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Before the “Green Deal” is implemented, energy efficient improvements to properties are an expense incurred by the occupier effecting the improvements but benefit all future occupiers. The new proposals for the Green Deal under the Energy Act 2011 (“the Act”) will allow property owners to adopt energy efficient improvements at no upfront cost to the occupier. The improvements will be financed by accredited providers, and the cost will be recouped in instalments through energy bills.  The aim of the Energy Act is to reduce carbon emissions cost effectively.

There will only be an incentive for the current occupier to adopt energy efficient improvements if any supplementary charge attached to the energy bills is smaller than the resultant saving on the bill with the improvements. The Act introduces the Green Deal which is based on the principle that energy efficient improvements to properties are paid for by the resulting savings on gas and electricity costs; this principle is known as “the Golden Rule”. It will mean that energy bills for all occupiers, present and future, will be reduced and the owner of the property will benefit from the increased value of the property. (Note that for certain expensive measures for residential property, an extra subsidy could be available via the Energy Company Obligation.)

The government is obliged to devise framework regulations to establish a scheme for the authorising of Green Deal assessors, Green Deal providers or installers and to regulate their conduct in a Code of Practice. On 23 November 2011, DECC launched a consultation on the details of the Green Deal and the Energy Company Obligation (ECO), with a view to drafting these regulations. A Memorandum of Understanding has very recently been signed between the government and 22 organisations to become the first Green Deal providers.

It is likely that the Green Deal will come into force in Autumn 2012 and initially will apply to England only. Some of the fundamental principles that the Act will lead to are:

1. Payments are recoverable as a debt against the bill payer. There will not be a charge against the property nor will future bill payers be liable for any arrears. Bill payers are liable only in respect of the period during which they are the bill payer.

2. From April 2016, private residential landlords will be unable to refuse a tenant’s reasonable request for consent to energy efficiency improvements, where a finance package, such as the Green Deal and/or the Energy Company Obligation (ECO), is available.

3. From April 2018, it will be unlawful to rent out residential or business premises that do not reach a minimum energy efficiency standard (the intention is for this to be set at EPC rating ‘E’). This might mean that Landlords will be forced to enter into or consent to the deal.

For further information please contact Pitmans’ Real Estate, Planning and Environment Teams.

Sally Sharp
Partner
T: 0118 957 0362
E: ssharp@pitmans.com

Today, Chancellor of the Exchequer George Osbourne has announced a number of measures relating to Stamp Duty Land Tax. Namely:

• Regulations have been introduced in the budget to ensure that those who buy more expensive homes contribute more by way of stamp duty land tax;
• In addition, new regulations are being brought in to tackle tax avoidance when buying homes and to clamp down on loopholes, which include: setting up a limited liability company to buy the property, and immediately selling it back to the individual; and placing properties in overseas tax shelters, whereby stamp duty land tax is avoidable for those who are not a resident or domiciled here for tax.
• As from 22 March 2012  properties sold for more than £2m will be subject to a new 7% stamp duty land tax charge;
• Stamp duty land tax on residential properties over £2m bought via a company to increase to 15% as from 21 March 2012;
• The Government will consult on the introduction of an annual charge on residential properties over £2m purchased by offshore corporations with a view to new measures being in place by April 2013.

For further information please contact Pitmans Real Estate team.

Sally Sharp
Partner
T: 0118 957 0362
E: ssharp@pitmans.com

Andrew Davies
Partner
T: 0118 957 0221
E: adavies@pitmans.com

Paul Murray
Partner
T: 0118 957 0201
E: pmurray@pitmans.com

Delphine Mehouas
Partner
T: 0118 957 0353
E: dmehouas@pitamans.com

Andrew Taylor
Partner
T: 0207 634 4611
E: ataylor@pitmans.com

The Land Registry has paid out about £30m since 2006 in compensation for property fraud. In an endeavour to combat this increasing incidence of fraud the Land Registry has introduced a new form RQ for entering a restriction against a title to help prevent property fraud perpetrated against those property owners who live abroad, or not at the property. The effect of the restriction is to prevent any sale or mortgage of the property without a conveyancer first certifying that the registered owner and the person intending to transfer or mortgage the property are the same.

The intention is that this new form will help reduce property fraud perpetrated against those property owners who are not resident at their registered address, which may instead be empty or tenanted. These properties are often susceptible to property fraud with fraudsters posing as the registered owner and forging signatures on transfers or mortgages.

The Land Registry will not charge a fee for processing Form RQ and are testing the initiative for a six month initial trial period.

Please note that Form RQ is not appropriate for use in respect of commercial property, development land or where a company is the registered proprietor of a residential property. Individual owner occupiers can enter a similar restriction to the Form RQ on their residential property by using Form RX1 for a Land registry fee of £50.

For further information regarding this article or other property matters, please contact Pitmans Real Estate Team.

Sally Sharp
Partner, Real Estate
T: +44 (0) 118 957 0362
E: ssharp@pitmans.com

In the recent case of Avocet Industrial Estates LLP v Merol and another [2011] EWHC 3422(CH) the High Court has decided that a tenant did not validly exercise a break clause in a lease which was conditional on there being no outstanding payments at the break date.  In this case, whilst rent had been paid up to the break date, the tenant had on certain occasions previously paid the rent after the due date provided for in the lease. The lease contained a standard provision entitling the landlord to charge interest on overdue rent. The landlord contended that there was an outstanding payment of the interest at the break date even though the landlord had not issued any demand for the interest. It was held that the condition for exercising the break had therefore not been satisfied. Even the Judge conceded that the outcome was “a harsh one” for the tenant.

In the light of this decision, tenants will need to check carefully through all previous payments due under the lease,  whether rent or other sums, to ascertain whether the landlord could validly charge interest.

The High Court refused permission to appeal. However an application for permission to appeal is due to be heard in the Court of Appeal in March 2012.

Please note that the above is a summary only of the above case and its implications and is not intended to be fully comprehensive. Each matter will depend on its own particular circumstances and we therefore recommend that legal advice is sought on each occasion.

For further information regarding property matters, please contact Pitmans Real Estate team.

Sally Sharp
Partner
T: +44 (0) 118 957 0362
E: ssharp@pitmans.com

This article appeared in the Estates Gazette in 11 July 2011.

One of the starkest, and ongoing, effects of the economic downturn on the property sector has been the creation of a two-tier market. In residential, commercial, leisure or even agricultural space, the flight to quality has seen prime assets rise in value over the past 18 months, while secondary properties have languished stubbornly close to their 2009 lows.

Such a two-tier effect has also established itself within the market for residential development sites. Well-located sites that are suitable for high-end residential development (limited, except in a few cases, to the south-east of England) command values far beyond plots that are suitable for only high-density housing focused towards first-time buyers.

The contracts for such land purchases are usually conditional on planning permission being secured, if not already in place, which typically takes upwards of 18 months. As a result, many developers in 2008 and early 2009 found themselves in a situation where they had entered into contracts that were conditional on obtaining planning permission, having agreed to pay top dollar for a site that was no longer economical to develop.

Delaying tactics

These situations became common, with developers desperately searching for ways to extricate themselves from their agreements. They used a number of delaying tactics, such as arguing that planning permissions obtained were not satisfactory or trying to avoid obtaining planning by invoking extensions to the contract to delay the time at which payment was required in the hope that values would recover. Another tactic was for work on securing planning permission to grind to a virtual halt.

Of course, the converse was true for sellers with option agreements where prices were linked to open market values. In those circumstances, it was the sellers that tried to prevent planning permission being granted, which would have enabled developers to exercise the option at prices below sellers’ expectations.

So how does the situation look in 2011? The experiences of the past two years and the uncertain future while spending cuts take place has made developers nervous about entering into contracts at prices that may drop by the time planning permission has been obtained.

The nature of the ongoing two-tier market in residential development means that the vast majority of secondary locations are unsold, while prime plots are being sold at prices that sometimes reach pre-credit crunch prices.

At the root of this situation lies the time needed to secure planning permission and the subsequent time before any return can be made. With a fresh site, planning approval takes at least 18 months and construction another year. This means that a developer will not be able to sell its property until two-and-a-half years after it first purchased the land.

As a consequence, developers prefer to enter into option agreements, since this gives them absolute control as to whether they proceed. If such an agreement is not acceptable to the seller, developers will want as much “wriggle room” as possible in their conditional contract.

Some developers look to negotiate the inclusion of a right to rescind after planning permission has been obtained, enabling the developer to reassess the viability at that stage and decide whether it wants to proceed. The benefit for the owner is that it is able to use the plans and drawings contained in the planning permission at no cost.

The contract can also be drafted to give the developer as much flexibility as possible. For example, the definition of what is an acceptable planning permission should contain an acceptable minimum square footage so that, if planning can only be obtained for a smaller area, the developer would be able to rescind.

In addition, the definition of an onerous condition should include a maximum limit for section 106 contributions. If the contributions exceed that amount, the developer can decide whether it wants to proceed.

It is, however, essential that such contracts contain the right to waive the conditions so that even if they are onerous, the developer can proceed notwithstanding such conditions are not satisfied.

In a property market that remains risk-averse, such sites remove a significant amount of the risk faced by developers: housebuilders know exactly where they stand on the planning front, and are also building homes to sell in 12 months’ time. However, as one would expect, these sites command the best prices.

Reasonable endeavours

One final point to note is obligations imposed on developers in contracts outlining one party’s responsibility to secure planning approval. With the deal not becoming unconditional until planning consent has been gained, the term “reasonable endeavours” is often used to describe the extent of the developer’s obligations in obtaining permission. The difficulty, or the benefit as the case may be, in defining “reasonable endeavours” is that there is a significant amount of leeway in determining this obligation.

Two other similar phrases are used. It is usual to resist an obligation to use “best endeavours” as this imposes too strong an obligation. However, care should also be taken to try to avoid an obligation to use “all reasonable endeavours” as some cases have held that this obligation can be close to “best” and implies that every reasonable possibility has been exhausted before this obligation is satisfied.

The lesson is simple: for a party to have wriggle room, or stop the opposite party having too much, it is essential to define what is required. Failure to do so could prove costly.

If you would like to know more information about this article, then please contact either Sue O’Brien or Andrew Davies.