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Thursday, 30 August 2012

Property Data Report 2012 – Who Owns What?

The Property Data Report 2012, released this month by the Property Industry Alliance, highlights the rapidly changing nature of commercial property ownership in the UK.

For the first time, the report also includes information both on property debt and the sustainability of the commercial property sector.

Here are some key facts from the report.

UK commercial property’s value in 2011 reached £717bn – half that of government bonds and about two fifths of UK equities.

“Core commercial property” - comprising retail, office and industrial property, dominates the commercial sector and accounts for £617bn worth of investment.

The “other commercial property” sector, which includes hotels, restaurants, pubs, car showrooms, petrol stations, cinemas and theatres, accounts for £100bn (other non-domestic buildings (including public buildings such as schools and hospitals) amount to £103bn).

The commercial sectors are dwarfed however by residential property, which accounts for a whopping £4,224bn and also far outweighs any other asset class in the UK.

Its value is almost six times the size of commercial property.

Retail, at £227 billion, is the largest commercial property sector, but offices are catching up, having seen greater capital value growth in 2011.

Over half of commercial property is rented, compared to only a third of housing.

The average length of a new lease continues to reduce and in 2011 fell to below 5 years, compared to 8.7 years in 1999.

76% of new leases were between 1 and 5 years; 33% had break clauses and the average rent free period was 8.8 months.

The shortest average lease length is in the industrial sector – at only 3.5 years.

Retail warehouses, where demand from tenants is relatively strong, have the longest leases.

UK institutions are still the biggest owners of commercial investment property, but they are being caught up by overseas investors, who already own more than half the offices in the City of London.

Ownership by collective investment schemes (managed funds, property unit trusts, limited partnerships, etc) has also grown substantially.

In one way or another, most of the capital invested in UK commercial property is used to provide pensions and savings for UK households.

The report gives more information on property debt - approximately £235 billion of debt is currently secured on commercial property, including developments. This represents a third of the total value of commercial property.

It also includes more information on investors and investment performance - directly owned commercial property returns were 7.7% in 2011, far better than that of UK equities but well below gilts. Property company shares though have been more volatile.

New development has been affected badly during the global financial crisis, reducing it to a third of the level recorded during the earlier part of the decade.

The report also contains information on energy consumption and CO2 emissions.

Housing and transportation are by far the largest sources of energy consumption and account for the majority of CO2 emissions.

The report concludes that residential and, to a lesser extent, commercial and public sector buildings represent one of the most important untapped potential sources of energy savings and reduced greenhouse gas emissions.

Wednesday, 29 August 2012

Buy Land – They’re Not Making it Any More...Plus Some Root & Branch Advice

Time to buy some mud, rather than sling it.

It seems it’s not just high-end West End apartments that are soaking up foreign Dollar (Euro, Rouble, Yuan etc) but also the English countryside.

The Guardian reports that English farmland prices have trebled in a decade as overseas buyers have moved in – and now average over £6,000 an acre.

In the next five years farmland is expected to rise in value by more than two-thirds.

It’s seen as a safe haven, like gold, but also gives annual returns of 2-3%.

Agricultural land can also be exempt from inheritance tax as long as it's managed as a farm.

You have to look after your land though, wherever it is.

If you have large trees on your property, for example, make sure that they’re pruned regularly to avoid damage to any neighbouring structures. 

CMS Cameron Mckenna reports a recent case where a landowner was ordered to pay £150,000 in compensation for damage caused by tree roots to a property that lay some 33 metres from the tree.

Damage is frequently caused by tree roots, particularly in areas of clay soil, and it can be substantial. 

Either the roots apply pressure to the subsoil and cause settlement or they cause changes in the subsoil by extracting moisture. 

The bigger the tree, the more moisture will be extracted.

Damage can be prevented if the trees are regularly pruned or lopped – in the recent case the court found that the damage would probably have been prevented if the trees had been pruned every four years.

That’s the thing about land; you can’t just stash it in a bank vault and forget about it...but enough about quantitative easing.

Tuesday, 28 August 2012

Improving Listed Building Consent

In July the Department of Culture Media & Sport (DCMS) launched a consultation seeking views on various options aimed at improving the system of listed buildings consents (LBCs).

For anyone caught up in Olympic fever or on holiday getting Brahmsed, as they say in Stratford, this might well have passed under the radar – especially as the consultation period ended on 23 August (blink, or drink, and you missed it).

I won’t dwell on the detail here - follow the link to the consultation if you’d like to know more.

In short, DCMS asked for views on these options for speeding up the process:-

·         A system of prior notification leading to deemed LBC.

·         A system of local and national class consents granting deemed LBC.

·         A “certificate of lawful works to Listed Buildings” issued either before or after they’ve been carried out.

·         Replacing local authority conservation officer recommendations for LBC by those made by accredited agents, if LBC applicants wish to do so.

The consultation also sought views on new or improved measures to address building neglect, which may or may not include legislative change.

The aim is to simplify the system by reducing the circumstances in which LBC is required and cutting down the information applicants have to submit, reducing the burdens on developers and allowing authorities to focus on the highest risk buildings.

The BPF is broadly supportive of the proposals, although it too was surprised at the timing and brevity of the consultation (four weeks rather than the more usual twelve) and hopes DCMS will consider any late representations.

The BPF doesn’t think the proposals go far enough however and suggests some better ways of dealing with the system.

It also wants English Heritage to continue the process of re-examining and clearly defining listing entries.

Listing can seem a highly subjective process.

More information on how it works is provided on the English Heritage website.

English Heritage says that post-1945 buildings have to be exceptionally important to be listed, and they make up only 0.2% of the listed buildings total.

The vast majority of buildings listed are pre-1900. All buildings built before 1700 which survive in anything like their original condition are listed, as are most of those built between 1700 and 1840.

Of those buildings listed, 92% are Grade II (nationally important and of special interest), 5.5% are Grade II* (particularly important of more than special interest) and 2.5% are Grade I (of exceptional interest, sometimes internationally important).

At the moment, if a building is listed, you have to apply to the local authority for LBC before making any changes to the building that might affect its special interest.

We’ll have to wait until DCMS publishes its follow-up to the consultation to have more idea of how the system will be changed.

Wednesday, 22 August 2012

Building on a Human Scale?

A statue facing The Shard puts it in perspective.

Heads Up

August meanders on, and to keep things ticking over here’s another random round-up of property-related flotsam.

On 13 August the government launched a consultation on the voluntary renegotiation of planning obligations known as Section 106 Agreements to make them more reflective of the current market and to “help unlock stalled development”.

Currently applications to modify these agreements can only be made five years after the obligations became effective.

The proposals would remove that restriction and enable planning contributions to be tested against current local plan policies.

This would only apply however to planning obligations agreed before 6 April 2010. The consultation ends on 8 October 2012.

The British Property Federation (BPF) reports that foreign investors are set to become the largest owners of UK commercial property in 2012, overtaking UK institutions according to a report by the Property Industry Alliance.

Foreign investors already own more than half of the offices in the City of London.

Overseas demand is expected to continue for at least the next five years.

The report also reveals the average length of lease terms continues to get shorter and in 2011 fell to below five years compared to 8.7 in 1999.

As we look forward to the Paralympics, there’s a piece on Pillsbury’s construction law blog on the green credentials of the Olympic park.

Venues constructed for the games include a number of innovative green features – the roof of Olympic Stadium, for example, was constructed from unwanted gas pipes from the North Sea and over 40% of the concrete used for construction is made of recycled materials.

There’s also now a global standard for sustainable event management, known as ISO 20121:2012.

Moving on to housing, Ian Birrell, a former speech writer for David Cameron, argued in the Guardian yesterday that it’s time to confront our “myopic nostalgia” and start building on the green belt; just 1% of “this misnamed land that is constricting our economic – and often environmental – needs”, he argues, could provide 300,000 homes.

The Guardian also reports that businesses are increasingly resorting to company voluntary arrangements (CVAs) to stave off insolvency.

CVAs increased by 32% in the last year to 924 from 699 in the previous year.

CVAs allow companies to continue trading and prevent creditors from taking action to recover debts until the agreement ends – either through completion or failure.

Landlords complain the process often leaves them out of pocket. 

After the recent announcement of the Travelodge CVA, Liz Peace, the chief executive for the BPF, said: 

"Once again landlords are being asked to play a significant part in rescuing a business, and a minority at that, who are being asked to take a 'hit' to keep a far bigger business afloat."
Retailers and hotel operators blame inflexible rents for the rise in CVAs.

Finally, back in the realm of landlord and tenant law, Eversheds report on a recent case highlighting the need to take care when applying for landlord’s consent to assign a lease.

Check the notice provisions in the lease and make sure you comply with them.

In this case, service of the tenant’s request by e-mail to the landlord’s managing agents wasn’t sufficient to trigger the landlord’s statutory duty to consider the application.

Monday, 13 August 2012

Summer coverage

Like everyone else, my attention has been elsewhere recently – what an amazing couple of weeks!

I’m having a break from the usual blogging this month, but to stop things slipping through the net entirely, here’s a fairly random round-up of some property law snippets that have caught my eye when I wasn’t looking the other way.

On 16th July 2012 the Treasury published a long awaited definition of an ‘environmental taxexplains CMS Cameron Mckenna.

For some time, several nations have been mulling over the concept of moving some of the tax burden from traditional sources (for instance income), to activities which damage the environment or which need a stimulus to improve behaviour. If movement is to be made in this direction, Governments will need to be able to demonstrate this and a definition of environmental taxes will help to provide this demonstration.

To be an environmental tax, the tax must meet all of the following three criteria:-

·         The tax must be explicitly linked to the Government’s environmental objective.

·         The primary objective of the tax is to encourage positive behaviour change.

·         The tax is structured in relation to environmental objectives and the more polluting the behaviour the greater the tax levied.

The committee advising the government considered the most important characteristic of an environmental tax is that it promotes more sustainable and less environmentally damaging behaviours regardless of why it was introduced.

The Treasury has identified the CRC Energy Efficiency Scheme as being one “environmental tax” – which is what everyone was calling it anyway once it had stopped being a “revenue neutral” scheme.

Wedlake Bell warns of a bill quietly making its way through Parliament which would prevent pubs and local independent shops from being used for a supermarket and for connected purposes without planning permission (which is not currently required).

Will this bill, which has its second reading in October, be the saviour of local independent shops, or result in more empty premises?

The dangers of fly tipping and the related responsibilities of land owners and waste managers are explained by Howes Percival.

Businesses occupying more than one floor in a multi-storey building may now have the opportunity to save business rates reports Herbert Smith.

DMH Stallard explain Land Remediation Relief is relief on corporation tax available to companies that buy and develop contaminated or derelict land. The relief, introduced in 2001, was expected to be discontinued in 2012. However, the Government has announced that the relief will now continue to be available.

On 20 July 2012, DECC announced its response to its consultation on the solar industry subsidy, Feed-in Tariffs (FITs). The key changes to the FITs scheme stated in DECC’s response are explained in this bulletin by Eversheds.

Penningtons has produced a useful summary of the workings of the Landlord & Tenant Act 1954 and how it affects the ending and renewal of business tenancies – yes the Act’s been around a long time, but given the mountain, or perhaps swamp, of litigation it has produced over the years, it’s always a good idea to have a refresher.

Wragge & Co reports on a case which shows how difficult it is to get round the limitation of a right of way – even with the assistance of some sheep!

Key points are:

·         A right of way granted for the benefit of land A cannot be used in order to get to land B (whether via land A or otherwise).

·         The court will look at the substance of what is being done by the beneficiary of the easement in order to determine if there is a breach.

·         The rule cannot be evaded by briefly leaving land A before moving on to land B.

The underlying reason for the rule is so that the burden of an easement is not increased. Using an easement for the benefit of a second or third parcel of land is likely to increase the burden. But this will not normally be the case where the land B is another means of access such as a highway.  

Squatting is back in the spotlight - Caroline Delaney of Kingsley Napely reports that the statutory instrument formally enacting section 144 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 has now been made and so from 1 September 2012 it will be a criminal offence to squat in a residential building. 

Anyone living in a residential building at that date, even if they entered before 1 September 2012, will be committing a criminal offence if they originally went in without permission, creating overnight a new category of criminals.

Commercial premises are excluded from the offence. 

Caroline mentions that the Department of Justice (DoJ) has said they recognise the impact of squatters on commercial property but that they intend to see how the new offence “beds in” before considering whether to extend it.  

In the meantime the DoJ will apparently be exploring existing eviction procedures and criminal offences such as burglary and criminal damage, to see how they can be better used to protect the owners of commercial property.