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The Importance of Lease Registration

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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Changes to Commercial Property Conditions of Sale

Latest changes made to the Standard Commercial Property Conditions are reflecting a variation in the VAT trend. Commercial Solicitor Keeley Miller explains.

The Standard Commercial Property Conditions (SCPC) are incorporated into the majority of commercial property contracts for sale. Historically, the SCPC required parties to opt to apply Part 2 of the conditions if the seller had exercised the option to tax the property.  This was reflective of the VAT treatment of most commercial property transactions at the time the second edition of the SCPC were published. 

The Law Society has now reversed this default position.  In the new third edition of the SCPC, the sale of commercial property will be a standard rated taxable supply and the sale not being a standard rated supply is now the optional part of the conditions. 

Sellers who opt into the VAT system generally do so in order to recover any VAT associated with maintaining and developing their commercial property during their ownership.  Not all commercial property owners will opt into the VAT system if they are looking to attract SME tenants who may not be registered for VAT themselves and would find the additional charge for VAT in addition to their rent prohibitive. 

When purchasing a commercial property over which a seller has exercised their option to tax, the buyer must fund the 20% charge for VAT in addition to the purchase price. After completion of the sale, the buyer will include the input tax on their next VAT return, giving rise to a VAT recovery. However, they could wait anywhere between 28 and 150 days for that rebate. 

Buyers of property elected for VAT have to pay stamp duty calculated on the total consideration paid for the property – the VAT element on a commercial property can sometimes push the price over £150,000.  Buyers are not able to recover Stamp Duty Land Tax attributable to the part paid due to VAT being charged on the purchase price.

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Sponsors of the HCCI Business Showcase

Havering Chamber of Commerce & Industry will host a Business Showcase on Monday 9th October at Queens Theatre Hornchurch, and Pinney Talfourd are sponsoring the event.

Havering businesses, small and large, will be attending a Business Showcase and Networking Exhibition in October, organisd by HCCI in association with Queens Theatre, Hornchurch.

Date: Monday 9th October 2017

Time: 6.30pm - 9.30pm

Venue:  Queen's Theatre, Billet Lane, Hornchurch, RM11 1QT

HCCI's mission is to promote a positive, balanced, vital economy and preserve those unique qualities that are good for business and make Havering a very special place in which to live and work.  With a full house of business exhibitors, the event will be opened by the Mayor of Havering and will include:

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Brexit Boom for Commercial Property

Since the vote for Brexit, the commercial property market has been braced for a recession. However, it looks like things are bouncing back. Our Partner Julien Pritchard explains more.

Ever since the UK voted to leave Europe, the majority of commercial property professionals have been bracing themselves for a substantial slump in the commercial property sector; it was certainly noted that immediately after the vote the London market came to a standstill overnight. However, the month after the Brexit vote over a million square feet of commercial property was let in the city – confidence was truly restored.

This nod of assurance appears to have continued into 2017 as purchases by investors hit a nine-year high of 127,280 in 2016/17, up six percent from 119,920 in 2015/16 according to Lendy, Europe’s leading peer-to-peer secured lending platform.

The significant rise in commercial property transactions demonstrates the continuing attractiveness of UK commercial property to both domestic and overseas investors.

Lendy explains that the UK property market is the most fluid in Europe and has a number of features - such as upward-only rent reviews and long leases - that are absent in other overseas commercial property markets.

The fall in the value of sterling since the Brexit vote in June 2016 has made the UK property market more attractive to foreign property buyers who are hungry for yield in a low-interest-rate environment.

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