Forsters promotes five new partners in latest promotions round
25 March 2025
News
Forsters, the leading London law firm, today announces the promotion of five partners with effect from 1 April 2025.
The newly promoted partners are:
Joanna Brown, Commercial Real Estate
Matthew Evans, Planning
Guy Mawson, Family
Maryam Oghanna, Trust and Estate Disputes
Thérèse Marie Rodgers, Construction Disputes
Natasha Rees, Senior Partner at Forsters, said:
“This year’s promotions reflect our commitment to strategic growth. We are really pleased to welcome five outstanding lawyers to the partnership, each a leader in their field, dedicated to our clients and instrumental in shaping our firm’s success. Investing in top talent strengthens our market position and ensures we meet the rising demand for first-class legal counsel in an increasingly complex world.”
Emily Exton, Managing Partner at Forsters, said:
“The fact that we are able to promote five talented lawyers in separate practice areas demonstrates that we are performing strongly across the firm. With the arrival of Immigration partner Tracy Evlogidisin November 2024 and five newly promoted partners, we enter the new financial year in a robust position and in an optimistic frame of mind.”
Meet our new partners:
Joanna Brown joined Forsters’ Retail and Leisure team in 2020 with her team from Orrick. She advises large scale institutional landlords on commercial property matters including asset management, redevelopment and refinancing of shopping centres, retail parks and industrial estates. She has in-depth experience, notably having worked on the top 20 shopping centres in the UK. Her contributions have been instrumental in boosting the firm’s market-leading reputation in retail focused real estate work.
Matthew Evans joined Forsters in 2015 from the London Borough of Hackney. A Legal 500 “Leading Associate” (2025), he is recognised for his market-leading expertise in planning law. His practice covers all aspects of planning, with a particular focus on large- scale residential-led development. He also advises on infrastructure agreements, the Community Infrastructure Levy, and has a growing practice advising on biodiversity net gain. Beyond his practice, Matt plays a key role in Forsters’ Graduate Recruitment Programme and mentoring scheme and sit as a board member of Baker Street Quarter.
Guy Mawson joined Forsters in 2021, after working in top-ranked family law teams at leading media-based firms. Recognised as a “Rising Star” in Spear’s 500, he advises on all aspects of private family law with standout expertise in high net worth divorce cases. His worth often involves assets and trust structures and multijurisdictional elements.
Maryam Oghanna joined Forsters’ Trust and Estates Disputes team in 2021 from Herbert Smith Freehills where she was a commercial litigator. Recognised in the Chambers HNW Guide, and as a “Rising Star” in the Legal 500, she advises on the full spectrum of private wealth disputes. Maryam represents high net worth individuals, trustees and professionals, executors, protectors, family offices and beneficiaries in complex, multijurisdictional disputes, with a particular focus on clients in the Middle East.
Thérèse Marie (TM) Rodgers joined Forsters in 2023 from White & Case, bringing broad experience in construction disputes. TM advises developers, building owners, main contractors, subcontractors and consultants on all forms of dispute resolution, includingmediation, adjudication, expert determination, litigation and arbitration. While she specialises in commercial real estate, she also has significant sector experience in oil and gas, hydropower, renewable energy and infrastructure.
It all starts with planning – ‘Future-proofing’ section 106 agreements
25 March 2025
News
Back in 2020 there was talk of section 106 agreements being scaled back (and, in some quarters, scrapped entirely) following the publication of the ‘Planning for the Future’ White Paper and plans to introduce a new Infrastructure Levy. The Levelling-up and Regeneration Act 2023 even made provision for the introduction of the Infrastructure Levy, which could have been the beginning of the end for section 106 agreements.
However, with plans for the Infrastructure Levy having been dropped by the Labour government last year in favour of improvements to the existing system of developer contributions, it looks as if section 106 agreements are here to stay for the foreseeable future.
In this article, I consider the ways in which, with the right drafting, section 106 agreements can be ‘future proofed’ and set out some practical ways in which issues can be avoided down the line. Even a straightforward deed of variation can take a significant amount of time to negotiate (particularly where local planning authorities (“LPAs”) are overstretched, and on more complex sites where there are multiple landowners and mortgagees) and the costs can mount up.
The following steps are useful tips and clauses to include in planning agreements to avoid the need for deeds of variation down the line. However, there is no ‘one size fits all’ approach to drafting planning agreements, so not all of what follows will be appropriate in all circumstances:
1. Getting early legal input
It is worth stressing the importance of getting early legal input. By ‘early’ I mean, where possible, before an application goes to committee (or in the case of delegated decisions, before the first draft is issued by the Council) – not least because seeking to amend the heads of terms post-resolution to grant permission could mean going back to committee or a risk of judicial review if material amendments are agreed without returning to committee.
2. Automatically binding s73 permissions
The need for a deed of variation can often be avoided by including a clause providing for future permissions granted under section 73 Town and Country Planning Act 1990 (as amended) to automatically be bound by the obligations in the section 106 Agreement. Clearly, if the extent of scheme changes proposed by the section 73 application are such that additional and/or varied planning obligations are necessary to make the development acceptable in planning terms, there is no avoiding a deed of variation. There can, however, be disadvantages to the inclusion of such a clause depending on the circumstances which our planning team would be happy to advise further on.
3. Affordable housing cascade mechanisms
In recent years, there has been a sustained reduction in the number of registered providers (“RPs”) actively participating in the market to acquire section 106 affordable homes. Indeed, research conducted by Savills last year (‘The challenges of unlocking Section 106 delivery’) found that 53% of the Housing Associations surveyed reported that they no longer intend to acquire section 106 homes or are reducing their requirements. House builders are consequently finding it increasing difficult to fulfil their section 106 affordable housing obligations. All too often section 106 agreements are rigid and provide no flexibility in the event that the policy compliant mix of affordable housing is not deliverable due to reduced demand from RPs. The tide is, however, starting to turn and we are gradually seeing more councils agreeing to the inclusion of ‘cascade mechanisms’. Such mechanisms provide that if a suitable registered provider cannot be found within a prescribed time frame, the developer may for example:
provide an alternative tenure of affordable housing, which might be more acceptable to an RP or which does not involve an RP at all (such as discounted market sales or discounted market rent);
offer the affordable units to the Council; or
as a last resort pay a commuted sum in lieu of on-site provision, which the Council can in turn use to secure the provision of affordable housing within its administrative borough.
Including a cascade mechanism at the outset can help developers secure funding (as lenders can be more confident that the scheme is deliverable) and stop sites stalling in the event that an RP cannot be found. Sadly, we are some way off cascade mechanisms for affordable housing becoming the ‘norm’ though.
4. Mechanism for repayment of unspent contributions
It is increasingly common for section 106 agreements to include a mechanism for repayment of contributions where they are unspent and/or uncommitted after a period of time (usually between 5 and 10 years). In the absence of a clawback provision, caselaw has established that a refund may be secured in limited circumstances where a term can be implied into the agreement. However, it is best practice to expressly include a clause to avoid having to rely on such arguments – not least because research conducted by the Home Builders Federation last year estimated that local authorities in England and Wales are sitting on over £6 billion in developer contributions from section 106 agreements, 25% of which it is estimated have been held for more than 5 years (with some councils holding funds for over 20 years). The full report ‘Unspent Developer Contributions – Section 106 and Community Infrastructure Levy funds held be local authorities 2024‘, makes for an interesting, if not somewhat disappointing, read.
A ‘use it or lose it’ clause also acts as a further incentive for the council to apply the money for the purposes specified in the agreement (which, after all, were deemed ‘necessary to make the development acceptable in planning terms’).
To avoid future (potentially costly) disputes as to who is entitled to any repayment, the section 106 agreement should clearly set out who contributions should be repaid to (for example, to the owner at the date repayment becomes due or the owner that originally made the payment).
5. Broad carve outs for statutory undertakers
Most section 106 agreements include a carve out so that the obligations are not enforceable against specified statutory undertakers. Often this is limited to those supplying electricity, gas, water and drainage services. However, consideration should be given to whether this should extend to other statutory undertakers, such as, telecommunication providers and public transport providers.
6. Mortgagee in possession clause (even where there is no current mortgagee)
Although there may not be a mortgagee in place when the section 106 agreement is entered into, there may well be a mortgagee at some point in the future. It is therefore sensible to include a standard mortgagee in possession clause from the outset to avoid requests from future mortgagees who made insist on one being included, resulting in the need for a deed of variation.
7. Force majeure clauses
The inclusion of ‘force majeure’ clauses (which excuses a party from fulfilling its obligations when unforeseen circumstances outside of its control make performance impossible, illegal or commercially impractical) in section 106 agreements became increasingly common during the Covid-19 pandemic. Post-covid there seems to be a return to the status quo and force majeure clauses are back to being something of a rarity in section 106 agreements, but you may wish to try and include one.
8. Automatic cancellation of local land charges entry
Providing for the automatic cancellation of any local land charges by the Council once all of the obligations have been satisfied in full, can avoid issues/delays when you come to dispose of a site. I have lost track of the number of times when carrying out due diligence on the acquisition or sale of a Property that the local land charges search reveals a section 106 agreement and it is not clear whether the obligations have been satisfied in full. If the local land charge entry has automatically been removed, it avoids the seller having to dig out evidence to demonstrate that all the obligations have been complied with.
For more information on the issues raised in the post (or on any other Planning matters) you can get in touch with our team here.
Continued recognition for Forsters in Spear’s Property Index 2025
20 March 2025
News
Lawyers in our Real Estate practice have been recognised once again in Spear’s Property Index 2025. This year includes two new additions to the rankings: Senior Partner, Natasha Rees, for her extensive expertise in ‘handling contentious leasehold enfranchisement cases and high-stakes property matters’ and Senior Associate, Poornima Andrews, for her ability to deliver ‘successful outcomes even in the most challenging circumstances’.
The Index features the industry leaders advising private clients on prime property. With more lawyers listed than any other firm, the Index is testament to our investment in curating a team of residential property specialists with the ability to advise clients on all of the legal particularities and peculiarities they face on their property journey.
The Negative Pledge: prohibition without the lender’s prior consent (at their…not so…sole discretion)
19 March 2025
News
(Macdonald Hotels Ltd v Bank of Scotland Plc)
The negative pledge in finance documents seeks to give a lender absolute discretion over a borrower granting further security over its assets, to protect the lender’s own security, or so we thought, until Macdonald Hotels Ltd v Bank of Scotland Plc shined a spotlight on the topic and called into question this absolute discretion.
Factual Background
A borrower owning a number of hotels claimed it had been forced to dispose of three of its hotels by the defendant bank acting in bad faith.
The bank had provided lending services to the borrower with security taken over the borrower’s hotel portfolio. Following the financial crisis in 2008/09 the bank decided to reduce its loan book size including by disposing of assets and paying down debt.
The borrower wanted to refinance another one of its hotels rather than dispose of the hotels financed by the bank. The finance documents, however, contained the usual negative pledge, being a restriction on the borrower granting security over its assets “without the prior written consent” of the bank. After lengthy commercial discussions, the bank ultimately refused its consent and the hotels financed by the bank were then sold, with the borrower claiming loss of opportunity as a result.
Braganza duty
The borrower argued that the discretion of the bank to refuse consent to granting third party security should be subject to the implied duty set out in the Braganza v BP Shipping Limited [2015] case, being that a lender should:
act in good faith and not arbitrarily or capriciously in exercising its discretion and exercise its discretion consistently with its contractual purpose;
take into account all relevant considerations and not take into account any irrelevant considerations; and
not use the discretion for an improper purpose.
The bank countered that the discretion for consent was an absolute right of the bank and even if the Braganza duty was implied, it had not breached the duty in reaching its decision to refuse consent.
Court Decision
The High Court judge held that the Braganza duty was implied in the agreements. It was noted by the judge that the prohibition expressly stated that such restriction would not apply with the bank’s prior written consent. It followed, therefore, that the parties agreed that the borrower might request that consent and that “No reasonable person with all the background knowledge of the parties could have thought the Bank was entitled simply to refuse to consider the request or refuse it for reasons unconnected with its commercial best interests. Had that been the parties’ intention then there would have been no purpose in inserting the provision concerning permission, because it is always open to a party to a contract to request a variation to it … A more cautious lender might have omitted the express permission qualification and left the borrower to seek a variation to the agreement.”.
Although ultimately, on the facts of the case, the judge held that the bank had acted in accordance with the Braganza duty and its own legitimate interests, and was entitled to refuse its consent to the borrower, the express inclusion of the lender’s consent right actually limited the lender’s ability to refuse its consent.
Implications
The consequences for the drafting in finance documents (and potentially all commercial arrangements) are potentially significant. Adding any sort of proviso along the lines of ‘without the prior consent of the lender’ may weaken a lender’s right to refuse consent to a disposal or granting of security (and arguably, any other restrictions).
There are also views that adding caveat wording to a consent proviso, such as ‘in the sole discretion of the lender’, would also be interpreted in a similar way and therefore not enough to argue that the Braganza duty should not apply.
Although the case here did not cover a clause with drafting that consent should not be ‘unreasonably withheld’, the judgment suggests that there is always a duty on a lender to not act unreasonably in withholding its consent where any proviso for requiring prior consent is included.
Considerations for Lenders
In reality, a lender is unlikely to ever make a decision that is against its own commercial interests (and the court made clear that a lender only needs to consider its own commercial interests and not those of the borrower).
However, a lender’s right to refuse consent to a disposal and a negative pledge are standard and fundamental rights for which it will likely want to retain its full discretion to protect its security interests. As such, there are steps lenders can take to protect their position following this judgment:
Where genuine sole discretion on consent is imperative to a lender, it is vital that they do not accept any caveat along the lines of ‘except with the prior consent of…’ (sole discretion or otherwise). This exclusion would support a lender’s argument that it is able to refuse consent, even if arguably such refusal is not in its best commercial interests.
Lenders should also consider recording in detail any decisions made regarding consents and how such conclusions were reached, so they’re able to evidence that the consents are reasonable and in their own commercial interests.
The judgment has certainly provided food for thought for both lenders and their legal advisors alike as to which restrictions are most important to a lender to retain absolute control over and how these clauses will be drafted from now on to protect such control.
Disclaimer
This note reflects the law as at 19 March 2025. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.
Lifecycle of a Business – When insolvency beckons: a company’s perspective – reviewable transactions
18 March 2025
News
Setting up and running your own business is an amazing achievement. It requires vision, creativity, motivation and stamina. On occasion, it can even bring you fame, riches and fortune. But it can also result in reams of paperwork and cause sleepless nights. And as someone once said to me about children “It doesn’t get easier, it just changes”, so the same can be said for your business throughout its lifecycle. From setting up to exit, it will force you to consider issues that you might not previously have known anything about and it will need you to make many decisions, sometimes very quickly. What it certainly is not is mundane.
With this in mind, the corporate team at Forsters, together with some of our specialist colleagues, has written a series of articles about the various issues and some of the key points that it may help you to know about at each stage of a business’s life. Not all of these will be relevant to you or your business endeavours, but we hope that you will find at least some of these guides interesting and useful, whether you just have the glimmer of an idea, are a start-up, a well-established enterprise or are considering your exit options. Do feel free to drop us a line or pick up the phone if you would like to discuss any of the issues raised further.
We’ve already discussed various topics, including funding, employment and commercial contracts, but it’s now time to discuss when things go wrong…
When insolvency beckons: a company’s perspective – reviewable transactions
We’ve recently discussed a director’s position when a company is facing financial difficulties. In this article, we consider transactions which might be reviewed if a company becomes insolvent.
Once a company enters formal insolvency, it is possible for historic transactions to be reviewed and challenged in certain situations, including where there has been a:
Preference;
Transaction at an undervalue; and/or
Transaction which defrauded creditors.
Preferences
Preference transactions occur when, prior to insolvency, a company unfairly favours one creditor over others by making payments or transferring assets that would place the favoured creditor in a better position if the company becomes insolvent, than they would have been otherwise.
For there to be a preference, the transaction must involve a company creditor or a guarantor of the company’s debts or liabilities.
Secondly, there must be a clear improvement in the creditor’s position as a result of the company’s actions. The company must have done something or allowed something to happen that placed the creditor in a more favourable position than they would have been in if the transaction had not occurred.
The third element relates to the intention behind the transaction. There must be evidence that the company actively intended to place the creditor in a better position. It is important to note that this intention is presumed if the transaction benefits a connected party, such as a director, family member, or associated business.
The transaction must also have occurred within a specific period before the company’s insolvency. For non-connected parties, this period is six months, while for connected parties, it extends to two years.
Lastly, the company must have been unable to pay its debts when the transaction occurred or have become unable to pay its debts as a direct result of the transaction.
Transactions at an undervalue
A transaction at an undervalue occurs when a company transfers assets or enters into agreements for significantly less than their true market value and the company was either unable to pay its debts at the time of the transaction or became insolvent as a direct result.
Timing is crucial; the transaction must have taken place within the two-year period prior to the onset of insolvency.
Intent also plays a significant role in determining whether a transaction is at an undervalue. If the transaction was entered into with the purpose of putting assets out of reach of creditors or prejudicing their interests, it is more likely to be considered a transaction at an undervalue. Courts often assess whether the transaction was made in good faith or if there were reasonable grounds to believe it would benefit the company or individual involved.
Transactions defrauding creditors
A transaction defrauding creditors occurs when a company transfers assets for less than their market value, with the aim of moving the assets beyond the reach of its creditors or otherwise harming their interests. While there must be an intention to place assets beyond the reach of creditors or adversely affect their interests, this intention does not need to be the primary reason for entering into the transaction.
Unlike other voidable transactions, there is no specific time limit for challenging a transaction defrauding creditors (although the Limitation Act 1980 will apply), and the company does not need to be insolvent at the time of the transaction or become insolvent as a result of it.
Additionally, it is not necessary to prove fraud in a technical sense, but there must be evidence of intent to harm creditors’ interests, as stated above. Claims can be brought by any affected party, not just insolvency practitioners, and can be initiated at any time.
Remedies
When a successful claim is made in relation to a reviewable transaction, the courts have a range of remedial measures at their disposal.
The court may order the return of property or sale proceeds to the company, release or discharge security provided by the company, or require new security to be given. Obligations that were previously released or discharged can also be reinstated, and new obligations may also be imposed.
In cases involving transactions at an undervalue or those defrauding creditors, the court may void the transaction entirely. This typically involves restoring assets to their original state or ordering payment equivalent to the value of the assets transferred.
Directors and other involved parties may face personal liability for these transactions, which can include financial penalties, such as fines or obligations to repay amounts to the company or its creditors. They might also be banned from serving as directors for periods ranging from two to 15 years, and in severe cases, they could face imprisonment.
Such offences can also lead to broader consequences, including damage to the company’s reputation and costly legal proceedings, ultimately impacting its financial stability.
Practical considerations
To reduce the risk of a successful claim in relation to a reviewable transaction, companies should implement a comprehensive set of practices, such as:
1. Fair Market Value and Professional Valuations:
Ensure all transactions are conducted at fair market value. Obtain professional valuations for assets being sold or transferred, particularly for substantial transactions.
2. Financial Transparency and Documentation:
Maintain financial statements, cash flow forecasts, and balance sheets to demonstrate the company’s solvency at the time of transactions. Keep thorough records of all transactions, including contracts and correspondence.
3. Corporate Governance and Board Approval:
Establish clear and consistent payment policies. Obtain consent and approval from the board of directors before transferring or selling business assets and consider including the justification / rationale for the transaction in the board minutes.
4. Equal Treatment of Creditors:
Ensure all creditors are treated fairly and avoid preferential treatment. Be particularly cautious about transferring assets to connected parties such as directors, family members, or associated businesses at prices below true value, as these transactions are more likely to be scrutinised.
5. Seek Professional Advice:
Consult with legal advisors and financial experts before entering into major transactions, especially if the company is experiencing financial challenges. Seek professional advice as soon as financial distress becomes evident. This can help evaluate the merits of a transaction.
6. Declaration of Solvency:
Third parties to transactions shouldconsider requesting a declaration of solvency from the company transferring the assets. This will provide some comfort that the company is solvent at the time of the transaction.
Disclaimer
This note reflects the law as at 14 March 2025. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.
Forsters advises on Joint Venture between Invesco Real Estate and Marchmont Investment Management
14 March 2025
News
Forsters’ Commercial Real Estate team has advised a new Joint Venture between Invesco Real Estate and Marchmont Investment Management in its first acquisition of a portfolio of industrial and logistics assets in strategic locations across the UK.
The new Space Industrial platform has been established to acquire, manage and re-position multi-let assets with a key focus on ESG-credentials, offering value-add opportunities. It has been seeded with funding provided by Marchmont and Invesco Real Estate Europe Fund III to acquire the portfolio comprising four assets in Milton Keynes, Sheffield, Manchester and Pershore.
Forsters’ role included advising the client on all commercial real estate aspects of the acquisition, including carrying out title and tenancy due diligence, negotiating all contractual documents, co-ordinating tax, construction, planning and real estate disputes where required.
As the first four assets to be acquired by the fund, the work incorporated extensive collaboration with the Jersey trust advisors. Subsequently, the properties have been secured against debt finance, necessitating a financing transaction with the firm’s Banking and Finance team.
Cam Fraser, CIO of Marchmont said “The UK multi let industrial (MLI) market has repriced more rapidly than others, presenting an opportunity for Space Industrial to invest in high-quality, income-producing MLI real estate, promising strong risk-adjusted returns. The venture will target assets between £10m-£100m and will look to provide capital solutions for Industrial Real estate platforms.”
International Women’s Day: A Reflection on Gender and Divorce
7 March 2025
News
On Thursday 6 March, the University Women’s Club hosted a talk on Gender Pay Equity and Financial Empowerment for Women Lawyers.
Rosie Schumm, Partner in the Family Team at Forsters, spoke about how women are often impacted by divorce more so than men. Legal and General conducted a study in 2024 which showed that women are more likely to face financial struggle post-divorce (24% vs 18%) with their annual household income taking a serious financial hit in the first year, falling by an estimated 41% compared to just 21% for men.
Historically, women have taken on a disproportionate amount of family responsibility over the course of their marriage often to enable their husband’s to further their careers. Despite changing attitudes and an increase in women’s financial independence, it was recorded in 2024 that men are still likely to be the main breadwinner in families (70% vs 21% of women), and earn more. This gap in earning potential, coupled with the average age women divorce, typically in their mid-40s, can place women at a significant disadvantage when negotiating a financial settlement and in their ability to build a career post-divorce.
In cases where (often) the wife has given up work to be the homemaker/stay at home parent, it is common for spousal maintenance to be awarded. This has typically been provided on a “joint lives basis”, meaning that (often) the husband has an obligation to pay maintenance until either the recipient remarries, the payer or payee dies or the court makes a further order. However, since the case of Waggott v Waggott [2018] EWCA Civ 727 in which the court rejected the wife’s appeal to increase her annual maintenance payment from her husband, there has been a shift in the court’s focus away from awarding spousal maintenance towards achieving a clean break.
The Law Commission published a recent scoping report that reviews the law derived over 50 years ago concerning financial remedies on divorce. One area being considered is whether there should be a cap on the term of spousal maintenance payments. Baroness Deech is a prominent advocate for reform and proposes a limited term of spousal maintenance of 5 years. For her, a maximum term would provide more certainty than the law at present, which allows a judge to decide the level and term of maintenance at their discretion, and would foster greater financial independence for, and empower, women. However, there are concerns that a limited term could impact those in need for long-term maintenance by fettering the court’s discretion.
The gender pensions gap must also be considered. It is typical for pension accrual to be lower for women than men (on average £23,000 for women vs £60,000 for men) as women are more likely to be out of work. For those in work the gender pay gap coupled with increased part-time work to cater for caring responsibilities and lower pay on maternity, narrows their ability to make pension contributions. Perhaps more concerning, is that women on divorce are more likely to waive their rights to their husband’s pension (30% of women vs 17%) leaving women without the resources to fund their retirement. It is imperative anyone divorcing understands the importance of pensions as a financial asset on divorce and considers legal and financial advice.
Forsters’ Family team support female clients both homemakers and high earners to achieve a fair outcome on divorce. As a firm more widely, we are proud of our gender pay gap statistics:
53% of partners at Forsters are female;
64% of associates are female. Women made up 61% of employees in the highest paid quarter;
Our Managing Partner, Emily Exton, and Senior Partner, Natasha Rees are both women;
Two out of four of our Family Partners are women (Head of Family at Forsters, Jo Edwards, and Partner, Rosie Schumm); and
5 out of 8 operational management heads are female.
Next Generation Buyers – Supporting your family onto the property ladder
7 March 2025
News
You might like to think, as a parent, that having seen your son or daughter through school and university (often at huge expense) you can sit back and relax a little and plan for your own retirement. Unfortunately, all too often that is not the case and instead you face the next significant financial hurdle; helping him or her onto the housing ladder. While the current generation of 50-somethings might have been able to get to acquire their first property with minimal or no help from their parents that is now nigh-on impossible for the current generation, unless they are either extremely successful financially or are prepared to wait to buy their first home until they are in their mid to late 30s. So, the solution for those fortunate enough to be able to do so is to resort to the so- called “bank of mum and dad” or the “bank of family”.
For those who are considering embarking on that process what are the legal and financial pitfalls and how best should they proceed? This article seeks to provide some guidance on those points.
Legal and Financial Considerations
If parents (or grandparents) are going to assist with the purchase of a property, there are a number of questions that need to be considered before proceeding. These include: whose name is the property going to be in, how much do you trust them, what restrictions should you put on the title, if any, how are you/they going to finance it, can you or they get a mortgage, how do you minimise stamp duty and other taxes and, even, what happens in the event of their death, to name a few. Unsurprisingly there is no simple answer to any of these questions and no simple one-size-fits-all solution. Each family is likely to have its own circumstances. Having said that there are some general points and advice that can be given.
Ownership
Generally, if the purpose of the exercise is to help the next generation to acquire a property then it makes sense for the property to be in their name, whether it be in the individual name of one son or daughter or the joint names of siblings. By putting the property in their name you ensure that any increase in value accumulates to them rather than the parent, and if they are able to show it is their principal residence they will potentially benefit from the principal residence exemption from Capital Gains Tax (CGT). They may also benefit from the first-time buyer’s exemption from Stamp Duty Land Tax (SDLT). If they are able to obtain a mortgage the lender is likely to expect and require the property to be in their name.
But all this potentially comes at the price of a loss of control. Do you really trust your young and inexperienced son or daughter to have complete control over the property and to be able to sell it and dissipate your hard-earned savings without reference to you? Even if you trust them, what influence might they fall under from others? Similar questions do of course arise in relation to marriage where the solution may lie in a prenup agreement. Fortunately, in the case of property, a relatively easy solution is at hand in the form of a legal charge. While the parents may give part of the cost of the property to the son or daughter outright some or all of the funds can be provided, at least initially, by way of a loan. A loan does not necessarily have to bear interest, and probably would not do so in these circumstances. Over time the loan can be reduced or written off by further gifts from the parent. The existence of the loan will be noted on the legal title to the property making it impossible for the property to be sold or charged further without the consent of the parent.
An alternative might be for the parent themselves to purchase the property. Except where the children are very young this is unlikely to be so attractive. Any increase in value of the property belongs to the parent and is liable to CGT and/or IHT accordingly, and the parent is almost certainly going to have to pay the SDLT surcharge of 5% payable on the acquisition of second homes. While full control is retained and you will have succeeded in providing a home for your offspring you will not really have helped them to progress onto the property ladder.
Financing the Purchase
If your son or daughter has reached the stage where they are able to obtain a mortgage themselves then clearly it may make sense for them to do so. However, that is not easy for those who have only recently joined the labour market and is much more difficult for them than it was for previous generations. While mortgage companies are not supposed to take into account student debt when assessing eligibility for a mortgage, it is hard to see how they can ignore it and in most cases it seems that they do not. Consequently, anyone who has not been working for several years is going to find it difficult to get a mortgage and even when they do it may not go very far towards financing the purchase of the property, particularly if it is in London.
So how else might it be financed if borrowing is required? One solution may be for the parent to take out or increase the mortgage on their own property and then lend the money, back-to-back, to their son or daughter with or without an interest charge. While this may not be very tax efficient (the interest charges will bear income tax for the parent) it may be a convenient and possibly less expensive way of borrowing money. An alternative may be for the parent to be a co-borrower or guarantor but that is not as easy to organise as it once was.
Minors
What if your son or daughter (or one or more of them) is under 18, the legal age at which they can own property in their own name? Normally a parent or someone else will stand in for them as “bare trustee”, that is they hold the property as nominee for the minor and once the minor reaches 18 he or she can ask the trustee to transfer title to him or her. This may be the situation if, for example, the child has received an inheritance so has the funds but not the legal capacity to purchase a property. In itself this does not cause a problem were it not for a quirk in the SDLT legislation relating to the 5% surcharge. This states that if a property is purchased on behalf of a minor it will be considered for the purpose of SDLT to be acquired by the parent of that minor. That means that if the parent already owns another residential property anywhere in the world (which is very likely) the purchase will be treated as a purchase of a second home for SDLT purposes, and the 5% surcharge will be payable even though the minor does not have any other property held for them. In other words, an 18-year-old can benefit from not having to pay the 5% surcharge while a minor never can. With the correct structuring it may be possible to avoid this charge particularly if at least one of the children has already reached 18 by the use of legal charges. Alternatively, it may be best to wait until one or all of the children for whom the property is being purchased have reached 18.
Inheritance Tax Considerations
Any gift from parent to child is potentially subject to Inheritance Tax (IHT). Once the personal allowance (currently £325,000) has been used up, tax is charged on death at the rate of 40% with gifts made in the preceding seven-year period being brought into consideration. It is therefore quite easy to avoid the charge if gifts are made seven years or more before death, known as a Potentially Exempt Transfer (PET). The trick therefore is not to leave it too late; the later you leave it to pass on assets the greater the risk of a charge. In the context of assisting children with their first property purchase there should therefore be a good chance of avoiding IHT entirely, given that parents are likely to be in their 50s or 60s when the issue arises. It is also possible to take out life insurance which will pay the tax in the event of the donor’s death within the seven year period. Do, however, bear in mind that different IHT rules apply for those who are not UK domiciled and that the law in this area is currently changing.
Children who become the owners of property (or have other assets) should also make a will. There are many reasons why it is always a good idea to have a will but one of them is that it will prevent the deceased’s assets passing back to the parents on death, which is what happens if there is no will. It may be better for them to pass to a surviving sibling (note, different rules apply if the deceased is married).
A few final points
As said above there is no one-size-fits-all solution but here are a few points worth considering:
A gift to your child in their late 20s to help them get onto the property ladder may have more long-term benefits than a larger gift to them at a later date.
Plan for grandparents to skip a generation when deciding on who will inherit. There is less chance of a charge to IHT if money is passed from grandparent to grandchild rather than via a parent. And, sadly, the timing of a grandparent’s death may be at a time when a grandchild is ready to step onto the property ladder for the first time.
Early gifts are more likely to be successful in saving IHT.
You can’t take it with you!
And, finally, you probably don’t want your children still living with you when they are in their 30s!
There are decades where nothing happens; and there are weeks where decades happen – the changing landscape of the logistics sector
7 March 2025
News
Beginning a summary of a conference with a quotation from Lenin was not something I thought I would be doing this year, however, as one panellist mentioned at this conference, this quotation encapsulates the current landscape of the state of the globe and the industrial and logistics sector is one of the few truly global sectors.
The Property Week’s Industrial & Logistics conference is always a perfect opportunity to gain and share insights in respect of what challenges the future of the sector faces. This year Magnus Hasset, Vicki Towers and I attended the conference. – The following are some of the key takeaways:
Planning
As any intrepid traveller within the sector will know, planning is never too far away from discussions when it comes to industrial and logistics. Maybe it was fitting that this year the conference was held in a new location where the Palace of Westminster loomed large in the background. With Government Policy Shake Up being the first panel event of the day, it demonstrated the important role that that government, and indeed planning, play in the future of this sector.
In short, the sector appears encouraged by the introduction of the “grey belt”, albeit with scepticism as to how this will evolve in relation to the green belt for industrial and logistics, especially as it appeared there were ‘subjective’ tests for such developments (as opposed to the more ‘objective’ tests assigned to residential developments).
As you might expect, there was continued dissatisfaction with the planning process as a whole with complaints surrounding different approaches taken by local authorities and the absence of any real “carrot” or “sticks”. Streamlining of the planning process is a theme that is broached each year and does not appear to be something that is going to change anytime soon.
Global trends
Macro and geopolitics are having a longstanding and sustained impact on the sector, . One area where this is having a profound effect is decision making. The predicament is causing higher costs but also making the decision process take longer. This has a knock on effect in respect of leasing voids and locations, with companies looking to near/on shore their facilities.
Power
Everyone is electrifying – indeed Maersk, for example, have started to electrify some of their fleet. What this means is that power is a crucial factor for any logistics & industrial stakeholder and one that will only continue to increase in importance.
Accordingly, power, or lack thereof, was another major theme for the conference. Experts were keen to stress that lines were not running “hot” – in fact, for example, UKPN are only at 60% capacity (although it was admitted that much of the technology was outdated). The real issue was in respect of queuing, with a number of “zombie projects” slowing up the process,. It was stressed, however, that capacity that had been allocated was starting to be rescinded if deemed to be ‘non-starters’.
It is clear that power – how to get it, what type, how quickly, at what cost – will continue to dominate the sector for years to come.
Sustainability
Intrinsically linked to power is sustainability – another overarching theme to the conference.
This angle has, and will continue to, come under increased scrutiny in light of America’s recent zeitgeist changes. This appears to have led major companies, such as BP moving away from renewables, to shift away from their sustainability targets. Whether the UK will start to follow suit, only time will tell.
An example of the drive to continue sustainability in this country is PV panels on rooftops – a project that is being championed by the UKWA (although it had hit some road bumps as parliament changes from blue to red). Warehouses with PV panels on roofs make up only 5% of the total warehouse rooftop space. It was clear that the low number was not due to a lack of appetite, or grid capacity, but because of the regulations and the amount of applications holding such items back.
In respect of CO2 emissions, the construction industry and the built environment has a large role to play in the reduction of carbon emissions given that they make up around 40% of total emissions. Most of this comes from the operation of the building, however a large element comes from ’embodied carbon’ – emissions as a result of material manufacturing, demolition etc. To achieve a reduction of the same it was clear that many elements have to be embraced by the industry such as; engaging early at the design stage; using, where possible, the circular economy; focusing on what materials were used (such as recycling concrete and steel); and collaborating with suppliers.
Postives?
Were there any? Yes. Despite the challenges above, growth still appears evident with normalised levels, if COVID peaks are ignored. E-commerce is still a driving factor of the logistics sector and one that does not appear to be slowing – especially when the “grey revolution” is taken into account, not to mention the ever increasing UK population.
Trump’s policies look set to have a positive impact on the defence sector with defence spending recently announced to be increased to 2.5%, at least in the short term. BAE Systems and the MoD have recently taken manufacturing space and this looks set to accelerate (which, in itself, highlights the diversification of occupiers of industrial warehouse space).
In short, the logistics sector is still grappling with many of the challenges that it has faced over the previous years with more appearing on the horizon. As mentioned above, the logistics sector is a vital sector that needs to grow and adapt to continue providing this essential service. Thankfully, it does appear that the sector looks poised to do so.
A key member of our Sustainability Group, Louise Irvine spoke to Estates Gazette regarding The Law Society’s forthcoming guidance for climate change advice within real estate conveyancing.
The Law Society’s forthcoming guidance for climate change advice within real estate conveyancing is coming at an ideal time. There is growing awareness that climate risks such as flooding, droughts, storms, and coastal changes are increasing and that this can significantly affect property values and the feasibility of transactions. Lawyers overseeing real estate transactions have the potential to act as an early warning system, with the new guidance seeking to help them navigate how climate advice should integrate with overall conveyancing practices and workflows.
As a first step, an industry consultation was undertaken to gauge current practices, attitudes towards climate advice and what support lawyers are looking for from the guidance. The consultation ran from 17 September to 31 October 2024, with the results recently being published.
One of the most striking findings has been the gap between the Law Society’s aspiration for solicitors to help take the lead in addressing the climate crisis and the high level of respondents who currently feel unable to confidently discuss climate risks with their clients (76%).
The rationale for the guidance
The context for the new guidance is a Law Society climate change resolution which was published ahead of COP26 in 2021. The organisation is keen for real estate lawyers to take the initiative, as the sector is responsible for an estimated 25% of all carbon emissions in the UK.
The Law Society’s resolution urges solicitors to “engage in climate conscious legal practice” by weaving climate change throughout their practice areas. There is an expectation that lawyers will provide competent advice to clients on how they can achieve their objectives while also mitigating the effects of the climate crisis, as well as advising on the potential legal risks and liabilities that might arise from inaction or action that negatively contributes to the climate crisis.
Published on 18 February 2025, you can read the full article on EG’s website, here.
Andrew Parker in Property Week and Building Magazine on the new single regulator for construction
5 March 2025
News
As the Government outlines their response to the Grenfell Inquiry, whilst reforms are welcomed by residents and builders alike, concerns are arising around the financial strains incurred by developers. Angela Rayner has recently announced the creation of a single regulator for the construction industry, to execute all 58 recommendations outlined in the Grenfell Inquiry Report, except those related to products and certificates of compliance, with a chief construction advisor also appointed to advise on expert construction matters.
However, there is the question of funding and resourcing these ambitious reforms, and the further financial strain that developers could incur from delays, similar to those faced from the BSR.
Quoted in both Property Week and Building Magazine, Andrew Parker, Head of Construction Disputes and Building Safety, outlines the concerns shared by developers.
Whilst the formation of both the construction regulator and chief construction advisor is “long overdue”, it needs to be appropriately executed for it to be an “effective way of reducing the complexity and fragmentation of the regulatory regime”.
“The industry is already getting to grips with relatively new legislation from the Building Safety Act and navigating the Building Safety Regulator. Too much radical change at this point would create further uncertainty and reduce productivity in the construction industry at a time when the government is seeking to deliver on its growth ambitions”.
EU Settlement Scheme – Is the pre-settled status upgrade as simple as the Home Office claim?
5 March 2025
News
You may have heard that the Home Office has recently announced changes to the EU Settlement Scheme (EUSS). One of these changes advertises an effortless immigration status upgrade for clients with pre-settled status who have lived in the UK for 5 years.
Though it sounds straightforward, we have looked at the guidance and advise clients to take caution, as the promise of an automatic upgrade may not be as simple as it seems…
What is pre-settled status?
Pre-settled status is an immigration status granted to individuals from the EU, Switzerland, Norway, Iceland or Liechtenstein who were living in the UK by 31 December 2020. Holders of pre-settled status are allowed to live in the UK for up to 5 years.
Most holders of pre-settled status will already be in the UK under this pathway, as the deadline for most people to apply was 30 June 2021. However, applicants who are family members of existing holders of pre-settled status, or individuals who can prove reasonable grounds for making a delayed application, can also apply for pre-settled status after the deadline.
What happens when your presettled status is due to expire?
Previously, at the expiry of your 5-year residence period, you were required to make a formal application to the Home Office for settled status. After that, you were permitted to remain in the UK indefinitely. If you did not make a formal application, your permission to reside in the UK would expire.
What are the changes?
The Home Office have introduced an automatic assessment process with effect from January 2025.
Anyone with pre-settled status who is approaching the end of their 5-year residence period will now receive an email confirming that the end of their residence period is approaching and they will be considered for an automatic conversion into settled status. The Home Office will then assess government records and grant an automatic upgrade to anyone that has clearly been in the UK for last 5 years. There is no longer a need to make a formal application. In theory, if you have been in the UK for 5 years with pre-settled status, you do not need to take any action in order to be upgraded to settled status.
The change is inspired by a High Court decision in February 2023 where it was found that people with pre-settled status should not lose protection over their residence rights simply because of the failure to make a further application within the timeframe.
What is the catch?
We understand that the automatic assessment process works by checking records held by government bodies such as HMRC, DWP and the NHS – and for many people such records are easily established.
However, many of our clients have incredibly busy lives, often travelling between different jurisdictions, with fluctuating tax liabilities and private access to healthcare and travel. In reality, for these types of clients, the paper trail could make it look like you haven’t been in the UK continuously.
The potential risks could be severe – not only might you miss the automatic upgrade, leaving minimal time to make an application to upgrade to settled status, there is a chance that the Home Office System could interpret you as not being resident in the UK when you needed to be.
How we can help
If you have pre settled status we would recommend that you take caution with the Home Office’s promise and consider making a voluntary application as usual. This can ensure that your rights of residence in the UK continue seamlessly and smoothly, without any stress at all.
With over 25 years of experience, our Immigration team are well placed to help you, so please do get in touch.
Lifecycle of a Business – When insolvency beckons: tips for company directors
4 March 2025
News
Setting up and running your own business is an amazing achievement. It requires vision, creativity, motivation and stamina. On occasion, it can even bring you fame, riches and fortune. But it can also result in reams of paperwork and cause sleepless nights. And as someone once said to me about children “It doesn’t get easier, it just changes”, so the same can be said for your business throughout its lifecycle. From setting up to exit, it will force you to consider issues that you might not previously have known anything about and it will need you to make many decisions, sometimes very quickly. What it certainly is not is mundane.
With this in mind, the corporate team at Forsters, together with some of our specialist colleagues, has written a series of articles about the various issues and some of the key points that it may help you to know about at each stage of a business’s life. Not all of these will be relevant to you or your business endeavours, but we hope that you will find at least some of these guides interesting and useful, whether you just have the glimmer of an idea, are a start-up, a well-established enterprise or are considering your exit options. Do feel free to drop us a line or pick up the phone if you would like to discuss any of the issues raised further.
We’ve already discussed various topics, including funding, employment and commercial contracts, but it’s now time to discuss when things go wrong…
When insolvency beckons: tips for company directors
Many companies will, at some point during their lifecycle, suffer financial difficulties. Hopefully yours will pull through if and when this happens, but directors need to be aware of their duties and potential liability when insolvency is on the cards. In this article, we set out some of the issues of which you should be aware and give a few tips which you will hopefully find helpful.
Directors’ duties
The Companies Act 2006 sets out a number of statutory duties for directors and we have covered these in an earlier article. Arguably the most significant of these duties is to promote the success of the company for the benefit of the members as a whole. However, this statutory duty is modified when a company is facing insolvency and instead of considering or acting for the benefit of the company’s members, the directors are instead required to consider and act for the benefit of the company’s creditors. The interplay between these two duties was clarified a couple of years ago, when the Supreme Court handed down its judgment in the case of BTI 2014 LLC v Sequana SA & Others. More detail about this case can be found in our article here, but essentially it clarified that directors of a company in financial difficulties need only consider the interests of creditors when insolvency becomes both inevitable and imminent. At this point, the interests of both shareholders and creditors should be borne in mind, although the interests of its creditors will become more significant as against the interests of its members as the company draws nearer to insolvency. Often, the interests of these two groups will align, especially when the company is first struggling, but the gap between the two is likely to widen the nearer to breaking point the company gets; it is at this point in particular when the directors may need to make some tough choices.
Personal liability
Directors are generally protected from personal liability for a company’s debts because a company is a legal entity and has a separate legal personality, i.e. if a company is in debt, its creditors can (generally) only claim against the company itself.
However, directors may be held personally liable in certain situations where the company becomes insolvent:
1. Wrongful trading
A director may commit the offence of wrongful trading if, in the lead up to insolvency, they:
concluded, or ought to have concluded, that there was no reasonable prospect of the company avoiding insolvent liquidation or insolvency administration; AND
failed to take every step that a reasonably diligent person would have taken to minimise the potential loss to creditors, i.e. the company has continued to trade and as a result of such trading, is worse off.
So, for example, actions such as purchasing stock or supplies on credit which you know the company can’t repay and taking customer orders despite knowing that the company won’t be able to honour them would trigger the offence.
Note that no actual dishonesty on the director’s part is required and ignorance is no defence.
If the offence is established, the director in question may be ordered by the court to contribute to the company’s assets and could be disqualified from acting as a director for a given period of time.
2. Fraudulent trading
Fraudulent trading is both a criminal and a civil offence. It arises if a company has entered liquidation or administration and the directors acted, or carried on the company’s business, with an intent to defraud.
To be guilty of the offence, the director must have participated knowingly in the fraudulent activity or business and have done so dishonestly.
A director found guilty of fraudulent trading may be personally liable for the company’s debts, be disqualified from acting as a director, incur a significant fine and/or be sent to prison, not to mention the adverse publicity and damage to the director’s and the company’s reputation that are bound to follow.
3. Misfeasance
Misfeasance is a catch-all claim which can essentially be brought against a director guilty of wrongdoing in respect of the company, for example, because they have kept or misapplied company property or are in breach of their duties. It’s worth noting that insolvency isn’t a necessary element of the offence, so a director can be found guilty of misfeasance where the company is trading and profitable.
However, a defence may be afforded the director if they have acted honestly and reasonably and the court is of the view that, considering all the circumstances, the director ought to be excused.
If found guilty, a court may order the director to account for the money or property (plus interest) which has been retained or misapplied, or to contribute to the company’s assets.
4. Personal guarantees
The general rule that a director of a company will not ordinarily be liable for any debts of that company will not apply in respect of any personal guarantee that you have given regarding the company’s liabilities.
It’s vital to remember that personal guarantees should never be given lightly and independent professional advice should always be taken before doing so; third party lenders, such as banks, will usually require a guarantor to take independent legal advice as a condition for their lending the funds.
Conclusion
The above may sound concerning but provided that you are aware of, and comply with, the various duties of a director and act reasonably and sensibly in that role, your risks of falling foul of the above offences should be small.
To assist further, we’ve set out below our top tips for directors. Ideally, these should be practised at all times, not just when the company is making a loss:
Top tips
DO stay informed about the business and its current financial position. Read board papers, understand the numbers and ask questions if necessary.
DO keep written records of decision-making and the reasoning behind them.
DO come to decisions independently after taking into account all of the information that you have been given. DON’T agree with the majority of the board unless you genuinely concur with them. Being put under pressure from other board members or taking the easiest option is no defence.
DO communicate with creditors, customers and suppliers, especially if financial difficulties arise or are likely. Often, an open dialogue with stakeholders can stave off the worst case scenario and a plan of action can be put in place, which allows the company to keep trading.
If difficulties arise, DON’T resign without first seeking legal advice. Leaving the board may not always be the answer and may not improve your situation; resignation could itself be a breach of your duties as a director.
Most companies will go through tough financial periods at some point, but if there is a cause for concern, DO take professional advice as soon as possible before taking any other steps.
Disclaimer
This note reflects the law as at 24 February 2025. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.
Government reveals details of inheritance tax reform on farms and businesses
3 March 2025
Views
Eight essential points
On 27 February the government published its consultation on the changes to inheritance tax (“IHT”) announced in the October 2024 Budget.
As is now well known, from 6 April 2026 only £1m of a person’s assets will be eligible for 100% agricultural property relief (“APR”) and business property relief (“BPR”). Beyond that £1m allowance, APR and BPR will be available at only 50%. The widely criticised changes will bring a huge number of farms and businesses into the IHT net.
The consultation clarifies some of the announcements made in the Budget and sets out how the new rules will apply to trusts.
There are a number of technical matters covered, but the eight key points to be aware of are:
The allowance (like the familiar £325,000 nil rate band) will ‘refresh’ every seven years, meaning that an individual can settle £1m of relievable property into trust every seven years. (There were concerns that the consultation would announce a £1m lifetime allowance.)
Unlike the £325,000 nil rate band, however, any unused portion of the £1m allowance cannot be transferred between spouses. We expect this point to be widely criticised in the consultation. But on the assumption that the government will not be diverted from its course, individuals should review their wills to ensure that everyone makes full use of their £1m allowance. The fact that the £1m allowance is not transferable may lead families to divide their businesses or farms between themselves in order to use as many allowances as possible. On a related note, the consultation proposes specific anti-fragmentation rules designed to prevent people depressing the overall value of their farm or business by dividing it between trusts and family members.
Helpfully, any pre-Budget succession planning (i.e. gifts of APR or BPR assets) will be subject to the rules at the time. So if someone dies after next April, but within seven years of having made a pre-Budget gift, the current rules (i.e. full BPR and APR) will apply.
IHT on agricultural and business property can be paid over ten years in interest-free instalments. As the interest rate on unpaid IHT is currently extremely high, this is helpful.
On an individual’s death, the £1m allowance will be shared with any trusts in which they have a ‘qualifying interest in possession’.
Trustees of ‘relevant property trusts’ (i.e. those that are subject to IHT charges every ten years) will have a £1m allowance, which will refresh every ten years.
Trusts created before the Budget that held relievable property will each have their own £1m allowance. For any trusts created subsequently, the settlor’s £1m allowance will be split between them.
For trusts created before the Budget, no IHT exit charges will arise on distributions of APR or BPR qualifying assets until those trusts have passed their first tenth anniversary. After the first tenth anniversary, the new regime will apply.
In conclusion, the details set out in the consultation are, in the main, sensible, albeit in the context of what is, for many business owners and farms, an enormously damaging change in the tax code. While we await the draft legislation, those affected by the reforms should seek specialist advice.
Contact us
Please get in touch with your usual Forsters contact to find out more or contact us here.
