Clarke and Son News

In the present economic environment, many tenants will be seeking to vacate premises, reduce the size of their premises or renegotiate their leases, so times are tough for landlords.  Furthermore, tenants who were ‘good tenants’ or who seemed financially strong may now be a less attractive proposition than they once were.

Here are some tips for landlords to help deal with tenants when a break clause in a lease is booming:

• Be ready. Do your research on your tenant and try to anticipate their stance. Get up-to-date accounts and look at their operation.  A short visit can often be very illuminating;
• Be ready to remarket your property if negotiations with your tenant break down or they wish to terminate. Put together a pack containing all the necessary planning consents, searches and so on, so a prospective new tenant is in possession of all the information they need to make a decision straight away;
• Make sure you know when and how notices must be issued. The notice you receive from your tenant may not be valid;
• If your tenant wishes to renegotiate their lease, make sure you know your market and can ascertain what their options might be.  Also, consider asking for better security; and
• If you think the tenant is likely to default, remember that your right to repossession of the property may be delayed unless you act first.

Says Charles Marchant-White,

Landlords need to take great care and do their research thoroughly in order to minimise their risks. We can help you control your risks in all property matters.

For more information on Commercial Property, contact Charles Marchant-White on Tel: 01256 320 555.

For the year 2010/11, empty commercial properties with rateable values of up to £18,000 will be exempt from business rates.

The Rating (Empty Properties) Act 2007 (REPA 2007) removed business rates relief for most unoccupied properties with effect from 1 April 2008.  REPA 2007 was widely criticised by the property industry as an additional strain on businesses in a time of economic difficulty.

In response to this criticism, the 2008 Pre-Budget Report announced that empty properties with rateable values of up to £15,000 would be exempt from business rates for the year 2009/10.  The exemption was implemented with effect from 1 April 2009.

This resulted in an estimated 70% of empty commercial properties being exempt from paying business rates.

The 2009 Pre-Budget Review announced that the temporary increase in the threshold for empty property relief will be extended for a further year and the threshold increased to £18,000.  This higher threshold reflects the effects of the 2010 business rates revaluation. The Non-Domestic Rating (Unoccupied Property) (England) (Amendment) Regulations 2010 (2010 regulations) have been passed to bring these changes into effect on 1 April 2010.

However, despite pressure from the property industry, the Government continues to assert that, in the long term, it is right to charge rates when properties stand empty. A rating charge encourages owners to re-let and reuse empty property, and owners of empty properties should not expect subsidy. 

Consequently the 2010 regulations provide that the threshold will reduce to £2,600 for financial years beginning on and after 1 April 2011.

For more information on Commercial Property, contact Charles Marchant-White on Tel: 01256 320 555.

The Health and Safety Executive (HSE) has published Asbestos: The Survey Guide, which provides guidance on asbestos surveys and includes information on the dutyholder’s use of survey information.

The guidance has been prepared to help those responsible for managing the risks from asbestos best protect those workers who may disturb it.  It will:

• Help people who carry out asbestos surveys and those with specific responsibilities for managing the risks from asbestos in non-domestic premises under regulation 4 of the Control of Asbestos Regulations 2006 (CAR 2006).
• Provide guidance in situations where surveys may be carried out for other purposes, for example for managing asbestos in domestic premises under wider health and safety legislation and for meeting the requirements of the Construction (Design and Management) Regulations 2007 (CDM).

The guidance is aimed at those who commission asbestos surveys, the surveyors who carry them out and those who use the surveys, such as architects and demolition or removal contractors.

For more information, please contact Charles Marchant-White on Tel: 01256 320 555.

In Fidler V Secretary of State for Communities and Local Government [2010] EWHC 143 (Admin), a landowner built a house without obtaining planning permission and concealed it behind bales of straw covered with tarpaulin.  After four years, the landowner removed the straw bales and the tarpaulin to reveal the house.  Within a year of the bales being removed, the local planning authority issued an enforcement notice requiring the landowner to demolish the house.

The landowner claimed that the property was immune from planning enforcement action because more than four years had passed since the building operations were substantially completed.

The High Court held that the erection and removal of the bales and tarpaulin were not building operations in their own right.  However, the landowner had always intended to remove the bales and tarpaulin so, as a matter of fact and degree, their removal was part of the building operations when the totality of the operations as originally contemplated and intended was considered. The property was not immune from planning enforcement action.

At first glance, the decision that taking down a wall of straw bales amounts to building operations appears to be surprising. However, it is a good illustration of the holistic approach take by the House of Lords in Sage v Secretary of State for the Environment, Transport and the Regions [2003] UKHL 22 and makes it clear that the meaning of “building operations” for the purposes of section 171B of the Town and Country Planning Act 1990 (TCPA 1990) is wider than the definition set out in section 55 of the TCPA 1990.

For advice and assistance relating to developments please contact Charles Marchant-White or Chris Lockley on Tel: 01256 320 555.

The Department for Communities and Local Government has published special lease templates for landlords with empty commercial properties who are worried about empty property rates, the threat of illegal squatters as well as the security/insurance costs associated with owning an empty property.  These have been called ‘Meanwhile Use leases’.

 The leases are intended to encourage the temporary occupation of empty town centre shops by occupiers who can contribute to the viability and vitality of town centres but who would otherwise be unable to afford normal commercial rents.

The intention is that occupiers, such as local voluntary or charitable groups, information centres, artists and musicians, will be able to use a vacant property temporarily and rent free for a non-commercial purpose, while the landlord looks for a permanent new tenant.

The British Property Federation has supported the initiative as a way of trying to revive activity on high streets and make it easier to find new uses for vacant premises.

 Commercial Property Partner Charles Marchant- White says:

“Meanwhile use leases should give landlords an opportunity to reduce their property costs, avoid empty property rates, ensure that the building is maintained whilst also having the legal assurance of getting the property back quickly once they can let it commercially again. They appear to be a simple temporary option worthy of consideration to achieve real practical and financial benefits.”

For more information on Commercial Property issues, contact Charles Marchant-White on Tel: 01256 320 555.

The recent introduction of Energy Performance Certificates for all Commercial Properties being sold or rented from last October has led to a wave of providers to offer services at knock down prices, whilst not necessarily providing a legally valid certificate.  Please see the attached article for more information on how you can ensure your EPC provider is providing you with a valid certificate.

For more information on EPCs for Commercial Properties, please contact Charles Marchant-White on Tel: 01256 320 555.

is-your-epc-valid.pdf

With effect from 1 April 2009, landlords and employers should check that anyone carrying out work on gas appliances or flues is registered under the new Gas Safe Register. CORGI registration will no longer carry any statutory force. There is no grace period.

In the commercial sector, failure to check that an installer is registered under the Gas Safe Scheme may mean a breach of the Building Regulations 2000 and Regulation 3 of the Gas Safety (Installation and Use) Regulations 1998.

In the residential sector, as well as a breach of the Building Regulations 2000, residential landlords (including those in the social housing sector) will breach Regulation 36 of the Gas Safety (Installation and Use) Regulations 1998 if their regular gas appliance checks are carried out by a person who is not registered on the Gas Safe Register.

This change in the regulatory regime will not only be of importance to Employers but also Landlords, Tenants as well as their agents, advisors and property managers.

If you would like advice on renting out a residential property, please contact Paul Cowdery on Tel: 01256 320 555.

If you would like advice on renting out commercial property, please contact Charles Marchant-White on Tel: 01256 320 555.

The House of Lords has reversed an earlier Court of Appeal decision that forced Solicitors, and possibly Commercial Agents, from having to serve potential default notices on tenants, and even guarantors and former tenants, in order to protect a Landlord where there was an outstanding rent review just in case a situation arose whereby arrears arose and it became necessary to commence proceedings for recovery as, without service of a notice within six months of sums ‘becoming due’ recovery would fail. So tenants were receiving notices even for ‘nil’ amounts just to protect Landlords in such situations and this will now no longer be necessary.

Below is a summary of the points that arose and the decision of the House of Lords:

• In Scottish & Newcastle plc v Raguz [2008] UKHL 65 the Lords held that, for the purposes of recovering sums from former tenants, the date that the additional rent under a rent review clause “becomes due” is the date when the increase has been agreed or determined, not the ‘Rent Review Date’ in the lease to which payment will be backdated.

• The opposite conclusion reached by the Court of Appeal meant that where a rent review had not been determined by the relevant rent review date, a landlord had, as a precautionary measure, to serve a section 17 notice on former tenant(s) (and any guarantors of those tenants) who remained liable for the payment of fixed charges. The notice had to be served within six months of each rent payment date until the rent review had been determined.

• The House of Lords considered that it was hard to attribute to Parliament the intention that landlords had to serve a section 17 notice within six months after every rent payment date specifying the amount due as “nil” if they wanted to preserve their rights against former tenants pending a rent review. In this case, the original tenant was legally bound to pay the sums demanded to the landlord and the original tenant was entitled to reclaim the amount from its assignee under the implied indemnity given under section 24 of the Land Registration Act 1925.

Landlords will be hugely relieved by this decision. The need to give precautionary notices to former tenants, even where there was no default by the current tenant, was administratively burdensome and imposed an unwelcome additional property management task on landlords. Landlords will no longer have to serve a succession of section 17 notices within six months of each successive quarter day so as to preserve their rights against former tenants.

The decision will also make it easier for sellers of properties subject to tenancies and for buyers carrying out due diligence exercises.

1st October 2008 marks the final roll-out of energy certificates to all buildings.

Since being introduced in 2007, more than one million Energy Performance Certificates (EPCs) have been produced and registered in England and Wales - with the average rating being a ‘C’ for commercial properties and a ‘D’ for homes.

The measures which come into force for October include:

• Extending the validity period of the EPC for homes when marketed for sale – currently one year - to three years. This has been the result of extensive consultation; and

• Clarifying arrangements for the October roll-out for commercial buildings already on the market which will be similar to those put in place in April and July. This means that any non-domestic building on the market before 1st October and remaining on the market will need an EPC by 1st January at the latest. If it is sold or rented out in the meantime, an EPC must be commissioned and then handed over as soon as is practicable. This measure is intended to make it easier for owners and landlords to comply with the legislation, avoid market fluctuations and is in response to expectations from the industry.

The full timetable is as follows:

Homes:

• Since 1st August 2007 all homes going on the market with 4+ bedrooms have required an EPC when sold
• Since 10th September 2007 all homes going on the market with 3+ bedrooms have required an EPC when sold
• Since 14th December 2007 all homes going on the market with one or more bedrooms have required an EPC when sold
• Since 6th April 2008 all new-built homes have required an EPC
• From 1st October 2008 all remaining homes for sale (including those which had been on the market from before the above dates) will require an EPC and all homes for rent will require an EPC when newly rented.

Commercial:

• Commercial buildings also require an EPC when built, sold or rented.
• Since 6th April 2008 this has applied to buildings over 10,000m2; since 1st July 2008 to buildings over 2,500m.sq.
• From 1st October they will apply to all remaining commercial buildings.

If you need further information, help or advice regarding Energy Performance Certificates or how quickly a certificate can be obtained, contact Paul Cowdery, (Partner, Residential Conveyancing) or Charles Marchant-White, (Partner, Commercial Services) for commercial properties.

Alternatively, call Clarke & Son on 01256  320 555.

Partners Charles Marchant-White (Commercial Property), and Paul Cowdery, (Residential Property), comment on an issue which may be of interest to property buyers seeking to negotiate on price. In particular, those with a view to taking advantage of the increased Stamp Duty Land Tax (‘SDLT’) exempt rate.

At Clarke & Son, we’re encountering instances (particularly with new build properties) where prices are dropped to £175,000 to take advantage of the increase in the Stamp Duty Land Tax exempt rate.

However, it’s often the case that the buyer must pay an engrossment fee for the preparation of the lease or transfer and this cost must be added to the purchase price as part of the consideration being paid (the total consideration will comprise the price and debt for SDLT purposes).

If, for example, the purchase price was £174,950 and the engrossment fee was £90 plus VAT, this would give rise to an SDLT liability. The key point is that SDLT is payable on all elements of consideration paid or payable to a Seller in any transaction that relates to the Property (or chargeable interest) being acquired.

In cases such as this, it’s important to resist any request to add an engrossment fee cost. It’s important that buyers emphasise to sellers that they will pay absolutely no more than £175,000.

It goes without saying that the same remark also applies at the £250,000 and £500,000 margins too although we suspect we’ll see more instances at the £175,000 margin.

While you might at first regard this as being a relatively minor issue it can have a very dramatic effect - especially at the margins of SDLT rates.

Here are some examples as to how this may work out in practice:

Consideration £175,000.00 - SDLT + £00.00
Consideration £175,000.00 + Engrossing fee £50 + VAT (£8.75) - SDLT = £1,750
Consideration £250,000.00 - SDLT = £2,500
Consideration £250,000.00 + Engrossing fee £50 + VAT (£8.75) - SDLT = £7,501

If you need practical, professional advice on any aspect of Stamp Duty Land Tax (‘SDLT’), please e-mail Paul Cowdery direct or telephone Clarke & Son on 01256 320 555.