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Wednesday, 31 August 2011

NPPF – Planning’s Big Bang

DCLG has published the draft National Planning Policy Framework (NPPF) for consultation.

The consultation ends on 17 October 2011.

You can access the draft NPPF and further details of the consultation, including the dates of local consultation workshops, by clicking on the above link.

Deregulation is sweeping through the planning world. Bales of red tape will be torched, and the planning system will be underpinned by a powerful presumption in favour of sustainable development (whatever that means).

If you want to see my earlier posts on this, looking at the meaning of sustainable development from the point of view of a non planning specialist – see Sustainable Development-What Does it Mean? and Planning Permission? Answer: Yes... If it’s Sustainable.

This is a complex subject. An interesting online debate was hosted on the Guardian website today – worth a look to get a flavour of the arguments being presented for and against the NPPF.

And of course the debate is currently raging all over the media.

The NPPF does not get rid of planning control altogether, but it is reducing thousands of pages of planning policy to just 52.

It seems the system will be focussed more on local plans drawn up by local authorities. However, many local authorities have not yet drawn up plans, whether this is because they couldn’t be bothered to do so or did not have adequate resources seems to be a moot point.

Local communities are to be given a greater role in the planning process, but what if they can’t be bothered either, or find the complexity of the process off-putting?

If there is no local plan (or an inadequate one) and no community involvement, will the presumption in favour of sustainable development effectively be a green light to all development?

Ultimately, the success or failure of any new system will rest on whether it successfully manages to balance economic, social and environmental needs.

It will take years to find that out.

By that stage, the government of the day will probably want to change the system again!

And if that’s all too much to think about at the end of August, you can instead once again venture into the twilight zone beyond parody by considering the Housing Minister’s answer to the housing shortage...er...houseboats apparently.

Inside Housing reports that councils which encourage people to live on boats to ease the housing crisis will be given financial rewards.

You couldn’t make it up.

Rubber dinghy anyone?

Tuesday, 30 August 2011

Economic Punditry and Paradox

The Bank Holiday weekend, with its less than cheery weather, saw a slew of articles in the media speculating on the likelihood of another major economic collapse.

Larry Elliot in the Guardian considers whether, three years after Lehman, a new debt crisis looms.

“The F word is back. Back in the financial markets, back in the conclaves of central bank governors, back among the manufacturers and the high-street retailers. The four-letter word is fear.”

Or, to nearly-quote FDR, do we have nothing to fear except fear itself?


“... once the markets start to panic, it can create a debilitating feedback loop. Falling share prices reflect firms' fears about the downturn, but they also amplify them by reflecting everyone's anxieties back on themselves. That in itself makes a synchronised downturn all the more likely.”

Then there is Keynes’ “paradox of thrift”. If one person is frugal instead of living beyond their means, that's good news; if everyone does it at the same time, it means collapsing demand and an almighty recession.

A day, or even an hour, can be a long time in economics as this minute’s headline in Guardian business is FTSE 100 posts strong gains as optimism returns to world markets.

Oh, so that’s all right then. Panic over.

Or maybe not. On the same day the Guardian reports that the housing market is in crisis as home ownership tumbles and house prices soar, whereas, to venture into the world beyond parody...the Express sees it as “fantasic news” that  “House Prices to Soar by 21 per cent”...by 2016.

The last two pieces come on the back of a report by the National Housing Federation (NHF), which represents England's housing associations, who warned today that the housing market will be plunged into an unprecedented crisis as it forecasts steep rises in the private rental sector and a house price boom. It blamed the bleak outlook on an under-supply of homes in the UK.

Chief executive, David Orr, said:

 "Home ownership is increasingly becoming the preserve of the wealthy and, in parts of the country like London, the very wealthy.”

That’ll be the metropolitan divide in the better-off boroughs between the “haves” and the “have yachts”.

The housing minister, Grant Shapps, admitted that "we have not been building enough homes", but insisted the government was "in the process of reversing that through massive planning reform" and a "massive programme" involving the release of thousands of acres of public land to build new homes.

The NHF said that, in 2010-11, 105,000 homes were built in England – the lowest level since the 1920s.

Some commentators have been moved to ask whether we should have a land value tax, as discussed in this article by Simon Wilson in Money Week. I don’t like this idea. What would happen to people living in expensive areas but with low income (for example following redundancy or retirement)? Shoved off to their own ghetto?

If you’re going to tax people, base it on their income – it’s the fairest way. Indeed some of the super rich are even asking to be taxed more with Warren Buffett (everyone’s favourite multi-billionaire) being joined by the richest woman in France, Liliane Bettencourt (and 15 others); a group in Germany calling themselves Vermögende für eine Vermögensabgabe (The Wealthy for a Capital Levy); and the chairman of Ferrari – all begging to be allowed to help solve the financial crisis by paying more tax. The 50p rate will not be long for this world in the UK however.

Meanwhile, back on the wider economy again, Money Week ran another piece today saying “there won’t be a recession this year, but 2012 will be brutal.”

It seems like the only boom industry right now is economic punditry.

And amongst all the verbiage and hoopla, one other piece caught my eye. Having said in a post last week, Low Rent, that no one would be interested in the ideas of the grand old beard-sporter himself, Karl Marx, I was surprised to see this article on Bloomberg by George Magnus – Give Karl Marx a Chance to Save the World Economy.

Now, I’m guessing most readers of a capitalist web organ like Digging the Dirt (and Bloomberg!) would rather see the economy entrusted to Groucho Marx than have his illustrious namesake make a duck soup of it all.

Interesting then to read a senior economic adviser to UBS opine that the sooner policy makers recognize we’re facing a once-in-a-lifetime crisis of capitalism, the better equipped they will be to manage a way out of it.

“Consider, for example, Marx’s prediction of how the inherent conflict between capital and labour would manifest itself. As he wrote in “Das Kapital,” companies’ pursuit of profits and productivity would naturally lead them to need fewer and fewer workers, creating an “industrial reserve army” of the poor and unemployed: “Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery.””

This leads to the over-production paradox. The more people are relegated to poverty, the less they will be able to consume all the goods and services companies produce.

Mind you, judging from the vitriol, anger and sneering to be found in the comments section that follow that piece, you dip your toe into a Marxist interpretation of anything at your peril. [Update 4/9/11 - and for more of the same see this piece and comments from the BBC.]

So I’ll wind up instead with this gem from Radio 4’s Today programme last week:

The Greeks have stopped exporting Hummus and Taramosalata.

It’s a double dip recession!


Friday, 26 August 2011

Spray-On Solar – Go Green Not Orange!

Just when you thought the apex of human endeavour had already been overreached with the spray-on fake tan, now we have spray-on solar cells too.

The Independent ran this story yesterday about how the Mitsubishi Chemical Corp of Japan has developed technology that enables solar cells to be applied to buildings, vehicles and even clothing in the same way that paint is applied.

The new solar cells utilize carbon compounds which, when dried and solidified, act as semiconductors and generate electricity in reaction to being exposed to light.

The spray-on cells currently have a practical conversion level of 10.1 percent of light energy into electricity, which is still some way behind the 20 percent that is standard in traditional crystalline silicon solar cells, but the company expects to be able to improve the efficiency ratio to 15 percent by 2015 and is aiming to reach 20 percent eventually.

This new technology could turn out to be an incredibly useful way of applying solar cells to curved structures and building shapes which would not be able to accommodate traditional solar panels.

The company even anticipates applying the spray to cars, to help power them, and even to clothing (an electro-magnetic personality could soon be yours).

The piece also mentions other organisations from Italy and Australia which are collaborating on “printable laser” technology which could impose nano-particles on to wafer-thin panels which could then eventually be developed into paper-thin solar panels.

Here’s another report from Business Green on 12 August which has details of similar technology being developed by the University of Leicester and Norwegian company EnSol.

We have already seen extensive use of solar panels in new buildings. In my recent post Heron Tower: Greetings and Thanks for all the Fish! I mentioned how the new Heron Tower, at 110 Bishopsgate, as well as being home to 1,200 fish (67 different species) in its 70,000 litre aquarium in the reception, has its south facade clad with 3,000 sq m of solar photovoltaic cells, helping it achieve an environmental and sustainability BREEAM rating of “Excellent”.

“The future is now”, as they probably don’t say down the tanning salon.

“Do you want a Blair or a Mandelson this week?” as they don’t say there either (my lawyers advise me).

Thursday, 25 August 2011

Parkridge Falls into Administration

Parkridge Holdings and Parkridge Gate Developments have gone into administration, according to this report in Property Week, in what must be one of the biggest casualties in the property world in recent years.

The accounts show that, including shareholder loans, Parkridge Holdings had debt of £345m. Its lenders include Royal Bank of Scotland, Lloyds Banking Group and Anglo Irish Bank. Property Week goes on to say:

“The accounts show that falling property values during the downturn meant that the company breached loan to value covenants in 2008. It outlined a strategy of selling developments once completed in order to repay debt, but again this strategy was forestalled by the credit crunch.”

Parkridge Holdings is the main holding company of Parkridge’s UK and European and UK empire, which owns over one hundred subsidiary companies, with assets in 14 countries. The subsidiaries owned by the companies are not in administration and the report says their day-to-day activities are unaffected.

Massive debt burdens continue to bear down on companies in the property sector.

Is this going to be another anxious autumn?

Strike a Pose – London’s Hidden Statues

A couple of years ago, inspired by the books in the Stoneheart trilogy by Charlie Fletcher, my son and I went in search of some of London’s hidden statues, sculptures and gargoyles.

In the books, the statues come to life and wage war. In reality, many of them lie hidden in London’s nooks and crannies or stand stoically on its main thoroughfares, ignored by passers-by to the point where they attain invisibility.

And so in the late August lull, here are some of those monuments of public art; statues rather than statutes, including one or two that I have already used to illustrate earlier blog posts.

At the top of this post sits the Minotaur, by Michael Ayrton (1921-1975); squatting in a small sliver of public garden on the raised walkway to the Barbican on the north side of London Wall. Originally sited in 1973 in Postman’s Park, by Guildhall, the sculpture was moved to its present location in 1997.

Ayrton also made this small statue of Icarus in Old Change Court, opposite St Paul’s Cathedral.

Many a pint of London Pride has been sunk in a futile attempt to put the world to rights, overseen at all times by the jolly Black Friar, standing guard over his pub on the north side of Blackfriars Bridge.

Tucked away in an alcove on busy High Holborn at the junction with Chancery Lane stands The Grid Man.

On the Embankment, outside the Ministry of Defence, there is the striking Daedalus, by James Butler, showing a pilot bearing wings.

Also appearing in the stories by Fletcher are poignant statues gracing some of London’s many war memorials, such as the First World War gunner on the Royal Artillery Memorial at Hyde Park Corner...

...and the Royal Fusilier, by Albert Toft, in High Holborn.

Back in “legal London”, there’s the statue of Dr Johnson, by PH Fitzgerald, behind St Clement Danes Church in the Strand...

...and nearby a memorial to Dr Johnson’s faithful cat, Hodge, who loved to eat oysters. The sculpture was created by Jon Bickley and unveiled in 1997 in Gough Square, just off Fleet Street, which is where Johnson worked on his dictionary. On the day I took this photo, some wag had put a bell around his neck!

The Temple Bar Dragon marks the former site of Temple Bar on Fleet Street, just outside the Royal Courts of Justice.

For more contemporary statuary, there’s Eduardo Paolozzi’s Newton, outside the British Library...

...or the surprising “Reflection” by Anthony Gormley, at 350 Euston Road.

And if you’re arriving or returning from Paris or Brussels, there’s always Sir John Betjeman, by Martin Jennings at St Pancras Station...

...joined now for 2012 by the Olympic Rings.

There are many more pieces of public art dotted around the capital, and many more statues and gargoyles in the Fletcher books. 

You can see more of them in this set on my flickr page.

This is the other side of London, always there, but not always seen; a mixture of the very old and the modern.

Lift your eyes occasionally from your Blackberry or skinny latte and look around; you never know what you might find.

Tuesday, 23 August 2011

Planning Enforcement – Law Society Lobbying Succeeds...Up To a Point

The government has amended its proposed changes to the planning enforcement regime enshrined in the Localism Bill in response to warnings from the Law Society that they would cause uncertainty and chaos in the market – but it has not gone far enough.

To recap - at the moment, the general rule is that enforcement action relating to building works or for changing the use of a building to use as a single dwelling house must be started within four years of the alleged breach. In all other cases (eg breach of planning conditions, other changes of use), the time limit is ten years.

If the council doesn’t take enforcement action within the time limit, then it loses the right to do so. The unauthorised development or change of use will then become lawful and immune from enforcement action (as long as it’s not a listed building). You can then, if you want to, get a certificate of lawful use or development from the council to prove this.

The Localism Bill sets out to change this, as I reported in my post in February, Localism Bill – Planning a Big Surprise and again in May in Localism and Planning Enforcement – Do We Really Need More Law? ,where I also looked at the case Secretary of State for Communities and Local Government and another v Welwyn Hatfield Borough Council [2011] UKSC 15 which dealt with dishonesty under the current enforcement regime.

Under the proposed new regime, even if the council first discovers the breach after the four or ten year period has passed, it can ask the Magistrates Court at any time for an order allowing it still to take enforcement action requiring the owner to remedy the breach.

The court would only be able to make such an order where it is satisfied someone has concealed the breach.

Originally the Bill provided that inaction would count as a sufficient act of concealment to justify an order being made.

In response to Law Society lobbying, the government has now amended the Bill to say that inaction will not amount to concealment.

However, the Law Society is still concerned this does not go far enough.

An innocent purchaser is still at risk, because if there has been concealment in the past, the local authority can still restart the clock and enforce outside the normal time limits.

The Law Society wants the proposed reform of the enforcement regime dropped altogether.

The Chair of the Law Society’s Planning and Environmental Law Committee, David Brock, comments:

“My personal view is that the provision causes more problems than it solves. Indeed, the problem which it addresses is minute - a breach which goes unenforced for 4 (or 10) years is rarely going to have caused any difficulties.  And the Supreme Court decision in the Welwyn Hatfield case makes it clear that dishonesty in the planning application will disentitle the applicant from relying on limitation periods.  I also question whether this is consistent with the red-tape initiative - that's the one about reducing the regulatory burden.”

He argues that the Bill’s provisions will still make old concealed breaches susceptible to enforcement and this will in turn lead to criminal liability if the enforcement notice is not complied with. 

“There's an argument that that would be a breach of the Human Rights Act by retrospectively making a state of affairs which became lawful when the 4/10 year period expired into a criminal offence.  It's certainly a problem if someone has bought the property in the meantime.”

So unless the proposal is dropped altogether, this is still going to cause problems for buyers and lenders and make due diligence advice difficult. Consequently this may have an impact on valuation and there remains a question over whether, and if so to what extent, this is a risk that could be covered by insurance (hard to see how where you are talking about possible criminal sanctions).

This proposal is at odds with the government’s stated aim of reducing red tape and simplifying the planning process.

It should drop it.

Monday, 22 August 2011

Low Rent

The BPF/IPD Annual Lease Review (which of course you read about first here!) has been presented to TV personality, Queen of Shops and government advisor Mary Portas, as an important contribution to her review of the High Street, says the British Property Federation (BPF).

Separate independent IPD data has also been submitted, illustrating that in real terms high street shop rents have fallen by a third over the past 20 years.

Portas, who is in the midst of her review, has indicated she is keen to understand the relationship between landlords and occupiers, and current trends in leases.

I summarised the main findings of the Lease Review in my post Lease Lengths are Getting Longer.

Looking specifically at retail, the key findings from a study of 47,708 retail tenancies that will interest Portas are that retailers benefit from the most flexible lease regimes ever – with the data showing:

·         Average lease length of 5.7 years.

·         Significant increases in break clauses as retailers look to hedge against economic uncertainty.

·          34% of new leases for high street shops have a break clause, up from 3.9% in 1999.

·         An average ‘rent free’ period of 10-months on a rent-weighted basis.

The separate IPD data on standard shop rents shows that whilst inflation has risen by 94% since 1989, rents for standard shops have only risen by 24%, and in real terms therefore fallen by 37%.

Rental growth for Standard Shops since 1989 has been 51% in Central London, 24% in the rest of London, 10% in the rest of the South East and Eastern regions and 25% in the rest of the UK.

The BPF makes the comparison with rate increases, which because of their link to RPI, has seen the rates bill for shops rise, roughly speaking, by 94% since 1989.

The rates burden on small businesses surely needs to be reduced if we are going to have the private sector-led recovery on which the government is pinning its hopes.

The property industry has had to adapt to the complex issues facing high streets and the difficult economic conditions – so should the government.

The old boy pictured above had some pretty innovative ideas on property too, but I can’t see a self-styled shopping aristocrat, or anyone else for that matter, being too interested in them...yet!

What’s the Use?

A question you may well ask yourself from time to time.

And a question that was posed, in a manner of speaking, by the government in June with reference to how change of use is dealt with in the planning process.

The Department of Communities and Local Government (DCLG) has produced an “Issues Paper” inviting comments on “how change of use is handled in the planning system – tell us what you think.”

Broadly speaking the suggestion is that the planning scheme for changes of use could be relaxed or deregulated, either entirely or to a degree.

Responses are invited by 1 September 2011.

DCLG says that the key aim of this review is to look at the scope for further liberalisation and how it might remove the barriers to change of use to help facilitate growth.

It is at pains to point out however that this is not a formal consultation, but rather a call for evidence from interested parties on how improvements could be made to the system. If a decision is made to make changes, then a full consultation will follow.

The issues paper provides a useful summary of how changes of use are dealt with in the planning system at the moment, so if you need a refresher on these matters or want a break from constructing sandcastles, have a look.

At the end of the document is a list of questions and issues, the first of which asks whether changes of use should be dealt with as part of the planning system at all.

In April this year there was a formal consultation exploring the scope for a permitted change of use from business, industrial or storage use to residential – which I mentioned in my post Offices to Homes – Change of Use in the Fast Lane.

See this article by SNR Denton for an analysis of the responses the government received to that consultation, which has proved more controversial than anticipated.

If you want to get involved there is still time to respond to the Issues Paper.

Thursday, 18 August 2011

Second Wave of Enterprise Zones

The government has announced the locations of a further 11 Enterprise Zones (EZs) designed to boost economic growth.

In March, the Plan for Growth, which accompanied the Budget, announced the setting up of 21 new Enterprise Zones (EZs).

See my post Enterprise Zones – Where, When, Why? for a list of the first 11 zones chosen in Leeds, Sheffield, Birmingham, Bristol, Liverpool, London, Manchester, Derby, Nottingham, the Black Country, the Tees Valley, the West of England and the North East.

The government launched a competition among Local Enterprise Partnerships (LEPs) to identify the locations of the remaining 10 EZs. Because of what it calls the “strength of applications”, the government has instead decided to award EZ status to a further 11 zones, rather than 10.

My July post, In the Zone - 29 Bids for the Second Wave of Enterprise Zones, links to the 29 bids the government received.

The 11 new EZs bring the total to 22 and are:

• Humber Estuary Renewable Energy Super Cluster (led by the Humber LEP)

• Daresbury Science Campus in Warrington (led by the Cheshire and Warrington LEP)

• Newquay AeroHub in Cornwall (led by the Cornwall and Isles of Scilly LEP)

• Daedalus Airfield in Gosport (led by the Solent LEP)

• MIRA Technology Park in Hinckley Leicestershire (led by the Leicester and Leicestershire LEP)

• Rotherwas Enterprise Zone in Hereford (led by the Marches LEP)

• (i) Discovery Park in Sandwich, Kent and (ii) Enterprise West Essex in Harlow (led by the Kent, Essex and East Sussex LEP)

• Science Vale UK in Oxfordshire (led by the Oxfordshire LEP)

• Northampton Waterside (led by the South East Midlands LEP)

• Alconbury Airfield, near Huntingdon in Cambridgeshire (led by the Greater Cambridge and Greater Peterborough LEP)

The ten zones selected will benefit from simplified planning rules, super-fast broadband and  tax breaks to promote growth, including a full business rates discount, worth up to £275,000 per eligible business over five years.

It remains to be seen how successful this policy proves to be.

This report from the BBC says ministers claim the policy will lead to the creation of 30,000 new jobs by 2015. Good news if it’s true, although to put that into the context, there are currently nearly 3 million people unemployed.

The EZs chosen are also not necessarily close to unemployment black spots. No doubt someone will suggest they are within bicycling distance however.

The British Property Federation has expressed concern that the incentives on offer will be too little to spur development in many areas.

So the question remains - will the creation of EZs succeed in promoting overall growth or instead become a distortion of the free market that basically pays businesses to move to one location over another?

Wednesday, 17 August 2011

How Can Landlords Support Small Business Tenants Affected by Riots?

The British Property Federation says the Local Data Company estimates that 48,804 shops, pubs, restaurants and clubs have suffered directly or indirectly in the 28 town centres affected by the rioting in England.

Of these, independent outlets were hit particularly hard, and the BPF has suggested that one way in which landlords might be willing to help small and medium size business tenants is for landlords to defer some of the rent whilst the businesses affected get back on their feet.

The BPF and law giant, Horgan Lovells, have issued a draft letter for landlords to use if they are prepared to defer rental payments. The letter does not release the tenant from liability to pay the rent eventually, but rather defers the payment until a later date. The landlord’s remedies for non-payment are temporarily suspended during the deferral period.

The letter, in common with most side letters, is personal to the parties and would not bind successors to the landlord and would not benefit successors to the tenant. It can also be withdrawn at any time.

Tenants should also be aware that the letter can be disclosed to third parties, for example in relation to credit-worthiness checks.

This is a helpful move by the BPF. However, in most cases where riot damage qualifies as an “insured risk” under the lease, rent deferral should not be necessary.

This is because, as I said in my post UK Riots – Repairing the Damage – Insurance & the Police, most standard commercial leases include a “rent cesser” proviso, which suspends the rent during reinstatement work by the landlord (who would normally be responsible for repairing damage by insured risks, and that responsibility is normally excluded from the tenant’s repairing obligations).

A rent cesser proviso will be of more benefit than the side letter because it stops the rent altogether during the reinstatement period – rent for that period never becomes payable – rather than simply deferring the rent to a later date. The tenant starts paying rent again once the premises have been reinstated (usually “made fit for occupation and use”). Disputes are normally dealt with by arbitration.

The landlord would normally be able to claim on its loss of rent insurance to cover the “void” period of the rent cesser.

You need to check the lease carefully however. Leases of small premises might not have been carefully drafted. For example if riot damage is not included as an insured risk; or if the lease is defective in some way; or does not include a rent cesser proviso, then it would be worth seeking a deferral along the lines suggested in the Horgan Lovells draft letter – and mentioning that the letter is being promoted by the BPF.

And of course there may also be many situations where it is not physical damage to the premises that has disrupted trade, but the loss of stock and damage to fixtures and fittings. In these situations, even if there were a rent cesser provision, it would not apply as the proviso would most likely be limited to physical damage to the property itself, rendering it incapable of occupation. In such circumstances, a rent deferral letter would provide much needed relief for the beleaguered tenant.

Whilst politicians fall over themselves knee-jerking their way to a robustier-than-thou response to the unrest, it is good to see a body as influential as the BPF suggesting practical support for affected businesses.

 Photo by kenjonbro via flickr

Lease Lengths are Getting Longer

The BPF/IPD Annual Lease Review 2011 reveals surprising evidence that, despite widespread economic woe and the travails of the high street, the average length of lease terms is getting longer.

Here’s a summary of the main findings:

·         The average length of all lettings increased from 5.0 years in 2009/10 to 5.3 years in 2010/11, measured on an equally weighted basis and including the first break where applicable. If licences and short leases of four years or less are excluded, then the average length of new leases (again including break clauses) increased from 7.2 to 7.6 years.

·         The average length of all new leases weighted by rent (including break clauses) rose to 9.4 years in 2010/11. This is a slight increase compared with the previous year when lease lengths were at their shortest in the review’s history (8.6 years).

·         2010/11 saw a decrease in the proportion of leases up to five years in length from 72% in 2009/10 to 63% in 2010/11. Although 63% of new leases were less than five years in length, on a rent-weighted basis they make up around 33% of all new leases. The longer leases make up a small proportion by number and a larger amount by rent or in other words, tenants who occupy larger units still tend to sign longer leases.

·         The proportion of leases with break clauses increased in 2010/11 to 31.1% compared to 29.4% in 2009/10. Break clauses became more common in new leases up to 15 years in length. However, the proportion of leases longer than 21 years with break clauses dropped from 31.1% in 2009/10 to 19.9% in 2010/11. The proportion of leases with break clauses also mainly increased in the retail sector and particularly in standard shops (34% in 2010/11 compared with 3.9% in 1999). [And if you want to exercise a break clause or are negotiating a new one – make sure you get it right! See my various posts on break clauses this year.)

·         In the retail sector, the proportion of leases with break clauses increased from 19.9% in 2009/10 to 24.8% during 2010/11; this was the largest increase since 2003. Leases from 11-15 years in length saw the largest increase, followed by 6-10 year leases and 1-5 year leases. On the other hand, the proportion of break clauses in longer leases (above 16 years in length) decreased.

Average lease lengths across all sectors increased in 2010/2011 after two years of consecutive falls. Retail continued to secure the longest leases (yes, really!) with and without breaks, followed by office, while industrial had the shortest lease lengths.

Overall, rent free periods increased to 13.4 months in 2010/11.

Leases granted for terms of less than 4 years were excluded from the analysis.

The review draws upon detailed evidence of almost 102,000 tenancies granted between 1999 and March 2011.

I suppose if one wanted to sound a note of doom (well, caution), you would have to bear in mind that since March there has been something of a downturn in business confidence which might be having a negative effect on the lengths of leases being granted now; not that I have any evidence of that.

Tuesday, 16 August 2011

Business Rates & Empty Properties: BPF Promotes Petition to Raise Rates Threshold

The British Property Federation is promoting a petition seeking to persuade the government to raise the empty property rates threshold from £2,600 Ratable Value and reinstate the £18,000 threshold that applied until April this year.

Back in February, in my post Business Rates & Empty Properties – Steep Rise in "Bombsite Britain" Tax Imminent, I warned that from 1 April 2011 the £18,000 threshold was being slashed to £2,600. Despite hopes in some quarters that the rise would not take place, it did.

Owners of empty commercial properties do not have to pay business rates for the first 3 months the property is empty (6 months for industrial and warehouse properties). There is 100% relief from business rates during that relief period.

After the relief period ends, the owner must pay full business rates as though the premises were occupied, basically a tax on empty buildings.

Before 1 April, if the rateable value of the property was less than £18,000, the owner was exempt from paying business rates even after the relief period ended. That exemption benefitted roughly 70% of commercial properties in the UK. The reduction in the threshold to £2,600 has seen the cost to many organisations of owning empty commercial property balloon.

The empty rate has been dubbed the “Bombsite Britain” tax because it has allegedly led to millions of square feet of property being demolished since it was introduced in 2009. Demolition is one, albeit drastic, way of avoiding the tax.

Some occupiers however will see things differently. The higher the penalties for owning empty properties, the more likely landlords will want to let the space at lower rents, or for “meanwhile use” – for more on which see these posts.

On balance however, in times of economic hardship, taxing empty property does not seem likely to encourage regeneration; quite the opposite, it will hit many businesses hard.

If you want to sign the petition, you can do so by clicking on this link.