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Almost Brexit-free? – Reminders for Property Owners

It is said that there are no immediate legal implications with the Brexit in respect of the UK land. But there has been a significant impact on the commercial property market due to the volatile financial conditions triggered by the UK’s decision to leave the EU. There may also be changes of some EU-derived legislations such as EPCs (energy performance certificates), MEES (minimum energy efficiency standards) and green leases (but we will have to wait and see, and we still have to comply with them).

Here are some reminders as to what you can and should do if you are a property owner.

  1. Need to raise money? – Property finance

Property is a key asset over which security can be taken in secured lending transactions in England and Wales. You may be able to borrow money by way of loans secured on property.

You might like to approach your existing lender or go and explore other lenders. You might like to obtain a second mortgage (for which you would usually need the first mortgagee’s consent), or to remortgage (to pay off the existing mortgage by taking a new mortgage).

Whatever you would choose among them when obtaining a mortgage, the lender would seek to establish that there is no issue with the Property that might adversely affect its value or its marketability prior to lending money, and would check various elements in respect of the Property, which include (but are not limited to): –

  • Property title;
  • Restrictive covenants (if any);
  • Rights of way and other easements;
  • Chancel repair liability (if any); and
  • Tenants and other overriding interests.

The lender will also consider: –

  • Planning history (and to see any outstanding obligations and/or capital payments under planning agreements);
  • Any risk of environmental liabilities on the Property;
  • Your insurance arrangements; and
  • (if the Property is let) Lease provisions.

If the Property is let to tenants, then the lender will particularly be interested in the cashflow generated by the Property, as this will be used to pay interest on the loan and perhaps to repay the principal loan amount.

  1. Letting the Property

You might consider granting a lease, or you are currently letting the Property, as to generate some rental incomes (and to keep the Property occupied and maintained). Here are some key issues: –

(a) Can you let the property? – check restriction/capacity

Don’t get angry, but you need to check the fundamental and obvious issues before letting it, and to ensure that you are able to let your Property.

(b) You should be reasonable as the Landlord.

The standard terms would be different depending on the purpose and the use of the Property, but it is advisable that you should act reasonably at all times.

(c) Granting a commercial lease – key points to consider

  • Inside or outside the 1954 Act?
  • Heads of terms? – see for the standard heads here
  • Rent deposit and/or licence for alterations?
  • CPSEs (Commercial Property Standard Enquiries) to reply

(d) Granting a residential lease – key points to consider

  • Long lease or short lease?
  • If AST (assured shorthold tenancy): Compliance with TDS (tenancy deposit scheme)?
  • Residential leases are heavily regulated, and the regulation is varied. Some legislations may be new to you – e.g. Homes (Fitness for Human Habitation) Act 2018, and/or the Tenant Fees Act 2019.

(e) MEES and other compliance issues

  • EPC – minimum energy efficiency standard (MEES) to be met before letting the property
  • Health and Safety (Fire safety, asbestos, defective premises act, and occupiers’ liability etc)
  • Tax implications
  1. Selling the Property

Some may argue it is not the “best” time to sell your Property, but when you have decided to sell it and get an adequate buyer, why not? The buyer (and its lenders) would like to check the Property in a similar manner as in financing for property (see paragraph 1 above: “Need to raise money? – Property finance”) and you might like to see above. Other issues to remember may be: –

  • Heads of terms (or memorandum of sale or other names)?;
  • Net sale proceeds – will they be sufficient to redeem any charge over the Property?;
  • Replies to enquiries (TA forms for residential, CPSEs for commercial property);
  • Deeds and other documents (including warranties, share certificate etc) intact?;
  • Any restriction or capacity in selling the Property?;
  • Check the contract once again and ask your solicitors if you do not understand;
  • Pay the Agent’s fees; and
  • Tax implications – do not forget your CGT/corporation tax (even you are non-UK resident/entity)!

At Cognitive Law we are very happy to assist and advise you on your property transaction. Please feel free to drop me a line at mayumi.hawkes@cognitivelaw.co.uk or ring me on 020 3034 0501.

Mayumi Hawkes