Fidlers blogs

Commercial lease – Short lease versus long lease

When negotiating a lease one of the most difficult questions to resolve is what length of term should the lease be for?

In the past when it was a landlord’s market, the landlord would be looking for long leases to ensure that the premises were let for a long period of time. In today’s markets more and more business are taking up short terms leases.

Short lease

The benefit of a short lease is that it provides you with more flexibility, if you are just setting up a business you might want to avoid being tied to a long lease on the property which could prevent you from moving /expanding.

You also have to consider stamp duty, generally, the longer the lease and the higher the rent the more stamp duty payable.

Long lease

If you are investing a lot of money into the property when you take occupation you might want a long lease to ensure security over the property.

Summary

Both short and long leases can have agreed terms that work to your needs, for example if you are a tenant under a short lease provided the Landlord and Tenant Act 1954 has not been excluded, (except in certain circumstances) the tenant will be able to request that a further lease is granted on the expiry of the current lease. The new lease terms will need to be agreed between the tenant and the landlord or if required an expert or the courts.

A tenant looking at a longer lease could consider having a break clause, the more flexible the better i.e. a rolling break clause after so many years that allows termination on notice. Likewise if the lease allows you to assign (pass the lease) to a new tenant then this may provide you with any flexibility you require during the lease term i.e. the ability to leave these premises and move to bigger premises.

If you need any assistance in negotiating the terms of a new lease or you have already agreed terms and require a solicitor to advise on the draft lease please contact Christie Limb (climb@fidler.co.uk)  she would be happy to provide you with a fixed fee quote for the work.

A CPO allows certain bodies to acquire land or properties without the owner’s consent, for example a local school is to be built and land needs to be acquired for the site and the local land owners will not sell the land to the local council or the Highways Agency wishing to widen a road. The local authority who is seeking a CPO must prove that there is a strong public interest in the development they are seeking to progress.

The process for obtaining a CPO is quite lengthy and we would advise you to contact a solicitor immediately if you receive a notice or become aware of a proposed CPO which could affect your land/property. Of Course we would be happy to advice and assist on such a matter.

How do the council exercise a CPO that has been made? Unless and agreement is reached then there are two main ways either:-

1. the execution of a General Vesting Declaration

This is a formal procedure when the council wait two months after sending out the preliminary notice before it can make a general vesting declaration. The local authority will send all owners and occupiers a notice confirming the general vesting declaration and provide at least 28 days notice that the council will be taking possession.

The property that is subject to a general vesting declaration will mean that the owners are entitled to compensation which will be settled and paid after the general vesting declaration has been made.

The council cannot serve a general vesting declaration on a party that has a long lease which is due expire or a short tenancy of a year or less as the council do not want to be paying compensation to parties whose interest in the land will expire before the period of the general vesting declaration expires.

2. Notice to Treat

The council will serve a notice to treat and request to agree a price for the property. The notice to treat is served with a notice of entry and the entry must take place at least 14 days after the notice. After the notice period the land or property is transferred and the settlement paid.

The council will often use this approach for speed. Further a notice to treat can potentially be withdrawn when and general vesting declaration cannot.

There are time limits that have to be complied with when a CPO is being sought and made.

It can be a stressful time for land/property owners and therefore if you are served with any notices in respect of a CPO please feel free to make contact with our Christie Limb climb@fidler.co.uk.

The government has recently approved the plans to build a high speed rail link between Birmingham and London.

At a later date this will be expanded to Leeds and Manchester.

There are obvious commercial benefits and we have seen commuter towns develop and flourish all around the rail links to London. I am sure the same will happen here.

The flipside is that some people will lose their much loved properties under Compulsory purchase orders or be affected by noise from the train itself.

There are statutory schemes in place to compensate for the loss of your property and a “home loss compensation payment” of 10% of the open market value upto £47,000 on top of the open market value of the property.
There are also schemes that compensate for the noise pollution.

However money won’t find you a new house of your dreams or create new school and social networks.

At least we have certainty now in terms of where the line will run and who will be affected by it and to some extent people can look forward again and plan their futures.

Any questions about any of the above issues then please email me at msslade@fidler.co.uk

A word of warning for customers who have had solar panels installed in recent months.  A few clients’ have approached me and queried whether the home insurance is invalid as a result of having the panels installed. This is a very good question.

Firstly, you will have to make your insurers aware of the installation. Failure to disclose this may invalidate your policy.

The second question to ask is whether the value of the panels takes you over the maximum amount your insurer will pay out if you make a claim. Essentially, you need to ascertain what the maximum cover is, whether this excludes anything specific and find out what the cost of the panels actually are.

In addition, your insurers will want to confirm that the installation has been carried out correctly and in accordance with Building Regulation. You should be able to confirm this with the company that installed the panels. Failure to be able to confirm this and provide evidence will almost certainly prevent your home being adequately covered.

Also ask whether the insurers will cover the actual cost for reinstalling the solar panels and not just the cost of the panels themselves.

The position is further complicated if you have solar panels installed under the ‘Free Solar Panel’ scheme, where by you effectively rent your roof out in return for using all the free electricity that is generated. In these instances you will need to look very carefully at the lease and find out who is responsible for what!

If you have any issues regarding problems with the installation of solar panels at your property why not drop me a line at wjames@fidler.co.uk or give me a call on 01623 45111. I have numerous blogs on the subject of solar panels so please also visit our website for information on this subject also.

Here is a quick 6 step guide to a commercial property sale transaction:- 

Step 1   We will obtain evidence of the title of the property, we can obtain up to date information from the land registry (if the property is registered)  but we would also ask that you provide us with your title deeds.  If you have a mortgage then the title deeds may be held by your bank or building society.

Step 2 We will draft up the contract detailing the terms agreed for the sale.

Step 3 We will need you to provide us with replies to CPSE enquiries, these are a standard set of questions which will be raised by the purchaser, but we will guide you through these and complete them on your behalf. We will also need to obtain from you all the relevant documentation such as planning consents/fire safety certificates etc.

Step 4 We will send all of the documentation onto the buyer’s solicitor. If they raise any questions we will ensure that these are dealt with swiftly.

Step 5  Once the parties are ready, contracts will be exchanged. This means that both the seller and buyer have signed the contracts and these forms are swapped. On exchange the agreement becomes binding.  The buyer will also provide a deposit usually equal to 10% of the purchase price. A date will then be set for completion.

Step 6  Sale transactions – On the day of completion we receive the balance of the sale price and in return we will hand over the ownership of the property to the buyer. We will use the monies to repay any mortgage that was held against the property and to pay the fees in connection with the sale such as the estate agents and our fees. The remaining money will then be sent onto you.

If you are planning on selling a commercial property please consider obtaining a fixed quote from us by clicking here or by making contact with Christie Limb at climb@fidler.co.uk or on 01623 448302.

Christie Limb

Partner

Earlier this year the council announced that the threshold for empty business rates would drop from £2,600 from £18,000. This means that more commercial properties would fall out of this exemption and would be liable for rates to be paid by the landlord or the tenant.

Shops and offices are exempt for the first three months after the property becomes empty and industrial units are exempt from rates for the first six months. After this period full rates will become payable.

Mortgages could become harder to get, with one in ten borrowers currently eligible for a mortgage being turned down in future.

The Financial Services Authority this morning published its long-awaited Mortgage Market Review.

The FSA’s consultation paper is to try and avoid another credit crunch where lenders were prepared to lend a 125% of a purchase price to clients who clearly couldn’t afford to pay it.

I remember seeing clients who I believed were being offered too much money and had not taken into account the fact that life and circumtances change.

New measures would include an affordabiliy exercise and a stress test to see how the finances would cope if there was an increase in interest rates.

On the one side this all seems very sensible. If you were starting with a white blank page then you would make sure as far as possible that the person can afford the the big debt he is taking on.

On the other side this will squeeze out people from the market. If the average salary is £23,000 then most people could only afford a property for £69,000 (3 times your salary when I bought my first property) and this doesn’t take into account any dependents. This limits the range of properties open to first time buyers and in South of the country totally blocks them out of the property ladder.

Lenders will now be responsible for risk assessing the client rather than a mortgage broker. This reduces the risk of fraud but heightens the entry bar to being offered that all elusive mortgage offer.

The report is a consultation so industry can comment on it but I don’t know how much will change before the publication of the final draft.

A greater number of house purchase mortgages were approved in November 2011 than at any time since December 2009.  The information has come from national valuation firm e.surv, which makes forecasts from its own data ahead of statistics from other bodies such as the Council of Mortgage Lenders.

If these e.surv figures prove to be correct, then the CML’s November statistics, will have to show a bounce-back from the downbeat figures it has newly released for October. In October, according to the CML, 44,500 loans for house purchase were advanced, down from 48,200 in September and from 46,900 in October 2010.

When you compare previous months figures from the two organisations, they matched each other in October in that both E.surv and CML indicated that lending dropped in October. However the actual number of mortgage approvals reported by E.surv( 50,383) is much higher than the CML’s figure of 44,500 loans for house purchase (for October).

Mortgage approvals rose by 15% compared to November 2010, says the firm, which is part of LSL, parent company of Your Move and Reeds Rains estate agents.

E.surv also indicates that more loans were made last month to borrowers with small deposits, including first-time buyers, revealing that loans to borrowers with a deposit of 15% or less accounted for 13% of all mortgage lending in November, up from 10% in October, and the highest since October 2008.  They further point out that the majority of Loans (75%) are for purchases below £250,000

Richard Sexton, director of e.surv, said:

“For the last few months, the banks have been focusing their lending on specific groups, particularly buy-to-let investors, but this is the first time they appear to have increased lending to first-time buyers in any notable sort of volume.

More first-time buyers are rolling up their sleeves and piecing together the bigger deposits required to access high loan-to-value mortgages.

No doubt they are sick of paying astronomically high rents and having their monthly budgets ransacked by the increasing cost of living.”

If you’re thinking of moving and need a conveyancing quote then let us pitch for your business

Cheers

Mark

The Council of Mortgage Lenders (CML) have reported this month that the low interest rates mean that first time buyers could be paying the lowest amount of interest on a mortgage since January 2004.

Previously first time buyers have been paying 20% of their income on mortgage interest this has now dropped to 12.3%.

Despite the CML report that lending activity in October 2011 dropped to 44,500 loans from the 48,200 loans advanced in September 2011.

It is likely however that first time buyer activity will increase in the New Year due to the government’s stamp duty concession ending in March 2012.

There appears to be no better time for first time buyers to take their first steps onto the property ladder.

No doubt we will see a rush of first time buyers entering the market in the New Year, all wanting to ensure that that take advantage of the stamp duty concession and the continuing low interest mortgage rates available.

If you do decide to buy a property please contact us for a competitive conveyancing quote. With our online case management system and dedicated team working for you, you can be assured that we will do our best to get your house purchase moving.

Christie Limb

Partner

Over the last 20 years we’ve seen a massive growth in the number of indemnity policies used in conveyancing transactions. This is partly due to people and conveyancers (they are often different things!) becoming more cautious, partly as a business opportunity for insurance companies, and partly to speed things up in conveyancing.

So what is an indemnity policy? Basically it’s an insurance policy used to safeguard against some risk with the property you are buying. You can get policies to cover many things such as building an extension in breach of an old condition on the title deeds, or buying without the aid of a local authority search. The policy will normally contain a number of conditions – what they will and won’t pay out for – and also confirmation of the maximum amount they will pay out.

Wouldn’t it be better to just sort the original problem out? Better – Yes; Easier or quicker? – No. A common condition put on older title deeds in some areas would be that you can’t build on a piece of land without the consent of Mr XYZ. Now Mr XYZ probably died 100 years ago. His heirs and successors could give their consent – if you could find them. Also even if you did find they may refuse consent, or take 6 months to decide that they are prepared to allow it and/or charge a fee for saying yes. When you’re in a chain of transactions who all want to move next month, this sort of delay isn’t acceptable. In these circumstances an indemnity policy is ideal.

The indemnity insurance policy usually has a one-off premium, and the policy stays with the title deeds and lasts as long as the house (and insurance company!). It means that all parties in the chain can move on.

The reason you can get the policy so easily is because the risk in these circumstances is very low – if the insurance company were having to pay out regularly they just wouldn’t be offering the policy in the first place.

This blog is titled “the rise of the indemnity policy” – if you go back 20 years you would still see indemnity policies but they were pretty rare and were a real pain to arrange. In those days what would normally happen is that people would “take a view”. The Solicitor would discuss with a buyer the likelihood of someone actually enforcing the policy and they buyer would normally decide that actually they weren’t bothered about it and would carry on and buy. The solicitor would also consider the position on behalf of the mortgage company and come to the conclusion that it presents no risk to their security, and therefore the transaction would go ahead.

This position has changed over the years – people are more prepared to sue generally, so no-one wants to “take a view” any more. Coupled with the insurance companies seeing a business opportunity and making it easy to put these policies into place and a whole industry has been created out of nothing.

Cheers,

Mark