Investing in Venture Capital Trusts to remove my CGT liability?

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I have just sold a rental property and will be liable for Capital Gains Tax after taking in to account the various tax breaks.

I understand the rate payable will be 18% or 28% depending on my other total income.

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RLA writes to Ministry of Housing over electrical safety loophole

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New regulations raise the prospect of the highest risk rental properties not being covered by a legally binding electrical safety regime for a prolonged period of time.

The changes, due to come into force from June this year

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Electrical safety rules will leave tenants at risk

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New electrical safety rules could leave tenants in high-risk rental homes vulnerable. The regulations are due to come into force from June this year and will immediately remove the obligation for landlords to carry out electrical safety checks in Houses of Multiple Occupation (HMOs).  The electrical safety obligation under the new rules will not apply until […]

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Break Clauses in Commercial Leases

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Lease Agreements:

Landlords of
residential properties have become used to the “rules of the game”
being largely governed by statute, that is laws laid down by
Parliament. They govern the relationship between landlord and tenant
much to the exclusion of express custom clauses drawn up by the
landlord and set-out in the tenancy agreement.

Many of the clauses in residential agreements are pretty standard, indeed the government now provides a model tenancy agreement that all landlords can use free of charge. It has clauses that reflect the Housing Acts, even when not expressly included, as some rules are implied. Yes, there is some flexibility whereby landlords can include their own rules by way of custom clauses, but they can only be enforced if a court deems them “reasonable.”

However, with a commercial lease things are somewhat different. Yes, there are some over-riding common law and statutory principles that lease clauses must adhere to, but in the main the agreement is based on contract law whereby the parties make and agree their own rules. It contrasts somewhat with the consumer law influence now attached to a residential tenancy.

This article is based on English law and is not a definitive statement or interpretation of the law; rules change and every case is different – only a court can decide. Other jurisdictions are similar but there are important differences. Always seek expert advice before making or not making decision.

A case that illustrates this point very well involved a dispute between commercial tenant Marks & Spencer and landlord BNP Paribas (Marks and Spencer pic v BNP Paribas Securities Services Trust Company (Jersey) Ltd), a case which in 2015 ended up at the Supreme Court, having previously gone through the Court of Appeal.

M&S had rented
retail space off the landlord on a lease which included a conditional
tenant’s only break clause. The conditions to exercise the break
were that (1) six months’ notice was to be given, (2) a break
premium was to be paid, and (3) there were to be no rent arrears at
the time the break notice was served.

The dispute between
the parties arose because the break itself was out of sync with a
quarter’s rent paid in advance, which meant two months’ rent was
paid for a period after the tenant had gone.

In all the respects
the conditions of the break were met in full, the six month’s
notice served, the break premium of £919,800 + VAT paid, and there
were no rent arrears, indeed the converse was true – rent was
overpaid.

The difficulty for
the tenant was that there was no express clause in the lease either
stating what would happen in the case of a rent overpayment, and
nothing to align the break with the end of a quarter, but the tenant
wanted the overpaid rent to be returned.

The initial court
case involved a claim for the “overpaid” rent on the basis that
the court should imply such a term in the lease; after all, on the
face of it logic would seem to imply that any overpayment should be
refunded.

The Court found in
favour of M&S, and as the tenant requested, implied a repayment
clause even though no express clause existed. BNP Paribas appealed
the decision and it was overturned by the Court of Appeal. M&S
then pursued the matter through to the Supreme Court, the final
arbiter, and lost its case, and its refund.

What are the
lessons for property investors?

The main principle
to remember is that business leases are basically contractual
agreements based on negotiations between the parties and the courts
will enforce them as such. Courts do not like to imply terms in
commercial leases unless there are exceptional circumstances.

In giving judgement,
the Supreme Court stated that “a term will only be implied if it
satisfies the test of business necessity or is so obvious that it
goes without saying.” It was determined by the Supreme Court
that the absence of a repayment clause in the lease was not a
“business necessity” or a “practical absurdity”
and accordingly it ruled that a repayment clause should not be
implied by the Court. These were matters that should have been dealt
with by the parties when negotiating the contract according, to the
judges.

The ruling is an
important one because it lends a good degree of certainty for
commercial landlords regarding the position of the parties regarding
the repayment of rent following a break. The Court was concerned that
if had it found in favour of the tenant in this case, then numerous
further disputes might arise alone similar lines where matters were
not expressly dealt with in the lease.

On the face of it
the decision could be construed as overly “landlord friendly” and
against logic; a harsh decision on the tenant when it had paid for a
period it was unable to use. This was the case even though it had
paid a substantial break premium. But it was stymied simply because
the date of the break did not align with a quarter day and there was
no specific repayment clause.

However, the Court
took into consideration that a tenant-only break clause was
potentially of considerable commercial value to the tenant, and
therefore deemed it fair that the landlord should not be obliged to
repay the two-months’ rent when it was the tenant’s decision to
break the lease.

This Supreme Court decision stands and it is an important principle for property investors and for assignees to bear in mind; that whatever the lease says binds the parties, and usually what it does not say, doesn’t. It’s important to check lease break clauses carefully when purchasing a commercial building with an existing tenant, or taking on an existing lease.

Break Clauses in Residential & Commercial Leases

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Break Clauses in Commercial Leases | LandlordZONE.

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Nottingham Council won’t refund my licensing fee

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The Nottingham Selective Licensing Fee is £780.00 for 5 years. I paid £460 in October 2018 and was due to pay the final £320.00 in 2021, but after 15 months I sold my property (tenant in huge arrears, UC messed up payments).

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Fitness for Human Habitation Act extension-one month to go

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On 20th March 2020 the Homes (Fitness for Human Habitation) Act will be extended to apply to existing tenancies in England. The law was introduced in March last year, to ensure rented homes are safe and secure-with tenants given the power to take their landlord to court if this is not the case. Tenants who […]

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Breaking: UK’s biggest estate agency companies in talks to merge

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Any deal will be scrutinised carefully by the competition regulator because landlords would face less choice when choosing a lettings agency to manage their properties.

The UK’s two largest estate agents, who between them have tens of thousands of landlord clients, are in talks to merge.
Countrywide and LSL have confirmed this morning that they are in discussions to merge the two businesses following media reports over the weekend.

Neither company is a household name but both operate many of the UK’s best-known estate agencies including Your Move, Reeds Rains, Bairstow Eves, Mann, Hamptons International, John D Wood and Marsh & Parsons.

If the two companies were to successfully merge, it would create a property industry behemoth that would, overnight, become the country’s largest lettings agency and employ over 14,000 people.

But such a powerful and dominant player would give competition regulators serious pause for thought, and it is guaranteed that the deal will be scrutinised by the Competition and Markets Authority (CMA); the two companies compete in many towns and cities across the UK with their different brands.

Landlords would therefore have less choice, it would be argued, when picking a lettings agency.

The merger follows difficult times for the two companies, both of which are listed on the London Stock Exchange.

Countrywide has endured a torrid few years during which it has battled mounting losses and ejected its CEO following a string of terrible financial results, while LSL last year executed a brutal cull of branches, keeping only the profitable and best-performing offices and merging, closing or selling off the remainder.

Both have suffered as the UK property market has been battered by consumer worries following the EU Referendum in 2016 and also a contraction of the buy-to-let market following government cuts to landlord tax relief, increasing regulation of the private rented market and the tenant fees ban.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Breaking: UK’s biggest estate agency companies in talks to merge | LandlordZONE.

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Tech launch: new app helps tenants offset their rental payments when they shop online

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The My Rent Award app gives online shopping tenants cash-back payments each month which are then paid to their landlord direct.

A smartphone app has launched that rewards tenants for spending money with leading online retailers and service providers and then gives them money toward paying their rent.

My Rent Awards, which is available to download on both the Apple and Android app platforms, sends tenants vouchers and discount codes to spend at 200 websites.

When users buy goods and services, they are given cash-back credits that are added to a ring-fenced account that is allocated to their rent payments.

Participating companies on the platform include easyJet, Tesco, M&S, Superdrug, Iceland and EE.

It also has agreements with seven major UK Housing Associations; three of which are members of the G15 group – which is campaigning to make renting cheaper in the affordable homes sector.

The free app, developed by Priscilla Mazava and Nichola Fahey, is being offered both to 250,000 housing association tenants but also those in the private rented market.

LandlordZONE contacted the company to ask how the system would work. Its spokesperson replied that: “The money is paid directly to the Landlord. When a user signs up they have to provide their landlord details.”

Many proptech companies have attempted to provide ‘added benefit’ services by placing themselves between tenant and landlord in the payment system, but to date only a few have succeeded.

My Rent Awards, although it is coy about exactly how the system works, says it offers tenants ‘an easy-to-use and manageable process of paying their rent with discounted everyday spending, alongside providing landlords with guaranteed ringfenced payments’.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Tech launch: new app helps tenants offset their rental payments when they shop online | LandlordZONE.

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Jersey Landlords Association battles island’s government over ‘heavy handed’ licensing proposals

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Landlords and a panel convened to scrutinise proposals to introduce rented property licensing both say it will have the opposite effect intended.

Jersey
landlords are calling on their government to rethink plans for a new licensing
system in the private rented sector.

Ministers hope to set minimum
housing standards and root out rogue landlords flouting the rules by making it
mandatory for all rental properties to sign up and pay for a licence.

This should reveal the location
of every private rented home on the island for the first time.

The Jersey Landlords Association opposes
the plan and believes Rent Safe – a voluntary scheme currently used to
encourage landlords to meet minimum standards – should be developed instead.

It also fears that more red tape
could lead to a possible homes shortage as investors quit the buy-to-let
market.

Chairman Peter Lucas tells LandlordZONE: “We want them to think again – we want to promote landlords’ good behaviour too, but they’re going about it the wrong way.

“There’s no evidence that tenants
are dissuaded from complaining for fear of revenge evictions and there’s
already considerable legislation for people to use to complain.” 

The Environment, Housing and Infrastructure Scrutiny
Panel has called for more detail on the financial implications ahead of next
week’s debate in the States, and has questioned how the register would work
alongside the existing Rent Safe scheme.

Chairman, constable Mike Jackson, says: “The panel believes that on balance there are as many bad tenants as there are landlords and that the proposals as lodged are somewhat heavy handed and bureaucratic in an age when most areas of government are trying to reduce ‘red tape’.”

A Jersey Government consultation revealed that some landlords, particularly social landlords, supported the proposals. Tenants were almost unanimously in favour and although some voiced concern over the effect on rental levels, others suggested it would be worth it to ensure good property management and decent property standards.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Jersey Landlords Association battles island’s government over ‘heavy handed’ licensing proposals | LandlordZONE.

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Landlord’s snap of tenancy welcome pack cleans up on social media

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Australian landlord’s collection of gifts to new tenant goes global on Facebook after it divides opinion what ‘passive aggressive’ means in the private rented sector.

Do you thoughtfully provide soap and loo roll for weary new
tenants moving into your property? Maybe you leave out wine or a box of
chocolates to welcome them after a busy day moving house?

But a basket of cleaning products? A dirty trick,
according to social media users who slammed one landlord for providing a washing
basket, bleach, cleaning products, sponges and toilet paper – as well as a
packet of chocolate biscuits – with the note: ‘A housewarming gift for a new
tenant, to help keep our renovated unit in good order’. 

While some posted about the Australian landlord’s generous
gesture, others labelled it a passive-aggressive ploy. Wrote one outraged
social media user: “Yeah, now every time they clean they are going to feel your
presumptuous judgment of their cleanliness. I’d chuck it all out so it didn’t
p*** me off.”

Perhaps these
bolshie Aussies are more judgemental than their British counterparts. A survey
by insurance firm Endsleigh found landlords who gave tenants presents usually
chose a bottle of wine, although a quarter gave flowers and plants as
housewarming gifts.

Although it didn’t mention cleaning gifts, about 70% of
the tenants who received presents stayed in their rental property for over two
years, whereas 54% of those who didn’t receive a gift stayed for more than two
years. 

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Landlord’s snap of tenancy welcome pack cleans up on social media | LandlordZONE.

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