Real Estate bulletin – November 2024

High Street Rental Auctions

From 2 December 2024, local authorities in England will have new powers allowing them to auction long term vacant commercial ‘high street’ properties to new tenants on short term tenancies of between one and five years. The government notes the ‘move is to stop disengaged landlords from sitting on empty properties’.

The framework for high street rental auctions (HSRA) was introduced by the Levelling-up and Regeneration Act 2023 (LURA), but the measures are only fully coming into force now. Regulations were introduced at the start of November which flesh out the details of this new regime.

An overview of the HSRA process is here.

Law Commission consultation - Business Tenancies : the right to renew

The Law Commission has launched the first of two consultation papers on potential reforms to the Landlord and Tenant Act 1954 and the security of tenure regime for commercial property. The results of this first consultation will shape the content of the second consultation.

In the first consultation the Law Commission are looking at ‘whether tenants of business premises should have statutory security of tenure and, if so, how it should operate’. Four models are put forward and are summarised by the Law Commission as follows:

• Mandatory statutory security of tenure: where the parties cannot agree to “contract out” of the statutory security of tenure regime.
• No statutory security of tenure: where there is no statutory security of tenure regime.
• A “contracting-in” regime: where the default position is that tenants have no statutory security of tenure, but parties can “opt in” to the regime.
• A “contracting-out” regime (being the current law): where the default position is that tenants have statutory security of tenure, but the parties can “opt out” of the regime.

This first consultation will also seek views on the scope of the regime and whether if a security of tenure regime remains which tenancies should be in scope and what factors may influence this.

The Law Commission notes that it wishes to consult widely and the fact that it is consulting on the above models and the scope of the 1954 Act ‘should not be seen as indicating that the Law Commission favours or supports any particular approach’.

The consultation runs until 19 February 2025.

Government gives indication of timings for further leasehold and freehold reform

On 21 November 2024 the Ministry of Housing, Communities and Local Government published a press release giving an indication of the time frames and next steps for residential leasehold and freehold reforms.

The press release is based on a written statement given by Matthew Pennycook, Minister of State for Housing and Planning, the purpose of which was to provide an update to parliament ‘on the steps the government intends to take to implement those reforms to the leasehold system already in statute and to progress the wider set of reforms necessary to end the feudal leasehold system for good’.

We take a look at the future timings here.

UK CBAM: consultation response

Alongside the October 2024 Budget, the government published a response to its March 2024 CBAM consultation confirming that the UK will introduce a UK carbon border adjustment `mechanism (CBAM) with effect from 2027. In particular, the UK has chosen not to follow the example of the EU CBAM in using tradeable CBAM certificates, but will simply apply a domestic CBAM charge on importers of goods within the scope of the charge. However, the response document confirms that the government has restricted the scope of the proposed CBAM by removing glass and ceramic products, at least initially.

The UK CBAM will be a charge on the carbon emissions embodied in relevant imports into the UK that take place on or after 1 January 2027. The first accounting period will run for 12 months and cover imports of CBAM goods from 1 January to 31 December 2027, with the first returns and payments due by 31 May 2028. From 2028, the government proposes that accounting periods become quarterly.

You can read more about the UK CBAM here.

Labour's Corporate Tax Roadmap

The government published its Corporate Tax Roadmap alongside the Autumn Budget. We look at this in more depth here.

SDLT group relief and tax avoidance

The Upper Tribunal has held that arrangements involving an inserted step to obtain a corporation tax advantage had a main purpose of avoidance of tax such that SDLT group relief was not available in relation to the transfer of a property as part of those arrangements: The Tower One St George Wharf Ltd v HMRC [2024] UKUT 373. The UT held that neither the fact that the arrangements failed to achieve the hoped for corporation tax advantage nor the fact that the ultimate aim of the transaction had a commercial motive prevented the application of the anti-avoidance provision in this case.

We take a more detailed look at this case here.

Recent construction updates….

Clarifying Contractor Obligations: Design and Build Contracts

A contractor had full responsibility for design and additional works under a D&B contract, and its termination had amounted to repudiatory breach.

In a recent judgment, BNP Paribas Depository Services Ltd & Anor v Briggs & Forrester Engineering Services Ltd, the court addressed critical issues surrounding contractual obligations, specifically in the context of design and build (D&B) contracts. This case, involving a dispute between an employer (BNP) and a contractor (B&F), provides valuable insight into the interpretation of construction contracts, in particular the scope of a contractor's responsibility for additional and unforeseen works on site, and the legitimacy of suspension and termination notices.

The court ruled in favour of BNP, holding that the contractor's suspension of works and termination notice had amounted to repudiatory breach of the D&B contract. The court emphasised the importance of clearly delineating the scope of work and responsibilities to avert disputes.

Read more about this case here.

On-Demand Performance bonds: issues for issuers

In Power Projects Sanayi v Star Assurance, the court underlined the independence of a bond-issuer's obligation to make payment from the existence of any liability under the underlying contract, and the limited routes available to challenge valid demands for payment.

UK Green Taxonomy – Consultation

On 14 November 2024, HM Treasury published a consultation to assist in its work to determine whether a UK Green Taxonomy would be beneficial in complementing existing sustainable finance policies, particularly in mitigating greenwashing and directing capital towards the Government's sustainability objectives. This follows the work of the Green Technical Advisory Group (GTAG) in developing a UK Green Taxonomy for financial and non-financial firms.

You can read more about this here.

Data Dive: Navigating Data Centres with Simmons

In this podcast series, we explore the world of Data Centres, which lie at the core of the digital infrastructure platform that enables the modern world to operate.