Latest Blog posts from Business-Lawfirm.co.uk

Problems for developers with expiring planning consents

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If you currently own a development site with planning permission that is about to expire then you could be faced with a number of problems.

The first problem is that if the planning permission expires without the development being commenced then you will be the proud owner of a site you cannot develop without re-applying for planning consent. If planning policy has changed in the meantime you may find your application is refused.

The solution to this problem is to ensure you have carried out a 'material operation' which can include doing something as minimal as digging a trench to contain the foundations before the time for commencing development expires.

Before carrying out a material operation, it is vital you identify whether any conditions attached to the planning consent need to be discharged before development is commenced. Carrying out a material operation before all such conditions are discharged may make the whole development unlawful. The law in this area is currently quite confused - failure to discharge such a condition might be just treated as a breach of condition which does not render the whole development unlawful. The question you need to ask yourself is whether you wish to risk the legality of your whole development by failing to discharge those conditions before development is commenced.

Another problem is that carrying out some works to keep the permission alive may result in an unattractive partly developed site. The Local Planning Authority has the right to issue a completion notice where development has been started but where there appears to be no prospect of completion within a reasonable period. In such cases, the LPA may serve notice stating that the planning permission will cease within a minimum of 12 months.

A completion notice cannot be served until after the planning permission’s expiry date, and does not take effect until it is confirmed by the Secretary of State who will not make her decision until after there has been an opportunity for a hearing. If the notice is confirmed, and if the development is not completed within a minimum of 12 months, the planning permission ceases to have effect.

Whilst the completion notice does not affect the permission for any development carried out before the end of the time specified in the completion notice, any development carried out after that time will be without the benefit of planning permission, and may be liable to enforcement action.

It may be that Local Planning Authorities will be hesitant to serve completion notices due to the resources required and the complexity of the process. Developers should be aware of their power to do so though and its implications.

This is yet another trap for the unwary for already beleaguered developers and it's more important than ever to ensure you are constantly taking advice from a lawyer who isn't afraid to put on his wellies

Steven Petty, Commercial Property Lawyer

Companies failing at an alarming rate

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The latest Government figures on insolvency (published 7th November 2008) show an alarming increase in the number of business failures. There were 4,001 compulsory liquidations and creditors’ voluntary liquidations in the third quarter of 2008, an increase of 10.5% on last quarter and a 26.3% increase on the same period last year.

Add this to the 27,087 personal insolvencies in the same period and you can see the recession in the UK is really starting to bite.

Even if your industry sector or your business is still doing well in this economic climate now is the time to start to be more cautious with customers – especially new ones. Check their credit rating before taking them on, reduce the length of credit you offer them and make sure you act swiftly if they fail to pay one of your invoices. Take the Zero Tolerance Approach to Bad Debt and you won’t go far wrong. Your business might be recession proof – but you’ll only survive if you customers continue to pay!

If you are one of the businesses struggling in these difficult times – and there are many, you are not alone – you might want to read “Keeping your business going when the going gets tough” on the Cousins Business Law website.

Gary Cousins, Business Lawyer

New Land Registry feature - discover the extent of someone's property portfolio

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Since 10th November the Land Registry have provided a new service. Anyone can now make a search of the Land Registry's index of proprietors against his or her own name, a company name, or the name of some other person in whose property the searcher can satisfy the Registrar that they are interested generally.

Whether you are a developer looking to discover the extent of your competitors' landbanks or are trying to establish whether someone has sufficient property assets to be worth suing, this is a powerful new tool.

If you are interested in finding out more about this tool then contact Steven Petty for more information.

Steven Petty, Commercial Property Lawyer

How much further will house prices fall?

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The reporting of house prices has become something of an obsession in the media. A wide variety of views are aired most of which have proved to be wildly inaccurate with the benefit of hindsight. One statistic that looks likely to revert to its long-term trend is the relationship between average house prices and average annual earnings. The credit orgy of the last ten years is now over and with lenders now returning to the prudent lending practices of previous decades it is not unreasonable to expect that average house prices will fall to around four times average annual earnings. If you're wondering how much further prices need to fall then the chart below (published in today's Bank of England Inflation Report) should give you your answer.

Steve Petty, Commercial Property Lawyer

Have you ever seen your lawyer in his wellies?

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If you are a property developer and you've never seen your lawyer in his wellies then it might be time to consider changing your lawyer.

Visiting a development site is the only way a lawyer can identify certain potential legal problems. If you've just bought a site that your lawyer hasn't visited then ask them the following questions:

1. How do they know there are no discrepancies between the title deeds and the physical boundaries on site?
2. How do they know whether there is any evidence on site of third parties exercising rights of way over it?
3. How do they know that carrying out the development won't give rise to party wall issues?
4. How do they know that neighbours' rights of light and air won't be affected by the development?
5. How do they know that no electricity or telephone cables, water pipes, drains or gas mains will need to be moved to enable the site to be developed?

Asking the seller these questions might reveal the correct answer but should your lawyer really rely on the seller when these things can be checked?

Developing land for profit is hard work at the moment. Don't let your lawyer's failure to get in his car and meet you on site make it even harder.

Steve Petty, Commercial Property Lawyer

VAT implications for housebuilders who let out unsold properties

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A lot of articles have been written recently about the Revenue’s view on the VAT treatment of a house-builder who, in the current climate, alters the nature of its business from the sale of houses (which are zero-rated supplies of new dwellings), to the short-term letting of houses (which are exempt supplies). Although a change from taxable to partially exempt supplies can affect a housebuilder’s VAT recovery position, the Revenue allows the application of a de minimis rule to ascertain if the level of partially-exempt activity should affect VAT recovery.

However, it's worth bearing in mind that you do not have to concern yourself with a partial exemption/de minimis approach (and the possibility of incurring a proportion of irrecoverable VAT) if you adopt an alternative strategy.

This involves transferring your interest in the completed dwelling to a connected person (who would not be a member of your VAT group) who then enters into the short-term letting arrangements. In this way, the initial transfer qualifies as a zero-rated supply of a new dwelling, and therefore facilitates full recovery of input tax incurred. The subsequent grant of tenancies by the connected company is exempt from VAT. According to the Revenue, this is not an abusive practice.

This is another example of why successful property development is all about avoiding the traps.

Steve Petty, Commercial Property Lawyer

Can you rely on a guarantee? - update

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The House of Lords has just overturned the case I referred to in my blog last week meaning that a landlord only needs to serve the guarantor with notice within six months of a rent review being decided. The same rule would also apply to a service charge where the final figure for payment is only decided after the service charge payment date.

It's good to see that the Law Lords had regard to "some remarkably silly consequences" of the decisions of the lower courts.

Steven Petty, Commercial Property Lawyer

Can You Rely on a Guarantee?

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Most modern leases impose an obligation on a tenant to stand as guarantor if the lease is sold on to a new tenant.

There are strict rules on the steps a landlord must take if it wishes to rely on that guarantee, however. A landlord cannot simply allow arrears of rent or other sums payable under the lease to mount up and then send the bill to the guarantor.

The landlord is required by law within a period of six months beginning on the date a sum of money becomes due to serve on the guarantor notice informing the guarantor that the sum has fallen due and that it is the landlord's intention to recover the sum from the guarantor together with (where payable) interest.

A court case last year established that this requirement can result in some perverse consequences. If, for example, a rent review is taking place then even if the tenant is not in arrears, a landlord should serve notice on the guarantor within six months of the rent review date (and every subsequent payment date until the rent review is completed) advising the guarantor that an increased rent may be due; the tenant may fail to pay; and if the tenant does fail to pay it is the landlord's intention to recover the money from the guarantor.

Many rent reviews are completed more than six months after the rent review date and the consequences for landlords if the tenant cannot pay the new rent are that if they fail to follow the correct procedure they also lose the right to recover the arrears from the guarantor.

If you are a landlord and are concerned about protecting your rights against a guarantor then you can take advantage of Cousins Business Law's free lease review service.

Steven Petty, Commercial Property Lawyer

Why You Should Revalue Your Property Portfolio

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The Bank of England published the latest edition of its Financial Stability Report today.

Apart from making very sober reading generally, it touched on a problem that may be facing commercial landlords.

Commercial property prices have fallen by 24% since their peak and rental growth has also ground to a halt. In addition, the downturn in the economy increases the liklihood of commercial tenants defaulting on their rental payments.

These facts are of real concern to commercial landlords as they will all contribute to difficulties in refinancing loans secured against their property portfolio. Banks may demand a further injection of capital from landlords to keep loan to value ratios at acceptable levels and banks may be less willing to lend money against anticipated rental levels, preferring to rely merely on the value of the underlying asset with vacant possession.

Landlords should be considering proactively obtaining fresh valuations of their property holdings to assess and plan for any funding difficulties over the next twelve months.

Carrying out a review of the terms of existing leases would also be a prudent step to ensure the bank can be provided with evidence of the quality of the portfolio. Cousins Business Law are offering a free lease review to all landlords.

Steven Petty, Commercial Property Lawyer

Construction Companies Withhold £1 Billion in Payments to Suppliers

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Construction companies withhold £1 billion in payments to suppliers. That's according to the National Specialist Construction Council (NSCC) which calculates that the amount of money owing to suppliers by construction companies is now 50% more than two years ago.

Just 15 percent of the NSCC's members are paid within 30 days of completing a job. The average is about 60 days while Carillion Plc, averages 86 days.

At a time when managing cashflow is more important than ever, small and medium sized businesses often find themselves at a disadvantage when owed money by larger companies.

The sad fact is that suppliers who chase for payment themselves are likely to be ignored. If you want to put yourself at the head of the queue for payment, then it is important to have a good procedure for avoiding bad debts.

Steve Petty, Commercial Property Lawyer