UK: Property In 2018: All Change

Last Updated: 12 January 2018
Article by Emma Broad, Darren Debock and Chris Carlisle

Who says that property law doesn't move with the times? 2018 kicks off with talk of a register of beneficial ownership, consultations on topics as diverse as electronic signatures and chancel repair liability, plus proposals for significant reform of residential leasehold, further reform of business rates and the long awaited implementation of the ban on new lettings of properties not meeting minimum energy efficiency requirements. We hope you'll read with interest.

Proposals to introduce a register of beneficial ownership of overseas entities owning property in the UK is a step closer to becoming a reality

In 2017 the Department for Business, Energy and Industrial Strategy called for evidence on proposals for a new register showing who owns and controls overseas legal entities that own UK property or participate in UK government procurement. Those proposals were summarised in our update " Property ownership by overseas investors: UK Government begins consultation process for Beneficial Ownership Register".

The government has now confirmed that it intends to pursue those proposals. On page 36 of the government's anti-corruption strategy for 2017-2022 it declares that it will "publish a draft bill in this session of parliament for the establishment of a public register of beneficial ownership of overseas legal entities. It will require them to provide this information when they own or purchase property in the UK or are participating in central government contracts". No further details were provided.

This development will be of interest to all overseas entities holding or intending to acquire property in the UK and we will provide further details as and when they become available.

The Law Commission's 13th Programme of Law Reform – what is in it for property?

On 14 December 2017 the Law Commission announced 14 new project areas for its 13th Programme of Law Reform. Topics that will be of interest to those involved in property include:

  • electronic signatures, smart contracts and residential leasehold (covering topics such as enfranchisement, commonhold and the regulation of managing agents) – these projects are to start immediately;
  • automated vehicles, registered land and chancel repair liability, and unfair terms in residential leasehold – these projects should commence in the near future.

Project times vary from six months to three years.

Disappointingly the Law Commission did not include proposals to review commercial conveyancing issues such as those surrounding lease assignments following the decision in EMI Group Limited v. O&H Q1 Limited [2016] EWHC 529 (see our update " The AGA GAGA SAGA" for more information).

The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (Regulations) introduce restrictions on new lettings

From 1 April 2018 it will be unlawful for landlords to agree a new tenancy (or a renewal of an existing tenancy) of domestic or non-domestic properties with energy performance certificate ratings of F or G unless an exemption has been registered. Failure to comply with the Regulations could lead to a fine of up to £150,000 per property and publication of the non-compliance.

For further information on the Regulations see our update " Minimum Energy Efficiency Standards in buildings".

In addition, landlords of domestic property should note that the Department for Business, Energy and Industrial Strategy has recently launched a consultation on amending the Regulations to introduce a capped landlord financial contribution element. As originally conceived, the Regulations incorporated the principle that any energy efficiency improvements would be at no cost to landlords, with relevant improvements being financed through pay-as-you-save funding, grant funding or subsidy. The consultation considers replacing that principle with a landlord funding contribution capped at £2,500 per property. The consultation closes at 11.45 pm on 13 March 2018.

Supreme Court appeal (1): relevance of motive to the statutory grounds for opposing lease renewals pursuant to the Landlord and Tenant Act 1954

By virtue of s.30(1)(f) of the Landlord and Tenant Act 1954 (ground f) a landlord can oppose a lease renewal where it can demonstrate an intention to demolish or reconstruct the relevant premises. In 2017 the High Court decided in S Franses Ltd v. Cavendish Hotel (London) Ltd [2017] EWHC 1670 that motive is largely irrelevant when considering this statutory ground of opposition. Accordingly, in that case, since the landlord had demonstrated sufficient intention to carry out a scheme of reconstruction to the premises, it did not matter that the landlord's primary motive for undertaking the works was the removal of the tenant rather than any commercial purpose, and ground f was still satisfied.

In 2018 we wait to see whether the Supreme Court decides to hear the tenant's appeal against this decision. If it does, will it too hold that motive is irrelevant to ground f? Landlords and tenants will be interested in the outcome – if motive is irrelevant then arguably the protection the 1954 Act offers to tenants will be vulnerable to being undermined by landlords with the will and the means to construct unnecessary schemes of reconstruction.

For further information on the High Court decision please see our update " Constructing a way around the 1954 Act".

Supreme Court appeal (2): can you have a valid easement over recreational and sporting facilities?

In Regency Villas Title Ltd v. Diamond Resorts (Europe) Limited [2017] EWCA Civ 238 the Court of Appeal concluded that, despite previous thoughts to the contrary, it is possible to create valid easements over recreational and sporting facilities. This decision is being appealed and is due to be heard by the Supreme Court later this year. Any clarification of this area of law is to be welcomed, especially given the increasing prevalence of recreational facilities in modern redevelopment schemes.

Outcome of the Law Commission's review of the Land Registration Act 2002

Land registration is key to the ownership and transmission of property in England and Wales. It is so important that the government confirmed in the 2017 Housing White Paper "Fixing our broken housing market" that it wants to achieve comprehensive land registration by 20301. Accordingly, we await with interest the outcome of the Law Commission's 2016 consultation on updating the Land Registration Act 2002 (2002 Act) which looked to comprehensively review the legislation that underpins land registration. A report and possibly a draft bill is expected during the course of 2018.

Changes to the 2002 Act could have a significant impact on those involved in property in England and Wales. By way of example, the Law Commission invited views on limiting the circumstances in which a mortgagee can claim against the Land Registry's indemnity – see our update " Mortgagees take note: the Law Commission thinks you might be special" - something that, if implemented, could have a material impact on lenders.

Ban on the sale of new or existing freehold houses on a leasehold basis and restrictions on ground rents

In July 2017 the government issued a consultation "Tackling unfair practices in the leasehold market" to look into, among other things, a prohibition on the sale of leasehold houses, limiting ground rents and protecting leaseholders from possession orders. The proposals outlined in the consultation were summarised in our update " Consultation on leasehold reform: a wide-ranging project".

Having considered the responses to the consultation, the government has now issued its response. Two of the most notable proposals to come out of the response are:

  • confirmation that the government will "bring forward legislation as soon as Parliamentary time allows to prohibit new residential long leases from being granted on houses, whether new build or on existing freehold houses". The response acknowledges that exemptions to the ban may be necessary but, while suggesting shared ownership schemes and Community Land Trusts could be considered, the government does not confirm the categories of exemption. Instead the government will "consider further if there are any particular cases where leasehold houses can be justified and, if they can, [the government] will work with sectoral partners to ensure that they are provided on acceptable terms to the consumer"; and
  • the government's commitment to "introduce legislation so that, in the future, ground rents on newly established leases of houses and flats for more than 21 years are set at a peppercorn (zero financial value)".

We await the draft legislation to implement these changes and will be commenting further in due course.

Business rates: legislative changes

In 2018 we can expect legislation to reinstate the business rates position prior to the Supreme Court decision in Woolway (VO) v. Mazars LLP [2015] UKSC 53.

Prior to the decision in Mazars it was the Valuation Office's practice to treat contiguous properties when occupied by the same person as a single hereditament for the purpose of assessing business rates. This included circumstances where the premises were separated by common parts, provided there was sufficiently strong functional connection between them. Following the decision in Mazars two contiguous properties in the same occupation will only be assessed as one if they can be considered a self-contained piece of property. For further information please see our update " Changes to business rates: how could they affect you?".

In late 2017 the government issued a consultation "Business rates in multi-occupied properties" seeking views on the proposed legislative changes to reinstate the pre-Mazars position. Those affected by the Mazars decision will be particularly interested in those parts of the consultation which discuss plans to allow ratepayers the opportunity to apply to amend the rating list possibly as far back as 2010. The consultation closes on 23 February 2018.

Footnotes

1 Currently around 86% of land in England and Wales is registered

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