Launched in 2017, the esteemed Global Elite Directory lists the world’s most respected lawyers advising High Net Worth clients, as nominated by peers within the private wealth industry.
The list of over 6,000 nominations each year is whittled down to just 250 industry experts.
This continued recognition of lawyers from across our Private Wealth practice is ongoing testament to the strength and breadth of services we provide to private clients.
An expert’s guide to…Women and Estate Planning – Rebecca Meade speaks to the Dura Society
20 December 2022
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Trusts and Estates (TTE) Senior Associate, Rebecca Meade, writes for The Dura Society and shares steps to take best advantage of her estate planning advice.
Did you know that, statistically speaking, women are more exposed to inheritance tax (“IHT”) than men?
This may be in part because women have a higher life expectancy and are, therefore, more likely to accumulate wealth.
It may also be because, according to a report published by the Office for National Statistics, despite usually being the ‘planning’ sex, 53% of women actually have no estate planning in place to ensure that their wish that assets pass to loved ones is fulfilled.
Property Week’s Year in Review – Victoria Towers talks ESG
16 December 2022
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Partner and Co-Head of Industrial and Logistics, Victoria Towers, has contributed to Property Week‘s ‘Year in Review’ – a look back on the key legal issues in property over the last year.
“Planning, ESG, the workplace, skills, cladding and building safety were all on the property agenda in 2022”, with Towers offering her insight into how environmental, social and governance (ESG) considerations – and in particular the ‘environmental’ – have risen to greater prominence this year.
Towers says: “Overall, 2022 has seen a more sophisticated approach to analysing the metrics of ESG compliance emerge, certainly from the sustainability side, and no doubt we will see growth from the social value angle over the coming months.
“It is also refreshing to see attention being given to what achieving net zero actually means, with a hard stance being taken in relation to offsetting and what actually counts.”
She says developers have also begun to adopt more widespread ESG credentials in their buildings, even without these being imposed by the government. “The voluntary uptake of [energy efficiency rating system] NABERS has become more widespread, which is hopefully a sign of things to come.”
This article was first published on 16 December 2022 in Property Week and can be read in full here.
Forsters wins Family Business Advisory Practice of the Year at the STEP Private Client Awards 2022
15 December 2022
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We are delighted that Forsters has been named Family Business Advisory Practice of the Year at this year’s STEP Private Client Awards.
The award reflects the pre-eminent reputation of the firm’s private client group for its advice to ultra-high net worth families on the successful transition of wealth from one generation to the next. The judges were particularly impressed by the firm’s focus on psychology and family dynamics when advising on governance matters.
Head of Private Client, Xavier Nicholas, comments: ‘We are extremely pleased to have been recognised by STEP for our expertise in advising clients on the establishment of family offices, family governance, and dynastic planning. This area of our practice continues to grow, owing to our reputation in the field and the demand for advice on wealth preservation that goes beyond the establishment of traditional asset holding structures.’
Shaking the foundations – Andrew Crabbie Maria Shahid and the Law Society Gazette
9 December 2022
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Head of Commercial Real Estate, Andrew Crabbie, has been extensively quoted in Maria Shahid’s latest piece, originally published by the Law Society Gazette, on how the uncertainty and fragility of the UK’s real estate market is being mitigated by a “wall of capital” from overseas.
The low down
The UK commercial property market is struggling. That is not unprecedented, but the sector’s challenges are much less straightforward than during the boom-bust economic cycles of the past. Property lawyers cite war in Ukraine, Brexit and ‘Trussonomics’ as complicating factors. Lawyers remain hopeful that after months of political turmoil, planning reforms may finally get under way, but geopolitical uncertainty and rising interest rates are twin headaches. Bargains abound for overseas buyers, as distressed assets and a weak pound present big opportunities. Or they would do if owners were not hanging on, apparently in denial about taking a ‘haircut’ on their investments.
Tumbling commercial real estate valuations and sales seem to signal a slump. But talk to commercial property lawyers at the sharp end of transactions and a more complex picture emerges. There is plenty to keep them busy, but often that is not good news for clients. The Gazette canvassed the sector’s specialists on how they are juggling the multiple challenges they face – from war and Covid to the legacy of ‘Trussonomics’.
Problems are multiplying
Crabbie commented: ‘We are only two years into a decade in which we have already experienced Brexit, Covid, the conflict in Ukraine and escalating climate change, which have accelerated political instability and economic downturn.’
Kwasi Kwateng’s notorious ‘mini-budget’ in September had a tangible impact, he adds: ‘After the chaos of “Trussonomics” and the resultant turmoil in the debt and gilt markets, it is unsurprising that major real estate investment deal activity has stalled.’
Kate Topp, partner and head of real estate at Ashfords, concurs: ‘Since the mini-budget we’ve definitely seen what I would call a slowing of transactions,’ she says. ‘I haven’t personally experienced anything becoming abortive but of course residential developers are having to take stock given the rising cost and general availability of mortgage finance.’
Boyes Turner partner Mark Appleton also points to overlapping problems for the real estate sector. ‘The property market has been hit by various factors: the war in Ukraine resulting in increased energy prices, rises in the cost of living and inflation, together with an ill-conceived mini-budget and political instability resulting in interest rate rises and a diminution in the appetite to lend on property transactions,’ he says.
Brexit effect
Can you form a clear picture of events while they are still unfolding? That is difficult, but on Brexit the challenges do not stop people from trying.
Ray Oshry, partner and head of commercial real estate at Harold Benjamin, sees little change in that respect. ‘To be honest, we haven’t noticed much impact at all from Brexit,’ he says. ‘In fact, we as a firm are busier than ever across the board. The reality is that everything in commercial property has been overshadowed by the pandemic, the war in Ukraine and the cost of living crisis, and their impact. This has had a significant impact on certain types of commercial property such as leisure and retail, and we are still experiencing the after-effects of that today.
‘If not for the Covid-19 pandemic, we may have noticed the effects of Brexit to a greater extent. It is likely we will feel some of the effects in the years to come, but it’s currently still a case of let’s wait and see.’
There is a more immediate effect on development work, notes Stephen Hedley, partner and head of real estate at Cripps. ‘The main impacts post-Brexit are supply-chain delays and cost pressures on development projects coupled with labour and skills shortages,’ he explains. ‘The pandemic and other global events compounded these issues and challenges remain, and in many instances are more acute. The significant impact on construction projects continues.’
Irwin Mitchell’s national head of real estate Adrian Barlow also highlights post-Brexit construction challenges. ‘The shortage of materials and labour remains an issue for our developer clients that has been exacerbated by Brexit,’ he says. ‘Developers are looking for flexibility with construction timescales in contracts and the ability to reduce prices to take into account rising construction costs. Interest in advice on drafting contracts has therefore never been higher.’
Topp confirms this: ‘Unfortunately, the availability and cost of mortgages is not the only challenge – the rising price of materials and issues in the planning system continue to impact on all developers, but particularly the SMEs.’
What about commercial tenants’ response to Brexit? Barlow says: ‘We have also found that tenants are looking for more flexibility in response to the rising cost of doing business. The “regearing” of leases to introduce breaks and rent concessions is particularly common – again bread and butter income for property lawyers.’
Post-pandemic bubble has burst
Hedley says: ‘For the wider commercial real estate teams the post-pandemic investment bubble has burst.’ Global and political events have led to a slowdown in these transactions. ‘Although we are still seeing healthy levels of interest in UK property from inward investors from the Middle East, far east and elsewhere in Europe… it’s clear some are holding back in anticipation of further price corrections.’
‘Covid has resulted in poor occupancy rates – about half of the pre-Covid rates,’ Boyes Turner partner Mark Appleton notes. This has led to surplus space which owners and occupiers are trying to sell or let. ‘As a result, investors have sought to take money out of property funds and place it elsewhere. Such funds may be forced to sell assets under value to plug a financial hole.’ It is reported, he notes, that Landsec accepted £809m from Lendlease for the Deutsche Bank building on Moorfields, London, compared with the original price of £1bn. ‘Things do not bode well when the UK property market made its worst ever return [in October],’ he adds.
Covid’s cottage industry
Irwin Mitchell’s Adrian Barlow says dispute resolution remains ‘extremely busy’. He explains: ‘On the disputes side, the statutory moratorium on enforcement action by landlords for commercial rent arrears built up when businesses were forced to close due to the Covid pandemic ended on 23 September. This led to significantly increased instructions from landlords looking for advice on their options to forfeit (terminate) leases for non-payment of previously “protected” arrears and pursue payment through various methods.’
Cripps’ Stephen Hedley says: ‘The pandemic created its own Covid-specific cottage industry for dispute resolution lawyers. There was the emergency legislation restricting landlord enforcement, the developing body of case law relating to the liability to pay rent during lockdowns, and the post-lockdown Covid arbitration scheme. These matters are concluding and Covid-specific litigation will likely soon be a thing of the past.’
Barlow says: ‘Looking forward, current economic conditions suggest more work for investors with defaulting tenants, for tenants looking to reduce their rent or get out of leases, and for the parties affected by delayed or aborted development or investment projects.’
Buyers and sellers: two worldviews
‘From a land-acquisition perspective,’ Topp says, ‘there definitely isn’t the same pre-Christmas rush from a purchasing developer’s point of view to get deals over the line, rather a desire to keep things moving; but see how things pan out in the new year.’
Crabbie highlights the problems arising when buyers and sellers have misaligned expectations – understandable in a market in flux. ‘The big challenge is pricing,’ he says, ‘and the disparity between expectations on both the sellers’ side, who are naturally reluctant to be pushed into a fire sale, and the buyers’ side who are eager to identify so-called distressed assets and scoop a bargain. It is difficult to predict with any degree of certainty where pricing corrections will eventually land but, depending on the sector, values may be down 10-20% from 12 months ago.’
Will sellers accept the ‘haircut’? Robin Grove, divisional managing partner of construction, real estate and disputes at Charles Russell Speechlys, says: ‘The weight of largely private capital seeking opportunities to invest means there will be a transactional market in real estate assets, once assets have been revalued. Those needing to refinance or exit to create liquidity recognise that revaluation to the “new normal” is needed and will do so more quickly than previously.’ Therefore, he says: ‘We expect the transactional market to reboot in early 2023, not least as overseas private capital seeks to take advantage of the weak pound.’
Hedley says: ‘On the occupier side and day-to-day asset management, we see resilience with no significant downturn. This includes office occupiers as we continue to see strong demand for high-grade offices within particular locations. [In London], there is also strong demand from high-end retailers in high-end residential areas such as Chelsea and Shoreditch, but not in traditional locations such as Regent Street.’
Borrowing costs and inflation
Crabbie says the ‘real gamechangers are interest and gilt rates which are driving uncertainty. Interest rates are likely to continue to rise into the early part of next year, and I would expect them to plateau around the second quarter’.
Prices are falling. ‘On one hand we have seen a reduction in property transactions, particularly due to higher borrowing costs, rampant inflation and soaring energy costs resulting in businesses generally having less disposable income for investment,’ Barlow says. ‘Clients are in some cases battening down the hatches and preparing for the impending recession… all of these factors have reduced the demand for commercial property, causing property prices to fall and clients seeking to withdraw from deals or looking to “chip” the price on property acquisitions.’
Conversely, Barlow says, ‘many clients are seeing excellent opportunities. Some businesses are under pressure to dispose of assets due to property corrections in the market. Cash-rich clients that have the money and appetite, and that can move quickly, are therefore identifying opportunities’.
Some developer clients are hanging on to sites until development costs make ‘building out’ more viable. ‘But, in the meantime,’ Barlow says, ‘they are getting income by leasing to tenants in the leisure and agricultural sectors, with breaks that enable them to regain the site when the time is right. Similarly, in the retail sector landlords are starting to rent vacant units for temporary “meanwhile uses” such as arts and creative centres, and in some cases looking to benefit from permitted development rights and converting properties from retail to residential use. We are able to advise on all such activity.’
Attractive assets
There remains a considerable ‘wall of capital particularly from overseas… waiting to be deployed in real estate’, Crabbie says. Such investors are, he adds, ‘benefiting from the weakness of the pound. I think we will see the return of good old-fashioned real estate asset management to create value enhancement as opposed to relying on a low-interest-rate regime. The fundamental of right location with strong tenant demand’.
In an inflationary environment, Crabbie says: ‘Rented residential, hotels and student accommodation will be attractive sectors. With the fundamentals of logistics remaining strong, retail undergoing something of a transformation and offices being at the forefront of the drive to decarbonisation and sustainability, new investor opportunities should arise.’
He remains ‘cautiously optimistic about the overall prospects for 2023 and that real estate will retain the resilience which has been its hallmark over my 30-year career’.
Clients are, Hedley notes, affected differently: ‘Where we see most activity is with clients not exposed to high debt costs.’ Activity, he says, has primarily been industrial and non-fashion retail parks. ‘Mixed-use development in major conurbations appears for now to be holding up. Lack of debt and interest rates seem to be a key issue, alongside price uncertainty. There is also still an element of political uncertainty making investors cautious.’
Jennifer Chappell, real estate counsel at BDB Pitmans, also notes that ‘the outlook for industrial sites, such as warehouses and life science labs, still remains incredibly strong.’
Cash is king
What next? Hedley says: ‘Higher interest rates and an economic downturn will inevitably see a greater focus on cashflow. For landlords this means measures to ensure rents are received. There will be an upturn in insolvency-based advice, whether in connection with CVAs, administrations or liquidations.’ Property-related professional negligence claims, he says, ‘will likely see an upturn, as is often the case in an economic downturn’.
Appleton says: ‘A nervous property market is unhealthy. These factors could easily lead to a downward spiral and ultimately a property recession unless overseas investors and wealthy funds bolster the market. Experts seem to think that any property crisis will not be as bad as the 2008 recession.’
However, he adds: ‘In the near future, there is bound to be a period of increased interest rates, a lack of demand until the economy gets back on its feet and property price readjustments.’
Topp sees a role for the state in improving the market. The planning system in particular, she says, ‘requires a good deal more investment and an increase in the number of experienced planning officers if the government is going to make any significant inroads into its new homes delivery target’.
Ending on a positive note, Grove says: ‘The office market remains an essential sector despite the changing accommodation requirements after Covid, and quality, including sustainability, is becoming ever more critical to protect asset value. Integrated teams of transactional and dispute lawyers close to their opportunistic clients will find their teams remain busy in 2023.’
This article was originally published by The Law Society Gazette on 2 December 2022 and can also be read here.
Sotheby’s and Forsters – An Owner’s Guide to Art – Part 2
7 December 2022
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Buying and owning art can be one of life’s greatest joys. But while the drive to own art is often fuelled by an emotional connection with a piece or the prospect of holding a lucrative investment, it is important for buyers and owners of art to keep their wits about them, from both a legal and practical perspective.
Felix Hale (Sotheby’s Tax, Heritage and UK Museums Team) and Jo Thompson (Forsters LLP’s Art Group) aim to point those wanting to buy, sell, and hold works of art in the right direction. This five-part mini-series will cover the following key areas:
If you wish to transfer artwork from the UK to another jurisdiction, you will need to comply with any applicable export reporting obligations and tax payments under UK rules and any import payment or reporting obligations in the jurisdiction of entry. Similarly, if you wish to bring artwork into the UK, you will likely have an exposure to UK VAT. This article outlines the applicable restrictions and rules in the UK and aims to provide practical tips for the transportation process.
Export considerations
Licences
Since the Second World War, the UK has exercised various export controls for works of art and other historical objects.
Broadly, where a work has been in the UK for less than 50 years one applies for an Open General Export Licence (Objects of Cultural Interest) which permits permanent export to any destination (save for embargoed ones) of works that do not exceed the age and value thresholds outlined below. Works of art that have been in the UK for more than 50 years and that meet a monetary value threshold (which can be fairly modest) require an individual export licence in order to be exported from the UK.
The process of applying for an export licence is as follows. You make an application (which contains details of the full provenance and ownership history of the artwork) to Arts Council England, who refer the work to an Expert Advisor. If the Expert Advisor objects to the export of the artwork, then the case is considered by the Reviewing Committee on the Export of Works of Art (RCEWA), who determine whether the work is a ‘national treasure’ on the basis that its departure from the UK will be a misfortune on one or more of the following three grounds (called the ‘Waverley Criteria’):
The work is closely connected to UK history and national life;
The work is of outstanding aesthetic importance; or
The work is of outstanding significance for the study of some particular branch of art, learning or history.
If the committee finds that the object meets one of the above criteria, a deferral period (called the ‘first deferral period’) is imposed to allow a UK purchaser (almost always a UK museum or gallery) a chance to express a serious intention to match the sale price (or an agreed value if no sale has taken place) and acquire the work of art. If a UK purchaser expresses a serious interest to acquire the work during this first deferral period, another deferral period (the ‘second deferral period) is imposed, giving the acquiring institution a chance to raise the funds necessary to purchase the work.
The export reviewing process can take up to a year to complete. Cases are heard by the reviewing committee normally within two or three months following the receipt of the objection to the export. The first deferral period typically runs for a period of between two and four months. The second deferral period typically lasts a maximum of six months, although if an object is exceptionally valuable the committee has discretion to impose an even longer deferral period to allow a UK purchaser to fundraise.
If no UK purchaser shows a serious intention to purchase a work by the end of the first deferral period however, the export licence is granted at that point. Similarly, if the potential UK purchaser fails to raise the necessary funds by the end of the second deferral period, the export licence is granted.
Often the export licencing process occurs when a work of art is sold in the UK and acquired by a foreign buyer who then wants to export their object. If the seller remains the owner (because the buyer hasn’t yet paid) the ‘matching offer price’ is the amount the seller would have received had the work been sold to the foreign buyer. If the buyer is the owner (because they have paid for the item) the matching offer amount is the amount they paid for it. If you are a buyer who intends on exporting a work that has been in the UK for over 50 years, you may wish to defer payment until an export licence has been granted. This is something that would need to be agreed with Sotheby’s prior to the sale.
The system in place tries to strike a balance between enabling a thriving art market, where buyers are able to purchase with confidence, and protecting the UK national heritage. Only a small number of items each year are referred to the Review Committee, and in even fewer cases are funds-raised successfully. Sotheby’s frequently represents clients whose objects have been referred to the Committee.
Currency fluctuations
Although the UK export licence applications are made in GBP, a foreign buyer may well have paid for the artwork in another currency. The export licence process can be lengthy, and currency fluctuations during that time can be a real concern to buyers. Since 2021, buyers who have paid in non-Sterling currencies can choose for the ‘matching offer price’ to be paid with the currency conversion as at one of the following three dates:
The date of the original sale;
The date of the export licence application; or
The date of the Reviewing Committee hearing.
Import considerations
If you wish to bring art into the UK, the import will generally be subject to a VAT charge of 5%. In order to benefit from this lower rate of VAT, the art will need to meet certain conditions and have the correct commodity code. There is generally no customs duty charged on imports of mainstream categories of art, for example, original oil paintings or pencil drawings.
Make sure that you have complied with any exporting obligations in the jurisdiction from which the artwork is being imported!
Practical considerations
We strongly recommend that your work is properly insured from the moment it is taken off the wall and placed onto a new one. In particular, we would recommend using a specialist fine art shipper for fragile pieces.
Sotheby’s can advise on shipping and arrange expert delivery of your works of art worldwide when either importing goods before a sale or arranging shipping and exporting on completion of a sale. Sotheby’s would be happy to speak to you about moving your art safely.
For any guidance on the import or export of artwork, please contact Forsters or Sotheby’s. In the next part of this mini-series, we will be looking at practical tips on how to maintain, insure and keep track of your artwork.
Please note that this briefing offers general guidance on the transportation of artwork. The circumstances of each case vary, and this note should not be relied upon in place of specific legal advice.
Felix Hale is a Deputy Director in Sotheby’s Tax, Heritage & UK Museums department. He works with some of the most significant estates and collections in the UK, working with clients on valuations, sales, offers in lieu of tax, and claims for Conditional Exemption. He is a member of PAIAM (Professional Advisors to the International Art Market, Vice-Chair of the next generation board) and a member of STEP (Society of Trust and Estate Practitioners).
If you would like to contact Felix, you can email him on [email protected].
Jo Thompson is an associate in Forsters’ Private Client team and part of Forsters’ Art and Cultural Property Group. She acts for UK and international clients, advising high net worth individuals, families, landed estates, family offices, trustees and beneficiaries on a range of estate, trust and tax planning matters. Her work includes succession planning for a number of living artists and advising on heritage property matters. She also acts for high net worth individuals and trustees holding significant art collections.
If you would like to contact Jo, you can email her on [email protected].
More Than Law Podcast host, Miri Stickland, is joined by various guests as they discuss the goings on in their departments, and what their days normally look like.
Episode 1 – Construction
Senior associates Daniel Burr and Dan Cudlipp and associate Lauren Hepburn join podcast host Miri Stickland to shed some light on the Construction team at Forsters. They discuss the best and worst parts of being a construction lawyer, exciting clients, and an average day in the life. The team also highlight the differences between contentious and non-contentious work and the key skills needed for success in each side of the team.
Non-contentious Tagline: The paperwork for the brickwork.
Contentious Tagline: Building your case when your building falls down.
Partner Anthony Goodmaker, associate Anna Penn and trainee Cameron Turnbull join podcast host Miri Stickland to explain why Forsters’ Commercial Real Estate department is more than just easements and covenants. The team run through an average day, give insight into the firm’s culture and identify key skills. They also share their own motivations for qualifying into CRE, and highlight the importance of keeping an open mind throughout your training contract as you may be surprised by the seat you enjoy the most.
Counsel Bryan Shacklady, senior associate Ashleigh Carr and trainee Joe May join podcast host Miri Stickland to give insight into the Dispute Resolution team at Forsters. They explain how no two days are the same and highlight the personal and professional skills needed to be part of this collaborative department. The team also stress the importance of attention to detail within their work, and provide examples of the unexpected topics they have had to become experts on.
