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A B C D E F G H I J K L M N O P R S T V W Y

Realty

A quarterly publication covering topical issues relating to the commercial property sector. The newsletter is designed to provide useful information and advice to landlords, tenants, property agents and surveyors.

Latest Issue

In the latest issue of Realty we look at the new provisions impacting directly on the real estate sector from the Queens Speech, plus what happens if a contract of sale is signed by one of two joint purchasers and not the other. We also look at property VAT and a variety of other topics that we hope you will find of interest.

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New provisions impacting on the real estate sector

Wednesday 22nd June 2016

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Realty - Issue 14

Last year's Queen’s Speech contained quite a number of new provisions impacting directly on the real estate sector; this year there was inevitably going to be less areas of direct relevance, but the Queen’s Speech did contain a number of provisions that will be of interest to the sector. 
 
Land Registry privatisation
 
Perhaps the most high-profile element of the Queen’s Speech within the media is the privatisation of the Land Registry, to which the Government remains committed despite this having been dropped altogether in the face of opposition (not least from the Conservatives’ coalition partners) when it was first proposed during the last Parliament, and despite some quite vocal opposition this time around from both the legal sector and the public.  
 
The Queen’s Speech indicated that provisions dealing with this privatisation will be contained within the Neighbourhood Planning and Infrastructure Bill when that comes before Parliament.  
 
The precise detail of how the privatisation will work, and how a privatised Land Registry will operate, remain to be seen. It also remains to be seen whether, like some other controversial proposals, it is ultimately dropped again if the Government perceives that it is unlikely to be able to pass the legislation through the House of Commons. 
 
A public consultation on how best to maintain service levels and data protection with a Land Registry in the private sector has also very recently closed, and so we expect the Government will be considering the responses to this before finalising the form of the legislation.  
 
Digital Economy Bill
 
The Digital Economy Bill aims to create a right for every household and business to access high speed broadband.  
 
The Queen’s Speech made clear that the Government also intends to use this Bill to introduce a new Electronic Communications Code, which governs the relationship between landowners and electronic communications providers regarding the installation and maintenance of communications equipment. This follows the very recent publication of the Government’s recent response to a public consultation on the introduction of a new Code.  
 
The new Code will:
 
  • Make major changes to the way land is valued in connection with the installation of new communications equipment, giving communications providers (both fixed and mobile) similar rights to other utility providers;
  • Remove the ability to contract out of its terms;
  • Move the dispute resolution process from the ordinary Courts to specialist tribunals; and
  • Allow communications providers fast interim access to a site in some circumstances.     
The new Code is likely to have a major impact on landowners with mobile masts or other communications infrastructure on their land.  Whilst the Code will not have retrospective effect, it is still likely to be of relevance if and when existing agreements are renewed.
 
High Speed Rail
 
The High Speed Rail (London – West Midlands) Bill has been carried over into the new Parliamentary session, having completed its passage through the House of Commons and received its second reading in the House of Lords.  The Bill will now be scrutinised by a House of Lords select committee.  
 
The final version of the Bill is likely to be of major interest to any individual or business whose property is affected by the proposed route of HS2.
 
Law of Property Bill
 
The Government announced in the Queen’s Speech that it intends to publish a new Law of Property Bill in response to the Law Commission’s 2011 report into easements and covenants.

The detail of the proposed legislation remains to be seen, but if it follows the Law Commission’s recommendations it is expected that the reforms will: 
 
  • Allow both the benefit and burden of positive obligations to be enforced by and against subsequent owners. Currently, only obligations that are restrictive in nature automatically run with the land; 
  • Simplify and clarify the rules on the acquisition of easements over time;
  • Provide more flexibility to developers to establish interconnected rights and obligations over parcels of land in larger development schemes. 
  • Expand the jurisdiction of the Lands Tribunal over the discharge and modification of easements. 
The law relating to easements and covenants is quite antiquated and complex, if not usually very high up the political agenda, and so any simplification and rationalisation of this area of the law has to be welcome.
 
Need advice or wish to talk to us?
 
If you would like to discuss any matters regarding these developments or for any other property related issue please do not hesitate to contact:
 
Senior Associate, Real Estate
Tel: 0151 600 3340
 
 

All sign together: What happens if a contract of sale is signed by one of two joint purchasers and not the other?

Wednesday 22nd June 2016

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Realty - Issue 14

So what happens if a contract of sale is signed by one of two joint purchasers and not the other?

Can it be enforced or is it invalid? The two names of the purchaser will be on the document but only one has signed. Is the one who has signed still bound by it or is the deed invalid?

In the recent case of Marlbray Ltd v Laditi and another [2016] EWCA Civ 476, the Court of Appeal held that where a husband had signed an ‘instruction memorandum’ to instruct a solicitor to act on behalf of him and his wife in relation to the purchase of an ‘aparthotel’ and had signed a contract for the grant of a long lease, although the documents had not been signed by his wife, the contract was still valid. It was irrelevant that the husband had not intended to proceed without his wife being a party to the agreement.

The Court stressed that there was no rule that said whether a contract would be valid where it was intended at the time of signing the contract that another party would be a joint purchaser. The Court of Appeal held that there was no “universal rule” and the validity of the contract would depend on the intention of the parties as ascertained on an objective basis from the factual matrix in existence at the time of the contract.

In the words of Lady Justice Gloster:

“Whether or not a valid contract has come into force as between A and B, both of whom have signed the contract, notwithstanding that contemplated party C has not signed the contract, will depend on the common intention of the parties as may be objectively ascertained from the circumstances surrounding the transaction.”

In this particular case, the husband had also paid deposits in the sum of £78,750. The couple sought to claim that the contract was invalid upon discovering that they were unable to obtain a mortgage to fund the remainder of the purchase price and following the developer having served a notice to rescind the contract and forfeit the deposit.

Thus a contract signed by one of joint purchasers alone could still satisfy the formalities of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 and the developer was entitled to retain the deposit paid by the husband.

There are a number of important lessons in this:

  1. Ensure that you are able to obtain the required funds prior to entering into a contract to purchase a property;
  2. Do not sign a contract on behalf of another - even your spouse - without clear authority;
  3. As there is no universal rule as to the validity of a contract in these circumstances, do not assume that you or your client can avoid liability under a contract where an additional party has not signed;
  4. Ensure that clients are aware that on signing a contract prior to it being signed by a joint party (or in the belief that s/he is doing so on behalf of the other party) there is a risk of the signing party incurring the entire liability alone.

 


Property VAT - sale and leaseback of care home did not trigger a VAT charge

Wednesday 22nd June 2016

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Realty - Issue 14

We look at the case of Balhousie Holdings Limited v HMRC [2016] UKFTT 0377, where the sale and leaseback to finance the acquisition of a zero-rated care home did not trigger a “change of use” VAT charge.

Background

Charities and providers of residential care homes (amongst others) can acquire newly constructed buildings without having to pay VAT provided they certify that the building will be used for a “relevant residential” or a “relevant charitable” purpose. If the conditions are satisfied the acquisition should be “zero-rated” for VAT purposes.

There may however be a 20% VAT charge if the building is subsequently sold, or its use changes, at any time within the following ten years.

The VAT charge is designed to claw back some or all of the benefit that was originally obtained from the acquisition being zero-rated. The charge diminishes over the ten year period, depending on when the sale or change of use arises, and falls on the charity/care home provider by way of a deemed self-supply.

The First-tier Tribunal decision

In order to finance the acquisition of three new care homes, the taxpayer entered into a sale and leaseback of the newly completed buildings with a third party funder. HMRC argued that the sale transaction was a stand-alone event that triggered the VAT charge described above. The taxpayer argued that the sale should not be considered in isolation, and given that it merely formed part of the wider sale and leaseback arrangement (under which the care home provider continued to occupy the buildings for the purpose of providing residential care) the VAT charge shouldn’t arise.

The First-tier Tax Tribunal agreed with the taxpayer and held that the VAT charge didn’t arise on the facts. The sale and leaseback were interdependent transactions, provided for within a single agreement, and should be viewed as a single composite transaction. As a result, the taxpayer did not “dispose of its entire interest”, and the care home continued to be occupied as such throughout. There was seen to be no sale or change of use of the building. The Tribunal ignored the fact that there was technically a fraction of a second during which the taxpayer did not have an interest in the property.

The decision is a sensible one and means that commercial sale and leaseback transactions, which are often used to finance acquisitions in preference to bank borrowing, should not trigger the VAT charge described above in relation to VAT zero-rated charitable and residential buildings.

Need advice or wish to talk to us?

If you like to discuss any property taxation matters please do not hesitate to contact our tax expert Mark Whiteside:


Mark Whiteside

Partner, Corporate
Tel: 0151 600 3269
Email: mark.whiteside@brabners.com


Housing (Wales) Act

Tuesday 8th March 2016

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Realty - Issue 13

The Housing (Wales) Act 2014 (the Act) deals with a range of subjects connected with housing and has core aims of improving the supply, quality and standard of homes in Wales.

The main area covered by the Act is the establishment of a new regime requiring the registration and licensing of private landlords and managing agents involved in residential lettings in Wales. Registration and licensing are treated as two entirely separate concepts under the Act and shall be discussed in turn. This regime came into force on 23 November 2015 and landlords have a year to comply with its obligations, failure to do so will be a criminal offence with a maximum fine of £1000.

Registration

All private sector landlords must be registered with Rent Smart Wales. For the purposes of the Act a landlord is the person who is entitled to possession of the property, which in most cases will be the owner. A landlord could therefore be a group of people where one lead owner must register on behalf of the others, or a company where the company will need to register. All properties in Wales that are let under an assured, assured shorthold or Rent Act 1977 tenancy must be included in an application for registration.

There is a positive obligation on each landlord to ensure that all details of their properties are kept up-to-date. This includes any change in name, address or contact information provided as part of registration and any change of interest that the landlord has with the property, failure to notify a change can result in a £250 fine. A landlord will have 28 days from the date of acquiring their interest in the property to notify Rent Smart. Registration will last for 5 years after which time the landlord must re-register.

Registration can be done online and will cost £33.50. There is an increased fee of £80.50 for paper applications. This figure will remain the same regardless of how many properties are being registered.

Licensing

The Act requires all those carrying on letting or property management activities to have a licence. Whether it will be for the landlord or a managing agent to obtain such a licence will depend on the nature of the work that they carry out at the rental property.

Letting activities consist of the following:

  • arranging or conducting viewings with prospective tenants;
     
  • gathering evidence for the purposes of establishing the suitability of prospective tenants;
     
  • preparing or arranging the preparation of a tenancy agreement; or
     
  • preparing or arranging the preparation of an inventory for the dwelling or condition of schedule for the dwelling.

Management activities consist of the following:

  • collecting rent;
     
  • being the principal point of contact for the tenant in relation to matters arising under the tenancy;
     
  • making arrangements with a person to carry out repairs or maintenance;
     
  • making arrangements with a tenant or occupier of the dwelling to secure access to the dwelling for any purpose;
     
  • checking the contents or condition of the dwelling, or arranging for them to be checked; or
     
  • serving a notice to terminate a tenancy.

A landlord who carries out any of the above will be considered a ‘self-letting or managing landlord’ and will require a landlord license. This will apply to landlord’s who intend to manage their own portfolio of properties and the cost is currently £144.

Any third party who contracts with a landlord to carry out any of the above duties on their behalf will need to obtain an agent’s licence. An agent’s licence will cost £3,728 if done online or £4,368 if done by paper and it will be an offence for a landlord to appoint or continue to allow a person to undertake lettings work if the landlord knows, or should know, that the person concerned does not hold a licence.

Licensing applications can be found here and must be sent to Rent Smart Wales where they shall assess whether the landlord or agent is ‘fit and proper’, usually by looking at any relevant previous convictions made against them, and that suitable training has been completed. The training is likely to be based on the current Landlord Accreditation Wales and will be provided by Rent Smart Wales, the costs involved are still to be confirmed.

It is advised for landlords to obtain a licence even if they are using a managing agent. This provides the freedom to carry out letting or property management activities including arranging for repairs and maintenance during the tenancy and checking the condition of the property at the end of the tenancy.

Exemptions

The requirement for registration and licensing will not apply for any of the following circumstances:

  • any property which is not considered to be an assured, assured shorthold or Rent Act 1977 tenancy;
     
  • where an application for registration or licensing has been made but not yet determined;
     
  • if the landlord is a social landlord or fully mutual housing association; or
     
  • if a landlord is taking steps to recover possession of the dwelling within 28 days of acquiring an interest in it.

Conclusion

It is expected that these legislative changes will seek to address a perceived imbalance between the roles of landlord and tenant. The Welsh Government will have a greater degree of control on housing and look to impose a higher standard of service on landlords. How the regulations hold up in practice will not be seen until they become compulsory after the autumn of 2016.

If you would like to discuss any of the points raised in this article about the Housing Wales Act or for any other property related matter please do not hesitate to contact either:
 
Partner
Tel: 0151 600 3396
 
 
 
 
Trainee Solicitor 
Tel: 0151 600 3145

Stamp Duty Land Tax - Holding Over: Are you failing to report? The repercussions may affect individuals too

Tuesday 8th March 2016

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Realty - Issue 13

It is now over 12 years since Stamp Duty Land Tax (SDLT) superseded Stamp Duty. While the latter was a duty payable on documents, SDLT is a self-assessed tax payable by an individual or company, and the rules can be complicated.

If a company repeatedly fails to file a tax return on time or pay any tax due, HMRC may investigate the company’s whole tax history, including tax records filed by individual members of that company – Corporation Tax, Capital Gains Tax, VAT and Income Tax.

So it is important that you get the facts right, and file on time, to avoid fixed financial penalties and penalty interest… and to avoid HMRC investigating other tax issues. 

If your Company is holding over under an SDLT lease (granted on or after 1 December 2003) there is a statutory obligation to report this to HMRC in certain circumstances, but many companies are falling foul of the rules, and failing to make additional disclosures.

If you are holding over under a SDLT lease and tax was already payable, there is strong possibility that this will be notifiable – have you filed a further return yet?

What you need to do now

  • review your property portfolio to check if you are still in occupation under any leases granted on or after 1 December 2003;
     
  • maintain a diary facility to alert you when SDLT leases will expire;
     
  • file a return if necessary – you may already be subject to late submission fixed penalties and penalty interest.

How we can help

We can review your SDLT Holding Over leases and assess whether a further return needs to be filed and submit this on your behalf.

It is worth remembering that HMRC will already hold details of the original lease, including its expiry date, and has the information available to check whether tenants are still in occupation and so holding over. 

If you would like any further information about this or to discuss how we can help you please contact: 


Karen Stanley

Conveyancing Executive
Tel: 0151 600 3325
Email: karen.stanley@brabners.com


MIPIM - International Property Event 15-18 March 2016

Tuesday 8th March 2016

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Realty - Issue 13

On 14 March Jeff Gillbanks, Chris Parkinson, Helen Brown and Iain Gamble shall be travelling to Cannes in France to represent Brabners at the annual MIPIM event.  The event gathers the most influential international property players from the office, residential, retail, healthcare, sport, logistics and industrial sectors for four days of networking, learning and transaction.
 
Diaries have been getting filled for the past few weeks to maximise opportunities whilst out there as well as supporting current clients of the firm for example Peel and Glenbrook.
 
If you would like to learn more about this year's event please visit the website www.mipim.com.
 
If you would like to discuss any property matter you may have please do not hesitate to contact Jeff or a member of our Real Estate team.
 
Partner, Real Estate
Tel: 0151 600 3364 

Break clauses in commercial leases: No implied term to apportion rent

Thursday 10th December 2015

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Realty - Issue 12

In our Realty Newsletter (Issue 12) we look at break clauses in commercial leases, with the recent Supreme Court decision of Marks and Spencer plc v BNP Paribas. We also focus on the Deregulation Act 2015 and its implications for residential landlords, plus a selection of other articles which we hope you will find of interest.

Break clauses in commercial leases: No implied term to apportion rent

The Deregulation Act 2015 - what does it mean for residential landlords?

A look at the new Smoke and Carbon Monoxide Alarm Regulations

Chancel repair liability – medieval madness continues to reign

Other articles of interest:

Protecting tenants against forfeiture for breaches of repairing covenants

Deferred Prosecution Agreements – a cost of doing business?

Shale gas planning applications to be fast-tracked


MIPIM - A look at the forthcoming property fair on 10-13 March

Monday 9th March 2015

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Realty - Issue 11

Once again, Brabners will be supporting Liverpool’s attendance at MIPIM.

We have been involved from the very early stages in discussions with Liverpool Vision, Liverpool City Council and Marketing Liverpool about Liverpool’s presence at MIPIM in 2015. With Brabners being represented on the Steering Committee, which helps design the whole programme for MIPIM 2015, we have been involved in the organisation of this year’s attendance since MIPIM last year. During this time, we have forged strong relationships with the public sector as well as many in the private sector.

There is now to be a strong and focused presence at MIPIM presenting what Liverpool has to offer as an investment opportunity.

Currently, the key sponsors who have committed to sponsor this year’s event along with us are:

  • Active Profile
  • Arup
  • Bruntwood
  • City Residential
  • Colliers
  • Countryside
  • Curtins
  • Deloitte
  • Downing
  • Falconer Chester Hall
  • Glenbrook
  • Grosvenor
  • GVA
  • Harcourt
  • Innov8
  • ISG
  • KPMG
  • Liverpool Airport
  • Liverpool BID
  • Liverpool & Sefton Chambers of Commerce
  • Peel
  • Pochin
  • Redrow

MIPIM is split into 4 key areas:

  1. Exhibition
  2. Conference
  3. Networking
  4. Events

Being part of the team of sponsors for this event we get access to all key events during MIPIM including conferences and other networking events such as a Delegation and Leadership networking event, a Regional Debate hosted by Liverpool Mayor Joe Anderson and the Chief Executive of Manchester City Council Sir Howard Bernstein and a Northern Powerhouse event with Leeds, Sheffield, Newcastle, and Liverpool Chief Executives.

Organised by Reed MIDEM, MIPIM has been a key conference, exhibition, networking and transaction event in the agendas of the world’s top real estate players since 1990 when it was launched in Cannes by Reed MIDEM with 2,973 participants and 837 companies from 22 countries. More than 20 years later, MIPIM gathers 19,400 unique participants and 6,800 companies from 83 countries. The idea being to reward the world’s most ambitious and innovative projects from the real estate industry.

It is the world’s leading property market bringing together the most influential players from all international property sectors - office, residential, retail, healthcare, sport, logistics and industrial, offering unrivalled access to the greatest number of development projects and sources of capital worldwide.

The Brabners team will comprise 3 partners from the Real Estate team, enabling us to maximise the opportunities which come from this event and building on the success of past events.

To view the full programme of conferences and events at MIPIM, please click here.

If you would more information or to discuss any property matter you may have please contact:

 

Jeff Gillbanks

Regional Head of Real Estate

Tel: 0151 600 3363 or 0161 836 8886

Email: jeff.gillbanks@brabners.com


The Scope of the Retainer

Monday 9th March 2015

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Realty - Issue 11

A solicitor is often only as good as the information or instructions provided to him or her. Two recent cases highlight the importance of ensuring that solicitors are correctly instructed and show how it is not always possible to fall back on a claim in negligence. Thus, clients need to ensure instructions are both accurate and full and should not rely on being able to fall back on a claim in negligence.

In the case of Hodgson v Richard Wilson Solicitors (formerly Richard Wilson & Co) [2015] EWHC 2015 (TCC), solicitors were instructed to act in a construction dispute. However, the solicitors were not instructed in relation to proceedings against certain third parties and the limitation period in relation to a claim against those third parties subsequently expired. The Court was asked to decide whether the solicitors retainer extended to cover a duty to advise in relation to the limitation period in the claims against third parties. The Court held that a solicitor was not under a general obligation to advise on issues outside its retainer unless it became aware of a risk or potential risk to the clients. Moreover, it was acknowledged that an inexperienced client might be owed a greater duty than an experienced business man.

In the earlier case of Rentakill Initial 1927 Plc –v- Goodman Derrick LLP [2014] EWHC 2994(Ch) Goodman Derrick LLP, a firm of solicitors, were instructed to draft a conditional contract for the sale of property.

Unfortunately, a formatting error in producing the contract later led to a dispute in relation to whether the buyers were able to walk away from the contract. The dispute was later settled and the seller sued its solicitors as a result of the defective wording. The Court was required to decide whether or not the solicitors had failed to advise the client properly.

The seller was a commercial client that would have been familiar with property documents. The solicitors had not been instructed to advise on the commercial aspects of the transaction and it was found that the sophisticated client understood the risks of a conditional contract and the importance of the conditions. The Claimant’s solicitors had not alerted it to the risks.  Indeed, the solicitors only advised by letter providing a brief summary of the contract.

In this case, as the clients were sophisticated commercial property clients, the Court decided that it was not necessary for the solicitors to undertake a “line by line analysis of the contract for the seller’s benefit”.

These recent cases are a useful reminder, of the importance of ensuring that the instructions to a solicitor are clear as the precise scope of the professional duty depends on the extent to which a client appears to need advice.  The more experienced and business savvy the client may be, the more important it is for that client to peruse and consider the terms of any legal document. 

Whilst considering the above, it is worth a reminder of the words of Mr Justice Laddie in the case of Credit Lyonnais –v- Russell Jones & Walker [2002](CWHC 1310) where he stated:-

“A solicitor(‘s) duties are defined by the terms of the agreed retainer. …. He is under no obligation to expend time and effort on issues outside the retainer”. 

It is therefore essential that a client ensures that all concerns are brought to the attention of the solicitor, otherwise, the client is unlikely to have any recourse to a claim in negligence.


Don't Let the Sun Go Down on Me or My Solar Panels

Monday 9th March 2015

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Realty - Issue 11

Renting out your rooftop for solar panels

With solar panels spreading across the rooftops of the country, leasing out a rooftop is becoming increasingly common.

It has never been so important to consider environmentally friendly and cost effective ways of powering your home and it seems as though the nation are jumping at the chance to do just that by allowing solar panel providers to use their rooftops.

Here is how it works:

A Homeowner enters into a lease with the solar panel provider who then installs the panels onto the roof and will continue to own and maintain them. The homeowners therefore avoid the cost of buying and maintaining the panels and the lease usually allows them the benefit of free power produced by the panels which could save them significant sums each year.

The solar panel providers will usually install far more panels than would be needed to power the house to which they are attached so they are able to sell any excess energy for profit to the energy companies.    

The homeowner will need to have obtained building regulations consent before the panels are installed and if there is a mortgage on the property, seek the permission of the lender. It is worth noting that some lenders are often reluctant to provide consent.

Whilst this all sounds very positive, going green whilst saving a few pounds, homeowners seem less aware about the downsides. For example, there may be penalties for terminating the lease early. There are other things to keep in mind too, like whether the homeowner should have a structural survey of the property due to the extra weight on the roof plus the fact that the homeowners may be restricted as to how often they can carry out maintenance works to the roof.  Homeowners should also remember that the solar panel providers will need regular access to maintain the panels which could prove disruptive.

The lease may also effect the saleability of the property. Opinions vary on the desirability of solar panels and this may also put off some buyers, particularly those who may struggle to get their mortgage lender’s consent to buy a house with panels already in place.

But don’t let the drawbacks mean the sun goes down on you or your solar panels. As long as you are aware of all the issues and protect yourself, there is no reason why, with a bit of forward planning, you can’t save money on your energy bills and get that green feel good factor at the same time!

If you would like more information or wish to discuss any issues you may have regarding solar panels on your property please contact:


Heather Morris
Solicitor, Property Solutions
Tel: 0151 600 3096
Email Heather


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