Jacksons Law Newsletter Oct 2011
Welcome to the Autumn edition of the Jacksons Law Firm Commercial Property Newsletter.
We are delighted that this month our leading article has been prepared for you by Tees Valley Unlimited and deals with the enterprise zone in this area announced recently. Should you have any queries arising from this article or those following prepared by members of our team then please do not hesitate to contact us.
Covered in this edition :-
1. Tees Valley Enterprise Zone
2. Consultation to reform town and village greens registration
3. Time limits for taking planning enforcement action
4. Dilapidations in Leases
5.SDLT and Multi Dwelling Relief
6. Claims for Capital Allowances
Tees Valley Enterprise Zone
Announced in August this year, the Tees Valley Enterprise Zone has been welcomed as a sophisticated package that will help secure the future economic well-being of the region.
12 individual sites have been identified that will benefit from simplified planning regimes and significant financial support to help attract growth and investment across Tees Valley’s existing and emerging business sectors.
Eight sites will receive Business Rate Relief whereby businesses within the eligible sectors and locating on site before the end of March 2015, will only have to pay rates over and above £55,000 per annum for their first five years.
The eight sites are:-
Queens Meadow in Hartlepool – looking to attract biotechnology and high value engineering businesses.
South West Iron Masters in Middlesbrough – available to those involved in advanced manufacturing/engineering and the new energy supply chain.
Kirkleatham in Redcar and Cleveland and Belasis Hall Technology Park, Billingham – both welcoming businesses within the chemical and biotech supply chain.
Oakesway Industrial Estate, Hartlepool – which will support renewable energy production.
Northshore in Stockton, Central Park in Darlington and St Hilda’s, Middlesbrough – will all support Tees Valley’s rapidly growing digital sector.
Additionally, Tees Valley is one of only a small number of areas across the country which can now also offer large-scale occupiers allowances against the cost of plant and machinery.
Four Enhanced Capital Allowance sites will provide for existing Tees Valley businesses to either expand their operations or move into new areas of activity, particularly in the renewable sector. They will also help to attract Foreign Direct Investment building on the key strengths of Tees Valley businesses and the skilled workforce.
The four sites are:-
Port Estates in Hartlepool – supporting renewable energy production
PD Ports / South Bank Wharf in Redcar and Cleveland – looking to attract renewables and advanced engineering projects
Wilton, Redcar and Cleveland – will support businesses in the renewable energy production sector.
While the New Energy and Technology Park in Stockton – is available to those in the petrochemicals industry.
The Enterprise Zone designation will be effective from 1 April 2012 and Local Enterprise Partnership Tees Valley Unlimited, the organisation behind the bid, is now pulling together the detailed offer in terms of governance and management.
For more information please visit www.teesvalleyunlimited.gov.uk
Consultation to reform town and village greens registration
The Department for Environment, Food and Rural Affairs (DEFRA) is consulting on proposals for reforming the registration system for town and village greens.
There has been a significant increase in the number of applications for land to be awarded the status of a green in recent years – in 2009 around 185 applications were made. While this often reflects the real desire of local people to try and protect land which they value there are concerns that in certain instances applications are being made in an attempt to prevent or delay development. The number of applications, the character of the application sites, the controversy which applications can attract, the cost of the determination process and the impact of successful registration on the landowner are all causing concern.
In addition the Government has announced its intention to introduce a new Local Green Spaces designation in the planning system to protect green spaces which are of importance to local communities. This designation would be used in local and neighbourhood planning and would be backed by strong planning policy in the new National Planning Policy Framework.
The consultation is aimed at trying to achieve an improved regulatory balance between protecting high quality green space valued by local communities and enabling legitimate development to occur where it is most appropriate. It also seeks to ensure that when land is registered as a green it really does deserve the level of protection that registration provides. Reform is further intended to improve the operation of the registration system so as to reduce the burden on local authorities which are responsible for implementing it and on landowners who are affected by applications.
In summary the proposals include the following:-
• enabling registration authorities to reject applications at an early stage where insufficient evidence has been submitted or where there is strong evidence that the application cannot meet the criteria for registration. This proposal is intended to ensure that weak or vexatious applications can be sifted out by the registration authority at an early stage to minimise the delay to all parties affected by a pending application and to minimise the costs to the authority and others in dealing with it.
• requiring the applicant to pay a fee when making an application. It is not intended that the fee should allow for full cost recovery but it should represent a sufficient demonstration of commitment to the application. A ceiling of £1,000 has been suggested.
• adding a land “character” test to the existing criteria for registration as a green so that only land which is unenclosed, open and uncultivated would be eligible for registration. The popular perception of a green is unlikely to include railway sidings, woodland, a churchyard, part of a golf course, former council offices or seafront public gardens yet all have been subject to applications.
• integrating registration of greens with local and neighbourhood planning so that future decisions on sites are taken into the planning system. This would prevent registration of land which was subject to a planning application or permission for development of the site or which was designated for development or as a green space in a local or neighbourhood plan.
• declarations by landowners. Landowners would be given the opportunity to make a statutory declaration to negate any evidence of use of a claimed green during the period which the declaration remained in effect.
The consultation ends on 17 October 2011 and the Government hope to announce their conclusions on reform early in 2012.
The power of local authorities to take planning enforcement action for breach of planning control is subject to certain time limits:
• 4 years from the date of completion of an unauthorised building, engineering, mining or other operations.
• 4 years from the date of an unauthorised change of use of any building to use as a single dwelling house.
• 10 years from the date of the breach for any other breach of planning control. This includes:
1) A material change of use other than a change of use to a single dwelling house.
2) A breach of a planning condition except a condition relating to use as a single dwelling house.
If the local authority does not take planning enforcement action within the relevant time limit, it loses the right to do so. The unauthorised development or use at that point becomes lawful and immune from planning enforcement action.
In addition, an application can be made to the planning authority for the issue of a certificate of lawfulness of an existing use or development confirming that:
• An existing use is lawful
• Any operations which have been carried out are lawful
• Any other breach of condition on limitation subject to which aplanning permission has been granted, is lawful
Where such a certificate is issued, it is conclusive as to the lawfulness of the matters to which it relates.
Dilapidations in Leases
The term “dilapidations” refers to items of disrepair in a property covered by the tenant’s repairing covenant in a lease. The term “terminal dilapidations” concerns the state of the property at the end of the lease term.
There are several remedies available to a landlord in respect of a tenant’s breach of repairing covenant resulting in dilapidations during the lease term. A landlord may consider the following:
- An action for damages
Damages available to a landlord for breach of repairing covenant are limited to the amount of the reduction in value of the landlord’s interest in the property. A landlord’s ability to claim damages may be restricted. If a landlord has granted a lease for a term of 7 years or more and its tenant breaches the repairing covenant when the lease has at least 3 years left to run, a landlord cannot bring an action for damages unless it has first served at least one months’ notice on the tenant.
The level of damages available during the lease term is different from those available after the term has expired. Damages available at termination of the lease however are the reasonable cost of carrying out the required works of repair plus rent for the period until the works have been completed. Claims for loss of rent are only likely to be successful where it is the disrepair of the property which caused the loss to the landlord and not some other reason.
- Forfeiture
A landlord is only entitled to forfeit if the lease expressly provides for this however most commercial leases do provide for such a clause. A landlord wishing to take forfeiture action must ensure it complies with the conditions in the lease applying to the right to forfeit such as restrictions on the times at which the landlord can access the property.
A landlord’s ability to forfeit a lease for breach of a repairing covenant usually requires a landlord to first serve a notice on its tenant specifying the breach and allowing the tenant a reasonable time to remedy the breach. Depending upon the term of the lease, the notice may require a statement informing the tenant of its opportunity to serve a counter-notice. Due to the complexities involved, specialist advice should be sought prior to commencing forfeiture proceedings.
- Self-help
If a landlord has the benefit of a modern commercial lease it may have the option of being able to enter the property during the term of the lease to carry out repair works and recover the costs of doing so from the tenant.
SDLT and Multi Dwelling Relief
The Finance Act 2011 (‘FA11’) received royal assent on 19 July 2011 and introduced a new relief for purchases involving multiple dwellings. Currently, where multiple dwellings are purchased in a single transaction or a linked transaction, the SDLT payable is that calculated on the aggregate price of all the properties.
Prior to the enactment of the FA11, section 116(7) of the Finance Act 2003 provided that where six or more dwellings were purchased as one transaction, they were treated as a non-residential transaction for the purposes of applying SDLT rates. However, this provision will be disapplied so that the new relief can apply to purchases of more than six dwellings.
Where a dwelling is let for a period of more than 21 years, then it will not be eligible for the new relief. Therefore, if a property is leased for 99 years and the freehold reversion is sold to a buyer (‘Property A’) together with other property, then Property A cannot be counted as a one of the six dwellings to enable the new relief to be claimed.
The new relief applies to transactions where at least two dwellings are being purchased. The rate of SDLT to apply will be the rate which would have applied on the sum which results from dividing the total purchase price by the total number of dwellings, subject to a minimum rate of 1% being applied.
For example, a block of 20 flats is purchased and 5 are let out on leases for terms of 99 years, all for a purchase price of £2m. Prior to the new relief, the applicable SDLT rate would be 4% (as a result of s.116(7) – see above) on the total sum of £2m, resulting in a SDLT payment of £80,000. If the new relief is claimed, then the £2m is apportioned as to £1.5m for the unlet flats (on a just and reasonable basis) and £500,000 for the other 5 flats. The 15 flats are eligible for the new relief and the rate to be applied is therefore based on the purchase price of £100,000 (£1.5m divided by 15) which results in a new 1% SDLT rate. Consequently, the revised rate of SDLT payable for the 15 flats is £15,000.
However, SDLT is still payable on the remaining 5 flats. The applicable rate in this instance is based on the actual purchase price of £2m, i.e. 5%. This is then payable on the valuable attributable to the 5 remaining flats, (£500,000) resulting in a further payment of £25,000. The total SDLT payable in this scenario is therefore £40,000, as opposed to the £80,000 that was payable without the relief.
Had there been 6 or more flats that did not qualify for the new relief, they would have been eligible for the rate cap provided for by section 116(7), resulting in the lesser rate of 4% being applied to £500,000 and therefore meaning £20,000 would be payable on this part of the transaction giving a total of £35,000 payable in this scenario.
However, there may be instances where an adjustment of the amount of SDLT payable will be required as a result of using this new relief. This will apply where there is a reduction in the number of dwellings of the property ceases to include dwellings, either happening within three years of the purchase.
The introduction of this relief is hoped to encourage further investment into the property market, at a time when buyers are exercising more caution, by reducing the tax payable on such purchases.
Claims for Capital Allowances
A tribunal has recently held that a buyer of a business, which included a property, could not claim plant and machinery allowances on certain fixtures. The buyer failed to obtain information about the seller’s capital allowances claims and could not show that the seller had not previously claimed allowances on those fixtures.
The case is a reminder of the risk for buyers in not obtaining full information about the capital allowances history of the assets being purchased. As previous owner’s claims can restrict the amount of a claim, it is important to carry out proper capital allowances due diligence and obtain detailed information.
Article Courtesy of Caroline Allen @ Jacksons Law
