Property sector’s net zero 2050 target ‘will be missed’ – Edward Glass speaks to Property Week
24 February 2023
Views
Commercial Real Estate Senior Associate, Edward Glass, has contributed to Property Week’s latest commentary on how the majority of senior property industry leaders believe the government will fail to deliver a net zero property sector by 2050.
The British Property Foundation’s (BPF) new report, published in collaboration with JLL, has predicted that “existing net zero carbon policy is not sufficient to achieve the 2050 target.”
The report identifies the primary challenges blocking the industry’s decarbonisation progress, urging government to provide “clear long-term policies”, while a lack of clear financial incentive to support retrofitting was hindering net zero commitments.
Property owners and occupiers surveyed by the BPF also rated poor access to quality data as a major barrier, and the industry body has called on Whitehall to set out new data sharing policies, including mandating data sharing of energy consumption between property owners and occupiers of large commercial buildings.
Edward commented that it was time for government to “give the industry the regulatory certainty it craves.”
He pointed at government consultations on MEES thresholds and a first mandatory performance-based energy rating system which, despite years having passed, have still not progressed.
“Quite rightly, the BPF are calling this out”, he added.
This article was first published in Property Week on 23 February 2023 and is available to read in full here, behind their paywall.
Lockton Property Issues Seminar – overview of the UK industrials and logistics market
22 February 2023
News
On Wednesday 22 February 2023, Commercial Real Estate Senior Associate Paul Grayson attended the Lockton Property Issues Seminar at Lockton’s offices at The St Botolph Building, 138 Houndsditch, London.
As part of the Property Issues Seminar, Kevin Mofid of Savills provided an overview of the UK Industrials and logistics market. Paul shares his key takeaways from this overview as follows:
Logistics take up remains high – 2022 was the third highest year in history for logistics space take up (with 47 million square feet of space been taken up). 2021 was the highest ever year, closely followed by 2020 (noting that in both 2020 and 2021, take up exceeded 50 million square feet). 2022 may have represented a seemingly sharp drop in take up, however this is only when comparing 2022 with the “Covid amplification years” of 2020 and 2021;
Regions are generally outperforming the long term annual average in terms of uptake – when looking at the data from 2022 as against the long term annual average for uptake, most regions are outperforming the long term annual average. For example:
The East Midlands is 40% above the long term annual average;
Yorkshire is 75% above the long term annual average; and
The North West is 69% above the long term annual average.
In contrast, the South East is currently 17% below the long term annual average. This perhaps reflects the lack of availability of stock in this region, as well as sustained rental growth;
A potential opportunity for second hand stock – in 2022, only 22% of take up was for second hand stock. In comparison, 50% of take up was for “build to suit” buildings. This perhaps reflects a flight to quality, however due to the rising cost of debt, build to suit schemes are becoming harder to fund. This may lead to an increase in demand for existing buildings;
The EPC timebomb for second hand stock – in contrast, a number of existing warehouse buildings risk becoming stranded assets due to the upcoming changes to the minimum standards required by the MEES Regulations. 90% of warehouses in the UK below 100,000 square feet currently have an EPC of C or below;
The supply chain faces multiple challenges – the supply chain faces numerous global challenges in the future. For example:
Chinese labour costs have risen by 250% since China joined the WTO in 2001;
One quarter of global trade is carried out with high-risk countries; and
International trade accounts for 20 – 30% of global emissions.
Manufacturing uses on the rise – 2022 saw the highest amount of warehouse space ever taken up in relation to manufacturing uses such as life science R&D, automotive production and battery production; and
The logistics sector will always be in demand as it is a necessity – despite challenging economic conditions, the logistics sector will continue to be the backbone of the country. Warehouses should be viewed as places of national infrastructure which are absolutely necessary in order to keep the country moving.
We are delighted to announce that Forsters has been nominated for the Real Estate Law Firm of the Year Award at the YN Property Awards 2023.
The annual YN Property Awards celebrate industry achievements across a selection of categories and raise vital funds for Norwood, the oldest Jewish charity in the UK. Their work provides a lifeline to children and families in crisis, as well as lifelong support to people and their families with learning disabilities and autism.
The nomination bolsters the firm’s market-leading reputation and recognises the quality and complexity of the work carried out across our real estate team.
Head of Commercial Real Estate, Andrew Crabbie, commented: “We are delighted to have been shortlisted for this award. Forsters is, and will always remain, a firm with real estate at the centre of its practice so it is incredibly pleasing to receive this impartial recognition of the team’s work.”
The winner will be announced at the Norwood dinner on 20 February.
Chris Armstrong of McDonald’s Restaurants and Commercial Real Estate partner Vicki Towers join podcast host Miri Stickland to talk through Chris’s experiences managing the roll out of rapid EVCPs across McDonald’s UK drive-through restaurant portfolio.
The Taxation of Heritage Assets: Rebecca Meade writes for ThoughtLeaders4
9 February 2023
Views
Private Wealth Senior Associate, Rebecca Bion, has authored an article for the ThoughtLeaders4 Private Client Tax Magazine entitled ‘Saving heritage assets for the nation whilst saving tax – the taxation of heritage assets’.
In the piece, Rebecca covers the acceptance in lieu (“AIL”) scheme, that allows taxpayers to give ‘pre-eminent’ assets to qualifying public institutions in payment of inheritance tax. She goes on to address what is considered a ‘pre-eminent’ asset, provides an example of the AIL scheme in practice, and explains the various other tax reliefs available for national heritage assets.
A tale of two halves… – Victoria Towers speaks to Logistics Manager
9 February 2023
Views
“The disconnect between the industrial logistics investment market and the industrial logistics occupier market seems to be at its greatest, following a tumultuous year but what does this mean for occupiers going forward?”
Partner and Co-Head of Industrial & Logistics, Victoria Towers, has provided expert commentary to Logistics Manager magazine on the growing discrepancy between the sector’s occupier market and investment market; how the former remains strong, but the latter has nosedived.
Towers describes how “We started the year [2022] in a beautiful world of high demand and a buoyant supply pipeline. Focus was on forward fundings, which meant funds were willing to pay handsomely for land in advance of development starting on site. Developments progressed well and contractors were robust. It was a market that seemed to be delivering for developers, funders, and tenants alike.”
The article, which includes additional commentary from other leading figures in the Industrial & Logistics sector, summarises the impact on the market of global factors such as the pandemic and Russia’s invasion of Ukraine, the increased cost of borrowing and the likelihood of a resultant slump in occupier demand. The article concludes with a look to the year ahead; 2023’s forecasted recession and prospective periods of both difficulty and opportunity for occupiers.
This article first appeared in the February 2023 edition of Logistics Manager magazine, it is available here.
This case was heard, in respect of two Jersey Law Trusts, in the Privy Council on appeal from both the Jersey & Guernsey Courts of Appeal.
The retiring trustee (RT) sought to rely on the indemnity in the Deed of Retirement and Appointment (DORA) in respect of its claim from the trust fund in relation to its significant liability. The question at stake was whether RT’s claim should rank in priority to other creditors and subsequent trustees. If all the liabilities were justified, then the trust would be “insolvent”. RT argued that as their indemnity was the first in time, they should recover the whole of the trust fund (which was in any case insufficient to cover its liability). If they had no such priority, then RT would recover significantly less than the full value of the trust fund, and be more substantially out of pocket in view of other trustees and creditors’ claims.
This issue had not been decided before anywhere in the world.
Decisions
The Jersey Royal Court said that RT had no priority and that all claims were to be on a pari passu (ie rateable) basis. The Jersey Court of Appeal reversed this saying that a former trustee’s right of indemnity and lien ranks in priority to later claims. The Privy Council took the case on the priority issue and the status of a lien under Jersey law. It reversed the Jersey Court of Appeal’s decision and decided that:
The lien conferred by the right of indemnity is not a form of security (so no priority);
The trustee has a proprietary interest in the trust assets;
The lien gives a trustee priority over the interests of beneficiaries;
Trustees’ claims were to be dealt with on a pari passu basis – not first in time;
The trustees’ indemnity covers costs of proving a claim.
Consequences
This decision has some potentially dramatic consequences for retired trustees, existing trustees and future trustees. Even though most trusts will not be “insolvent”, it will affect the taking on of liabilities by trustees, and their approach on taking on a trusteeship and retirement of a trustee. Some of the consequences are:
DORAs will be much more complex to negotiate, as retiring trustees will want to try to secure priority in respect of their indemnity. But why would a successor trustee agree to that?
Retiring trustees may now want to take a charge and/or possession/retention/ringfenced amount over trust assets on retirement. Some trust laws allow that; some do not; it may have to be specifically provided in the trust deed.
Incoming trustees will be much more vigilant over inspecting trust accounts and understanding potential liabilities.
New trustees will have one eye on their ultimate retirement or removal and will not want to give any priority to the then retiring trustees.
A trustee potentially the subject of future removal may need to secure their position when taking on the trusteeship.
Chains of indemnities may become more common once again.
Trustees will be reluctant to take on any third party liabilities, as creditors will want absolute security ahead of any past or present trustee’s indemnity.
Trust liquidity will be an increasingly focussed issue.
Incoming trustees will want third party commercial or lending liabilities paid off or terminated before taking on the trusteeship (but taking into account existing trustee indemnities).
Third party contracts should be novated to the incoming trustee.
Incoming trustees may find that outgoing trustees seek to prevent them incurring liabilities to preserve the outgoing trustee’s indemnity & lien.
Trustees still have to be mindful of their obligations to beneficiaries!
Thus all trustees will need to take these issues into account in the future. It is likely that, as this is a Privy Council decision, it will have relevance to all trust jurisdictions around the world.
On 1 February 2023 the Supreme Court handed down its judgment in the ongoing nuisance claim between the residents of Neo Bankside and the Tate Gallery relating to the public viewing gallery situated in the Blavatnik Building at the Tate Modern.
Lord Leggatt, who gave the leading Judgment (with which Lord Reed and Lord Lloyd-Jones agreed) decided that the Tate’s use of the viewing gallery does give rise to liability to the residents under common law nuisance and that the case should be remitted to the High Court to determine the appropriate remedy. The Judgment, which runs to 168 pages re-asserts the principles of the law of nuisance and considers its application to the facts and the decisions of the Courts below.
Background
The viewing gallery is situated on the 10th floor of the Blavatnik Building and affords a 360-degree panoramic view of London to visitors of the Tate Gallery at no cost. Around 5 and ½ million people visit the Tate Gallery each year and of those, it was estimated that around 500,000-600,000 visit the viewing gallery with a limit of around 300 on the gallery at any time. The Claimants all own flats that are situated in a development opposite known as Neo Bankside. The interior of the flats can be viewed easily from the south side and south western corner of the viewing gallery.
The Courts below
The Judge at first instance found on the facts that a significant number of visitors displayed an interest in the interior of the flats either by peering, photographing, waving or using binoculars to view. He considered this to be a material intrusion into the privacy of their living accommodation using “privacy” in its every day sense. Despite stating that such intrusive viewing could, in principle, give rise to a claim in nuisance he concluded that the intrusion experienced in this case did not amount to a nuisance for two reasons. Firstly, the claimants had properties with glass walls and secondly, because they had failed to take remedial measures to protect their privacy.
The Court of Appeal found that this reasoning involved material errors of law and that, had the principles of nuisance been applied correctly, the residents’ claim should succeed. Nevertheless, they then went on to dismiss the appeal. Their reason was that overlooking, no matter how oppressive, cannot in law count as a nuisance.
Supreme Court Decision
Lord Leggatt considered that whilst the Court of Appeal was right to hold that the first instance Judge incorrectly applied the law, it was wrong to decide that the law of nuisance does not cover a case of this kind, which he considered to be a straight forward case of nuisance. The notion that visual intrusion cannot constitute a nuisance is not supported by precedent and indeed the relevant authorities positively support the opposite conclusion. He concluded that in applying the well settled legal tests, the claim ought to succeed. He suspected that what lay behind the rejection of the claim by the Courts below was “a reluctance to decide that the property rights of a few wealthy property owners should prevent the general public from enjoying an unrestricted view of London and a major national museum from providing public access to such a view.”
This decision is a robust re-assertion of the protection afforded by the common law to privacy in the home. As a result, there was no need to extend the common law to accommodate the right to privacy guaranteed by Article 8 of the ECHR.
Natasha Rees, Senior Partner and lead lawyer advising the Claimants, said “Our clients are both pleased and relieved that nearly six years after they began their claim the Supreme Court has now found in their favour. Lord Leggatt, giving the majority judgment, recognised how oppressive it can be to live “under constant observation from the Tate’s viewing gallery for much of the day, every day of the week…much like being on display in a zoo.” Our clients now look forward to working with the Tate as valued neighbours to find a practical solution which protects all of their interests.”
