Category

Real Estate & Construction
•February 21, 2022•

Affordable Housing: More Crucial Than Ever

Affordable Housing: More Crucial Than Ever

With inflation at a 30 year high, pushing past 5% in the last 12 months to December 2021, rapidly rising energy costs, including Ofgem announcing that average energy prices will go up by £693 a year in April 2022, and it becoming increasingly difficult for working families to afford basics such as food and heating, affordable housing has never been more relevant or crucial.

The Times reported that Beadnell in Northumberland was “on the coolest places in the UK to move to” but due to a combination of second property ownership, holiday lets and the “staycation boom”, house prices have shot up and demand is hotter than ever. Local residents have launched a petition demanding affordable homes demanding the local County Council take urgent action to increase housing stock. In response, the Council says it has committed just under £50m over the next five year to tackle affordable housing in the area.

In Wales, house prices rose more than any other nation or region of the UK in the past 12 months, increasing on average by 14%.

In a recent report produced by Halifax, there were more than 400,000 people buying their first home in 2021, up some 35% from the previous year. Halifax also reported that the average age of first-time buyers is now 32, up from 29 a decade ago, with the average buyer needed to put down a deposit in excess of £50,000.

With these conditions making it extremely difficult for many, many people, the social housing sector will play a critical (and tremendously positive) role in their long-term futures. With reports suggesting that over one million households are currently on social housing waiting lists in England alone, there is plenty of political and social goodwill to push affordable housing to the forefront of key strategies to help many millions of people across the UK.

In short, affordable housing has never been more crucial. For information or advice on any of the topics raised, please contact our affordable housing team.

•January 14, 2022•

A Supreme Court “Leapfrog” Case Provides Clarification For RTM Estates

A Supreme Court “Leapfrog” Case Provides Clarification For RTM Estates

Key Contact: Jennifer Butcher

Author: Laura Spence

This month a landmark case has succeeded in the Supreme Court, overturning decisions in the First Tier and Upper Tribunal where it was previously dismissed because the courts found the facts to be bound by a 2012 Court of Appeal case known as Gala Unity Ltd v Ariadne Road RTM Co Ltd.

Firstport Property Services Ltd (Appellant) v Settlers Court RTM Company and others (Respondent)

Facts:

The case involved a block of flats known as Settlers Court (“the Block”), on the Virginia Quay Estate in East London (“the Estate”) held under long leaseholds. Leaseholders of the Block were entitled to acquire the right to manage the Block by virtue of the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”). Consequently, under the 2002 Act, leaseholders took over management of the Block from the existing third-party manager (“Firstport”) via a single purpose company, named Settlers Court RTM Company (“RTM Company”).

In addition to the Block, the Estate contains nine further blocks of flats which share facilities such as parking and security, known as “Estate Services”, with the Block. Under the terms of the leases, Firstport was entitled to levy charges from the leaseholders on the Estate in respect of proving the Estate Services.

A dispute arose between the RTM Company and Firstport over the extent of the RTM Company’s right to manage. The RTM Company arguing that the right to manage extended beyond the Block to include the Estate Services from which the Block benefitted, and that it should no longer have to pay its proportion of Estate Service charges to Firstport.

Firstport disputed this on the basis that it was entitled to continue to levy the Estate Charges from the Block leaseholders. They argued that the RTM Company’s right to manage did not extend beyond the Block and that Firstport alone continued to provide Estate Services to the entire Estate pursuant to their obligations under the leases of flats in all blocks and incurred the full cost of doing so.

Gala Unity Ltd v Ariadne Road RTM Co Ltd [2012] EWCA Civ 1372 (“Gala”)

The First Tier Tribunal and Upper Tribunal found against Firstport due to the decision in Gala being binding. The decision in Gala had dictated for the past 9 years that a leaseholder’s right to manage extended to facilities on an estate shared between blocks of flats despite this leaving the right to manage company and third party manager responsible to different groups of lessees for providing the same services. The view taken by the Court of Appeal in Gala was that the parties would just have to cooperate and reach an agreement as to how this worked. Unfortunately, in practice for the last 9 years this has not always worked. Instead, it has resulted in a plethora of issues where parties cannot reach agreement, such as right to manage companies and third-party managers both spending money on Estate Services, resulting in wasted costs, with neither party having the right to recover expenditure from the other. Interestingly, and historically for one of the first times, the Upper Tribunal issued a leapfrog certificate for an appeal at the Supreme Court, bypassing the Court of Appeal to determine whether the analysis in Gala was correct.

The Supreme Court found in favour of Firstport and in doing so overturned the decision in Gala:

The Supreme Court concluded that the right to manage conferred by the 2002 Act extends only to the relevant block, together with facilities used exclusively by flat owners in that block and crucially does not extend to estate services, which are shared by residents of the other blocks. The Court came to this decision for the following reasons:  

  1. The 2002 Act’s definition of ‘premises’ only includes the relevant building and physical features close to it which serve that building alone, contrary to the description provided in Gala which suggested the definition included easements shared by other occupants on the estate. Therefore, the definition of ‘premises’ in Gala was wrong.
  2. The right to manage given to a right to manage company is an exclusive right unless it chooses to agree otherwise. The Court felt like this is logical if the subject matter is limited to the block of flats whose owners set it up but makes no sense in relation to estate services.
  3. The 2002 Act specifies that the right to manage company exercising its rights must notify affected persons of a change in manager (including flat owners, landlords and third-party managers) but not the owners of the other blocks of flats in the estate. The Court felt like this would only make sense if the right only extends to the relevant block but not if it extends to the estate services.
  4. On the RTM Company’s interpretation, it would become involved in the management of Estate Services which leaseholders in other block relied upon, without there being any contractual relationship between the RTM Company and those leaseholders, meaning they could not hold the RTM Company to account and the RTM Company could not charge them for the management of the estate services. This was in sharp contrast to the relationship between the RTM Company and the flat owners of the Block who are entitled to become members of the RTM Company with a say in its affairs. The Act amends their leases so the RTM Company takes over the contractual relationship with those flat owners which the original manager had. The Court made it clear that other flat owners are entitled to have flats managed exclusively by their third-party managers provided for in their leases and the Act does not take this away or require them to be notified of any change. As the RTM Company’s interpretation was contrary to this, the Court found in favour of Firstport.
  5. Finally, and arguably most important for future reference; where there are two or more interpretations of statutory provisions the Court will lean away from interpretation which produce unworkable results. The interpretation here favoured by the RTM Company and confirmed in Gala produces unworkable results whereas the one favoured by Firstport does not. Difficulties which could come to surface include if the flat owners in each of the ten blocks formed their own right to manage company, all ten would not be able to agree/cooperate on estate services or on the recovery of charges for doing so. Accordingly, the Act provides no sharing mechanism in default of agreement thus the interpretation is unworkable.

The outcome is significant as it has overturned the leading authority that a right to manage company acquires the rights to manage a wider estate at the same time as acquiring the rights to manage the ‘block’. Since Gala, leaseholders have been unsure what the right to manage includes, or often put off acquiring the right to manage due to the potential of this including management of parts of the wider estate. The Supreme Court’s decision will provide welcomed clarity as to the extent of the parties’ responsibilities and reinstall confidence in leaseholders’ ability to acquire the right to manage. It is also anticipated to result in a significant reduction in the number of Tribunal cases such as those seen in recent years, which have considered this question.

If you have any questions in relation to the issues raised, please contact Jennifer Butcher.

•April 19, 2021•

Annual Tax on Enveloped Dwellings (ATED): An Overview

Annual Tax on Enveloped Dwellings (ATED): An Overview

Key Contacts: Gareth Baker & Ben Honour

Author: Emma Hutchings

What is ATED?

When purchasing and holding a residential property or when purchasing a company that owns residential property (whether for development or investment purposes) non-natural persons (NNPs) such as companies need to consider the potential ATED payable. ATED is an annual tax payable by NNPs (whether that NNP is based in the United Kingdom or not) that own residential dwellings in the United Kingdom with an individual property value of more than £500,000. For the purposes of deciding whether a property is a ‘dwelling’, the government guidance states that the property will be a dwelling if all or part of it is used, or could be used, as a residence and this will include any gardens, buildings or grounds within the property.  Properties such as hotels, hospitals, and student halls of residence are not classed as dwellings for ATED purposes.

ATED payable

If ATED is payable the amount payable is decided by using a banding system based on the value of the property. The following bands apply for the period 1 April 2021 to 31 March 2022:

Property ValueAnnual Amount Payable
More than £500,000 but not more than £1m£3,700
More than £1m but not more than £2m£7,500
More than £2m but not more than £5m£25,300
More than £5m but not more than £10m£59,100
More than £10m but not more than £20m£118,600
More than £20m£237,400

Reliefs and Exemptions

ATED will apply to NNPs that own residential properties unless the NNP is able to claim a relief. There are a number of reliefs available which reduce the ATED payable to nil and in order to claim the relief an ATED relief return will need to be submitted to HMRC by the relevant due date. The NNP may be able to claim a relief if the property is:

  1. let on a commercial basis to a third party and the property is not occupied by anyone connected to the NNP;
  2. being redeveloped for resale or held as stock for resale by a property developer;
  3. open to the public for no less than 28 days a year;
  4. repossessed by a financial institution;
  5. farmhouse being occupied by working farmers;
  6. being acquired under a regulated home reversion plan;
  7. held by a trading business for the use of employees as accommodation in the trade;
  8. owner by a registered provider of social housing.

Charities, certain public bodies and bodies established for National Purposes are exempt from ATED and will not need to submit a return or claim a relief.

Filing ATED Returns and additional considerations

If an NNP is purchasing a residential property that will trigger an ATED liability, a return will need to be filed with HMRC within 30 days of completion with subsequent returns being filed with HMRC between 1 April and 30 April in any chargeable period for the period the property is held by the NNP. Penalties for late filling and late payment of ATED also apply. 

In addition to paying ATED  companies will need to consider the amount of Stamp Duty Land Tax/ Land Transaction Tax that will become payable on the purchase of the property and the Capital Gains Tax payable on the disposal of any property.

A buyer (whether an individual or NNP) should also consider the ATED position when purchasing a company that owns a residential property valued at more than £500,000. The buyer should ensure that payment of any ATED due for the period prior to completion is paid prior to completion of the acquisition or is apportioned accordingly and the buyer should obtain advice on its ongoing ATED liability following completion of the acquisition.

How can Acuity Law help?

ATED is a complex tax area and we have a range of experts here to guide you through the ATED process.  If you would like further advice or guidance on the risks associated with ATED or your ATED obligations when purchasing a residential property or purchasing a company that owns residential property (including whether any reliefs are available) please contact our Real Estate team for assistance.

•March 30, 2021•

THE COST OF “SAVING” YOUR LOCAL PUB

THE COST OF “SAVING” YOUR LOCAL PUB

Disaster Capitalism: Part-funded by the taxpayer and possibly happening even now in your local community

Author: Jim Ryan

“Disaster capitalism” is an ugly phrase.  I have heard it recently described (accurately) as “vulture culture”.  For example, it conjures up images of predatory speculators making huge profits from betting against the value of a currency when the value falls because of some natural or economic disaster. But on a far smaller scale, vulture culture is merely an example of those people who profit from somebody else’s misfortune.

How is this relevant to a community trying to save its local pub from becoming yet another pub closure statistic?[1]

Well, it may not be relevant at all.  Some pubs can and do transition successfully from independent ownership to community ownership, but in other cases the owners of small independent pubs who live on the premises, become the victims not only of diminishing trade and a lack of space to expand and improve the business, but also of the sense of entitlement of the community which now wants to buy it.  There are examples where the community has not supported the pub with sufficient custom over the years, which of course depresses the value of the business as a going concern.  And any costs of necessary improvements or renovations will further erode the value.

You may think the answer is simple.  After all, if the premises are also the owners’ home, surely they can just close the doors, sell off any remaining stock and equipment, surrender the licence and, well, go on living there?  Having served the local community as publicans, perhaps for many years, one might expect that the local community would accept their decision to retire and let them do so gracefully.

The community had even signified their support for their beloved local pub by having it listed a year or two ago as an “Asset of Community Value[2]” (“ACV”).  But, after making enquiries to the local Council, it seems that the change of use of the property from a pub to a house is something called a “material change of use[3]” which needs planning permission.

Why is that a problem? 

The local Council will surely understand the circumstances and grant planning permission for the pub’s owners to continue living in the home they have lived in for many years?  The pub is not viable, and in fact the owners have been investing their own funds in keeping it open for quite a few years now.  But some local Councils take the view that because the property is now an ACV, and as there is a community group which wants to buy it (albeit at a knockdown price because of the costs of renovations and improvements and the significantly reduced trade), the Council will refuse planning permission for the material change of use to a home.

The owners will have to be very lucky indeed to be able to sell the property (whether to a local community group or on the open market) at a price sufficient to be able to buy even a very modest flat or maisonette, let alone a house, as a replacement home.  A shameful reward for years of service provided to the local community; the very same community which has now embraced vulture culture.

Bizarrely, the community values the asset, but not the owners, the principal people who created that very valued community asset.

In his Budget on 3rd March 2021, the Chancellor announced a new £150M Community Ownership Fund, to allow community groups to bid for up to £250k of matched funding to acquire ACVs.  The interests of the owners are again ignored.

If you have been affected by any of the issues raised in this article, please contact Acuity Partner,

Jim Ryan

+44 (0)7539 865 192

james.ryan@acuitylaw.com

[1] Altus Group (www.altusgroup.com) an expert service organisation for the commercial real estate industry, reported in July 2019 that around 40 pubs a month (235 in total) closed their doors for good in the first half of 2019.  The rate of closures was reported as slowing.  Subsequently, the hospitality industry has been very hard hit by the pandemic in 2020 and beyond.

[2] ACVs were created under the Localism Act 2011 and mean that if the owners decide to sell the listed property, a 6-month moratorium will delay the sale to allow the community an opportunity to raise the funds to bid for the property.  The owners have no obligation to sell to the community, even if the community successfully raises sufficient funds to make the highest bid.

[3] Under section 55 of the Town and Country Planning Act 1990, as amended.

•December 1, 2020•

Repair obligations and the removal of asbestos

Repair obligations and the removal of asbestos

Key Contact: Damien Cann

Author: Ffion Morgan

Repair obligations and the removal of asbestos The case of Pullman Foods Ltd v The Welsh Ministers and another [2020] EWHC 2521 (TCC) (23 September 2020) (HHJ Keyser QC), highlights the importance of understanding and reviewing repairing obligations in a lease especially where asbestos is present. This case is a useful reminder to tenants of the extent of their potential liability at the end of the term of their lease.

Background

The Welsh Ministers (the Landlord), served a section 25 notice on Pullman Foods Ltd (the Tenant) under the Landlord and Tenant Act 1954 (LTA) to oppose the grant of a new tenancy. Following this, the Tenant, relying on section 37 of the LTA, claimed compensation. In response, in a counterclaim against the Tenant, the Landlord argued breach of covenant. The Landlord argued that whilst the Tenant vacated the site in February 2015, it failed to comply with the yielding up covenant in the lease which required them to deliver up the site in ‘good and substantial repair and condition’ to the satisfaction of the Landlord.

The Landlord also argued that BFS Group Limited, the Tenant’s parent company (the Company), had breached the terms of their licences. The Landlord granted the Company two successive licences to enter the site and remove any building remains and constituents containing asbestos-containing material after the end of the term (ACM). Due to the failures of both the Tenant and the Company, the Landlord was required to conduct extensive remediation works at significant expense.

Breach of covenant

It is a legal requirement for both landlords and tenants to manage asbestos risk in non-domestic properties. In this case, the court said that at the end of the term, the Tenant’s failure to remove buildings at the site which contained ACM constituted a breach of covenant. The court said that the presence of ACM at the end of the term indicated that the site was in a ‘damaged’ or ‘deteriorated’ condition and therefore the Tenant did not satisfy the repairing obligations in the lease. In particular, the use of the word ‘condition’ in the yield up clause suggested that the Tenant’s obligation extended beyond strict repair. The court said that asbestos was brought onto the site after the commencement of the lease and as such, the obligation in relation to it and subsequently the removal of it rested with the Tenant. Interestingly, the High Court also held that the removal of asbestos was reasonably required for compliance with the covenant even if the asbestos had been present before the grant of the lease (which was not the case here).

Breach of the licences

Although there was no express obligation for the Company to comply with the covenant in the lease, insofar as liability also extended to the Company, the court said that as a result of the licences being granted, they also owed a duty to the Landlord to remove the ACM. Furthermore, the court had probable cause to believe that the work undertaken during the licence period was in fact, the major cause of contamination. The Company also failed to disclose to the Landlord the potential for further ACMs to be located at the site after these works had been conducted.

The High Court decision

The High Court ruled that the costs of remediation had been reasonably incurred. The Landlord recovered the full cost of remediation works from the Company. The High Court held that the Company was liable to the Landlord for the full costs of remediation to the site and additionally the Tenant was liable to the Landlord in damages for breach of the yield up covenant.

Key points

As demonstrated by this case, the implications of failing to comply with lease repairing obligations are potentially devastating. It is important to bear in mind that a repairing obligation may have been extended to either require the Tenant to put the property into a better state of condition than it was in before or to keep the property safe and fit for purpose. Tenants should be alert to onerous repairing obligations in yield up covenants from the outset.

In this case, it has been noted that even if the asbestos had been present before the grant of the lease, the obligation to comply with the yield up covenant would still apply. Prospective tenants should undertake environmental due diligence which includes a ‘suitable and sufficient’ assessment to ascertain the presence of any hazardous substances or contamination before entering into a lease. Where such due diligence is not possible at a proportionate cost the tenant should seek to exclude their liability for such matters through negotiation.

For more insights on the implications of failing to comply with lease repairing obligations, get in touch with Acuity’s Real Estate & Construction Team.

•October 7, 2020•

“Restart, reset, reinvent”: The Future of Off-Site Construction

“Restart, reset, reinvent”: The Future of Off-Site Construction

Key Contact: James Williams

Author: Harriet Kennerley

In a flagship speech delivered this summer, UK Prime Minister Boris Johnson described his approach to reviving the country’s post-Covid-19 economy as one of “build, build, build” –  putting construction and new infrastructure at the heart of the government’s growth strategy. It was telling that Johnson delivered his speech in front of a “modular home” – a house manufactured in controlled factory environment using a production line system.

Such dwellings are likely to be a significant part of the UK’s built environment in the years ahead, as decision-makers show an increased enthusiasm for a sector which goes by a number of names – including off-site construction and Modern Methods of Construction (MMC).

In a recent speech, Julie James, Minister for Housing and Local Government in Wales, said the Welsh Government wants housebuilders to “consider complementing traditional construction methods with new technologies and processes for housebuilding”.

“Off-site manufacturing producers based in Wales have capacity and an appetite to manufacture homes,” she added.

Why off-site is on the march

Modular homes are manufactured and then are taken on-site, which their enthusiasts say uses significantly less time and labour compared to traditional onsite construction. Potentially delivering homes in a matter of days, not weeks, means less noise, less fuel, less traffic, reduced disturbance to surrounding communities and improvements for health and safety. In any effort to, in the PM’s words, “build greener and build faster”, the ability to manufacture homes 50% quicker than conventional methods allow is a one of the key upsides to offside construction.  The benefits of MMC were demonstrated earlier this year by the delivery of 2,400 beds in two field hospitals in the Covid-19-hit Chinese city of Wuhan in just 12 days.

However, there remain underlying reservations about this construction method which cause concerns for buyers, developers and financial providers when considering investing in property built using MMC.

Challenges facing off-site construction

Physical drawbacks

The nature of off-site construction means the more uniform and repetitive the products and spaces can be, the better. This is less of an issue for apartment buildings and offices, but more of a downside when asked to create distinct or non-repetitive homes, potentially defeating the time and cost advantages for buyers and suppliers in some circumstances. A greater number of complex decisions are needed up front in the process, as it requires architects, engineers and contractors to be familiar with the modular fabrication stages. This front-loaded design process forces buyers and owners to make final selections on appliances and finishes well before the work even begins, meaning a relative lack of flexibility from the outset.

Transportation risks

Factories manufacture modular buildings potentially hundreds of miles away from where they need to be pieced together; transportation and rigging companies spend significant time and effort identifying suitable roads and planning the logistics of moving the modules to where they need to be. Contracts need bespoke provisions setting out obligations to adequately pack and load modules and to allow for insurance covering transportation issues and off-site storage.

Securing finance

Many funders have previously been hesitant about providing finance for modular construction projects. The funder is lending against elements of development which are being built off-site and away from the property which is where they have their security. There is the added risk that a developer will want to know that the homes they are providing funding for will be eligible for a mortgage which is difficult concern to square when a development is being worked on piece-by-piece in a factory with all of the previously discussed risks to be considered.

Quality concerns

A key criticism of some modular components is that elements built off-site fail to meet the quality standards expected of traditional on-site methods, with many developers still thinking that modular buildings do not look as “solid” or well-designed as traditionally built structures. However, NHBC, the firm which issues insurance and warranties for thousands of new homes across the UK each year has recently announced new accreditation processes designed with “innovative construction” in mind. The firm highlighted the importance of a strict assessment from factory to home, in an attempt to combat quality concerns and make more innovative ways of construction more appealing.

Taken together, efforts to tackle such obstacles should help to build confidence in innovative construction methods. When the design of off-site components follows established principles and quality measures are put in place alongside consistent and robust reviewal processes, the benefits of off-site manufacture should be obvious, and many existing anxieties can be settled.

Members of Acuity Law’s construction team will be publishing a series of articles over the coming months which will focus on the development of MMC and off-site construction, tackling some of the key concerns and proposed solutions highlighted in this article, alongside more intricate areas of this future-focused approach to construction. To speak with a member of our team regarding any of the issues raised, please contact our construction team.

•June 5, 2020•

Craning Their Necks

Craning Their Necks

Key Contact: James Williams

Author: Mark Summers

Construction’s leaders turn their sights to the post COVID-19 recovery

This week the Construction Leadership Council (CLC) – a high-profile organisation which brings together contractors, clients, academics and other key stakeholders in the industry – published its “Roadmap to Recovery”; a detailed set of proposals to guide the sector back to robust performance.

In its pitch to a government likely to be inundated with competing requests for financial assistance in the coming months, the CLC states: “Construction is uniquely placed to drive the national economic recovery”.

While the woes of the automotive and aviation industries have garnered more headlines in recent weeks, the CLC is at pains to point out that the economic output of the construction sector is nearly four times that of those two industries combined.

By the CLC’s count, the sector employs 3.1 million people across 405,000 firms in the UK, including 2.3 million people who work in contracting. Nearly a million construction businesses operate as sole traders, while around 41 per cent of workers in the sector are self-employed.

That’s a profile which has left the industry badly exposed to the current crisis – a raft of site closures followed the UK government’s initial lockdown and social distancing measures will complicate efforts to get back to full speed. The CLC highlighted the results of a survey taken in April in which nearly half of the 4,500 construction firms surveyed reported they had scaled back their activity by at least 80 per cent.

The Road to Recovery

Recovery from such a precipitous fall in output will be “gradual”, the industry body admits, estimating it will take two years for the sector to fully regain its previous level, with most of this revival taking place in 2021.

But the CLC’s roadmap is mindful that the first steps can’t wait until then – and with 93 per cent of infrastructure and construction sites in England and Wales now open, according to statistics compiled by industry body Build UK, the sector’s leaders are making their case for construction to be the engine of the economic recovery.

Contractors received praise for the speed in which they assembled the temporary Nightingale hospitals as virus transmission rates reached their peak – and now the CLC is making the case for the construction sector to be at the vanguard of government-led efforts to revive the economy, citing its “fast cashflow” and beneficial interactions with “local supply-chains”.

But the CLC have also allowed themselves to look beyond the pressing demands of the current crisis and their roadmap calls for a radical overhaul of the construction industry – one that will prioritise reducing its carbon footprint, increasing the utilisation of digital technologies and “delivering better, safer buildings”.

3 Steps to Heaven

The 2-year roadmap is divided into three sections.

The first – “Restart” – governs the next three months and calls for the industry to “restart work on the broadest basis”. Among the measures the CLC considers crucial to creating the “critical mass” it says is needed to get the construction sector back on its feet are the provision of “effective guidance on the safe operation of construction sites” and “training for workers on implementing safe procedures”; the use of test, track and trace services for construction workers; the expediting of the design and planning stages of public sector projects and swift clarity from the private sector on their likely project pipeline in the months and years ahead.

The CLC are also advocating for the government and local authorities to allow developers and contractors to “extend working hours on sites where reasonable to do so”.

The second stage of the plan – “Reset”- sets out the priorities for the industry for the nine months after the conclusion of the 3-month Restart phase. Chief among these is the call for a substantial government intervention to stimulate demand across a wide range of construction areas, to include “road, rail, flood defences, utilities, education, healthcare, housing (new build and maintenance), justice, security and defence”.

The CLC are also calling for a 12-month delay in the introduction of a new VAT regime for the industry – the so-called Reverse Charge VAT system – until October 2021. The industry would be helped by the authorities considering “flexibility around Apprenticeship Levy contributions”, which many firms are currently obliged to make. The body are also asking the government to accelerate the cladding remediation programme it initiated following the Grenfell Tower tragedy, saying this could create a “pipeline of early work” for some firms.

The final stage of the roadmap is named “Reinvent” and has been designed to govern the second year of the CLC’s two-year plan. With the industry expected to be back on its feet in a year’s time, it is at this stage its key stakeholders should be trying to create a more sustainable future, the organisation says.

That means the greater use of “offsite manufacturing in the delivery of homes and commercial construction projects”;  the embedding of net zero carbon 2030-2050 targets in new infrastructure and housing developments; creating more streamlined and digital planning and building control services and increasing the construction industry’s exports overseas.  

It’s a challenging workload for an industry dealing with unprecedented circumstances – but the CLC warns there is no time to waste.

“Failure to act,” it says “risks the industry lapsing into a longer term recession, which erodes capability and skills, and leaves a smaller, weaker sector as a legacy.”

For more information on any of the topics raised, please get in touch with our Construction Team.

•May 5, 2020•

Land Registry Updates

Land Registry Updates

Key Contact: Steve Morris

Author: Abby Stephens

In response to COVID-19, the Land Registry announced last Friday 1st May 2020 that it would introduce temporary changes, with effect from 4th May 2020, to make it easier to verify a person’s identity and sign deeds for land registration purposes.

Identity verification

‘Practice Guide 67A: temporary changes to HM Land Registry’s evidence of identity requirements’, is to be read in conjunction with ‘Practice Guide 67: evidence of identity: conveyancers’ and in addition to conveyancers and chartered legal executives, people who work in other professions can now also verify identity, for example, teachers, dentists, accountants and police officers. The full list of professions can be read within the practice guide here.

Following the temporary closure of HM Land Registry’s customer information centres and the closure of conveyancing organisations’ offices, the Land Registry will accept applications by non-conveyancer customers (e.g. citizens), where their identity has been verified by someone who is not a conveyancer. However, to reduce the risk of fraud, only people who work in the professions (or worked in one of these professions before retiring) in the full list, which will be kept under review, can verify a person’s identity. The person verifying the identity and the person whose identity is being verified must not be related to each other in any way.

Verification of a person’s identity can also be done via video call, subject to certain conditions. Except where verification is being done by a conveyancer, the following conditions must be satisfied:

  • the person whose identity is to be verified and the verifier must both hold a current valid UK full passport;
  • they must have known each other for at least one year;
  • they must both provide a copy of the personal details page of their passport; and
  • a screenshot photograph taken during the video call showing the faces of both people must be provided.

Where verification is by one of the authorised professions, a screenshot photograph must be captured of the video call while it is taking place that shows both the person whose identity is being verified and the verifier. A printed copy of that photograph must be submitted along with the form ID3 (for private individuals) or ID4 (for corporate bodies). The photograph can be taken by either person. It must be in colour and show the faces of both people looking straight at the camera and each face must be sufficiently clear to enable a comparison with the photograph on the copy of the personal details page of the passports.

Signing deeds

HM Land Registry will also, until further notice, accept deeds that have been signed using the ‘Mercury PDF’ signing approach for the purposes of registration of a transfer or other dispositionary deed. This will require the signature page to be signed in pen and witnessed in person (not via video call). Each party will then send a single email to their conveyancer (who will need to agree to this before the process starts), with the final agreed version of the document and a scanned or photographed copy of the signed signature page. Details of the full steps can be found in the updated version of ‘Practice guide 8: execution of deeds’, which can also be found here.

The combining of the transfer (or other dispositionary deeds) and signature pages may be done either by them being (i) electronically combined or (ii) printed out and then physically combined and the conveyancer must certify the resulting transfer as a true copy of the original in the usual way.

If you have any questions in relation to these changes, please contact Stephen Morris in our Real Estate team.

•May 5, 2020•

The Future of Real Estate

The Future of Real Estate

Key Contact: Damien Cann

Author: Charlotte Whitehead

The impact of the COVID-19 pandemic on commercial real estate in the UK has been dramatic.  Shops, pubs and offices alike have been forced to close for an indefinite period interrupting the income stream that sustains this investment class.  Amidst the multiple failures there will be opportunities for those with cash reserves and bright ideas.

Businesses such as Laura Ashley, Debenhams, Oasis and Cath Kidston, among others, have entered administration as a result of challenging trading conditions, exacerbated by COVID-19. The Government has suspended commercial landlords’ remedies for pursuing rent arrears against tenants who won’t or can’t pay to protect business.  In truth such steps were rarely going to be an appropriate strategy as the promise of delayed or reduced rent is likely to be preferable to a lengthy void period where banking covenants need to be met.   

Collaboration really does seem to be the best way through the crisis to rebalance the interests of landlords, tenants and funders albeit shifted in favour of tenants more than ever before. Savvy tenants will take advantage of the surfeit of unlet premises to negotiate lower rent payments. Prudent landlords will seek a relaxation of banking covenants breached by mounting rent arrears.  Enlightened funders are unlikely to conclude that enforcing their security against viable businesses is the most effective long-term strategy.

Crisis brings change and it seem likely that the current pandemic will be the catalyst for a comprehensive reform of business rates when the emergency rates relief available to retail and leisure businesses expires. It also seems inevitable that now, cybercrime aside, the robustness of remote working has been demonstrated, office tenants will consider alternative workplace arrangements, such as serviced offices, which can provide greater flexibility for businesses and reduce fixed costs in the new normal.

As we emerge from the lockdown we expect to see high investment transaction volumes with increased voids likely to depress values and bring many distressed sites onto the market at attractive prices. It seems inevitable that town centre retail space will be repurposed for office or residential accommodation as the crisis accelerates the decline of the high street.  It is hoped that residential conversions will respect the space standards that have been ignored when exploiting permitted development rights in recent years.   

The striking images of empty city centres present a blank canvas.  We may well look back on the pandemic as the moment the long called for transformation of the urban landscape to create more enjoyable public spaces began.  The rate and extent of that change will be contingent on the rate of economic recovery.

If you have any questions in relation to the Real Estate market, please contact Damien Cann or Charlotte Whitehead in our Real Estate team.

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•April 24, 2020•

COVID- 19 Update: Landlord and Tenant

COVID- 19 Update: Landlord and Tenant

Key Contacts: Hugh Hitchcock & Gareth Baker

Authors: William Rees & Charlotte Whitehead

In response to the Coronavirus pandemic, the legislative landscape continues to evolve at a rapid pace to the emerging issues facing businesses.

The Coronavirus Act 2020 (the “Act”) which came into force at the end of March, introduced provisions in S82 preventing landlords from using the remedy of forfeiture against their tenants for non – payment of rent during the current quarter.

Importantly, the scope of S82 of the Act left other remedies available landlords to exert pressure on their tenants to pay. These remedies include: winding up proceedings, applying for a county court judgment against the tenant, and the Commercial Rent Arrears Recovery (CRAR) regime, which, when utilised, allows the Landlord to take control of the premises and sell property belonging to the tenant in satisfaction of an outstanding debt.

However, business secretary Alok Sharma announced yesterday that further measures are now imminent. These measures include:

  • statutory demands and winding up petitions issued to commercial tenants to be temporarily voided where a company cannot pay their bills due to coronavirus; and
  • prevention of landlords using CRAR unless 90 days or more of unpaid rent is owed.

The new measures are due to be set out in the Corporate Insolvency and Governance Bill, which will supplement the Act.

Guidance on the implementation on the above measures sets out that “The law will not permit petitions to be presented, or winding-up orders made, where the company’s inability to pay is the result of COVID-19”. The causal link between COVID-19 and non -payment appears to be a very low threshold for a non – paying tenant to satisfy. As yet, the guidance remains vague and consequently application of the new measure could be the subject of litigation.

The government announcement further set out that landlords and investors will be asked to work collaboratively with high street businesses unable to pay their bills during COVID-19 pandemic.

The above represents a somewhat bleak picture for landlords during this period who of course have their own outgoings to meet. Whilst the legislation  urges tenants to ”pay what they can” in practical terms from some of our landlord clients own experiences ‎many tenants are already treating the moratorium in an aggressive and opportunistic manner and will claim this new legislation will hugely exacerbate that. It also creates an unfair playing field and removes any incentive or leverage to agree fair and sensible interim payment arrangements.  In what may be some consolation, the Government’s announcement referenced above reports that The FCA, FRC, and PRA bodies have intervened and issued a statement encouraging landlords’ backers such as investors and lenders to take into account the issues arising directly from the COVID-19 pandemic in responding to potential breaches of covenants by landlords. Whether or not landlords also get some protection in law remains to be seen.

If you have any questions in relation to impact of the Coronavirus Act or the Corporate Insolvency and Governance Bill on the property market, please contact Gareth Baker in our Real Estate Team or Hugh Hitchcock in our Dispute Resolution Team.

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