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News & Blog

Property Newsletter – May 2014

Welcome to the latest departmental newsletter from Davis Blank Furniss. Our focus this month is on our Property team.

DeBrieF OPINION

Susan Warden – trainee solicitor in our Property department – discusses the proposed construction of HS2…

There’s no doubting that HS2 is dividing public opinion with the affect it’ll potentially have on communities being at the heart of people’s concerns.

The proposed construction is likely to have an impact on property prices along the route. The plan has been split into two phases: Phase One from London to the West Midlands and Phase Two from Birmingham to Leeds and Manchester. On 28th January last year, the government announced an initial preferred route for Phase Two and a public consultation followed in July last year. The actual route is not expected to be announced until 2015 and isn’t expected to be up and running until 2033.

The government will have compulsory purchase powers to facilitate the HS2 project by buying up land needed for the scheme, whether the owner wants to sell or not. If your land is selected for compulsory purchase then you will be entitled to compensation for the loss of your land.

However, uncertainty about which properties will be affected is likely to reduce the value of potentially affected properties until the actual route is announced. If the draft HS2 Bill, which MPs recently approved at its second reading, passes in its current form then this uncertainty will be amplified by the unprecedentedly wide compulsory purchase powers that would be granted to the government. These would potentially allow local authorities to buy properties that had not previously been affected. Although this bill relates to Phase One of the scheme, property values are likely to be affected on the assumption that similar measures will be included in the separate bill which will be brought in later by the government to allow the second phase to go ahead.

In order to ameliorate the consequences of this uncertainty, the government launched a discretionary Exceptional Hardship Scheme last year, which is expected to remain in place until 2016 for people affected by Phase Two. The scheme is open to eligible residential and small business owner-occupiers whose property value may be affected by the HS2 proposals and who can show that they need to sell before a final decision on the route has been made. By the start of April, 94 applications had been made under this scheme and eight purchases had completed for an average purchase price exceeding £514,000 per property.

Alternatively, from around the end of 2016, property owners may be able to use a ‘statutory blight procedure’ to force the government to acquire their property now rather than wait for the compulsory purchase procedure to take effect.

If you are attempting to sell property which may be affected by the HS2 proposals, it is important to take advice early on. This will help ensure smooth management of any extra complexities.

To learn more about Susan and her work, please visit:
http://www.dbf-law.co.uk/our-people/susan-warden/

DeBrieF TEAM SPOTLIGHT: Jennifer Smith, solicitor…

What does your role at Davis Blank Furniss involve?
I deal with all aspects of commercial and residential property, including commercial property sales and acquisitions, advising on business tenancies for landlords and tenants, and sales, purchases and re-mortgages of residential properties.

What is the best thing about your job?
Buying a property is probably the most expensive thing anyone will buy in their life so it can be a stressful time. It is satisfying to get a matter completed for a client as smoothly as possible and seeing them pleased with the end result.

What is the best case you have been involved in?
In terms of high value, I was involved in the purchase of a large multi-million pound commercial property portfolio which started out fairly complex and we managed to unravel the problems and achieve the right result for the client. It is equally satisfying to complete a first time buyer purchase when you hear how excited a client can be about their first home.

Name the person who has been the biggest influence on your career.
It wouldn’t be fair to name just one person as there are probably many people who have had a hand in encouraging me and helping me along the way. I was lucky to have some brilliant teachers at school and I think perhaps they gave me the grounding and confidence I needed to pursue a professional career.

If you were not a lawyer, what would you be doing?
If paying bills was no object, I’d be travelling the world. Otherwise I always fancied doing something in sport, although probably not on the playing field!

For more information on Jennifer and her work, please visit:
http://www.dbf-law.co.uk/our-people/jennifer-smith

DeBrieF LEGISLATIVE DEVELOPMENTS

Charlotte Fielding – solicitor in our Dispute Resolution team – discusses commercial rent arrears…

Distressed about commercial rent arrears?

The Tribunals Courts and Enforcement Act 2007 and the Taking Control of Goods Regulation 2013 contain changes which are intended to modernise the collection of commercial rent arrears. The changes relevant to the collection of rent arrears of commercial property came into force on 6th April 2014. Residential tenants have long received the benefit of fairly significant legal protection in relation to the collection of rent arrears. The new commercial procedure is giving commercial tenants a taste of this protection.

One of the key changes brought in by the new legislation is in relation to the remedy of distress. Distress is a remedy which has been available (under common law) to landlords since medieval times. It allowed a landlord (or the landlord’s agents) to enter the property to seize goods to the value of the arrears and sell the goods to satisfy the debt. The new legislation has abolished the right.

The new legislation has created a new process called the Commercial Rent Arrears Recovery Procedure (CRAR) to replace the common law remedy of distress. CRAR allows a certified enforcement agent to attend the property and take control of goods. The landlord cannot exercise this procedure themselves. The enforcement agent is able to attend the property and remove goods and secure them elsewhere or enter into a controlled goods agreement with the tenant (similar to a walking possession agreement under the law of distress).

The goods can then be sold for the best price which can reasonably be obtained. This sale cannot take place until seven clear days after removal of the goods and the tenant must be given seven clear days notice of the sale.

CRAR can only be used to recover rent under a written lease of commercial premises. This is the sum paid for the possession and use of the premises. It is common for leases to reserve other items as rent, for example, service charges, council tax and insurance. CRAR cannot be used to recover these sums even if they are reserved as rent under the lease. It is also important to note that if CRAR is used then the landlord will waive any right to forfeit the lease (i.e. bring the lease to an end) on the basis of those arrears of rent. A new right to forfeit the lease may develop in the future.

In order to use the CRAR procedure the enforcement agent has to give at least seven clear days notice before CRAR is to be exercised. This may prove beneficial to the landlord as some enforcement agents consider that some tenants may make payment upon receipt of this notice and not require a visit by the enforcement agent (which increases the fees payable). However, there are no figures available yet to support this assertion. There is also a potential risk that the provision of this notice may mean that the tenant removes any goods from the property prior to the enforcement agent attending thereby defeating the procedure and reducing the chances of a successful recovery.

If you are a landlord or a tenant who is thinking of exercising CRAR or CRAR is being exercised against you and you would like some advice please contact a member of our Dispute Resolution team who will be able to assist.

For more information on Charlotte and her work, please visit:
http://www.dbf-law.co.uk/our-people/charlotte-fielding/

Jennifer Smith – solicitor in our Property department – explains the new rules changing the mortgage application process…

On Saturday 26th April, the Financial Conduct Authority (FCA) is set to introduce a set of new rules that will change how the mortgage application process operates.

In an effort to pursue responsible lending it has been decided that banks and other mortgage lenders needed to gather more information from potential customers about how much they could afford to borrow, before agreeing an offer with them. Lenders will be asking for further details of a borrowers spending habits and general expenditure as well as taking into account their income to gain a more detailed understanding of their financial position. Information such as commuting costs, household expenditure and social spending will be asked for in much more detail than perhaps they were before to meet the new criteria. Other details such as reasons for job changes or length of service at an employer may also be requested.

It is hoped that the more detailed checks will be beneficial to all parties so that borrowers only accept loans they can afford and lenders only offer loans that can be repaid. It is envisaged that borrowers’ individual circumstances will be looked at to ensure that the right products and terms are being offered and seeking to avoid people signing up to excessive borrowing that may not be suitable and which as an industry contributed to the recent financial crisis.

On the other hand opponents of the new rules suggest that they will result in longer application times and more loan rejections thus making it even more difficult for first time buyers to get on the ladder or for existing homeowners who will be subject to fresh affordability checks before they can get a mortgage on a new property.

Before starting a mortgage application, you may therefore want to check your bank statements and be clear on what your usual expenditure is so that you can show that your day-to-day finances are in order. You should also check what sort of information will be requested from you before you start the application process so that you have everything readily available and will avoid any undue delays as a result of missing or incomplete information.

Most lenders actually already operate their mortgage application process to include borrower affordability questions so in practice it may be that few changes will be noticed with some lenders, but it is still advisable that you ensure you are familiar with your finances before making an application so that the process is as smooth as possible.

For more information on Jennifer and her work, please visit:
http://www.dbf-law.co.uk/our-people/jennifer-smith

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