Contributed By Hawkins Hatton Corporate Lawyers Ltd
UK real estate law is derived from common law and statutory legislation. In relation to the latter, the primary legislation comprises:
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:
This change will no doubt impact on investment by landlords in buy-to-let properties.
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.