Hello lovely readers! I must first apologise for the lack of blogging in my current seat, commercial property litigation. Combined with the particularly busy nature of this seat and my wedding in July, my attention has unfortunately been diverted.
However, we are back with a February – June blog to cover what I’ve been up to in commercial property litigation. If you haven’t read about my seats in commercial litigation, insurance & reinsurance litigation, or my secondment at NatWest, you can click on the links to have a read through.
As this is now my third litigation seat, I thought it would be good in this blog to highlight the differences between the three litigation seats, cover some interesting insolvency work I’ve been involved with, and the negotiations workshop I participated in.
Key differences
Commercial litigation is the broadest category of litigation because it encompasses so many different areas of work such as litigation arising from breaches of contract, procurement challenges and product liability to name a few.
Insurance and reinsurance litigation is typically split into coverage work (where we advise on whether an insurance policy is responsive to a claim so that an insurer should pay out or vice versa) and defence work (where an insured person/entity is sued, and they have professional indemnity insurance, the insurance policy pays the defence costs and we act for the insured and the insurer in any court actions/negotiations/settlements).
My current seat in commercial property involved any dispute, as you’ve probably guessed, involving commercial real estate. For the majority of my work, our clients are the landlords of the property.
Commercial property litigation
For example, some work so far has included:
- Acting for landlords and pursuing action against a tenant where the tenant has significant rental arrears – we can do this in a number of ways:
- A demand letter to the tenant (the debtor) to seek the payment within x days (usually 7 days)
- A statutory demand is a formal demand in accordance with the Insolvency Act 1986 where the debtor has 21 days to make payment of the debt. Where the debt is not paid within the 21 days, the statutory demand can be used as the basis of a winding up petition (an application to the court to wind up/close down the company) because it shows that the debtor is insolvent insofar as not being able to pay its debts as they fall due
- A court action in the Sheriff Court (where the debt is less than £100,000 or this court is elected even if the debt is over £100,000) or the Court of Session (only where debts are over £100,000) in Scotland to sue the debtor for the payment of the debt
- Reviewing and advising on leases, licences, and agreements – for example, advising on terminating the lease and doing so validly (i.e., in the timeframe provided for in the lease and in the format provided for, if relevant)
- Dilapidations – when a tenant moves into a property, they may carry out various renovations and alterations to the property. For example, the landlord may hand over an empty shop unit to a tenant who wants to turn it into a bakery. The tenant would then carry out various works to have equipment (i.e., display cabinets, lighting, kitchen equipment etc) installed. The lease may also provide that the tenant is to maintain and repair the roof throughout the duration of the lease. The lease then usually states that the property is to be handed back to the landlord in the same condition in which it was given to the tenant. When the lease ends and the tenant is to move out, the landlord can do an inspection to check that the lease provisions have been complied with. Typically, the landlord will instruct a surveyor to review the obligations under the lease and review it against their findings of the inspection. Let’s say the tenant has left the display cabinets and shelving in the unit, and there is a hole in the roof. The surveyor then prepares a “Schedule of Dilapidations” which is a document listing out the tenant’s obligations under the lease, what the current condition is/how the current condition fails to comply with the lease, and then a cost for remedying that item. In our hypothetical example, the Schedule of Dilapidations would list a cost for removing the display cabinets, removing the shelving, repairing any holes or damage on the walls or floor (due to the brackets for the cabinets and shelving) and for repairing the hole in the roof. Let’s say the figure is £50,000 to fix everything and return the unit back to the way it was before occupation. That Schedule of Dilapidations is then served on the tenant – the procedure after service can vary. One example is that the tenant could instruct their own surveyor so whilst they accept that they left the cabinets and shelving and that there is a hole in the roof, they think the figure of £50,000 is too high. Their surveyor then conducts a survey and may conclude that to remedy the cabinets, shelving and roof would only cost, £35,000. Then parties may then go back and forth to negotiate how to settle the dilapidations.
Insolvency work – and why does that come to commercial property litigation?
Although not entirely obvious in the team banner of commercial property litigation, our team dabble in a bit of insolvency work (though of course not to the same depth and expertise as our insolvency and restructuring team). This is because, it is often that the reason a tenant is unable to pay its rent and is accruing arrears is because it is experiencing cash flow issues or other general financial issues.
Sometimes the tenant has liquidators appointed to proceed with a liquidation (realising the assets of the company and distributing it to any creditors). If we act for a landlord who is owed money by the tenant because of rental arrears, we then “intimate a claim in the liquidation” which means we notify the liquidators that our client is owed money and then we have to let the liquidation runs its course. Any assets or money is then distributed amongst the creditors. It is usually unlikely that creditors are paid in full, and it is more usual that creditors are paid X pence in the pound.
Negotiations workshop
CMS recently invited CEDR to run a negotiations workshop in-person in the London office. This was a full day workshop where we learned a lot of the soft skills to negotiations by Phil (a former crisis and hostage negotiator) and Baria (a former barrister and now mediator and consultant).
We learned tips and tricks for a successful negotiation and to avoid parties just “walking out” and how to structure, analyse and present our client’s position. We discussed a lot about finding common interests and active listening.
All round, it was an incredibly positive day, meeting new colleagues and learning new negotiation techniques.
And of course, when one is in London, it is a foodie’s heaven so instead of boring you with a picture of me in the office, here is one of me holding my sandwich from Dal Fiorentino (it was super delicious, not sponsored!).
Podcast
As some of you may know, I sit on a lot of panels, partner up with societies or platforms to record YouTube videos and record podcasts. The latest podcast is with Reimagine Law where I recorded a podcast, with my colleague Gordon Tsang, to discuss what we get up to in the litigation team, what arbitration is and what skills we use on a daily basis in our team. There is also a “what advice would we give our younger selves” section.
It is a 25-minute podcast and if you fancy a listen, you can find it HERE.
What’s next?
It’s hard to believe that there is just over a month left of my Training Contract which will finish on 1 August 2023. Before that though, I’ll have my wedding and I’ll update you all on what’s next in store for my legal journey!
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