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Life is getting harder for offshore property owners

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The latest Companies House business plan makes tough reading for offshore corporate owners of UK property, with the annual update championing plans for a register of their beneficial owners.
 
The company registrar has confirmed that it will be assisting the Department of Business, Energy and Industrial Strategy (BEIS) and plans to work in conjunction with HM Land Registry in developing a register extending to beneficial owners of overseas companies holding UK residential and commercial property.

This will implement the Government’s ideological attempt to crack down on money laundering and financial crime in the UK, and stands to be the first of its kind in the world.  It is no secret that the use of offshore companies to launder money via the UK property market is an increasing problem. The scale of the issue is in fact much larger than many might assume. Companies House recently reported that over 75% of properties currently under investigation use off-shore corporate secrecy.

That said, for the many legitimate offshore entities that choose to invest in the UK, this register will mean more administration, more fees, and more ‘red tape’, aside from a perceived loss of privacy given that information will be placed on a public register for all to see in a similar way to the PSC (People with Significant Control) Register.

Arguably, reporting requirements in some overseas territories are lax in comparison to the UK.  This allows criminals to cover their tracks behind such companies by taking advantage of their comparative secrecy. By introducing the requirement, the UK Government hopes to clearly send a message that if you own property in the UK, then you will be held accountable in the UK.

It has yet to be decided how the register will work and be enforced. However, there have been suggestions that if an overseas company fails to comply with the requirements then they could face criminal sanctions as well as the ability to lose the power to sell the property.

Companies House will be releasing updates as plans develop over the next few years but have confirmed that the register is unlikely to be introduced until around 2021.

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The Importance of Lease Registration

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Another recent high court decision regarding effective service of a break notice highlights the importance of registration following the lawful assignment of a commercial lease.

In Sackville UK Property v Robertson Taylor Insurance Brokers Limited and Integro Insurance Brokers Limited [2018] EWHC 122 (Ch), the landlord rejected service of a break notice by the new tenant on the ground that the notice was invalid, as it had been served by a party who was merely a beneficial owner and not the tenant at the time the notice was served. 

On an assignment of a commercial lease, the existing tenant is generally required to obtain the consent of the landlord to assign (‘transfer’) the remainder of the term of the lease to a new party, known as the assignee. When a registered leasehold title is assigned, a transfer deed is executed by the parties and sent to land registry to enable the assignee to be registered as proprietor of the leasehold title following assignment.

On the facts of this case, the landlord had granted consent to the assignment of the lease. However, the assignee failed to register a change in the ownership of the leasehold title at Land Registry on the mistaken belief that the assignment was sufficient to transfer the remainder of the lease. By failing to register the transfer of the registered legal title, the assignment took effect in equity only and the legal estate did not vest in the assignee. 

The new tenant purported to serve a break notice in accordance with the terms of the lease.  It is always advisable to obtain legal advice when serving a break notice, as this is one of the most litigated clauses in commercial leases. 

In this case, the landlord rejected the notice as invalid because the tenant had failed to register themselves as legal proprietor, and the high court agreed with the landlord; a disposition of a registered estate does not operate at law until the disposition is completed by registration.

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Employers - Get Ready For GDPR

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You have unlikely escaped the General Data Protection Regulations (GDPR) which will take effect on 25 May 2018. We look at what this means for businesses and employers.

Currently, the UK relies on the Data Protection Act 1998, which was enacted following the 1995 EU Data Protection Directive. Some of the new regulations mirror those found under this Act, but as of May this year, all will be superseded by the new legislation. GDPR aims to introduce tougher fines for non-compliance and breaches and gives people more say over what companies can do with their data. It also makes data protection rules more or less identical throughout the EU.

Under Article 5 of the regulations it requires that personal data shall be:

  1. Processed lawfully, fairly and in a transparent manner in relation to individuals;
  1. Collected for specified, explicit and legitimate purposes and not further processed in a manner that is incompatible with those purposes: further processing for archiving purposes in the public interest, scientific or historical research purposes or statistical purposes shall not be considered to be incompatible with the initial purposes;
  1. Adequate, relevant and limited to what is necessary in relation to the purposes for which they are processed;
  1. Accurate and, where necessary, kept up to date: every reasonable step must be taken to ensure that personal data that are inaccurate, having regard to the purpose to which they are processed, are erased or rectified without delay;
  1. Kept in a form which permits identification of data subjects for no longer than is necessary for the purposes for which the personal data are processed; personal data may be stored for longer periods insofar as personal data will be processed solely for archiving purposes in the public interest, scientific or any public interest, scientific or historical research purposes or statistical purposes subject to implementation of the appropriate technical and organisational measures required by the GDPR in order to safeguard the rights and freedoms of individuals; and
  1. Processed in a manner which ensures appropriate security of the personal data including protection against unauthorised or unlawful processing and against accidental loss, destruction or damage, using appropriate technical or organisational measures.

Article 5(2) of the regulations requires that the controller should be responsible for, and be able to demonstrate compliance with the principles. So, in short, what does that all mean for you?

As a business, you must have a lawful basis in order to process personal data. Article 6 of the regulations sets out the lawful basis for processing data.  At least one of these must apply whenever you process personal data. The lawful bases for processing data are:

  • The data subject has given consent to the processing of his or her personal data for one or more specific purposes.
  • Processing is necessary for the performance of a contract to which the data subject is party or in order to take steps at the request of the data subject prior to entering into a contract.
  • Processing is necessary for compliance with a legal obligation to which the controller is subject.
  • Processing is necessary in order to protect the vital interests of the data subject or of another natural person.
  • Processing is necessary for the performance of a task carried out in the public interest or in the exercise of official authority vested in the controller.
  • Processing is necessary for the purposes of the legitimate interests pursued by the controller or by a third party, except where such interests are overridden by the interests or fundamental rights and freedoms of the data subject which require protection of personal data, in particular where the data subject is a child.

You must determine the lawful basis (or base) before you begin processing and should document it, as well as the purposes for processing. Privacy notes should be updated in compliance with the new regulations.

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Interest-Only Mortgages – Stirring Up Future Trouble?

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The mortgage market today offers a wide range of products for your average and, not-so-average, house buyer. But just how risky are interest-only mortgages?

Whether you are a first-time buyer, multiple property owner or looking to help your children get onto the property ladder, there’s a mortgage out there for you. At least, that’s what we’re led to believe…

In fact, broadly speaking, mortgages fall into one of only two types - repayment and interest-only.

Under a repayment mortgage, your monthly payment will clear both the month’s interest on the loan and a small part of the capital. The end result being that, when the final payment is made at the end of your agreed mortgage term, you own the property free and clear.

Under an interest-only mortgage, the monthly repayments simply clear that month’s interest that has accrued, however, the capital (the original loan amount) remains untouched. At the end of your mortgage term, you will still have to repay the original loan amount, and the sum will be due to be repaid in full immediately.

Monthly repayments on an interest-only mortgage are typically cheaper than those under a repayment term. First-time buyers tend to opt for interest-only as they appear to be the more attractive, cheaper option. If finances are tight, some borrowers change their mortgage to interest-only, telling themselves at the time that it’s only for the short term and they will change back when finances aren’t so tight. People who do so are unlikely to put repayment plans in place due to the cost. Borrowers believe they will switch to a repayment mortgage when the current deal comes up for renewal, or when finances get easier. The reality is they never do because interest-only will always be the cheaper monthly option.

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Is Your Lease Extension About to Become a Lot Cheaper?

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The Court of Appeal is soon expected to deliver their decision on an appeal brought by a leaseholder challenging the traditional tools by which a leasehold premium is calculated.

Sloane Stanley Estate Trustees v Mundy [2016] UKUT 223 (LC) is a case that challenges the system of lease valuation, specifically the ‘relativity graphs’ used by surveyors and others in the property industry to calculate the value of the property following the increase in the lease. It is the position of the applicant that the existing models are currently too generous to the freeholder. In May 2017, the Upper Tribunal (Lands Chamber) ruled against a new relativity graph proposed by the applicant which would have reduced the cost of lease extension premiums for flat owners.  

Leases are known as ‘wasting assets’ as they diminish in value as they expire over time. Traditionally, mortgage lenders wouldn’t provide loans on leases below 70 years, although over the last ten years many lenders have increased this with some lenders requiring 85 years of unexpired term; 5 years beyond the point at which the ‘marriage value’ comes into effect. The marriage value is the additional premium on lease extensions paid to the freeholder that reflects the increase in the value of the property once the lease has been extended.

As a result of the increased lease extension premiums, many leaseholders who have allowed their leases to run down now face inflated costs when looking to extend. In some cases, the premium increases to the point where the property has to be sold at a reduced cost to allow the purchaser to immediately extend the lease at the same time as their purchase to obtain mortgage finance.

Whatever the result of Mundy v the Sloane Stanley Estate, here at Pinney Talfourd we advise all leaseholders to look into extending their lease long before it reaches 85 years. If you have allowed your lease to run down beyond this point, then it really is a ‘sooner rather than later’ scenario to make sure the property is marketable when you look to sell the property or extend the lease. If the legal challenge is successful, we expect changes to the way that leasehold premiums are calculated that could benefit leaseholders - but it may take time for any changes to come into effect.

 

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Your responsibilities as a company director

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Aside from the obvious duties, such as filing reports at Companies House, there are numerous other duties and liabilities all directors should know about.

If you fail to comply with your duties your position on the board may be under threat, as you can be held liable by the company and in some circumstances by minority shareholders. In the most serious of cases directors may be disqualified or face criminal sanctions. 

The duty to avoid conflicts of interest

A director must avoid a situation in which they have a direct or indirect interest that may conflict with the interests of the company. This duty is extremely broad, extending to situations where any information or opportunity available to the director is exploited for their own benefit. The liability of the director who breaches this duty is severe: they will be personally liable to account to the company for any profits or benefit they have received as a result of the breach. The conflict of duty may be breached even in situations where there has been no actual loss caused to the company, it continues after a director has resigned.

The easiest way to avoid liability for a conflict of interest is to obtain advance authorisation from the company for any proposed activity, unless the articles of association prohibit them. Directors who have a personal interest in a proposed transaction can avoid liability by declaring their interest in advance.

There is a defence relating to unforeseeable conflicts, where ‘the situation cannot reasonably be regarded as being likely to give rise to a conflict of interest’.

The duty not to accept benefits from third parties

A director must not accept a benefit from a third party that arises as a result of being, or doing anything as, a director. Such benefits commonly occur as a ‘commission’ paid to the director personally whilst the director is in the process of negotiating a business transaction on the company’s behalf.

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Adult Children Inheritance Claims - Reasonable Provision refused in Court Case

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If you are not a beneficiary in your parents’ Will, why would a court automatically grant you any of their estate? A recent case suggests they may not...

When 41-year-old Danielle Ames' father passed away having cut her out of his £1 million Will, she brought a claim against his Estate. The Estate included the £650,000 family home in Hertfordshire and a number of other assets.

Ms Ames argued that no reasonable financial provision had been made for her. She claimed she was dependent upon her father and entitled to a share of his Estate which had been left entirely to her stepmother, Elaine Ames.

Miss Ames expressed surprise at having been cut out of her father’s Will but Judge Halpern QC determined she had exaggerated the strength of her relationship with her father and she had no moral claim on his money. The Judge told Miss Ames at Central London County Court that her lack of employment was a lifestyle choice and when claiming that her father had assured her that “it will be all yours one day” she was “gilding the lily”. Judge Halpern decided that Mr Ames’ widow with whom he had lived with for over 30 years required the entirety of the Estate to lead a comfortable retirement. The Judge commented that Mrs Ames was not living the highlife and needed the whole of the husband’s Estate to meet her reasonable needs.

Statutory claims

A court will generally try to uphold the terms of a valid Will, but there is a recognised statutory claim under the Inheritance (Provision for Family & Dependants) Act 1975 for a child to make a claim on a parents Estate whether by having been excluded from the Will or under intestacy provisions. Such claims do not prohibit adult children, and in a case where reasonable financial provision has not been made, the Inheritance Act enables the court to vary the distribution of assets between potential dependants.

There appears to be no good reason why Miss Ames was unable to secure employment, suffering from no disability. The Judge was of the view Miss Ames had failed to discharge the burden proving that she was unable to obtain work.

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Implications of filing a late Defence

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File a Defence late and the chances are you will face judgment being entered against you.

The case of Billington –v- Davies and another [2016] EWHC 1919 [CH] heard in the High Court, considered an application by a Claimant for default judgment where the Defendants Defence was filed at Court after the deadline set for filing.

In considering whether to give default judgment, the key question for the Court is whether or not the Defence has been filed, rather than the mertis of the defence. There are strict time limits for acknowledging service and filing a Defence which are calculated by reference to service of the Claimant’s Particulars of Claim on the Defendant. Within 14 days after service of Particulars of Claim, a Defendant must have filed either an Acknowledgment of Service or a Defence. If neither is filed after 14 days, default judgment can be entered. If an Acknowledgment of Service is filed, a Defendant must file a Defence within 28 days after service on him of the Particulars of Claim. If no Defence is filed within that deadline default judgment can be entered.

In Billington the First Defendant did not file a Defence until the day before the Hearing of the Claimant’s application for judgment in default. It was argued that it was a pre-condition for obtaining default judgment that a Defence must not have been filed; the implication being that even a late Defence would be enough to scupper a successful application for default judgment. Deputy Master Pickering rejected this argument. In his judgment, the reference to a Defence in the CPR “was to a Defence which had either been served within time, or in respect of which an extension had been granted”. In the absence of either in this case, the Court considered the significance of a note contained in the White Book (the rule book on civil procedures), which stated that filing a Defence late would prevent a Claimant obtaining default judgment. It was held by the Court that this note was essentially wrong.

It was found that neither the Defendant’s lack of funding, nor the existence of negotiations between the parties existing prior to the application for default judgment, were good reasons for delaying filing a Defence. The Deputy Master found that this was not an appropriate case where he should exercise his discretion to extend time.

A useful reminder

This case serves as a useful reminder for all those served with Claim Forms on the perils of ignoring the time limits for filing a Defence. Anyone served with a Claim Form and/or Particulars of Claim by a Claimant, should seek legal advice as quickly as they can to avoid filing and serving documents late and/or pleading facts which are unhelpful or not accurate or comprehensive enough for both the Court and the other side to understand the essential facts in the case.

MORE INFORMATION 

If you have been served with Claim Forms and require advice on filing a Defence, please call on 01708 229444.
 
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as at October 2016.

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Why are inheritance disputes on the rise?

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Pinney Talfourd's Contested Probate Solicitor, Kerry Hull explains that the rise in inheritance disputes is due to a number of factors. 

Inheritance disputes were once considered the preserve of the super-wealthy or famous but in recent years the number of children disputing their parent’s estate in the High Court has risen by 11% to 116 in 2015 from 104 the previous year according to The Times.

Kerry Hull, contested wills and probate solicitor at Pinney Talfourd in Essex explains that the rise in inheritance disputes is due to a number of factors.

The use of home-made wills is a major contributor, but the rise in these types of disputes also reflects the changing nature of our society’, says Kerry.

Higher rates of divorce, remarriage and cohabitation, combined with an increase in the value of estates, longer life expectancy and a greater awareness of rights, means that relatives are less willing to do nothing when their inheritance is taken from them.

An inheritance dispute can take any number of forms, from concerns that a will has been incorrectly made or forged, to a dependant believing that they have been unfairly left out or not received what they were entitled to.

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Who will inherit your estate - promises and arguments

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Solicitor Chris Dickinson explains the importance of knowing what is in your estate and who you have promised it to.

From time to time, families will talk about the future and parents will often give an indication to their children of what they can expect to inherit when they pass away. However, relationships and circumstances can change over time and this may influence how people choose to leave their estates.

In the recent case of Davies v Davies, an elderly couple owned a farm worth in the region of £4m. They had three children. One of their daughters worked on the farm for 25 years for a minimal wage as she helped support its upkeep. The other two children did not work on the farm as they were progressing their own careers. The parents had repeatedly promised their daughter that she would eventually inherit the farm from them in recognition of her commitment to its maintenance.

After a family dispute, the couple had a falling out with their daughter and sought proceedings to evict her from the farm. In turn, the daughter claimed that she had a beneficial interest in the farm through her commitment to its upkeep and the promises made by her parents. The daughter also claimed that she had worked for a minimum wage on the understanding she would inherit the farm and, if this was not going to be the case, that she would have pursued a more fruitful career like her siblings.

The judge agreed with the daughter’s argument that she had acted to her own detriment in reliance on her parents’ promise and made an award of £1.3m to her. The parents appealed this decision and were successful in having the daughter’s award reduced to £500,000.

Cases like this demonstrate the importance of knowing what is in your estate, who you intend to benefit, whether there are likely to be any claims brought against you or your estate and, ultimately, seeking proper legal advice to ensure your affairs are in order. 

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If you would like to discuss your affairs and have your Will prepared or updated,please contact a member of our Wills, Trusts, Tax and Probate Department who can expertly guide you through the process. Call 01708 229 444 or email This email address is being protected from spambots. You need JavaScript enabled to view it. 
 

This article was written by Chris Dickinson, an Associate Solicitor in our Wills, Trusts, Tax and Probate Department at Pinney Talfourd Solicitors. This article is only intended to provide a general summary and does not constitute legal advice. Specific legal advice should be taken on each individual matter. This article is based on the law as at August 2016.
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Office of the Public Guardian – Gratuitous Care Payments

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Becoming a Deputy carries a lot of responsibility and The Office of Public Guardian has provided some guidelines regarding family care payments.

Individuals who take on the role of Deputy to a person lacking capacity (usually to a close friend or family member) often fail to fully understand and appreciate the burden, responsibility and duties that fall to them in handling the financial obligations and in particular maintaining accounts and financial records of expenditure.

Such accounts are open to inspection by the Office of the Public Guardian, not only on an annual basis but particularly if a third party should have cause to raise concern over items of expenditure on behalf of the donor.

On 18th May 2016 the Office of the Public Guardian published a practice note on its approach to family care payments that Court of Protection Deputies make to family members who are providing care to someone who lacks mental capacity.

The Guide provides a helpful definition of family care, the legal framework and when Court of Protection authority is required. It highlights factors a Deputy should consider when deciding if payments are in the patient’s best interest and the level of those payments.

Family Care

Frequently, family members provide a level of informal care such as cooking, laundry, cleaning and companion care. On occasions this can go beyond this to include physiotherapy and nursing skills over lengthy time periods and many do this without expectation of payment. However, receiving such care can frequently be in the Patient’s best interest and enhance their quality of life. If there is no contractual relationship and the care is provided by way of natural love and affection without agreed hours or breaks the Deputy would be entitled to consider a family care package.

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Decisions over rights of a deceased body

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Following the death of a family member there can be disputes over decisions on the funeral. Contentious probate expert Kerry Hull explains.

More often these arguments can be whether the deceased should be buried or cremated where the deceased has previously given no clear indication of a preference. However, on occasions such disputes can go even deeper.

The personal representatives of a deceased are primarily responsible for the disposal of a body. Their appointment and duties arise normally through the naming and appointment in the deceased’s will. If there is no will it will be the person who is entitled to letters of administration.

However, S116 of the Senior Courts Act 1981 gives the court power, in special circumstances, to pass over the person with primary responsibility, should it be necessary and appropriate to do so.

ANSTEY –V- MUNDLE AND ANOTHER (2016)

S116 of the Senior Courts Act 1981 was used in a recent case when the immediate family members were unable to agree where the deceased body should be buried. Having been born in Jamaica, but having lived and worked in the UK for many years the deceased had expressed a wish to be buried beside his mother in Jamaica. A will (the validity of which was disputed) appointed two of his daughters as Executors and set out the same wish. Two other daughters objected, believing the deceased wished to be buried in the UK. At an injunction hearing the court determined to whom letters of administration should be granted solely for the purpose of disposal of the body only.

The Judge determined that the court had jurisdiction to direct who had the right and duty to bury the deceased. It was unclear if the power under S116 SCA 1981 enabled the court to choose among a group that was equally entitled. The Judge therefore settled the matter upon the courts inherent jurisdiction applying relevant criteria identified in an earlier case of Hartshorne –v- Gardner (2008), such criteria being:

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Documenting a commercial tenancy

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How important is it to document a commercial tenancy? The simple answer to this question is "very!" Keeley Miller explains why.


All of the fundamental terms of a commercial tenancy are contained in the document itself, unlike residential tenancies which have a range of legislation to protect the rights and well being of the Tenant, commercial Tenants are deemed to be capable of looking after themselves and much less protection is implied for the Tenant.

Heads of Terms

All of the agreed terms should be documented right at the outset in the Heads of Terms, even if the parties are not using land agents or professional consultants to broker the deal. A lease can take several weeks to conclude and it is often necessary to refer back to heads of terms to remind the parties what was agreed at the negotiation stage.

The lease, once drafted and entered into, will deal with a range of issues such as how much rent is paid, when, to who, can the rent be increased, who insures, who repairs etc. The lease will also cover a range of more unusual circumstances such as what happens if the building burns down or there are issues with the condition of the building. If you ever ask a solicitor what happens if… in relation to a commercial lease the answer will invariably be, what does your lease say?

It is often the case that the parties are keen for the lease to be completed as soon as possible after heads of terms are agreed. I have completed a lease of part of an office building in one week but that was an exception and not the norm! It is imperative that Landlords do not allow eager Tenants into occupation until a lease has been completed, or if they do want to allow a Tenant into occupation early it is essential that they instruct their solicitor to prepare a Tenancy at Will or a Licence to Occupy which will bridge the gap between agreeing heads of terms and completing a formal lease.

Licence to Occupy

A Licence to Occupy is simply a permission granted by the Landlord to the eager Tenant and it records the extent of the Tenant's rights in relation to their use of the property. In the event the lease negotiations fail, the Landlord can simply withdraw their permission and bring the Tenants occupation to an end with the minimum of fuss.

If, in the same scenario, there was occupation by a Tenant without a written licence or a written Tenancy at Will, the Landlord may have real difficulty recovering the property quickly. Depending how the long the status quo is allowed to continue the Landlord may even inadvertently create a protected tenancy which allows the Tenant to stay in the property.

More information

It is in the interest of all parties to have the benefit of a considerate, negotiated and properly drafted agreement which removes all doubt in the event there is an issue in the future.

The Commercial Property team at Pinney Talfourd Solicitors can assist with all aspects of commercial leases. Please contact any member of my team on 01708 229 444 and we will be happy to help. Alternatively, click here to find out more about our commercial property services.
 

This article was written by Keeley MillerCommercial Property expert at Pinney Talfourd Solicitors. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter.
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Landlords - at your tenant's service?

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What should a landlord do if faced with a tenant not paying his or her service charges?

The landlord may well think that if the tenant is not prepared to pay then why should he or she receive the service? However, landlords are advised to think again if considering cutting off services to their tenants.

A recent High Court case, Winchester Park Ltd v Sehayak, decided that a landlord was not entitled to shut down a lift service in a building because the tenant had failed to pay his service charges.

The tenant was a leaseholder in a fairly upmarket block of flats. A dispute had arisen over the service charges and this had rumbled on for some time. The tenant was refusing to pay the service charges. The landlord thought it would be a great wheeze to “convince” the tenant to pay by shutting down the lifts which serviced the tenant’s flat. The landlord clearly believed that the prospect of climbing the stairs would be sufficient to persuade the tenant to pay.

However, the tenant had other ideas. So, eschewing the health benefits of the increased exercise he would receive from using the stairs, the tenant applied to Court for an injunction. The injunction was dealt with prior to the hearing because the landlord restored the service, but the Court still needed to decide whether the landlord was entitled to take that action in settling the issue of who paid the costs. The Court found against the landlord and determined that the landlord was wrong to stop providing the lift service.

The law in this area is complicated and even if your lease makes the provision of services conditional on payment of service charges by the tenant you may still be legally required to provide services even if the tenant doesn’t pay. It is important for landlords to seek legal advice before taking any step to cut off services to your tenant because you could end up with a significant costs order against you.


More information

The Dispute Resolution Team at Pinney Talfourd Solicitors in Essex can assist with all aspects of property litigation work. If you have any queries relating to a property litigation please contact any member of my team on 01708 229 444 and we will be happy to help. Alternatively, click here to find out more about our services.
 

The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter.
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Brexit - the implications for employers

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The historic outcome of the Brexit referendum has left many questions on the implications of this decision for workers and employers within the EU.
 
Currently, EU citizens can live and work in the UK without the need for work permits or visas. Although Brexit might eventually mean an end or restrictions on this free movement of people, any changes are yet to be decided. In the meantime, both employers and employees will be looking for reassurance for what it means for them.

Alex Pearce, employment law specialist at Pinney Talfourd in Essex advises employers on what to expect and what you need to do in the immediate future.

No immediate change

Among all the uncertainty, one thing is certain; there is no immediate effect on employment law or the right of EU nationals to work in the UK. What is more, it is unlikely that we will see any changes to employment law or the free movement of workers as a result of the referendum for some time. The formal process for leaving the EU only starts once the UK government gives two years’ notice. Our legal framework will remain in place until at least the end of those two years.

How significant is EU employment law in the UK?

Much of our employment law is based on EU law. The UK is currently required to implement EU law. The Working Time Regulations 1998 and the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) are two significant examples of regulations based on EU law.

However, this is by no means the full picture. There are some significant areas of UK employment law that have nothing to do with EU law. The law on unfair dismissal is probably the most important. The right to request flexible working and the national minimum wage are further examples. What is more, the UK created employment protection in areas such as race discrimination, long before the relevant EU directive came into effect. Finally, the UK sometimes builds on the minimum standards in EU directives to give more generous rights. This is known as gold-plating. For example, EU law only requires employers to give workers 20 days’ paid holiday but UK regulations increased that entitlement to 28 days.

Possible changes to UK employment law

No one can say with any certainty what the future impact of Brexit will be on UK employment law. It all depends on the terms of the trade agreements that the UK negotiates with the EU or its individual member states. One possible outcome is that the UK would still have to apply most EU employment laws as a condition of accessing the single market. This is the case for non-EU countries such as Norway.

At the other end of the spectrum, the UK may be released from applying EU law. In this scenario, the consensus is that a wholesale repeal of all UK employment law based on EU law is very unlikely. Commentators broadly agree that likely targets for changes include the regulations on agency workers and elements of the working time regulations and TUPE. However, this will depend very much on the politics of future governments.

Employing EU nationals

In the short term, EU nationals from outside the UK can still continue to work in the UK. This right of free movement of people remains until the end of the formal withdrawal process.

In the longer term the situation is unclear. EU nationals who have exercised the right to work in the UK before the UK’s withdrawal may point to a precedent in international law. This is the principle of acquired rights; having exercised rights under an EU treaty, an individual may continue to benefit from those rights even after the treaty has ended. This potential protection for the existing workforce could encourage an increase in immigration from the EU before the UK leaves the EU.

After the UK’s withdrawal, the terms of any future trade agreements will determine whether the right of free movement will exist at all or if it will be restricted. Non-EU countries, such as Norway and Switzerland, have to allow free movement of EU nationals in order to access the single market. However, countries such as Chile are not required to honour free movement under their trade agreements with the EU.

Next steps

Employees may be anxious about their rights, particularly those employees whose right to work here depends on the UK’s membership of the EU. Employers should consider issuing a statement to reassure employees and set up meetings to deal with any concerns.

Employers who are heavily reliant on non-UK EU nationals may wish to audit the basis of their employees’ rights to work in the UK. This could be followed up with a review of recruitment practices. Many employers are concerned that the impact of Brexit on the UK economy will trigger a downturn in business. You may want to consider any staffing efficiencies or increasing flexibility in your workforce to ensure that your business is as resilient as possible in these uncertain times.

We can help with writing staff communications and advise on the extent to which you can offer reassurance to your staff.


More information 

For advice on avoiding any discriminatory pitfalls in changing your recruitment practices, as well as advice on steps to increase your workforce flexibility, such as restructuring, redundancies and changing terms and conditions of employment or any other employment law issues, contact Alex Pearce in our Employment Law Department on This email address is being protected from spambots. You need JavaScript enabled to view it. or call 01708 229444.

This article was written by Alex Pearce our Employment Law Specialist at Pinney Talfourd Solicitors. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law at July 2016. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.
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Small Business, Enterprise and Employment Act 2015

No more annual returns, simplified statements of capital... Looks at what's new in the world of company law for June 2016.
   
The latest provisions from the Small Business, Enterprise and Employment Act 2015 are due to come into effect on 30 June 2016. 

The Act is designed to improve transparency around company ownership and to tackle directors involved in misconduct. At the same time, the Government has taken the opportunity to introduce a number of company filing reforms. This simplifies the current filing requirements and should improve the accuracy and integrity of information held on the public register at Companies House.

The provisions in the Act are coming into effect in stages. Agata Rumbelow, our company commercial expert looks at the latest stage of the Act:

No More Annual Returns

Companies will no longer be required to file an Annual Return (AR01); instead they must file a Confirmation Statement once a year confirming to the Registrar of Companies that the information held at Companies House is still current. Annual Returns will not be accepted for filing after the end of the month.

The Confirmation Statement fee is the same as that currently for the Annual Return (£40 for paper and £13 for electronic filing).

Of course, information that changes in the course of the year (e.g. directors resigning or new directors being appointed) must still be notified to Companies House as they occur, as previously.
 

Statement of Capital Simplified

This is to make it clearer how much (if anything) shareholders owe the Company on unpaid shares, so that anyone using the Register to check a company’s financial health can access the information more readily.
 

Company Registers

Private companies (i.e. not PLC’s) now have the option of just recording information about directors and shareholders at Companies House without a requirement to keep separate registers at their Registered Office.
 

Register of People with Significant Control

From the end of the month, the information that companies are now required to keep on those who hold or control (directly or indirectly) more than 25% of the shares or voting rights in a company, will also have to be provided to Companies House once a year with the Confirmation Statement.

 

Find out more

If you require any further information on different types of business structure or any company and commercial law matter, contact our Company and Commercial team on 01277 246833. 

The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as at June 2016.
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Managing the online reputation of your business

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When does a negative statement constitute defamation and what you can do to protect the reputation of your business. 

In a world where business is increasingly conducted online, customers are choosing to turn to the Internet in order to share their experiences of all manner of commercial transactions. This ranges from rating their plumber to complaining about poor service from their utilities providers.

Positive online reviews can increase traffic to your site, and improve the trust that customers have in your products and services. They also build confidence in your brand.

However, negative reviews can be detrimental or even disastrous for your business, and your brand may be irreparably damaged. While people are entitled to their own opinions and it is impossible to please everyone all of the time, should false or malicious comments online be tolerated?

When does a statement become defamation?

A statement may be defamatory if it is untrue and has caused or is likely to cause your business serious harm. Under section 1(2) of the Defamation Act 2013 (‘the Act’), a body trading for profit must, in order to establish serious harm, show actual or likely serious financial loss; but a natural person does not have to satisfy that further requirement.

The term ‘defamation’ covers libel and slander. Both concern the publication of defamatory material, that is, something that adversely affects a person's reputation.

The distinction between the two in the context of the Internet can sometimes be blurred. Broadly speaking, libel concerns "lasting" forms of publication such as print, online or broadcasting. Slander concerns more transient forms such as spoken words or gestures.

Libel is the publication in permanent form of a defamatory statement. Slander is its publication in transitory form. It is now generally accepted that defamatory statements on web pages are to be regarded as libel.

Generally, If it is said or spoken aloud, it is slanderous. The Act overhauled the law in this area and changed the criteria for what was required in order to bring a claim for defamation. It introduced the requirement for there to have been serious harm caused to the reputation of the claimant. For a business, it is necessary to show, on the balance of probabilities, that the defamatory material in question has led to actual or probable serious financial loss to the Claimant.

In considering serious harm, a court will have regard to all of the relevant circumstances, including events post-publication.

Does the author have a defence?

There are some very specific defences which can apply to Internet defamation. These cover the actions of intermediaries and website operators.

Generally though the author of the review or material will have a defence if the content is true, or in the case of statements that have a degree of partiality as to the truth, substantially true. Even if some of the published material is untrue, if no serious harm or financial loss has been caused to your business, the author will still have a valid defence; for example, it may be difficult to prove probable serious financial loss if a review focuses on a product that you no longer stock.

It is also a defence if the material constitutes an honest opinion (formerly the defence of fair comment). If it is not someone’s honest opinion, or if it is someone else’s opinion and not the author’s, the defence fails, although in practice this is likely to be difficult to prove. For the honest opinion defence to succeed, it needs to be a statement of opinion, which indicates the basis of the opinion, and must have been made by an honest person, based on any fact that existed at the time the statement was made.

It is also possible to defend a claim on the basis that the statement was published in the public interest and on the basis of reportage.

What evidence is needed to prove serious financial loss?

The evidence you require may differ, depending on the nature of the defamatory content, but generally you need to be able to prove the following:
  • the content is available on the internet
  • it relates to your business
  • it is not true or not the author’s honest opinion
  • the review has or will cause your business serious financial loss if it is not removed

Proof of actual or likely damage to your business is required that:
  • specifies what the loss is or is likely to be, and
  • shows that the loss is serious (‘serious’ loss may mean, for example, that you have lost potential clients and the value of those clients is significant)


Alternatives to going to court

Going to court or arbitration can be particularly costly. Before resorting to time-consuming and expensive court action, it is well worth seeking the advice of a dispute resolution lawyer. Often such disputes can be resolved without the need to start legal proceedings.

It is possible for victims of website defamation to try to get the search result(s) removed from Google and other search engines. If this fails, your lawyer may be able to put pressure on the author and also the website operator or host, where applicable, since both can be liable for defamation. The defences available to website operators and hosts are complex and, if they do not comply with the regulatory provisions prescriptively, they may risk losing their defence to an action.

What are your legal options?

If a case does have to go to court remedies that the court may grant a successful claimant include: 
  • damages
  • an injunction to restrain publication of derogatory remarks
  • for a successful claimant
  • an order for the defendant to publish a summary of the judgement
  • an order to remove a statement or cease distribution of the same
  • an Offer of Amends (an apology made in open court)

As with all court proceedings there are costs consequences to consider and it is not advisable to take action without having sought specialist advice beforehand. In practice, these cases are often resolved without needing to go to court. The material can be removed on the basis that there be no further claim for compensation. Whilst a lack of compensation may be disappointing, you will have achieved what you set out to do in many cases by having the offending material removed.

There is a one-year limitation which applies to making a defamation claim which starts to run from the date of the “accrual of the cause of action” (the date of publication) so it is advisable to seek legal advice as early as possible to explore the options in your particular case.

More information

If you need help with removing an online review or other content that is libelous, contact us on 01708 229 444.


The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice, and the law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances. This article is based on the law as at May 2016.

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Have you included a "purpose" in your commercial contract?

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A recent Appeal Court case confirms the importance of a contract having a clear purpose in law.   

Without a purpose, one or other of the parties may not get the benefit they were expecting from the agreement.

But how can the purpose of a contract be unclear? It should be fairly obvious you might think, especially if the parties have specified what it is. Well, not necessarily. The Judge in the leading case on this point stated "A person's purposes are almost always to some extent mixed, and the ordinary principle is that the relevant purpose is the dominant one".

In other words, Judges will make a distinction between

  •  the sole purpose
  •  the dominant purpose
  •  one of several purposes, all of varying importance.

So, it is easy to see how the parties might end up with something they did not intend, and which one or the other of them did not want.

If you have an important commercial contract in the pipeline, are you sure that you will get what you want out of it? If not, why not get it checked out by Pinney Talfourd’s experienced Company/Commercial team.

If you require any further information on different types of business structure or any company and commercial law matter, call 01277 246833. 

The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as at May 2016.
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Brexit and the Property Market

brexit
The EU referendum is fast approaching with the vote due to take place on 23rd June 2016. Julien Pritchard considers what potential effect the vote will have on the property market.
 
Unless you do actually live in a cave it is reasonably hard to avoid this topic at present with many arguments being put forward by both the remain and leave camps.

Before we get started please let me state categorically that this article is not a statement either in support or against the “Brexit”. I am afraid you will have to form your own opinions on that particular issue. However, I am willing to consider the potential effect of the vote on the property market.

The simple fact is that the property market in the UK likes one thing and that is stability. The reality is that whether we as a nation vote to remain or leave we are in a period of instability. Many large organisations have considered this issue in great detail. For example, a KPMG poll of 25 global real estate investors with assets under management of over $400bn has revealed that two thirds believe a Brexit would result in less inward investment into UK property and property companies.

The estate agency Savills has warned that the UK residential and commercial investment markets are “subdued”. The Royal Institution of Chartered Surveyors has voiced a similar opinion stating that the current vote could result in “a degree of uncertainty for buyers that may negatively affect some elements of the market”.

It is recognised that general elections tend to paralyse house sales and recent research from Hamptons International and Jefferies demonstrated that property transactions tend to slow ahead of a general election. There is no reason not to think that a vote on an issue as large as Brexit will have similar effect.

Whatever the outcome of the referendum we are entering a period of uncertainty and that cannot be good for the property market. If we do leave then that period of uncertainty may be extended, however, only time will ultimately tell what the long term implications are and whether any potential short term loss is offset by a future gain.


More information

The Commercial Property Team at Pinney Talfourd Solicitors in Essex can assist with all aspects of commercial property work including refinance, sales, purchases, lettings and licences for alteration, assignment etc. If you have any queries relating to a commercial property please contact any member of my team on 01708 229 444 and we will be happy to help. Alternatively, click here to find out more about our services.
 

This article was written by Julien Pritchard, Head of the Commercial Property Department at Pinney Talfourd Solicitors. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter.
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Changes to the taxation of dividends

Outlining the changes and advising on how reviewing the structure of your business could help offset some of the pain.   
 
The April budget brought about significant changes to the taxation of dividends which will affect investors, business owners and the self-employed. It is anticipated that married couples who work in family companies might be among the hardest hit and may be thousands of pounds worse off each year.

 

Who is affected by the change?

Anyone who receives more than £5,000 in dividends per year will have been affected. Limited company shareholders will face higher taxes and family-run companies, in which husband and wife both receive dividends, are likely to be significantly affected.

Business owners who pay themselves a small salary and top up their income with larger dividend payments are likely to end up paying more tax under the new rules.

Now is an ideal time to seek advice on how you will be affected and to find out whether making changes to the structure of your organisation or altering the way in which you are paid could reduce your tax bill.

 

The position before 6 April 2016

Before 6 April 2016 dividends were taxed at source at a rate of 10 per cent, which was called a tax credit. Basic rate taxpayers then paid no further tax. Higher-rate taxpayers paid 32.5 per cent tax after the deduction of the tax credit but once the 10 per cent tax credit was deducted the effective rate became 25 per cent. For additional rate taxpayers, the rate was 37.5 per cent, which produced an effective rate of 30.6 per cent after the deduction of the tax credit.

 

6 April 2016 changes

After 6 April 2016 the national 10 per cent tax credit will be abolished. Anyone receiving dividend income above £5,000 will be subject to a higher tax rate.

 2015/2016 tax year2016/2017 tax year
Basic rate tax (20%)0%7.5%
Higher rate tax (40%)25%32.5%
Additional rate tax (45%)30.6%38.1%

 


Why have the changes been brought in?

These changes are designed to tax small companies that pay small salaries and much larger dividends. This is a popular way for business owners to pay themselves since it has the effect of preserving the entitlement to the basic state pension while reducing national insurance costs.

 

Winners and losers

As with most changes in taxation there are winners and losers, but small business owners and the self-employed need to be aware that they could be significantly worse off.

For example, higher earners who receive income from company shares outside an ISA up to £5,000 will pay nothing in tax as of the next financial year, but in 2015/2016 would owe £1,250 in tax. However, if as a higher earner you currently pay yourself more than £21,667 in dividends per year you will be worse off than before.

If you are a basic rate taxpayer who receives dividends of more than £5,001 you will need to complete a self-assessment tax return starting from the tax year 2016/2017.

 

What are your options?

Given the complicated nature of the rules, a review of your business profile could reveal whether a change to your company structure would help you to save money.

Some business owners may consider that share splitting, that is, subdividing shares so that their individual value is diminished, or else distributing income could be advantageous at this time.

Contractors who operate from limited companies may simply adopt a policy of retaining profit within the company until such time as they decide to close it down, since profits remain subject to the same 20 per cent corporation tax as before. Any money drawn from the company from April 2016 will be caught by the new rules, however, and subject to this new taxation.

If you do not currently have a pension or are paying for it out of your net income, now might be the time to set up a limited company pension. Profits can be transferred into a pension, thus avoiding corporation tax as well as dividend taxes to which you would be subject if you were to draw the income personally.

If you are able to bring your spouse into your company, they can be used to absorb unused personal allowances. The level of pay has to be reasonable and they must be seen to do some tangible work but it is important to note that the company will receive tax relief for this cost. If this is within the personal allowance there is of course no income tax payable on this.

A review of your business structure will involve your accountant. Pinney Talfourd will assist in preparing the legal documentation required to put any recommended changes into effect.

If you require any further information on different types of business structure or any company and commercial law matter, call 01277 246833. 


The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as at May 2016.
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