Remittance Basis Users: Beware of giving collateral over foreign income and gains for UK loans
24 February 2022
News
In light of an HMRC change of practice, remittance basis users need to take additional care if providing collateral over non-UK assets for loans brought into or taken out in the UK.
HMRC’s change of practice is highlighted in a recent (21 December 2021) note (“the Joint Note”) prepared by three of the UK professional bodies, STEP, CIOT and ICAEW. In particular, whereas previously remittances triggered by reference to collateral were capped at the amount of the loan brought into the UK, the cap no longer applies in cases where the entirety of the loan is brought into or used in the UK.
The change of practice means that where the non-UK collateral represents or is derived from previously unremitted foreign income and gains (“FIGs”), then once the entirety of the loan is brought to the UK, all of the FIGs over which collateral has been given are remitted even if worth many times more than the value of the loan. Where only part of the loan is brought into the UK, however, and because of particular provisions in the Income Tax Act 2007, the remittance of FIGs given as collateral is limited by reference to the amount of the loan brought to or used in the UK.
If a remittance basis user brings the entirety of a loan of £1m into the UK, for example, but provides collateral for the loan over their non-UK bank accounts containing £2m of previously unremitted FIGs, then on the basis of the latest HMRC practice, the loan will trigger remittances of £2m. On the other hand, if the remittance basis user brings only £900,000 of the loan of £1m into the UK, the remittance of FIGs is limited to the amount of the loan brought into the UK, being £900,000. There would, of course, be further remittances if interest payments and capital repayments are made from a separate pool of previously unremitted FIGs.
Before HMRC’s most recent change of practice, even if the entirety of the loan had been brought into the UK, the amount of FIGs given as collateral that would be remitted was limited to the amount of the loan. Furthermore, under an HMRC concession of 2010, withdrawn in 2014, there was in effect no remittance of FIGs given as collateral provided the loan in question was fully commercial.
HMRC’s latest practice is contained in changes made to the HMRC Manual on Residence, Domicile and the Remittance Basis. The changes were made in three stages, from 17 December 2020 to 21 July 2021 but, as pointed out in the Joint Note, the changes were not announced by HMRC.
Furthermore, as far as we are aware, there is no “grandfathering” under HMRC’s latest practice, of previous loan arrangements made by remittance basis users. This means that HMRC might now consider there to have been additional remittances in past tax years of FIGs given as collateral where the full amount of any loan in question was brought into the UK. However, the implications of this for the remittance basis taxpayer are not fully clear.
As the Joint Note points out, there are a number of uncertainties in connection with HMRC’s practice on remittance of FIGs used as collateral for UK loans. The fact of HRMC’s changes of practice in this area may undermine confidence in their approach. There is furthermore uncertainty over the nature of the collateral that leads to FIGs being remitted by reference to a loan brought into, or taken out in, the UK. It appears that FIGs are remitted even when the form of the collateral falls short of being a formal charge or pledge. According to HMRC’s current practice, it suffices if the loan is “conditional” on the FIGs used as collateral. The professional bodies have sent the Joint Note to HMRC for comments and we hope that some clarification might emerge from this.
In the meantime, the Joint Note has highlighted the need for caution on the part of remittance basis users providing collateral over non-UK assets for loans brought into or taken out in the UK. The Joint Note also highlights the possibility that past loan arrangements might need to be revisited, including for compliance purposes.
For further detail and background on the points made in this blog you can refer to the Joint Note itself, which can be found here.
Disclaimer
This note reflects our opinion and views as of 24 February 2022 and is a general summary of the legal position in England and Wales. It does not constitute legal advice.
‘Letters of wishes’ play an important role in respect of trusts; both those created on death (by Will) and during lifetime.
Letters of wishes are closely associated with ‘discretionary trusts’, whereby trustees are given discretion over which beneficiaries to benefit and whether through distributions of income and/or capital. However, any trust (be it a charitable trust or ‘life interest’ trust (where one or more beneficiaries has a right to the income from the trust)) should be accompanied by a letter of wishes or other guiding document, so that the trustees have a clear sense of the objectives of the settlor (the person creating the trust).
The role of the letter of wishes
The purpose of the letter of wishes is to provide guidance to the trustees as to the manner in which the settlor would like the trust fund to be administered for the benefit of his or her chosen beneficiaries. Letters of wishes are not legally binding (noting that if they were then the letter, in itself, may create a separate trust), although it would be unusual for trustees to deviate from the settlor’s wishes, unless there are compelling reasons for doing so.
The advantages of letters of wishes
Letters of wishes have a number of advantages:
In contrast to an English law Will, which becomes a publicly accessible document on death, letters of wishes are confidential. Only in very limited circumstances will the English courts order disclosure of a letter of wishes.
Letters of wishes add an additional level of flexibility, as they can be amended or updated by the settlor whenever they wish, without the need to amend the underlying Will or trust instrument.
Letters of wishes can be used to provide detailed, personal guidance to the trustees, which may not be appropriate to include in the Will (particularly given that it may become public) or trust deed. Whilst the first draft of a letter of wishes is usually prepared by a solicitor to ensure that the key provisions are included, the settlor is encouraged to make it their own as it is a highly personal document intended to capture his or her particular wishes. This means that letters of wishes are also easier for trustees (particularly non-professional trustees) and beneficiaries to understand and use, in contrast to the underlying legal document, as they are not written in legalistic language.
The contents of a letter of wishes
Whilst the below list is not intended to be exhaustive, letters of wishes can provide guidance in respect of the following points:
First and foremost, how the settlor intends for beneficiaries to be provided for out of the trust fund (for example, whether they should receive income and/or capital at particular ages, or on the happening of particular life events).
The factors the settlor would like the trustees to take into account when deciding when or how to make distributions to a beneficiary. For example, the letter of wishes may request trustees not to make distributions where a beneficiary is unable to manage his or her finances properly (e.g. as a result of addiction to alcohol or drugs) or is going through a divorce. It is not uncommon for letters of wishes to go one step further and to request that beneficiaries enter into pre-nuptial agreements before receiving trust distributions (to ensure that the trust fund is protected, so far as possible, in the event of a beneficiary’s divorce).
A ‘default beneficiary/beneficiaries’, that is the person(s) or charitable institution(s) that the settlor wishes to receive the balance of the trust fund in the event that none of the specified beneficiaries are alive when the trust comes to an end.
Provision for charitable giving: setting out how, when and which charitable institution(s) the settlor would like to benefit from the trust.
Special guidance regarding complex assets (for example, shares in a family business) or assets that qualify for special tax treatment and for which it may be beneficial to create a separate fund within the trust (for example, interests in trading businesses that qualify for ‘business property relief’ from UK inheritance tax).
The settlor’s wishes regarding the investment approach to be taken in respect of the trust fund.
Guidance regarding the approach that should be taken to resolving any disputes that may arise in respect of the trust (e.g. encouraging parties to mediate in the first instance).
In respect of letters of wishes accompanying Wills in particular, funeral and/or burial wishes may also be included, as well as provision for the distribution of personal effects, such as artwork and jewellery.
Forsters advises HG Living on a £80 million Build to Rent scheme in Milton Keynes
22 February 2022
News
Forsters has advised specialist Build to Rent and student accommodation developer HG Living on a development and funding agreement in respect of a 306 unit residential scheme at Bowback House Milton Keynes.
Funding for the £80 million scheme will be provided by institutional investor Pension Insurance Corporation. The redevelopment of the brownfield site will employ around 750 people during construction. The scheme will use air source heat pumps for hot water and green electric for heating, with solar panels also helping towards net-zero efforts. It will target a 4* Homes Quality Mark, Wiredscore gold rating, and a minimum EPC rating of B.
Rob Greaves, Development Director of HG Living, said: “We are delighted to be working with Pension Insurance Corporation on this project, which will be delivered in the spirit of true partnership with PIC. HG Living and HG Construction have an enviable track record of delivering projects with certainty for our institutional funding partners and creating high quality, sustainable living spaces that will make a positive long-term contribution to local communities. The Build-to-Rent sector has an important role in addressing the current housing shortage and we are pleased to play our part in bringing urgently required homes to the market at scale and at speed.”
At Forsters we have a large and dynamic real estate team, with a deep knowledge and understanding of the lifecycle of the Build to Rent (BTR) product. Engaging lawyers who understand the market as well as the most effective ways to structure deals and avoid pitfalls, will secure the value of your development and investment.
Housing for sale or rent for households whose needs are not met by the market.
All Inclusive Rent
The rent payable under an AST which includes an element for service charges but generally excludes council tax and utilities which are payable by the occupier.
AST
An assured shorthold tenancy, the most common form of tenancy used in Multi Family BTR (including Affordable Housing).
BTR
Build to rent: a distinct asset class within the private rented sector, essentially new build developments designed specifically for renting. They tend to offer an enhanced range of services than, traditional rented accommodation for example, onsite managers, concierge services, communal spaces.
Clawback
A mechanism contained within a Section 106 Agreement to require developers to contribute more affordable units (or cash in lieu) following viability testing (when benchmarked against the testing at the time of a planning consent) once private units are sold/let.
Developer
A party with skill and expertise who plans and develops a BTR development, generally through the planning process to disposal.
Development Break Viability Review
A Viability Review undertaken in the event that construction of the development begins but then ceases entirely for a defined period, usually 12 months.
Early Stage Viability Review
A Viability Review to be undertaken if a certain point of construction (usually defined as “Substantial Implementation”) is not completed within a specified timeframe (anywhere from 12 to 24 months is common). The intention is to incentivise Developer’s to progress developments and avoid the pain of a Viability Review. The obligation usually requires additional onsite affordable housing or a financial contribution, or a combination of both, to be provided.
Forward Funder
A party who provides finance to the Developer to develop a BTR project, ranging from institutional funds through private equity.
Golden Brick
The level of construction a development needs to reach in order to qualify for VAT Zero Rating. This enables the developer sell a site (generally to an RP) at Golden Brick stage at zero rate VAT and allowing the developer to recover VAT it incurs on the development. The RP will then engage the developer to complete the development.
IRR
The internal rate of return of an investment over its life cycle, it is the annual rate of growth that an Investment is expected to generate and is calculated by setting NPV equal to zero when running a cashflow for each year of the Investment. Certain assumptions will be made, for example, GDV, in order to calculate the IRR. Investors back projects with positive NPVs and the IRR calculation allows Investors to choose between a number of projects with positive NPVs.
Late Stage Viability Review
A Viability Review undertaken towards the end of the development cycle, commonly between 75% and 90% occupation/sale of the development. As the development has been completed and is in the process of being occupied, it is not feasible to request further on-site provision so such review should only attract a financial contribution towards off site affordable delivery. A certain percentage (10-25%) of occupations are held back until the review is determined and the contribution paid.
Leakage
The difference between the All Inclusive Rent and the costs attributable to the provision of services at the BTR development including planned preventative maintenance.
Let Up Period
The time it takes the Forward Funder to let private units. This tends to be much quicker than the period for sales of private units.
Mixed Tenure
A mix of private, affordable, intermediate and social tenures with affordable tenures generally being at a discount of at least 20% of open market rent.
Multi Family BTR
BTR schemes focussed on city centre locations, providing around 200 + apartment units. Amenity heavy – think gyms, communal spaces, workspaces, with the aim of creating a community feel.
NPV
An Investment measure which tells an Investor whether the Investment will achieve a target yield. It is the value of all future cashflows, positive or negative, discounted back to present value at an assumed discount rate and with other assumptions built in e.g. assumed disposal value. A positive NPV means an asset over its life cycle is worth more than it cost. Investors back projects with positive NPVs.
Occupation Restrictions
Restrictions on occupation of (generally) a percentage of private residential units in a BTR development prior to Affordable Housing being available sold to an RP and ready for beneficial occupation.
PPM Strategy
A planned preventative maintenance strategy ensuring that maintenance tasks are scheduled ahead of time and take place regularly, enabling the reduction in reactive maintenance.
RP
Registered Provider: An approved body which owns and manages Affordable Housing and generally takes a freehold interest/long leasehold interest at Golden Brick and then funds the construction of the Affordable Housing.
Section 106 Agreement
An agreement entered into between the local planning authority, a Developer and a Forward Funder. This deals with the requirement to provide Affordable Housing within a BTR development and regulates the disposal of the Affordable Housing to an RP. It generally contains Occupation Restrictions and viability testing of Developer profit at key stages and providing for Clawback in certain situations.
Single Family BTR
Typically houses, and a smaller number of units in each development than in Multi Family BTR. Amenities are still important and focus on the demographic of the renters. Think more rural locations, community space and events.
Viability Review
An obligation in a Section 106 Agreement that reviews the viability of a development at particular stages to assess whether additional affordable housing can be provided, either by way of on site or via a financial contribution, in the event that additional profit, over and above that shown at the application stage, can be demonstrated. In London, the assessment is generally carried out against formulae issued by the GLA, with a variety of other approaches elsewhere.
Void Risk
The risk in the Forward Funder having empty units post practical completion which negatively impacts its IRR.
Zero Rating
A “VATable” supply where no VAT is charged to the buyer. This may apply (for example) to the construction of new dwellings or to the sale or grant of a long lease over newly constructed dwelling.
At Forsters we have a large and dynamic real estate team, with a deep knowledge and understanding of the lifecycle of the Build to Rent (BTR) product. Engaging lawyers who understand the market as well as the most effective ways to structure deals and avoid pitfalls, will secure the value of your development and investment.
Would you advise your client to set up a trust? Maryam Oghanna to speak at ConTrA Seminar
21 February 2022
News
Contentious Trusts and Estates Senior Associate, Maryam Oghanna, will be speaking at ConTrA’s first event of 2022.
She will be joined by speakers Deborah Nicholls-Carr of Withersworldwide and Gregor Hogan of Serle Court.
The hybrid seminar, entitled ‘Would you advise your client to set up a trust? – feuding families, fee-hungry fiduciaries and other fearsome fiends…’, is taking place on 23 February 2022 and will be hosted by Forsters.
Further information on upcoming ConTrA events can be found here.
Forsters advises Mumbles Group on £20M funding deal with OakNorth
18 February 2022
News
Forsters’ Banking and Finance team acted for Mumbles Group in a £20M loan arrangement with OakNorth bank. Head of Banking and Finance, Victoria Edwards, and Senior Associate, Roisin Forde, assisted the commercial developer in gaining funding for its ambitious growth plans to acquire and develop more than 20 forecourts across the UK.
Mumbles Group is a privately-owned commercial developer specialising in the development of roadside sites for new forecourts. It has completed eight successful forecourt projects since 2014 with occupiers including Co-operative Group (Co-op), M&S and Sainsbury’s.
Mumbles are currently building a new forecourt and convenience store for Co-op at Moor road, Chorley, and have exchanged contracts for an existing site in Crystal Palace which will provide EV charging.
Victoria Edwards commented: “It was fantastic to act for Mumbles Group on this acquisition and development facility to enable them to grow so significantly over the next few years. Being a part of businesses in their growth phase gives us a real buzz and is what it is all about being a lawyer.”
These proposals are the latest in the strategy to resolve the cladding crisis. Among them is the initiative that could see developers and product manufacturers who refuse to bear the cost of removing dangerous cladding having future planning applications or Building Control approvals blocked by the Government.
This listing highlights the ‘need to know’ advisers and managers under the age of 40 in the wealth management and private client industries.
The recognition is testament to Ashleigh’s ever-growing reputation as a rising star in Contentious Trusts and Estates matters, which has also seen her named as one of the Top 35 Private Client Lawyers Under 35 by eprivateclient in 2017 and 2019, shortlisted for Lawyer of the Year (Associate) in the Citywealth Future Leader Awards and named on the Citywealth Future Leaders Top 100 list in 2020.
Losing ground: Robert Barham writes for EG on the Leasehold Reform (Ground Rents) Act 2022
17 February 2022
Views
Residential Property Partner, Robert Barham, has authored an article for Estates Gazette entitled ‘Losing ground: inside the Act abolishing ground rents in new long resi leases’.
In his article, Robert looks in detail at the Leasehold Reform (Ground Rents) Act 2022 and the impact it will have on developers and landlords.
On 8 February the Leasehold Reform (Ground Rent) Act 2022 received royal assent. The main provisions of the Act are not yet in force, but the government has pledged to bring the Act into full effect within six months, that is by around the beginning of August.
The purpose of the Act is to outlaw the reservation of ground rents in new long leases of residential property.
The full article can be read here, behind the paywall and is published in full below.
On 8 February the Leasehold Reform (Ground Rent) Act 2022 received royal assent. The main provisions of the Act are not yet in force, but the government has pledged to bring the Act into full effect within six months, that is by around the beginning of August. The Act does not, however, abolish ground rents in residential leases retrospectively – a change that Labour had advocated.
What does the Act do?
The purpose of the Act is to outlaw the reservation of ground rents in new long leases of residential property. All such rents will be set to a peppercorn. This mirrors the provisions relating to an extension of leases granted under the Leasehold Reform, Housing and Urban Development Act 1993. When one considers that, it is perhaps surprising that it has taken parliament nearly 30 years to bring in the equivalent provision for leases granted on a voluntary basis.
The Act only applies to new leases granted after the commencement date, and of particular note is that it excludes leases granted after that date which are in pursuance of a contract entered into before the commencement date. Only leases of residential property that are for a term of more than 21 years from the date of grant are affected, thereby excluding shorter arrangements which might be termed “tenancies”. There are limited exceptions to this, including shared-ownership leases, and there is to be a delay in bringing in the parts of the Act that relate to retirement homes, which the government has agreed not to bring in until after 1 April 2023.
Interestingly, from a legal draftsman’s point of view, it seems that the practice of referring to the ground rent as a “peppercorn” is likely to continue. The Act specifically refers to a peppercorn rent being a “permitted rent”. One might have thought that the opportunity could have been taken to abolish ground rent wording from leases in its entirety, but it seems that that is not to be. References to peppercorn rents often leave foreign buyers bemused. For example, we were once given a box of peppercorns by a foreign buyer client to be passed to his new landlord so that he could never be accused of missing his rent.
There is no actual requirement in the Act for wording relating to the payment of ground rents to be excluded from leases, but clearly any wording will be void in so far as it reserves a rent above a peppercorn. The Act provides that it will be an offence to recover ground rent under such a provision, although there is a saving where ground rent is charged but returned within 28 days, presumably to prevent mistaken breaches. The Act puts the duty of enforcement on local weights and measures authorities, and fines of between £500 and £30,000 can be imposed for breaches. Any prohibited ground rent paid can be recovered by the tenant.
Responding to the new provisions
The Act was first published in May 2020, but the intention to bring in legislation to provide for the abolition of ground rents was known well before that. Some developers saw the writing on the wall a while ago and have already reduced rents to a peppercorn. Others, however – and perhaps the majority – continue to demand ground rents and seem to have taken no heed to the impending changes.
One reason for the fact that developers have not supported the idea that legislation was necessary in order to force their hands is presumably that the reservation of a ground rent makes very little, if any, difference to the price that can be charged for a new property. In theory, the right to receive a ground rent throughout the term of a lease has a relatively easily ascertainable value, yet that value does not seem to be taken into account when determining the market price.
In some developments the ground rent is £1,000 a year or more, which must have a capital value in the tens of thousands. In other words, landlords often receive a bonus through creating ground rents, which can be realised when the reversionary interest is sold following the sale of all units in the development. This will be lost. In theory, landlords would be compensated by higher premiums, but it seems unlikely that the market will see it like that.
Now that the writing is on the wall, developers will presumably launch new schemes with zero ground rents. This will avoid the situation where units sold early will reserve a ground rent but those sold after the commencement date of the Act will have no ground rent. However, there are plenty of schemes currently part-sold with ground rents reserved which are going to end up with some flats in the scheme paying ground rents and others not.
A proposed amendment to require landlords to inform prospective tenants of the pending abolition of ground rents prior to the commencement of the Act was not adopted by parliament. Nevertheless, it must be incumbent on solicitors and property advisers to inform their buyer clients of the existence of the legislation, with a view to negotiating ground rent provisions out of leases.
It is likely that the pressure on landlords to abandon ground rents will steadily mount as the commencement date draws nearer to the point at which they have no option once the law comes into effect.
The Corporate Insolvency and Governance Act 2020: a refresher on termination clauses in supply contracts
16 February 2022
News
Many businesses have been, and continue to be, under financial strain as a result of the pandemic, with some having to resort to liquidation or other insolvency processes.
The Corporate Insolvency and Governance Act 2020 (“CIGA”) was enacted in June 2020 and introduced certain business rescue reliefs and insolvency measures, some temporary and others permanent in nature. Now, 18 months later, as the UK emerges entirely from Covid-related restrictions, the temporary measures have fallen away, but what is the continued impact of CIGA from a supply point of view?
Typically, most supply agreements (whether of goods or services) include provisions regulating when and how the agreement may be terminated, often including the right for a party to terminate if the other party suffers an insolvency event. CIGA aims to assist the rescue of a struggling business by limiting a supplier’s right to terminate supply. Barring certain exceptions, a supplier is unable to exercise its termination rights upon the occurrence of an insolvency event and must continue to supply the goods or services, thereby allowing the business to continue to trade during the insolvency period.
Another important provision of CIGA provides that termination rights which arose prior to the occurrence of an insolvency event but which weren’t exercised at the time they arose, may not be exercised after the insolvency event has occurred for the duration of the insolvency period.
There is a debate about whether CIGA applies to ongoing termination rights, that is termination by way of notice, and in particular whether this pre-existing right would constitute an “event occurring before the start of the insolvency period”. If not, a party could terminate the agreement upon notice, even after the occurrence of the insolvency event, but would have to continue its supply until expiry of the notice period.
CIGA also renders inoperable any other provisions that are triggered by the insolvency event, such as using variation rights to change payment terms or pricing.
While CIGA prohibits a supplier from demanding that outstanding amounts are paid as a condition of its continued supply during the insolvency period, the supplier may take comfort in the knowledge that it will enjoy increased payment priority for the goods or services supplied during this period as these are typically considered to be an expense of the insolvency process. Furthermore, if the supplier is not paid for the supply of goods or services made during the insolvency period, the supplier may then exercise any available termination rights for non-payment on the basis that these were not triggered by the insolvency event. The supplier may also terminate the agreement with the consent of the insolvency practitioner or other applicable office-holder depending on the rescue procedure being used, or with the consent of the court. A supplier who can prove that it would suffer hardship caused by the continuation of the agreement may petition the court for its consent to terminate the agreement. What qualifies as “hardship” is unclear, but the government’s guidance suggests that this exception would be available to a supplier whose own solvency would be threatened by a continuation of the agreement.
So, if CIGA renders insolvency-related termination rights inoperable, why do we still see them in supply agreements? The answer is simply that in certain cases as described above, such as where the supplier suffers hardship or permission is granted by the relevant office-holder or court, termination may still be available to the supplier and failing to include such a provision in the supply agreement would remove that right. Further, termination rights may now capture termination in circumstances where insolvency might reasonably be expected to occur, enabling suppliers to potentially make the call to terminate the agreement prior to the insolvency event taking hold and the CIGA provisions biting.
It is clear that these CIGA provisions are here to stay, so how can suppliers adapt and obtain the comfort they need?
Undertake enhanced financial due diligence on your customers prior to entering into any supply agreement
Keep up-to-date on your customers’ financial situation and, where appropriate, consider including information rights or an obligation on the customer to provide you with certain financial information in the supply agreement itself
Monitor customers with overdue accounts (prior to any insolvency events taking place) and open conversations to allow you to assess the situation and risks
The best commercial outcome for both parties is usually the rescue and continued trading of your customer in the long-term and so if you are able to continue supply and maintain a good relationship with them during their difficulties, this may be the preferred course of action
Disclaimer
This note reflects our opinion and views as of 15 February 2022 and is a general summary of the legal position in England and Wales. It does not constitute legal advice.
As simple as E.S.G.? – pre-empt the challenges of implementing an Environmental, Social and Governance (“ESG”) agenda
16 February 2022
News
Having in place a genuine ESG agenda counts for a lot in today’s employment market. As well as appealing to prospective employees, it also attracts attention from peers who can view open reports.
As such there is growing support (and increased pressure) for employers to consider how they can operate their business in a manner which is as sympathetic as possible to ESG considerations. For example, businesses are responding to the challenge of climate change through finding innovative ways to reduce carbon emissions and increase sustainable practices, such as rethinking their use of disposable materials or increasing their use of green or public transport options. Doing so can however, create challenges from an employment law perspective.
So, to what extent can an employer require their workforce to comply with any ESG initiatives? A simple way to formalise a change to internal working practices is to introduce a new policy or to amend an existing one. This doesn’t require any explicit consent from your employees so is arguably the most straightforward way to set out your plans. The downside is that enforcing a policy can be difficult, so it might be preferable to instigate an update to contractual terms (this will be required in any event if the relevant policy is contractual in nature).
Updating contractual terms lawfully will involve a little more legwork than the policy option, including communicating the changes to your employees and getting their explicit consent. If they do not consent to the change, then their contractual terms will not technically have been updated because an employer cannot unilaterally enforce a change to contractual terms. Carrying out a short consultation process to engage employees with the proposed changes may increase the likelihood that you will get a high level of agreement to the updated terms.
More broadly, the increased focus on ESG agendas fuels the debate surrounding what is and is not a protected philosophical belief for the purposes of the Equality Act 2010 (the “Equality Act”). Where a belief is deemed protected under the Equality Act, individuals holding such a belief will be protected against discriminatory practices. For example, if an employee reasonably chooses not to comply with a policy because it would contravene their protected belief, an employer cannot compel that employee to comply without exposing themselves to the risk of a claim under the Equality Act being brought against them by the employee.
Where there could be some resistance to the implementation of policies, for example, if they arguably support some political agenda, the extent to which these policies risk straying into discrimination territory must be taken seriously. The Employment Tribunal has already considered the extent to which ethical veganism can be protected from discrimination in the case of Mr J Casamitjana Costa v The League Against Cruel Sports. In this case, ethical veganism was found, in a non-binding judgment, to be a protected philosophical belief. So, in a rather speculative way, it is possible that this shift in commercial focus could result in an increase in employment law developments.
An additional prediction, also related to ESG agendas, is the scope for protected disclosures (whistleblowing) to be made which expose employers’ “greenwashing”, i.e. insincere efforts to appear to be supporting a green agenda, or similar. It is clear that only realistic and genuine efforts, policies and contractual terms should be promoted, and equally, employers should be alive to the protections afforded to potential whistleblowers and to the correct way to respond when an employee comes to them with a potentially protected disclosure. Demonstrating ESG credibility through setting ambitious goals and having strong data-based credentials can help avoid charges like greenwashing – for example aligning your sustainability work with science-based targets, or another framework.
The current focus on ESG is leading many businesses into new territory in what is an exciting, yet challenging, time for employers. Developing ways in which your business and employees can do their bit to support sustainability and other ESG initiatives is an important role and one not to be shied away from. But, implementing these practices needs consideration and careful planning to reduce the potential risks.
If you wish to discuss the above in any more detail or have any other employment or HR law related issues, please contact Joe Beeston, Counsel, or Nina Gilroy, Legal Executive, in our Corporate group.
Disclaimer
This note reflects our opinion and views as of 9 February 2022 and is a general summary of the legal position in England and Wales. It does not constitute legal advice.
Reducing the graft of drafting: Miri Stickland speaks with Clarilis on the upturn of LegalTech
16 February 2022
Views
Knowledge Development Lawyer, Miri Stickland, of Forsters’ ‘trailblazing real estate practice’, recently spoke with Clarilis about the dramatic upturn in the use of LegalTech for commercial property transactions.
“The real estate industry itself has been transformed by technology” Miri points out. “We have smart buildings which know when to turn the air-con and lights on, and we’re starting to see tenants pay their rent in crypto-currency. The way in which we provide legal services must keep pace with this. So, although not all the new technology we’ve seen will stay the distance, there are products that really increase speed and efficiency, and which can be flexed to meet changing demands without compromising on quality. These are the ones that are going to stay the course.”
The Environment Act – A Quick Guide for Landowners and Developers
15 February 2022
News
The much-delayed Environment Act 2021 (“the Act”) which finally received Royal Assent during the second week of COP26 (in November 2021), has been described by the UK government as delivering “the most ambitious environmental programme of any country on earth”. The Act introduces far-reaching statutory changes aimed at, amongst other things, increasing biodiversity, restoring natural habitats, reducing waste and making better use of our resources.
The Act brings in mandatory biodiversity net gain provisions through changes to the existing planning regime and introduces the concept of voluntary but legally binding conservation covenants. There is much to digest and in this briefing, our team sets out an overview of the key provisions that landowners and developers alike will need to consider going forward.
Biodiversity Net Gain
Biodiversity net gain refers to an approach to development aiming to leave the natural environment in a measurably better condition than it was to begin with. The part of the Act securing the biodiversity net gain provisions is not currently in force but is expected to take effect for new planning applications in November 2023.
Following implementation, the Act will require a pre-commencement condition to be attached to every applicable planning permission, requiring a Biodiversity Gain Plan to be submitted to and approved by the local planning authority (“LPA”). The Act provides that certain permissions are exempt, for example those granted by development order.
The Secretary of State has the power to expand the categories of development which will be exempt and it is expected that this discretion will be exercised. The ongoing consultation indicates that exemptions are now only proposed for householder applications, changes of use and those development which will impact habitat areas below a de minimis threshold.
This plan must set out how a net biodiversity gain of at least 10% can be achieved for the development by:
Having biodiversity included on the site or at a registered biodiversity gain site (being off-site) or
Purchasing biodiversity credits through the government’s system (which will be established through secondary legislation).
As this condition is mandatory and imposed by statute, it will be possible to submit the required information in support of the planning application at the initial stage (where the information is available) rather than via an application to discharge a condition.
The metric by which the biodiversity value of a site will be measured has not yet been finalised and will be brought forward via secondary legislation. Any habitat enhancement introduced by works to increase the biodiversity value of the on-site habitat, or off-site provision of biodiversity gain, is required to be maintained for a period of 30 years from completion of the development. This will be secured by a planning condition, planning obligation or conservation covenant (see page 3) and the associated enforcement will fall within the planning system.
A government consultation is currently ongoing in order to finalise the details of the associated secondary legislation and will close on 5 April 2022. Further details can be found here.
Developer Considerations
Biodiversity assessment
Potentially undertake a biodiversity assessment prior to submitting the planning application, so that the biodiversity value of the site is known. This may make it easier to anticipate the LPA’s requirements in respect of the net biodiversity gain for the development in granting the planning permission.
Design process
Biodiversity could be integrated into the design of the development to achieve the necessary net biodiversity gain.
Availability of offsite biodiversity options (if required)
There will be a register of such sites which can be consulted to ascertain nearby sites. Maintaining such offsite options may be achieved by a developer entering into a conservation covenant to procure that a charity or other organisation manages a biodiverse site away from the development site (see further details below on conservation covenants).
Availability of biodiversity credits
It is not yet clear how easy it will be to purchase credits; the National Planning Policy Framework already includes a biodiversity mitigation hierarchy as guidance for LPAs and places compensation for biodiversity harm as the last resort.
Public relations for the development
With many developers now having sustainability targets, their actions relating to biodiversity net gain may be more heavily scrutinised and the results will be publicly available via the planning process.
ESG requirements of stakeholders
Developers may also need to consider their investors, lenders, tenants or other stakeholders’ sustainability requirements in their decisions on achieving a net biodiversity gain for the development.
Conservation Covenants
Conservation Covenants (“CCs”) are voluntary but legally binding agreements between a landowner and a designated ‘responsible body’ such as a conservation charity, public body or for-profit body to conserve the natural or heritage features of the land. Conservation covenants can contain positive and restrictive obligations to fulfil conservation objectives for the public good. Designed to be flexible, the parties can negotiate the terms (including the duration) to suit their circumstances. Generally, they will bind subsequent landowners and therefore have the potential to deliver long-lasting conservation benefits.
Though novel in England and Wales, there are existing covenants in favour of the National Trust which can, and does, enforce broad conservation restrictions on land. CCs also exist in various forms in Scotland, New Zealand, Australia, Canada the USA and elsewhere.
It will be interesting to see how CCs will work in practice.
How will they be enforced?
Which organisations will be allowed to take the benefit of CCs?
Where will they find the resources to enforce them?
What happens if the organisation ceases to exist? The government has deliberately designed CCs as a private sector tool, but it might find itself the enforcer of last resort.
What can they cover?
The legislation is drawn widely and leaves plenty of room for discussion about what might fall within it. A CC may act to conserve:
The natural environment of land or the natural resources of land.
Land as a place of archaeological, architectural, artistic, cultural or historic interest.
The setting of land with a natural environment or natural resources or which is a place of archaeological, architectural, artistic, cultural or historic interest.
Landowner Considerations
CCs will automatically limit and, therefore, impact upon the value of land, so landowners should think carefully about entering into them. There are three main incentives to do so:
Altruism and environmental conscience.
As a means of discharging its bio-diversity net gain obligations under a planning agreement (which is specifically allowed for under the Act).
As a contractual means of securing obligations benefitting natural capital, such as carbon sequestration.
At the moment, there is no tax incentive for CCs. However, that may change if the government wishes to encourage their use and/or align them with the wider green agenda.
Tree Felling
The key changes to the law relating to tree felling which may impact landowners are set out below. Note however that the date they will come into force has not yet been confirmed:
Illegal felling land charge: there is now a new power for a Local Land Charge to be created where illegal felling of trees has taken place on a piece of land. This is something that should be noted when undertaking due diligence of a property. Additionally, landowners considering felling trees on their land should check whether they have the relevant felling permissions otherwise they may then incur a Local Land Charge on their property.
Consultation prior to felling: a duty has been imposed on local highway authorities in England to consult before felling urban road trees. Urban roads are those that are not trunk or classified road and which are restricted to 30 miles or 40 miles an hour or otherwise a street in an urban area. However, there are certain exemptions for:
Small trees (diameter of the trunk being no more than 8cm at 1.3m above ground level).
Dead trees.
Where the tree is required to be felled owing to a disease.
Where the tree is dangerous.
Causing an obstruction.
Where a development (and the felling of a tree being part of that development) has been authorised by planning permission.
The Act is a significant step towards protecting and improving people’s health and the natural environment, but it is only the beginning, and much will depend on further targets and policies that are yet to be developed through further consultation and engagement.
We are committed to running a business that is environmentally sustainable. Not only do we continually strive to minimise our impact on the environment, but we have years of experience of incorporating sustainability considerations into the legal advice that we provide to our clients.
Our sustainability hub brings together the team’s insights and legal expertise on a broad range of environmental matters that affect our clients’ business and personal affairs. This is a rapidly evolving and wide-ranging area of law and we will continue to share our insights about related legal developments on this hub.
Andrew Parker speaks to the BBC about the latest Building Safety Bill proposals
15 February 2022
Views
Forsters’ Head of Cladding, Andrew Parker, provided an expert comment to the BBC on the latest proposals relating to the Building Safety Bill put forward by Michael Gove.
The Bill suggests that residential developers who refuse to bear the cost of removing dangerous cladding could have future planning applications or Building Control approvals blocked by the Government.
“Follow the paint” on a unique tour of artist Jock McFadyen’s studio whilst he reveals the mastery behind his paintings and artistic legacy
15 February 2022
News
Forsters’ Head of Art and Cultural Property, Catherine Hill, joins longstanding client Jock McFadyen at his artist studio in London Fields for a captivating conversation in which Jock reveals his painting techniques, reflects on a 50-year career and the challenges of accepting the kind of artist you’ve become, as well as musings on the future of the art market. Jock wraps up the discussion by sharing some surprising advice to young artists, originally revealed by another well-known Royal Academician.
This article provides extracts of the most fascinating parts of the interview but do watch the videos for the richest insights and a unique glimpse of Jock’s working studio.
Part 1: Jock on the myth of painting landscapes and the skill of depicting skies
As Jock shows Catherine around his studio, they pause to view some of his paintings on display. Jock discusses how he is going back to some of his old paintings to rework them. He reveals to Catherine how he works up a scene in a painting:
“It’s not really imagination… because the paint throws up its own chances.
So you follow the paint, the paint is moved at the speed of thought, so there’s lots of visual research. In other words, photography, roughing things out, telling lies, saying I’m going to move this building across to here or chop that bit off, or I don’t like that mountain and all landscape painters do this.
The majority of paintings in the world are studio paintings, and the minority of paintings in the world are done from life…
Art is short for artifice, so visual research is important as is imagination. But you follow the paint.”
After some gentle persuasion, Jock shares more about his painting techniques:
“I like to paint in a method that’s called ‘wet on wet’ so you pour paint on and you paint on while the paint is still wet, even detail you can do that with. So paintings are in a constant state of adjustment.
But when you’re doing the skies…it’s a game of chance because the skies are liquid and the real sky is liquid. The real sky out there, out of these windows, because clouds are water floating about and if you’ve got paint floating about on here, you can replicate a sky…
I’m always trying to get light to come from the painting that’s underneath and the fact that the paint of the sky is liquid which solidifies overnight [helps this] because if the paint is thin, it is all oil paint, but it will be dry enough to work back into…
I think you’ve got to have the painting keep its energy, so you’re always fighting against flatness.”
Part 2: Jock on cataloguing a lifetime’s work and curating an artistic legacy
Catherine and Jock move on to the area of the studio where most of Jock’s art work is stored. Canvases of all shapes and sizes are stacked on shelves and scattered around the workspace; some of which will be reworked, and others kept to form part of Jock’s artistic legacy – a challenging endeavour that Catherine and Forsters’ Art Group have been advising him on.
Catherine asks Jock to reflect on the experience of attempting to archive art works that will represent him as an artist in perpetuity:
“It’s something that happens to painters at a certain time. If you are a young artist, say you’re 30… you’re setting out, you’re still deciding what kind of artist you [want] to be. Because the contemporary art business… is a sea of possibilities and options.
And then, this is a terrible expression “mid-career”, an artists of 50 years old, has gone some way, and they’re consolidating and they’re understanding the ramifications of the decisions they’ve made 20 years before.
But when you’re 70, you’re in neither position. You’re in the business of turning around and looking at the footprints in the snow and…not deciding at all. You have to accept what kind of artist you actually are. The decision making is over. This is what you turned out to have become. And it’s too late to change.
It’s not too late to experiment and go in new directions. What I mean is you can’t deny what you’ve previously done over the last 40 or 50 years because it’s there, it’s evidence and that is what you have to accept… Even if you hate it, you have to say, well, I seem to have done this.
…And of course, if you don’t like something, you can destroy it and shape what you want to leave in the world after you pass, so it is something which is really important and it’s something that is up to the artist to do unless you have curators you can really trust.
Because most artists who get to my age have got works in public collections and those will be there in perpetuity and so they define what kind of artist you are. So you have to join in with that perception of yourself, which is the official story of what you’ve done. Even if…sometimes you find your work in the wrong context. You can’t do anything about that. No sort of manipulation of your external image or appropriation of you or someone misconstruing…
But you know, time will pass and then work will be seen in a purer light.”
Part 3: Jock on the changing business of art and the future direction of the art world
Catherine and Jock’s conversation then shifts to the business side of being a successful artist and how this has changed throughout his career. As art becomes arguably more commercialised but with that more accessible to a wider audience of potential collectors, Catherine asks for his views as to when and how the art world had changed:
“There are three stages I think of the art business.
When we were in the student refectory at Chelsea Art School off the Kings Road, crying into our cold tea, thinking about what we’re going to do when we leave art school, everybody’s dream was to have a three-week solo exhibition in Cork Street. Cork Street was the street where all the galleries were, like Savile Row is to suits, and that was what people wanted.
And, in my career, it’s gone from three weeks in Cork Street to, in the 1990s, it was three days at Art Basel Miami.
And in the nineties and the early 2000s, the group exhibition became just as important as the solo exhibition because it gave you context. And then it moved from three days…to three hours on the Thursday evening at Sotheby’s…
But now we have NFTs and a virtual pair of trainers, and we’re in a strange world because the auction rooms are desperate to get in on NFTs because they daren’t miss anything commercially. So I’ve seen a lot of changes.
But the thing is, back in the day you had a critical backdrop. If you did have one of these exhibitions in Cork Street and I had a few in the 1980s, when that was the thing to have, you hoped to be reviewed by the F.T., The Guardian, The Observer, or The Times. And that was what you needed, the critical backdrop and that’s just art journalism.
But the critical backdrop is not now done by writers – it’s done by money. It’s underpinned by money. So the more important art is the most expensive art.”
As Jock mentions NFTs, Catherine picks up on this hot topic and considers the potential positive aspects for artists of these technological advancements:
“There’s opportunities within blockchain for linking artwork. If you imagine a studio where you can scan your work and it becomes part of the blockchain. It may develop such that the artists then have much more control over their work.
The other idea is that you might be able to link in effectively a quasi-royalty within the blockchain that requires a payment back to the artist every time the works change hand. So I think we’re going to see some quite seismic change.”
As the conversation draws to a close Jock reflects on the wide range of matters discussed and muses:
“It’s amazing. I mean, it’s a case in point that we’ve come here to talk about painting. Of course, we’ve ended up talking about the business side. Money.”
And finally Catherine ends with one last question:
If you are thinking back over your career and also considering young artists today, have you got any key words of advice for them, things you might have done differently yourself looking back at your existing legacy?
Be sure to watch the videos to discover Jock’s surprising answer!
You can view Jock’s artwork at his current exhibition “Tourist without a Guidebook” at the Royal Academy of Arts in London, which Forsters is proudly sponsoring.
To find out more about how Forsters’ Art Group advises living artists and others in the art world please contact [email protected] or visit www.forsters.co.uk/art.
Jock McFadyen is a pre-eminent contemporary British painter and Royal Academician who is best known for his gritty urban landscapes and use of texture. Jock’s works are held in 40 museum collections, including the Tate, National Gallery, the V&A, the British Museum and the Scottish National Gallery of Modern Art.
Forsters are honoured to be sponsoring a five-week long exhibition of celebrated contemporary artist and longstanding Forsters Art Group client Jock McFadyen at the Royal Academy of Arts.
Painting a legacy: How Forsters’ Art Group advised pre-eminent artist Jock McFadyen on his estate planning
15 February 2022
News
Jock McFadyen is a pre-eminent contemporary British painter and Royal Academician who is best known for his gritty urban landscapes and use of texture. Jock’s works are held in 40 museum collections, including the Tate, National Gallery, the V&A, the British Museum and the Scottish National Gallery of Modern Art. Jock was previously Artist in Residence at the National Gallery and, in 2019, curated the Summer Exhibition at the Royal Academy. As part of Jock’s 70th birthday celebrations, he has a solo exhibition in the Weston Rooms at the Royal Academy running from February to April 2022 titled ‘Tourist without a Guidebook’, sponsored by Forsters. The exhibition brings together 20 works spanning 30 years, showcasing Jock’s fascination with London’s changing urban landscapes.
Estate planning
Jock came to us for advice on his estate planning, wanting to be proactive about safeguarding his artistic legacy after his death whilst balancing this objective with the need to provide for his family and his desire to support philanthropic organisations that helped him in his early days as an emerging young artist.
Steps taken
The first step was to run through Jock’s assets, their values and examine how each is held. This included his studio and gallery space; his impressive portfolio of works; and a foreign property where he has a second studio. We advised on succession planning in relation to his foreign property and prepared a will and letter of wishes for Jock, using trusts to structure Jock’s legacy. The letter of wishes provided a framework for Jock’s legacy planning, including a strategy for categorising Jock’s works as follows:
core works which would form part of his legacy;
important works which would be gifted to the nation in lieu of inheritance tax; and
works which could be sold to partially settle inheritance tax.
Tax
In terms of tax, we took Jock through how the inheritance tax regime works in the UK and advised on how best to maximise the available reliefs. For example, we advised on the availability of business property relief on Jock’s studio, gallery space and works to reduce significantly the inheritance tax bill on his demise. We also considered the charitable nature of an artist in residence scheme in light of the ‘public benefit’ requirement and arranging for annual grants to be made after his death to young contemporary art students to subsidise the costs of renting studios.
Specialist advice for artists
Artists, like the rest of us, need to consider carefully and plan what should happen to their estates on death. However, for artists, maintaining or enhancing the value of their works after they are gone is paramount not only to provide an endowment to sustain their artistic legacies but also to support their families. To achieve these dual aims, it is important to get the right advice and plan ahead.
How Forsters can help
Forsters advises on artists’ business structures; taxation; succession and legacy planning; property advice relation to homes and studios; wills; intellectual property, Artist Resale Rights; representation agreements, consignment agreements and contracts generally; international aspects of studios owned abroad; movement of works across jurisdictions; and advice on foundations, charities and gifts to the nation.
Forsters’ Head of Art and Cultural Property, Catherine Hill, joins longstanding client Jock McFadyen at his artist studio in London Fields for a captivating conversation in which Jock reveals his painting techniques, reflects on a 50-year career and the challenges of accepting the kind of artist you’ve become, as well as musings on the future of the art market.
Forsters are honoured to be sponsoring a five-week long exhibition of celebrated contemporary artist and longstanding Forsters Art Group client Jock McFadyen at the Royal Academy of Arts.
Moving to the UK – crossing the pond: George Mitchell and Lucie Bennett join Buzzacott’s Stepping Stones podcast
14 February 2022
Views
Private Client Partner, George Michell, and Associate, Lucie Bennett, were invited to join Buzzacott’s Stepping Stones podcast entitled ‘Moving to the UK – crossing the pond’.
If you’re a US citizen living in the UK or you’re planning to move here, there will be a number of important life stages that you will need to plan for. It is important to ensure you have everything in place to plan tax-efficiently and remain compliant.
In the podcast, Forsters’ US/UK specialists share the key considerations at every step of the journey.
Sustainability: Strategic planning for real estate projects
14 February 2022
Podcasts and videos
Managing Director of sustainability consultants Element Four, Georgia Elliott-Smith, and Commercial Real Estate Partner, Vicki Towers, join podcast host, Miri Stickland, to discuss the advantages of strategic sustainability planning within the real estate sector, the concept of Net Zero, why you shouldn’t assume that a BREEAM excellent rating necessarily means a high EPC rating and the direction of travel for the energy rating of buildings.
Georgia talks us through some of the most commonly used acronyms, certifications and standards in the world of sustainability and real estate:
BREEAM
“So BREEAM is the Building Research Establishments Environmental Assessment Method and it is a really widely used method for assessing how environmentally friendly a building is it can be used in a number of different ways for different types of projects so you have new construction, refurbishment and fit-out standard, you’ve got an infrastructure standard and one for communities which you use for master planning projects. There is also a BREAAM in use standard as well which you can use for operation buildings to work on things like energy efficiency, water efficiency and so on. So it is split into ten categories – ten different ways in which you can focus on your building and looks at things like pollution, waste, energy, ecology and so on and in each of those different sections you are able to achieve points and the more points you get – credits they call them within the Scheme – the higher your score and your overall rating. So, the ratings are broken down into a grading system so you have a simple pass – you then go into good, very good, excellent and the highest rating is outstanding.
The good things about BREEAM is that it holds your design team’s toes to the fire and given that certain performance standards are required it means that some of those things cannot be value engineered out, so it is really good for making sure that design intent is followed through. Some of the negative and some of its critics say that actually it is simply an environmental assessment method and nothing more. It isn’t really an indicator of true sustainable development and actually the design team don’t require a great deal of client or investor engagement in order to deliver a BREEAM high level of standard and so it doesn’t take into account a lot of fundamental sustainability considerations but overall you know it is very well recognised, very popular and a good standard.”
GRESB
“GRESB is the standard for the Global Real Estate Sustainability Benchmark and it is a globally applicable benchmark for Environmental Social and Governance issues (ESG). It is, as the name suggests, specifically for the real estate sector and it is aligned by the GRI Initiative which is the Global Reporting Initiative which is a global sustainability reporting standard. What it does is you self report to GRESB so there are tools online that you can access for free where you go in you answer many questions. There are hundreds of questions – as I say you don’t enter GRESB lightly but you go in, you answer questions and you provide data on the environmental, social and governance issues for your business so that will be things like disclosing information about your carbon emissions, your water consumption, the sorts of impact that you have on communities and employees, data to do with things like gender balance and the living wage provision and so on so it is a very broad very wide ranging question set and that is a way of getting a benchmark score for your approach to ESG and it is a way of communicating and reporting with your stakeholders on how you are doing as an organisation.
You can then see as well how you have scored in different sections of the GRESB rating so you can see whether maybe you are acing it on environmental issues but you are not doing so much on social and community issues so it is a way of prioritising your investment moving forward and it is also aligned with lots of other certifications so if you achieve BREEAM, Well Building or perhaps Fit Well Certifications on your real estate they will add points in different sections of the GRESB standard so it seeks to align a lot of different moving parts across the sector and give you good quality information to share with the market.”
NABERS
“It actually stands for the National Australian Built Environment Rating System. It came over to the UK a couple of years ago back in 2020/2021 and the Better Buildings Partnership took stewardship of trialling the scheme in the UK. It had been incredibly successful in Australia as a mechanism for designing and operating buildings in line with true energy efficiency. So, what it seeks to do is close what we call the design gap so the design performance gap is that when you intend the energy performance of a building to be often doesn’t play out in operation of the building. That is what we call the compliance gap there, so you design a building in order to get a certain EPC rating in the UK what we then find is that the building is not operating in line with its predicted energy efficiency in practice so there is this big gap between design intent and actual performance. NABERS closes that gap and what it requires that you do is that instead of designing the building for compliance with a particular EPC rating you add in other bits of the energy jigsaw that you wouldn’t normally have to assess for compliance so things like small power, looking at what is likely to be the small power draw in a building, you add in things like data servers which again are not part of a standard building compliance model for energy, you look at actual hours of operation of the building based on the local demographic or the type of industry in that area rather than just falling down on a compliance assumption so you use much more accurate modelling of what the energy performance is likely to be of the building and then you design the building according to a target energy performance. It means that NABERS is much much more accurate when it comes to predicting the actual energy performance of a building – much more accurate than EPCs and it is really the new kid on the block but I think it is going to take off very very quickly.
It was originally launched in September 2021 it is now managed by the BRE as a certification scheme – there are two stages to it so one is the design for performance stage (DFP) that is the design stage so where you design team actually do the building modelling and they design the building to achieve a certain energy performance. The second stage of the certification where you get final certification is after 12 months of building operation you then take a look how it has performed during that 12 months you will have monitored its performance, you will have done some fine tuning and tweaking of the energy systems in the building and if your building is operating as per the design intent after 12 months then you can get your final certification so it is a really good robust scheme that means that our buildings are likely to perform in a much more efficient way.”
WELL Standard Building
“The WELL Building Standard came to the UK in 2014. It was developed in the USA. It’s a standard and the first standard internationally that focusses entirely on the occupant experience and the health and wellbeing of the occupants of the building and the neighbouring community.
So, when we look at other standards that are much older, BREEAM for example has been around since 1990, but BREEAM is an environmental assessment method and there are parts of that standard that do look at local community but they are only incidental really and very small parts of that assessment. Well is entirely about human experience and it was really revolutionary when it came to the UK when it was released because we are looking at buildings. As we had been looking at lot of the environmental impact of buildings for many years but although we were trying to design buildings that were healthy and good for people there wasn’t really a yard stick for measuring that and there wasn’t really an agreed design standard for how you go about assessing and improving buildings for human health. So WELL came on to the scene in 2014. Since then it’s been revised a couple of times and now we have Well version 2. It’s applicable for both whole buildings and also core and shell so landlord demise. You can also do a commercial interior project if you are just doing one or two floors for example as a tenant of a building. It is made up of what we call pre-conditions which are basic requirements that every single project must achieve and then other credits that are called optimisations and the way that the scoring works is that all buildings have to achieve the pre-conditions and then you build up your optimisations and the more points you get through optimisations the higher your final rating and the ratings are silver, gold and platinum. So, there’s three that are available. Very similar to BREEAM you work through it with your design team from the very beginning of the project so what we do as consultants we create a pre-assessment where we will look at all of the various bits of the standard, work with the design team and what are the achievable levels and then try and challenge them to go further and do more and the things that they focus on. There are ten, what we call concepts which are essentially the chapters, but they are things like air, water, light, movement, nutrition and so on and it goes on through ten of those different factors. It’s really striving to achieve clean air, lots of good available drinking water, movement through the building is really important so trying to drive people into using the stairs rather than lifts for example. And making sure that our indoor environment is healthy so making sure we are not bringing products into that space whether it’s cleaning products or furniture that are bringing pollutants into the space and our understanding, the science of human health and how it’s impacted by our buildings has just gone off the scale recently and I think particularly with COVID there’s this new appreciation of the stuff that we are breathing in, you know, what we surround ourselves with. And the importance of things like daylight, of exercise, of improving our mental health through socialising, communicating you know, the effect of good sleep and good nutrition. And we know that our buildings can really impact on our quality of life. So Well seeks to distil all of that science into some design features that can be implemented.
The other thing about WELL which is new and really quite revolutionary is that it’s not just a design standard, it’s about the operation of the building. So, you cannot achieve Well certification until after occupants have moved into the building and have been working in that space for at least three months. At that point you will have what’s called a performance verification visit where an auditor will come to the site and will check that people are using that space in the way it was designed and intended to be used and that the space is performing. So, they will come and take air quality readings, they will come and do sampling of the drinking water quality, they will check light levels and they will check that everything you have said at design stage was happening actually is happening in the building. The certification once you get it is valid for three years so it really is a living standard that you then have to maintain through operations so one of the big changes between this and I think BREAM is that your facilities managers, all of the building occupants, people like the cleaning contractors, the caterers all need to understand how the Well Standard works and what bits of their job are really important to maintain this healthy indoor environment and what has to be done. But what that means as a result is that when you walk into a Well certified building you can tell it’s different, it feels different, it looks different, the way you interact with it is different and there is a lot more awareness as well amongst the people inside of what a great space they are in and the communication of that is really powerful I think for people particularly post-COVID.”
RESET Standard
“The Reset Standard is an international quality standard for indoor air. So, it came from China where it was originally developed where municipal air quality is notoriously poor particularly in urban areas and they wanted to develop a standard that would demonstrate that the indoor air quality in buildings was good, so the reset standard was developed by the organisation GIGA which is a Chinese organisation.
It has become really popular now in the era of Covid and post Covid in order to demonstrate that the equipment that we are using and the way in which are monitoring indoor air quality is of a good standard so at the moment indoor air quality monitoring kit is a real world test you can go onto the internet and for a few pounds you can buy a little plug in air sensor that just plugs into your computer and gives you readings of the air quality. You can also spend £10,000 on a piece of air quality testing kit. You know, how are you supposed to know which one is good and which one is reliable and whether they are accurately calibrated and whether the componentry is good and all of that stuff. It is really difficult to be able to discern good kit. Reset has two parts to it really. One is that is creates a quality mark for the tech for the kit so it certifies the particular indoor air quality sensors are of a high standard and you can go onto their website and see which of those pass their test and so which are recommended and then the second part is that they provide a quality design standard that says where you put the sensors for exampled that they need to be within the breathing zone which is at between about 5/6ft high in your space. They need to be in certain areas so you know you don’t end up with your sensors just in corridors they need to be in the arears that are occupied by people regularly so what it does it sets out a design standard for where you put the sensors and the quality of the sensors. What you then do is that there are two versions of the standard that you can certify to. One is the base building standard for landlords and what that does is that you put a sensor on the outside of your air handling kit to monitor the external air quality and then you put sensors the other side of the air handling kit so the air intake post filtration and what that then does is it verifies the quality of the air that is actually being delivered to the floor plates so that all of your tenants know that they are getting good quality air coming through into their floors.
The other standard is the commercial interiors standard and that is really where you put the sensors in the floor plate and you will then see changes depending on how many people are in the space, whether the cleaners are in and spraying chemicals everywhere, you know you will see differences in temperature, humidity and so on and that is really the exciting bit that you can see live what is going on in your space and how your activities are impacting on the air quality. The requirements of both standards is that data is consistently monitored and uploaded so for both the landlord’s standard and the interiors standard you need to have a live display showing the air quality at that time that any occupant or visitor to the building can access so it really does keep people alert to the conditions in that space and it means that you can then look back at that data and you can see what happened aligned with different events so if you have a big town hall meeting in your space you can see how that impacts on the quality of the space. If you have got, like I say, cleaners coming in and the idea is that they are supposed to be using low toxin chemicals, low toxin products in order to maintain good air quality you can see whether that is happening and you can directly see the impact so it actually develops this ownership over the air in the space and a lot of education and you get people getting quite geeky about it and quite excited it is really cool when you do it I mean it is definitely not something to be entered into lightly because you cannot just plug it in and forget about it you do need to constantly be checking, be aware, you need alerts in the system to tell you when something is going on but because of that people within the space can be assured that their facilities managers, the people that run the building, are really on top of it and are aware of the air quality in the building.”
TCFD
“TCFD stands for the Taskforce for Climate related Financial Disclosures. This was established in 2015 and it was established by Mark Carney and Michael Bloomberg as an initiative and it started out as a voluntary initiative and really what it was about was getting major fund managers, asset managers, the financial institutions to start examining and disclosing information about how their investments impacted on the climate and how the climate changing then impacted on their investments so it was this two way street looking at how much carbon are we emitting, what are our liabilities and also looking at changing where the patterns with moving populations and so on related to climate how is that going to impact our funds. So that is how it started as a voluntary initiative but it has been really successful and has been picked up by the UK government now in October 2021 to coincide with COP the Government announced that as of April 2022 the TCFD rules are going to become mandatory for large UK companies so that is for companies that are listed in the London Stock Exchange, any company that is required to produce a non-financial statement and it is going to be for private companies as well and limited liability partnerships that have more than 500 staff members and the turnover of more than £500m. So that is basically who is going to be included in the scheme – the way that the TCFD’s rules are set up is they have four what they call pillars and the pillars are governance, strategy, risk management and then metrics and targets and within those four pillars they have got 11 recommendations and those are things like describe the risks to your organisation of in the short, medium and long term of climate change. Describe your carbon emissions related to your investments and things like that. Now, at the moment, we are not exactly clear on the wording of the mandatory requirement for Government but what we do know is that from April this year those largest companies are going to have to start reporting in line with the TCFD rules.”
We are committed to running a business that is environmentally sustainable. Not only do we continually strive to minimise our impact on the environment, but we have years of experience of incorporating sustainability considerations into the legal advice that we provide to our clients.
Our sustainability hub brings together the team’s insights and legal expertise on a broad range of environmental matters that affect our clients’ business and personal affairs. This is a rapidly evolving and wide-ranging area of law and we will continue to share our insights about related legal developments on this hub.
Can Tenants get a Rent Free Period for Fit out Works and Lease Renewals?
14 February 2022
News
The Judgment on a significant retail test case has just been made public involving Boots and Quadrant Estates and CarVal Investments owners of a portfolio of 123 Boot Stores regarding lease renewal claims. The 123 stores are let to Boots under a sale and leaseback arrangement but this case, in particular, centred on the renewal of the lease of Boots’ premises at The Promenade/Princess Street in Bridlington, Yorkshire.
If you are a retail tenant you will be encouraged by the Court’s acceptance of a requirement for flexibility but discouraged to by the treatment of rent-free periods for fitting out periods. Similarly, there was both good and bad news for retail landlords in the findings of the Court.
Key issues the Court found on were:
Length of term – The landlord sought a ten-year term with no break, the tenant a three-year term with annual breaks. The tenant offered little evidence of its specific intentions for the property. But, given the level of economic and market uncertainty at the time (the trial was at a time when no one knew whether the planned lifting of all restrictions would be a short-lived reprieve from restrictions or not), the Court felt the reasonable balance was a five-year term.
Break – A third-year break was awarded. The old lease had annual breaks. The landlord was seeking to diverge from the previous lease terms by removing a break entirely and bore the burden of justifying this to the Court. A third-year break struck a balance of providing flexibility to the tenant, which was needed in the uncertain retail market, while giving the landlord greater certainty of term than it previously had.
Fixed rent increases – The lease had fixed rent increases of 1.5%. There was no evidence provided to the Court of fixed rent increases being common in the market and so the Court determined the new lease should not have a stepped rent increase either. This was separate to whether a rent review should be ordered.
Rent Review – No rent review was ordered for a five-year term. Had a ten-year term been ordered, the Court would have ordered an upwards only rent review after five years, to reflect current commercial practice.
Rent – As ever, a detailed analysis of the expert evidence was carried out. Of most interest was the following:
Treatment of rent-free periods for fitting out – The Court went against other County Court decisions and held that there should not be a rent-free period for fitting out given the tenant was already in occupation. The Court favoured a valuation approach which was based on reality (Boot did not need a fitting out period) given there was no specific assumption for rent free periods for fitting out works in the 1954 Act. The decision is not binding, other recent County Court decisions have included rent-free periods for fitting out works. Not every case has been subject to detailed submissions on the point and this case shows that it remains an arguable point for landlords to include in negotiations and Court proceedings. Where the current fit out is old and due for renewal, the arguments in favour of a rent-free period for fitting out periods are stronger.
Lettings to charities (or other businesses that do not pay rates) should not be discounted when looking at comparable evidence. No business wants to pay more for its premises than it needs to. It should not be assumed that a charity or other business that doesn’t pay business rates would pay more rent than the market rate.
While still relatively uncommon for an unopposed lease renewal to reach a trial, economic uncertainty and the Covid-19 pandemic has provided the backdrop for a spate of recent decisions.
Commuter belt crush – Helen Marsh quoted in The Times
11 February 2022
Views
Residential Property Partner, Helen Marsh, has been quoted in The Times article, ‘Commuter belt crush: why everyone wants to buy in the suburbs’.
With the ending of England’s ‘Plan B’ Covid restrictions, many employees have been called back to their offices and are therefore re-evaluating their pandemic induced moves to locations which now present a lengthy commute.
Sales of homes in traditional commuter locations have risen dramatically since the pandemic began. The huge rise in demand and a shortage of houses has pushed sale prices to boiling point. Record numbers of houses are being sold off-market, and bidding wars have become routine.
Helen explains that “there is lots of gazumping going on”, as lengthy property chains and delays present ample opportunities for other buyers to swoop in.
The full article can be read here, behind the paywall.
Over the last decade Airbnb has become a booming business, but this increase in rentals has led to a shortage of properties on the normal rental market. As such, the government is considering introducing a requirement for planning permission for use of properties for short-term rentals, to help resolve the lack of availability.
In their article, Charles and Victoria outline the likely effects this will have on the property market and highlight the complexities faced by those tasked with policing the use of properties.
The article was first published on PrimeResi on 9 February 2022, and is available to read in full here, behind the paywall.
First Homes has its challenges – Head of Planning, Victoria Du Croz writes for Property Week
11 February 2022
Views
First Homes has been lined up as the replacement to the Help to Buy scheme, but unlike Help to Buy, First Homes will count towards a developer’s affordable housing provision as part of a planning application.
With at least 25% of affordable housing being First Homes, there will be a knock-on effect on the amount of affordable/social rented and shared ownership units being delivered, which could further exacerbate supply issues in local areas.
The government has set a minimum discount on First Homes of 30%, but local authorities can stipulate further reductions to 40% or even 50% of open-market value. Additional eligibility criteria – beyond the household income cap of £80,000 (£90,000 in London) and the requirement to be a first-time buyer – such as local connections and being a key worker can also be put in place by local authorities.
In the long term, Local Plans will include policies setting out First Homes eligibility requirements. However, there are transitional arrangements for local authorities mid-way through the Local Plan process and some may issue interim policy statements.
In the meantime, the inclusion of First Homes in the government’s planning guidance means it can be a material consideration when determining planning applications.
However, given the flexibility for local authorities to impose additional price reductions and eligibility criteria, in the absence of clear Local Plan policies it could be difficult for developers to be certain of the local requirements for First Homes. It may also make it harder to determine the viability of a site during the acquisition process.
The scheme puts considerable onus on local authorities at a time when they are already facing resource constraints. First Homes will have a restriction on the title deed to ensure that buyers meet the eligibility criteria, but it will be down to local authorities to carry out the required checks before the dwelling can be sold.
First Homes has the potential to plug a gap in the market and avoid creating price inflation (a criticism levied at Help to Buy), but it does not come without its challenges.
This article was first published in Property Week on 10 February 2022, and can be found here.
For further information on the First Homes Scheme, please contact Head of Planning, Victoria Du Croz.
Robert Barham quoted in The Law Society Gazette on the ground rent reform
11 February 2022
Views
Residential Property Partner, Robert Barham, has been quoted in The Law Society Gazette article entitled ‘Messy situation: ground rent reform becomes law’.
In the article, Robert shares his views on the Leasehold Reform (Ground Rent) Act, which received Royal assent this week.
The article was first published in The Law Society Gazette and can be read in full here and below.
‘Messy situation’: ground rent reform becomes law
Housing developers could face a ‘messy situation’ now that a bill setting the ground rent for new leasehold properties at ‘one peppercorn’ per year has become law, a residential property solicitor has warned.
Housing minister Eddie Hughes said the Leasehold Reform (Ground Rent) Act, which received Royal assent this week, will set the ground rent to zero on new leases from this summer and save future leaseholders hundreds of pounds a year.
Robert said some developers anticipating the bill have already effectively abolished ground rents. Developers launching new schemes may want to pre-empt the new law by abolishing ground rents ‘but for schemes that are half sold at the time the law comes into force they will face the messy situation where some tenants pay ground rents and others do not’.
Robert added buyers are likely to resist having to pay a ground rent ‘particularly if they can delay their purchase long enough to ensure it becomes illegal. Solicitors and other advisers will no doubt want to advise both their developer and buyer clients of the pending changes’.
The government said ‘tightly defined’ exceptions under the act include applicable community-led housing and certain business leases. Statutory lease extensions for houses and flats are exempt. The ground rent that can continue to be charged on a voluntary lease extension is capped and cannot exceed the amount specified in the lease for the remaining term, before reverting to a peppercorn rent for the extended term. The act will come into force no earlier than 1 April 2023 for retirement homes.
Forsters sponsors acclaimed artist and client Jock McFadyen’s exhibition at the Royal Academy
7 February 2022
News
Forsters are honoured to be sponsoring a nine-week long exhibition of celebrated contemporary artist and longstanding Forsters Art Group client Jock McFadyen at the Royal Academy of Arts. The Exhibition “Tourist without a Guidebook” will run from 5 February – 10 April 2022, and will bring together 20 of Jock’s works spanning almost 30 years. The free display in the Weston Rooms will explore the artist’s fascination with London’s changing urban landscapes.
We are also delighted to be displaying a range of Jock McFadyen prints in our office waiting and meeting rooms for the appreciation of all clients, visitors and staff.
Jock McFadyen is a long-standing client of Catherine Hill, Partner and Head of Art and Cultural Property at Forsters. Catherine is a recognised legal expert in advising living artists with their estate and legacy planning. Most recently she co-launched Artistate, an innovative professional services platform providing artists and their estates with integrated legal, tax and financial advice.
Forsters’ Head of Art and Cultural Property, Catherine Hill, joins longstanding client Jock McFadyen at his artist studio in London Fields for a captivating conversation in which Jock reveals his painting techniques, reflects on a 50-year career and the challenges of accepting the kind of artist you’ve become, as well as musings on the future of the art market.
Jock McFadyen is a pre-eminent contemporary British painter and Royal Academician who is best known for his gritty urban landscapes and use of texture. Jock’s works are held in 40 museum collections, including the Tate, National Gallery, the V&A, the British Museum and the Scottish National Gallery of Modern Art.
Construction focus: The year ahead – Lauren Hepburn and Beatrix Dyer write for Property Law Journal
7 February 2022
Views
In the latest Forsters contribution to the Property Law Journal, Construction Associate, Lauren Hepburn, and Trainee Solicitor, Beatrix Dyer, consider what 2022 might hold in store for the UK construction sector.
This article was first published in Property Law Journal 394 (February 2022) and is also available on lawjournals.co.uk.
In their article, entitled ‘Construction focus: The year ahead’, they discuss the Building Safety Bill, unsafe cladding, development tax, retention return, labour and supply shortages, climate change, digital technology, and other legal developments.
Over 2021, the size of construction industries output fell, falling 1.8% in October alone (ONS). Labour shortage is clearly one very important issue the industry will need to tackle in 2022.
The impact of Covid-19 may not yet be behind us, but there promises to be a lot to look out for in 2022, from new building safety legislation, to an increased focus on technologies to promote sustainability and tackle climate change in construction projects.
Kelly Noel-Smith discusses the sustainability agenda for private clients in Transmission Private’s podcast
4 February 2022
Views
Head of CSR and Private Client Partner, Kelly Noel-Smith, shares her insights on what is driving the sustainability agenda within the private sector and what it will look like in the year ahead in Transmission Private’s TP Talks podcast, ‘What sustainability means for private clients in 2022’.
Kelly discusses her views on greenwashing, the future of ESG and why some private clients are still reluctant to embrace the ESG agenda. ” I think it’s human nature that some people find change easy, some embrace change, some accept the need for change, and some are reluctant. Part of our job as lawyers is to work with your particular client and help them manage change, and if it’s difficult, you work with them to surmount those difficulties.”
The full podcast and transcript, can be found here.
Kelly Noel-Smith heads up Forsters’ Sustainability Board. To find out more about our firm’s science-based emission reduction target click here.
Dan Cudlipp, Associate in our Construction team, and Hannah Coupe, Trainee Solicitor, spoke to the Property Law Journal to recap a selection of the legal developments of particular interest and importance to construction professionals in 2021.
First, Dan and Hannah discussed three cases relating to suppliers attempting to rely on its own standard terms and conditions (T&Cs) in order to avail themselves of some benefit contained within those terms. For varying reasons, each of those attempts failed, and the travails of the suppliers provide a helpful lesson for the rest of us.
Second, they focused on two decisions from the Supreme Court that deal with two issues that construction professionals will frequently encounter, particularly the latter: limitation and liquidated damages.
Finally, they focus on the legislative changes and guidance in the construction sector. The review and achievement of fire safety remained a central theme of 2021, and their selection focuses on the progression of legislation and guidance on that topic.
With a rise in alternative accommodation being sought by renters in place of traditional-style hotel rooms, short-term lettings such as those offered by Airbnb have become a booming business, giving property owners far more flexibility on how they rent their property.
This has particularly been highlighted by the pandemic, as working from home gives more flexibility in terms of how people are choosing to live and how long they stay in one place.
There are recognisable economic benefits to short-term lettings, specifically tourism and income stream for landlords. However, there are genuine concerns that this is leading to a reduced supply of housing stock (longer-terms lets) as properties shift from serving local residents to serving short-term renters, thus impacting neighbourhoods/local residents by raising housing costs.
With this in mind, the government is considering its tourism policies and the possibility of introducing planning requirements in respect of short-term lets. There is already a limit on the number of days (currently 90 days) that landlords can short-let a property in London without obtaining formal planning permission (Deregulation Act 2015). Cornwall led the way in 2016 in places such as St Ives, where a neighbourhood plan was adopted that effectively banned new dwellings being purchased as second/holiday homes.
While inroads may be being made to address the issue, it is not clear who will be enforcing this. There are often regulations contained in mortgages and other legal documents, specifically leases, that will curtail the use of a property from being let on a short-term basis that quite simply get flouted. There is little impetus for banks or superior landlords to enforce these regulations unless there is an issue, such as non-payment of a mortgage or a nuisance in the building. It is likely therefore to fall to local authorities to enforce any measures, and whether they will have the ability to do this (given their infrastructure and financial constraints) is to be seen.
It is clear that there are challenges in balancing both the needs of landlords and the tourism industry, which have both suffered in the pandemic, and the longer-term housing issues that need to be addressed for localised economic recovery. The short-term rental sector is facing a number of changes. It appears likely that tighter controls will be effected and it may encourage some landlords and potential second-home buyers to rethink their rental strategy.
This article was first published in Property Week on 3 February 2022, and can be found here.
Once upon a time the words “new build” might have triggered images of numerous small studio apartments crammed into soulless high-rise tower blocks, but the face of residential development in London has undergone substantial transformation over recent years.
Luxury schemes designed by award winning architects boast state of the art tech and interior design and concierge services now range from a 24-hour desk in the entrance hall to partnerships with well-known five-star hotels offering amenities from dry-cleaning to private dining and much more. As well as the wealth of facilities offered in these high-end residential developments (which continues to grow and diversify as developers look to set themselves apart from their competitors), new schemes are carefully planned and branded by their creators, often drawing inspiration from local residents, architecture and businesses. “Placemaking” is a must, and there is increasing pressure to forge new communities, not simply new homes, attracting both domestic and international buyers and investors from all walks of life.
From a logistical perspective, new build properties are generally “chain-free” so there is no dependency on other sales/ purchases further down the line which might potentially delay the transaction. This makes it incredibly attractive to occupiers and investors alike.
“Off-plan” vs “build complete”
One key advantage of purchasing new build property is that it can be bought prior to construction. This can be preferable, particularly for overseas purchasers who may not need to have use of the property immediately, or buyers looking for first choice of the apartments on offer. It can also be attractive to those looking to purchase a portfolio of apartments within the same building/scheme.
Often the deposit structure can be more lucrative as it involves transferring a proportion (usually between 10% to 30%) of the purchase price generally over a period of 12 – 24 months so allows the buyer time to organise international payments by way of planned “stage payments”.
It is of course also possible to purchase a new build apartment which is “build complete”, i.e. ready to move into. There are subtle differences which are briefly outlined below.
Off-plan
Build complete
Apartment selection
Made based on architect’s plans and CGIs
Often at the time of, or following a, “launch” during early stages of development
Due to early stages, wider selection of apartments available to choose from
Made based on visit to site and (hopefully) apartment itself
Have the benefit of seeing the finished article
Depending on developer’s sales model, there may be a limited choice of apartments left
Reservation
Heads of terms agreed and holding fee paid
Heads of terms agreed and holding fee paid
Contract
More detailed due to the property not yet being “finished”
Scope for variations between exchange of contracts and completion
Should be simpler as the property is being “sold as seen”
Snagging list and inventory of fittings and contents should be attached
Deposit structure
Generally, 5-10% on exchange followed by one or more “stage payments” payable on specific dates
Usually 10% on exchange
Variation
Estimated area of the property (usually 5%)
Internal layout and plans
Planning permissions
Estimated completion dates
Rarely any as property is sold as seen
Snagging items (minor defects) should be remedied pre or ASAP post completion
Financing
Depending on lender, often subject to the market at the time of completion (not exchange)
Valuation often carried out and offer obtained prior to exchange
Completion
Usually on 10 – 20 working days’ notice
Fixed date agreed between buyer and developer
Warranties/guarantees
10-year new home warranty should be given on completion
Most developers hand over guarantees for white goods on completion
10-year new home warranty should be given (commencing when the apartment was certified complete so may have already started running)
Guarantees for white goods (may have started running)
Instructing a lawyer
Whether purchasing off-plan or build complete, it is fundamental to engage the right advisors in order to ensure a smooth and seamless transaction. New build properties are understandably desirable for a number of reasons, but they require thorough legal checks and careful reporting. There will often be a complex title to review, a large number of planning documents to check and more sophisticated contract paperwork in comparison to a second-hand purchase where the contract would likely be predominantly based on the UK’s Standard Conditions of Sale. It is therefore important to choose a law firm who are not only experts in residential real estate but well acquainted with new build property transactions. It is also worth considering law firms who have specialists in planning and construction, particularly if you have intentions to reconfigure the apartment layout, or amalgamate one or more apartments on completion.
Tax considerations
When investing in UK residential property, it is vital to ensure your tax position is assessed prior to exchange. If purchasing off-plan and completion is some years later, it may also be worth obtaining refreshed tax advice. Aside from stamp duty land tax (which is in itself a minefield requiring careful guidance), a good tax advisor will be able to provide bespoke advice on the most efficient way to structure a property purchase from an inheritance tax, income/ corporation tax and capital gains tax perspective, as well as assisting with any pre-arrival tax planning which may be required if the purchase is for the purposes of relocating to the UK from another country.
Moving to the UK is an exciting life event whether it be a short-term move for work to explore business prospects or a more permanent relocation with the whole family; the UK offers an eclectic range of options to live, work and learn, from the cityscapes of London to vineyards in the English countryside and historic university towns in-between. Setting up life in a new country can feel daunting too and it can be difficult to know where to start.
With 2022 well underway, you may want to keep an eye out for some of these anticipated employment law changes.
Firstly, there will be the annual rate changes in April. These will see a rise in the National Living Wage, the National Minimum Wage and National Insurance Contributions, as well as an increase to the statutory rates of pay such as maternity, paternity and sick pay. The rate changes always serve as a good prompt to make sure that all pay arrangements are up-to-date and in line with the statutory minimum requirements. The full list of revised rates is available on the gov.uk website and we have included a summary of the National Minimum Wage and statutory rate changes at the end of this article.
Later in the year, legislation which has faced pandemic-related delays will hopefully make its way through Parliament. Many of the expected changes will be captured in the Employment Bill, which, after being notably absent from the Queen’s Speech in 2021, will be considered “when parliamentary time allows”. The Employment Bill is due to include:
An attempt to encourage a greater work-life balance by introducing a day-one right to request flexible working. This is currently a right for employees with 26 weeks’ service only. The benefit of the right to make a flexible working request is that it must be considered by the employer following due process. A request can only be denied for one of eight reasons
Introduction of new statutory leave entitlements for carers as well as for parents with neonatal care obligations
Introduction of a new statutory right for those without a fixed working pattern to request a more stable or predictable contract, reasonable notice of expected working hours and compensation if work is cancelled on short notice
Extending existing redundancy protection measures that are available to employees on maternity leave from the point they notify their employer of their pregnancy until six months after their return to work. The proposed changes are now on their second reading in Parliament and will also apply to those taking adoption and shared parental leave
Establishing a single labour market enforcement body to bring together traditionally separate bodies with the focus on protecting workers’ rights, including holiday pay, sick pay and modern slavery.
Beyond these changes we also expect to see progression, if not confirmation, of the outcome of the consultations surrounding ethnicity pay reporting and disability workforce reporting. The consultation for disability reporting has gone live and the consultation period is open until 25 March 2022, welcoming comments from employers and employees on the possible benefits and problems which could arise from any reporting. The ethnicity pay reporting consultation period closed in January 2019, but the consultation paper is currently being considered. The outcomes of both consultations are likely to be published within the Employment Bill as well.
Similarly, the current gender pay gap reporting regulations are undergoing a government review, with particular regard being given to the effectiveness and necessity of the regulations. The review comes amongst critics’ opinions that the intended goals of the regulations may not have been achieved and on the other hand that the reporting could be enforcing an unnecessary burden on employers.
As well as bringing in the “new” it is forecast that some “old” will be revoked. Most notably we will start to see the lifting of temporary measures that were introduced to mitigate the problems posed by COVID-19. This will include lifting the short-form right to work checks and reinstating the need for employers to check original documentation or the prescribed online testing for those holding either a biometric residence permit, biometric residence card or frontier worker permit. In addition, employment tribunals are expected to move away from remote hearings and back towards traditional in-person hearings where possible.
Inevitably there will be developments throughout the year which we cannot yet anticipate, including any binding judgments given in the courts and tribunals. As always, we will keep abreast of any such developments and release updates on the most pertinent issues.
April 2022 rate changes
National Minimum Wage
Category of worker
2021/2022
2022/2023
Aged 23+
£8.91
£9.50
Aged 21 – 22 inclusive
£8.36
£9.18
Aged 18 – 20 inclusive
£6.56
£6.83
Aged under 18
£4.62
£4.81
Apprentice rate
£4.30
£4.81
Statutory rates
2021/2022
2022/2023
Statutory sick pay
£96.36
£99.35 per week
Statutory maternity, paternity, adoption and shared parental pay together with maternity allowance
£151.97
£156.66 per week
If you wish to discuss the above in any more detail or have any other employment or HR law related issues, please contact Joe Beeston, Counsel, or Nina Gilroy, Legal Executive, in our Corporate group.
Disclaimer
This note reflects our opinion and views as of 14 January 2022 and is a general summary of the legal position in England and Wales. It does not constitute legal advice.
