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Thursday, 20 December 2012

Going Bust - Review of Insolvency Practitioners Announced

Business minister Jo Swinson has today announced a review of insolvency practitioner (IP) fee charging and whether it represents value for money and fairness.

The review will be carried out by professor Elaine Kempson of the University of Bristol, who will hear views from members of the insolvency profession as well as debtors and creditors, and a report is expected in summer 2013.

The review will build on an earlier study conducted by the Office of Fair Trading which responded to concerns expressed by creditors that fees charged by IPs do not represent value for money.

There's also going to be a shake-up in the way complaints against IPs are handled by industry regulators.

The Insolvency Service will create a single complaints gateway in the spring next year so complaints against IPs can be made in an easier and more transparent way. There will also be sanctions guidance.

Earlier this week it was announced that the Insolvency Service will investigate the events surrounding the collapse of electrical retailer Comet.

It's "too little, too late" for landlords though, says the British Property Federation.

The property industry has repeatedly made the case for reform of the insolvency system, particularly in relation to pre-pack administrations and payment of rent during insolvency , which it feels is too far tipped towards company rescue, regardless of the consequences for creditors.

Back in April, the BPF launched a campaign, called Taking the Profit, seeking retail insolvency reforms to restore fairness to pensioners, especially with regard to pre-pack administrations.

That came shortly after the High Court had made an important ruling (in Leisure(Norwich) II Limited v Luminar Lava Ignite Limited (in administration)) that potentially lets administrators off the hook for a whole quarter’s rent if they are appointed a day after the quarter day - for more about that see my post at the time Free Quarter for Administrators Strengthens the Case for Monthly Rents.

There's been some encouragement for landlords recently though.

Wragge & Co report on a recent ruling by the court allowing a landlord to forfeit a lease where the tenant's business had been sold by its administrators as part of a "pre-pack" administration on terms that the buyer took on the risk that the landlord's consent to assignment of the lease to the new company would not be obtained. 

Photo by LHOON via flickr

Tuesday, 18 December 2012

Flood Insurance - Talks Resume

The property industry reminded the government yesterday that property without insurance is essentially worthless, as talks to ensure universal flood cover resumed after a month-long impasse.

The British Property Federation report that Cabinet Office Minister, Oliver Letwin, and the Association of British Insurers (ABI) resumed talks to find a replacement to the Statement of Principles, which expire next June.

Since 2000 the Statement of Principles ensures every property in the country can access insurance in exchange for state investment in flood defences. 

In November the ABI blamed the impasse in talks on the government’s refusal to consider providing a temporary overdraft facility to a proposed not-for-profit special insurance fund for 200,000 high-risk households which will otherwise struggle to get affordable household insurance when the current arrangements come to an end next year. 

Insurers want householders pay an extra £8 to £10 on top of their premiums which would go into a £100m pool used by insurers to cover flood affecting their homes.

The temporary overdraft facility would be used to pay claims if there were large-scale floods in the early years of the scheme before it had built up its reserves.

This needs to be sorted out quickly.

Without a deal, hundreds of thousands of households and businesses won't know whether they will be able to cover flood risk from next June.

Monday, 17 December 2012

Commercial Property - The Slowly Unwinding Debt

The UK Commercial Property Lending Market Report by De Montfort University - the largest of its kind to look at UK commercial property lending - reported last week that the slow unwinding of commercial property debt is continuing.

The British Property Federation has more on this, but here are some headlines.

The survey of the main lending organisations reports that debt with a loan-to-value ratio of over 70% fell by £12bn - from £106bn to £94bn - in the first six months of the year as lenders rebalanced their loan books.

High loan-to-value debt remains a legacy of the boom years.

70% is now the furthest many lending organisations are likely to go with senior debt, making anything in excess potentially impossible to refinance.

Debt held against UK commercial property generally fell 4.3 per cent to £204.1bn during the first half of 2012.

The report voices concern that the prolonged financial crisis, coupled with loans written at the peak of the property boom in 2007 now reaching maturity, has lead to an estimated £48bn of loans being declared in breach of financial covenant or in default; a situation that will deteriorate if there's a continuing decline in the capital values of the commercial property securing historic loans. 

The £11.3bn of new loans, including refinancing, made during the first six months of 2012 is roughly in line with previous mid-year reports. However, there's further suggestion of a ‘flight to quality’ with new lending focusing on prime property in London and the South East

The survey also reveals that of the £11.3bn of new lending only 5 per cent was lent to commercial development, starkly illustrating the continuing draining away of development finance to this sector.

In contrast, 15% was lent to residential development.

Photo by chadmiller via flickr

Friday, 14 December 2012

Lords of the Manor to Get Fracking?

New controls were announced yesterday by DECC for shale gas exploration - or "fracking" as it's commonly known (the gift that keeps on giving for headline writers).

"Fracking" is shorthand for  hydraulic fracturing, the process of blasting of water, chemicals and sand at high velocity into a shaft to crack rock and release the shale gas.

The new controls are an attempt to mitigate the risks of seismic activity - two small tremors happened in Lancashire in 2011 when fracking was first attempted.

The process has been widely used in the US, but is in its early stages in the UK and it's provoked a great deal of controversy - as you'll have seen in today's press.

I mention it here because it's relevant to a post I wrote recently on manorial rights - To the Manor Born: Time Running Out to Protect Manorial & Sporting Rights.

Before an operator can begin fracking they must obtain the landowner's permission.

In some circumstances however, the rights to mines and minerals might be owned separately from the land, and sometimes they might be owned as manorial rights - rights an individual or estate may possess over someone else's land by virtue of owning the lordship of a manor.

Manorial rights couldn’t be created after 1925.

Many of them derive from an ancient form of ownership known as copyhold, which was finally converted to freehold in 1926.

Owners of manorial and sporting rights however now have until 12 October 2013 to register those rights at the Land Registry or risk losing them altogether against future buyers of the affected land.

That's because although the rights are currently classed as “overriding interests” (which means they don’t have to be recorded at the Land Registry to be enforceable), on 13 October 2013 they will lose that status, meaning the rights will only bind a buyer of land if they are registered as a notice on the title.

Manorial rights are being dealt with in the same way as chancel repair liability and under the same legislation, the Land Registration Act 2002

Last year the Telegraph reported that lords of the manor were rushing to cash in on the rush for shale gas by registering their mineral rights before they are lost forever.

There are many other hoops would be shale-gas exploiters need to jump through before they can get fracking , including obtaining planning permission and other regulatory consents, environmental permits and scrutiny from the Health and Safety Executive before DECC will consider whether to grant consent.

Nevertheless, ownership of some ancient mineral rights could prove to be very valuable in the light of yesterday's announcement.

Will there be a frenzy of manorial registrations over the coming year?

Photo by EssJayNZ via Flickr