Real Estate Focus – May 2025

The Law Society climate change and property practice note: practical guidance for solicitors

Monday 12 May saw the publication of the Law Society’s climate change and property practice note which aims bring some clarity for property solicitors on what they should (and should not) do in terms of advising clients on potential future climate change issues relating to property transactions.

Background

The note builds on the Law Society’s climate change guidance from April 2023: The impact of climate change on solicitors.

Property solicitors may recall that, following the publication of the April 2023 guidance, various search providers brought out products purporting to predict the effect of climate change on property, in some cases up to 50 years in the future. There were also other professional opinions being circulated amongst the profession relating to the potential duties of solicitors when advising on climate change. Needless to say, this led to some confusion amongst property solicitors as to what, exactly, they should be advising clients upon when it comes to climate change, with solicitors eagerly anticipating the “sector specific” guidance referred to in the April 2023 note.

Two years down the line, we have the “Climate change and property” practice note which, as it says on the “tin” includes “practical guidance to help address common challenges identified by solicitors”.

Overview

The note is split into, essentially, four sections:

1. Examples of climate risks in property transactions – this covers the physical, transition and legal or liability risks potentially encountered in respect of climate change. There is emphasis on the position that “solicitors are not qualified to advise on physical risks”, which will be a relief to the profession. Instead, it suggests that solicitors should advise clients to seek suitable specialist advice. Ultimately, solicitors should advise on the legal implications of potential liability or legal risks arising from physical or transition risks.
2. How to advise on climate risk – this is the most practical part of the note and includes a checklist of what solicitors should consider doing about climate risk in property transactions. It also includes sample wording which can be inserted into reports on title and even adapted for letters of engagement. There is also a section on climate risk searches, including information about how they work and their limitations.
3. Acting for clients in different types of transactions – this section focuses on specific types of transactions, but also emphasises that advice given by solicitors very much depends on different clients’ intentions including experience and knowledge of climate change, appetite for risk, and access to expertise.
4. Valuations and surveys – finally the note concentrates on valuations and surveys. It provides a list of organisations which may be able to recommend suitably qualified professionals to provide such specialist surveys and valuations in the context of climate risk that solicitors can point clients towards.

Principal outcomes

It is clear that, in preparing the note, the Law Society’s aim was not to impose additional duties upon solicitors, but instead to support them in discharging their duties when advising clients on the potential impacts of climate change. The note gives practical guidance as to how solicitors may choose to act, depending on a number of factors including the specific property and its intended use, the nature of the transaction, as well as the client’s knowledge, experience, access to specialist advice and attitude to risk.

Solicitors should be relieved to note the repeated emphasis that they are not qualified to advise on the physical and technical impact of climate change, and as such they should not try to do so. Instead, clients should be seeking advice from qualified professionals, with the note including a list of organisations which can help with this.

But as always with matters connected with a legal transaction, solicitors should make sure all discussions and advice given should be recorded in writing throughout.

URS Corporation Ltd v BDW Trading Ltd - Highly anticipated Supreme Court Judgment handed down

On 21 May, the Supreme Court handed down its eagerly awaited judgment in this case concerning contributions to remediation costs. The ruling essentially determined that structural engineers owe a duty of care to developers for economic losses arising even after the relevant remediation had been carried out, and the properties sold on. The judgment also clarified other issues arising from changes to the law brought in by section 135 of the Building Safety Act 2022 (BSA).

Background

Prior to the Grenfell Tower tragedy in 2017, BDW developed two residential tower blocks known as "Capital East" and "Freemasons Meadow" (the Developments), and appointed URS to provide structural design services. In 2019, BDW discovered structural design defects in the Developments, and due to the potential danger to residents, commenced remedial works. In March 2020 BDW sought to recover the associated costs from URS in the Technology and Construction Court (TCC), claiming that URS had breached its duty to exercise reasonable skill and care. No claim was brought under the contract or the Defective Premises Act 1972 (DPA) because, at the time, such a claim would have been time-barred.

In 2021 the TCC ruled the case could proceed, with BDW's economic losses being recoverable since they accrued no later than practical completion of the Developments. In addition, the TCC advised the developer can also bring a contribution claim under section 1(1) Civil Liability (Contribution) Act 1978 (Contribution Act).

In 2022, section 135 of the BSA came into force. This retrospectively extended the limitation period for claims under the DPA to 30 years. As a result, BDW amended its pleadings to add claims under the DPA and the Contribution Act.

On appeal by URS, the Court of Appeal upheld the TCC's decision, and URS appealed again to the Supreme Court.

Grounds of appeal and Supreme Court Decision

• Ground 1: Did BDW suffer actionable and recoverable damage or was the damage outside the scope of the duty of care and/or too remote because it was voluntarily incurred?

URS argued that, because the remedial works were voluntarily carried out by BDW on the Developments (which it no longer owned) then the economic loss it incurred was not within the duty of care. The Supreme Court considered the role of "voluntariness" to be obviously bound up in the consideration of whether the chain of causation from breach of duty to loss has been broken by a claimant's own voluntary conduct, or whether the claimant has failed in its duty to mitigate its loss. In any event, it did not consider, on the facts of the case, that BDW had freely and voluntarily carried out the remedial work (the works were necessary bearing in mind the serious safety issues), concluding that "there is no rule of law which meant the carrying out of repairs by BDW rendered the repair costs outside the scope of the duty of care or too remote".

• Ground 2: Does section 135 of the BSA apply in the present circumstances, and if so, what is the effect?

The Supreme Court was assisted on this ground by the Secretary of State for Housing, Communities and Local Government relating to the policy and purpose underlying the BSA which is both a backward and forward looking piece of legislation. "Backward looking" provisions such as section 135 uphold one of the main policies behind the legislation, being to hold to account those actually responsible for defects. This purpose would be undermined if section 135 was limited to claims against the developer, or restricted to actions under section 1 of the DPA. The Supreme Court concluded that section 135 applied equally to claims for negligence and/or contribution.

• Ground 3: Did URS owe a duty to BDW under section 1(1) of the DPA and, if so, are BDW's alleged losses of a type which are recoverable for breach of duty?

Under section 1 of the DPA, a person taking on work for or in connection with the provision of a dwelling owes a duty to any person, to whose order a dwelling is provided, to see that the work which is done in a workmanlike or professional manner so that the dwelling is fit for habitation. URS argued that this does not confer a benefit on a developer as the purpose of the DPA was to address unfairness suffered by inhabitants of the dwellings.
The Supreme Court did not agree, stating “there is no good reason why a person, for example, a developer, cannot be both a provider and a person to whom the duty is owed”. Accordingly, the duty is owed “to any person, including a developer, to whose “order” a dwelling is being built”.

• Ground 4: Is BDW entitled to bring a claim against URS pursuant to section 1 of Contribution Act even though there has been no judgment or settlement between BDW and any third party and no third party has asserted any claim against BDW?

The Contribution Act addresses the situation where a person who is liable for damage suffered by another person has a statutory right to recover contribution from anyone else who is liable for the same damage. The cost of compensation can therefore be allocated between the liable parties depending on their relative responsibility for the damage.

URS argued that BDW’s claim was premature as the right to contribution does not arise unless and until BDW’s liability to the homeowners has been established by a judgment against BDW, an admission of liability by BDW or a settlement with the homeowners.

The court rejected this contention, confirming that the right to contribution arose when (i) damage was suffered by the homeowners when the development was completed; and (ii) BDW paid or agreed to pay compensation in respect of the damage. In this case, by carrying out the repairs, BDW had paid compensation to the homeowners (in kind). The fact there had been no judgment against of admission of liability or settlement between BDW or any homeowners did not prevent BDW from claiming a contribution from URS.

Implications

The Supreme Court’s decision will be welcomed by developers. It provides clarification that, where building owners have incurred costs to rectify defects, they will be able to recover those costs from other negligent third parties even where the work to rectify has been incurred voluntarily, and where the developer no longer owns the building(s) in question. The decision also recognises that practical steps taken to address defects can form the basis of a contribution claim, even in the absence of formal legal proceedings or settlements with affected third parties. This will hopefully encourage developers to take on any necessary remediation works without delay, knowing they can claim for a contribution to those remediation costs from other responsible third parties.

The decision is also helpful in confirming that the retrospective thirty-year limitation period under section 135 BSA applies to claims (including contribution clams) that are dependent on the time limit for claims under section 1 DPA, not just those which are brought under it. However, the Supreme Court emphasised that, in relation to claims in negligence for remedial works carried out before section 135 BSA came into force, the question of recoverability remains fact-specific and is not automatically resolved by the retrospective extension of the DPA limitation period.

Consideration in Interim Rights Agreements – Pennies or Pounds?

The issue

The judgment handed down by the Upper Tribunal (Lands Chamber) (UT) on 30 April 2025 in the case of Covent Garden IP Limited v Cornerstone Telecommunications Infrastructure Limited [2025] UKUT 136 (LC) sheds light on how tribunals approach consideration in interim rights agreements under the Electronic Communications Code (the Code), especially in relation to multi-skilled visits (MSVs).

Background on multi-skilled visits

To assess the viability of a site, operators will usually carry out MSVs. In which case, the operator needs either the written consent of the owner / occupier (usually documented in an access agreement) or an Interim Order imposed by the first-Tier Tribunal (FTT) under Paragraph 26 of the Code.

Nominal consideration is not a rule (just a common practice)

Historically, tribunals have awarded nominal consideration, typically £1, for interim rights to conduct MSVs. This is because the rights are generally non-intrusive and limited in scope and duration i.e., they usually involve access to rooftops or service areas for a few hours over a period of six months, with building owners entitled to compensation for any damage or inconvenience caused.

However, the Code aims to maintain an equilibrium between the interests of property owners / occupiers and operators, facilitating necessary surveys while ensuring fair compensation. In this decision, the UT confirmed that there is currently no legal principle requiring only nominal consideration. If there's a dispute, parties can argue for more than nominal consideration but must support this with expert valuation evidence based on what a willing buyer and seller might agree in an open market.

It is also worth keeping in mind that ultimately, the decision on consideration remains at the discretion of the FTT as per paragraph 26(6)(b) of the Code. For instance, the UT ultimately dismissed Covent Garden IP Limited's appeal for more than nominal consideration due to failure to comply with procedural formalities. The judge specifically emphasised that their application for expert evidence was "hopelessly late”.

In any event, even if only nominal consideration is awarded, site owners are entitled to:

• compensation for any loss or damage caused by the MSV; and

• reasonable transaction costs, such as legal advice and time spent negotiating the agreement.

Conclusion

The UT's decision in the Covent Garden case highlights the discretionary nature of awarding consideration under the Code. While nominal consideration is a common practice, it is not a strict rule. Parties can negotiate higher amounts than the usual pennies, and the FTT can award more than nominal consideration if justified by the evidence and circumstances of the case. This approach ensures that agreements reflect the true value of the rights being conferred and maintains fairness in the process.

Stamp Duty Land Tax – Tribunal exercises its discretion

In March 2025 the First-tier Tax Tribunal (FTT) ruled in the case of Sajedi and others v HMRC [2025] UKFTT 297 (TC) that taxpayers were not entitled to repayment of the 3% SDLT surcharge on additional dwellings as the FTT did not consider that they had disposed of their original main dwelling when they transferred a 1% freehold interest. The case is interesting as while the FTT found in favour of the taxpayer on the original question put to it by HM Revenue & Customs and the taxpayer, it felt obliged to go further and consider additional points on which the parties had already agreed – leading to a taxpayer loss in the case overall.

Background

An SDLT surcharge of 3% applies to the purchase of additional dwellings by individuals, except if the purchased dwelling is a replacement for the purchaser’s only or main residence; in order for this relief to be available the purchaser or their spouse must dispose of a major interest in another dwelling within three years of the date of purchase of the replacement residence. A change in law was made so that with effect for any land transaction on or after 22 November 2017, the relief will only be available if neither the purchaser nor their spouse retains a major interest in the other dwelling.

The taxpayers in the case were two couples; each couple acquired a new home in early 2017 and paid the SDLT surcharge (since, as a result of those acquisitions, they had two dwellings). In 2020, both couples entered into transactions in relation to their respective pre-existing homes which resulted in one spouse transferring a 1% interest in the freehold to the other.

Having disposed of their interest in the original residence, the taxpayers made applications for repayment of the surcharge on the 2017 acquisitions. HMRC rejected the claims.

Findings

The parties had come to the hearing prepared to argue a single point in relation to the timing for commencement of the November 2017 change in law – specifically, where the additional dwelling was purchased pre November 2017, and the original dwelling was disposed of post November 2017, did the new rule requiring that the taxpayer or their spouse could not retain any interest in the prior dwelling apply? The FTT agreed with the taxpayers that the new condition did not apply as the acquisition of the replacement dwelling took place prior to the change in law – but found that in the interest of justice they should also decide whether the other conditions for relief were met in these circumstances.

In particular, the FTT concluded that the meaning of “disposes of a major interest” must be concerned with transactions that had a real-world impact on the rights and obligations of the parties consistent with the notion of a replacement of an only or main residence. According to the FTT, the only evidence of disposals presented for the taxpayers were consistent with pure paper transactions with no intention to substantively alter the taxpayers’ real-world position. It followed that the taxpayers had not established that they had disposed of major interests in their pre-existing properties. As such, the FTT found that the taxpayers were not entitled to a refund of the SDLT surcharge paid in 2017.