Limitation on extent of legal privilege confirmed

Confidentiality between client and lawyers is one of the bedrocks of the way the legal profession works and something that clients have always taken for granted (and indeed should be able to!)

One of the rare instances when that confidentiality does not apply quite as clients might expect is the situation in which their lawyer is acting not only for them but also for the mortgage lender in a property transaction - this happens in about 95% of cases.  If mortgage lenders routinely instructed separate lawyers then the costs of buying property would increase significantly and this is why mortgage lenders are happy for the same lawyers to represent their interests and the interests of the buyer.

What happens, though, where for example the buyer ultimately defaults on the mortgage and the mortgage lender requests the lawyer's file?  Many clients assume that the file cannot be released to the mortgage lender because of the confidentiality rules and that even if some papers can be released, then those released are limited to such documents as directly involve the lender.

However, the High Court has now confirmed that borrowers have waived their right to legal professional privilege over those documents in their mortgage files that may otherwise have benefited from that protection. The reason being that the borrower will have signed a mortgage application form which contains a declaration consenting to the whole file being handed over to the lender on request!

The case is a useful reminder to both lawyers and clients that signing a standard form which is as simple as an application for borrowing can have consequences which last well into the future.

Lyn Brisley looks at the new Supreme Court ruling on pre nuptial agreements

Pre-nuptial agreements allow people to ringfence part of their wealth at the outset of a marriage. They are enforceable in many countries but they have never been binding in England and Wales

However, the Supreme Court has ruled that a pre-nuptial agreement is binding in the case of a German paper company heiress.

Katrin Radmacher's ex-husband Nicolas Granatino went to the Supreme Court after appeal judges slashed his divorce settlement from more than £5m to £1m.

The Supreme Court said it agreed that in the right case pre nuptial agreements can have decisive or compelling weight.

The case was seen by lawyers as a test of whether “pre-nup” agreements were applicable in law in England and Wales.

The judges deciding the case said "it will be natural to infer that parties entering into agreements will intend that effect be given to them".

In effect, therefore, these agreements are now binding unless they are unfair. So if the parties enter into a "pre-nup" freely, are fully informed of all the relevant financial and other information, and the implications of the agreement, then the courts will generally uphold the terms of that agreement.

The president of the Supreme Court made it clear, though, that courts would still have the discretion to waive or vary any pre nuptial (or post nuptial) agreement especially in cases where the terms of such agreement would have an adverse effect on any children of the family.

The ruling has been hailed as a judgement for a modern society, but there are some who believe it will significantly damage the financially weaker party in divorce. If that party, normally the wife, is held to the terms of a pre-nup she may be deprived of a considerable chunk of the couple's wealth.

The Law Commission is due to report in 2012 on whether a change in the law should be made to ensure pre-nuptial agreements are fully enforceable.

If you, or anyone you know, needs advice on any pre nuptial agreement then please give Lyn a call on 01733 888841.

"Squatters" beware!

Anyone who continues to believe that  cheekily taking over a piece of their neighbour's land and simply sitting on it and waiting for it to become theirs should take heed of a new ruling by the High Court which has awarded damages of £428,812.29 plus interest, including exemplary (i.e. "we're going to make an example of you") damages of £60,000, against a someone who took part of his neighbour's property into his own with what the court called "reckless disregard of the interests of the true owner".

The award of exemplary damages was made to deter the "squatter" from repeating the same behaviour, as the court felt that the regular award was not a sufficient deterrent.

It's a slightly different scenario from someone taking over an area of land where there appears to be no owner (the "no man's land" scenario) but even so it's something of a wake up call to those people (and they do exist!) who treat land ownership as something of a movable feast.

Saying "No" to mediation - a mistake?

Mediation is an alternative method of resolving disputes, where the parties involved agree to appoint a third party, whose role is to assist them in coming to a settlement.

 

While mediation is not compulsory, the Court have encouraged the use of the same, particularly if the costs involved are considerably less than taking a matter all the way through the Court system. In order to encourage the parties to mediate, they have made it quite clear that if a party refuses to mediate, and they do not have a good reason to do so, then even if they succeed in the case, at trial, then they will not be entitled to recover the costs either in part or in full. In a recent case, where one party refused to mediate for “commercial reasons”, although those reasons were never stated. The Court, when refusing to make a costs order in that case, gave some guidance as to what factors would influence their decision either way namely:

 

• The party refusing mediation must have strong grounds.

 

• Strong grounds do not include that the matter cannot be easily mediated.

• That it can be a good ground to refuse to mediate if you believe you have a strong case. However, if you feel that your case is strong enough, then you would normally be expected to apply to the Court for an early determination of the matter by way of Summary Judgment Application. If you don’t then the Court will probably take the view that you obviously didn’t believe the case was as strong as you say.

 

• It is reasonable to refuse to mediate if sensible and realistic offers have already been made and have been rejected.

 

• It is not good grounds to allege that the parties are so far apart that mediation will not be effective. The whole point of mediation is to bring parties closer together.

 

• Refusing to mediate because of the additional costs that will be incurred is also not good grounds, as the costs of mediation are often less than allowing a matter to go to a fully contested trial.

 

• The burden of showing that the refusal was reasonable lies on the party refusing to mediate.

• If mediation is attempted but fails then no criticism can be raised by the parties because the whole process is confidential.

 

In the circumstances, it would only be in exceptional cases that mediation would not be appropriate. The consequences of refusing to do so can result in you succeeding in your claim but being unable to recover your costs either in part or in full.

New court decision on remedies for right to light infringement

Rights to light and air are not something that the planning process generally takes into account - at least not in the way that those rights are protected in title deeds to property.  It's perfectly possible for a planning authority to grant planning permission only for the property owner not to be able to carry out those works because he finds out that his proposed building works would interfere with the existing light and air to the neighbouring property.

Until now, though, it has always been assumed (especially in relation to commercial property - the courts having always taken a slightly different tack with residential property) that if the neighbour didn't complain about the infringement of his rights before the building work was carried out, his only remedy was to damages for loss of amenity - the view of the courts being that it was unfair to make someone take down a building that was already completed.

However, a recent High Court decision seems to have turned that on its head!

The court awarded an injunction against a developer whose development interfered with the rights of light to a neighbouring commercial property, despite the development having been completed.

In the past, developers may have assumed that they could simply buy rights of light out from the neighbouring land owners after completion of the development if necessary.  It would seem that they must now start to think slightly differently!

Tenants Rights - Changes to the rules

The Civil Procedure Rules are being amended and some of those amendments have consequences for mortgage lenders who have mortgages over tenanted (rather than owner-occupied) property.

In particular the rule changes will allow tenants about whom the lender has no knowledge (that is to say tenants who the property owner has not told the lender about!) who are living in a mortgaged property to apply to the court for postponement of any repossession order granted in favour of the lender.

That obviously has repercussions for lenders being able to sell the property to recover their loan.

The new rules also require lenders to notify tenants and occupiers of a property before taking steps to enforce a possession order.

In those circumstances any tenant who the lender has had no previous knowledge of can apply to the lender for a delay repossession to allow the tenant time to find another home.

If the lender does not agree to an extension of time the tenant may apply to the court for a decision.

At the moment we can only speculate about what effect these changes may have on the willingness of lenders to make mortgage advances to landlords in relation to "buy to let" properties.

Changes to the Building Regulations

The Government has published two new sets of legislation relating to the building control regime in England and Wales.

Many of the changes in the new regulations deal with "tidying up" the current regulations in order to make them easier to understand (we hope!)

In addition, though, there are also some more meaty changes - including the widening of the provisions for self-certification to cover a greater range of activities which deal with the improvement of the energy efficiency of a building.

A proper understanding of the new provisions is vital for anyone who regularly deals with building control issues- especially those businesses whose bread and butter is dealing with construction and property.

The new rules come into force on 1 October 2010, but it may be some while after that before detailed guidance is published.  Until that guidance is forthcoming, anyone seeking clarification on the new regulations will need to look at the government's documentation showing the differences between the 2000 and 2010 regulations.