Last Updated May 23, 2019

Law and Practice

Authors



Hawkins Hatton Corporate Lawyers Ltd is a niche corporate law firm formed in December 2005 and based in London and Dudley, dealing primarily with corporate and commercial work together with commercial property and litigation. Its client base includes European and Anglo-US companies, regional and national clients as well as individuals. The firm’s Real Estate department is best known for secured lending work on behalf of HSBC, Lloyds Bank, Santander and RBS, as well as all aspects of commercial property work on behalf of its SME client base, which spans a number of key industry sectors including pharmaceutical and healthcare, manufacturing, engineering and pension funds. It advises on a wide range of property-related matters, including commercial acquisitions and disposals, commercial leases, secured lending and corporate support. Hawkins Hatton also offers advice on a broad range of specialist areas such as property investment and finance, development schemes, compulsory purchase issues, construction and commercial leases for clients including landlords and tenants, public companies, banks, private companies, developers and investors.

UK real estate law is derived from common law and statutory legislation. In relation to the latter, the primary legislation comprises:

  • the Law of Property Act 1925, which reduced the number of legal estates to two and streamlined the transfer of interests in land for purchasers;
  • the Land Charges Act 1972, which updated the process for registering charges against unregistered land; and
  • the Land Registration Act 2002, which updated the law of land registration and stipulated the registration of shorter leases. 

UK retailers have continued the struggle to compete with online competition. This has inevitably caused a sharp decrease in investment in retail premises, such that it is now at its lowest level since the financial crisis in 2008.

Britain is sometimes known as 'a nation of shopkeepers', but this has changed with the arrival of an internet-savvy generation. The old stalwarts of the high street have been consigned to the dustbin of change as we have moved into new waters. Warnings of this collapse on the high street have long been broadcast: as far back as two years ago the British Retail Consortium warned that there would be 900,000 jobs lost in the retail sector. The national minimum wage and business rates are often regarded as the two largest costs retailers face. The other catalyst for change is shopping habits. We are still in a cycle of consumption, it is just that consumption has moved from the high street to online. There are many reasons for this, but the main one has to be accessibility. High street retailers now need fewer staff and less floor space. Less bricks and mortar are required in expensive high street locations if retailers change their business models. It should not be forgotten that this squeeze on the high street is not confined to retail shops but to financial services: many banks have also started to push their online offering in preference to having a branch operation, which inevitably leads to fewer branches and staff throughout the country.

As the UK continues its departure from the EU, investment in real estate has declined – including in London office space. This comes off the back of a number of major banks announcing their exit from London to cities such as Paris, Amsterdam, Frankfurt and Dublin. The City’s diminishing relevance as a financial centre may put an end to London office space attracting premium prices.

Despite the above, 2018 witnessed a record-breaking commercial property sale in which 20 Fenchurch Street, London (the so-called 'Walkie Talkie') sold for GBP1.28 billion, making it the most expensive office block in the UK to date. Additionally, 5 Broadgate (also a London property) sold for GBP1 billion. Despite the fact that the UK commercial property market is facing many challenges, the appetite for ‘trophy’ buildings appears strong.

House prices are also in decline due to the pressure of Brexit, especially in London. Moliar London reported that 46% of London’s 68,000 partly built homes have no buyer – the highest number since 2007. The rise in inflation due to the fall in sterling since the referendum has added to the strain in real estate, as has the rise in interest rates.

By-to-let investors are also less prevalent as new tax and regulation changes (see 1.3 Proposals for Reform, below) have undermined profits.

Until the terms of the UK’s departure from the EU are clarified, the real estate market is unlikely to change. That said, the uncertain market still provides astute buyers an opportunity to secure a good property investment deal. 

Landlords were able to deduct the payment of the mortgage interest on the property from their income so as to reduce their income tax liability. From April 2020, however, new legislation will mean that a landlord will only be allowed a 20% tax credit for mortgage interest paid. This has two main implications for landlords:

  • if the landlord is a higher-rate tax payer, only a 20% tax refund will be given (not the higher rate of tax paid); and
  • it may force landlords into a higher tax bracket as they will have to declare the monies paid on the tax return.

This change will no doubt impact on investment by landlords in buy-to-let properties.

Capital Gains

Individuals pay ‘non-resident’ CGT (NRCGT) at 28% on any (post-April 2015) gains made on UK residential property if they are non-resident for tax purposes.

From 6 April 2019, NRCGT is extended to (post-April 2019) gains in respect of commercial property, albeit with certain exemptions.

Hawkins Hatton Corporate Lawyers Limited

Foxglove House
166 Piccadilly
London
W1J 9EF

+44 020 8191 7893

N/A

crodrigues@hawkinshatton.co.uk www.hawkinshatton.co.uk
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Authors



Hawkins Hatton Corporate Lawyers Ltd is a niche corporate law firm formed in December 2005 and based in London and Dudley, dealing primarily with corporate and commercial work together with commercial property and litigation. Its client base includes European and Anglo-US companies, regional and national clients as well as individuals. The firm’s Real Estate department is best known for secured lending work on behalf of HSBC, Lloyds Bank, Santander and RBS, as well as all aspects of commercial property work on behalf of its SME client base, which spans a number of key industry sectors including pharmaceutical and healthcare, manufacturing, engineering and pension funds. It advises on a wide range of property-related matters, including commercial acquisitions and disposals, commercial leases, secured lending and corporate support. Hawkins Hatton also offers advice on a broad range of specialist areas such as property investment and finance, development schemes, compulsory purchase issues, construction and commercial leases for clients including landlords and tenants, public companies, banks, private companies, developers and investors.

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