Lucy Barber shares her views with The Times on Land Registry delays

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Across England and Wales, countless homeowners are facing stress and uncertainty when submitting applications with the Land Registry. Due to longstanding delays, and lack of staffing or funds, property owners are seeing transfers and registrations of ownerships taking at least a year or two to be registered, having to turn to their solicitors to help prove ownership to complete simple tasks like setting up utilities. For other concerns, like removing restrictive covenants, even after waiting years there can be no end in sight.

The backlog is partially due to stamp duty holidays during the pandemic leading to an increase in the numbers of registrations, but can also be attributed to a need for technical experts. When plans are assessed by a caseworker, years after the fact, any irregularities on plans or plots that need addressing become ultimately more difficult – the sellers won’t be around to help.

Speaking to The Times, I explained how we frequently see delays affecting our clients.

“One of my team checked to see how long it would take to register a simple freehold transfer [of ownership] and they were getting return dates of 2025 or even 2026. If you’ve got a freehold transfer, it’s a 50/50 chance it’ll come back quicky. If you’ve got a new lease for a home on a development you bought off-plan [before it was built], that’s almost certainly going to be a two-year wait before you’re registered as the owner.

Lots of people still feel very uneasy about the fact they are not yet the registered owner of their property. They also can’t send evidence to local authorities or utility companies that they own the property unless they’ve got a letter from their solicitor. We are writing lots of letters saying ‘we acted for this person and can confirm they purchased this property on that date’.”

Applicants can ask for prioritisation in some instances, but this doesn’t solve the overall backlog and delays. The industry is doing all it can to help the Land Registry and property owners, but more support is needed.

Read the full article here in The Times.

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Lucy Barber

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Forsters team supports Ministry of Defence in settlement of landmark litigation, bringing Armed Forces housing back into public ownership

The Ministry of Defence (MOD) and Annington Homes have today announced that they have reached a major deal to bring the Armed Forces housing estate back into public ownership.  MOD will re-acquire c36,000 houses from Annington Homes for a total purchase price of £5.9945bn, as well as unwinding the complex and costly set of contractual arrangements between the parties which has governed their relationship since 1996.

The transaction marks the culmination of landmark litigation between the parties concerning the scope of MOD’s enfranchisement rights.  Forsters has advised MOD in relation to the enfranchisement and subsequent litigation since 2020 and the firm was also selected to handle the transactional elements of the deal, which is one of the largest property transactions in UK history. The entire Forsters team has worked immensely hard on behalf of MOD, alongside Slaughter and May who advised on the public law aspects of the litigation, to help bring matters to a successful conclusion.

The Forsters team comprised Senior Partner Natasha Rees, Real Estate Disputes Partner Julia Tobbell and Commercial Real Estate Partner Ben Brayford.  They were supported by Senior Associate James Carpenter (Real Estate Disputes), Counsel Andrew McEwan, Senior Associates Alexandra Burnaby and Alex Harrison and Paralegal Kelly Pryor (Commercial Real Estate).

Help! How do I stop my neighbour letting out their property on Airbnb?

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In the current cost of living crisis, with sky-high property prices, and incoming rental law reform, an increasing number of leaseholders and homeowners are turning to short-term letting agencies such as Airbnb to generate extra income from their property. While these short-term lettings might seem like a quick and easy way to generate income for the occupier, they can be disturbing to those living nearby and can have legal ramifications. So, can you stop your neighbour from letting out their property on a short-term basis?

Failure to obtain planning permission

Your neighbour may require planning permission to let the property on a short-term basis. In London, you must obtain planning permission if you are intending to let your property out for over 90 days a year (see Sections 25 and 25A of the Greater London Council (General Powers) Act 1973). You can check the local authority’s planning portal to see whether your neighbour has obtained the relevant permissions. If planning permission has not been obtained, the local authority may be willing to take enforcement action to restrain the unauthorised use.

Breach of the lease

If your neighbour holds their property pursuant to a long lease, the lease might require the property to be used only as a private residence: to let the property on a short-term basis is likely to be a breach of this provision. The lease may also prohibit the letting of the property on a short-term basis without consent from the landlord and/or without appropriate planning consent. The use of the property as a short-term letting may also invalidate the building’s insurance and be contrary to the terms of the leaseholder’s mortgage. If any of these apply, you may be able to ask your landlord to take steps to force your neighbour to comply with the terms of their lease.

Private or statutory nuisance

The use as a short-term letting may constitute either a private or statutory nuisance, or both.  In the first instance, you may wish to alert the local authority of the actions of your neighbour, as they may be able to take action against the neighbour if their actions amount to a statutory nuisance, which can include things like noise and light from a premises or an accumulation of waste. The local authority may serve an abatement notice to restrain the nuisance. Alternatively, you could bring civil proceedings for an injunction compelling your neighbour to stop any private nuisance. These proceedings are expensive but the threat of proceedings and your neighbour’s liability for costs could be sufficient to stop your neighbour’s actions.  

If you require advice in relation to any of these issues, please contact our real estate disputes team.

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Lessons from the Olympics: creating lasting value at pace. Helen Streeton writes for EG

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With the Paralympics now finished, attention turns to what the future holds for Paris’s Olympic Village and its legacy for Parisians.

The newly developed Olympic Village is to be transformed into a combination of homes, leisure, commercial, community and education facilities. The homes will be a mix of social and open-market homes, with the design of the apartment buildings highlighting how good affordable housing can be.

Similar to the plans for Paris, the London 2012 Olympics kick-started a huge regeneration project in east London, transforming Stratford and Hackney Wick through £400m of investment into the area. This delivered economic growth which exceeded pre-Games projections three-fold, with almost 40% growth in local employment and thousands of homes (East Village, the former Athletes’ Village, has more than 3,284 homes and an estimated 6,500 people live there). Legacy was at the forefront of the vision for the London Olympics – a goal it has seemingly successfully achieved.

The French government also has ambitious plans to create four new Metro lines for greater Paris through the Grand Paris Express project, which will focus on connecting disadvantaged areas and streamlining commutes for thousands of people. Not only does this new infrastructure reduce travel times, but ultimately provides access to employment opportunities and amenities that are currently out of reach for many in Paris. It is said there will be 11 times more job offers to people within a 45-mile radius of the new hub than now, showing the true value added through improvement to infrastructure and travel.

Need for speed

The connectivity to Stratford was key to unlocking the East Village. Stratford International opened in 2009, connecting the area to King’s Cross in seven minutes, followed by the Elizabeth Line in 2022. Sustainable travel connections need to underpin any major regeneration, alongside employment opportunities and affordable housing.

Hosting the Olympics is a remarkable opportunity and can create meaningful value for the surrounding community and wider country, but it cannot continue to be the case that we need to be on the world stage to release necessary funding and deliver projects successfully and at speed.

Government funding was a key element of ensuring the London Games were delivered by the Olympic Delivery Authority and demonstrates that it is possible to deliver government-funded housing at speed when there is a need. With the Athletes’ Village then sold on to the private sector, this shows how effective public-private partnerships can be.

In many ways, the transformational ideas of the Paris and London games align with the Labour government’s focus on “new towns”. A few weeks ago the government announced its New Towns Taskforce, a key role of which will be to advise ministers on appropriate locations for significant housing growth. A final shortlist will be coming down the track within 12 months.

We can expect a mix of new standalone communities built on “greenfield” and a number of “urban extensions”, presumably to optimise transport links and other important infrastructure. The unifying principle is that they will contain at least 10,000 homes. That is a large metropolis, which will throw up additional demand for public services – schools, medical facilities, green spaces and so on. It isn’t clear where this land will come from – exercise of CPO powers is slow and public-private partnerships may be a part of the answer for land assembly.

Lessons from the past

As a new programme of garden cities and new towns looks increasingly likely, it is surely the case that there is much to be learn from the post-war new towns programme – the most ambitious large-scale project of its type in the UK. Between 1946 and 1970, 32new towns were delivered across the UK. Brought forward by development corporations, which had a wide range of borrowing, planning and strategic powers, the towns provided homes and jobs, while aiming to create socially balanced communities. Key to the successful delivery of these new towns was the powers the development corporations possessed, similar to those that the Ebbsfleet Development Corporation has for the delivery of Ebbsfleet Garden City.

The New Towns Taskforce is in good hands with Sir Michael Lyons, who chaired the 2014 Lyons Housing Review, at the helm. It will be interesting to see how the plans develop – what use can be made of the existing legislation and what lessons can be drawn from the building of the previous new towns – to deliver much-needed housing. Much like the Olympic villages of London and Paris, the earliest new towns were delivered quickly – Stevenage in 1946 and Harlow by 1947. Let’s hope we can take some lessons from the Olympics.

Published in EG on 10 September 2024, you can also access the article here.

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Helen Streeton

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Is your private drainage system compliant?

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It is not uncommon to find that rural properties are served by private drainage systems, however, it can be uncommon for property owners to be aware that they must ensure that their system complies with current regulations, known as the General Binding Rules. If a system is not compliant, it can affect or delay the sale of a property. The most recent update to these rules was in October 2023.

There are different types of private drainage systems, but we find that there are two main types:

  1. Septic tanks
  2. Sewage treatment plants

The regulations apply to all systems, but septic tanks and sewage treatment plants are especially affected as they can involve discharging sewage or water into natural water courses or the environment in general.

Septic tanks:

A septic tank is used for the partial treatment of wastewater from properties that are not connected to a mains sewage system. It works by collecting wastewater from toilets and drains, and retains solids within the tank, while draining the water to (usually) a drainage field, if it is compliant with regulations. The tank itself is then emptied when necessary.

In the past, septic tanks have been known to drain into water courses which is what the regulations now protect against, as this was causing polluted water. Property owners were required to upgrade their systems before 2020 to ensure that they did not drain to a water course. It is surprising how many systems are still not complaint with the current regulations.

Any upgrade or replacement system has to comply with the regulations as well as the current British Standards. It also needs to be large enough for your purpose, which is based on the daily volume of waste discharged. A permit is required from the Environment Agency where a system discharges more than two cubic metres of wastewater per day. It is not unusual for property owners to not have the required permit, which can also cause delays when selling a property.

Since October 2023, it is not permitted to discharge using the same outlet as another property if the combined discharge is more than 2 cubic metres per day; and it is not permitted to have a system which is within 50 metres of another drainage system. This can cause issues if neighbours each have septic tanks.

Property owners upgrading their systems need to ensure that they have the relevant planning permission and building regulations approval to do so.

Sewage treatment plants:

Unlike septic tanks, sewage treatment plants are permitted to discharge into water courses. This is because they include a secondary treatment for waste, making it clean enough to discharge into the water, as well as to a drainage field.

A sewage treatment plant is subject to all of the same regulations as septic tanks (except for the above difference), must comply with the British Standards and have the relevant planning permission and building regulations approval.

Summary

In property transactions, it is always advisable for a buyer to carry out a specific survey to establish whether the drainage system is compliant with current regulations. If it is not, then it is generally a seller’s responsibility to ensure that this is rectified before completion of a sale. In practice, this can be, and is more often than not, dealt with by way of reduction to the sale price of a property, with the buyer confirming they will upgrade the system following purchase. Costs to upgrade a system differ from property to property, but it is said that upgrading a system can cost in the region of £20,000 (and it is not unusual for a sale price to be reduced by that amount), and so it is important for a seller to ensure that their system complies with current regulations before they agree a sale.

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Jayne Beardmore

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A landlord’s guide to tenant administration

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Administration is a “rescue” procedure, where the primary statutory objective is to allow a company to carry on trading as a going concern. In practice, most administrations do not achieve this objective and result in a sale of certain assets and the liquidation of the remainder – the original company rarely survives.

Administration works by imposing a moratorium on legal action against the company by creditors: thus allowing the company breathing space to reorganise its affairs. Once appointed, administrators will have the power to deal with the company’s property and assets. They will often sell off parts of the business to third parties, and may grant third parties the right to occupy the premises.

Will Rent Be Paid?

If the administrators continue to use the premises for the purposes of the administration – for example, by trading from it or allowing others to trade from it – then they will be liable to pay the rent and other sums due under the lease in respect of that period as an expense of the administration. This means the sums are payable as a priority, before sums owing to the majority of creditors. They will be payable at a daily rate, for the period that the administrators use the property. Rent paid as an expense is typically paid monthly in arrears, even though the lease might state otherwise (e.g. quarterly in advance).

Rent and other sums which have fallen due for payment in respect of a period either before the administrators are appointed, or once they have stopped using the premises, are unlikely to be paid immediately or in full.

What is the Effect on any Guarantee or Other Security?

The administration of a tenant will not have any impact on a guarantee given by a third party company or individual, unless there are specific provisions governing this in the guarantee agreement. We recommend that you check the terms of any guarantee as soon as you can, and ensure that you understand what steps need to be taken in order to make a claim from the guarantor. If the guarantee is in the form of an authorised guarantee agreement (“AGA”) given by a former tenant, or the guarantor of a former tenant, you will need to serve notice (under s17 of the Landlord and Tenant (Covenants) Act 1995) on the guarantor within 6 months of the sums falling due. This time limit is strict, and the right to recovery will be lost if it is not met.

The impact of the administration on any rent deposit will depend on how the rent deposit deed has been drafted, and how the deposit is held. Again, we recommend that you check the terms of the rent deposit deed as soon as possible, and ensure you understand what needs to be done in order to withdraw sums. It is usually possible to withdraw sums to settle any outstanding liabilities of the tenant under the lease. The administrators’ prior consent for this is often required, and is usually given.

Can the Administrators Bring the Lease to an End Without My Consent?

No. Unlike some other insolvency procedures such as liquidation, administrators do not have the power to disclaim leases.

If the administrators do not want to use the premises you may find you are offered a surrender early on. Administrators will often ask for a complete release of liability under the lease upon surrender. You should consider any such offer very carefully, since accepting it may bring forward your liability for business rates or limit your ability to recover unpaid arrears or claim for dilapidations.

You should also be careful of any attempts by the administrators to return keys to the property, as this may give effect to a surrender by operation of law if accepted by the landlord (or its agents). If keys are returned, then it should be made clear that they are being held on the tenant’s behalf for collection.

Can I Terminate the Lease and Re-Let the Premises?

Any surrender of the lease requires the agreement of both parties, in the usual way.

Whilst a tenant is in administration, the usual position is that a landlord may not forfeit the lease without either the consent of the administrators or the permission of the Court. A landlord may request the administrators’ consent to forfeit. If the administrators refuse, their reasoning should be examined carefully- the Court may take a different view.

If a landlord considers it likely that a tenant may shortly enter administration, it may wish to consider forfeiting the lease at an earlier stage and before these protections come into effect (assuming of course that the landlord has grounds to do so).

There is a Third Party In Occupation: What Are My Rights?

Administrators often let third parties into occupation of premises- often in breach of the terms of the lease! This is usually done as part of a sale of the company’s assets, by which the administrators permit the purchaser to occupy pursuant to a licence pending a formal application for landlord’s consent to assign. While the moratorium makes it harder to take action against the administrators, such action will usually be a breach of the tenant’s covenant not to assign without consent and the usual rules and the provisions of lease will apply to any subsequent application for consent that is made. You should check your rights under the lease carefully as this may be an opportunity to insist on the provision of additional security for the new tenant’s covenants and/or payment of any arrears as a condition of the assignment – most modern leases will contain provisions that entitle the landlord invoke such conditions.

When dealing with such applications, it is worth remembering that the landlord’s duties under the lease and statute are owed to the tenant, not the proposed assignee.

If your preferred course is to recover the premises, it may be possible to pursue a forfeiture strategy based on the breach of the tenant’s covenants but this will require the court’s permission if the administrators will not consent to it. It may not be possible to convince the Court to grant consent to forfeit where the occupation of the premises by the third party is helping to achieve the aims of the administration, and rent is being paid.

How Do I Get the Court’s Permission to Forfeit or Enforce the Adminstrators’ Duty To Pay Rent?

The administration will be listed in the High Court and, like most creditors, landlords can make applications in the administration for the Court to determine. These applications are governed by the insolvency legislation, so the Court will consider your application in the context of the whole administration process and, if successful, its impact on other creditors. These additional considerations can sometimes see one creditor’s rights not enforced even though there appear to be clear grounds for doing so on a purely contractual level. That said, many applications can and do succeed, so it is important to take stock early and execute any strategy with the benefit of expert advice.

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Financing Biodiversity Net Gain requirements – who pays? Sophie Smith shares her thoughts with Sustain

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Best practice is yet to emerge on how responsibility and cost for compliance with biodiversity net gain (BNG) planning requirements in England will be split between developers, landlords and occupiers. In this article, Sophie Smith, an associate at law firm Forsters, discusses how to lessen the likelihood of disputes between these parties and whether BNG considerations are likely to slow an already sluggish planning system.

BNG aims to leave the biodiversity position of development sites in a measurably better state than before the development was carried out, maintained over a 30-year period. Developments are required to deliver a 10% increase in biodiversity value relative to the pre-development value of the onsite habitat.

Achieving this comes with costs which landowners must factor into the price paid for development sites at the outset. Depending on whether the net gain is provided on-site, off-site, via the purchase of statutory creds, or as a combination, BNG compliance costs arise differently.

For on-site delivery, in addition to the initial cost during development, ongoing maintenance costs throughout the 30-year period will arise. Depending on the nature of the site and at what stage the landlord-tenant relationship arises, these costs could be recovered via service charge. From a landlord perspective, the leasehold allocation of responsibility for BNG should be considered from a future onward sale or funding perspective. Traditionally, landlords have expected a “clean” rent and there is no reason why that could not capture maintenance of on-site, and off-site mitigation. We expect landlords will take a robust position on this, but whether the market will accept that remains to be seen.

Responsibility for maintaining BNG for the requisite 30-year long period will bind successor interests in the site. Where the on-site gain is secured by a s106 agreement, depending on how the s106 is drafted, it could relieve occupiers from responsibility for maintaining onsite BNG. This is distinct from any leasehold covenant of the tenant to be responsible for BNG and apportioning financial and/or active maintenance responsibility for BNG amongst a multi-let estate. Factors to consider include where the relevant mitigation is located within the site and the level of maintenance required to protect the net gain. Careful consideration will be required as to the initial delivery of BNG and separately its ongoing maintenance, particularly in terms of phased planning permissions.

Whilst BNG mitigation is a hierarchical system, with the onus being on on-site delivery in the first instance, an alternative option is to deliver the required BNG by securing off-site units. Whilst this could be expensive for landlords in terms of upfront costs, off-site BNG delivery gives developers more freedom on-site resulting in neater solutions.

A last resort is the purchase of statutory biodiversity credits from the Government, which are invested in habitat creation in England. Depending on the distinctiveness of the habitat, a measure based on the type of habitat and its distinguishing features, such credits can cost anywhere between £42,000 per unit rising to a maximum of £650,000 per unit for the highest value water environments. These costs can be more than ten times the price of delivering on site, according to CBRE, making them significant for developers.

Advance planning, from both landlords and tenants, is crucial to successfully financing and complying with these planning requirements. Equally, additional time should be factored into developments owing to a lack of resource at local authority level, which may cause delays both in obtaining planning permission and discharging the associated pre-commencement condition.

This article was published on Sustain on 07 August and can be read here.

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Victoria Du Croz and Amy France share how housing need is an age-old issue with Property Week

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The government must factor older people’s accommodation needs into its plans to boost housing supply.

It has been refreshing to see planning policy at the forefront of the new Labour government’s initial announcements. Many in the industry have welcomed the approach being taken by the government and we certainly need ambitious growth plans for housing delivery if we are to redress the under delivery of the past decade. However, we also need a nuanced approach to ensure a range of housing is delivered to meet the needs of all members of society, and the delivery of specialist housing for older people in particular needs to be addressed.

A recent JLL report indicates that there will be a shortage of up to 46,000 later-living homes in the next five years. The challenges facing the sector include competition from mainstream housebuilders for sites; the impact of inflation on build costs and viability; and the planning system, which continues to stymie development.

A review of appeal decisions for later-living development indicates that establishing the ‘need’ for these facilities takes up a huge amount of time at the planning committee stage and subsequently at appeal. The difficulties are in part due to the range of care models available, which often leads to planning applications for developments where the residents will have specific care requirements.

However, need assessments carried out by local authorities often use data from the Care Quality Commission based on the number of registered beds available (ie, the maximum number permitted, which may be more than the actual number provided) and apply that to their duty of care to provide support to all those over the age of 65.

The data available is often not directly applicable to the proposed development, so assumptions and extrapolations need to be made. Further clarity is urgently needed to help local planning authorities formulate local plan policies that meet the needs of the communities in their administrative area.

The National Planning Policy Framework (NPPF) requires local planning authorities to plan for housing to meet the needs of older people, with the 2023 NPPF changes expanding that definition to reference “retirement housing, housing with care and care homes”. However, this does not encompass the wide range of available models, such as integrated retirement communities, sheltered housing, extra care/assisted living and older persons shared ownership.

Simplistic use classes

The current Use Classes Order is too simplistic, with residential accommodation either failing within class C3 (dwelling houses) or class C2 (residential institutions). Many later-living developments will look to cater for residents with a range of care needs and with the flexibility to meet their changing needs in the future. The ability to provide for a range of care options within a facility without needing planning permissions or without rendering the whole facility sui generis would be welcomed.

The later-living sector continues to wait with bated breath for the findings of the Older People’s Housing Taskforce, which was set up to look at options for the provision of greater choice, quality and security of housing for older people. The taskforce’s objectives were to examine how to increase supply and improve housing options for people in later life, as well as to explore how to overcome obstacles to this goal. The taskforce submitted its report to the previous government on 22 May 2024. However, the general election was called before any action could be taken.

It is hoped that the new Labour government will pick up the taskforce’s report swiftly and look to implement its recommendations as a priority. Those in the sector will be looking out for proposed changes that will bring more clarity to the planning system, so that specialist schemes for older people’s housing are not inadvertently being disadvantaged at the planning stage for the reasons set out above.

Given that Labour has made it clear it aims to build 1.5 million new homes within the first five years of taking office, it would also be welcomed if the government could set out an ambitious target for the proportion of this housing that will be set aside for the specialist later-living accommodation.

There is much to be optimistic out of government in these early days of the new parliament. We can only hope that these announcements result in concrete proposals and policies that can effect change sooner rather than later, particularly for the later-living sector.

This article was released In Property Week on 01 August 2024 and can also be read behind the paywall here.

Time to loosen the green belt? Victoria Du Croz quoted in Property Week

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The Labour Party has pledged to unlock ‘grey-belt’ land to tackle the housing shortage – but what planning issues could they be faced with? Head of Planning, Victoria Du Croz, shared her views in Property Week.

“We don’t have a legal or policy concept of what grey belt is, The National Planning Policy Framework (NPPF) sets out five purposes of the green belt. So, would developers have to show that area of green belt doesn’t meet all five of those purposes, just one of them or some of them for it to be considered grey belt?

I think (Labour’s proposal) shows the misunderstanding about what green-belt land is and what purpose it serves… Many think it’s quintessential rolling green fields, but green-belt land doesn’t need to have any ecological or biodiversity value or any right of access for the public.”

Read the full article here to understand more about the planning hurdles that could impact Labour’s proposed plans.

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EPC Conversion Factors – Guidance Note

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In June 2022, there were updates to the EPC calculation methodology, that are typically seeing worsening of EPCs that use gas and do not comply with the latest building regulations. Typically, non-domestic properties of this type have experienced a 1-grade drop.

Landlord building implications

Was your EPC lodged prior to June 2022? Does your property use gas?

If your property falls into both of the above categories, your current EPC was calculated using the old methodology, at renewal of EPC, you may be at risk of a worse EPC score or rating, even if you have completed improvement works. Depending on the property, a worse EPC may negatively impact:

  • Tenancy contracts/green lease clauses
  • Existing funding or investment agreements (if clauses are linked to the EPC rating)
  • Current Minimum Energy Efficiency Standards, if you are currently close to a D or E rating.

To understand the potential implications to your EPC, it may be time to commission a new EPC assessment (this does not necessarily need to be lodged if your current EPC is still valid), to enable accurate forward planning if issues arise.

Landlord lease implications – new leases and tenant alterations

It is now commonplace for commercial tenants to be under an obligation for their alterations to not negatively impact the EPC rating. The concern for tenants arises where works have been carried out since the EPC was initially lodged (prior to June 2022). Upon completion of the works (if these works necessitate a new EPC), there is a significant risk that the overall EPC rating could come down. Tenants may face challenges proving that the completed works are not the cause of the downgraded EPC rating, which could complicate their position.

Actions going forward – mutual benefit/clarity

To provide clarity for both landlords and tenants on the current position of the building where:

  • The EPC was lodged prior to June 2022
  • Gas is used at the property.

Consider commissioning a new EPC assessment (as previously mentioned this does not necessarily need to be lodged if your current EPC is still valid). This can then be used to evidence a correct baseline which ensures clarity for both a landlord and tenant on the EPC rating of the property (allowing the tenant to accurately assess the impact of any alterations they may be planning) and gives the landlord an ability to plan what future investment will be required to ensure they continue to have a good and marketable asset well into the future.

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Helen Streeton featured in PERE’s ‘on the minds of the experts’

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The residential sector remains attractive, with strong supply and demand dynamics across markets, but it is not without its challenges. PERE looks to the experts to answer questions on the residential sector and Helen Streeton, Partner and head of our BTR sector, shares her thoughts as one of the industry leaders.

Question: What is the current appetite for residential property investing and how has that changed in recent years?

Helen shares “Investments into BTR continues despite economic headwinds as demand outstrips supply. In 2023, the BTR market saw £4.5 billion invested. Housebuilders continue to face challenging conditions, meaning that investment is greatly needed to tackle the UK’s housing shortage.”

Read the full Q&A on PERE’s website here.

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Amy France speaks to CoStar on how investors are finally waking up to the potential of care homes

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Published as one of CoStar’s expert opinions, Amy France discussed the big supply-demand imbalance the private sector can plug and how investors are finally seeing the potential in care homes.

The gaping supply-demand imbalance for care homes has now reached acute levels, yet delivery has been slow and investors have been reticent in making serious moves into the asset class. However, numerous factors and a succession of significant deals indicate that in the first quarter 2024, sector activity is picking up and looks set for a period of sustained growth.

According to the Office for National Statistics, the proportion of the population over 85 years old in the UK is forecast to more than double over the next three decades, from 2.5% in 2021 to 5.2% in 2051. Research from Knight Frank has found that by 2035 there will be a shortfall of 58,000 beds across the later living sector and that by 2050 an additional 350,000 older people will potentially need a care bed, which indicates an even greater acceleration in the demand for more beds.

Read the full article published on 29 May 2024 on CoStar’s website here.

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The Leasehold and Freehold Reform Act 2024

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On 24 May 2024, the Leasehold and Freehold Reform Act (the “Act”) was the last act passed in the current Parliament, and, quite possibly, by this Government. It was pushed through the Commons at speed to ensure it received Royal Assent before Parliament was prorogued. The debate of the House of Lords amendments started at 19:21 and 11 minutes later all 67 amendments were passed. Parliament was prorogued at 20:46.

It is striking that the Act grew from 65 clauses and 8 schedules to 124 clauses and 13 schedules during its passage through Parliament. That speaks to the complex and technical nature of the matter area; but equally raises questions about the scrutiny those amendments received.

In the course of the debate, Sir Peter Bottomly praised Michael Gove for “getting a grip of the horrors in residential leasehold.” However, it remains to be seen whether the Leasehold and Freehold Reform Act and indeed Michael Gove’s legacy will stand the test of time. The new Act’s journey into the statute book has obvious parallels with the Landlord and Tenant Act 1987. The 1987 Act was also rushed through by a Conservative government three days before the dissolution of Parliament in the build up to the General Election of that year. It is widely regarded as one of the worst examples of legislative drafting and has a resulted in significant amounts of often unnecessary litigation for tenants and landlords alike. Unfortunately, there is scope for the new Act to go the same way.

Much of the commentary so far has focused on what is not in the Act. Michael Gove’s plan to remove ground rent for existing leaseholders or cap it at £250 was the most high-profile absentee. However, the ban on forfeiture of long residential leases and the introduction of commonhold also ended up on the cutting floor.

So what now? The Act is, of course, not yet in force. The parts of the Act that amend the Building Safety Act 2022, and deal with rent charge arrears, will become law on 24 July 2024. The remainder of the Act (including the 990 year lease extension, the new ‘standard valuation method’ (which will make it less costly for leaseholders to extend their lease or buy the freehold), the tenant’s right to buy out its rent, the ban on leasehold houses and the changes to service charge demands to make them more transparent) will be commenced by the Secretary of State via statutory instrument.

As Parliament is now in purdah, this responsibility will fall to the next government. The question of how the deferment and capitalisation rate should be fixed is complicated, politically charged and is highly likely to result in a human rights challenge. However, given the broad cross-party support for the Act, there is little doubt that the next government will grasp the nettle and bring the Act into force. When exactly this will be is anyone’s guess. Perhaps the most realistic guide is Baroness Scott’s 1 April 2024 written response, which estimated that the majority of the reforms would come into effect during 2025-2026.

In the interim, the leasehold enfranchisement industry remains in purgatory, although we now at least have an Act. For now, all we can do is work together to ensure that the new legislative landscape is understood as clearly as possible, so we are ready for the new Act when it becomes law.

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Louise Marin-Bataller shares her thoughts on ‘Plugging the affordability gap’ with Property Week

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In Property Week’s article titled ‘Plugging the affordability gap’, Louise Marin-Bataller from our Commercial Real Estate team shares her thoughts on social rented homes.

Louise Marin-Bataller, senior associate and property specialist at law firm Forsters, calls for an increased focus on provision of homes for tenants. “If the provision of social rented accommodation was increased significantly, this would take many more people away from the complicated elements of the affordable sector,” she says.

“Providing sufficient volumes of accommodation with a rent of 50% market value is going to require significant funding from central and local government. But with the Affordable Homes Programme allocating £11.5bn of funding from 2021 to 2026, and prioritising social rent, this should help registered providers increase supply.”

Read the full article, and hear the thoughts of other industry experts, on Property Week’s website here.

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Helen Streeton features in BTR News’ Legal Perspective: five minutes with Forsters Head of Build to Rent

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Helen Streeton, Head of Build to Rent at Forsters, recently sat down with BTR News to discuss her role at Forsters, the challenges facing the industry and the future of the sector.

In the interview, Helen discusses her 30 year career in real estate and the different challenges and opportunities she has come across over this time. From the affordability of UK housing, the sense of community that Build to Rent can bring, and the Renters Reform Bill, Helen shares her thoughts on key considerations in the market – you can also find out a few fun, non-property related facts about her too!

To read the interview in full, please visit BTR News, here.

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Is the UK housing market facing the prospect of rent controls? Louise Marin-Bataller shares her thoughts with IPE Real Assets

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Louise Marin-Bataller, Senior Associate within our Commercial Real Estate team, has shared her industry reactions to The Renters Reform Bill with IPE Real Assets in a feature named ‘Is the UK housing market facing the prospect of rent controls?’

Louise questions “how long could a reform of the court system take? Will it ever happen and will section 21 ever go?” It seems unlikely during the current government’s lifetime.

There are many other aspects to the Reform Bill, however, which might still have implications if not further amended. Worries around the private student housing market appear to have abated, which is lucky as some of the original proposal regarding changes to notice were quite simply “a minefield” in Marin-Bataller’s opinion.

She remains worried about proposals to stop landlords accepting more than one month’s rent in advance. This could cause problems for foreign renters or those with bad credit histories, who “would normally get around the credit referencing issue by paying six to 12 months’ rent in advance,” Marin-Bataller says. “What will happen to this group of people, particularly when some have suggested that guarantors should also no longer be allowed?”

Tenants could clearly benefit from landlords being unable to service notice to terminate a lease until six months into the lease term. But unless proposed amendments are accepted, “landlords could be faced with notices served on day one by tenants resulting in short-term lets of two months”. Marin-Bataller wonders: “Will this ultimately lead to landlords leaving the PRS?”

Real the full article, alongside comments from other industry leaders from the BPF, Get Living and Nido, on IPE Real Assets’ website here.

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The key to a successful country home or farm sale – Adam Saunby shares his insights

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Adam Saunby joins Matthew Allen and Richard Gadd of Fisher German, on their podcast ‘Fisher German Talks’, to share his insight and expert analysis of the rural property market.

In the podcast, Adam highlights the importance of thorough preparation before properties are marketed. He covers:

  • Pre-sale preparation
  • The importance of site visits
  • The conveyancing process
  • Replies to enquiries
  • Preparing a data room
  • Drafting the contract
  • Holdover for crops and farm machinery auctions
  • Overage and its complexities
  • Key challenges in the process

You can listen to the full episode here.

If you are preparing to sell your country home or farm and would like expert advice on the process, please do give Adam or a member of our Rural Land and Property team a call.

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The rise of the Branded Residence

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True to its name, a Branded Residence is a property attached to a brand. Historically, we’ve predominantly seen renowned hotel brands absorbing the lion’s share of the market: Six Senses/The Whiteley, The Four Seasons/Twenty Grosvenor Square, Raffles/the OWO, the Peninsula/the Peninsula Residences, to name but a few.

Recently, other well-known names have started to move into the market: fashion designers, car manufacturers, jewellers and even luxury restaurants are demanding a place at the branded residence table.

Why invest in a Branded Residence?

These prestigious brands have a track record in the highest levels of customer care, hospitality and amenities, resulting in, quite literally, all singing all dancing accommodation – residential living with the services, facilities and luxuries of a hotel.

Never has the word “turnkey” been more apt than for a hotel branded residence. Need your car? The valet will have it at the entrance before you’ve made it downstairs. Staying in the UK intermittently/for short periods at a time? Someone will stock your groceries before you arrive. Looking for somewhere to eat? The concierge knows a place – and can get you a table, at short notice. And that doesn’t even cover the world-class gyms, swimming pools, spas, private dining rooms, private cinemas, not to mention the highest levels of security… the list goes on.

On top of this, there is of course the fact, that by aligning themselves to a particular property/development, these brands are accepting a certain level of responsibility with regard to the running and overall “feel” of a building, often beyond their contractual duties; there is automatically a reassurance as to the quality and management. Whilst there is likely to be an independent managing agent “running” the residential aspects, it is likely be the household name that people remember and automatically associate with the property, wrongly or rightly and for good or bad reasons. This offers comfort to buyers – they are not just purchasing a property, they are investing in a trusted brand.

What are the legal implications?

The agreement for lease (i.e. the purchase contract) and the long residential lease which would need to be entered into by buyers on completion are likely to be very similar to those seen on a high-end new build estate without the branded element. The legal paperwork will often be more detailed than that of a second-hand sale and purchase in order to:

  1. cover the ongoing development;
  2. deal with snagging/the Seller’s pre-completion obligations;
  3. address any other complexities across the site; and
  4. take into account any third party operator involved (such as a hotel brand).

That said, there is unlikely to be a significant amount to consider legally on the branding side. This can be positive (global brands often means hugely complex, sensitive and probably confidential agreements) but ultimately this is simply because it is unlikely that a brand operating at this level will agree to enter into a direct contractual relationship with individual buyers.

Given that the majority of “new” long residential leases are granted for a term of 250 – 999 years, it is understandable that these companies are unwilling to be held to ransom for the duration of these leases which often vastly exceed the term of the agreement between the freeholder/superior landlord and the brand in question. In some instances, developers (and/or the brands themselves) may even require a waiver signed by the buyer, confirming that they understand the brand could withdraw from the estate in future.

The considerations are largely commercial and, as one might expect, tend to relate to the costs involved. A luxury brand is likely to come with a luxury price tag, not to mention luxury services and therefore, luxury service charges. Service charge deposit deeds requiring 6 – 12 months of service charge on account are often required by management companies at this level, employing concierge teams of the highest calibre costs money and buildings insurance on these schemes isn’t cheap.

In conclusion, branded residences offer a harmonious blend of luxurious living and hotel-style services. With turnkey convenience, world-class amenities, and the assurance of a trusted brand, buyers invest not only in property but also in a lifestyle. While, as a potential buyer, considerations on the branding side are likely to be more commercial than legal, buyers should be sure to appoint a lawyer who is well-versed in the intricacies of new developments/off-plan paperwork, and of course be prepared for the potential costs of such a high-end living experience.

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Understanding Biodiversity Net Gain: part two – landowners

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With many environmental factors and new green legislation for the real estate industry to consider, we continue to focus on Biodiversity Net Gain in the second of our two-part special.

In part one, we discussed Biodiversity Net Gain obligations imposed by the Environment Act 2021 through the lens of developers; today in part two, we focus on landowners. Alongside Polly Montoneri, Partner in our Rural Land and Business team, and Planning Associate, Sophie Smith, we talk about the impacts of Biodiversity Net Gain obligations and the challenges landowners are faced with.

Read more about Real Estate Sustainability here.


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Five factors shaping the future of landed estates: Henry Cecil quoted in Spear’s

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Henry Cecil and other industry experts have provided their insight on the future of landed estates to Spear’s.

The article, ‘Five factors shaping the future of landed estates’, discusses various challenges and emerging trends in the management and ownership of landed estates. Henry’s key takeaways are summarised below:

Legislative Changes

  • The phasing Basic Payment Scheme (BPS) has previously acted as a safety net for farmers and crofters by supplementing their main business income, but it also presents a challenge for in-hand estates.
  • It could lead to significant opportunities with new streams of income in natural capital markets.

Diversification

  • There is a growth in interest for landowners wanting to enter into natural capital markets, ranging from biodiversity net gain projects to nutrient neutrality and exploring landscape recovery schemes.
  • There has been an expansion in the scope of Agricultural Property Relief which now includes environmental land management schemes. This is a step in the right direction for landed estate owners to have confidence to enter natural capital markets.
  • With diversification on the rise, there are growing opportunities in renewable energy and other emerging markets.

Climate Change

  • There is an increase in flooding in parts of the UK at the moment. While it is area dependent, estates must prepare for changes in response to environmental and climate shifts.

Global Ownership

  • Although British farmers and entrepreneurs make up the majority of buyers and sellers, there has been a recent uptick in interest from American buyers.
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Owen Spencer quoted in Property Week on the increase of film and TV studios in the North

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Owen Spencer, Counsel in our Commercial Real Estate team, has been quoted alongside other industry experts in Property Week’s article discussing the increase of film and TV studios being developed in the North.

The article ‘Northern Hollywoods’ reports that several film and TV studios are set to significantly increase production capacity in the North of the UK, and explores the reasons to drive development in the North.

When most people think about the film and TV industry, their minds turn to Hollywood’s rolling hills or maybe Manhattan’s skyline. Increasingly, however, US production companies, among others, are choosing to shoot in the UK, attracted by a variety of factors including tax breaks and highly skilled production staff.

Owen adds that while living and working in the North has many attractions, being dependent on one studio would not appeal to everyone. “It will be a key challenge for new studios to train and bring forward their own skills pathways,” he says.

The full article, published on 26 April 2024, can be accessed here, behind a paywall.

Victoria Du Croz speaks to Property Week on the slow path to planning reform

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Partner and Head of Planning, Victoria Du Croz, met with Property Week to discuss the planning system and the government’s decision to increase application fees.

Many people attribute delays in the planning system to under-resourced local planning authorities. However, the government’s solution – to increase planning application fees at the end of last year – caused an outcry among developers, with many rushing to submit applications before the fees hike.

Much of the outcry focused on the government’s refusal to ringfence income from the increased fees so that it could only be spent within the planning department of the local authority. Given how cash-strapped local authorities are, it would be understandable if income generated from fees was diverted to prop up other council services.

In practice, this means many developers are paying the increased application fee and are still being asked by local authorities to enter into a planning performance agreement (PPA). PPAs will usually set out an agreed programme for determination, including commitments on officer engagement in return for the developer paying a fee.

However, what can a developer do if the local planning authority does not keep to the determination programme set out in the PPA or fails to ensure a sufficient level of officer involvement? Many are calling for PPAs to have more teeth, but in practice what penalty could there be other than requiring the local planning authority to return the PPA fee?

The developer still would not have any certainty over the determination period, and the local planning authority would have to return money it has probably already spent.

The full article, published on 18 April 2024, can be accessed here behind the paywall.

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Understanding Biodiversity Net Gain: part one – developers

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As we progress towards a greener future, the real estate industry faces many changes and new challenges.

Today, we dive into the first of a two-part special that looks closely at wildlife and its new place in the planning system.

Hosted by Senior Knowledge Development Lawyer, Louise Irvine, we take a look at Biodiversity Net Gain with Charlie Croft, Senior Associate in Forsters’ Commercial Real Estate team, and Sophie Smith, Associate in our Planning team. Together, we look at the Biodiversity Net Gain requirements outlined in the planning process, and how these obligations will impact developers.

Listen to Understanding Biodiversity Net Gain: part two – landowners

Read more about Real Estate Sustainability here.


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Changes to planning controls bring consistency to enforcement rules and increased powers to local planning authorities (LPAs)

Construction Planning

Reforms which change the planning enforcement rules set out in the Levelling-Up and Regeneration Act 2023 (LURA) will come into force on 25 April 2024.

It will now be the case that LPAs can enforce against all breaches of planning control for a period of up to 10 years. This marks an increase from the previous 4-year time limit for bringing enforcement action against building or engineering operations and changes of use to a single dwelling-house. The single 10-year tariff for bringing enforcement will apply where alleged operational development was substantially completed on or after 25 April 2024, or where the date of an alleged change of use to a single dwelling-house was on or after 25 April 2024. These changes will not apply where the alleged operational development or change of use occurred before 25 April 2024, as confirmed by a Government statement published earlier this month; this will be welcome news to developers, who will be ‘in the clear’ for enforcement action where an LPA has not taken action within 4 years and where they are able to demonstrate that any unlawful use of a single dwelling-house or unauthorised works were substantially completed on or before this date.

The regulations also give power to LPAs to use Enforcement Warning Notices (EWNs). EWNs constitute the taking of enforcement action and allow LPAs to invite regularisation applications when it appears that a breach of planning control has occurred.

The restriction on appeals against enforcement notices is a further key change to planning controls. Changes to Ground (a) (an application for retrospective planning permission) will limit circumstances in which an appeal against an enforcement notice can be brought on Ground (a). This will apply in circumstances where an application for planning permission has already been made to regularise the breach. These amendments do not apply to appeals against enforcement notices that were issued, and have not been withdrawn, before 25 April 2024.

The Planning Inspectorate will also have the power to dismiss appeals against enforcement notices and certificates of lawfulness on the grounds of undue delay by the appellant in progressing the appeal, unless steps are taken by the appellant, within a period specified by notice, to expedite the appeal. These changes do not apply to enforcement appeals or appeals against a refusal to grant a certificate of lawfulness that were made before 25 April 2024.

The Secretary of State also gains the authority to determine the procedure for lawful development certificate appeals.

Please get in touch with our Planning Team if you would like to find out more.

Construction insolvencies are up – what can developers do?

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Thérèse Marie Rodgers, Counsel in the Construction team, has written a piece for React News discussing how the strict application of contractual rights is not always the best way forward.

The latest monthly figures from the government’s Insolvency Service, out last week, show that 4,370 construction firms failed in the UK in the year to the end of November 2023 – around 7% up on the previous year.

While we wait to see whether an upward trend in construction sector insolvencies continues to the end of the year, the figures still make grim reading for the construction industry, and have ramifications for the property and development sectors.

The rate of inflation has been impacting the already slim margins of contractors, many of whom were still recovering from the financial pressures resulting from pandemic-related delays. With the majority of the Building Safety Act 2022 now in force, this financial stress will increase on contractors.

Where difficulties start to arise on some projects as a result, employers and developers should consider whether strict application of their contractual rights is the best option for the project as a whole.

For example, levying liquidated damages as soon as a party is entitled to may initially appear attractive – but it could be the difference between a contractor completing a project or becoming insolvent.

The collapse of a sub-contractor causes delays, but a main contractor’s failure can have a far more serious effect, halting projects for months. Buckingham’s collapse in August left its clients with unfinished projects and the unenviable challenge of finding a replacement contractor.

New challenges

While the focus of the Building Safety Act has been on higher-risk buildings (namely those that are 18m or taller, or seven storeys high), parts of the act will have implications for all buildings. This means that all contractors will need to expend time and money ensuring they are adhering to the evolving applicable laws and regulations for each specific project.

The significant increase to the limitation periods for claims under the Defective Premises Act 1972 – 30 years for works completed before 28 June 2022, and 15 years for claims for works completed after 28 June 2022 – is likely to affect all players in the construction cycle, with claims arising in relation to projects long since completed.

In respect of higher risk buildings, the act brings multiple challenges. The new gateway process introduces the requirement for building control approval before building work can commence, and once it is complete, prior to occupation of the building.

These stages are likely to cause delay, and the risk of submitting the relevant applications and incorporating the period for any such applications into the programme will need to be considered at the outset of a project. There is also more onerous competency and golden thread requirements, which are likely to cause increased costs or put a further squeeze on profit margins.

Warning signs

What are the signs that a contractor may be nearing insolvency? On site, you’d expect to see work stalling, contractual milestones being missed and fewer people on site, as well as equipment, plant and materials disappearing.

Problems with cash flow may lead to the contractor requesting early payments, and potentially submitting over-inflated claims. Further down the chain, sub-contractors might complain of lack of payment – and may even request direct payment.

There are some practical actions developers or employers can take in these circumstances, such as ensuring it has a complete set of contractual documents – all guarantees and warranties, including any sub-contractor collateral warranties – and to check the insurance required under the building contract is still in place and all premiums paid.

It is prudent to increase monitoring of the progress of the works to ensure the information on the contractor and status of the project is understood. It would also be beneficial to understand the contractual position in the event of a contractor insolvency. Are protections in place, such as a performance bond, parent company guarantee, step-in rights and termination rights?

A new agreement

Notwithstanding the above, in the vast majority of scenarios, it’s in everyone’s interest to reach a commercial solution that gets the project completed with the contractor continuing in business. That’s likely to need open and frequent communication – initially to understand whether the contractor is willing and able to complete the project, and whether realistically that can be achieved by a commercial agreement.

Such agreements could restructure payment arrangements, speeding up payments, making them more frequent and perhaps providing that the employer pay subcontractors directly. It’s key that safeguards are put in place to ensure any such funds are only being used to complete the project at issue, and not propping up other projects.

A moratorium on liquidated damages may also assist, with the incentive of waiving them altogether if a new agreed programme to complete the project is met.

If completion by the contractor isn’t possible, the discussion should focus on an orderly handover of works. To what stage of the project is the contractor able to complete? When will an alternative contractor need to be engaged to complete the works? Relieving some pressure on the contractor in this way could lead to improved performance.

Whichever option you take, you must protect your interests. Don’t just agree a new programme without maintaining an incentive for performance, and ensure you have a remedy should the project deteriorate.

Worst-case scenario

If the worst happens, it’s not impossible to continue with an insolvent contactor, dependent on the type of insolvency proceedings and whether the contractor considers it’s able to complete the works. It might be the best option if the project is very near completion.

There is also the option of stepping in to engage subcontractors directly to complete the project or, following termination for insolvency, engaging directly with the subcontractors. This is the approach Liverpool FC has taken (at least in part) to complete its stadium following Buckingham’s insolvency.

Engaging a new contractor is not always a silver bullet, and can come with significant downsides. It could delay completion and is likely to be more expensive. The new contractor may not assume responsibility for the insolvent contractor’s works, or will charge a premium for doing so.

Should your project encounter contractor insolvency, careful consideration of all the options available is needed to get work back on track, with the minimum amount of disruption.

Originally published on 22 January 2024, the article can be accessed here behind the paywall.

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Helen Streeton quoted in Inside Housing on the landmark ruling demanding building owners pay for cladding fixes

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Partner and Head of BTR, Helen Streeton, has been quoted in the Inside Housing article entitled “What the landmark Get Living ruling means for housing associations and leaseholders”.

Late in January, a first-tier tribunal ordered the owners of London’s Olympic village to pay £18m to fix fire safety issues on five blocks of flats. The judgement was the first use of new remediation contribution order (RCO) powers under the Building Safety Act 2022. It was hailed as a victory by the leaseholders, who have been unable to sell their flats since defects were uncovered, and Triathlon Homes, the housing association that brought the action.

The first-tier tribunal has ruled that Stratford Village Development Partnership (SVDP), the developer of East Village, and Get Living, its parent company, must pay £18m towards making five of the 66 blocks safe.

Helen Streeton, Head of Build-to-Rent at law firm Fosters, says the decision bumps up against other government legislation to cover remediation work. Under the ruling, the owners must now reimburse the government’s Building Safety Fund (BSF), which is paying £24.5m of taxpayers’ money to cover both Get Living and Triathlon’s share of the works.

On the RCO, she says, “its interface with the BSF is a bit odd. They’re not particularly aligned”. The Building Safety Fund allows people with responsibility for remediating the defective cladding to apply for taxpayers’ money, but “overlayed on that”, the Building Safety Act says “we can require you to contribute”.

“Although I understand the concept of somebody apart from the taxpayer being responsible for funding the works, I think it’s a massive decision for developers and building owners,” she says, as it “provides uncertainty” over whether they or their shareholders will have to pay back into the fund.

Helen adds that further thought will now be required around due diligence and the decision may deter investment into the residential HRB sector.

The full article, published on 27 February 2024, can be read here behind a paywall.

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Can the Government’s new Office-to-Residential rules solve the UK housing crisis?

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Andrew McEwan, Senior Associate in the Commercial Real Estate team, recently wrote an article for CoStar on the new legislation around permitted development rights and how it can assist the UK housing crisis.

Housing Secretary Michael Gove recently announced legislation to relax the rules around permitted development rights. New flexibilities came into force on 5 March and have been introduced to support office-to-residential conversions, a trend that has been gathering pace over the past few years.

The government has made the changes with the intention of creating a more favourable planning context to address the fact that a large proportion of office buildings are becoming obsolete (due to the twin effect of more home-working and tightening sustainability requirements) while we remain in the grips of a worsening housing shortage.

Office-to-residential conversions have, however, produced inconsistent results to date, and the latest changes are likely to be met with opposition from local authorities who continue to face a lack of funding which would help alleviate some of the delays experienced with the ‘traditional’ planning regime.

You can read the original article, published on 29 February 2024, behind the paywall here.

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Department stores considering a wide range of uses to fill vacant spaces – Andrew Denye speaks to Property Week

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Partner and Head of Retail, Andrew Denye, has been quoted in a Property Week article discussing the wide range of uses former department store owners are considering to fill the vacant spaces.

This April will mark eight years since the high-profile collapse of BHS. With all 167 of its shops closing, it proved to be the tip of the iceberg for department store chains and their problems. Since then, Debenhams and House of Fraser have suffered a similar fate, albeit not a complete wipeout, while long-established chains such as Beales now only operate a couple of sites.

So, what has become of these properties and what are the challenges their owners face in repurposing some of them?

For Andrew Denye, head of retail at law firm Forsters, it is simply the scale of the buildings that has left some landlords struggling to find a way forward. “It took a while for landlords to work out what on earth they were going to do” he says. “Some of these spaces are bigger than shopping centres. That’s a very big hole to fill.”

Denye has already spotted an uptick in department store deals coming through. “We’ve got more big-box deals on our books than at any point over the past 10 years. There’s been a really positive uptick in people looking at these spaces.”

Originally published on Property Week on 1 February, the full article can be read here behind the paywall.

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The Sector Race to Net Zero – a fund level perspective

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We all recognise the real estate industry is shifting towards net zero, but where are the different sectors at on their journey?

In the second of our Race to Net Zero podcast series we set out to explore this question, taking a fund level perspective with Ben Lonsdale, Director of ESG at Patrizia, and Edward Glass, Senior Associate in Forsters’ Commercial Real Estate team. Together, we delve into the different decarbonisation pathways parties are considering, discuss whether green regulation can help drive change, and understand the importance of the S in ESG.

Read more about Real Estate Sustainability here.

In this episode:

  • Louise Irvine – Senior Knowledge Development Lawyer, Commercial Real Estate
  • Edward Glass – Senior Associate, Commercial Real Estate
  • Ben Lonsdale – Director of ESG, Patrizia

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A look at landed estates: Charles Hancock is quoted in CityWealth

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Private Client Senior Associate, Charles Hancock, has been quoted in the CityWealth article ‘A look at landed estates’. In the article, CityWealth editor, Ashleigh John, discusses the current trends and concerns for landed estates and their owners with leading industry experts.

A link to the full article can be found here.

Here are Charles’ key updates and observations:

  1. Diversification and Sustainability:
    • Landowners are seeking alternative income sources beyond traditional farming due to climate changes, government policies, and price fluctuations.
    • Post-Brexit, the UK government shifted support from the Basic Payment Scheme (BPS) to Environmental Land Management Schemes (ELMS).
  2. Long-Term Planning and Challenges:
    • Landed estate owners are prioritising preserving land and businesses for future generations.
    • Complex tax regimes and the fragile social and political landscape are posing challenges for landowners.
    • Careful planning, including wills, prenuptial agreements, and strategic structures, is essential.
  3. Tax Frameworks and Uncertainty:
    • Brexit-led schemes focus on environmental stewardship and tax rules like Agricultural Property Relief (APR) have needed to adapt.
    • Rural sectors operate amid unclear tax and subsidy frameworks.
  4. Strategic Advice for Succession:
    • Viewing a landed estate holistically, considering family dynamics and long-term goals, is crucial.
    • Strategic guidance ensures continuity and preservation for future generations.

For more information on this topic, please do contact Charles directly.

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Connected thinking on rooftop solar – Victoria Towers writes for EG

Rooftop Solar

Victoria Towers, Partner and Co-Head of Industrial and Logistics, has written a piece for EG on the benefits of collective thinking to streamline the legal processes causing delay to rooftop solar.

With time running out for promised legislative change to facilitate rooftop solar, there is much to be achieved in banging a few heads together and streamlining some of the legal processes currently causing delays.

The issue is acute for power-hungry industrial and logistics development, when rooftop solar is often incorporated as part of any planning application and the market is clamouring for fast delivery of new space in the right locations.

It was October, in energy secretary Claire Coutinho’s speech to the Conservative Party conference, promising to reduce red tape for solar panels on industrial rooftops, that she bemoaned solar farms covering our green and pleasant land, and pledged to make it easier for solar panels to be installed on industrial rooftops, warehouses, car parks and factories, cutting through the planning red tape that limits the amount of solar that businesses can currently install.

At the same time, her department’s Solar Taskforce has been looking at barriers to rooftop solar after highlighting the untapped potential of commercial sites, such as warehouses. The task force is due to be wound up around February, and its work will be used for a solar roadmap, to be published later this year.

This time last year, a survey by Forsters found 77% of developers and investors currently used solar panels on industrial and logistics real estate or planned to. The Department for Energy Security and Net Zero should be pushing at an open door.

The government’s own figures show progress in getting photovoltaics on to buildings. An update published in January showed that 50% of capacity came from ground-mounted or stand-alone solar installations at the end of September 2023, but – rather perversely – the majority of the remaining capacity was on domestic buildings, not commercial.

November’s Autumn Statement addressed the issue, promising reform of the grid connection process to cut waiting times, including freeing up more than 100GW of capacity so that renewable energy projects can connect sooner, potentially reducing connection delays from five years to no more than six months.

Co-operation is key

For those of us negotiating these connections for industrial developments, day in and day out, investment is certainly needed. Not only in the grid infrastructure itself but also – much like the challenges around the planning process – in the process of securing a connection. Client projects seem to be held to ransom on substation and wayleave arrangements when they want to connect to the grid.

A question often presents itself when repeatedly agreeing substation leases with providers: why, when dealing again with the same provider, can we not cut through the negotiation and proceed on similar terms? There are a handful of points that are site-specific, but the usual obligations around repair, alterations, use and works in the vicinity of any cabling do not need to be brokered every time. Surely it is better for all those concerned to ensure that the legal documentation is progressed as swiftly and efficiently as possible.

To that end, it does not seem beyond contemplation to have a common ground as a starting point – but standard terms will only work if drafted well. A few years ago, a template wayleave agreement was introduced, but the result was too complicated and everyone quickly broke away from the standard approach. As the pressure increases on all those involved, it seems that we should look at agreeing a succinct, market-appropriate suite of documents that can be called on.

We know that most substation providers have a list of requirements – for example, uncapped indemnities – but many of these are unrealistic and deter investment. Investors don’t like indemnities where they are unnecessary, and quite often facts can allay the concerns that providers have. For instance, an indemnity should not be required on a site that is verified as remediated from an environmental perspective.

Mindset shift

Another frustration comes in the interplay between utility companies. If a gas pipe and an electricity cable are both needed, we would expect some joined-up thinking in using the same route and consulting with each other over installation.

We need more co-operation between independent distribution network operators and distribution network operators. We find ourselves in situations, albeit rare, where we are only permitted to liaise with the IDNO, which in turn has to pick up with the DNO. Alternatively – and again rather confusingly – we liaise with each entity but they do not have any contact with each other. This makes negotiations more protracted and challenging.

There is an interesting legal question here as to whether a potential power user has a right to be connected to the grid. We know the regulatory backdrop, but more and more we are being presented with a “take it or leave it” attitude to negotiations, where the view seems to be that if the end user does not agree to the terms, then the relevant development can be left without power. How has it come to this?

An attitude shift and greater uniformity should not require test cases or legislation. Instead, there should be a focus on working together, taking a sensible approach and not reinventing the wheel every time negotiations are commenced. Strict timelines, set in legislation, would focus minds, but it is hard to imagine a sanction that would not make the situation worse by drawing resources away from investment in grid infrastructure.

Developers are incurring huge costs as a result of delays in getting substations built, signed off and energised. Industrial and logistics development needs to be quick to meet demand – and we need the providers to be more responsive and more reasonable.

The article was originally published on 27 February 2024 and can be read here behind the paywall.

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Anthony Goodmaker awarded Property Lawyer of the Year at the YN Property Awards 2024

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Following the announcement in early February that Anthony Goodmaker, Partner in Forsters’ Commercial Real Estate team, was made a finalist in the YN Property Awards, we are delighted to share he has since been awarded Property Lawyer of the Year 2024.

This award is testament to his dedication to his work and his clients. Speaking of the award, Anthony says “I am delighted to win this award at an event which raises significant funds for an amazing charity in the community. I am honoured to have been chosen by the judging panel in what has been a difficult year in the real estate industry. We hear a lot about this being the era of the specialist lawyer but hopefully this award also shows that there’s nothing wrong with being a generalist too, especially in this market!”

The YN Property Awards are an opportunity for professionals across real estate to come together and celebrate industry successes while raising vital funds for Norwood, the oldest Jewish charity in the UK. Each year Norwood supports more than 2,500 people, including some of the Jewish community’s most vulnerable children, adults and families. From specialist therapy to counselling to parent programmes, their work is invaluable. We are very pleased to continue supporting this worthy cause.

Well done to Anthony, alongside all the other winners and finalists for their achievements.

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Q&A: Five minutes with Victoria Du Croz, Head of Planning at Forsters, featured in Property Week

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Head of Planning, Victoria Du Croz, spoke to Property Week in their regular ‘Five Minutes With’ column on how she got started in property, her favourite destination, her top book and album recommendations and the celebrity she would most like to meet.

How did you join the property industry?

“I was able to do a few law modules while studying English literature at Durham University and found the subject fascinating. I got accepted on to a vacation scheme at Lovell White Durrant (now Hogan Lovells), at the end of which I was offered a training contract. After qualifying, I could not decide between international banking or planning, but I am so relieved I chose the latter and have not looked back.”

What does your job entail?

“I am head of planning at Forsters, working closely with my commercial and rural estates colleagues to advise on all aspects of planning law. We advise major developers, institutional investors, housebuilders, high-net-worth individuals, strategic land promoters, landowners, local authorities, film studios, hotel operators – basically anyone who needs planning law advice.”

What do you like most about the property industry?

“I love that there is a physical building at the end of it. I am incredibly proud of the schemes I have worked on – my family says that from the way I talk about the finished buildings, you would think I had personally built them.”

The article was first published on Property Week on 16 February 2024, and is available to read in full here, behind the paywall.

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Drone technology in real estate: the future or pie in the sky? – Louise Irvine writes for PBC Today

Drone Technology

Louise Irvine, Senior Knowledge Development Lawyer, has written a piece for PBC Today (Planning, Building and Construction) on the expanding use of drones in the world of real estate and examines the legal considerations.


Drone technology in real estate: The future or pie in the sky?

Drone technology might be hitting the headlines due to their vital usage by the armed forces in global conflicts, but its potential is also fast expanding in the world of real estate. Louise Irvine, senior knowledge development lawyer at Forsters, takes a look.

New developments are continuously emerging but current uses of drone technology include bird’s eye and panoramic surveys, which are particularly useful for large agricultural sites or greenfield development, carrying out inspections in hard-to-reach areas and investigating breaches of planning regulations.

Drone technology can also access areas that might be hazardous or not otherwise accessible at all, such as dilapidated buildings with structural issues (such as unstable roof spaces) or where there is known contamination. They can also provide footage for 3D surface models and imagery overlapping.

Real estate businesses are starting to ready themselves for more extensive uses of drones. Clients such as Cubex Land are incorporating drone landing pads into their new schemes, such as with the Halo Building in Bristol.

What is the current legal framework – who owns the sky?

The common legal position in England and Wales is that a landowner owns the air immediately above their land up to the height that would be reasonably necessary for the ordinary use and enjoyment of the land and the structures upon it.

This does infer a vertical limit on a landlord’s ownership and in terms of the usage of the sky above their properties.

There are also various rules that apply in different scenarios around when and where drones may be flown but as a general principle, it’s worth noting that commercial drones may not be flown within 50m of people, vehicles, vessels, buildings or other structures which the drone operator doesn’t control and must be further away still from large crowds.

At present, the regulation of drones is restrictive, particularly in busy metropolitan areas. So, the Civil Aviation Authority has not yet had to worry about managing airspace for drones. It will be a huge amount of work to ensure that drones are integrated into the existing air traffic control system, which represents a major regulatory hurdle.

Planning drone landing spots or vertiports on new build and refurbishment schemes

As business start to futureproof their buildings ready for widespread drone usage, we expect to see more landing spots or vertiports on new build and refurbishment schemes.

Roofspace on commercial buildings, such as office blocks and car parks, are largely underutilised, presenting a commercial opportunity for landlords to add value.

Landlords and developers will need to consider planning permission, firstly in relation to the use of the property as a whole and whether use as a vertiport is either permitted under the existing permitted use of the building or whether it is ancillary to the existing permitted use.

Secondly, in terms of whether the installation of external infrastructure to support a vertiport on a building will constitute development for planning permission purposes.

Planners may also need to consider the ecological impact of drone flight on animals, particularly birds. This is from the obvious risk of collision but also with disturbances and stress caused by noise, lights and the presence of drones in their natural habitat.

Nuisance, privacy and GDPR considerations

It is important to bear in mind privacy, as drones have increasingly sophisticated long-range cameras and recording devices. Using drones over private areas could constitute an invasion of privacy.

GDPR must also be factored in, as those who collate and control data from drones will need to ensure that it is being managed in accordance with regulation.

Most leases will also have restrictions against doing or permitting anything on the premises which may cause nuisance, annoyance or disturbance to the landlord, any other occupiers of the building or estate, and occupiers of any premises in the neighbourhood.

If such a clause is in the lease then the drone operator will have to consider the hours during which the drones can take off and land, and any ways in which noise can be restricted.

Future uses of drone technology

Companies such as Skyports are exploring air taxi services and have been acquiring sites for this purpose. Around 50 different countries are reportedly looking into the viability of unmanned flights forming part of their transport network, driven by often congested and ageing road networks, but it’s unlikely we’ll see any unmanned drone taxi flights before the 2030s at the earliest.

In 2016, Amazon completed its first commercial delivery using a drone in the UK as part of its Amazon Air trial using a GPS-guided drone to deliver its cargo to a home in Cambridge. But progress has since been slow.

However, in Australia, Wing (which is part of the Alphabet group) has been regularly delivering cups of coffee and other groceries by drone, apparently without any safety issues thus far.

In London, the Lyons Place residential development is the first residential development to incorporate a drone port to accommodate drone deliveries to the residents of the building. Meanwhile, Royal Mail has partnered with a few UK drone companies to start transporting parcels using drones to remote rural areas.

Skyports has also been exploring medical uses. Drones delivered Coronavirus testing kits and medical supplies to the remote region of Argyll & Bute in Scotland during the pandemic.

It remains to be seen whether drone technology will rapidly rise or if progress will be slow. Either way, there will need to be more legislation and regulation to protect privacy, flight paths and areas of national security. But the potential for drone usage to expand is clear, and it is definitely an area to keep a close eye on.

This article was originally published by PBC Today on 29 Jan 2024 and can be read here in full.

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Louise Irvine

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Paper trials – Conveyancing and the Building Safety Act: Charles Miéville quoted in the Law Society Gazette

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Residential Property Partner, Charles Miéville, has been quoted in the Law Society Gazette in an article on conveyancing and the Building Safety Act.

The article draws on opinions from industry experts and touches on the issues surrounding the Building Safety Act 2022 and the subsequent slowing of leasehold transactions. The article elaborates on recent guidance published to try to provide conveyancers with some clarity.

Charles highlights issues when selling a property and the difficulties of navigating the legislation when dealing with property transactions. He comments: ‘There’s a bit of a learning curve, and some of the legislation hasn’t been tested in the courts.’

As a solution to these issues Charles suggests that there is a ‘need to advise landlord clients where they sit in terms of remediation costs. If one deadline is missed, costs cannot be recouped from the tenant.’

The full article can be read here.

Please contact Charles to discuss any of the topics raised in this article.

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Biodiversity Net Gain obligations

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BNG planning obligations came into effect on 12 February 2024. This means that for most developments, any planning application submitted from this date will be subject to the BNG requirements. Any existing permissions, or applications pending at this date, are not affected.

The obligations are onerous and developers will need specific guidance. Forsters’ planning experts can offer guidance and practical advice on how to navigate the BNG requirements.

Read our introductory briefing note

Read our follow-up briefing note from February 2024

Further guidance and practical examples will be circulated when available.

For more information, get in touch with our Planning team to discuss how we can help.

Testing the limits of transparency: Guy Abrahams is quoted in Property Week on land ownership

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Private Client Partner, Guy Abrahams, has been quoted in the Property Week article ‘Testing the limits of transparency’.

The article seeks the opinion of industry experts on the transparency of Britain’s property market regarding land ownership. The push for greater transparency is to help target illicit finance and corruption in the property sector.

Guy explains a key issue in identifying property owners is balancing the need for transparency with the right to privacy. On whether the government should enforce the publicity of property-owning trusts, he comments that it would not go far enough to minimise the chance of illicit funds infiltrating the property market.

The full article can be read here.

Please contact Guy to discuss any of the topics raised in this article.

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Anthony Goodmaker shortlisted for Lawyer of the Year at the YN Property Awards 2024

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We are delighted to announce that Anthony Goodmaker, Partner in Forsters’ Commercial Real Estate team, has been shortlisted for Property Lawyer of the Year at the YN Property Awards 2024.

The annual YN Property Awards celebrate industry achievements across the property sector and raise vital funds for Norwood, the oldest Jewish charity in the UK. Founded in 1795, Norwood supports people with learning disabilities and autism, and offers support to vulnerable children and families.

The winners will be announced in February 2024.

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Private Water Supplies

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About one percent of the population rely on a private water supply, where water is drawn from a borehole, well, spring, lake, stream or river to service their properties. A borehole is likely the most common method for domestic properties.

There are extensive regulations surrounding a private water supply, these are contained in the Private Water Supplies Regulations 2016, which focus on the quality of water, and the Water Resources Act 1991, which focusses quantity and supply. Local authorities have wide powers to enforce these regulations, and breaching them, or abstracting water without a licence can be a criminal offence.

Relevant persons:

Responsibility for the quality and quantity of private water supplies lies with the owners/occupiers of the property serviced by the water supply, the owners/occupiers of the property where the water supply is sourced, or any other person who has management or control of the water supply. The law identifies these people as ‘relevant persons’.

Understandably, there is a requirement for a water supply to meet basic regulatory standards, ensuring that it is safe for use and consumption at all times. This is measured by testing the number of contaminants in the water and depends on the size and nature of the supply.

1. Commercial supplies (including supplies to a number of dwellings):

These are defined as supplies of a daily average of over 10m3 or to either public or commercial premises. Properties let to third parties also fall under this category. Risk assessments must be carried out at least every 5 years and a water test must be carried out at least annually. If it is determined that a supply is a danger to human health, a local authority has a duty to warn the occupants of the property and advise how to minimise the danger.

2. Standard private supplies:

This is a supply to any premises, other than a single dwelling, not used for commercial purposes. Again, these are subject to 5-yearly risk assessments and an annual test, however, a narrower number of contaminants are tested.

3. Single dwelling supplies:

Single dwellings that are not used for any commercial activity. In this case, a risk assessment is required only, and the supply is monitored, if requested by the owner or occupier of the property.

4. Distributed mains supplies:

These are rare, but occur where water is supplied by a mains provider and then further distributed through a private water network. Risk assessments are still required, even though the water originates from a mains source.

Relevant persons are also responsible for the sufficiency of a private water supply. Supply can change in drought or severe cold weather, or as a result of a burst or leaking pipe etc.

In these cases, relevant persons are responsible for putting in place alternative arrangements and central responsibility is with the owners of the supplies, who should have an emergency plan in place. An owner of a water supply can never just disconnect the supply, even in the event of non-payment by a user.

If a local authority finds that a water supply is insufficient, either due to quality or quantity, then they are able to serve a ‘private supply notice’ on the owner of the supply, setting out the steps they must take to rectify the situation. This can prove expensive, particularly if the required action is to connect to a mains water supply. If an owner of a water supply does not comply with the notice, the local authority can do it on their behalf and recover the costs from the owner.

A more serious notice – ‘a regulation 18 notice’ is served where a supply is proved to be a danger to human life. If this is not complied with, it is a criminal offence carrying up to 2 years’ imprisonment, and/or a fine.

Abstraction:

Taking water from a source is known as abstraction. A licence is required from the Environment Agency where an average of over 20m3 is abstracted daily. This is unlikely to be the case for a single residential dwelling. Again, abstraction without a licence, where one is required, can be a criminal offence.

Licences are transferred with a property on a sale, but a buyer does need to contact the Environment Agency to transfer the rights under the licence.

Summary:

To summarise, a relevant person is responsible for the quality and quantity of a private water supply, with central responsibility lying with the owner of the supply. Local authorities can enforce the regulations, and it can be costly to comply with them, and it is essential that an abstraction licence is obtained where an average of over 20m3 of water is abstracted daily.

Advice from a specialist should be obtained if you are purchasing a property responsible for a private water supply or serviced by one.

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What’s in store in ’24? Andrew Crabbie quoted in BE news

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Andrew Crabbie, Partner and Head of Commercial Real Estate, has been quoted in BE News offering his predictions for 2024, alongside other leading industry figures.

Crabbie highlighted the importance of high quality, sustainable office space to occupiers, as Forsters settles into their new office in 22 Baker Street. He stated:

“Planning will continue to be a thorn in the side for developers. Local and national government must get to grips with the planning application bottlenecks (though with a general election looming, it is likely this will be on the back burner). The impact in 2024 of the introduction of biodiversity net gain regulations will prove another challenge to developers. Michael Gove’s decision to refuse M&S’s plans to develop its flagship store on Oxford Street on the grounds that the project was not compatible with the transition to a low-carbon future has amplified the ‘demolish and re-build versus retrofit’ debate, which will continue to run in 2024. From an occupier perspective, the flight to quality zeitgeist will grow across all assets as companies share the same priority of inhabiting well located, highly amenitised, sustainable and flexible workspace that puts the performance and well-being of its employees at its heart. Indeed, here at Forsters we’re a living, breathing exemplar as in January we’re consolidating our London business into a new headquarters on Baker Street in the heart of Marylebone.”

The full article was published by BE news and can be read here (behind their paywall)

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Forsters represent Elsevier in HQ sale and new letting

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Forsters advised Elsevier in relation to the sale of their long-term UK HQ in Kidlington, Oxford and associated relocation into new premises.

Part of the FTSE 100 RELX Group plc, Elsevier is an academic publishing company specializing in scientific, technical, and medical content.

Glenn Dunn, Head of Forsters’ Corporate Occupiers group, advised Elsevier and was assisted by Owen Spencer and Molly Haynes.


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Outside the Box: An Occupier Perspective

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In the fourth episode of our Outside the Box podcast, we focus on the occupational requirements within the industrial and logistics sector. How has occupier demand changed during 2023 and, with an increasingly diverse occupier mix, is the industrial and logistics sector addressing the needs of occupiers? Paul Grayson, Senior Associate at Fosters chats to Tom Shaw, Director in the industrial and logistics occupier advisory team at Savills.

Read more about the industrial and logistics sector in Forsters’ report Outside the Box – Supporting an Industrial Evolution.

Contact our team

 

In this episode

  • Paul Grayson, Senior Associate
  • Tom Shaw, Director SE Industrial, Savills

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The overriding concern of the industry is that the government’s proposals will lead to even less housing being delivered – Victoria Du Croz quoted in the Financial Times

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Planning Partner, Victoria Du Croz, has been quoted in the FT article entitled “Michael Gove insists he has not ‘abandoned’ local housing targets.”

Speaking on Tuesday 19 December, as the revised National Planning Policy Framework (NPPF) was published, Michael Gove said that local authorities will be given three months to deliver housing plans or face losing planning powers.

In the article, in which housing and property industry groups responded to Gove’s speech, Victoria du Croz, partner at Forsters said “The overriding concern of the industry is that the government’s proposals will lead to even less housing being delivered. The government has produced no convincing evidence to demonstrate how their reforms will deliver more housing.”

To read the full article (behind a paywall) please click here.

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Public Rights of Way: How to keep the curtains open without seeing dog walkers!

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When purchasing a property, it is important to ensure you are fully aware of any public rights of way crossing the property or near to it.

Those seeking peace and quiet in their new home will often want to ensure they are not besieged by local ramblers on the warpath.

Public rights can be divided into four categories

  1. Footpaths (people on foot only)
  2. Bridleways (people on foot, cyclists and horse riders)
  3. Restricted byways (people on foot, cyclists, horse riders and any other transport without a motor)
  4. Byways open to all traffic (people on foot, cyclists, horse riders, cars and any other transport with a motor)

There are exceptions for people in mobility scooters and powered wheelchairs.

A local authority and highways search obtained as part of the due diligence when purchasing a property should reveal any public rights of way crossing or abutting the Property. However, your solicitor should also enquire of the seller whether they are aware of any applications or pending submissions to add any public right of way to the definitive map or extend an existing public right of way which would abut and/or cross the Property.

The highways search will only reveal rights of way that are recorded as public rights of way at the date of the search result. Where a public right of way is shown on the local authority’s definitive map, that is conclusive evidence that it exists. However, definitive maps can be incomplete or not up to date which means that they are not conclusive evidence that no public right of way exists.

There are different ways in which new public rights can be created including (1) by express grant, (2) by order of a public authority, (3) dedication by the landowner and (4) presumed dedication.

Presumed dedication arises where the public at large have used a defined route for a 20 year period without permission from the landowner. Creating rights of way under presumed dedication is something that any purchaser should be mindful of when purchasing a property. Whilst the burden of proof is high for presumed dedication your solicitor should raise enquiries of the seller to determine if there has been any activity which could amount to presumed dedication.

What can you do to ensure the privacy of your home?

It is possible to:

  1. Deposit a landowner statement under section 31(6) of the Highways Act 1980 with a map marking any ways across the property that the owner accepts are public rights of way and includes a declaration that the landowner does not intend to dedicate any new public rights of way across their property. This will “stop the clock” on the 20 year period and (unless the public can provide evidence to the contrary) any use of the property by members of the public during this period should prevent against new rights of way being established.
  2. Apply to divert footpaths, bridleways and restricted byways provided certain requirements are met including that the diverted route is not substantially less convenient to the public. However, this can be a costly and drawn-out process especially if objections are raised. You should always get the right advice and, to avoid objections, ensure that any diversion benefits not only you but also members of the public.

Forsters can assist you with both these options and provide advice on public rights of way that currently affect your property or may affect a future property you are interested in purchasing.

Following a purchase, we always advise our clients to take active steps to ensure that no new rights of way are acquired which may include ensuring your boundaries are fenced, any gates specify that there is no public access, and you remain vigilant as to any members of the public gaining access to the Property.

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Film Studios: Peering Through the Letterbox

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Podcast host Louise Irvine, and Owen Spencer, Counsel in Forsters’ Studios Group, were joined by Simon Calvert of CBRE to discuss film studio real estate.

The trio peer through the letterbox on the sector and give insights into the latest trends and likely developments in the film studio sector.

In this episode we were joined by:

  • Simon Calvert, Senior Director at CBRE
  • Owen Spencer, Counsel in Forsters’ Studios Group
  • Louise Irvine, Senior Knowledge Development Lawyer in our Commercial Real Estate team

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Navigating the Evolving Landscape of Energy Efficiency Regulations in Real Estate

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Listen in as we uncover the intricacies of global real estate decisions impacted by changing regulations with Edward Glass.

We explore critical topics such as minimum energy efficiency standards, energy performance certificates, and the rise of green lease clauses. Edward has been tracking the E in ESG closely since 2013-14, and his expertise shines as he discusses the change in the industry that EPC regulations have instigated and how Forsters is dedicated to sustainability.

We venture further into the financial implications of current and future regulations on real estate investments, emphasising the potential costs and risks for asset owners. We tackle the important question of how landlords should approach energy performance certificates, particularly with the looming necessity of capital expenditure to upgrade buildings to comply with future regulations. Listen in as we analyse the proposed uplift in minimum energy standards, its potential impact on the UK real estate, and strategies for budgeting for OPEX costs.

The episode concludes with an insightful look into the changing landscape of green lease clauses, data sharing, and its enforceability. Edward shares his observations on the evolving narrative for both landlords and tenants and key considerations when drafting leases. We discuss innovative approaches like the Chancery Lane Project, the challenges of enforcing sustainability clauses in the commercial sector, and the importance of a strong landlord-tenant relationship in the residential sector. So, tune in and equip yourself with knowledge about the changing regulations in real estate, whether you are a landlord, tenant, or investor.

  • Energy Efficiency Standards and Green Lease
  • Implications of Energy Performance Certificates
  • Changing Green Lease Clauses Landscape
  • Green Lease Clauses and Data Sharing


This podcast was recorded and first published by LifeProven. Read more here.

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Edward Glass

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Spurs result flags up venues’ residential neighbour disputes – Victoria Du Croz speaks to Property Week

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Head of Planning, Victoria Du Croz, has spoken to Property Week on how a legal dispute recently lost by Tottenham Hotspur football club has returned attention to the debate over the balance of rights and obligations for both businesses and local residents.

Commenting on how the club had objected to proposed residential developments close to their stadium (and had had a subsequent judicial review dismissed on the grounds that access to the stadium would not be unreasonably impacted), Du Croz wrote that:

“Spurs was looking at how it could future-proof itself and force Lendlease to allow very reasonable terms through the planning system, without having to rely on a commercial negotiation.”

No guarantees

Businesses such as these inevitably come with noise and disturbance to the local area, with a previous example being that from 2011 in which a proposed development within earshot of Elephant & Castle’s Ministry of Sound nightclub threatened the club’s operation.

Du Croz explained that the Ministry of Sound eventually settled its case with a compromise, writing that:

“The owners of the new residential development agreed to allow the Ministry of Sound to make a certain noise level without it being considered a nuisance. That then enabled permission to be granted.”

She caveats this story with the point that the introduction of the ‘agent of change’ principle to the National Planning Policy Framework has since altered such circumstances. Now, “the onus is on new residential schemes to put in place noise-mitigating measures.”

This principle, however, does now demand that new developments have no impact on businesses. What it emphasises, Du Croz believes, is the need for “entertainment operators to diversity and in [reaching agreements] agree what the noise level should be.”

“You want to allow for diversity. Football stadiums often have pop concerts that exhibit a different noise matrix [to football].”

Light issues

Beyond noise, the effect of light is also an issue currently being contested, with current attention current fixed on the proposed MSG Sphere development in Stratford. On this, Du Croz explains that the law isn’t as developed for light as it is for noise.

“The sphere is visually dynamic, but potentially visually intrusive. There’ll be planning policies in place to ensure that any new developer doesn’t adversely impact people’s amenity and access to light, so they will have to contend with that.”

This article was originally published by Property Week on 15 November 2023 and can be read here in full (behind their paywall).

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The Sector Race to Net Zero – a cross-sector regulatory perspective

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As the real estate industry transitions towards a net zero world, where are the different sectors on that journey?

As we move into 2024 and an Olympic year, Forsters are set to explore that question, looking at how the sectors are embracing the net zero challenge. In our first podcast, we take a cross-sector approach in conversation with Rob Wall, Assistant Director of Sustainability and Tax Policy at the British Property Federation. What is the state of play in terms of regulation?

Read more about Real Estate Sustainability here.


In this episode:

  • Louise Irvine – Commercial Real Estate Senior Knowledge Development Lawyer
  • Rob Wall – Assistant Director of Sustainability and Tax Policy at the British Property Federation

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Outside the Box – Episode 3 – ESG-volution

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In the third episode of our Outside the Box podcast, we look at sustainability in the Industrial and Logistics sector.  Miri Stickland, Forsters’ Head of Knowledge is joined by Victoria Towers, Partner at Forsters and Co-Head of Industrial and Logistics, and Jessica Pilz, Head of Sustainable Investing, Private Markets at Fiera Capital.  

With the sector committed to meeting net zero targets by 2050, UK investors and developers have highlighted the need for further assistance from Government. We discuss how recent announcements from Rishi Sunak weakening net zero policies will impact the sector, how pressure is mounting and where meaningful gains can be made. 

Read more about ESG and the I&L sector in Forsters’ report from Spring 2023:  Outside the Box – Supporting an Industrial Evolution.

Contact our team

 

In this episode

  • Victoria Towers, Partner and Co-Head of Industrial and Logistics
  • Jessica Pilz, Head of Sustainable Investing, Private Markets at Fiera Capital

 

You may also be interested in

 

Previous episodes:

 

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The King’s Speech: Leasehold Reform

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The Department of Levelling Up Housing and Communities estimates that there are around 4.98 million leasehold homes in England, making up a significant proportion of all residential housing. Impacting on the lives of so many, leasehold ownership has therefore been the subject of much debate over the years.

The existing law allows leaseholders of residential properties to purchase the freehold and/or extend the leases of their houses or flats. However, these rights have been developed piecemeal, and are the product of over 50 Acts of Parliament, totalling 450+ pages of legislation. Unsurprisingly therefore, the system has been criticised as inconsistent and unnecessarily complex, often leading to protracted and expensive legal proceedings.

There was a lot of speculation as to what leasehold reform proposals might be included in the King’s Speech and so enfranchisement practitioners waited with bated breath.

Unfortunately, it was an anti-climax! With the King saying only:

“My Ministers will bring forward a Bill to reform the housing market by making it cheaper and easier for leaseholders to purchase their freehold and tackling the exploitation of millions of home owners through punitive service charges”.

The background briefing note confirmed that a Leasehold and Reform Bill would be introduced to “put the country on the right path for the future by giving homeowners a fairer deal in the following ways”:

  • Making it cheaper and easier for existing leaseholders in houses and flats to extend their lease or buy their freehold. It is difficult to tell whether this is a proposal in itself (with further detail perhaps to follow in the draft Bill) or whether this is simply a reminder of the government’s overriding objective i.e. with the proposals that follow being the way in which the government intends to fulfil this promise. The latter is probably more likely, otherwise this proposal is frustratingly vague.
  • An increase to the standard lease extension term from 90 years to 990 years for both houses and flats (with ground rent reduced to £0, which is of course, already the case) – this was included in the February 2021 policy statement so was no surprise.
  • Removal of the 2-year ownership rule currently required for statutory lease extensions and freehold house purchases/lease extensions – again, this was included in the February 2021 policy statement and so is not controversial.
  • A ban on the creation of new leasehold houses. This was a manifesto commitment by the Conservatives at the last general election so is not a surprising announcement, but the impact of this is now likely to be minimal. Since the Leasehold Reform (Ground Rent) Act 2022 came into force, the number of houses being sold on a leasehold basis is very small.
  • Increasing the 25% ‘non-residential’ limit to 50% for freehold and right to manage claims. This was the subject of a government consultation in January 2022 but to date, there had been no government response and so it feels a little surprising that this has made it through.

These proposals all seem like easy wins, which are designed to grab the headlines! So, one would be forgiven for thinking that, despite all the hype, the government has simply paid lip service to the promise of far-reaching reform.

That said, the last of the proposals is rather more far-reaching and that is the proposed consultation on capping all existing ground rents. This was included in the government’s February 2021 policy statement – but there, the proposal was for ground rents to be capped at no more than 0.1% of freehold value. Given the difficult political arena and the need to find a balance between the competing interests of leaseholders and landlords, it is difficult to see this going through without a strong challenge, even with consultation.

The argument will be over what compensation is to be offered to landlords and whether there is to be a statutory acquisition process. A number of funds, which quite possibly form part of pension funds, own large ground rent portfolios and this value cannot simply be wiped out.

Almost as interesting as the proposals that were included in the Speech, were the proposals that weren’t! Most particularly:

  • The proposed abolition of marriage value. This was one of the most controversial of the proposed measures and so it is perhaps not surprising that it did not feature in the Kings Speech. Having said that, it was included in the government’s February 2021 policy statement and was also widely trailed in other recent ministerial briefings, so the omission does seem slightly odd.
  • The prescription of capitalisation and deferment rates and the introduction of a calculator to determine the enfranchisement price were also omitted. These seem to have fallen off the government’s radar. Perhaps because the task of balancing the contradictory agendas of both leaseholders and landlords is too tricky?!
  • Finally, and as predicted, the gradual phasing out of leasehold properties and the phasing in of commonhold as an alternative form of ownership for flats was not mentioned either. This is most likely because of the enormous cultural shift which it would require, which is not something that could be achieved overnight.

Overall, a bit of a damp squib! Of course, the devil will be in the detail and until we see the draft Bill, it would be foolish to think that anything is either on or off the table. There does seem to be a general trend for the enactment of primary legislation or enabling legislation though, with the detail being determined later in Regulations and so the fear is, that this may be the way the proposed Leasehold and Freehold Bill will be drafted.

Also, there will certainly be attempts by the very effective leaseholder lobby, during the passage of the Bill, to add all sorts of other things, of which the “abolition” of marriage value will undoubtably be one. In addition, there is already talk about a back-bencher revolt over the failure to include a ban on the sale of new leasehold flats.

Unfortunately therefore, for the enfranchisement industry, it’s yet another case of having to watch this space…

Caroline’s comments have also featured in articles published by Estates Gazette (found here), Inside Housing (found here), and BE News (found here).

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Outside the Box – Episode 2 – Market Challenges

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In the second episode of our Outside the Box podcast, we look at market challenges and opportunities in the industrial and logistics sector.  Miri Stickland, Forsters’ Head of Knowledge, is joined by Magnus Hassett, Partner and Head of Industrial and Logistics at Forsters, and Ben Sleath, Equity partner at DTRE

In early 2023 businesses were recovering from a turbulent political period and much uncertainty remained.  Had inflation really peaked?  How much would interest rates rise by?  Our research report from Spring 2023 (Outside the Box – Supporting an Industrial Evolution) revealed the general sentiment seemed to be that the warehouse bubble had burst, but the jury was out as to whether the industrial real estate sector faced a sustained downturn.  The report also identified a range of opportunities across the UK market, and as we know, sometimes the greatest opportunities arise from facing the greatest challenges.  In this podcast we discuss how has the industrial and logistics market has progressed in 2023 and Ben Sleath shares his views on occupier demand and rental growth and where the opportunities might be in 2024.

Read more about the challenges and opportunities facing the industrial and logistics sector in Forsters’ report from Spring 2023:  Outside the Box – Supporting an Industrial Evolution.  

Contact our team

In this episode

  • Magnus Hassett, Partner and Co-Head of Industrial and Logistics
  • Ben Sleath, Equity Partner at DTRE

Previous episode The Future of Freight

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Navigating the Last Mile: Insights from the Last Mile Industrial and Logistics Conference 2023

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On October 12, 2023, logistics and warehouse specialists, developers, funders, planners and, notably, a commercial real estate and a construction lawyer from Forsters, converged at the iconic BAFTA venue in London for the Last Mile Industrial and Logistics Conference.

Dan Easom, my construction colleague, and I had the privilege of attending this informative event. We went with an aim of exploring the latest developments and challenges facing industrial and logistics in London and the South-East and, quite frankly, this one article will not cover half of what was discussed. We share some of the key takeaways from the conference.

State of the Market

Through the many graphs and figures that were shown and discussed, a key point to note was that occupier demand, although showing signs of cooling, continues to favour landlords. The real headline, however, is the aging infrastructure in London where a startling 65% of warehouse space is over 30 years old. Combining this with a notable drop in new construction projects compared to the previous year shows that this problem is not going to be alleviated any time soon.

Another emerging trend in the market is the growing importance of Energy Performance Certificates (EPCs). Occupiers are increasingly willing to pay a premium for A and B-rated buildings, reflecting the industry’s commitment to sustainability and the target for an EPC rating of B by 2030.

Planning for the Energy Infrastructure

An overarching theme of the afternoon was energy – how much do stakeholders need, where do they get it from, and, crucially, what to do with it one it is generated (can they sell or it or store it efficiently?). The electrification of vehicles, the rise of robotics in logistics and warehouse operations, and the proliferation of personal electric vehicles are driving up demand for electricity and this, in turn, increases the need to find practical solutions to solve energy creation and storage needs, let alone ensuring that necessary infrastructure (such as EV charging) is incorporated into developments.

The discussion around renewable energy sources, particularly photovoltaics (PVs), was robust. It’s puzzling that only 5% of warehouses have embraced PVs, given their cost-effectiveness, with the cost paid off within three years. The main hurdle appears to lie in obtaining permits to sell excess energy back to the grid, a bureaucratic process that is fraught with uncertainty. There was anecdotal stories of some developments having even been stalled due to these challenges.

The need to revise the planning process and eliminate restrictions on PVs and renewable energy installation became clear. Local authorities should incorporate energy plans into their development strategies, and the possibility of moving from a centralised power grid to localised grids was discussed. Such local grids, however, are unlikely to be feasible without advances in battery technology and planning ahead to ensure that there is sufficient space on site for the installation of such batteries.

Ultra-Urban Logistics

Navigating logistics in ultra-urban environments is a complex puzzle. Electric vehicles are a step in the right direction, but continuous innovation is imperative. The overarching theme is collaboration and data sharing. Comparable, industry-wide data should be collected and perhaps mandated, with the potential for machine learning applications to drive further improvements.

The idea of reducing door-to-door deliveries in favour of centralising spaces for local businesses was pondered. The West End’s unique property landscape poses limitations for installing such spaces, but this challenge must be addressed in both new developments and retrofits.

A powerful and memorable quote of the day was “the best logistics mile is the mile not travelled”. While ultra-urban logistics has its challenges due to the nature of the existing environments, choosing the right places to build warehouses and focusing on increasing efficiency and reducing unnecessary travel should provide for streamlined logistics and reduced carbon use for all stakeholders.

The conclusion? London urgently needs a comprehensive logistics plan, at the local and national government level, that focuses on logistics and warehousing site allocation, energy demands, and energy capacity.

Making it Sustainable and Maximising Space

Sustainability was a recurring theme, not only in terms of achieving net-zero carbon but also in addressing embodied carbon. The significance of steel and concrete emissions, responsible for 16% of global emissions, was highlighted. There’s a growing interest in traditional materials like bricks and timber, with lower carbon footprints and long-lasting qualities. While this might result in an increase in development costs, the status quo is unsustainable.

Properties that can cater to different types of occupiers is becoming a key consideration for developers. An easy way to provide for such varied uses such as robotics, logistics, vertical farming and film and tv studios is simply to try and maximise the space that is available, as more space allows for more flexibility and adjustability.

Vertical development and underground construction were discussed as ways to optimise space. However, while increased space might mean more flexibility, it was emphasised that these approaches should be demand-driven, requiring collaboration among occupiers, developers, and landlords.

Regardless of the approach taken, these ambitious ideas depend on reliable power sources (energy being a common theme throughout the day).

Creating a Logistics Pipeline

London’s historical stock of properties is a valuable but challenging resource. The task is to determine whether to demolish and develop, retrofit, or repurpose. The goal of achieving EPC rating B for all commercial buildings by 2030 further compounds the problem as it raises questions about the feasibility of retrofitting some of the historical stock.

Each property site demands a unique approach, considering the site’s specifics, location, and existing structures, but balancing financial and carbon costs is essential, as sustainability goals need to be aligned with the economic realities.

One key takeaway is that old doesn’t necessarily mean obsolete, provided it’s adapted thoughtfully to meet modern demands. Moreover, any new developments should be forward-looking, designed to accommodate future technological advancements and to withstand the test of time.

The themes mentioned above are explored further in our recent report – Outside the Box: Supporting an Industrial Evolution.

Buying & Selling Farms – The Nuts & Bolts: Adam Saunby to present MBL webinar

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Rural Land and Business Senior Associate, Adam Saunby, will be running the MBL webinar ‘Buying & Selling Farms – The Nuts & Bolts’ on 24 January 2024.

This webinar will look at the fundamentals of buying and selling farms, useful tips, as well as discussing some of the nuances that acting in land transactions brings.

Whilst farming is as old as time, over the last few years there has been an increase in additional revenue streams to supplement income, which means that in addition to purchasing a farm, it is sometime necessary to consider its future use.

Adam will cover the following:

  • Why collaboration with other professionals is key
  • The basic fundamentals involved in a transactional process when selling and buying a farm
  • The importance of site visits
  • Understanding farming activities
  • The basics of different types of farming tenancies and licences
  • Contract negotiations
  • Other things to be aware of such as environmental schemes, employees, tax considerations
  • The increase in diversification on a farm e.g., renewable energy, holiday lettings

The webinar will be streamed at 12:30pm on Wednesday 24th.

Book your place here.

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Building liability orders lift the corporate veil on developers – Andrew Parker writes for Property Week

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Construction Partner and Head of Building Safety, Andrew Parker, has written for Property Week on how, a year on from the passing of the Building Safety Act 2022 (BSA), we are now starting to see the cumulative effect of all the new devices for holding the residential development industry to account for the building safety crisis.

However, Parker adds that: “What we have not yet seen is any clue as to how the High Court will decide what is ‘just and equitable’ in the granting of a building liability order (BLO). The phrase ‘just and equitable’ appears to give the court discretion and introduces huge uncertainty.”

BLOs allow those pursuing litigation to “lift the corporate veil” on special-purpose vehicles being used for developments. In other words, where a company is liable for a building safety risk, a BCO also then enables the associated company to become liable itself.

“This sounds well intentioned”, writes Parker, who holds the same view of the BSA’s retrospective extension of limitation period by 30 years, as well as the Residential Property Developer Tax, the Building Safety Levy and the “contracts requiring developers to fix what they built.”

Looking beyond the impact of developers on this crisis, who may arguably now carry a disproportionate burden in solving the crisis, the government also wants other parts of the supply chain to contribute. Namely, they are focusing on the investors in the manufactures implicated in the Grenfell Tower fire. “The government probably assumes that developers will recover costs through litigation, but it has identified developers as a soft target with deep pockets.”

There is concern, then, that BLOs have gone too far. They pose the risk of “undermining the financial stability of development groups, boosting insurance premiums to cover uncertainty and affecting the feasibility of schemes.

“The complex corporate structures under attack are how property developments are commonly procured; and so to retrospectively create liabilities for companies that would otherwise not have had them is dramatic. It may hit share prices for companies, with knock-on effects for funding and future developments.”

Corporate liabilities

Parker considers whether it was wise to lift the corporate veil in this instance; a mechanism that has been in place for some time and successfully resisted numerous previous arguments against it. Those developers who made corporate acquisitions to enter the residential development market now hold considerable liabilities thanks to these changes in legislation.

SMEs, which the government “has been straining to advantage in the market”, will face real challenges in this new landscape of extended and uncertain liability.

Parker predicts legal challenges, and so expensive litigation, before the rules are fully understood. Any increased reliance on insurers will not help a market that has already hardened and indeed insurers may not even pay out where policies did not consider such liabilities across the group.

A potential workaround Parker raises is via the ownership by individuals rather than companies, since BLOs only apply to corporate bodies. This may however have significant tax consequences.

Parker concludes by writing that: “All of this could give rise to further insolvencies within construction given the market has seen contractors struggle to cope with price increases. Now, they will have to face unforeseen claims.

“The position could have been improved if the meaning of ‘just and equitable’ had been addressed in the explanatory notes. We may find that BLOs are ordered very rarely; but until the courts hear some cases, we will not know and the damage to the industry will have been done.”

This article was originally published in Property Week on 13 September 2023 and can be read here in full (behind their paywall).

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Will lease extension be deemed a disposal for tax purposes? Elizabeth Small and Lucy Barber write for Taxation

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Tax Partner, Elizabeth Small, and Head of Residential Property, Lucy Barber, have answered a reader’s question for Taxation on lease extensions.

In the article, entitled ‘Will extension be deemed a disposal for tax purposes?’, the reader asks:

“A client owns the freehold of a block of flats in London and granted a 99-year lease for one of the flats to a lessee some years ago. A premium was received which was subject to tax under the usual part disposal principles. The lessee now wishes to extend the lease to 999 years and a further premium of £10,000 will be paid. I understand that the premium is relatively small as there is little difference in value between a 99-year lease and a 999-year lease. It seems that the transaction will be deemed for tax purposes as a disposal of the old lease by the lessee and the grant of a new lease by the freeholder.”

Elizabeth and Lucy explain that typically, the extension will be outside the terms of the current lease and therefore it will be treated as though there was a surrender of the old lease and the grant of the new longer lease. Sometimes, it may be possible to ameliorate this by ensuring that there is not a surrender and regrant, and instead grant a reversionary lease which takes effect at the end of the term of the existing lease. A supportable valuation of the reversionary freehold interest and the value of the lease surrendered will be key to determining the tax impact, and awareness of these issues is key to ensure that a proportionate tax result is achieved.

The full answer can be read here.

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Outside the Box – Episode 1 – The Future of Freight

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In Q1 2023 we quizzed investors and developers on the key issues affecting the industrial and logistics sector and the resulting research report, Outside the Box, set out what we characterised as an ‘industrial evolution’.
In this series of podcasts, we explore the sector’s key issues in more detail and discuss with some well-informed guests. 

Episode 1
In our first episode, Magnus Hassett, Partner at Forsters and Co-Head of Industrial and Logistics, is joined by David Elvy, Head of Future Freight Strategy at the Department for Transport, and Matthew Evans, counsel in Forsters’ Planning team.  Together, they take a closer look at the Department for Transport’s Future of Freight plan, with a particular focus on the role and impact of the planning system. 

The scale of the UK’s freight and logistics sector is enormous with 1.6 billion tonnes of goods transported in and around Britain each year.  Recognising the importance to the country of moving goods efficiently, in 2022 the Department for Transport published its Future of Freight plan.  Developed in partnership with the UK’s freight and logistics industry, the plan sets out the Government’s long-term vision for UK freight, identifying some key challenges and objectives for the sector. 

If this discussion gets you thinking about your own experience of the planning system, then do share your thoughts and respond to the ‘Freight, logistics and the planning system call for evidence’ which closes on 6 October 2023.

For Forsters’ own manifesto for the logistics industry take a look at our report from Spring 2023:  Outside the Box – Supporting an Industrial Evolution.

In this episode

  • Magnus Hassett, Partner and Co-Head of Industrial and Logistics
  • Matthew Evans, Counsel
  • David Elvy, Head of Future Freight Strategy at the Department for Transport

 

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The charge of microgrids – Louise Irvine speaks to Property Week

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Senior Knowledge Development Lawyer in the Commercial Real Estate team, Louise Irvine, has spoken to Property Week on energy alternatives for developers, should the national grid run out of capacity.

One method of overcoming the issue of power shortages, currently being considered by developers, is the creation of microgrids, which involves producing and storing electricity from renewable sources locally and then distributing it around a development.

Main benefits

Irvine believes in the future of microgrids and that they will evolve to play a bigger role in property developments.

She says that: “In the future, local microgrids could connect to each other so that developments could buy and sell electricity to and from each other in times of need or surplus to avoid drawing from the National Grid.

“Whatever form a microgrid takes, there are benefits to such systems. Microgrids help overcome the inefficiency of distributing power over a larger distance.

“It is estimated that up to as much as 15% of electricity dissipates in transit, so by having the power generated close to the area being served, this issue is greatly reduced.”

Cost-effectiveness

Microgrids may indeed be cost-effective, especially after considering the cost and likely delays of connecting to the national grid.

There are restrictions that developers need to be aware of; namely that any microgrid on a residential development needs to be operated by an IDNO.

However, it is possible that microgrids – or at least the potential for their future development – could become compulsory.

“It is currently a Section 106 requirement to ensure developers leave capacity for and safeguard a route for future connection to combined heat networks, subject to the costs being viable,” says Irvine. “We might see similar rules being inserted relating to microgrids.”

So, while microgrids might be some way off being mainstream in the UK, it looks likely that they will play a growing role in property developments in the future.

This article was originally published by Property Week on 21 September 2023 and can be read here (behind their paywall).

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Could census data be better used to determine housing supply? – Matthew Evans and Helen Streeton write for CoStar

Modern apartment buildings stand in a row, featuring large windows and balconies. The setting includes landscaped paths, benches, and greenery under a partly cloudy sky.

Commercial Real Estate Partner and Head of Forsters’ Build to Rent group, Helen Streeton, and Planning Counsel, Matthew Evans, have written for CoStar on how the data is there to get new homes built, and why it is not currently being mined.

The pair write how the local plan-making process to deliver new homes was further complicated by Michael Gove’s announcement earlier in the year that the government is scrapping housebuilding targets.

Even before this decision, the delay in implementing planning reforms had been causing severe challenges to the delivery of these new homes.

Evans and Streeton explain that “although local authorities still need to update (or in some circumstances, create) local plans, many are still adopting a wait-and-see-approach while they wait for further clarity on legislative reform within the Levelling-up and Regeneration Bill and the government’s response to its recent consultation on the National Planning policy Framework.”

Resultantly, housing needs continue to go unmet and rental levels continue to rise. This is particularly pertinent for the rental market, with average prices nationwide rising 4.8% in the 12 months to April 2023, “the highest increase since the national data series began in 2016.”

Despite widespread focus on community opposition to new homes, and a strong anti-development rhetoric in mainstream media, Evans and Streeton say that the reality is very different.

There is a genuine appreciation for the need for new homes, but the underlying concern is around the demands an increased population would place on local infrastructure.

“Would top-down housing numbers solve the problem? Potentially, if they leaned on data that gives a true representation of housing need. Utilising census data could be a more effective way of identifying the tenure and size of homes needed, and in what locations.”

The pair add that even though the Build to Rent sector is projected to grow rapidly over the next decade or so, moving from 1.5% to 8% of the total rental market by 2032, there continues to be a lack of knowledge and expertise around its role in meeting housing need.

It is a similar case for the later living sector. There is an urgent need for sector growth but insufficient amounts of suitable housing. The pair suggest that creating a separate use class could be helpful in expediting planning applications, thus alleviating the strain on the sector.

Evans and Streeton conclude that: “The answer to meet housing need is not to scrap housing targets. It is to be smarter about how housing numbers are calculated and tap into the incredible wealth of data that already exists on our current and future population, in order to provide the right homes in the right places.”

This article was originally published by CoStar on 22 August 2023 and can be read here in full (behind their paywall).

Releasing 1.4% of greenbelt could deliver 1m homes – Matthew Evans quoted in Property Week

Blueprint displaying a detailed architectural floor plan, showcasing rooms, corridors, and spiral staircases. Grids and lines indicate measurements and sections. Text includes numbers and labels like "SALON."

Planning Counsel, Matthew Evans, has been quoted by Property Week reacting to a recent report that has revealed that building on just 1.4% of the green belt, would accommodate the government’s target of 1m homes before the next general election.

The research, conducted by Wood Harwick, claims that only 8.7% of England’s land area is of development use, compared to 12.5% which is designated as green belt. They therefore believe that building on the green belt is a solution that has been largely overlooked.

In response to this, Matthew commented ‘We need to be looking at land across the board, considering and balancing its relative value and the potential contribution it can make to housing our growing population. Not all green belt is created equal, and we need to move to a place where the quality of greenbelt is graded.’

This article was first published in Property Week on 24 August 2023 and is available to read in full here, behind their paywall.

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Developers get ready for BNG – Sophie Smith quoted in Property Week

A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

Planning Associate, Sophie Smith, has been quoted in Property Week’s latest piece addressing biodiversity net gain (BNG) and the November deadline for developers.

From November, developers in England will have to ensure any projects they undertake produce a BNG of at least 10% – and put a plan in place to ensure the gain is maintained for 30 years or more.

Property Week highlighted that some developers will already have experience dealing with this as some councils have implemented such policies in local plans. However, for many others, BNG will be entirely new.

Sophie Smith shared her thoughts on the new guidance acknowledging that it does seem to indicate that the Government is ‘moving in the right direction’ to meet the November target but notes that there are still significant gaps in the regulation and that time is running out.

She goes on to comment “There are still fairly material points that remain to be dealt with via secondary legislation, particularly, for example, in relation to outline schemes or phased developments.”

“Where this information is not clear and local planning authorities are not prepared in advance for the requirements, this will inevitably lead to confusion in the planning system from all sides and delays to applications being progressed.”

“This will particularly be the case if the November target remains and the legislation is published fairly last minute.”

This article was first published in Property Week on 24 August 2023 and is available to read in full here, behind their paywall.

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A blend of features in vineyard planning – Victoria Du Croz writes for EG

Rolling green hills are adorned with scattered trees and stone walls, creating a peaceful rural landscape. In the distance, soft hills rise under a clear, bright sky.

Head of Planning, Victoria Du Croz, has written a piece for Estates Gazette on the important planning implications of the supply network involved in the UK’s wine production.

Many vineyards and wineries operate through a network of supply contracts. Grapes may be grown at one vineyard and processed on site. More commonly, grapes will be grown at a variety of locations and processed by a single winery, or a specific vineyard might contract with a winery to process their grapes. Many vineyards in the South East, for example, will grow their grapes, send them to be processed elsewhere, then bring the bottled wine back on site for tours, tastings, refreshments and sales. Furthermore, many vineyards and wineries are continuing to diversify, offering a range of experiences, including tours, tastings, overnight stays and the hosting of weddings and corporate events.

The practical realities of commercial operations of vineyards and wineries’ commercial operations means industry experience is needed to advise on the planning position and experience is critical. A vineyard with a commercial winery, tastings and tours, etc can look like a different business in each month of the year – the shape of the business will differ from season to season, much more than a traditional arable farm may do.

It is essential to understand what is actually happening on the ground when the year is viewed in the round and to map this on to the current planning framework. Many vineyards are located in designated areas of outstanding natural beauty, which have particular planning restrictions for their preservation. Most of these vineyards will be agricultural in nature, but can stray into commercial use classes if the commercial activity is not directly ancillary to the viticulture, leaving them open to enforcement action if they do not have the correct consents in place.

Full-bodied case

In a recent appeal in respect of the Cuxton Winery, in Kent, an inspector had to grapple with whether there was a material change in use at the vineyard if the grapes were taken off-site for wine production and then returned for storage and sale. Previously, Medway Council had granted a certificate of lawfulness for agricultural use that expressly permitted wine to be produced, stored and sold on site. The certificate made no express mention of the lawfulness of providing tours, tastings and refreshments, nor for selling wine produced elsewhere. The appellant sought revised wording in a certificate of lawfulness to cover these two points.

As noted by the inspector, in such applications the onus is on the applicant to provide sufficient evidence and accordingly the decision is fact-specific. However, it does raise an interesting point about what is “incidental” to the growing of grapes to produce wine, which is accepted as an agricultural activity. The inspector considered that wine production is a lengthy process to make a different product and is therefore akin to an industrial process (in contrast to simply crushing grapes). Previously, case law has held that the on-site production of wine is incidental to the primary use of that site for the growing of grapes.

The inspector considered that, based on the information before him, the appellant had failed to demonstrate that it would be ordinarily incidental and reasonably necessary to process up to 20,000 bottles of wine annually off-site as part of the primary agricultural use of the site. The inspector accepted that some off-site production could be regarded as incidental but, in this case, it appeared all the wine would be produced off site. While not entirely clear from the decision, it seems to be the return of the entirely different product from the off-site industrial process, ie the wine, for the subsequent storage and sale which meant there was a material change in use from the main agricultural use of the site.

The inspector also rejected the proposed wording in the certificate for the tours, tastings and refreshments, which did not seek to quantify the frequency and extent of such activities. The inspector considered that if the wine were to be produced on site, the scope and quantity of tours would potentially broaden, which may mean the tours, etc would cease to be incidental. Again, the inspector did not consider that the appellant had discharged the necessary burden of proof. Accordingly, the appeal was refused.

Endnote

The decision serves to highlight the importance of applicants discharging the burden of proof for certificates of lawfulness by providing sufficient evidence. It also demonstrates the potential pitfalls in seeking to diversify agricultural land against the backdrop of our historic and restrictive planning use class system.

The decision is one of many recent planning decisions affecting this industry. With WineGB reporting there are more than 940 vineyards and over 200 wineries in Britain and, as the industry is still expanding, there are likely to be more.

The matter is not helped by broader planning policy. Although the National Planning Policy Framework supports a prosperous rural economy, each local planning authority has its own local plan and it is rare for these to address diversification of vineyards and wineries adequately. Advice should be sought at the earliest opportunity on the scale and scope of any diversification plan including whether and what planning applications need to be made.

The diversification of vineyards is becoming increasingly important from a commercial standpoint and for the future-proofing of such businesses. Although seemingly welcomed in the UK, it requires careful thought and consideration from a planning perspective.

This article was originally published by EG on 15 August 2023 and can be read here in full (behind their paywall).

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Logistics needs to reach a more diverse talent pool – Victoria Towers writes to Property Week Editor

A vast, empty warehouse features polished floors and high ceilings. Bright overhead lights illuminate the spacious interior, which includes stacked pallets and shelving on the right side.

Commercial Real Estate Partner and Co-Head of the Industrial and Logistics group, Victoria Towers, has written to the Editor of Property Week on how “the recent announcement that the Generation Logistics campaign, which aims to improve recruitment and retention in the logistics workforce, securing another year of government funding is welcome news for the sector, where there remains a critical need to expand the labour pool.”

Towers writes: “Based on independent research we recently commissioned, investors and developers active in industrial and logistics real estate cite availability of labour as the third most significant factor – close on the heels of connectivity and value – in deciding where to invest.

“Encouragingly, this year’s Department for Transport funding is to focus on raising the profile of logistics in schools and colleges, which chimes with the wishes of investors and developers, who responded to our survey calling for careers advice alongside talks in schools and the promotion of training.

“Our study found potential for the sector to make itself more attractive to a diverse talent pool, highlighting that the rise in last-mile logistics should support more part-time roles in daytime hours for those with family commitments. Automation was thought likely to lead to a gradual change in the nature of careers, increasing the need for engineers and technicians.

“The sector needs to both demystify its operations, promote the diversity of opportunities and reach a more diverse talent pool. Youngsters need to understand this isn’t simply an industry of long-distance lorry drivers, away from their families for days at a time.

“This is a truly nationwide sector, looking to be in easy reach of every home and business in the UK. The industry needs to reach a lot of schools and colleges. Even with contributions from industry, this year’s government funding of £300,000 will be stretched thin and more needs to be done to tackle the issue.”

To explore more of our ‘Outside the Box’ research, please click here.

This letter was first published by Property Week on 3 August 2023 and can be read here (behind their paywall).

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Mortgages for Overseas Buyers of UK Residential Property – The Advantages and Disadvantages

Chair rows face large windows; outside, an aeroplane ascends over the airport runway. Sunlight floods the seating area, casting long shadows on the carpeted floor.

We are often asked by overseas clients buying UK property whether or not they should take out a loan secured against the house or flat they are buying. Quite often buyers have the financial means to complete the purchase without a loan of any kind but nevertheless there are good reasons why they might wish to consider taking out a loan.

In fact, it is increasingly common for overseas buyers to take out mortgages and it is now less likely that they would wish to purchase for cash than was the case a few years ago.

We summarise here the principal considerations to take into account and to outline the possible advantages and disadvantages of taking out a loan.

Types of mortgages

There are clearly a huge variety and number of financial products potentially available to overseas buyers. These are likely to be different products, and perhaps at less advantageous rates, than those available to UK resident buyers who wish to purchase a property as their principal residence. The first consideration is whether the loan will be to an owner-occupier or whether it will be for the purposes of buying an investment property that will be let. The rates available to owner- occupiers are generally better than those available to buyto-let purchasers and it is likely the bank or lender will offer entirely different products in each category. The loan to value ratios are likely to be different and for buy-to-let might be only 50% or 60% of the market value of the property.

Traditional mortgages are secured by a first legal charge over the property being acquired. The mortgage deed under which this is created is relatively straightforward and will refer to a set of mortgage conditions, which tend to be fairly standard, drawn up the lender. More recently a different type of mortgage product has emerged arising from religious considerations particularly those relating to Islamic law. The traditional type of mortgage may not be acceptable for religious reasons and, as a result, a number of alternatives have been drawn up which, for example, create lease and rental agreements so that interest is not payable to the bank. Some lenders only offer Sharia compliant finance and their products are therefore available not just to Muslims but to all applicants.

UK tax considerations

UK Inheritance Tax (“IHT”)

It is likely to be beneficial for IHT reasons for an overseas buyer to take out a mortgage when buying a UK property. IHT is payable at a rate of 40% on the value of assets situated in the UK worth over £325,000 (the “nil-rate band”). A mortgage which is taken out at the time of purchase is deductible against the value of the property. Therefore, taking a loan of, say, 60% of the value of the property could reduce the exposure to IHT considerably. The following example illustrates the differing IHT treatment for an overseas owner with only one asset in the UK, a property valued at £1 million at the date of death, which was purchased for £800,000:

IHT without mortgage IHT with 60% mortgage

Gross value at date of death: £1,000,000

Gross value at date of death: £1,000,000

Less nil-rate band: (£325,000)

Less nil-rate band: (£325,000)

Taxable value: £675,000

Less 60% mortgage: (c.£480,000)

Taxable value: £195,000

IHT @ 40%: c. £270,000

IHT@ 40%: c. £78,000

Remittance basis of taxation

Buyers will also need to consider their UK tax status before importing funds into the UK for a property purchase. A remittance basis user who has to remit funds to the UK for a purchase may incur a tax charge if they do not have sufficient clean capital to bring in. In those circumstances, reducing the amount that needs to be remitted by taking out a loan would be a clear advantage (although the remittance basis user would require sufficient clean capital to service the interest on any mortgage).

Tax reliefs

While tax relief on buy-to-let properties has now been curtailed, there are still some advantages for landlords. Landlords can now claim a tax credit at 20% of the interest costs payable under their loan to set against the income tax due on the rent. A loan will make no difference to a buyer’s liability for Stamp Duty Land Tax (“SDLT”) on acquisition or Capital Gains Tax (“CGT”) on the disposal of the property.

Potential disadvantages

The most obvious potential disadvantage for an owner who is borrowing money when they do not really need to borrow it is that they will have to pay interest on the loan. As for all buyers, this may not be seen as a particular disadvantage when interest rates are low, but rates have risen considerably and it is not possible to predict how they will move in the future. Most loans have an initial fixed period at an advantageous rate but then, potentially, revert to a higher rate when that fixed period ends. There may also be penalties for redeeming a loan in an initial period.

The other main disadvantage is the potential increase in cost and delay at the time of purchase. The lender is likely to require a formal valuation of the property which it will expect the borrower to pay for and may wish to be separately legally represented.

Depending on the lender, legal fees might increase significantly particularly where a Sharia complaint mortgage is being used. There is typically a considerable delay in getting formal mortgage offers even sometimes after they have been agreed in principle, but this can vary considerably between lenders. It is worth checking at an early stage if the lender will want to use separate solicitors because this can also add considerably to delay. Sellers are generally aware of the delays and uncertainty that can be caused where a buyer requires finance and often they will prefer to accept an offer from a buyer who offers cash rather than requires finance.

A further point that should not ignored is that the lender may exert a level of control over the property during the period of a mortgage. If the buyer has taken out an owner-occupier mortgage then they will need to get the bank’s consent to then let the property; to do so without their consent is likely to be a breach of the loan conditions. Likewise, some products are specifically only for commercial letting arrangements and for the borrower to occupy the property will be not just a breach of the loan agreement but may breach the lender’s own lending licence. Borrowers are also under obligations to the lender to maintain the property, insure it, and to comply with any restrictions and with the lease terms if it is leasehold.


Moving to the UK – Everything you need to know

Moving to the UK is an exciting life event whether it be a short-term move for work to explore business prospects or a more permanent relocation with the whole family; the UK offers an eclectic range of options to live, work and learn, from the cityscapes of London to vineyards in the English countryside and historic university towns in-between. Setting up life in a new country can feel daunting too and it can be difficult to know where to start.

Moving to the UK

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Industry reaction to Gove’s housing plan – Victoria Du Croz speaks to the Press

A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

Partner and Head of Planning, Victoria Du Croz, has been quoted in numerous broadsheet and industry publications this week on the government’s response to the recent local elections.

Du Croz says that: “The Government and DLUHC appear to be having a knee jerk reaction to the results of last week’s local elections and the impending General Election in 2024, essentially seeking to demonstrate that action has been taken to deliver on housing and development in the current parliamentary term.

“A focus on inner cities makes sense, given the Conservative’s aversion to delivering development on the green belt, but the reality of bringing more homes to the cities will mean building high in order to reach the necessary density.

“Neither brownfield sites nor conversions of office to residential buildings have delivered the number of new homes that are needed across the country to date. Re-focusing on these planning mechanisms, by expanding permitted development rights to shop and commercial conversions, is unlikely to boost housing numbers to the levels that are needed.

“[Monday 24th July’s] announcement failed to recognise the vital importance of a cohesive vision for our towns and cities, that housing is just one element of growing the economy and supporting people. Housing is needed alongside job creation, space for warehousing and a retail and leisure strategy.”

A list of the publications featuring Du Croz’s comments is featured below:

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Forsters responds to UK government’s consultation on reforms to the Construction Industry Scheme

Construction workers in high-visibility vests and helmets stand and communicate amidst metal scaffolding at a construction site, with sunlight streaming through an open structure.

Tax Partner, Heather Corben and Tax Associate, Oliver Claridge, responded this week to the UK government’s consultation on reforms to the Construction Industry Scheme (“CIS”), which was published on 27 April 2023 (the “Consultation”). The Consultation closes at 11:45pm on 20 July 2023.

What is the CIS?

The CIS was originally put in place in the early 1970s to protect taxation revenue in the construction industry, which then, as it does now, regularly employs a large number of mobile workers who are paid in cash.

Contractors have to determine the CIS status of their subcontractors and make deductions from payments to them accordingly:

  • 30% deduction if the subcontractor is not HMRC-registered
  • 20% deduction if the subcontractor is HMRC-registered
  • 0% deduction if the subcontractor holds Gross Payment Status (“GPS”)

The withholding tax is then paid by the contractor to HMRC.

There is no exemption for contractors from registering for the CIS and any business which does not fall squarely within the construction sector but which spends over £3 million on construction operations annually also has to register.

In order to qualify for GPS, a subcontractor must satisfy three tests, namely, the compliance test (all direct taxes must be up-to-date with returns and payments made correctly and on time), the business test (the operating business carries out construction work and has a UK bank account) and the turnover test (the net 12-month turnover must exceed £30,000 per director or partner or £100,000 for the entire company or partnership).

If at any time, the subcontractor fails to satisfy any of the tests, its GPS can be cancelled by HMRC.

What is the Consultation about?

Strengthening GPS tests

Currently, only direct tax compliance is considered for the purposes of the GPS compliance test. The Consultation is therefore seeking views as to whether VAT should also be included to prevent businesses which have committed VAT (and potentially wider compliance) abuse from achieving GPS.

Annual checks of a business’s continuing compliance are undertaken by HMRC once the subcontractor has been registered for GPS. The Consultation covers whether the first check by HMRC should be brought forward to six months post-registration in order to detect businesses which become non-compliant soon after GPS registration.

The Consultation is also asking for opinions as to whether HMRC should be able to determine the medium by which an application for GPS is made, with the intention that this will become digitalised in the future. At present, applications can be made by telephone and the government is of the view that this may be “a less challenging route” and as such, is preferred by fraudulent entities.

Simplifying the treatment of landlord to tenant payments

Payments made by landlords to tenants (perhaps to encourage a tenant to enter into a lease) are classified in two different ways for the purposes of the CIS:

  1. Category A payments, being payments for works that are the landlord’s responsibility (for example, structural work) – these fall within the CIS
  2. Category B payments, being payments for works that benefit the tenant’s business (for example, internal cosmetic work) – these fall outside of the CIS

It is the landlord’s responsibility to determine which category a payment falls into and, simply put, this is causing a number of issues.

The Consultation is asking for views on the extent of these issues and on the government’s proposals to remove both categories from the CIS.

Reducing the administrative impact of operating the CIS

The CIS requires monthly reporting obligations with the ability to notify HMRC if monthly payments to subcontractors will not be made for up to six months. However, large groups of companies may not make such regular subcontractor payments and as a result, use a lot of resources to determine which companies within the group have made such a payment (which requires a return to be made) and which have not. “Nil returns” are often completed for those companies which have not made a payment to ensure that late filing penalties are not incurred, although strictly speaking a “nil return” is not actually required.

The Consultation is seeking views on whether the implementation of a “CIS grouping arrangement” would be beneficial, in a similar vein to corporation tax and VAT. This would allow one company within the group to submit a single monthly return on behalf of all the companies within the group.

Forsters’ response to the Consultation

Forsters welcomes the inclusion of VAT in the GPS compliance test, if this allows entities which may not have been in existence for long enough to file a corporation tax return to apply for GPS. However, we have also raised the concern that minor VAT errors are commonplace and should not prevent usually compliant entities from achieving GPS status. We have suggested that a minimum non-compliance threshold be put in place to counteract this potential problem.

We are not of the view that any landlord to tenant payments should fall within the CIS. In these cases, it is usual for the tenant to then pay a subcontractor, and so the arrangement will fall within the CIS regime anyway as the exemption does not continue to apply further along any contractual chain. Even in those cases where a tenant itself carries out the work, HMRC will have security in the form of the actual property asset.

Finally, we consider that a “CIS grouping arrangement” would be beneficial, provided that landlords as contractors or deemed contractors are able to benefit from such an arrangement and that the definition of “group” is clearly delineated.

Disclaimer

This note reflects our opinion and views as of 19 July 2023 and is a general summary of the legal position in England and Wales. It does not constitute legal advice.

Residential SDLT – I am a private rental tenant, do I have to pay stamp duty land tax?

A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

Most people are aware of the need to pay stamp duty land tax (SDLT) when buying a house for a high enough purchase price.

With its myriad of rules (additional property surcharge, non-resident surcharge, flat rates for companies), SDLT has become increasingly complicated, however one group who rarely have to consider the Byzantine depths of the Finance Act 2003 are private renters. But is this something they should be thinking about?

What is SDLT?

SDLT is a transfer tax on the acquisition of property interests in England and Northern Ireland. Wales and Scotland have similar but slightly different regimes (Land Transfer Tax and Land and Building Transfer Tax respectively). SDLT is due whenever a relevant land interest is transferred, be that by sale or by grant of a lease, and chargeable consideration above the nil rate threshold is paid for this transfer. SDLT is taxed in a progressive banded system, much like income tax, such that the value of the chargeable consideration that falls into each band is taxed at the relevant rate for that band, for example the first £250,000 of a purchase price (assuming neither the additional property surcharge or non-resident surcharge applies) will always be taxed at 0%, regardless of whether the total purchase price is £300,000 or £2 million.

There is no difference for SDLT purposes between a “tenant” and a “leaseholder”. SDLT applies to any freehold or leasehold transfer (it does not apply to licences) subject to certain transactions that are exempt from the tax (primarily for being low in value). SDLT as a tax looks at the substance of a transaction, not the way it is described. One cannot define oneself out of an SDLT charge, for example by labelling a lease as a licence.

Chargeable consideration is the price paid for the transfer. For a purchase this is simply the price you pay. For rent it is the net present value (NPV) of all the rent across the term of the lease. This uses a discount value (3.5%) so future rent is not valued as highly as rent due immediately. For leases longer than five years it is only rent in the first five years that is used for the SDLT calculation, with the highest year’s rent in that five-year period being taken as the rent for every year above five; thus rental increases after the first five years are ignored. As such, the NPV will be less than just simply adding up all the rent over the term of the lease.

Does this apply to private rental tenants?

The short answer is “it can do”. The slightly longer answer is “it’s very unlikely that the average tenant will need to pay SDLT or file an SDLT return”.

For a lease of under seven years an SDLT return only needs to be filed if the chargeable consideration is above the nil rate threshold. This is currently set at £250,000, raised from £125,000 in 2022 by Liz Truss, although due to be cut back to £125,000 in March 2025.

It is highly unlikely that most residential rental leaseholders will be taking leases with a rental NPV above £250,000.

What if I renew my lease?

Some tenants may fear that by renewing their lease several times they may reach a stage where SDLT is due. This will, however, only be the case if the renewals are “linked” for SDLT purposes.
Linking is a grey area for SDLT, primarily designed to stop transactions being split to minimise tax, e.g rather than buying a house for £500,000, you buy the house for £250,000 and the garden for £250,000, and pay no tax as you have two transactions each under the nil rate threshold.

Renewing a lease is not traditional transaction splitting, however if it is done with an option to renew within the lease itself then this will be linked, i.e. if the lease includes a provision allowing the tenant to renew the lease at the end of the current term, and the tenant does so, the renewal will be deemed to be linked.

On the other hand, if, around the time of expiry of the term of the lease, the tenant and landlord agree they both want the tenancy to continue for a further term, with no requirement that both or either must agree to this, (probably with some degree of negotiation over any rental increase), then it is likely that the leases will not be linked.

Even if leases are linked, at the current nil rate threshold, a lease with a rental value of £2,000 a month will need to be renewed for an occupation of 14 years before SDLT is due on the rent. On that basis, even London renters are unlikely to be triggering SDLT obligations.

If a lease is renewed such that it lasts for over seven years, and each renewal is linked, then an SDLT return is likely to be required even if no SDLT is due.

What if I am non-resident?

For SDLT purposes you are generally non-resident at the time of a transaction if you have not spent 183 days in the UK in the 364 days before the transaction.

Unlike the “additional property” 3% surcharge, which only applies to the premium, the 2% non-resident surcharge can apply to rent in some circumstances, namely:

  1. If there is also a premium value worth more than £40,000. This will trigger the non-resident surcharge, making the nil rate threshold for rent a 2% band, such that any level of rent will result in tax
  2. Where the lease is for more than seven years and the annual rent is more than £1,000

If you are UK non-resident, then you may pay SDLT on your rent if you take a lease for seven years or your lease renews to be, in total, over seven years in length (and the renewal(s) are linked as above) or you pay a premium over £40,000 alongside your rent.

What if I am doing something unusual?

The risk of an average private rental tenant having to file an SDLT return or pay SDLT is low. The tax is most likely to be paid by someone doing something unexpected such as:

  1. Paying a very high level of rent – the exact level will depend on the length of the lease but for a one-year lease, rent of over £21,000 a month would be needed to go over the current nil rate threshold
  2. Renting where there was always an agreement that the leases would renew, especially to take the total term to over seven years
  3. Renting from family on a non-arm’s length basis – this would make it more likely that renewal leases are linked (however the most obvious non-arm’s length basis is for under market rent which would mean the nil rate threshold would be less likely to be triggered!)

For the average renter, who has taken a lease from a third party landlord, even London rental rates will not trigger SDLT liabilities for a short term AST (assured shorthold tenancy) unless the lease contains an option to renew and this is triggered several times.

Summary

SDLT can apply to private rental tenancies, but typically only applies where rent values are very high or if something unusual is taking place. For the vast majority of renters, SDLT is not a tax that they will need to consider.

That said, renters should be careful if:

  1. Their lease is granted for a term of seven years or more
  2. Their lease contains an option to renew, and they take up this option (and the renewed lease has a further option to renew, etc.) such that the total length they occupy the property exceeds seven years (in which case an SDLT return will be due in the seventh year although depending on levels of rent there may still be no tax)
  3. Their lease does not contain an option to renew but it was always intended that the lease would last more than seven years (in which case an SDLT return will be due in the seventh year although depending on levels of rent there may still be no tax)
  4. They are non-resident for SDLT purposes and either pay a premium worth £40,000 or occupy for over seven years (with any renewals treated as linked)
  5. Their lease has a very high level of rent

Disclaimer

This note reflects the law as at 11 July 2023. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

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Forsters advise RELX on letting in Leeds

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Forsters have advised RELX (UK) Limited on their new lease at No4, Wellington Place, Leeds.

Part of RELX Group plc, RELX (UK) is a global provider of information-based analytics and decision tools for professional and business customers.

Glenn Dunn, Head of Forsters’ Corporate Occupiers group, advised RELX and was assisted by Owen Spencer and Alex Harrison.


Progress on energy use is essential – Edward Glass responds to Property Week Editor

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Commercial Real Estate Senior Associate and member of our Sustainability group, Edward Glass, has written to the Editor of Property Week, Lem Bingley, agreeing with his latest leader column that the Climate Change Committee’s negative assessment of progress in decarbonising buildings is deeply worrying.

Glass says: “We need to see progress on the ground, where it really counts. Regulation has a role to play here and the Minimum Energy Efficiency Standards (MEES) regime, in which it is now unlawful to continue to let a commercial property with an ‘F’ or ‘G’ Energy Performance Certificate (EPC) rating (subject to exemptions), has focused attention.

“However, as the report identifies, we have not seen progress on occupational energy ratings or regulatory certainty on anticipated uplifts to MEES thresholds.

“Many are calling for mandatory disclosures on an annual basis, using the updated NABERS 2.0 rating, potentially with fiscal incentives resulting from achieving a top score. Surely this is the next logical legislative step to drive actual change on the ground. The relevant government consultation seems to be on the backburner and while the report identifies this, a response is not a key priority recommendation, in contrast to that on the ‘EPC C by 2028’ consultation for privately rented homes.

“There is no question that onsite renewable provision is acknowledged as an open goal in terms of opportunity for the industry. Owner and occupier collaboration is on the increase, but again, surely we need more legislative weight, for example mandatory photovoltaic panels on larger commercial buildings, as well as more attractive fiscal incentives? Plus of course, there is a notable limiting factor: grid capacity. Plenty of progress is surely needed here to realise the full potential.

“The committee’s chair Lord Deben has said that one of the government’s biggest failures was not putting net zero at the heart of the UK’s planning system. He will, no doubt, approve of the recent initiative from the UK Green Building Council, which organised for 100-plus companies, including Landsec, Grosvenor Property and Rockwool, to sign an open letter urging prime minister Rishi Sunak to make planning decisions take account of climate change by law.

“With the tide of green regulation turning the screws on the current building stock, it’s a natural next step to boost sustainability standards of new development from conception.”

This letter was originally published on 13 July 2023 by Property Week and can be read here (behind their paywall).

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The challenge faced by the Older People’s Housing Taskforce – Amy France writes for Property Week

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Commercial Real Estate Partner and Head of Later Living, Amy France, has written for Property Week on how the Older People’s Housing Taskforce will fare in tackling one of the UK’s biggest challenges: How can suitable housing options be provided for later life?

France notes that “Housing has always been intrinsically linked to life chances, and this is no different in later life. Housing that provides the right kind of support and adequate care, if required, can help people live well for longer.”

France writes how a lack of suitable later living options has had a significant impact on the NHS, resulting in a bottleneck whereby patients who no longer need treatment cannot be discharged as they don’t have a home which is suitable to be discharged to. As a result, in January 2023 “more than 19 in 20 beds were occupied across adult general and acute hospital wards, and more than 14,000 of these beds were taken up by patients who no longer required hospital care.”

With the Taskforce’s recommendations due in 12 months, the key message will be around the delivery of new homes, with France asking: “How else will the taskforce meet one of its central aims – providing older people with access to the right homes in the right places?”

This will be a significant challenge when viewed against the government’s scrapping of mandatory housing targets and the prediction of net additional homes each year dropping to 140,000. France writes that local authorities must commit to ensuring a certain proportion of these homes are suitable for older people.

The government has also proposed an increase in planning fees, which has industry support provided that it does actually result in a swifter approval of planning applications. “At the current pace, though, applications and the homes they propose to deliver will take months to materialise, while our population continues to age and our NHS and care system continue to buckle under the pressure.”

France concludes by writing: “Older people don’t want to have to move miles away from their existing home so that they can access retirement communities or sheltered housing. In later life, people want to have the option of moving to a more suitable type of accommodation close to their existing home – the only way that we can ensure this is possible is to support the development of later-living schemes all over the country, and in all different sorts of settings.

“The taskforce needs to take a truly holistic view of the solutions, and cross-department working will be essential in delivering these solutions. Let’s hope that this once-in-a-generation opportunity for meaningful and significant change in delivering housing for older people is seized and much positive change emerges from it.”

This article was originally published by Property Week on 6 July 2023 and can be read here in full (behind their paywall).

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Government action on short-term holiday lets – what could this mean?

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The Government has responded to mounting pressure to address the adverse impact of short-term rentals.

Over the years the significant increase in short-term lets and second homes have seen local authorities complaining about anti-social behaviour from “party” lets, local residents in holiday hot spots being priced out of the local housing market and hotel operators struggling in an already difficult market. The counter argument is that short-term rentals play an important role in the country’s tourism economy.

Last year the Government issued a call for evidence on how the sector could be further regulated. Out of the 4,000 responses, 60% indicated support for further regulation and control and 42% wanted a light touch, low-cost licencing scheme.

In response the Government is introducing, through the Levelling Up and Regeneration Bill, a statutory licensing scheme for all visitor accommodation providers. The scheme will be brought forward through regulations which can set out any conditions that must be satisfied for a short-term rental property to be registered and the circumstances in which the registration can be revoked. As with much of the Government’s current legislation agenda, the devil will be in the detail of the regulations.

Alongside the registration scheme, the Government has consulted on the introduction of a new use class C5 for short term lets. There will be permitted development rights to change from standard residential C3 use class to the new C5 use class. However local planning authorities will be able to apply for Article 4 Directions to remove those permitted development rights, thereby giving them control over the number of new short-term lets in their administrative area. The Secretary of State can direct a local planning authority to cancel or modify an Article 4 Direction and, anticipating a large number of applications for the Directions will be made, it will be interesting to see how many are made and where, and whether the Secretary of State intervenes.

It remains to be seen how effective the registration scheme and the introduction of the new C5 use class will be in reducing the adverse impact of short-term rentals. In practice, it is unlikely to significantly reduce the current number of short-term rentals meaning the adverse impacts may continue to be suffered. There is also the concern that already stretched local authorities will not have the resources to properly enforce the registration scheme or unlawful changes of use to short-term lets.

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Are film studios about to go Back to the Future? – Owen Spencer writes for EG

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Commercial Real Estate Counsel and member of our Film and TV Studios group, Owen Spencer, has written for EG on how hiring production space at film studios differs from other real estate sectors.

He goes on to ask, having seen considerable upheaval to studio bookings in the last 5 years and with 44 new studios planned, if more changes are around the corner.

Quiet on set

Spencer explains that the traditional and longstanding way to hire space at a film studio is by hire agreement, “which is, at its heart, a commercial licence, usually signed on standard terms.”

Principal photography is the most expensive phase of film production – this means that space will only be booked for as long as it is needed. There is no subsequent commitment to use the site again and therefore studios are reliant on reputation to secure the next booking.

“The rate card for a sound stage will generate substantial returns for the studio, but the nature of the short-term commitments means there is an ongoing challenge of attracting and securing the next big production. So maintaining a high level of utilisation is a constant aim for studio management.”

Rise of the streamers

Spencer adds that the rise of streaming services over the last few years popularised the “master lease agreement” (MLA). Essentially a multi-year lease and thus by no means a groundbreaking real estate concept, it creates a long-term financial commitment to the studio.

These services, wanting to make their own content, need to also secure studio space. This emphasised an “undersupply of studio space in the UK [and so] the race for space was on.”

Race for space

With multiple MLAs now signed, many of the UK’s studios are now tied up in terms of upcoming lease agreements. “The sector has responded”, Spencer adds, “with there reportedly being 11.2m sq ft of space in the pipeline.”

What is yet to be seen is whether this increase in studio space will result in the fall-off in popularity of the MLA. “Could the projected increase in capacity mean that productions will go back to the future, comfortable to operate under the old studio hire agreement model?”

“However, very little of the new pipeline space has yet come online. While many of the proposed operators suggest their operations will not need MLAs to flourish, it is likely to require a certain kind of funder or investor to speculatively develop a film studio with a business model built around studio hire agreements alone. This may give hope to both operators and productions that there are one or two more big MLA deals left to do.”

This article was originally published in EG on 16 June 2023 and can be read here (behind their paywall).

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BPF leads industry calls to scrap infrastructure levy plans – Victoria Du Croz and Helen Streeton speak to Property Week

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Partner and Head of Planning Victoria Du Croz, and Partner and Head of Build to Rent Helen Streeton, have featured in Property Week’s latest piece on the BFP’s opposition to government proposed new infrastructure levy plans.

The British Property Federation (BPF) urged the government to abandon the plans for the levy, claiming it would add new challenges and instead called for reform of existing planning contributions.

The BPF highlighted the difficulty it said local authorities would have setting viable levy rates, particularly for brownfield and urban development sites, due to land values and build costs varying site by site and by land use. It also claimed under a single, more rigid levy, the mechanism for calculating affordable housing contribution would raise less as it would not be site-specific.

Victoria Du Croz shared her concerns on the fundamental problems with the government’s proposals, including a failure to focus on securing the actual development of infrastructure.

She states that “Most local opposition to development is due to the perceived adverse impact on existing infrastructure,” she said. “If infrastructure comes forward in a timely manner, it would alleviate this opposition, but local authorities are struggling to deliver infrastructure for new development under the current system due to resourcing constraints.

“The new levy does nothing to remedy this challenge and adds more layers of complexity. It will require viability assessments for types of development that currently don’t require them, including industrial and offices. It is difficult to see how local authorities will have the additional capacity needed to handle the new volume of assessments.”

Helen Streeton echoes these concerns warning that the levy runs the risk of further stifling new home development, increasing developers time securing planning consent.

She adds: “As infrastructure needs to be delivered in advance, or in tandem with new development, the government is proposing to introduce two new routes: delivery agreements for ‘integral infrastructure’, which will work alongside planning conditions for onsite infrastructure, like play areas; and levy-funded infrastructure, which will pay for the community infrastructure.

“It is difficult to see how this approach simplifies matters and is any different from having CIL plus Section 106”.

This article was first published in Property Week on 12 June 2023 and is available to read in full here, behind their paywall.

The year of the great care home revival – Amy France writes for CoStar

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Commercial Real Estate Partner and Head of Later Living, Amy France, has written for CoStar on how 2023 is seeing a return to full health for the care home sector, following a period of dramatic drop-off in terms of occupancy rates during the pandemic.

France explains that there are several positive factors that have seen the sector return to pre-pandemic occupancy levels (84.3%, Knight Frank 2022). The first reason is that of the significant growth in our ageing population, with the number of over-65s set to reach 17 million by 2040. “The research suggests that the number of older people’s housing units constructed per year to meet this demand will need to rise from 7,000 to 50,000.”

Beyond the need for more units, there is also a need for better quality units; near to 80,000 have been removed from the sector over the last decade due to them being below standard. “Although some of these have been replaced, overall the number of care home beds in the UK are 5,000 less than five years ago.”

“This growing lack of suitable housing for our ageing population represents an opportunity for investors to improve the lives of older generations, generate both social and financial value, and in turn satisfy the social element of ESG metrics. For example, our client Octopus Real Estate recently became a signatory of the Operating Principles for Impact Management, a global standard for managing investments for impact.”

Long-term resilience is also evident within the sector, with an increased demographic demand and fee rises despite a cost-of-living crisis due to the fact that “the older generation [are] generally wealthier, with more money to spend on better quality care homes.”

France highlights how care homes have consistently produced higher returns than other sectors and so asks: “what are we going to see in terms of delivery as the year unfolds?” She describes seeing a sector that “is emboldened by the significance of government and regulatory support in both the short and the long-term.”

France predicts that the incoming announcement of the Older People’s Housing Taskforce and the proposed updates to the National Planning Policy Framework (coupled with market fundamentals) “should see institutional money continue to flood into the sector.” Further to this, she adds, care home investment has also become popular with foreign investors, particularly when they are fully managed and deliver regular income.

“This is a great opportunity for the real estate sector to improve the lives of older people, achieve stable returns and deliver this much-needed aspect of our community infrastructure.”

This article was originally published by CoStar on 23 May 2023 and can be read here in full (behind their paywall).

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Shorter, faster, better, stronger – Andrew Crabbie speaks to IREI

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Partner and Head of Commercial Real Estate, Andrew Crabbie, has featured in Institutional Real Estate, Inc.’s latest piece on how an increase in flexible leases will drive up innovation, rental income and standards across every conceivable metric.

Due to the disruptive and unpredictable nature of the last 25 years, almost all industries have been gripped by a continuous sense of uncertainty.

In relation to real estate, one trend to come from this is the movement towards shorter and more flexible tenancy agreements. Crabbie explains that due to this desire for flexible tenancies (primarily from SMEs), landlords have increased the amount of turnkey space they offer.

“Increasingly, landlords are providing letting deals where the landlord is doing the basic finishing works to the building – and the full cat-b fit-out. So the tenant just walks in. This is 100 percent in line with the tenant requirement for flexibility and the need to transact swiftly.”

The article goes on to clarify how landlords enabling a “plug-in-and-play” solution to tenants also benefits them, allowing them to charge higher rent in exchange for immediate occupancies and landlord responsibility for dilapidations at the end of the tenancy.

This article was originally published by Institutional Real Estate, Inc. on 1 June 2023 and can be read in full here (behind their paywall).

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Evolving industrial and logistics sector finds reason for optimism – Victoria Towers speaks to Property Week

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Commercial Real Estate Partner and Co-Head of the Industrial & Logistics group, Victoria Towers, has spoken to Property Week on Forsters’ survey, conducted for our recent ‘Outside the Box‘ campaign, on current market sentiment within the Industrial and Logistics space.

Towers says: “Investors are confident of long-term occupier demand and of overcoming construction risk as inflation peaks.

“So much is changing so quickly, and the sector is definitely having to adapt more than it has previously. The sector is innovating and continues to show resilience.”

To find out more about our ‘Outside the Box’ campaign and explore the statistics learnt from our survey, click here.

This article was originally published on 12 May 2023 by Property Week and can be read here (behind their paywall).

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Why the logistics sector is under pressure to evolve – Victoria Towers writes for React News

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Commercial Real Estate Partner and Co-Head of the Industrial & Logistics group, Victoria Towers, has written for React News on the evolution of the logistics sector and how owners are pushing to innovate and meet sustainability goals.

Towers writes that “[Forsters’] recent Outside the Box study of the expectations of investors and developers in the [industrial and logistics] sector confirms our own experience as lawyers in advising on our clients’ innovations. Multi-storey formats, renewable energy and integration with residential require legal and technological support.”

From the survey, we saw that the greatest consensus was on multi-storey sheds. “77% believe they will play a large role in the UK logistics sector in the future and 52% have seen an increase in developer appetite in the past year.”

The key driver for this is the competition for land, with all that’s missing a confidence in the resilience of this new multi-storey shed format. “Are there cost-effective structural engineering solutions and ways around a vehicle stuck on a ramp? Are goods lifts now reliable enough?” Regardless, Towers says we should expect to see a proliferation of warehouses, light industrial units and the occasional 20-storey tower.

“In the meantime, lawyers will develop the legal structures needed to ensure that a multi-tenanted, multi-storey scheme remains attractive to both tenants and investors.”

The co-location of residential and urban logistics is causing issues in relation to design, technology and legal rights, with classic NIMBYism in play.

The solution will most likely lie with technology, which will also improve prospects for planning. Key forms of technology raised in our survey include clean energy, modernised site infrastructure, air filters and quieter HGV engines. There is also particular optimism for the impact of e-commerce, robotics (67%) and EV charging.

The real cause for excitement is, however, the impacts expected from artificial intelligence. Towers explains that “automation has required tighter legal controls on landlords to avoid them marching in on an inspection and getting in the way of a robot. As we start to see the uses emerging for AI we will get a clearer sense of the legal principles no longer fit for purpose and the gaps in regulation.”

Missing link

Battery storage has been a particular source of debate. Industrial real estate is becoming increasingly power hungry, and the “broad, flat roofs of our sheds are a gift for photovoltaics.”

“Battery storage is the missing link. The industry needs the capacity and ability to retain the energy generated by photovoltaics. If the panels produce excess energy, it is wasted should the National Grid not buy it back and there is nowhere to store it.

“The innovations we have discussed so far could have a big impact on the efficiency, value and deliverability of industrial real estate. But there could be a more disruptive change in the pipeline.”

Towers goes onto highlight the environmental incentive of shifting from road to rail, with particular reference to HGVS. This sentiment is shown in our survey with many anticipating rail freight generating the greatest growth in occupier demand in 2023.

“The picture that emerges is of a sector that is far from complacent in surfing the continuing wave of strong demand and high values. The industrial real estate sector is conscious of pressure to transform its environmental performance, and is investing in the innovations that will deliver a cleaner and more efficient industry.”

To find out more about our ‘Outside the Box’ campaign and explore the findings of our survey in detail, click here.

This article was originally published on 22 May 2023 by React News and can be read here (behind their paywall).

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Enforcing net zero targets – Louise Irvine writes for EG

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In the final article of a three-part series on ESG and sustainability, Senior Knowledge Development Lawyer, Louise Irvine, has written for Estates Gazette on the rise of sustainable leases and the challenges around enforcement.

Irvine writes how a recent report by JLL and the BPF identified access to data – particularly on energy consumption – as a major challenge in implementing these leases, with the BPF also recommending a mandate for data sharing between landlords and occupiers. “Without accurate and timely data sharing, it will become increasingly difficult for both landlords and tenants to track against their own and industry-wide sustainability targets.”

She explains that it is difficult to enforce provisions that serve to encourage more sustainable behaviour, rather than obligate them. Even where there is an obligation for the tenant, the landlord is unlikely to forfeit a lease for such a breach. It may also be difficult for a landlord to demonstrate loss arising from breach of a green lease clause.

This is where, Irvine emphasises, collaboration between landlord and tenant is crucial.

“It has historically been more challenging to introduce green lease provisions on a lease renewal under the Landlord and Tenant Act 1954. However, this was considered last year in Clipper Logistics plc v Scottish Equitable plc (unreported, Sheffield County Court, 7 March 2022) where it was held that requirements on the tenant to preserve the existing EPC rating of the property were reasonable modernisation and could be included in a renewal lease.

“As green lease provisions become increasingly common, we are slowly shifting towards an institutionally acceptable sustainable lease. The new 8th edition City of London Law Society Certificate of Title, published in May 2023, includes a statement that tenants will not carry out alterations which adversely affect the EPC rating for the property, and that landlords and tenants will share data relating to the environmental performance of the property. These are small but promising steps towards lenders expecting sustainable lease provisions.

“The Financial Conduct Authority is making moves to investigate and tackle greenwashing, which will inevitably mean that contractual arrangements start to be more scrutinised. Green leases will need to be backed up by demonstrable steps or activity to avoid regulatory enforcement for greenwashing going forward.”

The role of regulation

Irvine explains that “as part of the government’s net zero push, there will be a major overhaul of the non-domestic Part L of the Building Regulations in 2025. In the interim, the Minimum Energy Efficiency Standard is the primary driver for change.” The goal is to achieve an EPC rating of B by 2030 and, while this may be unrealistic, it has certainly proved a catalyst in prompting action.

While we have not seen much enforcement of MEES breaches so far, it will be interesting to see if there is a rise in penalties for landlords letting below the requisite EPC rating. Irvine argues that the reputational damage incurred by sub-standard EPC ratings may do more to drive change.

“The government’s Roadmap to Sustainable Investing, published in October 2021, proposed introducing sustainability disclosure requirements into UK legislation to encourage firms (including pension funds, asset managers and investment companies) to accurately report on their ESG data and policies, and this could help to drive change.

“The Law Society has issued guidance to lawyers covering the transition to net zero, and how climate change risks may be relevant to client advice. There are already searches covering climate change risk, which raises the question of the extent to which property lawyers are required to analyse and report on this to clients, or whether this should remain strictly within the remit of surveyors and the client’s own ESG team.”

Future steps

The BPF also advocates greater collaboration between businesses and the government. To catalyse progress, landlords must learn from each other and support a system of greater transparency. “The government response refers to supporting businesses to provide “consistent and comparable data”, which has been welcomed by landlords.

“The Better Building Partnership launched its green lease toolkit back in 2013 and is expected to update its model lease clauses and guidance later this year. Lawyers are also working collaboratively through the Chancery Lane Project, a movement of legal professionals dedicated to using contracts to fight climate change and examine net zero clauses. These go beyond what we are typically seeing in the market and will help to drive the argument for significant drafting changes to meet more ambitious sustainability targets in the future.”

To find out more about Forsters’ ESG & Sustainability credentials, please click here.

Click here to read the first article and second article in our three-part series.

This article was originally published by EG on 16 May 2023 and is available here (behind their paywall).

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Working together towards net zero – Laura Haworth and Louise Irvine write for EG

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In the second article of a three-part series on ESG and sustainability, Commercial Real Estate Senior Associate, Laura Haworth, and Senior Knowledge Development Lawyer, Louise Irvine, have written for Estates Gazette on how landlords and tenants should collaborate on improving energy efficiency and reducing carbon emissions.

With the government target to achieve nationwide net zero by 2050, the real estate industry is subject to increasing scrutiny to reduce its emissions within this timeframe, if not sooner.

The key point on this is deciding where the responsibility lies and who will pay for the transition. “The industry is coming to realise that the burden is shared, and that only through collaboration can the sector, as a whole, shift forwards and deliver results.”

Sharing data

Irvine and Haworth explain that: “a key opportunity for landlords and tenants, across both the commercial and residential sectors, is to boost data sharing, a crucial factor in meeting net zero goals.”

By doing so, landlords will be more able to understand their tenants’ energy demands and both parties will be better informed as to possible improvements.

The evolution of green leases

“On 1 April 2023, new requirements came into force for all let commercial properties to have an EPC rating of E or above, otherwise those property owners face fines pursuant to the Minimum Energy Efficiency Standard Regulations. But this is the tip of the iceberg in terms of green lease drafting.”

There is a trend towards “dark green” lease clauses, which include provisions such as the sharing of information regarding energy use and waste management, landlord rights of entry to carry out energy efficiency works and more general provisions for the landlord and tenant to co-operate with each other to improve energy efficiency. An implication of this is that tenants “may be required to avoid using gas and for both landlord and tenant to procure their energy supplies from renewable energy providers.

“These green clauses are generally seen by landlords as a back-up. It is preferable that there is an ongoing open dialogue between landlords and their tenants, with a shared objective to move closer to net zero. The provisions in the lease are something to point to if a tenant becomes obstructive.”

Irvine and Haworth write that collaboration is key in making green clauses work since landlords are unlikely to forfeit a lease if a tenant has not provided data on their energy usage. While in the past tenants have often struck out green clauses in leases, today we are seeing much more of an acceptance as many tenants also need to demonstrate their own green credentials as well.

Fit-out for the future

Irvine and Haworth explain that landlords tend to fit-out a space to a basic level, with subsequent occupiers then altering the space in order to it make work for them.

“While there is generally a requirement for the parties to use, where possible, materials that have been recycled and/or are recyclable, often with an obligation to carry out the works with a view to achieving the landlord’s net zero target, parties are now increasingly realising the environmental impact of these frequent re-fits. There is a focus in the industry towards reducing the environmental impact of changing occupiers. There are calls for more flexible spaces so that minimal works are required for each change of use.

“If possible, it is useful to get the tenant involved as early as possible and to work together so that there is only one joint fit-out. However, this involves significant trust between the parties and a willingness to compromise to meet the needs of both.

“Another option is for landlords to retain much greater control over tenants’ works than they perhaps have done previously. Rather than just approving drawings and letting the tenant get on with it, landlords will need to ensure that the actual works meet all of the environmental targets promised in the design stage.”

Tech longevity

“There is a focus on investment in net zero technologies, so it is expected that we will see quite a rapid development of smart tech to assist with energy efficiency. Landlords might find that fairly new systems they have installed become outdated quite quickly. The key is going to be ensuring that individual elements of smart systems can be updated without a total overhaul. This will mean making sure that systems do not use specialist cabling or that the chosen system is not limited by only a handful of people being able to do works to it.

“By working collaboratively, landlords and tenants can move towards a cleaner and greener future. But a willingness to be open and transparent is essential to decarbonising our built environment and reducing operational energy. It is in the interests of both landlord and tenants.”

To find out more about Forsters’ ESG & Sustainability credentials, please click here.

To read the first article in this three-part series, click here.

This article was originally published by EG on 16 May 2023 and is available here (behind their paywall).

Student Housing Conference – 5 Key Takeaways

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On Tuesday 9 May, LD Events organised an in-depth review of the current student housing market with panel discussions from a wide range of industry experts.

Here are my five takeaway points from the Conference:

Demand versus Viability

The student housing sector is seeing unprecedented demand, largely driven by a 23% increase in international students and a 33% increase in postgraduate students since the 2019/2020 academic year. During that 2 year period there has been an increase in demand of 59,190 beds in London but only an extra 1,511 PBSA units have been built.

So what’s stopping us from building more? Money!

Despite a healthy growth in rents within the sector, they can’t keep up with rising costs from construction (including as a result of the Building Safety Act), the unwieldy planning system and operator costs (including a 30-50% increase in the cost of utilities and staff pay rises of 10% to keep up with inflation). It costs an average of £80/90k to build 1 unit of PBSA, which would likely need to command an annual rent of £7.5k to meet viability requirements – for comparison, the average student loan outside of London is £5.5k, creating an obvious strain on profitability.

This also raises issues beyond the real estate sector. On the back of a failing student loan system, we risk creating a two-tier market where certain universities are only accessible to students from the wealthiest backgrounds. This issue is not confined to London either; Durham saw a 14.9% rent rise but demand was seemingly unaffected. It is thought this is partly due to the fact that 38% of students at Durham are from independent schools, whose families are more likely to be able to assist with the increased rents.

Viability is the biggest challenge facing this industry and, despite innovation from the private sector, universities and the Government are going to have to address this issue if they want to keep attracting the best students – and not just the wealthiest ones.

Out with the new, in with the old?

As the industry strives to bridge the gap between available units and ever-increasing demand, one solution is to repurpose existing buildings rather than build from scratch – in particular, the number of vacant department stores and office buildings were identified as a potential growth area.

For many schemes, this could reduce costs given that planning can be easier to obtain when redeveloping existing buildings however, retrofitting isn’t always cheaper. Given the focus on net zero targets, heavy capex can be required to improve the sustainability credentials of existing building stock. This risks creating a two-tier market (as is being increasingly being seen in the office sector) where only the top investors can hold ‘green’ stock.

Location, Location, Location

Location is always important, but in a sector where the occupiers have such specific (and usually predictable) requirements, location really is everything! Student satisfaction is known to be lower if they are not happy with the location – after all a lot of students aren’t just going to University for the academics. From my personal experience, some universities in London couldn’t guarantee me a room in student accommodation as my family home in Essex was deemed commutable and consequently, I did not apply to those universities.

As well as building the right types of PBSA in the right towns and cities, the micro-location also counts – this means consulting people with local knowledge to ensure that accommodation is being built in the best locations within towns/cities for the intended end-users.

What else is important to students?

Other than the price and location, what else matters to gen Z/ Alpha students?

Unsurprisingly, high speed internet is number 1 on the shopping list, followed by smart tech and security. Research has found that students don’t want to pay for social spaces, which is good news for developers as they can maximise (and more importantly rentalise) all available space within a scheme. That said, there are certain things that students expect to be included as standard (at no extra cost), such as well-being support and strong ESG credentials.

Ultimately, it is important for universities and investors that developers build schemes that will be popular and therefore successful. Consistent with my own experience when applying to University, 50% of students responding to the UCAS Student Accommodation survey 2022/2023 said that the availability of accommodation had influenced their decision on where to study.

Operators coming to the fore

Operators are now front and centre of the accommodation offering especially following Covid and in light of the cost of living crisis. This is leading to an increase in brand recognition and a desire to live in branded accommodation. 60% of students living in PBSA indicated that brand was a factor in choosing their accommodation. It is therefore more important than ever that owners appoint the right operator for their scheme.

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Nicola Copsey

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Forsters act for LexisNexis Risk Solutions on lease renewal

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Forsters acted for LexisNexis Risk Solutions in relation to the lease renewal for their office in East Grinstead.

LNRS, which is part of RELX Group plc, provides analytics for organizations seeking to manage risks, find opportunities and improve their results.

Glenn Dunn, Head of Forsters’ Corporate Occupiers group, advised LNRS and was assisted by Owen Spencer and Molly Haynes.


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Net zero and the push for a greener tomorrow – Laura Haworth and Louise Irvine write for EG

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In the first article of a three-part series on ESG and sustainability, Commercial Real Estate Senior Associate, Laura Haworth, and Senior Knowledge Development Lawyer, Louise Irvine, have contributed a piece to Estates Gazette about the UK’s pathway to reach net zero by 2050.

On 31 March, the government released three documents intended to lay out the UK’s plan to achieve this: the Green Finance Strategy, the Net Zero Growth Plan and the Energy Security Plan. These were released collectively under the government banner of “Green Day” announcements.

Haworth and Irvine write of how, “for those in real estate, the challenge is that there were scant measures that addressed the sector directly, yet at the same time, a large proportion of the measures will have an indirect impact and will need to be considered.”

Despite this, they do say that the announcements clearly outline the government’s overall strategy centring around a “pro-growth regulatory regime”, with examples including “carbon border taxes” and plans to upgrade the UK’s power grid.

Green Day provisions for real estate

The “Great British insulation scheme” is one of the few policy references to real estate, albeit focused on domestic buildings only. It involves middle-income households being offered grants worth hundreds of pounds to make their homes more energy efficient.

A common criticism of this scheme is that while the UK Green Building Council say 27m homes need retrofitting, this initiative will only cover 300,000 households. Moreover, there is no such scheme for commercial real estate.

As expected, the government is also focusing on transitioning to low-carbon heating systems such as heat pumps. For social and low-income homes, the aim is to improve energy efficiency through the extension of the Energy Company Obligation levy.

“While this is a positive move, it does not address energy inefficiency, a fundamental issue that must be rectified across domestic and commercial real estate if the industry is to meet net zero.”

How can landlords fill in the blanks?

Since Green Day, real estate trade bodies like the British Property Federation, the BPF and CBRE say that a much greater level of detail is needed from government in terms of a net zero transition strategy.

Haworth and Irvine believe that landlords are already under considerable pressure to demonstrate how they are tackling the fight towards net zero. “There are factors beyond looming regulatory pressures, such as reputational risk and the idea that there will increasingly be a premium on green spaces. Landlords want to attract the best tenants so they need to ensure that what they are offering is both what tenants want and competitive against other offerings. It is also important to bear in mind that tenants will have their own environmental targets, which will affect their real estate requirements.

“Competition is playing out in terms of compliance with the growing number of accreditations that landlords can seek for their buildings. These not only improve reputation but also help to attract tenants.”

The retrofit revolution

Retrofitting, which carries the dual benefit of helping to decarbonise the sector while also enabling landlords to think more creatively in terms of sustainability and design, is gaining popularity.

Haworth and Irvine comment: “The trend is moving away from the white box spaces that have been popular for so long and towards spaces with more character and in which sustainable measures are very visible. It is a chance to showcase and to create flexible spaces that do not require a complete re-fit every time there is a change of occupier.”

In order to keep pace with the trend’s growing momentum, there is a need for a larger workforce to carry out the improvements to building stock as currently there are few that specialise. The government talks of securing supply chains for the transition, but only time will tell if that extends to the types of skills required for retrofitting and whether it translates into government investment for skills training or if that is left largely to private funding.

How should it be funded?

The Green Finance Strategy indicates that financial markets are planned as a key driver in funding this climate action. “Once again, the real estate sector is in a prime position to benefit from more money going into green projects through dedicated green funds or green loans.”

While the Green Finance Strategy does not, as many had hoped, contain a finalised green taxonomy, it does include a renewed commitment for the UK to be the “best place in the world for raising transition capital”.

“Although there has been an increase in sustainability-linked lending (a loan where the pricing is tied to the borrower’s achievement of sustainability performance objectives as an incentive), and green loans (where the loan proceeds are used for green projects), these are not as commonplace as might be expected, and do not usually offer a real financial incentive to landowners.”

Haworth and Irvine believe that lenders will increasingly focus on the green credentials of buildings and interrogate this more closely as part of their due diligence.

“The question then is – should landlords or tenants pay for the works? There is no one size fits all. The good news is that payback periods for measures such as solar panels are getting shorter. This means tenants are more likely to contribute if they are going to get a full return on their investment during the term of their lease. But, largely, the cost will fall to landlords, and landlords will pay in order to attract the best tenants and achieve the best rents.”

A way to go

Haworth and Irvine conclude by writing: “While there is still a long way to go, the property sector has proven itself to be committed to net zero, as confirmed by a recent joint survey by the BPF and JLL. The government’s Green Day drive has been welcomed for the partial direction that it gives but, as has been the case to date, it will be the pioneers within the sector that drive the initiative and the innovation needed. The good news is there is a growing bank of evidence that green commercial buildings are attracting higher rents, which is expected to act as an incentive, alongside government policies and regulatory requirements.”

To find out more about Forsters’ ESG & Sustainability credentials, please click here.

This article was originally published by EG on 9 May 2023 and is available here (behind their paywall).

Consultation on Agricultural Property Relief and natural capital – looking to the future of British farming

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There was some cautiously welcomed news in the Chancellor’s 2023 Spring Budget for those in the agricultural sector with the announcement of a wide ranging consultation on tax in the context of rural land.

In the wake of Brexit, Government schemes introduced as successors to the removal of EU subsidies have shifted the focus away from agricultural activities towards environmental land stewardship. However, tax in the rural economy, particularly Agricultural Property Relief (APR) under the inheritance tax (IHT) regime, has not evolved to reflect this change of emphasis. This leaves the rural sector operating in tax and subsidy frameworks with little clarity and conflicting incentives.

The consultation is broadly in two parts, the first calling for evidence on the tax treatment of environmental land management and ecosystem service markets. Part 2 then focuses on APR as a whole, with an ancillary section to consult on whether the Government should implement the Rock Review’s recommendation that APR be restricted to farm tenancies with a life span of at least eight years.

A New Rural Landscape – The Government’s Agricultural Policy Shift

Post-Brexit support for farmers and landowners is moving away from the Basic Payment Scheme to Environmental Land Management Schemes (ELMS): ‘public money for public goods’. There are three tiers of ELMS:

  1. Sustainable Farming Incentive (SFI) will pay farmers to adopt sustainable farming practices.
  2. Countryside Stewardship (CS) will pay for targeted environmental work, like restoring wildlife habitats.
  3. Landscape Recovery (LR) will fund longer-term, large-scale projects (over 500 to 5,000 hectares), such as improving water quality across a river catchment area.

As well as direct Government support, landowners are being encouraged to access private sector funding through ‘ecosystem service markets’, including:

  • Woodland carbon units, which pay for carbon sequestration.
  • Biodiversity Net Gain (BNG): from November 2023 (or April 2024 for small sites), every planning permission will be required to generate at least 10% BNG. While the preference will be for BNG to be delivered onsite, it will also be possible to deliver offsite. Landowners will be able to sell BNG units to developers to meet the condition.
  • Nutrient Neutrality (NN): to date, Natural England has advised seventy-four local planning authorities that protected habitats within their areas are in unfavourable condition due to excess nutrients and that development should only go ahead where it will not cause additional pollution to those sites. Mitigation measures for nutrient pollution can be delivered onsite (such as wastewater treatment facilities) or offsite (such as the creation or restoration of natural wetlands). Landowners can deliver offsite
    mitigation and then sell NN credits to developers.

ELMS and ecosystem services will involve moving away from intensive agriculture and (other than SFI), from focusing on food production. Landowners need to understand the implications of this policy shift for their IHT planning.

The Agricultural Property Relief Incentives at Odds with the New Rural Subsidies Schemes

Broadly speaking, APR is available where an IHT ‘transfer of value’ is attributable to the agricultural value of agricultural property. Agricultural value does not take account of any value the same property may have by virtue of other aspects, such as being a site with potential for building development. The relief may apply to lifetime transfers (broadly to trustees on trust or on a gift made by someone within seven years of death), transfers on death or when agricultural property is held on trust under the IHT ‘relevant property regime’ (which can result in a charge being levied on property transferred out of a trust or on every 10-year anniversary).

APR can apply at 50% or 100%, largely depending on who farms the land and the nature of any tenancies in place over it. To qualify for the relief, there are two main parts that have to apply, one of which relates to ownership and occupation requirements. The other, which is where the problems lie in the context of the incentives under the new environmental schemes, is that the property has to be ‘agricultural property’, which is (broadly speaking) land occupied for the purposes of agriculture, together with cottages, buildings and farmhouses which are of a character appropriate to that property.

The tension lies within this definition of agricultural property, specifically the need for it to be ‘occupied for agricultural purposes’ to qualify for the relief – which does not, on the face of it, include land used for, or to take advantage of, the environmental schemes described above.

Questions that we are regularly asked by clients include, “If I graze my sheep over a wildflower meadow a few times a year, is this enough for the land to qualify for APR?” “Will I lose APR if I rewild my land and stop farming?” Of course, the availability of APR is always fact-specific, but at the moment, the legislation raises more questions than it answers.

The problem is exemplified in upland regions of the UK where vast areas have seen a significant increase in value thanks to natural capital potential. As things stand, this uplift in value is unlikely to be covered by APR as it does not fall within the current definition of ‘agricultural value’. The consultation acknowledges this and asks how environmental land should be valued.

Clarity on the Horizon?

Tax and subsidies are key to the way the rural economy functions and the way land is managed. So long as conflicts exist within these frameworks, the rural sector will be in limbo. Forsters will be contributing to the consultation, which closes for feedback on 9 June 2023, in the hope that its outcome will lead to meaningful clarification of the Government’s agricultural policy. Aligning the tax and subsidy incentives is key to restoring the rural sector’s confidence in a robust, sustainable and thriving future.

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Charles Hancock

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Forsters wins bid to be reappointed as legal advisors to Notting Hill Genesis

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We are delighted to announce that, after a highly competitive tender process, Forsters have been reappointed as advisors to Notting Hill Genesis, one of London’s largest housing associations. We will continue to provide advice to Notting Hill Genesis, our longstanding client, on:

  • building safety
  • acquisitions
  • sales
  • developments (complex as well as simple)
  • joint ventures
  • Section 106 schemes
  • commercial lettings
  • residential sales and resales

Commercial Real Estate Partner and Head of Affordable Housing, Sara Branch, says: “We are delighted that Notting Hill Genesis has chosen to retain Forsters to work alongside them and we look forward to continuing to work with them in delivering much needed affordable housing and helping to fulfil their ambitious affordable housing development and sales programme.”

Forsters’ Affordable Housing Development Team provides a complete legal service; including property, construction, planning, finance, tax, residential services, corporate and property litigation.

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Sara Branch

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Major survey of investors and developers reveals growth opportunities in evolving industrial real estate market

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Extensive independent research commissioned by law firm Forsters reveals key growth opportunities as the industrial and logistics real estate sector adapts to market and policy pressures.

Forsters’ report, Outside the box: supporting an industrial evolution, is based on a survey by FTI Consulting’s professional research team in the first quarter of 2023. Sixty-one UK-based professional investors and developers in UK real estate assets were surveyed and another four leading developers and investors were interviewed about their experiences in competing for land, investment and occupiers while adapting to the shifts taking place in uses, formats, locations and policy.


Outside the Box - Supporting an Industrial Evolution


Markets and demand

The ‘warehouse bubble’ has burst for 77% of the sector, but almost half (46%) expect an increase in asset values and rental levels in 2023 and a smaller proportion (39%) believe there will be an increase in occupier demand.

Urban logistics and last-mile real estate are expected to experience greatest demand in 2023. As last-mile delivery centres move closer to residential areas, the sector acknowledges the need to be neighbourly. Around half say that running HGVs on clean energy (46%) and creating a modernised site infrastructure (46%) will help co-location and planning permission.

The research suggests some mismatch between future investment development. There is a higher demand from investors than developers in transport and logistics (49% investors, 36% developers), retail (28% and 15%) and post and parcel delivery (26% and 18%). Where there is higher demand from developers than investors, the result could be a lack of finance for speculative development. Uses most affected would be data centres (25% investors and 38% developers) and food and beverage (31% and 38%).

Advocates of modal shift from road to rail will be heartened to see rail come top for its prospects: 51% believe rail freight will generate the greatest growth in occupier demand in 2023, compared with 33% for both road and maritime.

Greater London is seen as offering the best prospects for investment by 28%, followed by the North West (13%), South East (11%) and West Midlands (11%). Those who selected Greater London were mainly driven by its connectivity (47%), availability of assets (35%) and availability of supply (35%). Across all regions, the key factors for investors were connectivity (51%), closely followed by good value (49%) before a large gap to availability of labour (30%).

Innovation

Competition for land continues to drive interest in multi-storey industrial development: 52% have seen an increase in developer appetite in the past year and 77% believe that multi-storey sheds will play a large role in UK logistics in the future.

Investors and developers were optimistic about the impact of technologies, such as e-commerce (69%), robotics (67%) and electric vehicle charging (67%), and saw the most significant positive impact coming from artificial intelligence (33%) which trumped e-commerce (28%). AI was also seen as most likely to have a negative impact (15%).

Sustainability

The industry highlighted the need for assistance in meeting net zero targets. Key asks were government subsidies for renewable energy (54%), assistance with measuring progress (34%) and expert guidance (26%). With growing pressure for refurbishment, 57% said that cost is an issue, while 34% highlighted the extent of refurbishment required and around a quarter blamed inadequate structures (26%) or the quality achievable through refurbishment (23%).

Smart meters (57%) were most popular as a means of improving the sustainability of existing developments, followed by additional insulation (51%), while 77% of respondents currently use solar panels or plan to. Although only 18% currently use battery storage technology, a huge 51% are planning on using it.

When it comes to incentivising tenants to reduce energy consumption, 39% advocate the use of smart meters as part of a reciprocal agreement. Only 26% of respondents see green lease provisions as the most effective incentive to offer a tenant.

Forsters partner Victoria Towers comments, “Investors are confident of long-term occupier demand and of overcoming construction risk as inflation peaks. What this national survey reveals is huge diversity in not only the opportunities but also the responses to them.

“The sector is innovating and continues to show resilience. The pioneers will need legal innovation to keep pace. Lawyers must help manage the development and use of space looking to the long term to preserve asset value in schemes. This should include supporting a collaborative relationship between landlords and tenants to achieve environmental and social sustainability objectives.”

Outside the box: supporting an industrial evolution

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Magnus Hassett

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Taking Care: Europe’s (sometimes) controversial later living market – Amy France speaks to Institutional Real Estate, Inc.

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Commercial Real Estate Partner and Head of Later Living, Amy France, is quoted in Institutional Real Estate, Inc.’s latest piece on Europe’s later living market, which looks at how private capital is sometimes prevented from entering the sector, and how more uniform regulation could reassure investors.

The article describes how “care homes and senior living, such as retirement villages with medical and hotel-style facilities, are proving popular with investors across Europe.” While there is a clear reasoning for such investment trends, when understood alongside Europe’s ageing, affluent demographic, there are still several challenges which need of tackling.

One such challenge is fragmentation within the sector, on which France comments: “This is a story of two halves, concerning regulation and planning. In the UK, care home regulation is in a good place compared to other types of retirement living, but many believe that increased government guidance on leasehold structure and deferred management fees, for example, would help the sector grow, providing consumers with more reassurance. And planning remains an issue, with consented sites in short supply.”

This article was originally published in the May 2023, Vol. 7, No. 5, edition of Institutional Real Estate, Inc. and is available here behind their paywall.

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Amy France

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Developments in the UK film and TV sector – Owen Spencer speaks to Property Week

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Commercial Real Estate Counsel and member of the Film & TV Studios group, Owen Spencer, has spoken to Property Week about how the last 12 months have seen a change from the rapid rise in film and TV studio space, which the industry had enjoyed throughout the five years prior.

Property Week report that the last year has seen “a number of films due to be produced in the UK, including the next instalment of Star Wars, delayed, and industry giants Disney and Netflix have both reported falls in profits, potentially affecting future productions.”

This has provoked questions as to how much further studio development will take place, especially as a record £6.27bn was spent by film and TV companies last year; much of it going towards an additional 1.1m sq ft of stage space that has been developed since 2021.

Does this extra capacity, then, mean that the market is likely to cool?

Spencer, whose clients include Netflix, Warner Bros. and Sony Pictures, comments that it is more a case that the market has matured, rather than reached saturation point.

He notes that after the likes of Disney and Universal started striking long-term deals with established studios such as Pinewood and Elstree from 2019, their owners were able to create secure incomes and studio space became even more scarce as a result.

Now, with many major film and TV companies having studio deals in place, the market has changed, but Spencer adds: “Some big studios don’t have long-term commitments in the UK, so it’s not necessarily the case that there aren’t more big deals to be done, but we’ve moved into a different phase.”

One strategy employed by studios as a response to the scarcity in available studio space, was the trend of converting industrial warehouses into studios.

Spencer says yields will vary depending on location but adds that there are additional benefits to striking such deals with film companies.

“The other thing that’s attractive about doing a film-studio conversion from a landlord’s point of view is that it might be quite nice to have an international corporation on your books as opposed to a small logistics operator.”

This article was first published in Property Week on 26 April 2023 and is available to read in full here, behind their paywall.

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Forsters advise Taconic Capital on lease renewal

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Forsters have advised Taconic Capital Advisors on the renewal of the lease of their premises on Grosvenor Street, London.

Taconic Capital is a global alternative investment manager and advisory firm.

Glenn Dunn, Head of Forsters’ Corporate Occupiers group, advised Taconic Capital and was assisted by Owen Spencer.


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Forsters advises Fiera Real Estate UK and Cubex on the acquisition of a 2.6 acre development site in Bristol

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Forsters has advised Fiera Real Estate (“Fiera”) and Cubex on the acquisition of a 2.6-acre site in Filton for the proposed development of a new 75,000 sq.ft Grade A urban logistics scheme with a GDV of £20m. The scheme is expected to complete in the second quarter of 2024.

The site was purchased through the Fiera Real Estate Logistics Development Fund UK (“FRELD”). All assets in FRELD’s portfolio will meet the rigorous environmental and social requirements set out by FRE UK’s Sustainable Design Brief, which align with its ambition to drive positive change and contribute to a low carbon economy. The scheme has had ESG considerations embedded at all stages of its design process and along with future projects for the fund, it will be targeting net-zero carbon construction, BREEAM Excellent and EPC A.

The site is situated in the Filton area of Bristol, which is already a prime industrial location and in close proximity to the M4, M32 and A38. It was previously occupied by Rolls Royce before being acquired by St Francis Group and is the last remaining plot of the Horizon 38 development, which already hosts several investment grade occupiers.

Joe Downey, Managing Director at Cubex, commented “I absolutely love this site. Filton is undoubtedly the best-connected location in Bristol for urban warehousing. The immediate area is home to some of the largest aerospace and defence companies in the world, and the neighbouring Brabazon development will create an entirely new neighbourhood with thousands of new homes.”

Chris Button, Fund Manager at Fiera, added, “We are super excited to be funding another high quality and sustainable development with Cubex and have immediate appetite to invest a further £250m.”

Commercial Real Estate Partner Jade Capper, assisted by Senior Associate Charlie Croft, advised on the deal.

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Government’s proposals to increase planning fees ‘broadly welcomed’ – Matthew Evans speaks to Property Week

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Planning Counsel, Matthew Evans, has spoken to Property Week’s Ciaran Nerval on how the government’s proposals to “hike up planning fees for developers” have been “broadly welcomed”.

However, industry sources have called for “real change” to planning departments through the provision of additional funding.

Evans agreed that the proposals to increase planning fees (by 35% for major applications and 25% for all others) were “broadly welcomed”.

However, he said these proposals needed to deliver “real change to local authority planning departments and translate effectively into increased resource.

“Local authorities have seen budgets slashed due to austerity-era policies, so to see real change we need to ensure the funds generated from increasing planning fees are ringfenced and spent within the department; without this, any change to the fees won’t deliver genuine results.

“There is no quick solution, but there is an urgent need to establish a long-term plan that boosts resource, improves retention and is closely monitored; otherwise, we run the risk of slowing down economic growth, which is so intrinsically linked to the planning system and new development.”

This article was first published in Property Week on 26 April 2023 and is available to read in full here, behind their paywall.

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Government’s older person housing taskforce has its work cut out – Natalie Cameron writes for React News

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Commercial Real Estate Senior Associate and member of the Later Living team, Natalie Cameron, has written for React News on the Government’s recent progress in establishing an “Older People’s Housing Taskforce” and the appointment of Professor Julienne Meyer as its Chair.

The taskforce was first announced in the February 2022 ‘Levelling Up’ white paper and is being launched by two Government departments – the Department of Health and Social Care (DHSC) and the Department for Levelling Up, Housing and Communities (DLUHC).

Cameron highlights the differential between the UK and countries such as New Zealand, Australia and the USA, in terms of the availability of homes “with on-site care available”, with the UK (0.6% of total units) lacking far behind similar nations (5-6% total units).

Recognising this supply issue, the taskforce’s purpose is “to work across housing, health and care sectors to drive an increase in the volume and range of housing options, with a particular focus on boosting ‘housing with care’ numbers.”

This is an important issue, as highlighted in Professor Les Mayhew’s review for City University, which concluded that to meet demand, one in four new homes must be built with “housing with care” in mind. This equates to 50,000 of such homes built each year.

Cameron goes on to emphasise the significant role of taskforce appointees in delivering the vision of the ‘Levelling Up’ agenda and state how upcoming legislation aimed at enabling sustainable housing options “tailored to the varying needs of older people will be crucial in the integrated provision of facilities and care services.”

An additional focus for the taskforce will be on potential solutions to the supply of adequate later living housing, including providing clarity on the role of “housing with care” in regard to the planning system and leasehold reform.

The taskforce (consisting of 14 members from a variety of sectors within the later living sphere) will run for 12 months and will work independently of both DLUHC and DHSC ministers, with interim findings to be published after six months.

Cameron concludes by writing: “It is clear that the work to be done by the taskforce is both urgent and vital in enabling the required pace of development of later living accommodation.”

This article was originally published by React News on 20 April 2023 and is available here in full (behind their paywall).

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Natalie Parsons

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BISNOW Seminar – The UK’s Industrial and Logistics Transformation

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On Tuesday 18 April 2023, Commercial Real Estate Senior Associates Daniel Steele and Paul Grayson attended the BISNOW seminar on The UK’s Industrial and Logistics Transformation at the Royal College of General Practitioners.

The seminar focused on two key themes:

  1. Investing In Industrial: Is The Bubble Going To Burst? and
  2. The Future Of Industrial: Sustainability And Technology,

as well as a general discussion regarding the green industrial revolution. The speakers came from a variety of backgrounds, including international investment managers, UK big-box developers, London-focused developers, real estate consultants and a representative of the UK Warehousing Association.

Daniel and Paul share some key insights and thoughts from the various discussions as follows:

Wishful thinking

When each asked one thing that the panellists wished would happen in the next 12 months, pleas for changes to the planning system, for market participants to adjust their expectations and for a move towards adopting multistorey industrial options were all mooted.

It was widely acknowledged by panellists across the afternoon that the current planning system does not appear to be working and changes need to occur in order to make this more transparent and consistent across the UK.

Some market participants still appear to be clinging to memories of before the Liz Truss mini budget in September 2022 and are not adjusting their expectations. While prices are slowly adjusting to realistic levels, the panellists believed that there has been a structural change in pricing that should be accepted and built upon, rather than relying on prayers and hopes of what has happened historically.

Multi-storey developments are common in Europe but UK occupiers appear to be slow to adopt this. Given the demand for space multi-storey options should be considered by tenants as viable options to their needs and should be encouraged by agents to increase uptake. That said, the panel did acknowledge that occupiers will not fully commit to multi-storey developments until it can be widely demonstrated that the ramps/lifts between floors can adequately sustain the demands of industrial use.

High Voltage

While there is a push towards adopting green energy and adapting operations and assets to avoid the use of fossil fuels, there is concern as to whether the grid has the capacity to tolerate increased energy consumption. To mitigate future energy concerns, many developers and landlords are opting to put solar PV panels on their buildings but there are still questions regarding how (and if) excess capacity can be returned to the grid and at what return? Is there enough incentive to developers or landlords to install solar PV panels if the tenant does not have any need for excess power and the energy cannot be sold back to the grid at a reasonable rate?

i-Robot

Many tenants are investing in robotics and are leaving room in their plans to accommodate expanded robotics schemes in the future. The UK market, however, faces issues in attempting to expand robotics, such as:

  1. as mentioned above, does the UK have the energy capacity to cope with this? and
  2. are there enough engineers in the UK to service them?

A panellist described an example of an entire automated facility shutting down and having to wait for an engineer from Europe to fly over and fix the situation. Should the industry be offering apprenticeships so that the UK can train their own engineers to facilitate the expanding growth of robotics in industry?

Mixing it up

The rise of dark kitchens, vertical farms and film studios occupying warehouse space all offer opportunities for access to new tenants and therefore new growth and demand, particularly for urban and last-mile logistics sites (assuming the sites have the energy capacity to cope with tenant’s requirements – film studios are energy hungry!).

ESG and benchmarking

Whilst the market is rightfully driving the ESG agenda, there is still no commonality as to what “net zero” means. Each market participant is undertaking their own ESG initiatives, however the lack of commonality makes it difficult to benchmark one’s performance against others in the market. The market needs to be more transparent as a whole, perhaps an alien concept to investors and developers who closely guard key information such as yields.

We need to get the green belt back on the agenda’ – Matthew Evans writes for React News

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Planning Counsel, Matthew Evans, has written a piece for React News on the need for the government to develop its strategy when it comes to housing delivery by once again focusing on green belt sites, rather than solely brownfields as they are currently.

Evans explains that while the government’s recent emphasis on the redevelopment of brownfield sites has been logical, noting to factors such as location, ecological value and offset considerations. However, many of the straightforward sites have now been developed, meaning only “difficult and constrained sites remain.”

The costly redevelopment of these challenging brownfield sites needs to be understood against the fact that they are better suited to high-density apartments rather than family housing (the latter of which is more greatly needed). While the government has put forward £60m via a new “Brownfield Land Release Fund 2”, this is an insignificant sum when looking at the wider issue.

Evans writes: “If we truly want to build the housing the country needs, green belt reviews need to be put firmly back on the agenda. It is a highly politicised topic, but it is crucial. There needs to be careful consideration of green belt versus protected. No one is advocating for runaway urban sprawl, but there are a lot of poor and allegedly green belt sites that are hardstanding or generally low quality – neither of which deserve the high level of protection that green belt designation affords.”

He goes on to recommend a new, additional categorisation of these sites (akin to the recent proposal for Grade-III buildings) that will differentiate between true green belt land and low-quality land that is suitable for housing developments.

“There are places in the home counties that haven’t reviewed their green belt for a very long time, and with changes to the national planning policy framework stating that green belt reviews will not need to be carried out to meet housing need, there is little chance of this changing now.”

Evans concludes by advocating for the need for greater public awareness of the sort of land that is being (unnecessarily) protected, framed against the trends of dwindling supply and rising house prices.

Without a reconsideration of both a reliance on brownfields and the funds required to do so, “it is hard to see how we are going to deliver on growth ambitions and provide the homes that people want and need.”

This article was originally published by React News on 29 March 2023 and is available here in full (behind their paywall).

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Cutting to the chase on the revised Minimum Energy Efficiency Standards regime

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Returning to the familiar ground of sustainability in commercial real estate, podcast host Miri Stickland chats with Senior Associate Ed Glass and Senior Knowledge Development Lawyer Louise Irvine about forthcoming energy efficiency regulatory changes taking effect on 1 April 2023.

We discuss the impact of the changes to the Minimum Energy Efficiency Standards (MEES) regime, the key issues landlords, buyers and sellers need to be aware of to avoid acting unlawfully and how landlords can best future-proof their leases.

In this episode we were joined by:

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Industry warns of development delays for Infrastructure Levy – Victoria Du Croz speaks to Property Week

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Partner and Head of Planning, Victoria Du Croz, has spoken to Property Week about the government’s proposed new Infrastructure Levy, the consultation for which launched last week, and the likelihood of it causing delays to future developments.

Designed to replace section 106 contributions and obligate developers to pay a fairer share towards local infrastructure, the levy will give local councils the power to dictate what proportion of it is delivered through affordable housing developments and how much is put toward local infrastructure.

The proposed changes would be introduced through a 10-year ‘test and learn’ period, regarding which Du Croz said that “[it] doesn’t give developers certainty on how the new Levy will work in practice”.

“This could lead to delays in sites coming forward while any teething problems are fixed – It would be better if government spent time getting the new regulations right, rather than rushing them through and looking to address any issues during the transition period.”

The consultation is due to conclude on 9 June 2023.

This article was first published in Property Week on 24 March 2023 and is available to read in full here, behind their paywall.

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7 Forsters lawyers recognised in the Spear’s Property Advisers Index 2023

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Spear’s Property Advisers Index highlights the best property lawyers in and around London.

We are delighted that 7 members of our Residential Property team have been recognised this year, with the following rankings:

Top Flight

Top Recommended

Recommended

Rising Star

The full index can be found here.

As the largest specialist team dedicated to Residential Property in London, our lawyers can provide an unrivalled level of service to clients. To learn more about our lawyers, and the services they can provide for you, please visit our luxury property hub.

Bisnow UK Life Sciences Real Estate Annual Conference – 6 Key Takeaways

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On Thursday 2 March 2023 Construction Partner, Emily Holdstock, and Commercial Real Estate Partner, Anthony Goodmaker, attended the Bisnow UK Life Sciences Real Estate Annual Conference at the White City Innovation District.

The overwhelming message from the many industry-leading speakers was one of optimism and growth – here are their 6 takeaways from the event:

1. Exponential Growth

Whilst some predicted the boom of this sector a decade ago, the pandemic has no doubt accelerated the growth of Life Sciences as a key real estate asset class. 5 years ago there was next to no lab space in London. Now it is really starting to rival Oxford and Cambridge for dominance in the market. In truth, all three will prevail together as ageing populations and increased Government investment in healthcare drive the continued demand for Life Sciences real estate in the UK. And the shortage of current space remains chronic in spite of a significantly increased development pipeline for the coming years.

2. Know Your Occupiers

Whilst most startups and university research spin-offs just require a simple lab and small adjacent office space as a starter for 10, their needs can quickly change as investment funds pour in. The need for a more specialised and bespoke workspace can arise overnight and so being nimble and being in a position to provide a variety of facilities for a variety of tenants on the same campus is key to building long term relationships with occupiers.

3. Co-Location is Key

The life sciences ecosystem is crucial for companies in sharing infrastructure, facilities and knowledge. A single life sciences building without a surrounding cluster of chemists, biologists, biochemists, engineers, researchers, universities and hospitals may be less attractive to smaller start-ups who rely on the collaborative benefits that clustering brings. Innovation districts are not just a buzzword, but an operational need.

4. ESG Concerns

Life sciences buildings are intensive users of energy – up to 5 times more than a standard office. But unsurprisingly for a sector whose users lead the way in innovation and technology, things are starting to change as the push for increased digitisation and reduced reliance on gas will help keep the sector on track to meet Government sustainability requirements.

5. Live Work Play

The development of new Life Sciences clusters in the UK, particularly new facilities in the outskirts of Oxford and Cambridge, must be accompanied by sufficient provision of adequate housing, transport, healthcare, schools and nurseries. Young people are the main workforce for this sector and suitable 24/7 infrastructure is needed to ensure that key Life Sciences locations are attractive to them as a place to live, work and play.

6. Institutionalisation

Real estate must not become the blocker that restricts the output of this fast-paced sector. All the new space required to meet the growing demand must be high tech and complex, and the real estate sector needs to get its head round it quickly. Site and sector specific knowledge for owning and operating such highly complex assets means that while institutional capital wants to be in the sector, there are still real barriers to entry. Unlocking the full potential of institutional investment will be key to ensuring that that demand can be met sooner rather than later.

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Sharing the Load – Andrew Parker speaks to Construction News

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Construction Partner, Andrew Parker, has been quoted heavily in Construction News‘ James Wilmore’s latest piece on the role of collaborative risk-sharing in preserving the resilience and capacity of the construction industry in times to come.

Risk-sharing, in the Construction Leadership Council’s (CLC) words, is vital due to a “sustained, high level of construction firm insolvencies, particularly among SME builders and specialist contractors.” Among the culprits for these collapses are “economic uncertainty and the difficulty of reconciling fixed-priced contracts with price inflation and reduced cashflow.”

This, along with expectations of recession and poor demand conditions, as well as inflationary pressures, means confidence in the sector is contracting.

In this context, then, risk-sharing could perhaps be under threat, and so Wilmore’s article explores the kinds of risk-sharing that are already happening and if they are sustainable.

Parker is consistently quoted throughout the piece on factors such as “fluctuation clauses” (enabling clients to take a “pragmatic approach” to their supply chain), a need for “more collaboration” in the face of inflationary and pricing issues, and how despite the various pressures, “if you’re a big strong contractor, you’re becoming bigger and stronger in this market.”

Read the full article in the March 2023 edition of Construction News, found here.

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Property sector’s net zero 2050 target ‘will be missed’ – Edward Glass speaks to Property Week

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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.

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Lockton Property Issues Seminar – overview of the UK industrials and logistics market

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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.
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Forsters nominated at the YN Property Awards 2023

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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.

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An appetite for Electric Vehicle Charging Points

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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.

In this episode we were joined by:

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A tale of two halves… – Victoria Towers speaks to Logistics Manager

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“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.

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Supreme Court win for flat owners in Fearn v Tate

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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.”

For more information about our services, please visit our Residential Property and Property Litigation pages.

The later living sector needs a boost – Amy France speaks to Property Week

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Commercial Real Estate Partner and Head of Later Living, Amy France, has spoken to Property Week about the International Longevity Centre’s research into Later Living and how this can trigger progress by tackling issues that have held back growth and innovation in the sector.

With the number of over-65s set to reach 17 million by 2040, the research suggests that the number of older people’s housing units constructed per year will need to rise from 7,000 to 50,000.

A considerable boost in production is therefore necessary and France outlines several steps that can be taken to facilitate this. She specifically mentions sector-specific legislation, local authority targets and widespread planning exceptions as methods to increase clarity, accountability and viability of developments. She also references flexible tenure options, such as shared ownership agreements and stamp duty land tax removals.

France says: “There is no lack of good ideas for how we can get the sector motoring. We need the public and private sectors to work together to escalate delivery. This means putting some meaningful incentives in place for later-living development to thrive.”

This article was first published in Property Week on 19 January 2023 and is available to read in full here, behind their paywall.

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Historic Buildings

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Historic England’s General Counsel, Andrew Wiseman and Commercial Real Estate partner Victoria Towers join host Miri Stickland to unpick what a historic building is and how can they be developed and adapted for future generations, with a particular eye on the challenges around introducing energy efficiency measures into historic buildings.

In this episode we were joined by:

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Design codes: a thing of beauty, or else… – Victoria Du Croz writes for EG

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Partner and Head of Planning, Victoria Du Croz, has written for EG on Michael Gove’s recent statement to the Centre for Policy Studies that the government will do everything in its power to prevent the development of homes that are “not aesthetically of high quality”.

This includes, Du Croz says, a threat to call in planning applications that are “not beautiful”.

The creation of new design codes is one tool that the government plans to use to prevent “ugliness” being imposed on communities. But there are fundamental issues with design codes, not least that design by its very nature is subjective.

Local authority-wide v granular

The National Planning Policy Framework has outlined that the new design codes should be set at the local authority level. However, borough-wide design codes fail to recognise the different street level vernacular. Walk down three to four roads in most local areas and you will see a mix of architectural styles, from Georgian townhouses to listed 1960s council housing and everything in between.

Borough-wide design codes will either lack enough specific detail, rendering them meaningless, or be so generic that they will contribute to the creation of identikit housing – a criticism already volleyed at new build schemes. If local authorities try to make them more granular to better reflect specific areas, it will be an incredible burden and at considerable cost, at a time when local authority budgets are seeing below inflationary increases over the next two years, before falling further to just 1% real term increases from 2025.

Many London local authorities already consult design review panels – impartial experts including architects and urban designers alongside engineers, sustainability specialists and built heritage experts – who provide advice in relation to the design of new schemes and public realm.

As well as having panels that can be called on to provide guidance, there are standards and policies to ensure new homes are built to a suitable standard in terms of space, light and quality. At the application stage, design and access statements, submitted alongside applications, go into detail on the design response to the local area and reasons for the proposed material palette.

Given that all these existing checks and balances are in place and are factored into a local authority’s decision, why should central government step in to alter that decision? Especially when call-ins can slow down delivery, running counter to the need for new homes.

Community Perspective

Part of the impetus for implementing design codes is to bring communities onboard with new development. And while you can go through planning portals and see people commenting on the design of schemes, most nimbyism stems from concerns about additional strain on public services and infrastructure.

The frequent refrain at public consultations is about the difficulty in getting a doctor’s appointment, concern about securing a place at the local school or the state of the local roads – all things that the community infrastructure levy is supposed to be allocated towards.

The problem with CIL in its current guise is that it is not ringfenced to deliver these improvements in the same part of a town or city as the development is happening in, meaning that local residents cannot see new infrastructure being delivered alongside the new development to alleviate pressure on services in their local area. All they see is new homes and the challenges that come with this.

Reform CIL, force local authorities to spend the money and spend it in the local area where housing is being delivered and you could remove some of these objections. Ultimately, local communities do not rail against new developments just because of how they look, it runs much deeper than that.

Poundbury (pictured, above) – often held up as the exemplar on the use of design codes (the Duchy of Cornwall created a Poundbury Design and Community Code) – not only divides opinion, it also has wider cost implications. Replicating Poundbury fails to recognise the importance of having a range of housing products on the market to cater to different needs.

This does not mean bringing forward sub-standard accommodation, but it does mean recognising that sourcing specific materials and bringing forward a range of housing designs can affect both the price for the buyer and the viability of a scheme – meaning less affordable housing is delivered.

It would also be a mistake to think that Poundbury has “worked” because of the design of the homes, when in fact there is a lot to be learnt from the integration of shops, business and even factories alongside the new homes. It is this interaction between uses that makes for successful development, especially the consideration and incorporation of employment land.

Getting the priorities right

New home delivery continues to be a priority across the country, though the specific mechanism for deciding how many homes we deliver and where is currently a topic of debate. What everyone should be able to agree on is that the priority is delivering a range of high-quality homes.

This can be done while still respecting listed buildings, conservation areas and even local design palettes. What the UK planning system does not need is another layer of complexity adding cost and time to new home applications.

The government can surely use its power and resources to better effect than overturning decisions made by local planning authority committees – especially when beauty is in the eye of the beholder.

This article was originally published in EG (10 January 2023) and is also available to read here behind their paywall.

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Now that the sale of Channel 4 is off, what does that mean for its property strategy? – Owen Spencer speaks for React News

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Commercial Real Estate Senior Associate and member of our Film & TV Studios Group, Owen Spencer, has written for React News on the ongoing ownership saga surrounding Channel 4, and how staying in public ownership – in addition the departure from its role as “publisher-broadcaster” – may result in greater investment in regional production facilities.

In an unexpected change to the Media Bill Channel 4 will for the first time be able to make and own original content itself. “This is a key plank in the strategy to move the broadcaster away from its resilience on advertising revenue: by allowing it to monetise its content.”

With the specifics of these new freedoms yet to be finalised, Channel 4 will be keen to understand this new remit as any money spent on Channel 4 original content instead of on independently produced content “is a conflict of interest that will need to be managed.”

The broadcaster is also to double its regional headcount from 300 to 600 by 2025. While some of these jobs will be based at existing sites, reference to jobs being created ‘potentially elsewhere’ will catch the eye of the property agents.

Any plan to employ staff at new regional sites is in line with the ‘Levelling Up’ agenda, however the government may be missing a trick when it comes to growing the regional studios sector, since the broadcaster’s regional programme-making quota remains unchanged.

“If there are 300 extra jobs going North, does this mean a corresponding reduction in the numbers employed in its recently refitted London office?”

If this is the case, alongside a new statutory duty on the corporation’s board for financial sustainability, the potential sale of its London office – a £100m asset – will be an option. Such a shift would give Channel 4 the chance to become a “national champion” by helping catalyse the dispersal of skilled crews around the country.

This article was originally published by React News on 9 January 2023 and is available here in full (behind their paywall).

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Lights, Camera, Action! Film Studios Demand Creating Massive UK Opportunity – Owen Spencer writes for CoStar

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Commercial Real Estate Senior Associate and member of our Film & TV Studios Group, Owen Spencer, has written for CoStar about how both the government and real estate industry should be alive to a major opportunity which could drive the ‘Levelling Up’ agenda.

With the film and television industry set to require an extra 6 million square feet of space by 2026, Spencer writes how the continued development of sites around London and the M25 may not be possible due to greenbelt protection. As such, the industry could be forced to look to new locations across the country.

What this growth industry also needs is additional crew – all trained and highly skilled. Currently, studio workers tend to live and work around the South East – where the largest studios are located.

The 2023 revaluation list for commercial buildings increased business rates for film studios. Spencer questions if this may also favour regional studios with a lower cost base.

Spencer suggests there is scope for the government to drive its much-publicised ‘Levelling Up’ agenda off the back of the industry’s dispersal across the country by facilitating the training of studio professionals outside of the South East.

He concludes by writing: “While there are many challenges, there is an opportunity for the government to place the UK’s expertise in the studio sector centre stage in its levelling up agenda and give the regions a starring role in this growth industry.”

This article was first published on 4 January 2023 by CoStar and can be read here in full (behind their paywall).

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Top five things to know about Listed Buildings

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Having private outdoor space is now seen as a necessity by many more people living in an urban environment, where once it was only within reach of those city dwellers fortunate enough to afford spacious surroundings.

This has resulted in many cases to the much-publicised move to the countryside. It may well mean for many that they are now, for the first time, the custodians of a property of special architectural or historical interest: a listed building.

Owning a listed building is not for the faint hearted, but it can also be a source of much joy and fulfilment. Here are five crucial things to know for those thinking of purchasing, or already owning, a listed building:

1. Special attention needs to be paid when considering any repairs, maintenance or alterations.

It is an offence to extend, demolish or carry out internal or external alterations which would affect the character of the property without Listed Building Consent, whether or not the owner is aware of that being the case. Replacing windows, fitting a new kitchen and even painting the exterior of the property could all require Listed Building Consent.

2. The listing does not just include the building itself.

It includes any item or structure fixed to it and any item or structure within the curtilage, provided the latter has formed part of the land since before July 1948. This might include anything from an outbuilding to a boundary wall, a fountain or, in some cases, statues.

3. Failure to obtain Listed Building Consent has consequences.

If consent has not been correctly obtained for works which require it the person carrying out the works will face a possible maximum penalty of two years’ imprisonment and an unlimited fine.

4. A new owner may inherit works carried out without Listed Building Consent.

It is not uncommon for works to have been carried out by a previous owner which required Listed Building Consent, but for which no Consent was obtained, or that the works were not carried out in strict adherence to the approved plans or the conditions of the Consent.

In these situations, the current owner has not committed an offence by simply owning the property. However, the local planning authority may issue an enforcement notice requiring the building to be restored to its former state or for further works to be undertaken to alleviate the effect of the works carried out without Listed Building Consent. Should the owner of the building fail to comply with the enforcement notice they will then commit an offence, for which the maximum penalty is an unlimited fine that will take into account any financial gain.

5. Seek professional advice.

It is crucial when considering purchasing a listed building, and throughout one’s ownership of it, that professional advice is sought from solicitors, architects, agents, surveyors and builders who specialise in listed buildings to ensure that potentially costly mistakes are avoided and the heritage asset of which you are a custodian can continue to be appreciated in the future.

Victoria Salter-Galbraith is Counsel in our Landed Estates team and has a passion for listed and historic buildings. She has been instructed in relation to Grade I, Grade II* and Grade II listed buildings, some with secret rooms, follies and one with a carving dating from around the time of Christ.

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Property Week’s Year in Review – Victoria Towers talks ESG

A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

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.

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Forsters advise Left Bank Pictures on office relocation

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Forsters have advised Left Bank Pictures on their office relocation to the west end of London.

Left Bank Pictures is a film and television production company, their productions include The Crown, Wallander and The Damned United.

Glenn Dunn, Head of Forsters’ Corporate Occupiers group, advised Left Bank Pictures and was assisted by Owen Spencer.


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Shaking the foundations – Andrew Crabbie Maria Shahid and the Law Society Gazette

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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.

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Electric Dreams – Victoria Towers speaks to Property Week

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Co-Head of Industrials & Logistics, Victoria Towers, has spoken to Property Week about the aim of warehouse developers to get ahead of the game by installing charging facilities for electric HGVs and vans, as well as investing in solar power.

In light of the statistic that 16% of the UK’s domestic transport emissions come from HGVs, many warehouse developers are looking to increase the current percentage of electric vehicle (EV) charging provision, which currently stands at around 10% of parking spaces.

While the sale of new petrol and diesel cars will be banned by 2030, new petrol or diesel HGVs will not be banned until 2040. Nevertheless, eHGVs are gaining momentum.

Towers commented: “The new shed developments we’re seeing all have EV charging provision for cars and vans and the bigger players are starting to secure warehouses with provision for HGVs. We expect other businesses to follow suit, especially as restrictions and extra charges come into force in towns and city centres to deter the use of petrol and diesel vehicles.”

This article was first published in Property Week on 25 November 2022 and is available to read in full here, behind their paywall.

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Key Takeaways – Nicola Copsey attended the ‘Current Trends in Sheds and Industrial Developments’ webinar

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Commercial Real Estate Senior Associate, Nicola Copsey, attended the ‘Current Trends in Sheds and Industrial Developments’ webinar. The event described the most recent movements in the industry. Below are her key takeaways:


To help slow my heart rate after the shock defeat of Argentina at the hands (or rather feet) of Saudi Arabia and the damaging effect that has had on my fantasy football team, I dialled in to the webinar on Current Trends in Sheds and Industrial Developments, where the speakers were Lesley Males, Chris Hobday, Tom Malcolm Green and Mat Rogers from Avison Young. Little did I know that the shocks would continue! Here is a short summary of the webinar.

Demand

  1. The demand for Big Box space (over 100,000 sq ft) remains strong but has declined compared to last year. By the end of 2021 there had been take up of over 50 million sq ft of grade A Big Box space, and we will not surpass this in 2022
  2. The demand is driven by a critical lack of supply
  3. Take up of grade A Big Box space is highest in the East Midlands, followed by the West Midlands, given its strategic location (within a 4 hour drive of much of England)
  4. In London, levels of take up in 2022 are 50% of those seen in 2021 (partially due to a lack of supply)
  5. 3rd party logistic providers dominate take up, largely due to the increase in online shopping which escalated during the pandemic. Although retail sales are declining, especially over the past few months due to the cost of living crisis, the requirement for space by 3rd party logistic providers will continue as internet sales as a percentage of total retail sales are expected to hit 30 – 35% in the coming years

Type of Property

  1. Design and Build (compared to existing builds and speculative builds) has an increasing share of the take-up for 2 key reasons:
    • Occupiers are becoming more specific in their requirements for space, especially as the importance of ESG increases
    • Speculative builds are becoming more expensive because of the increasing costs of materials and labour. Some developers aren’t committing to lettings until buildings have PC’d due to uncertainty over costs

Lack of Supply

  1. There is only 24 million sq ft of grade A Big Box availability nationwide
  2. 52% of this supply is under construction
  3. The critical lack of supply is expected to continue into 2023 and is causing reduced occupier take up
  4. Key cause of the lack of supply is the slow planning system, even where a site is non-contentious
  5. Other causes are supply chain and material issues, labour shortages and the costs of getting materials to site

Economic uncertainty

  1. UK investment volumes declined sharply in qtr 2 and 3 2022 because of economic uncertainty. AY reported one purchaser pulling out of a deal post-exchange and forfeiting a deposit of between 12.5 and 25 million pounds
  2. However cash buyers who don’t need to rely on debt may be able to take advantage of a slow in demand
  3. Overseas buyers may be in a better position due to a weaker pound. The highest levels of overseas investment in 2021 came from North America, and this trend is set to continue in 2023 when overseas investment is expected to be higher than domestic investment
  4. Industrial rental growth is still outstripping CPI inflation and the growth is expected to continue
  5. The speakers were not too concerned by the ongoing economic uncertainty because there is a backlog of demand. So even if some investors hold off, there will be others to fill the void
  6. Occupiers wanting to expand are generally holding off at the moment, however other reasons for taking space (i.e. relocation and moving to buildings with increased efficiency in light of energy costs) are still pushing up the demand

Emerging sectors

  1. Vertical farming i.e. the practice of growing crops in vertically stacked layers- due to environmental pressures and population growth, this is expected to be an emerging sector. M&S and Tesco have trialled vertical farming, and there was investment of 800 million USD in 2021 which is expected to grow each year, especially in light of the war in Ukraine
  2. Open storage (e.g. not built upon) – there has been an increase in demand for higher quality open storage (with security and lighting) since the logistic issues caused by Brexit and the pandemic. Enquiry levels in 2022 are already double those since 2021
  3. Data centres- for those with access to the internet, 40% of our waking day is spent online. By 2025 the total amount of data consumed globally is forecast to treble compared to today. The installed base of storage capacity is forecast to increase, growing at a compound annual growth rate of 19.2% from 2020 to 2025. London is the data centre capital of Europe, but some boroughs are out of capacity for the next 8/9 years because of a shortage of power needed to run them. This may encourage an increase in the use of renewable energy sources

ESG

  1. The built environment is responsible for 38% of global emissions and 35% of its power consumption
  2. There is an increasing use of renewable energy, particularly PV panels. Not only does this have a positive environmental impact, but it can create a revenue stream when sold back to occupiers which also benefits occupiers because of the cheaper rates of energy
  3. By 2030, the minimum energy efficiency standard in relation to let non-domestic buildings is set to increase to a B rating. Currently, 90% of properties on the EPC register are below B so there is a huge amount of work to be done by 2030. To upgrade every property on the EPC register to a B rating would cost an estimated £30.5 billion (£334,000 per property)
  4. Part of the issue is that the industrial sector has much older stock compared to retail and office sectors. 40% of industrial stock is 40 years and older, with 8% being built pre-war
  5. On the positive side, the average EPC rating of industrial properties has increased by 3% per annum since 2016 when MEES was introduced

Summary

  1. Strong occupier demand continues but economic situation creating uncertainty
  2. Growing sectors could create opportunity in future years
  3. Retrofitting – out with the new and in with the old
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The London Prime Property Market: Helen Marsh features on Bellecapital podcast

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Residential Property Partner, Helen Marsh, joined Rudy Vandaele-Kennedy of Bellecapital and Claire Reynolds of Savills to discuss the London Prime Property Market.

Prime London, although not representative of the whole market, is a key segment. UK property market coverage remains negative but how do the recent increases impact different sectors and locations?

Helen, Claire and Rudy address the below discussion points:

  • Rates/inflation outlook
  • Prime property prices
  • The difference between a ‘turn-key’ property and those that require work
  • Legal/structuring considerations
  • Buyer profiles and current demand

You can listen to the full discussion here.

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Forsters advise Evolution Markets on relocation within the City

A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

Forsters have advised Evolution Markets Limited on the acquisition and legal aspects of the fit out of their 38 Threadneedle Street headquarters in the City.

Evolution Markets provides strategic financial and industry-leading transactional services to participants in global environmental and energy markets and is recognised as a leader in green markets.

Glenn Dunn, Head of Forsters’ Corporate Occupiers group, advised Evolution Markets and was assisted by Owen Spencer and Charlotte Mashhoudy.


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The Building Safety Act 2022 (“the Act”)

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The Act runs to more than 250 pages, covering a vast range of fire safety related matters in great detail. The Act’s provisions will become law in stages, with the changes to the Defective Premises Act and the Building Act (explained below) having taken effect first on 28 June 2022.

So, what does the Act change in practice?

1. Potential Claims

Extension of Limitation Periods

  • Claims under the Defective Premises Act:

The Defective Premises Act enables claims to be made for defective work relating to the construction of dwellings where the work renders the dwelling unfit for habitation. The limitation period (deadline) for claims brought under the Defective Premises Act is extended from 6 years to 15 years for new claims.

Where the claim relates to construction rather than the refurbishment of dwellings, there will be a retrospective 30-year limitation period.

  • Section 38 of the Building Act:

This section provides a statutory right of action for breach of a duty imposed by the building regulations, so far as it causes physical damage (either injury or property damage). The limitation period for breaches is extended to 15 years.

  • Claims against construction product manufacturers:

Where the use of defective construction products leads to the building being uninhabitable the limitation period will be 15 years. If the claim relates to a cladding product however, there will be a 30-year retrospective limitation period.

Other claims

  • There will be a new right for those with an interest in a dwelling to claim against construction product manufacturers where the product fails to comply with a relevant requirement, has been mis-sold or is inherently defective and the use of that product causes or contributes to the dwelling being unfit for habitation.
  • The High Court is able to make building liability orders against developers who have failed to meet a relevant liability under the Defective Premises Act 1972, or s38 of the Building Act 1984 as a result of a risk from fire spread or of structural collapse.
  • New build home warranties to provide cover for 15 years.

2. Remediation Costs

  • Part 5 of the Act deals with liability for costs of relevant defects, i.e. anything arising out of things done or used in connection with relevant works in the last 30 years or after that period to remedy a relevant defect which causes a risk to safety from fire or building collapse. A ‘waterfall’ approach is taken to liability – developers pay first, then manufacturers, then freeholders and then leaseholders last.

The provisions apply to buildings containing at least two dwellings that are at least 11m or 5 storeys high, but leaseholder owned buildings are excluded. It applies to any qualifying lease of a dwelling. i.e. one for more than 21 years granted before 14 February 2022 when at that date the dwelling was the leaseholder’s only or principal home and the leaseholder did not own more than 2 other dwellings.

No leaseholder will be liable to pay a service charge in relation to cladding remediation or relevant professional services. Additionally, service charges are excluded for costs of relevant measures relating to relevant defects (i.e. waking watches etc.) for which the landlord /developer associate is responsible, or where the landlord has a high group net worth, or where the lease is of lower value. Otherwise, charges will be limited by a £15,000 (London) or £10,000 (outside London) cap.

  • Additionally, Landlords are obliged to take all reasonable steps to find out if money for remediation works can be obtained by grant or from a third party, or else costs may be deemed to be unreasonable service charges.

3. New Regulatory Regime

  • Applies to ‘higher risk’ buildings, i.e. those of at least 18 metres or 7 storeys high. Provided the height threshold is met then draft regulations confirm that buildings in scope must contain at least two residential units (dwellings or other unit of temporary accommodation), or be hospitals and care homes during the constructions phase.
  • The Building Safety Regulator (“the Regulator”) will be the building control authority.
  • Building safety is to be considered at each stage of design and construction, with a ‘golden thread’ of information about each stage being maintained to ensure that building safety risks are managed throughout the building’s life.
  • An Accountable Person will be the duty holder and must register the building before it is occupied, apply for a Building Assessment Certificate, and proactively manage safety risks by way of a Safety Case Report which must be kept up to date and be submitted to the Regulator. Once registered the Regulator will manage the assessment process by ‘calling in’ higher-risk buildings. For new buildings, this is likely to be within six months of occupation, with existing buildings being called in in tranches from April 2024.
  • An amendment to the Regulatory Reform (Fire Safety) Order 2005 will require all Responsible Persons to record their fire risk assessments and only instruct competent persons to undertake these assessments. Closer collaboration with other Responsible Persons in the same building is also expected and in the case of residential higher risk buildings, Responsible Persons will need to co-operate with the Accountable Person.

The Building Safety Act - view our PDF


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Fusion energy: bottling a star

Skyscrapers rise into a cloudy night sky, their windows glowing with interior lights. Nearby buildings reflect on the glass surface, creating an urban atmosphere.

This episode of the More Than Law Podcast was recorded at the UK Atomic Energy Authority (UKAEA) headquarters with Dr Alexander Pearce, the modelling lead in the UKAEA Power Plant Technology Group, and senior associate Laura Haworth. Alex and Laura joined podcast host Robert Linden Laird Craig to talk about fusion energy; what it is and how it might one day be used to put power on the grid.

You can take a look at the MASCOT robots at UKAEA playing Jenga here.

For an insight into how humans thousands of years from now will be warned against uncovering nuclear waste, you can visit this Wikipedia page.

In this episode we were joined by:

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You can listen to more episodes of the More Than Law podcast here on our website, as well as subscribe on your favourite podcast services, including SoundCloud, iTunes/Apple Podcasts, Spotify, Stitcher, TuneIn and YouTube.

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Ten years on from the Montague Review: What’s next for the Build-to-Rent sector?

Modern apartment buildings stand in a row, featuring large windows and balconies. The setting includes landscaped paths, benches, and greenery under a partly cloudy sky.

Helen Streeton, Partner and Head of Build to Rent gives her key takeaways from the British Property Foundation and Get Living breakfast event, hosted by FTI Consulting on 19 October 2022.

It was fantastic to attend this engaging and informative seminar, with excellent hosting by Giles Barrie and a very informed and energised panel made up of:

  • Ian Fletcher, Director of Policy, British Property Federation
  • Rick de Blaby, Chief Executive, Get Living
  • Alex Greaves, Head of UK and European Living, M&G
  • Jacqui Daly, Director of Residential Research, Savills

This made for a very interesting review of the last ten years since the Montagu Review, and a look ahead for the BTR sector. Here are five key takeaways:

  • The asset class has grown from a relatively immature market, which was feeling its way and described as seeming “bonkers” to many in the real estate sector, to a best in class asset in a relatively mature market place.
  • Despite significant investment over the period, some supply side help from the government and significant units delivered, demand continues to outstrip supply which is putting upward pressure on rental levels.
  • Despite rising construction costs which impact the cost of delivery, and the ever- increasing list of requirements from funders and occupiers alike, in particular around ESG, there seems to be no slow down in the appetite for the product. This is based on strong rental growth which is expected to continue for some time given supply and demand conditions.
  • Nicola Sturgeon has announced a rent freeze in the rental market in Scotland until March 2023. It remains to be seen whether this will be a cap on rent rises or a freeze itself. Panellists felt it was unlikely that this strategy would be rolled out here in England, due to the further excess demand this creates in the market which cannot be met, but that a cap on rent rises might be something which would protect tenants and landlords alike.
  • Placemaking and infrastructure remains at the heart of the build to rent offering alongside high end amenity space.
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Government sends a clear signal to get on with cladding repairs – Andrew Parker writes for Property Week

Construction workers in high-visibility vests and helmets stand and communicate amidst metal scaffolding at a construction site, with sunlight streaming through an open structure.

Construction Partner, Andrew Parker, has spoken to Property Week on the newly redeclared urgency from the government to act on building safety. The new Housing Secretary, Simon Clarke, declaring that it was his “duty” to fix an “ineffective” building safety regime.

While there have been delays in the process, the view is commonly held that the government’s making use of the Building Safety Act (which gained royal assent in April 2022) is a step in the right direction.

Parker commented: “The action being taken is a positive step from the government to make good on its promise to ‘pursue firms that have failed to do the right thing’ as [former housing secretary] Michael Gove put it.

“It shows that the provisions of the Building Safety Act have teeth, such as section 123, which introduces the remediation orders that require landlords to remedy specified defeats within a specified period.

“This government action suggests that the net is closing in on those responsible for fire safety defects… and who are unreasonably delaying carrying out necessary remedial works.”

This article was first published in Property Week on 19 October 2022 and is available to read in full here, behind their paywall.

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Last Mile Logistics Conference 2022

A vast, empty warehouse features polished floors and high ceilings. Bright overhead lights illuminate the spacious interior, which includes stacked pallets and shelving on the right side.

On Tuesday 11 October 2022, Commercial Real Estate Senior Associate Paul Grayson, along with Construction Senior Associate, Daniel Burr, attended the Last Mile Logistics Conference at the Postal Museum in London.

The conference consisted of a number of interesting panel discussions involving key members of the logistics sector, as well as a free trip on the Mail Rail (see photos below)!

In this blog post, he shares his key takeaways from the event.

Current Market Conditions

  • The developer’s view: Inflation has led to a sharp increase in the cost of materials. Additionally, it is very difficult for developers to forecast pricing in the current market. Developers can only price developments based on today’s information. The current market volatility is requiring developers to make more assumptions than usual when forecasting how much a site will be worth once a development has reached practical completion.
  • The contractor’s view: The rise in the cost of materials has led to questions as to whether contractors can still deliver fixed price building contracts. The view is that this may still be possible, however it will depend on the type of project and the material selection. The earlier that contractors engage with their customers, the higher the chance that a fixed price building contract can still be delivered. If a fixed price building contract can be delivered, the customer may need to accept a mark-up on the fixed price to reflect current market conditions.
  • The investor’s view: Pricing is cooling due to the rise in interest rates and inflation. Investors are currently querying whether we have reached the bottom of the market, or if prices will decrease further. This has created a large amount of hesitancy in the market. If investors commit to sites in the current market, it is very likely that the investment decision will be due to the investor believing in the long-term vision for the site (as opposed to making a commitment solely due to pricing).

Delivering ESG

  • Carbon sequestration: Science is likely to change how buildings are constructed over the next twenty years. There needs to be a shift towards materials which use less carbon, as well as an increase in funding for businesses who are studying how to remove carbon from the atmosphere and holding the same within materials (a process known as carbon sequestration).
  • Retrofitting: In comparison to other sectors, the logistics sector is unlikely to have a large problem with retrofitting existing stock in order to meet EPC standards. There are a number of ways in which the energy efficiency of a warehouse can be improved, such as the use of LED lighting, increased thermal insulation and the use of solar panels. Solar panels can give rise to fire risks (due to the temperatures that the panels can reach), however the general consensus is that this risk can be alleviated by raising the panels above the roof of the warehouse in order to allow an air flow below the panels.
  • Ensuring that logistics and residential schemes can co-exist: As logistics and residential schemes move closer together (due to the increase in last mile logistics), efforts need to be made to ensure that these schemes can co-exist. Electric vehicles are required to safeguard air quality in urban areas. From a planning perspective, a masterplan approach can help industrial schemes integrate into local areas. Site layouts and frontages which include green space can make logistics schemes more attractive to local communities.

Diversity and Skills

  • Demystifying the logistics sector: The logistics sector needs to be demystified in order to make the sector more attractive to a diverse talent pool. Long hours are commonly associated with transportation jobs within the sector. However, due to the rise in last mile logistics, a number of driving roles can now support daytime hours and those members of society who need to maintain both a family and professional life.
  • Social values: The next generation of employees will overlook a higher salary for a firm which has social values that they share. The logistics sector needs to be better marketed to young people leaving school in order to attract talent from the youngest possible age.
  • Automation: It should be conveyed to the future workforce that automation will not remove all jobs from the logistics sector. Automation will change the nature of the jobs required and will increase the need for engineers and technicians.

Multi-storey Sheds

  • Multi-storey vs mezzanine: Warehouses may not need to be fully multi-storey in order to service interested occupiers. A large warehouse with a functioning mezzanine may perform just as well as a multi-storey shed which is serviced by ramps.
  • Occupier demand: Whilst it is interesting to discuss the architectural challenges/viability of multi-storey sheds, the key question is whether there is occupier demand. Before committing to a multi-storey space, occupiers will want to ensure that the space is resilient and can respond to a goods lift breaking down on the third floor or a HGV breaking down on a ramp between floors. Ultimately, occupiers will only have confidence in multi-storey sheds once such schemes are more common in the UK market.
  • Functioning spaces: From a developer’s perspective, intensification of space is generally attractive (more lettable floor space results in a higher possible rent). That said, intensification cannot come at the cost of functionality. Large logistics operators will always need large yard areas in order to accommodate HGVs.

Last Mile Logistics Image 1

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Bringing the house down: Robert Barham quoted in the Law Gazette

A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

Residential Property Partner, Robert Barham, has been quoted in the Law Gazette feature entitled ‘Bringing the house down’.

The feature explores systemic problems for residential conveyancers stating that the sustained property boom which arose from the SDLT ‘holiday’, for various reasons, has not been a rewarding time.

Robert comments “The general trend of conveyancers requiring every small point to be answered continues with ever more detail being required,” he says. “Sometimes this applies even where the answers are not helpful or even particularly relevant and would have no impact on a buyer’s decision to proceed. Increasingly solicitors are not willing to “take a view” nor to permit their clients to, even if they want to, particularly where there is a mortgage.”

One reason for this, Barham contends, is that “a lot of conveyancing is now done by paralegals with solicitors in a supervisory role. It is more difficult for paralegals to decide what is important and what is not, hence the concentration on small details referred to above which may not be that important either legally or to the client”.

He goes on to comment “Conveyancers have come to recognise that conveyancing is not easy and simply cannot be done at knock-down prices, particularly leasehold property. Therefore, charges have risen over the last few years and are now more realistic”.

This article was first published in the Law Gazette and can be read here in full.

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Powering the UK: Renewables and rural affairs – Polly Reeve writes for EG

A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

Rural landowners would not admit it publicly, but many of them lie awake at night thinking about rows of wind turbines or fields of solar panels.

Renewables appear lucrative and easy compared to the hard slog that is agriculture. They are the Massey Ferguson combine harvester to agriculture’s hand scythe.

First and foremost, the returns on renewables are enormous. Annual rent for a solar farm is around £1,000 per acre, three or four times what the most efficient farmer might generate from the best land. Secondly, they require virtually no looking after, since typically the energy company manages them day to day. Thirdly, everyone involved can hold their head high in the knowledge that they are doing their bit to protect the planet’s future.

Alas, the reality is not always as exciting as the idea. Renewables have their drawbacks, as well as advantages.

Short-term cost

We hear that around 10% of proposals lead to an operational solar farm. The high failure rate is partly due to speculative developers who approach multiple landowners without really considering whether their land is actually suitable.

Partly it is also a reflection of the complicated regulatory landscape. Securing a grid connection and planning consent is hard. Even for the successful minority, from proposal to working wind farm takes years, not months.

Successful or not, landowners need to invest considerable resources – in agents, lawyers, consultants, their own time – in a process that leads to disappointment more often than not. The developer will cover some of these costs, but rarely all of them.

The big money does not come until the turbines are turning or the sun is shining on the panels. In the preparatory stages, where a developer is seeking planning consent and a grid connection, landowners will receive a smaller option fee – perhaps £5,000 for 100 acres – in exchange for quite severe restrictions on the land. The landowner generally cannot negotiate with other energy companies and the chosen developer has wide discretion to enter onto the land to carry out tests and preparatory works and keep equipment on the land. If the land is mortgaged, lender consent is needed and, if the land is let, the farm tenant has to be on board.

There is always an element of trust and a successful project will rely on a good working relationship between a landowner, farm tenants and a developer.

Long-term cost

Where a renewables project actually happens, the term is typically somewhere between 25 and 60 years. Once concrete panels and turbines are in the ground, agreements are legally and logistically hard to back out of. Landowners should know that they are committing their land in the long term and there is an opportunity cost.

While your field is full of solar panels you cannot do much else with it. If you negotiate hard, you might be able to graze a few sheep, but you certainly cannot plant any serious crops because harvesting becomes impossible. You can forget about shooting and may be limiting yourself in terms of environmental land management schemes. The energy company will build roads, fences, chop down trees, erect substations and excavate soil. Some of these rights will extend to your land outside the solar farm too.

While it may seem attractive now, relinquishing land that has always been used for producing food and, in tandem, delivering environmental benefit, could carry with it risk. This kind of land use change currently carries significant economic, social and political support, but landowners are, to some degree, reliant on this continuing to be the case.

The options and leases through which renewables projects are structured are complicated, sophisticated and commercial agreements. Legally, they have much more in common with industrial, urban developments than most rural agreements. Landowners need someone on their side who understands what the developers actually need and what they will concede.

Net zero, biodiversity net gain and food security might all fall in the green category, but they are often mutually exclusive. Policy ebbs and flows with successive governments and we live in what feel like peculiarly unstable political times. Yet landowners are being asked to make changes that will last generations.

Governments, left or right, need to be consistent and support renewables schemes in the long run. If not, they risk messy U-turns as landowners put their property to other uses.

Changing land use takes time (years) and it needs proper consideration for habitats, river and watercourse management and consequent flooding and pollution risks. Land returning to food production also requires careful regeneration. Correct removal of energy generation equipment and infrastructure is critical to mitigate environmental damage. Political U-turns could do great damage not only to the prosperity of landowners, but also to the British countryside that is one of the nation’s great assets.

Decommissioning cost

A 2020 government study suggests that it will cost £60,000 to decommission a single wind turbine at the end of its life. Few renewables projects have reached that stage yet, but everyone agrees that decommissioning will be expensive. Lawyers are alive to this and draft tight covenants in the agreements to ensure that the energy companies tidy up after themselves. The trouble is that energy companies create special purpose vehicles – without any other assets – to enter into the agreements and manage the site. Plus, they like to assign the benefits to other group companies or third parties. Decommissioning bonds – where the energy company pays into a ring-fenced fund – and insurance are other means by which landowners seek to protect themselves against the future liability of a field full of rusty solar panels securely fixed to the ground.

You cannot be certain of enforcing the energy company’s obligations so far in the future. Decommissioning is perhaps the most important point to negotiate.

Tax cost

If you stop growing barley and start growing wind turbines, income will increase substantially, which is a good thing. But inevitably there are tax implications.

Many landowners carefully arrange their affairs to maximise agricultural property relief (APR) and business property relief (BPR), thereby reducing their inheritance tax liability. Replacing sunflowers with solar panels will clearly make that field ineligible for APR. It can upset the overall balance of an estate or farm. Income needs to be 50% trading, as opposed to investment, to qualify for BPR, as set out in Commissioners for HM Revenue and Customs v Brander (as executor of the will of the late fourth Earl of Balfour) [2010] UKUT 300 (TCC).

Although it has not been tested in court, taking rent from renewables will likely count as investment rather than trading income, and harm your Balfour balance. If landowners manage the renewables themselves – which is virtually unheard of – then it might count as trading income. And the 50% figure is likely to increase to 80% soon.

Millions of pounds can rest on these reliefs, so it is vital that these are factored into decision making. Sometimes it also makes sense for the landowner to set up new companies, trusts or partnerships to manage the income or own the land.

Localised cost

Nothing can unite a community like opposition to wind turbines or solar panels. Neighbours will do their best to create a hostile environment.

The physical environment can suffer too. The wider national and global need for renewable energy is clear, but the localised damage it can cause is often overlooked. Sinking tons of steel and concrete into the ground is clearly harmful and, as mentioned above, leaves future liabilities.

Land around turbines and solar panels is hard to farm and cultivate, so it often degenerates to scrub and ragwort, unless properly managed. What constitutes sustainable land use is a contentious subject. Even growing and generating energy from biomass can upset the local eco-systems since the digestate produced and used as fertiliser is still too ammonia-rich and leads to a host of environmental issues.

Great care must be given to land management once the installation is in and the developer has moved on to the next project. This is where the landowner can play a key role and, we believe, there is great scope for renewables and biodiversity to make friends. As the structure of natural capital agreements, environmental grants and biodiversity net gain requirements becomes clearer and with continued support for scientific research and development, more can be done to mitigate the environmental impact of renewable energy generation, while enabling landowners to continue to own and manage their land sustainably.

Tread carefully

The point of this article is not to deny the transformative and positive opportunities renewables present for many landowners and for government net zero targets. Nor is it to question the global importance of generating power in an environmentally sensitive way. Rather, it is to highlight the practical, local considerations that landowners and governments must consider when pressing for the delivery of green energy in rural areas. It should be done with eyes wide open, a full appreciation of the pros and cons and government commitment to renewable energy in the long run.

This article was originally published in EG (5 July 2022) and is also available to read here behind their paywall.

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Construction Focus: A solution to a problem or a problem in itself? – Polly Streather writes for the PLJ

Construction workers in high-visibility vests and helmets stand and communicate amidst metal scaffolding at a construction site, with sunlight streaming through an open structure.

Construction Associate, Polly Streather, recently wrote for the Property Law Journal on the use and benefit of pre-contract tools, such as letters of intent, in trying to alleviate the strain of increasing construction prices and highlighting the risks that should be considered by employers before entering into such arrangements.

Polly writes: “Once the letter of intent is in place, there is sometimes a temptation for contractors to work outside of the authorised scope or beyond the expiry date so as to keep the project on target. However, this raises problems if the final contract is never entered into and a dispute arises as to payment or such other matter.

“Although it is always advisable to enter into a building contract rather than commence work under a letter of intent or other pre-contract tool, there may be times where this is not possible for the reasons highlighted above. It is important to be aware of the risks of entering into letters of intent and undertaking (and other forms of pre-contract tool), and to weigh these against the benefits. While such letters can often seem like a straightforward solution to the pressures arising from increasing construction prices and long lead times, they may cause unintended issues further down the line if due consideration is not given to their terms.”

The full article can be read here.

This article was first published in Property Law Journal 401 (October 2022) and is also available on lawjournals.co.uk.

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UK retail weighs up government’s economic gamble – Andrew Denye speaks to Drapers

A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

Head of Retail, Andrew Denye, recently spoke to Drapers about the implications of the UK government’s mini-budget for the fashion retail industry.

While certain elements of the tax-cutting mini-budget have since been reeled back or cancelled, certain elements key to the retail sector remain, such as the scrapped plan to increase corporation tax from 19% to 25%.

Opinion is divided within the fashion industry as to whether such measures are enough to stimulate the economy, with some citing the need for a proper stimulus; free trade with Europe and a windfall tax on energy companies.

Energy prices indeed seem to be the key concern of fashion retailers, with some stating they are expecting up to a four-fold increase in energy prices and others, Denye explains, postponing the opening of new shops because of these fears.

Andrew said: “This is unprecedented, at least not since the 1970s – retailers are pulling out of new leasing deals because they don’t think they can afford the energy bills, not because of rents or business rates.

We’re likely to see shops turn down the temperature, dimmer the light and even reduce opening hours.

The energy cap announcement will have offered some in the retail and hospitality sector a bit of breathing space to trade through the Christmas period. While it does provide some respite, it doesn’t deliver long-term security or enable businesses to plan beyond that timeframe.”

This article was first published on 27 September 2022 in Drapers and is available to read here in full.

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Forsters advises a Wrenbridge / Bridges joint venture on over 700,000 sq ft of net-zero carbon logistics space across the South East

A vast, empty warehouse features polished floors and high ceilings. Bright overhead lights illuminate the spacious interior, which includes stacked pallets and shelving on the right side.

Forsters has advised a joint venture between Wrenbridge and Bridges Fund Management on the acquisition of sites in Aylesford, Basingstoke, and Stevenage and in securing planning permission for up to 700,000 sq ft of new, net-zero carbon logistics space across the sites in the South East of England.

Commercial Real Estate Partner Victoria Towers and Senior Associates Paul Grayson, Ed Glass, and Charlie Croft advised on the deals, with GLP UK also supporting the developments in Basingstoke and Stevenage through forward funding.

At Aylesford the site has planning permission for 300,000 sq ft across six units and will include substantial solar panel and air source heat pump installations expected to avert over 500 tonnes of CO2 emissions, while reducing tenant energy bills by at least £200,000 per year. Building work will begin on site at the end of 2022, with the property in line to become the most sustainable scheme in Kent. Ben Coles, Chief Executive of Wrenbridge, said the scheme’s “proximity to motorway connections is unrivalled.”

The Basingstoke and Stevenage sites both have planning permission for over 205,000 sq ft, with a single 209,461 sq ft facility expected to be completed at Basingstoke in 2023, while at Stevenage three facilities ranging from 25,736 sq ft to 106,531 sq ft (the largest of which has been pre-let to FTSE 100 company Bunzl) also expected to complete in 2023. The units are to be built to net-zero carbon and Exemplar ESG specifications. Wrenbridge Chief Executive Ben Coles said: “We are excited about developing these schemes and working with GLP to deliver a best-in-class product backed by a pre-let to Bunzl in Stevenage.”

All the sites will be targeting BREEAM Excellent and EPC A+ ratings, and Bridges Fund Management Partner Henry Pepper said: “At Bridges, we are committed to delivering some of the most sustainable industrial schemes in the UK – not only because it reduces emissions and supports the transition to net zero, but also because it makes the buildings more attractive to potential occupiers.”

Victoria Towers commented: “We are excited to be working with Wrenbridge and Bridges on these projects and to be leading from the front when it comes to the green agenda. Not only is the connectivity of the Aylesford site exceptional, but the combined schemes will be best in class in terms of sustainability.”

The Occupier View: On leaving Mayfair for Marylebone – Glenn Dunn speaks to EG

Two blurred figures walk in an office, featuring a circular staircase and modern furniture. Glass walls partition a conference room, enhancing the open, contemporary workspace design.

There was a moment – a fleeting, blink-and-you-missed-it moment – in which Forsters could have become a fully remote business. No offices. Zoom and Teams screens only.

This article was originally published by EG on 10 August 2022 and is also available here (behind their paywall).

Head of Corporate Occupiers, Glenn Dunn, says he breathed “a huge sigh of relief” when partners showed “next to no support” for the idea. After all, it would have ended his own project to find Forsters a new headquarters in no uncertain terms. But the fact that the option was discussed, even briefly, shows just how open Corporate Occupiers are becoming to change as they map out their post-pandemic real estate needs.

In June, Forsters confirmed a move to Lazari Investments’ 22 Baker Street, W1. It’s not as radical as going remote, but the relocation still has its surprises. It puts the 500-person firm in Marylebone, leaving its Mayfair home of more than two decades, and it was the only building from a lengthy list of viewings that was not a multi-let. For Dunn, the letting is the culmination of lessons learnt throughout the pandemic.

Early bird

Forsters moved to its current headquarters at 31 Hill Street, W1, in 2005. In the years since, a growing headcount has pushed the firm to take on other offices, at 22 Hill Street, Berkeley Square House and Canary Wharf’s South Quay Plaza. Those have more than doubled its space to 50,000 sq ft, from 23,000 sq ft.

Dunn started looking at options for a move back in 2019. “Every well-advised business will do a stay-versus-go analysis, look at its existing buildings and ask whether, with capital investment, staying put is the right thing – like Slaughter and May, for example,” Dunn says. “But we knew that these buildings were operationally becoming more of a challenge for us, and we were across four sites. We see ourselves as one family and we wanted to be back under one roof, as we were when we moved into this building.”

The lease break at 31 Hill Street wasn’t due until the first quarter of 2023, but Dunn knew that would come around sooner than he and colleagues thought. “The one thing that I learned from my years of acting for occupiers is that the early bird catches the worm,” he says. “You don’t want to leave your search too late because it closes down your options.”

No sooner had the board discussed potential locations and picked CBRE as its adviser, Covid-19 hit. The firm weighed a pause in the search, perhaps with a short-term lease renewal at Hill Street. But Dunn was adamant that the hunt should continue.

“It was clear when you looked at the development pipeline that grade-A stock was going to become a challenge,” he says. “The number of developments starts during Covid really tailed off. Having appointed CBRE to advise us, their predictions – which turned out to be pretty accurate in terms of the huge uptake that was going to come in 2021 – were that there was not going to be the stock available to meet demand.”

Location was a big factor. Forsters’ description of itself on its website is a “Mayfair law firm”. But as the team started to view possible new homes, Dunn knew it had to be open to looking elsewhere and hunted from Paddington in the west to Farringdon in the east.

“We had been considering how much of the brand was tied to Mayfair and how much of it was tied to a differential of not being in the City,” he says. “The advice from CBRE was if you’re going to do an HQ relocation, you have to do a pan-London search because you might just see something that was off of your radar. Moves like Kingsley Napley going to Shoreditch are examples of people thinking outside the box and getting the right building in locations that are not necessarily known for law firms.”

Ahead of the curve

The firm ended up looking at between 12 and 15 buildings, Dunn said – none of which were in Mayfair. All were multi-lets, until an off-market opportunity to take 22 Baker Street appeared. The chance for the firm to have its “own front door and control of reception” was immediately appealing, he adds, and an existing relationship with Lazari helped to swing the deal.

The deal isn’t a downsize – Forsters’ 15-year lease is for 50,000 sq ft, equalling its four existing offices. But that wasn’t always taken for granted – the pandemic shifted how Forsters viewed its requirements in two distinct ways, Dunn says.

“The first one was, how much space did we need?” he says. “That was a difficult question to answer. You’re looking into the crystal ball and you’re trying to work out what growth there might be. Every business has to go through that exercise. You don’t want to end up with extra space that you don’t need on day one.

“The other part of the equation has been the layout of the physical space. So whereas a lot of law firms still are cellular or hybrid, we largely went to open plan back in 2013. We were probably ahead of the curve there because we saw the benefits of people learning by hearing others around them and trying to break down that traditional, cellular, siloed environment. We’ve always been quite economic in terms of how we view space.”

22 Baker Street will undergo a refurbishment once Japanese technology group Fujitsu moves to Lazari’s upcoming Lantern scheme in Euston. Forsters will then move in late next year.

“What we really wanted was something that demonstrated the character of the firm,” Dunn says. “We didn’t want a glass box, something that was ultra-modern. We wanted something with a period feel. But at the same time, we wanted something that has more modern amenities. And that has been a big driver in terms of the accommodation that that we will get at 22 Baker Street.”

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SDLT cuts – what do they mean for me?

A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

Following the Mini Budget delivered on 23 September 2022, residential Stamp Duty Land Tax rates have changed (again). Unlike Sunak’s “SDLT holiday of 2020-2021”, Kwarteng has confirmed that these cuts are permanent – a relief for the real estate sector at the prospect of no looming SDLT deadlines.

Unless you are a first time buyer, the cuts are far from ground-breaking but are no doubt intended to be the Mini Budget’s mini boost for the residential property market and will be gratefully received by many.

FAQs

Do the changes apply to me?

Yes, if you are:

  • purchasing property in England or Northern Ireland;
  • have not yet exchanged contracts; or
  • have exchanged contracts but have not yet completed your purchase

When are the SDLT changes effective?

Immediately (i.e. from 23 September 2022)

Is there a cut-off date by which I need to exchange/complete?

No, the government has confirmed these cuts are permanent.

How much will I save?

This will depend on your purchase price and the rate of SDLT which applies. For a freehold property on a purchase price of £500,000:

  • a first time buyer would save £6,250
  • a UK buyer replacing their main residence would save £2,500
  • a UK buyer purchasing an additional property would save £2,500
  • a non-UK resident buyer purchasing their first property worldwide would save £2,500
  • a non-UK resident buyer purchasing an additional property would save £2,500

What if I have already completed?

Unfortunately the cuts will not apply if you completed on your property purchase on or before 22 September 2022.

For further information on SDLT rates please contact the Residential Property team.


Buying and selling luxury residential property in a competitive market

The purchase or sale of a high value home requires expert legal advice to manage the complexities involved. Our lawyers are dedicated to sharing their knowledge to enable you to navigate the legal practicalities of buying and selling high value assets. We will support you through every stage of the process, and with the largest dedicated Residential Property team in London, we have the strength to do this. Visit our Hub to learn more.

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Georgina Haddon
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Georgina Haddon

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The Register of Overseas Entities: how does it apply to trusts?

A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

The new register of overseas entities (“ROE”) maintained by Companies House came into effect on 1 August 2022. The aim of the ROE is to record the beneficial ownership through “overseas entities” of land in the UK. Non-compliance with registration obligations will in practice make it impossible for overseas entities to buy, sell, let or charge UK land and also carries criminal sanctions. It is therefore crucial that overseas entities, including corporate trustees, are aware of their obligations in relation to the ROE.


Download this briefing in PDF format

Download in PDF format


Our briefing answers the following key questions:

  • What is the Register of Overseas Entities?
  • Which kinds of entities are required to register on the ROE?
  • What is a “Qualifying Estate?”
  • When must an Overseas Entity register on the ROE?
  • What information does the Overseas Entity have to provide to the ROE when registering?
  • What information on the ROE is publicly accessible?
  • Who are “Registrable Beneficial Owners”?
  • How does the new requirement to register on the ROE apply to trusts and their related entities?

Read our full briefing here

Should I buy a home on my own before we get married? Helen Marsh answers the Financial Times reader’s question

A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

Residential Property Partner, Helen Marsh, answers a reader’s question in the Financial Times’ article entitled “Should I buy a home on my own before we get married?”

Helen identifies two issues in her response, one relating to tax and the other to joint ownership, and discusses the benefits of entering into a declaration of trust which clarifies respective shares in a property. She also addresses issues around stamp duty and other tax implications if gifted money is shared between a couple in order to purchase a property in which one of the individuals is not a first time buyer.

The full answer can be read here, behind the paywall.

For further guidance on this topic, please contact our Residential Property team.

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Landlords on alert as Cineworld collapse raises spectre of widespread closures – Andrew Denye speaks to CoStar

Escalators transport people in a busy shopping mall. Shoppers, some blurred from motion, navigate levels surrounded by sleek glass and modern architecture, creating a bustling, dynamic atmosphere.

Head of Retail, Andrew Denye, has offered his comments to CoStar News on how Britain’s Cineworld, the world’s second-biggest cinema chain, has filed for bankruptcy protection in the US in a move that has left landlords across the country staring down the barrel of widespread anchor-unit closures.

The group operates 751 movie theatres including more than 500 in the US, as well as more than 100 in the United Kingdom and Ireland. In Britain it also owns the Picturehouse chain.

Cineworld said in a statement that it had filed for Chapter 11 protection, a court-supervised restructuring in the US that gives companies breathing space to negotiate with creditors on debt.

It confirmed it will try to renegotiate leases, while existing management will stay in post.

It added that it aims to emerge from bankruptcy proceedings in the first quarter of 2023 and had secured $1.94 billion in financing from existing lenders.

Landlords across the country will clearly be concerned that a key tenant in major developments is about to exit, or seek to sublet space, with the recent disappearance of department stores such as Debenhams from the high street and malls a worrying precedent in terms of scale.

Andrew says Cineworld appeared to be facing a perfect storm of the dramatic impact of COVID-19 on cinema attendance, followed by the cost of living crisis and finally the problem that not enough “top-notch” films are being produced.

“Then they have a significant amount of debt. And it is almost a classic case of ‘big is not always best’ as they have a huge number of big buildings at a time when for numerous reasons cinemagoers don’t really need all that space. There is talk of a sizeable chunk of money there to help them, but a problem is the market has moved to the high end with Everyman, or lower end, and Cineworld has tracked through the middle to a degree.”

In terms of what lease negotiations with landlords will look like, Denye said Cinewold may choose the company voluntary arrangement route, a method of restructuring real estate in the UK that has been much less used in the past 12 months as market conditions have improved for retailers and leisure operators.

CVAs are legally binding agreements with a company’s creditors to allow a proportion of its debts to be paid back over time and need 75% of the creditors, by value, to support the proposal. For a review of why they have been controversial in the UK and why they have been few and far between recently click here.

What Ever Happened to the Landlord Fight Against CVAs?

“They may go the CVA route which immediately solves the negotiation point as it is what it is. If they try to renegotiate leases, because their spaces are so large they are effectively an anchor so ultimately landlords will do what they can to help them keep the doors open; the alternative is going to be very painful.”

That is because fitting out a cinema is extremely expensive and the auditorium for instance is more difficult to repurpose than for instance department store space.

“It is going to require a sizeable cheque,” Denye agrees. “We will see closures, that is clear, but we also might see them try to carve out underlet portions of space.”

Denye said there is a real prospect of more CVAs again this year from operators.

“I think, that 2021 we saw an improvement in conditions for retail and leisure as people got out and about. But I think the energy crisis will have a dramatic impact and even this week I have seen occupiers put things on pause citing the cost of energy.”

In terms of Cineworld’s likely cause of action Denye says it is too early to tell. “All we know is what they have done in the States, but landlords up and down the country will be expecting a phone call or more likely will be making a phone call. It is a genuine asset management challenge.”
Recently Cineworld was on the losing end of a critical legal battle over COVID-19 rent arrears which will also be a backdrop to negotiations.

London Trocadero and the Bank of New York Mellon were backed at the Court of Appeal in linked landlord test cases against Picturehouse Cinemas and Cine-UK in a decision with major implications for commercial landlords and tenant negotiations in England and Wales.
A three-judge panel dismissed the two claims from the tenants ultimately including Cine-UK and Cineworld. The Trocadero case against Picturehouse Group related to £2.9 million of specific rent arrears owed, but many other landlords and tenants have been awaiting the decision. For a review of three critical cases focused on the matter during the pandemic click here.

This article was originally published on 8 September 2022 on the CoStar website and can be found here (behind their paywall).

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Caring for our aging population

Modern apartment buildings stand in a row, featuring large windows and balconies. The setting includes landscaped paths, benches, and greenery under a partly cloudy sky.

Marking the start of World Alzheimer’s Month, an annual event raising awareness and challenging stigma surrounding Alzheimer’s and dementia, podcast hosts Miri Stickland and Robert Linden Laird Craig are joined by partner Amy France and counsel Mike Armstrong to talk about the advantages of forward planning for later life, the importance of having difficult conversations at the right time and the evolution of later living homes in the UK.

In this episode we were joined by:

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Powering the UK: Balancing National and Local Agendas – Victoria Du Croz writes for EG

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In the second article in a three-part series on energy supply, Head of Planning, Victoria Du Croz, discusses national targets, local planning and the importance of biodiversity net gain.

The government’s plan to increase the UK’s energy self-sufficiency is urgently needed, but it doesn’t account for the inherent conflict between national policymaking and local political pressures.

At the local level there is already significant competing demand for land, whether for the delivery of much-needed housing, logistics, social infrastructure or national infrastructure. Now added into the mix is the top-down strategy to move away from a reliance on fossil fuels, increase clean energy sources and decarbonise the economy, resulting in a push for renewable energy projects.

April’s Energy Security Strategy adds urgency to existing energy policy. It was preceded in December 2020 by the government’s energy white paper, Powering our Net Zero Future, which built in turn on existing policy commitments set out in the Ten-Point Plan for a Green Industrial Revolution and the National Infrastructure Strategy. Those documents set out the government’s vision of how the UK would make the transition to net zero by 2050.

While the cost-of-living crisis and increased scrutiny on gas supplies from Russia may have shifted the dial slightly in terms of local sentiment towards energy projects, there is a long way to go to deliver the wind farms, solar farms and supporting infrastructure to make the UK self-sufficient and net zero.

The government’s decision in early June to permit new drilling in Surrey to establish the size of a natural gas field highlights the tensions between local and national sentiment, with Surrey County Council having blocked the project twice in recent years. It also highlights the increasing conflict at national level as the government grapples with decarbonisation at the same time as trying to alleviate cost pressures for consumers amid Russia’s war in Ukraine.

National need and local lobbying

Local decision-making and consultation are a vital part of the planning system. However, there is an inherent tension when the government insists on developments securing local support, while also pushing the delivery of key infrastructure that benefits the wider population.

In response to significant local opposition to onshore wind farms back in the 2010s, the government issued a written ministerial statement in 2015 preventing local planning authorities from granting planning permission for onshore wind farms unless the site was allocated as such in the development plan and local support could be demonstrated.

At the same time, the government also amended the Planning Act 2008 so that applications for onshore wind farms are determined under the Town and Country Planning Act 1990 rather than under the Nationally Significant Infrastructure Planning regime, owing to communities complaining that they felt excluded under the latter regime.

While this effectively killed off the delivery of onshore wind farms in some areas, in other parts of the country this tension has played out by local opposition being overruled and planning permission ultimately being granted. In the Scottish Highlands – albeit under a different consenting regime – local decisions to refuse wind farm applications have been overturned 40 times in the past five years, while secretary of state for business, energy and industrial strategy Kwasi Kwarteng has gone against recommendations from the Planning Inspectorate by granting planning permission for the multi-billion-pound Norfolk Vanguard Offshore Wind Farm.

A Politico poll from earlier this year indicated 72% of people would support new wind farms in their area, but query whether that support included residents located adjacent to such projects.

In the British Energy Security Strategy, the government states it will not amend the current planning regulations for onshore wind, in all likelihood meaning the 2015 written ministerial statement will remain in place. Instead, it will look to develop local partnerships for a limited number of “supportive communities who wish to host new onshore wind infrastructure”, with the incentive for the community of guaranteed lower energy bills. Given the current cost of living crisis, it will be interesting to see if such incentives mean there is competition to be one of the identified communities.

While the tide may be turning a little, objection from local communities is not going to blow over anytime soon.

Biodiversity net gain

Renewable energy, conservation and the environment have historically had a conflicted relationship. Often the sites that are seen as suitable locations for wind turbines and solar panels are those that are also species-rich. There have been cases of endangered birds being affected by wind turbine blades, as well as the ground intrusion and disturbance of building solar and wind installations.

In June 2022, there was a parliamentary debate on the location of solar farms owing to growing concern with them being constructed on greenfield sites. In response to the debate, the government confirmed it will consult on amending planning rules in England to strengthen policy in favour of solar development on non-protected land. However, given the reduction the cost of generating solar energy and the government’s commitment to a fivefold increase in solar energy generation, it is widely accepted that a considerable number (potentially 50%) of solar farms will need to be located on greenfield sites.

In the Environment Act 2021, the government introduced a biodiversity net gain target of 10% as a condition on all new planning applications. It can be considerably harder to deliver this level of net gain on solar developments located on greenfield sites, which are likely to have a higher starting level of biodiversity than brownfield sites.

In addition to the 10% uplift, there is an ongoing 30-year maintenance requirement for the biodiversity, which can be difficult to achieve in often densely packed solar farms. The ability for other developments to deliver biodiversity net gain off-site is likely to further increase competition for sites.

The case for cross-boundary co-operation

Who takes on responsibility for ensuring that sufficient energy projects are brought forward? Will local authorities be prepared to allocate sites for renewable energy projects? Where is the strategic direction to ensure that new wind farms and solar farms are being delivered in the numbers that are required?

The numbers are significant. To meet the government’s ambition for all energy to be from “clean sources” by 2035, offshore and onshore wind capacity would need to quadruple and double respectively. It is highly likely that some areas of the country will need to deliver most of the solar and wind farms the country needs. Wind and solar farms require significant space to generate the level of electricity the UK needs to meet its net zero targets, but sites that are deemed suitable often come up against other land designations, such as preservation of the green belt in the National Planning Policy Framework or areas of outstanding natural beauty.

The current duty to co-operate on local planning authorities when plan-making is set to be abolished through the Levelling-up and Regeneration Bill, and there is a lack of clarity on how it will be replaced to ensure cross-boundary co-operation between local authorities.

Some in the industry have been calling for the return of the controversial regional spatial strategies, revoked in 2010, which aimed to bridge the gap between local planning issues determined by local planning policies and nationally determined policy aspirations.

The Levelling-up and Regeneration Bill introduces “national development management policies”, which essentially aim to take “general” development control policies out of local plans, with these set centrally instead. These national development management policies – expected to include green belt designation and heritage protection – will be given the same weight in decision-making as development plans.

Currently, planning applications under the 1990 Act regime are determined in accordance with the development plan unless material circumstances indicate otherwise. The Bill is proposing to strengthen this so that material circumstances must strongly indicate otherwise before applications can be granted if they depart from the development plan – and, in future, national development management policies. It will be interesting to see whether the nation’s energy security and net zero ambitions will be sufficient material circumstances to support sites not allocated in the development plan.

The resourcing challenge

It is widely recognised that planning departments are severely under-resourced. The government’s latest initiative to increase planning fees, unveiled as part of the Levelling-up and Regeneration Bill, is being billed as one way to help address this. But an uplift in application fees is by no means a panacea for the challenges that local authorities’ planning teams are grappling with owing to funding cuts over the years, including low staff numbers and a huge volume of work. A quick job search highlights the issues, with hundreds of vacancies listed for planning officers at local authorities.

Yet the government has signalled that planning will be sped up for solar, and both on- and offshore wind. Which specific mechanisms will be used to bring forward more sites and achieve quicker determination of planning applications remains to be seen. The government could place an obligation on local planning authorities to allocate sites, but that would need to happen within the local plan process and sites could take years to work their way through the plan-making system, especially given the necessary transition provisions before the Bill’s proposed amendments to development plans.

The wind is definitely blowing in the direction of renewable energy generation, but there is a long way to go before the UK is running on clean sources.

This article was originally published in EG (27 June 2022) and is also available to read here behind their paywall.

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When a collateral warranty is a construction contract – Daniel Burr and Sophie Togwell write for the Property Law Journal

A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

Construction Senior Associate, Daniel Burr, and Associate, Sophie Togwell, have written for the Property Law Journal, on necessary criteria for defining a collateral warranty as a construction contract.

“It was held that, for a warranty to be a construction contract, it must be an agreement for the carrying out of construction operations, meaning it must relate to the performance of works rather than just the quality of work.”

Their article references the outcome of a recent Court of Appeal decision, which states that a collateral warranty can be a construction contract under s104 of the Housing Grants, Construction and Regeneration Act 1996.

The pair go on to discuss the case, its issues, and the wider practical implications of the ruling.

This article was first published in Property Law Journal 400 (September 2022) and is also available on lawjournals.co.uk.

The full article can be read here.

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Daniel Burr

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Forsters advises Fiera Real Estate UK and Wrenbridge on the acquisition of a 2.3 acre development site in Hemel Hempstead

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Forsters has advised Fiera Real Estate (“FRE UK”) and Wrenbridge on the acquisition of a 2.3 acre site in Hemel Hempstead for the speculative development of a new 52,000 sq.ft Grade A industrial warehouse scheme with a GDV of £22m. The proposed development will benefit from 12 metre clear internal eaves, 50kN/sq m floor loading, PV panels, electric car charging points and high efficiency HVAC systems.

The site was purchased through the Fiera Real Estate Logistics Development Fund UK (“FRELD”) and represents the first acquisition for the fund which reached its first close earlier this year with £180m of equity committed. All assets in FRELD’s portfolio will meet the rigorous environmental and social requirements set out by FRE UK’s Sustainable Design Brief, which align with its ambition to drive positive change and contribute to a low carbon economy. The scheme has had ESG considerations embedded at all stages of its design process and along with future projects for the fund, it will be targeting net-zero carbon construction, BREEAM Excellent and EPC A.

The site is situated within the Maylands Business Area, which is a prime industrial location and is less than two miles from Hemel Hempstead town centre. The town is one of the principal commercial centres of Hertfordshire and the property benefits from excellent transport links due to its strategic placement one mile from the M1 motorway and four miles from the M25 motorway. Hemel Hempstead also provides regular train services to London within 30 minutes.

Chris Button, Fund Manager of Fiera Real Estate, commented, “We are very pleased to have completed on our first acquisition for the fund and to be bringing forward yet another high-quality and sustainable scheme alongside our Operating Partner, Wrenbridge. The fund is targeting similar sites for speculative industrial development around the UK.”

Jamie Garrett, Director at Wrenbridge, commented “We are really pleased to be delivering much needed, sustainable high quality industrial space to the local area, which will meet demand for traditional warehouse occupiers but will also appeal to mid-tech, R&D and life science operators. The scheme will make a strong contribution to the local economy boosting local jobs. We look forward to delivering this with Fiera.”

Commercial Real Estate Partner Jade Capper, assisted by Senior Associate Daniel Steele, advised on the deal.

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Ready, Steady, (almost) GO! The Register of Overseas Entities is live

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The register of overseas entities managed by Companies House (the Register) is now live and accepting applications, but there is a short grace period until 5 September for the registration of land transactions. In this update we set out more detail as to the registration requirements and process and our thoughts as to what overseas entities should be doing now to ensure compliance.


Download this briefing in PDF format

Download in PDF format


Background

The English government has established the Register with the intention of increasing “transparency”, to allow “law enforcement agencies to investigate suspicious wealth more effectively”. Essentially, any overseas entity which owns or is to acquire UK property will need to register, providing details about the entity itself and its beneficial owners. HM Land Registry will enter restrictions against the title of such property so preventing the overseas entity from entering into various property-related transactions unless it is on the Register. Failure to comply with the requirements to apply to be on the Register can constitute an offence.

Further detail about the Register and the obligations arising can be found in our earlier note on the topic (see our article here). Since that note’s publication, additional regulations have been published adding in extra layers of process.

Key Dates

The Register went live on Monday 1 August 2022, meaning that overseas entities can now apply to Companies House to be admitted to the Register.

The property-related provisions will however, only take effect on 5 September 2022. This grace period has been implemented to avoid property transactions being held up by the need to register. Its effect is that any overseas entity currently in the middle of a property acquisition which completes and in respect of which the application to register the transaction at the Land Registry is made before 5 September will not need to be on the Register in order to complete and make the necessary entries at the Land Registry. However, any overseas entity which intends to complete the purchase of any UK property and to apply to register the transaction at the Land Registry on or shortly after 5 September would be wise to apply to the Register now to ensure that the registration process does not delay completion. As from 5 September 2022, overseas entities will not be able to register a freehold interest or a lease exceeding seven years from the date of grant unless they are registered on the Register at the time the (Land Registry) application is made.

Any overseas entity which held UK property prior to 4 September 2022 will need to apply to register in any event by 31 January 2023 (i.e. six months from the Register going live). This registration obligation applies to overseas entities which became registered as proprietor of the UK property pursuant to an application to the Land Registry on or after 1 January 1999. However, bear in mind that where an overseas entity acquired UK property between 1 August 2022 and 4 September 2022, it will not be able to dispose of that property or grant a legal charge over it unless it is duly registered. (Overseas entities which acquired the UK property prior to 1 August 2022 will be able to make such a disposal without first being on the Register until 31 January 2023.)

Any overseas entity which has made a disposition of UK property since 28 February 2022 must provide details to Companies House by 31 January 2023. Where the overseas entity is obliged to register (because it still owns UK property), the details of such disposition must be provided at the time of its application to register.

UK-Regulated Agent

To register, an overseas entity will need to provide certain information about itself and its beneficial owners (or if there are no beneficial owners, its managing officers) to Companies House. Pursuant to regulations published earlier in the summer, such information must first be verified by a “UK-regulated agent”. Registration will not be possible without this verification from a UK-regulated agent. The information must be verified not more than three months before the application to register is sent to Companies House.

Service providers such as accountancy firms and law firms are among those who may apply to become a UK-regulated agent but obviously, there are responsibilities, risks and potential liabilities which also come with the position. It is to be hoped that a publicly available list of such agents will become available in due course. The verification process is not exactly aligned with the requirements of anti-money laundering regulations, so overseas entities may find they are required to provide more detailed information than is ordinarily required for transactions.

The UK regulated agent can submit the registration application with the verification statement, or if the overseas company is making the application itself, the agent can provide the verification separately to Companies House by email within 14 days of the application being made.

Verification will also be required when the overseas company complies with its duty to update its entry on the register each year.

Fee

There is a registration fee of £100 payable to Companies House.

Practical Steps

  • Overseas entities which: (a) currently hold UK property; (b) disposed of UK property since 28 February 2022; or (c) intend to acquire UK property, should be collating the information required to register and submitting their registration applications to Companies House as soon as possible
  • Acquisitions of a freehold interest or of a lease for a term exceeding seven years from the date of grant or the grant of a legal charge which are completed and registered at the Land Registry between 1 January 1999 and 4 September 2022 will not immediately be affected by the Register, but the purchaser should register as soon as possible (and must register by 31 January 2023)
  • Acquisitions of a freehold interest or of a lease for a term exceeding seven years from the date of grant cannot be registered at the Land Registry after 5 September 2022 unless the overseas entity is on the Register
  • Overseas entities must provide details of any disposal of a freehold interest or of a lease for a term exceeding seven years from the date of grant or the grant of a legal charge since 28 February 2022 to Companies House by 31 January 2023 whether or not the overseas entity in question needs to be on the Register
  • The disposal of a freehold interest or of a lease for a term exceeding seven years from the date of grant or the grant of a legal charge by an overseas entity which acquired the property on or after 1 August 2022 will not be permitted unless the overseas entity is on the Register
  • An overseas entity which acquired the property and applied to be registered at the Land Registry prior to 1 August 2022 can dispose of a freehold interest or of a lease for a term exceeding seven years from the date of grant or grant a legal charge in respect of the property before 31 January 2023 without first being on the Register, although it will still need to apply to the Register and provide details of the disposition by 31 January 2023.

Disclaimer

This note reflects the law as at 1 September 2022. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

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Lianne Baker
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Should SDLT go “green”?

A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

With rising energy costs and challenging net zero targets, could Stamp Duty Land Tax (SDLT) be a useful tool to help Britain take the next steps towards more energy efficient homes?

We believe that SDLT, as well as Welsh Land Transaction Tax and Scottish Land and Buildings Tax, could be used to assist taxpayers to achieve a greener, more energy efficient future.

Between 2007 and 2012, full relief from SDLT was available on the purchase (for £500,000 or less) of newly constructed properties which met specified standards of energy efficiency, whilst purchasers buying dwellings for more than £500,000 obtained a £15,000 relief from their SDLT liability. To obtain this relief, the seller had to provide a certificate that had been issued by an assessor to demonstrate that the home qualified.

A decade later and SDLT has only increased in complexity and cost, with added surcharges around second home ownership and non-resident purchasers, as well as reliefs targeted at first time buyers and others. Indeed, nowadays the tax on residential properties can be as high as 17%.

Although adding a further relief to an already complicated set of rules may seem counterproductive (especially for busy conveyancers who are not supported by a wealth of tax lawyers), successive governments have been willing to use SDLT to nudge behaviour in certain directions and the changes made have had significant impact on purchasers’ actions. For evidence of this, we only have to cast our minds back a couple of years when SDLT reliefs put in place during the COVID-19 pandemic resulted in an overall increase in transactions, with properties in the price bands that benefitted the most from the increase in the nil rate threshold (such as properties above £500,000) receiving a significant proportion of the upturn. It is not difficult to envisage purchasers turning their focus to a property’s energy efficiency if there is a significant tax saving (for example, on their SDLT bill) to be made.

With ambitious targets for Britain’s reduction in carbon emissions, the Government could look to the reinstatement and beefing up of this “green” SDLT relief. One option would be to tie the level of relief to the Energy Performance Certificate (EPC) ratings which are required to be produced before a property can be marketed for sale, with more energy efficient properties benefitting from a greater relief. Expanding such a relief to all dwellings (not just new builds), would incentivise property owners to invest in improving their property’s energy efficiency; sellers would then be able to market their low carbon properties as more affordable or share in the SDLT savings with the purchaser.

We are not alone in thinking that this could be an effective way forward. The UKGBC made a similar suggestion in their 2021 report with a plan to make the change revenue neutral by also adding SDLT increases to homes with low energy efficiency.

Coupled with other targeted assistance the Government provides for improving energy efficiency, this could be an effective way of encouraging homeowners to take the often-expensive steps to improve the energy efficiency of their homes; surely an appealing prospect on both an environmental and cost of living level?

Disclaimer

This note reflects the law as at 23 August 2022. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.

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Will ground rent legislation deliver positive change in later living? – Amy France writes for EG

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Commercial Real Estate Partner and Head of Later Living, Amy France, has written for EG, considering how the later living sector may now be viewing the Leasehold Reform (Ground Rent) Act 2022, as an opportunity to deliver positive change.

The article, which was first published on 8 August 2022 on the EG website, is available to read in full here (behind the EG paywall).

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Revisiting termination: When to stick or twist? – Richard Spring writes for the Property Law Journal

Construction workers in high-visibility vests and helmets stand and communicate amidst metal scaffolding at a construction site, with sunlight streaming through an open structure.

Construction Senior Associate, Richard Spring, has written for the Property Law Journal, about the options available to those who are not happy with the performance of their contractor.

This article was first published in Property Law Journal 399 (July/August 2022) and is also available on lawjournals.co.uk.

“What of a contractor who, put simply, is just not performing? What options are available to an employer who believes its contractor is not holding up its end of the bargain?”

The article gives consideration to the intricacies of terminating a contract’s engagement and providing practical advice on how to safely exercise this inherently risky enterprise.

Spring describes how “a thorough, detailed analysis of the events surrounding the contractor’s non-performance, possibly with expert opinion, should be undertaken to ascertain whether the contractor has indeed failed to proceed regularly and diligently with the works before any decision to terminate is taken.”

He concludes by offering 10 key considerations to note when considering terminating a contractor’s engagement.

The full article can be read here.

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Richard Spring

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Forsters act for the FCA on new office letting

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Forsters have advised the Financial Conduct Authority on taking space at 6 Queen Street, Leeds.

The office will be the new home for the FCA’s Digital Delivery Centre and other key business teams.

Glenn Dunn, Head of Forsters’ Corporate Occupiers group, advised the FCA and was assisted by Owen Spencer and Lauren Melachrino.


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Owen Spencer

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Depth and diversification will drive logistics growth – Victoria Towers writes for React News

A vast, empty warehouse features polished floors and high ceilings. Bright overhead lights illuminate the spacious interior, which includes stacked pallets and shelving on the right side.

The emergence of a new sub-sector of alternative uses is providing opportunities for investors and developers.

Commercial Real Estate Partner and Co-Head of Logistics, Victoria Towers, has guest written for React News on the rapid growth of the industrial and logistics market, resulting from changes in consumer behaviour thanks to the pandemic, the adoption of new technology, and the inexorable rise of e-commerce.

Contrary to popular belief that Amazon’s apparent reining in of its growing property requirements would curtail market growth, recent research from CBRE demonstrates a 10% growth in take-up of warehouse space between the first half of this year and last, alongside a UK vacancy rate of 1.2% – a new record low.

Towers describes how such growth and confidence in the sector can be attributed to the diversity across its occupier base. Production and distribution, life sciences, and light industry are all sectors worth mentioning, whilst “data centres have [also] become critical pieces of national infrastructure, required to store and process the data by the move to cloud-based computing.”

The lack of supply and high interest in this sector will continue to fuel the meteoric rise of the industrials and logistics market, and the diversification of the occupier base means that the pace of this growth may yet accelerate further. Landlords and developers must be forward-thinking and quick-moving in order to flourish and meet this growing demand from uses which will, over time, emerge from the alternative to the mainstream class.

This article originally appeared in React News on 21 July 2022, available here behind their paywall.

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Renters’ Reform Bill: A ‘New Deal’ for Residential Tenants

Terraced houses in brick stand in a row, featuring black doors and white-framed windows. A street lamp with hanging flowers sits in front, and a sign reads "Shouldham Street W1".

Property Litigation Partner, Natasha Rees, and Associate, Elizabeth Oxendale, consider the Government’s long awaited White Paper published on 16 June, which sets out the 12 point action plan to reform the private rented sector.

While there is currently no indication of when the Bill will become law, it is set to introduce changes which will fundamentally overhaul the existing basis of the Private Rented Sector.

Read more here.

A revised version of this content has been published in EG on 22 June 2022, available here, behind the paywall.

Funding a Wine Estate or Winery

Green and white line graphs and bar charts fluctuate against a background of blue financial data panels in a digital stock market display, showing numbers like 47.5, +4.78, and 780,516.

Making wine is expensive. You need the land, the labour and specialist plant and machinery plus long-term capital to support expansion and maintenance. It takes five to ten years for a new vineyard to start selling wine so sufficient capital will be needed in the early years.

Where that money comes from is important. Are you borrowing it? From whom? What is the loan secured on? A range of assets can be used for security, not just land itself; some require more bespoke financing than others. The right finance can make a huge difference to the amount you can borrow, the interest you pay and how much flexibility you have over the operation of the business.

Generally, land is the easiest asset to secure and, in recent years, money has been reasonably cheap. However, high street lenders will not usually lend against agricultural property, meaning you need to approach the handful of specialist lenders in this area. Larger and more established vineyards with a trading history meanwhile are increasingly using asset-based lending, which is borrowing against receivables generated by the business as well as land, plant and machinery. This often provides more flexible working capital than vanilla loans secured against just the land.

As with any financing, it is often helpful to approach a specialist broker who can find the right lender for your business and its borrowing needs.

You will need a solicitor to act on your behalf. Lending terms can be onerous and it is important to take legal advice to understand them in the context of running the business day to day. A good lawyer will explain potential defects in your security to your lender and give solutions, rather than simply identifying problems.

Lenders will look at assets in the round and demand adequate security for the debt, like (in the case of companies) a debenture creating fixed and floating charges over all assets or a share charge from the shareholders over the borrowing entity.

Buying plant and machinery on hire purchase terms can make sense from a balance sheet point of view. Sophisticated creditors provide overdraft facilities (secured and unsecured), and legal charges can be left in place for short notice lending too. Collateral can also come from outside the business. Personal guarantees from beneficial owners or from trustees can be especially helpful for young businesses. Remember that trustees’ guarantees should be limited to trust assets and personal guarantees should be capped. Parent company guarantees can have implications for the wider group.

Ultimately a vineyard is a collection of assets and approaching it as a straightforward land purchase is not always the answer. Forsters’ Banking & Finance team knows about complicated real estate finance and asset-based lending. They will work closely with you and the Rural Land and Business team to understand the wider project. Combining these two elements allows us to advise on and structure the most suitable form of finance for you.

Expert Insights

“With rising temperatures, improved technology, and increasing demand for wine and land suitable for vines, there is a real sense that vineyards in the UK are now, for some, a viable option. C. Hoare & Co. has funded both acquisitions and serious investment in existing businesses. As a 12th-generation family business, we take a long-term view well beyond the usual rolling five-year strategy, and with the cost of capital at a near-historic low, the timing couldn’t be better. We recognise, however, that vineyards need the right team on the ground, as well as favourable soil, aspect and climate conditions – we all know it only needs one unexpected frost to wipe out an entire season. This places winemaking some way up the risk spectrum, and it won’t be for everyone, but we have been on journeys with a number of well-advised customers and feel we offer a flexible approach.”

Simon Collins – Head of Landed Estates Group, C. Hoare & Co.


Vineyards and wineries

A great bottle of wine is a wonderfully elegant, simple thing. But the process of making it is complicated. Small variables in soil, climate, management and markets can make the difference between a great year and an average one.

An image of grapes growing in a vineyard.

Where have all the good sheds gone… – Victoria Towers writes for Logistics Manager

Skyscrapers rise into a cloudy night sky, their windows glowing with interior lights. Nearby buildings reflect on the glass surface, creating an urban atmosphere.

You can’t find a good shed these days for what seems like love nor money – is this going to be the new ‘normal’?

Industrials & Logistics Partner, Victoria Towers, has provided expert commentary to Logistics Manager magazine on the growing supply-demand imbalance of warehouse space and the unsurprising increase in rent levels, highlighting that “we are still in a landlord’s market.”

As a result, speculative space is frequently being let during construction, prior to practical completion.

Towers adds that “with demand still very much outweighing supply, occupiers are also accepting longer leases and thought is being given to rent reviews. Rather than open market rent reviews, developers and landlords are looking at CPI rent reviews, and this is being accepted by tenants.”

The article summarises that due to inefficiencies within councils in relation to planning approvals for new developments, developers and investors are essentially taking a lottery ticket when it comes to getting their planning application approved, regardless of their scale of investment or prior experience with the system.

This article first appeared in the July 2022 edition of Logistics Manager magazine, it is available here.

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“The challenge of your career” – our takeaways from the BPF Annual Conference 2022

A row of modern townhouses features large glass doors and brick façades. The buildings have balconies above the ground floor, and the symmetrical design is set in a suburban environment.

We had a fantastic morning at the BPF Annual Conference on 15 June 2022. It was the first since the coronavirus pandemic and there was only one topic on the agenda – the path to achieving Net Zero.

The conference included keynote speakers from industry, government, and policy as well as shining a light on the perspective of the next generation of leaders in property via the involvement of BPF Futures.

As the property industry finds itself centre stage in the challenge of a generation, Chris Stark from the UK Climate Change Committee (UKCCC) noted the difficulties of the real estate sector for climate change. He proposed, however, that the difficult bit is actually the most exciting part of the journey.

Here’s our key takeaways from the day.

We’ve been here before – and it’s damaging your real estate portfolio

Global temperatures have been at their current level before, millions of years ago. At that time the sea level was 20 metres higher than it is now. This really highlights the danger that we face if we fail to take action now. The heatwave experienced by the UK in 2018 was used as an example of impact on UK real estate. It resulted in subsidence claims costing £64 million. This is an issue for us, right now, and the UK hazards caused by climate change are only forecast to increase as the global temperature increases (sorry).

Sustainability is in your financial interest

It’s not all doom and gloom. With the cost of gas skyrocketing at the moment, it is cheaper to use renewable electricity than fossil fuels. There are also economic benefits to retrofitting buildings; sustainable assets generally have a higher rental value at a price premium. The Bank of England and Lloyds Bank both commented that there are a lot of investors wanting to inject cash into green real estate, leading to more discounted lending as the green lending market grows. Whilst it is estimated that £50-60bn capital investment per year is needed to meet the 2050 Net Zero target, it is expected that with returns from savings on expensive fossil fuels the overall cost will be close to zero. The UK has some of the “leakiest” buildings in Europe so there is also big saving potential from insulating.

Sustainability is important for talent retention

Perhaps one of the biggest takeaways from the day was the expectation that younger generations have for their employers in terms of progressing towards Net Zero by 2050. BPF Futures members consider sustainability issues a critical factor when considering workplace options. They have clear expectations of the property industry to end greenwashing and produce tangible strategies towards achieving Net Zero. Putting in place innovative ESG strategies (social as well as environmental) is key. If a company cannot innovate to solve this problem, junior colleagues feel that they cannot add value in an organisation that is simply doing things the way they have always done them.

Greenwashing is holding us back

Chris Stark (UKCCC) advised the industry to minimise the use of offsets, as it is more important to focus on reducing actual emissions even if that means you won’t quite hit Net Zero. What matters more, is pushing along the national strategy towards reaching that goal. It is his view that de-carbonising buildings is the big story for the next 20 years, and the challenge of our careers.

Sarah Breeden from the Bank of England also highlighted the risks to the economy associated with greenwashing. She said that there is a wall of capital wanting to invest in green, however, with no clear pathway to Net Zero, investors are finding it hard to identify genuine opportunities.

Doing something now is more important than being perfect

This was another of the key messages from the day. One of the greatest challenges for sustainability at the moment is the difficulties in measuring our progress; however time is running out to have a meaningful impact. Sarah Breeden (Bank of England) said that, when making disclosures on sustainability, it is better to be roughly right “now” than precisely right when it is too late. Catherine Sherwin of BlackRock phrased this as trying to make better choices, even if they cannot be measured in their entirety.

We need to get better at sharing data and ideas

This is not a new challenge for the property industry, but with an estimated 90% of investment in sustainability needing to come from the private sector, the quicker we can learn the better. One of the key challenges in funding de-carbonisation is obtaining tenant data relating to carbon. In the absence of legislation mandating the sharing of data as can be found in countries like France, we need “radical collaboration” (to borrow COP’s slogan).

At the conference the BPF launched its Net Zero pledge for members, which aims to enable businesses of all sizes to engage with this issue practically and strategically. The overarching theme was one of collaboration: we need to work together to tackle this global problem.

Whilst the UK is on track to reach Net Zero by 2050, not all of the rest of the world is. In fact, global emissions are still rising. The UK needs to set an example of working together.

We need to prioritise areas of greater impact

Large scale renewable generation is well on its way and so we need to focus on being ready to switch to electricity as a priority, rather than installing a couple of solar panels on houses which will not make a fundamental difference in the long term. To be ready to switch over from gas heating in 2030, action needs to be taken now: training installers, testing hydrogen (and coming up with another solution if that doesn’t work!), preparing the grid and installing district heating networks.

Yael Selfin of KPMG flagged that whilst only a mild recession next year is anticipated, there is a concern that there will be a drop in investment (including in skills training) in 2023 which could hamper our ability to prepare for switching to renewables. The following graph shows the number of jobs needed in this area to help us reach this important goal.

Workforce Requirements Graph

Image source: UKCCC

The private sector has a heavy role to play

As aforementioned, the vast majority of investment in sustainability will need to come from the private sector. The regulators are aware of their role in this challenge, with the FCA reportedly putting out proposals in July to engage with the need for regulation to help investors differentiate between real green investment and greenwashing. In politics, whilst there is a cross party consensus that sustainability is an issue, there remains a debate over the change of pace.

Retrofitting is crucial to reduce embodied carbon and upgrade the UK’s existing building stock. There is a view that the incentives for demolition (such as works on new builds being zero-rated for