Michelmores’ Agricultural Litigation team has succeeded in opposing a Definitive Map Modification Order (DMMO) which would have re-categorised a public footpath running through our clients’ woodlands as a bridleway. If confirmed by the Secretary of State, the DMMO would have allowed horse riders and cyclists access to the environmentally sensitive ancient woodland, which is classified as a site of special scientific interest.

With the help of the Michelmores team, led by Partner Adam Corbin, supported by Hannah Drew and along with Alistair Mills of Landmark Chambers, the land owners successfully opposed the confirmation of the DMMO.

The application relied upon a combination of historical documents and user evidence. The case involved issues of capacity to dedicate and historical charity law as well as interpretation of historical documents and arguments concerning the safety of the proposed reclassification.

The land owners said:

‘We had absolutely no experience of public rights of way matters and are glad we asked Michelmores to act for us.  They assembled a team of specialists who not only impressed us with their thorough and knowledgeable credentials, but also with their understanding and collaborative approach.  The Michelmores team and Alistair Mills helped us navigate the considerable stress caused by the fight to protect and preserve this valuable haven for people and wildlife.   We are pleased to have the opportunity to thank them and would not hesitate to recommend them to anybody in a similar position.’

The decision hopefully marks the end of a long-running dispute, with the present application being made in 1996, following an unsuccessful previous attempt to reclassify the footpath at a public inquiry held in 1995 and historical evidence showing some uncertainty over the footpath’s status dating back more than a hundred years.

A full copy of the decision can be found here.

A recent Court of Appeal decision has confirmed that there is limited scope for local authorities to dismiss applications for DMMOs. The requirement for any unrecognised or incorrectly recorded public footpaths and bridleways to be recorded on the Definitive Map by 2026 is also believed to have led to an increase in DMMO applications. Because of these two factors, it is anticipated that there will be an increasing number of this type of dispute being heard at public inquiries and Adam and his team continue to act on a number of such matters.

This Article was written by Becky Kells at AllAboutLaw. 

Observing a few simple principles can make all the difference in how your application is perceived.

At Michelmores, training contracts are very competitive, with fewer than five percent of applicants securing one. Since virtually all applicants meet the basic qualifications, it follows that your application is going to have to stand out from the majority for you to have a decent chance at being shortlisted and moving on to the interview phase. Here are some tips that can help you improve your odds of success.

Put yourself in your reader’s shoes

The person who initially reads your application (and makes the first cut) is likely to be examining over 100 applications a week for only a few available positions, which means that they are looking for a reason to reject your application, not accept it. Don’t give them an excuse.

It is critically important that you answer precisely the question asked, instead of using the question as a platform to tell the reader what you want them to know about yourself. Above all, don’t cut and paste material from applications to other firms just to save time. An experienced application reader will be able to spot a cut-and-paste job immediately, and it could be fatal to your application.

Demonstrate your capacity for concise, lucid writing and sound logical reasoning

It’s not just the content of you answers that matter—it’s how you present them. Words are the stock in trade of a competent solicitor, and now is your chance to prove that you have mastered them. Treat your application as if it were part of a legal brief that you are preparing as your first assignment for the firm. In other words, make sure it is flawless.

Michelmores’ application questions have a 1500-character limit. Remember, that means characters, not words—and 1500 characters adds up to only about 250 words. Do not exceed this limit. As a solicitor, you are going to need to express complex ideas in clear, concise language. Consider your answers to the application questions to be your way of demonstrating your ability to do exactly this. Get straight to the point in rigorous, logical fashion—in fact, it might be a good idea to outline your response before you write it.

Do your homework

Michelmores is looking for people who want to become a part of the team, not just someone who wants to become a solicitor. The more you know about the firm, the more you will be able to demonstrate this knowledge in your responses, and tie it in to your own experiences and demonstrated inclinations. Resist the temptation to list what you know about the firm; find a way to work it into the point you are trying to get across.

Show, don’t tell

Anyone can speak floridly about their “passion for commercial law”, their “problem-solving abilities” or their “commitment to teamwork”, for example. It takes a little bit more to convince the firm that you actually embody these qualities. It is better to illustrate that you possess these qualities, without necessarily even stating them directly. Try using the STAR approach:

• describe the Situation;
• explain the Tasks you were charged with;
• list the Actions you took; and
• describe the Results

Emphasise the skills you have developed, not just the titles of your positions

There will be plenty of space in your application to list your activities by name. Ultimately, however, it is more important to show how participation in these activities made you into the person you are today. Joining the International Law Association, without more, is not likely to be as impressive as obtaining a promotion at work, even if your job has nothing to do with law. Certain attributes, such as interpersonal skills, are transferable to a wide variety of activities.

Avoid fatal mistakes

No matter how good your application is, a fatal mistake could ruin it. Do the following to avoid making errors:

• Have someone else proofread your application for typos. Law is a detail-oriented profession, and there is no better way to have your application thrown into the reject pile that to commit a typographical error.
• Don’t engage in flattery—lawyers are known for their ability to catch the faintest whiff of this misguided form of persuasion.
• Don’t overuse cliches or write in “legalese.” Both of these habits are annoying, and they detract from your credibility.
• Don’t engage in dishonesty of any sort. Whoever is reading your application will have developed a fine-turned radar for even subtle acts of deception.
• Don’t regurgitate what you have read on the firm’s website. It is OK, however, to tie in the firm’s values and expectations with your own experience, as long as this is done seamlessly and doesn’t appear to be grafted onto your application.

Observing the foregoing application tips, of course, is not enough to guarantee that you will be offered a training contract—the competition is simply too intense for that. It will, however, help you put your best foot forward and maximize your odds of making it to the next step in the process.

The Corporate Finance team at Michelmores has acted on behalf of its longstanding client, Magicseaweed (MSW) on the acquisition by Surfstitch Group, which was announced today.

MSW is the world’s largest user generated surf content network, providing forecasting and live reporting of over 4,000 beaches across the globe. The business was founded in Devon in 2002 and has become the world’s leading online surf forecasting platform, used by surfers and water sports enthusiasts in over 200 countries.

MSW serves the key markets of North America, Europe and Australia, attracting over 2 million unique monthly users to its site, and over 1 million app downloads.

Surfstitch is a publicly listed company on the Australian Stock Exchange (ASX) which is an industry leading online retailer to over 2 million customers through its websites surfstitch.com, swell.com and surfdome.com.

Surfstitch undertook its ASX IPO last year and is quickly growing into a global leader in the sector. Surfstitch’s focus has historically been on retail and MSW’s has been on content (surf forecasts, user generated, editorials, etc). Surfstitch’s mission is to become the global destination for action sports, youth lifestyle content and online retail.

The Michelmores Corporate Finance team was led by Richard Cobb and Henry Taylor, with support from Francesca Eastwood, Tom Torkar and Andrew Tobey.

The shareholders of MSW were advised by Gary Partridge, Richard Day and Tracey Bentham from PWC’s Bristol based Corporate Finance Team.  Herbert Smith Freehills acted as lawyers to Surfstitch, KPMG carried out financial due diligence and J P Morgan in Sydney provided corporate finance advice.

Commenting on the deal, Henry Taylor, Lead Associate, said:

“As an enthusiastic user of the MSW website for many years, it was very refreshing to be able to use my passion for a client’s services in the context of a fast-moving international listed transaction.  We wish Ryan, Ben and Nick all the best for their exciting future under Surfstitch’s new ownership”.

Ryan Anderson, Co-Founder of Magicseaweed said:

“We are thrilled to be working with the Surfstitch Group as we look to expand Magicseaweed in the USA, Australasia and Europe.

“It’s a unique opportunity to find the right balance of surf forecasting, inspirational content and product offerings to our global surf community and millions of users.

We are very grateful for the outstanding support we have received from Michelmores for many years and especially at this key point in the company’s history”

For further information, please visit  www.magicseaweed.com

Michelmores’ Corporate team has advised wealth planning firm Succession Group in its largest acquisition to date − buying Birmingham-based Clay Rogers & Partners Limited (Clay Rogers) via a mix of cash and shares, which over time could value the deal at over £10 million.

This is the 25th acquisition for the Plymouth-based firm and the largest and most complex they have completed to date.

Clay Rogers began working with Succession in 2013 to develop its proposition and grow capital value. It has £450million of funds currently under management.

The deal will see significant investment into Clay Rogers’ former Birmingham headquarters to become a client servicing hub, consolidating Succession’s Midlands activity to deliver world-class wealth planning solutions locally.

The Michelmores team advising was led by Partner Henry Taylor, with support from Associate Francesca Hubbard and Solicitor Megan Wright.

Paul Morrish, Group Corporate Director at Succession, said:

“The Group continues to identify strong businesses to further develop our leading consolidation model and this latest acquisition – the biggest and most complex we have undertaken to date, marks an exciting time of growth for Succession.

“The Michelmores team provided excellent support, offering proactive and efficient advice throughout the process”.

Michelmores Partner Henry Taylor said:

“This was an exciting deal between two like-minded and driven businesses. We very much enjoyed working with the whole Succession team and look forward to contributing to their continued progress”.

For more information please contact Henry Taylor, Partner on henry.taylor@michelmores.com or +44 (0)1392 687654

Triodos Bank, one of the world’s leading sustainable banks, has launched its own crowdfunding platform, offering a range of bonds and equities issued by organisations focusing on positive social and environmental impact. The platform, www.triodoscrowdfunding.co.uk, is the first to be launched by a bank, and will allow investors to hold the investments in an Innovative Finance ISA (IFISA).

Alexandra Watson, Partner in the Corporate team, said:

“This was a really exciting project to be involved with, and one that has a direct, positive impact to society and the environment. Not only did we advise on the establishment of the platform, including drafting the terms and conditions, but we also advised on the two bond issues currently on the platform and on their documentation and security. We are delighted that the platform is now live and look forward to continuing to support it as it develops.”

The two current investments include Mendip Renewables, which pays 5 per cent a year, increasing in line with RPI inflation and repayable over 17 years. This project aims to take a 5MW operational solar farm in Somerset into community ownership. An estimated £1.4m of profit will be contributed to a community benefit scheme over the life of the project.

The second investment is Rendesco, which is rasing £5.5m to develop green energy from ground source heat pumps and is paying 7 per cent interest per year over a 7-year term. The aim is to develop 100 sites, with a focus on retirement homes and providing low-carbon heating to keep the elderly warm.

Shortly there will be the Thera Trust going live, which provides home for people with complex learning disabilities, which offers 5.5 per cent interest per year over a 6-year term.

Triodos said the investments “have been extensively screened by Triodos for social and environmental impact, the viability of their business model and the credibility of the management team”.

Bevis Watts, Managing Director of Triodos Bank UK, said:

“We’ve been crowdfunding since before it became a well-known term. With the new Triodos Crowdfunding platform we’re recognising the huge potential of crowdfunding and responding to demand for Innovative Finance ISAs. Investors are looking for opportunities that allow them to support progressive companies, social enterprises and charities making a positive impact, while also receiving good long-term returns.”

Investments offered on the Triodos platform are not readily realisable, which means that they may be difficult to sell and you may not get back the full amount invested. Investments are not covered by the Financial Services Compensation Scheme (FSCS) and your capital is at risk and returns are not guaranteed. Repayment of capital and interest or payment of dividends will be dependent on the success of the organisation’s business model and past performance isn’t a reliable indicator of future performance. You should always read the offer document in full before deciding whether or not to invest as it will cover risks specific to an individual investment. You can read more about the general risks associated with making these types of investments here. If you are unsure if any of these investments are right for you, you should contact an Independent Financial Adviser.

In November Lord Justice Coulson and Lady Justice Rose gave judgment in the development dispute case of Farrar and another v Rylatt and others [2019] EWCA Civ 1864.

The appellants had been disappointed by a decision in the High Court that oral discussions between the appellants and respondents did not amount to either an oral profit share agreement, or an oral express trust; and that (concerning a different agreement) heads of terms marked “Subject to Contract” did not morph into a binding agreement. The Court of Appeal agreed that the appellants should remain disappointed.

The alleged profit share agreement, whether or not it included a trust, was a complicated arrangement, which both courts doubted could have been agreed by these parties orally, and at such a high level. Further, the appellant had not been able to identify and plead clearly enough when, and where the oral agreement was reached, or what was said.

The use of the label “Subject to Contract” to avoid a binding agreement, was given a high degree of respect at the outset, with the Court then considering carefully at each stage, since the heads of terms, whether the parties had started to perform an agreement, or otherwise by conduct agreed to be bound by it, reaching the decision that they had not.

The Farrar v Rylatt case

This is a decision which bears all of the hallmarks of a development dispute; there is usually a profit to be split, or a loss to be apportioned, a number of incomplete documents, some alleged oral agreements, a number of parties, including limited companies, which are often wholly owned by their principles, and people building stuff.

In this instance the claimants, and then appellants were Neil Farrar (referred to in the judgment as Neil) and his company Farrer Construction Limited (Farrer). The defendants and later respondents were James and Kevin Rylatt (referred to in the judgment as James and Kevin), and their limited company, JKR Property Developments Limited (JKR).

The dispute concerned two development projects, in each instance the defendants had purchased the land, and the claimant was the builder developing it.

Hazel Grove development

The first project, where the arguments were for an oral profit share or trust of land, involved a development site purchased by James and Kevin, referred to as Hazel Grove, for £50,000. James and Kevin agreed to pay either Neil or Farrer £97,000 to build a house at Hazel Grove. It appears not to have been resolved who was supposed to be paid, or in fact who was paid, but agreed that someone was paid.

The development was purchased in the end for £190,000, meaning that (in broad terms) a profit of £40,000 was up for grabs.

Oral agreement

Neil and Farrer sought to argue that there had been an agreement that there had been an oral agreement that the proceeds of the sale of Hazel Grove would be held on trust for Neil, and James and Kevin, at 50% each side, or that there was an oral agreement that the proceeds of sale would be split in that way.

The Judge at first instance, and then Lord Justice Coulson giving the leading Judgment were unimpressed with the oral evidence, and noted that there was little documentary evidence in support of the claim. There was also universal judicial agreement that the idea of parties reaching agreement orally on a complex declaration of trust was unlikely, given that they were probably good builders, but unlikely to fully understand the application of trust law in those circumstances.

The Barns development

The other property, known as the Barns, was owned by Neil. The parties appear to have agreed in principle to develop the property together, pursuant to heads of terms, drawn up by a chartered surveyor, bearing the heading “subject to contract and without prejudice”.

The heads of terms included that James and Kevin would purchase the site, Farrar would build out the project under a JCT contract for a fixed sum of £300,000, which would be paid by James and Kevin, in return for which the net profit of the development would be split, 50% to Neil, and 25% each to Kevin and James.

The heads of terms were not signed, but were a common document between all of the parties.

Farrar commenced work on the barns, then the site was conveyed to JKR (not James and Kevin personally), and a JCT Contract between Farrar and JKR (again not James and Kevin personally) was entered into, with the heads of terms annexed to it.

There was a dispute over the final payment for the building works, but that appears to have been resolved, and some of the properties had been sold, at least by the point that the Court of Appeal heard the matter.

Court of Appeal

The Court of Appeal preferred to look at three types of agreement (land sale, building contract, and profit share) which the parties might have entered into. It then considered various points at which such agreements might have become binding on the parties: the point at which the heads of terms were completed, the date of sale of the land and the date of entering into the JCT.

Neither Court found any significant evidence of performance of any of the terms, indicating that the parties intended to be bound by the heads of terms, despite entitling them as subject to contract.

The Court of Appeal agreed with the trial judge that the heads of terms were unlikely to amount to a binding agreement to sell land, given that the agreement fell short of the stringent provisions of section 2(3) of the Law of Property (Miscellaneous Provisions) Act 1989, and that the term that the property was transferred to James and Kevin personally had not been reflected in reality.

Both Courts also drew inference from the fact that the only contractual emanation of the heads of terms was the JCT, indicating that if the parties had intended upon a binding agreement for the rest of the terms they would have entered into one.

“Subject to contract”

Both Courts also attached much importance to the subject to contract tag. The Court of Appeal pointed out the authority of Regalian Properties PLC and another v London Docklands Development Corporation [1995] 1WLR 212 which provides that: “…in the absence of special facts (which the judge explained by reference to a number of separate conditions which needed to be fulfilled) the deliberate use of the words “subject to contract” had the usual effect so that, in the event of no contract being entered into, any resultant loss must lie where it fell.”.

The special circumstances in this case might have been substantial performance of the terms, but in this case, having carefully analysed the chronology of events, the Court could not find any performance which amounted to a special fact.

“Without prejudice”

Incidentally, the Court of Appeal pointed out that the use of the label “without prejudice” did not appear to be appropriate in these circumstances. The parties were not at that time in a dispute, and the use of the label added nothing except confusion. There will be times where it would be appropriate to use the label on heads of terms, but normally these would be times when there was a dispute in contemplation, and the parties did not want to water down their evidence by indicating they were willing to settle.

Practitioners should take comfort from this decision, as it indicates that heads of terms which are appropriately titled, will be construed as working, not binding, documents. On the other hand, no doubt James and Kevin will have incurred costs which they have not been able to fully recover from Neil, and as such, perhaps they might (with the benefit of hindsight) have been better to clearly indicate to Neil that there were no special deals.

Click here to read a transcript of Farrar and another v Rylatt and others

Michelmores has announced a new two-year charity partnership with The Charlie Waller Memorial Trust, a charity working to educate young people on the importance of staying mentally well, and how to do so.

From January 2020, Michelmores will fundraise in support of The Charlie Waller Memorial Trust, across its offices in Bristol, Exeter and London.

The Charlie Waller Memorial Trust, based in Berkshire, was set up by Sir Mark and Lady Waller, in memory of their son Charlie, who sadly took his own life whilst suffering from depression. The charity’s work focuses on delivering talks, education and training to young people, teachers and those who work with them about positive mental health. They provide education and training to primary health care and other professionals, in identifying and supporting those with depression as well as offering training and self-help resources to universities and colleges to promote resilience and mental wellbeing.

Lady Waller, Head of Fundraising at Charlie Waller Memorial Trust said:

“We are thrilled to have been announced as Michelmores’ Charity Partner and are looking forward to working with them over the next two years. The money raised by the three offices in London, Exeter and Bristol will mean that we can run many more training sessions in schools, universities, FE colleges and workplaces and enable more people to understand and talk openly about depression and other mental health problems, stay mentally well and access appropriate treatment.”

Every two years, Michelmores invites applications to become its dedicated charity partner. Submissions are shortlisted and the winning charity is selected through a staff vote.

Michelmores staff raise approximately £40,000 annually for their nominated charity partner through initiatives such as the 5K Charity Run, the Christmas bizarre, the National Three Peak Challenge and many other fundraising events each year.

For further information on the Charlie Waller Memorial Trust, please visit their website here.

I am often asked by clients what is the difference between executors and attorneys.

The role of attorney and executor are similar to some extent but also very different. Both roles involve attending to somebody else’s financial affairs but in different contexts. The main difference is when that person can make decisions for another – depending on whether they are to act during that person’s lifetime, or after their death.  In addition, attorneys and executors are appointed in different ways by entirely separate documents.

An attorney is appointed by an individual (the Donor) to act on their behalf during their lifetime by the creation of a Lasting Power of Attorney (LPA). An attorney can be appointed to act in respect of either the Donor’s health and welfare matters and/or their property and financial affairs. In this article, I will be focusing on attorneys appointed to deal with a Donor’s property and financial affairs. Subject to the LPA being registered with the Office of the Public Guardian, and any restrictions that may be placed on the scope of their authority written within it, an attorney appointed under a LPA can make decisions on behalf of the Donor in respect of his or her property and financial affairs. This authority to act can extend to making decisions even when the Donor has lost the requisite capacity to be able to make those decisions themselves.

The appointment of an attorney automatically ends on the death of the Donor, at which time their executor becomes responsible for dealing with their financial affairs.

By comparison, an executor is generally appointed in the Will of a person (the Testator). The appointment only comes into effect once the Testator has died, at which point the executor becomes responsible for administering the estate. In the same way that an attorney cannot act under a LPA for a Donor after their death, an executor appointed in a Will cannot act for a Testator during the Testator’s lifetime. The appointment of an executor only comes into effect when the Testator has passed away.

The role of attorney and executor also differs in how they make decisions. An attorney must ensure that they have made every effort to allow the donor to make their own decisions before they decide on a course of action on the Donor’s behalf, and must act in the donor’s best interests at all times. This is set out under the Mental Capacity Act 2005.

In contrast, an executor must act in accordance with the provisions of the Will and is subject to duties set out in various legal instruments, such as the Administration of Estates Act 1925 and the Trustees Act 2000. These duties include collecting in and safeguarding the assets of the estate, paying all debts and liabilities and distributing the estate to the beneficiaries in accordance with the terms of the Will.

It is crucial for both the person choosing to appoint attorneys and executors (and of course those who are due to act) to understand the difference between these very separate and distinct roles, even if the same person is to act as both attorney and executor. Both roles create a heavy weight of responsibility and there are strict penalties for failing to act in the correct manner in either role.

If you would like further assistance or advice about appointing attorneys or executors or if you wish to review your existing appointment please contact Gemma Shepherd.

This article was first published on LexisNexis on 10/10/2019

Energy analysis: The Crown Estate has released the UK’s first major offshore wind leasing round in a decade. Ian Holyoak, partner at Michelmores LLP, points out that the capacity released is only a quarter of the previous round as the Crown Estate seeks to balance the strong market appetite for new seabed rights with the interests of other seabed users and the potential environmental impact.

Original news

The Crown Estate reveals next round of Offshore Wind Leasing, LNB News 19/09/2019 36

The Crown Estate has launched Offshore Wind Leasing Round 4, which has opened up seabed rights for offshore wind development around England and Wales estimated to allow for the production of at least seven gigawatts of electricity. The Crown Estate, which manages the seabed surrounding England, Wales and Northern Ireland, will now allow potential developers to bid for project sites. The opening of Round 4 follows 18 months of engagement with the market and stakeholders.

What is the Crown Estate Offshore Wind Leasing Round?

The Crown Estate Offshore Wind Leasing Round 4 is the next round of auctions of seabed rights for offshore wind projects in the waters around England and Wales. It is the first opportunity for offshore wind developers to obtain new seabed rights since the last award of rights in 2010 (Leasing Round 3). The Crown Estate has indicated Leasing Round 4 will result in the release of at least 7 GW of new seabed rights, up to a maximum of 8.5 GW.

There are four bidding areas that will be up for grabs in Leasing Round 4:

• ‘Dogger Bank’—off the coast of Northumberland, North Yorkshire and County Durham
• ‘Eastern Regions’—a large area directly south of the Dogger Bank off the coast of Lincolnshire, Norfolk and Suffolk
• ‘South East Region’—off the coasts of East and West Sussex and the south coast of Kent, and
• ‘Northern Wales and Irish Sea’—off the coasts of Northern Wales, Lancashire, Merseyside and southern Cumbria

Within the four areas above, potential bidders will be free to identify and put forward their chosen project sites. The minimum individual project size is 600 MW in the Dogger Bank area, and 400 MW in all other bidding areas, with the maximum individual project size being 1.5 GW in all areas.

Leasing Round 4 will incorporate a three-stage tender process. The first stage will include an evaluation of a potential bidder’s financial capability and technical experience, to ensure bidders meet a minimum required standard. The second stage focuses on the details of a bidder’s proposed projects. Project submissions as a part of the second stage will be assessed on the basis of a number of pre-defined criteria relating to project capacity, project density and other technical variables.

Once through these first two stages, a potential bidder will be able to participate in a multi-cycle bidding process, with the award for each project to be determined by the option fees bid by eligible bidders. One project will be awarded per daily bidding cycle, with bidding cycles continuing until the 7 GW has been awarded (or exceeded). According to The Crown Estate, the process has been designed in this manner to allow for more price transparency, allowing participants to adjust their bidding strategy as the round progresses.

What is the anticipated timeline for the latest leasing round?

The overall leasing process is set to run from October 2019 through each of the stages of the tender process up to signature of an agreement for lease for successful bidders in Autumn 2021.

The first stage for potential bidders, submission of a pre-qualification questionnaire (PQQ), will run for 14 weeks from October 2019 until January 2020. The overall tender process is expected to take approximately 12 months, with a plan-level habitats regulations assessment (HRA) taking a further 12 months.

It is worth noting that the timeline for Leasing Round 4 is not legislatively mandated, so the timelines set out by The Crown Estate should be considered in that context. It is possible that the anticipated timelines will shift as the process progresses.

How does the latest round differ from previous rounds?

The Crown Estate seems to have been at pains to ensure that the design and methodology of Leasing Round 4 has considered the views of a range of stakeholders, given the political and economic context in which this round will take place. The announcement of Leasing Round 4 comes following almost two years of stakeholder consultation, through which several tangible changes were made to the model initially proposed by the Crown Estate in 2017. The model ultimately adopted for Leasing Round 4 is substantially different to Leasing Round 3 and previous rounds.

One key difference in Leasing Round 4 as compared to Leasing Round 3 is the amount of capacity released. While not unexpected, the capacity to be released as a part of Leasing Round 4 represents approximately a quarter of the capacity released under Leasing Round 3. The Crown Estate cited the need to find a balance between the strong market appetite for new seabed rights, the interests of other seabed users, as well as the potential environmental impacts from further offshore wind development. The Crown Estate’s ‘Resource and Constraints for Offshore Wind: Methodology Report’ reveals weight was given to range of factors, including the visibility from shore and the impact on shipping and fishing. Each of these factors had an impact on the location, and ultimately the total capacity, of the rights released as a part of this round.

Perhaps the most notable difference in the latest leasing round is the role of the ‘option fee’. The ‘option fee’ in Leasing Round 4 will act as both the bid at the auction stage, as well being one of the bases upon which the base rent under a lease for a project is to be calculated (at both pre-generation and operational stages). In contrast, the revenue model adopted for projects awarded under Leasing Round 3 was based on a percentage of the revenue generated by a project. The latest model accordingly shifts a certain amount of development and generation risk back to the developers and funders on each project, particularly during development stages.

On a similar theme, Leasing Round 4 will also not incorporate the co-investment aspects seen in Leasing Round 3, whereby the Crown Estate invested directly by funding a proportion of a developer’s consenting costs. Assistance from Crown Estate in the new Leasing Round comes in the form of study and feasibility support, information collation and ‘enabling’ works packages. The Crown Estate’s guidance document indicates ongoing engagement and facilitation will be available to successful bidders, particularly in relation to consenting and environmental impacts. The latter will be of particular note, given the recent progression of the 2017 Extension projects through the HRA to the rights award stage.

Is there anything unexpected?

As with any energy generation projects, the availability and location of cabling and grid connections are crucial to the viability of a project. The Crown Estate identified concerns around cabling and grid connections as a key feature of stakeholder feedback during the consultation process leading up to the latest leasing round. This remains one of the key unknowns in the Round 4 process.

The underlying regulatory basis for offshore transmission is, of course, well understood by the market and it will apply equally to the projects developed as a part of Leasing Round 4. The transmission infrastructure will be developed by the developer of the windfarm and then transferred to an Offshore Transmission Owner (OFTO) which will either be selected through a competitive tender process or directly appointed by Ofgem.

However, the feedback to the consultation raised a number of questions that the Crown Estate has been unable to address head-on, and which are unlikely to be resolved prior to the bidding stage of the process. In particular, whether transmission could be accommodated within existing transmission routes (where the bidding area abuts already developed seabed), and how future development of grid infrastructure may impact grid connection availability in constrained landfall areas (for example within Suffolk). On the latter point, the Crown Estate has revealed that when designing the amount of capacity that will be allowed in any region, it did not explicitly take into consideration the findings of the National Grid’s Electricity System Operator (ESO) desktop connection feasibility study, which assessed grid connection and possible cable routes for the regions. Developers will, accordingly, need to make use of the resources provided by the Crown Estate and undertake their own assessments of the financial viability and consent risk for potential cable routes and grid connection locations prior to submitting bids.

Notwithstanding these points, in the main, given the long and detailed consultation process undertaken, there are few surprises in the documentation released by the Crown Estate launching Leasing Round 4. It broadly aligns with the previous documentation released and many stakeholders are likely to have already begun progressing internal planning for these projects.

What potential implications does it have for the UK energy sector?

The launch of Leasing Round 4 appears to have been received positively by the majority of stakeholders in the energy sector and, unsurprisingly, particularly by those engaged in or seeking to engage within the renewables sector. Offshore wind is a key feature of the government’s future plans for decarbonisation of the UK energy supply chain and it seems likely that the private sector will be similarly enthusiastic about investing in the technology through Leasing Round 4. The strong government support will no doubt be viewed favourably in contrast to what is seen as a general cooling in government support for renewable energy development on a wider level, most notably in the area of small-scale generation.

The energy supply chain and the local energy sector business in the areas from which these projects will be constructed and serviced will naturally also benefit from both the construction and operation of the offshore windfarms as a result of the development of rights released under this latest leasing round. From the perspective of UK energy security and job creation, there would appear to be little to complain about in the announcement of Leasing Round 4.

Assuming the round is a success—and there is no reason to suggest otherwise given the success of past rounds—it is also likely to add to the narrative of offshore wind being seen as a ‘thermal generation killer’. Coming at the same time as historically low prices seen in the most recent Contract for Difference (CfD) auction round for offshore wind, Leasing Round 4 may add weight to arguments against new government-supported developments of non-renewable forms of electricity generation. Ever the punchbag in the renewables sector, Hinkley Point C will undoubtedly continue to receive its share of criticism, as proponents point to the Crown Estate’s ambition to deliver future leasing opportunities in line with market and government appetite. However, the need for baseline generation and technological advances to address the inherent volatility of wind generation will remain.

Holyoak was interviewed by Grania Langdon-Down of LexisNexis.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

The Michelmores Energy Team has significant experience advising on the financing, development and sale/purchase of wind projects. If you or your company would like any further information, please contact Ian Holyoak.

Average read time: 2.5 minutes. 

Every playground has one so why should the Financial Conduct Authority (“FCA”) miss out on all the fun?

In software development, “sandbox” is a word commonly used to describe an isolated testing environment for new apps or programmes. The regulatory sandbox is just that – a framework set up by the FCA, the regulator of the financial services sector in the UK, to allow small scale, live testing of innovations by private firms in a controlled and safe environment.

The FCA’s aim in building the Sandbox was to reduce time-to-market for businesses wishing to innovate while providing support in identifying appropriate consumer protection safeguards to build into these new products.

How it works – the basics

Authorised and unauthorised firms and technology businesses are able to apply to enter the Sandbox via the FCA website once a new round of applications (“Cohort”) has been launched. Within the application form, applicants have to set out how they meet the eligibility criteria. If accepted, participants are usually subject to a less onerous regulatory regime via waivers and protection from enforcement action which together with guidance and informal steers comprise the “Sandbox tools” available to participants as they develop their products. For example, businesses seeking to introduce new technologies in the banking and investment markets have benefited from reduced capital adequacy requirements.

Advantages

The Sandbox is a good example of collaboration between regulators and innovators aimed at encouraging the realisation and full potential of technologies, such as artificial intelligence, whilst protecting the consumer. It recognises that innovation happens faster when businesses can test new ideas without the burden and cost of compliance with exhaustive consumer protection and is better when it is tested in a live environment with real consumers on a trial basis. Other benefits include:

• Proof from experimentation improves access to capital for innovators.
• Consumers benefit because new technology-based products are brought to market sooner.
• Direct communication between fintech developers, businesses and regulators creates a more cohesive and supportive industry.
• Successive trial-and-error testing within a controlled environment mitigates the risks and unintended consequences such as unseen security flaws when a new technology is adopted in the market too quickly.

The information gathered during each Cohort cycle feeds into a lessons learned report (October 2017 report here), reflecting on insights gained and lessons learned from testing products which ultimately assists in shaping a new regulatory framework to govern these products. More recently the FCA published a report outlining the impact of innovation on firms that have been supported through the sandbox and how it promotes effective competition in the interest of consumers (here).

What’s next?

Applications to Cohort 5 closed on 30 November 2018. On the 29 April 2019 it was announced that 29 businesses of 99 applicants were accepted. A list of the firms accepted can be found here. Applications are now open for Cohort 6 – apply by 31 December 2019.

Given the continued popularity of the Sandbox, it is likely that further Cohorts will follow. Steps to create a Global Financial Innovation Network and global regulatory sandbox are being taken.

Average read time: 3 minutes.

Why is storage important?

The transition of the electricity network in the UK to a smarter, flexible and more modern system has been underway for some time, with Distribution Network Operators (DNOs) transitioning to Distribution System Operators (DSOs) with more responsibility for actively managing the distribution network. Storage, whether by battery or other technology, provides opportunities for increased flexibility for the electricity network, in particular at times when there is an imbalance between generation and consumption.

Advancements in battery technology and a developing battery industry mean storage projects with over 550MW capacity are now being proposed by developers. However, current regulatory controls have made it difficult for battery storage technology at this scale to be widely deployed.

What are the existing planning challenges for storage?

Currently, there is no definition of “electricity storage” within planning law, which has led to a lack of clarity in relation to planning requirements.

The current regulatory regime is not clear on whether electricity storage technologies constitute an electricity generating scheme. The Planning Act 2008 requires that where an existing or extended electricity generating station results in a capacity of over 50 MW in England, and 350MW in Wales, it will be classified as a Nationally Significant Infrastructure Project (NSIP).  As a result of this, a Development Consent Order is required.

This means a different application process for planning, taking the decision from the local planning authority and moving it to the Planning Inspectorate (i.e. Government approval).

What is the latest consultation on the planning system for storage?

In response to push-back from the industry on an earlier consultation in January 2019 regarding the treatment of electricity storage within the planning system, BEIS has issued a follow-up consultation along with two published two draft orders; the Infrastructure Planning (Electricity Storage Facilities) Order, and the Electricity Storage Facilities (Exemption) (England and Wales) Order.

The original proposals covered England only, and were to retain the 50MW NSIP threshold for standalone storage facilities, and to provide a new capacity threshold for co-located sites. The revised proposals are (in summary) to carve out electricity storage (other than pumped hydro) from the NSIP regime. This means that a standalone storage project (other than pumped hydro) would not fall under the NSIP regime (unless directed by the Secretary of State) and for co-located projects involving storage, the storage element would not trigger the NSIP threshold by itself.  It is proposed this would apply through England and Wales. The consultation on these proposals is open until 10 December 2019 and can be found here.

The BEIS proposals set out in the draft orders and consultation seek to clarify the planning law requirements by introducing a new definition of “electricity storage facility”.  Under the proposals, electricity storage facilities (other than hydroelectric pumped storage facilities) would be exempt from the requirement to obtain a Development Consent Order and consent under s.36 of the Electricity Act 1989.  In other words, larger storage projects could receive consent from local planning authorities under the country’s Town and Country Planning Act.  While there are advantages to the NSIP regime, there is potential for the planning process to take significantly longer and cost more, than for a project with a lower capacity, creating a significant challenge for larger storage projects.

The proposed changes to the planning regime could therefore reduce the pre-construction costs which might otherwise have been in place.  It will also allow developers who have capped their projects at 49.9MW (in England) to access larger project capacities, which can unlock investment.

The new proposals, if implemented, are likely to come as a welcome change for developers adding exempt electricity storage facilities to existing electricity generating stations.

However, it is important to note that a Development Consent Order may still be required where the development also involves non-electricity storage related element.

In what is being described as “the biggest change to the private rental sector for a generation” the Government has recently reported that it intends to abolish the use of section 21 Notices, seeing an end to the so called “no-fault” eviction process for assured shorthold tenancies (“ASTs”).

At the same time, the Homes (Fitness for Human Habitation) Act 2018 and the Tenant Fees Act 2019 have recently come into force – the latest in a whole series of statutory restrictions introduced since 2015. It appears that the statutory freedom enjoyed by landlords since 1989 is well and truly coming to an end.

Section 21 proposal

Currently, under Section 21 Housing Act 1988, landlords may terminate a periodic AST without providing a reason for doing so and with as little as 8 weeks’ notice.

The procedure for ASTs has historically been criticised by tenants’ associations and more recently by the Prime Minister, who has labelled it “unfair and ‘wrong”. Its abolition is therefore welcome news for tenant groups, however will remove certainty and autonomy from property owners, in what is otherwise a highly regulated area.

Although “no-fault” evictions will end, landlords will still be able to terminate ASTs provided they establish a legitimate reason for doing so, eg wanting to move into the property themselves or wanting to sell the property.

In a bid to level the playing field between landlords and tenantes the wider reform package also includes proposals to improve the Section 8 eviction process (the process for obtaining possession, where a tenant is in default) including speeding up the court process. This is welcome news for landlords as currently the Section 8 process is costly and time consuming, with cases being drawn out over long periods due to oversubscribed court lists.

It is unclear when the proposed changes will come into effect, but until they do Section 21 will remain in force.  Landlords wishing to regain possession in the near future, would therefore be well advised to press on and serve a Section 21 notice soon, before it is abolished.

Homes (Fitness for Human Habitation) Act 2018

Under this Act a new covenant will automatically be implied into most new residential tenancies of less than 7 years, granted after 20th March 2019 (including those which continue as statutory or contractual periodic tenancies after that date) a covenant that the dwelling is fit for human habitation throughout the tenancy. For tenancies caught by the Act and created before 20th March 2020 the implied covenant starts as from 20th March 2020. If a dwelling is not up to the appropriate standard a tenant will be able to take action in the courts for breach of covenant. Further details are available on the Government website.

Tenant Fees Act 2019 (“TFA”)

The TFA applies from 1st June 2019 to the grant of all new ASTs, licences to occupy and student accommodation. For existing tenancies there is a period of grace until 1st June 2020.

The TFA imposes a ban on requiring any payments from tenants or their guarantors, apart from certain “permitted payments”, set out in schedule 1 to the TFA. The Act also prohibits landlords and letting agents from requiring tenants to enter a contract with a third party for a service or insurance, although there are a number of limited exceptions.

Sanctions are imposed for non-compliance, including restrictions on using the s21 eviction procedure, if a Landlord has taken prohibited payments and not returned them.  For further details see the Government website.