permission would, under the normal rules, lapse during the “emergency period,” the period within which development is to be commenced is automatically extended to the end of the “extended period.” The “emergency period” has recently been extended so it now means the period begins on 7 April 2020 and ends on 31 March 2021. The “extended period” will end on 30 September 2021. The same applies to the time during which the requisite approval of additional details under a planning permission in principle must be submitted, and similar provisions relate to listed building consents.
This means that a planning permission deadline that would normally fall within the emergency period is extended to 30 September 2021, unless development has already commenced in the meantime.
England: Planning permissions are subject to time limits which require work to be started on site within a set period, but amendments introduced by the Housing and Planning Act 2020 allow further time to implement permissions. Sites with consent that will expire between 23 March and 31 December 2020 will now see their consent extended to 1 May 2021; however, in respect of some consents, further approvals may be required to secure this extension.
Wales: statutory procedures already existed which allow extension of the duration of planning permissions in Wales and these will continue to apply.
Planning obligations and community infrastructure levy: Commencement of a development is highly likely to trigger a liability to pay community infrastructure levy (CIL). This could be a substantial amount. In England, the government has urged planning authorities to apply as much flexibility as possible within the system, such as waiving late-payment surcharges, avoiding enforcement (e.g. by CIL stop notice) where possible, and introducing instalment policies that will apply to development not yet commenced. Regulations also allow authorities to waive and/or repay late-payment interest for smaller developers (with a turnover of less than GBP45 million) for a temporary period.
CIL is a local land charge that binds the land to which the planning permission relates. This means that the planning authority can take various types of action to recover unpaid CIL including proceedings in the magistrates' courts and, in some circumstances, exercising a power of sale as a quasi-mortgagee. While authorities are being urged to consider leniency where possible, this could affect not only landowners, but also any lenders or other bodies who have secured debts against the property in question – the value of that security could well be significantly affected and a registered charge-holder would not necessarily have priority over any sale proceeds realised.
In addition, Ministers have urged English local authorities to approach enforcement of planning obligations pragmatically and proportionately during this period, and be open to renegotiating triggers and deferring payments in s106 obligations. Given the public law nature of the planning system, any agreed changes should be documented in a deed of variation to provide clarity and certainty going forward.
Extended permitted development rights:
Use of premises as takeaways: Following the closure of pubs and restaurants after 20 March 2020, the countries of the UK have, in differing ways, allowed these premises to provide takeaway food. Legal advice should be obtained to confirm the position; please get in touch with your usual DLA Piper contact for help.
In England, a new permitted development right allows restaurants and cafes and pubs to provide hot and cold food to take away. This applies for a temporary period (which has recently been extended) from 24 March 2020 until 23 March 2022. The local planning authority must be notified and the property must return to its previous use at the end of the period.
In Wales, planning law does not place a restriction on change of use between restaurants, cafés and pubs to takeaways.
In both cases, there may be planning conditions affecting the property that restrict such changes. Tenants will still need to comply with any use restrictions set out in the lease, unless agreement can be reached with the landlord.
A separate licence may also be required if hot food and drink is to be supplied during certain hours (generally, from 11pm until 5am the morning after).
In Scotland, the Chief Planner has advised that the Scottish government does not expect enforcement action to be undertaken that would unnecessarily restrict public houses and restaurants from providing takeaway services on a temporary basis during the current outbreak. If amenity issues arise which warrant investigation, local authorities are required to consider the impact use of enforcement powers would have on the businesses concerned. This advice was confirmed in June and July 2020, including informal flexibility over the temporary use of outdoor spaces for provision of seating by pubs, cafés and restaurants (subject to the operation of the tier system in Scotland). The Scottish government indicated it intended to review this approach in September 2020, and as yet there is no published change to this position.
Emergency planning powers and developments: Local planning authorities and health service bodies in England, Wales and Scotland have been granted temporary planning powers to carry out development to prevent or mitigate the effects of the current emergency. These can permit temporary hospital and healthcare facilities, mortuary facilities, storage and accommodation that may be required due to COVID-19. In England, these powers are subject to restrictions and conditions, including a requirement to cease the use (by 31 December 2021), and to restore the land within 12 months of stopping the use. In Scotland, the use of the land under these planning powers must cease by 1 July 2021, with restoration of the land to take place within six months. In Wales the use must cease and the land be restored within 12 months of the date the development began, but these powers do not have a set period of application.
Similar powers were already available to government departments to undertake emergency development. However, in England, this has also been amended to allow developments under the power to remain in place for 12 months. In addition, government departments in England have been granted a new power for works in response to the pandemic, which may be also kept in place for 12 months before restoration is required. These powers are being used to create additional capacity at courts and to support new test and trace facilities. Though such changes and works may not be a breach of planning control, for leasehold property consideration should be given to compliance with lease terms.
Food supply chain: Ministers in England, Wales and Scotland have urged local authorities to not enforce conditions in the supply chain that will restrict times and frequency of deliveries to food outlets during the COVID-19 emergency to ensure food supply. In England ministers are also urging flexibility from local authorities when applying conditions which restrict retail opening hours Monday to Saturday during December 2020 and January 2021. The conditions themselves remain in place. Landlords may also be asked to be flexible in not viewing such technical breaches of planning conditions as breaches of lease terms
Litigation and Regulation
14. Is the use of disclaimers for visitors or others coming on to the site of business useful for limiting potential future COVID-19 claims?
The overarching duty to protect the health and safety of employees and others affected by the business will continue to apply during the COVID-19 pandemic. Risk assessments and safe systems of work will need to be reviewed and updated as appropriate, and control measures implemented to ensure the safety of employees, and visitors and others entering the site.
Though disclaimers could provide a useful tool in certain circumstances, these are unlikely to be effective in the event of regulatory compliance issues or personal injury claims. Disclaimers are no substitute for implementing suitable control measures to control the spread of COVID-19. Documentation evidencing the control measures and that the business monitored compliance with these will likely help limit potential future COVID-19 claims.