New RICS Service Charge Code now in Force
On 1 October 2011 the RICS Service Charge Code (Second Edition) came into effect in order to give occupiers a fairer deal under service charge provisions. The Code recommends that landlords, occupiers and their solicitors ensure the lease they sign reflects the Code but they are not obliged to comply with it unless they incorporate it into the lease.
A landlord with a well-run multi-let portfilio may consider this unnecessary but a Code compliant lease could be seen to have a greater market value and thus a multi-occupied building may be a more attractive investment opportunity.
Also, he introduction of an Information Paper requires an outgoing managing agent to supply incoming agents with all the information necessary to ensure smooth transition.
New EPC Regulations
From 6 April 2012 new EPC rules will apply for commercial and residential buildings prior to marketing for letting or selling. Both owners and agents will be required to demonstrate an EPC has been commissioned to ensure it is obtained within 7 days of marketing, and in any event within 28 days. This measure is to prvent landlords withholding certificates until shortly before exchange.
Written particulars of a sale must include a copy of the first page of the EPC (not just the asset rating). If an air conditioning report is required as part of the EPC assessment it will now need to be recorded on a register held by the Secretary of State.
Energy Efficiency Regulations
From 2018 it will not be possible to let residential or commercial properties with an EPC lower than E, in England and Wales. This is the second stage of the Energy Security Bill. The first, from April 2016, will make it illegal for landlords to refuse tenants requests for energy efficiency improvements (if a landlord objects it will then go to a tribunal).
Break With Care
This recent case highlights the importance of correctly serving break notices:-
AHC Westlink took a lease from Hextone Holdings which contained an option for the tenant to break the lease on 31 October 2009. AHC Westlink had been purchased by Stobart Group Ltd in August 2007. The break notice sent to the landlord was signed "for and on behalf of Eddie Stobart Limited". The landlord contended that AHC Westlink remained the tenant as there had been no assignment to Eddie Stobart Limited and that the notice should have come from AHC Westlink. The Court agreed that the notice had not originated from AHC Westlink and therefore was not valid. The Court also rejected AHC Westlink's argument that the notice had been given by Eddie Stobart Limited as agent for AHC Westlink.
The lesson in this case is that parent companies should ensure that any notices served on a landlord originate from the tenant company. Likewise, where the landlord has an option to break the lease, the break notice should originate from the landlord company and not the landlord's parent company.
Commercial Property Investment
Click on the link to for the RICS Guide for the Small Investor
Temporary increase in Small Business Rate Relief
Small Business Rates Relief is available to businesses whose rateable value is less than £18,000. From 1 October 2010 to 30 September 2011 anyone who is entitled to Small Business Rate Relief and has a rateable value of £12,000 or less will be eligible for an increased level of discount off their rates bill.
Eligible businesses with a rateable value of up to £6,000 will be entitled to 100% relief and rateable values between 6,001 and £12,000 will be entitled to relief on a sliding scale between 100% and 0%. To find out more please contact Gordon Ellis or Will Drayton on 01284 700700.
Rates Liability - 2012/2013
Rates payable by businesses are based on the rateable value multiplied by the Uniform Business Rate (UBR) - otherwise known as the "rate in the pound". The UBR is generally increased each April in line with the Retail Prices Index (RPI) dating from the previous September.
By a cruel coincidence, in September 2011 the rate of inflation peaked at 5.6%. Whilst the Chancellor does have scope to adopt a lesser increase it appears thus far that the intention of the Treasury is indeed to impose the full 5.6% increase from 1 April 2012 - this despite the Bank of England forecasting that the rate of inflation will fall significantly throughout 2012. Assuming the proposed uplift goes ahead the full UBR will rise from 43.3 to 45.7 pence in the pound from April 2012.
As a sop to the business community the Chancellor has, however, announced that businesses will be able to defer 60% of the increase in their 2012/2013 rates liability. The deferred sum would be repaid over the following two years. Whilst this concession is to be welcomed, the scheme will require businesses to apply for the deferment. They will also rely on the often dubious expertise of local authorities in calculating and applying the deferment correctly.
Small Business Rates Relief
Under the Small Business Rates Relief Scheme no rates are payable by qualifying small businesses where the property rateable value is below £6,000. This applies until April 2013. For rateable values above £6,000 but below £12,000 the relief will reduce on a sliding scale with full rates liability kicking in for RVs above £12,000.
This relief scheme provides scope for small businesses to save significant sums if their rateable values can be reduced so as to fall within this threshold. Acting on behalf of clients, Merrifields were recently able to reduce the rateable values on a shop and commercial premises by 30% and over 50% respectively. On both occasions this outcome brought the RVs down to just below £6,000, thereby enabling the tenants at each property to benefit from zero rates liability.
Empty Rates
On the 1 April 2008 the government brought in changes to the rates liability for empty property. Prior to this date, following an initial void period shops, offices and most other non-domestic properties were liable to pay 50% of the full rates bill. Industrial premises were treated even more favourably when empty as no rates were payable.
The situation now is that after an initial void rates period virtually all properties attract the full rates charge. This tax has to be paid by whoever is in control of the property - this could be a tenant but, in many instances, it will be the owner.
Situations where empty rates are not payable include; properties with a rateable value below £2,600, listed buildings, ancient monuments, properties formerly occupied by companies in administration or a bankrupt person, properties owned by charities or community amateur sports clubs, property whose occupation is prohibited by law and those properties where the owner is the personal representative of a deceased person.
There remain certain measures which may be able to be taken so as to minimise Empty Rates liability. Merrifields can advise businesses of these options and discuss whether it will be possible to implement them.
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