REAL INSIGHT - Property Update - July 2010
Good Harvest, bad news
A controversial High Court ruling that lets a former tenant's guarantors off the hook once a lease is assigned will stand, after the parties settled the day before it was due to be heard by the Court of Appeal.
The appeal related to the High Court's decision in Good Harvest v Centaur that a tenant’s guarantor is released on a lawful assignment of a lease and cannot be required to enter into an authorised guarantee agreement. The decision was not a huge surprise, as these lease mechanisms had been treated with caution for a number of years. The case was due to be appealed on 29 June 2010 but settled on the eve of the hearing - an unsatisfactory conclusion as we are left with uncertainty in relation to the guarantor's position for existing leases and because of the difficulty this now creates in structuring new leases where, previously, the guarantee would have ensured continuing security.
In future, landlords should either ask the guarantor to take the lease in its own name, persuade the tenant to sub-let rather than assigning, or seek other forms of security. For more information on the High Court's decision, please click here.
CRC deadline extended
The Environment Agency, which administers the Carbon Reduction Commitment Energy Efficiency Scheme (CRC), has agreed to extend the deadline for disaggregation of organisations to 31 July 2010.
If an organisation qualifies for CRC, disaggregation permits it to separate into single or group undertakings to facilitate administration of the scheme. Where a qualifying organisation doesn't want to disaggregate, it still needs to be registered by 30 September to avoid penalties.
CRC is a "cap and trade" scheme which is intended to encourage large users of energy to become more energy efficient. Organisations which qualify for CRC must purchase "allowances" from the Government to cover their carbon emissions based on a forecast, report their actual emissions, and they will receive back "recycling payments" proportional to their actual emissions based on a league table.
As the allowances are bought on a group basis, and not per building, this leads to complexities in seeking reimbursement of CRC costs from tenants.
For more information, click here.
Tax relief for land remediation
Earlier this year, HM Revenue & Customs published revised guidance on Land Remediation Relief. This is potentially a very generous relief, allowing a corporation tax deduction of 150% in respect of certain expenditure. This valuable relief should always be considered when incurring costs:
- cleaning up land acquired from a third party in a contaminated state (as a result of industrial activity);
- bringing 'long term derelict land' back into use; and
- cleaning up land acquired from a third party where the contamination is caused by naturally occurring arsenic, radon or Japanese knotweed.
Various condition must be met in order to claim the relief. Where the relief applies, a 150% deduction can be obtained for qualifying costs, whether the expenditure is of a revenue or capital nature, provided that the company elects within two years after the end of the relevant accounting period in which the expenditure is incurred. Where the person incurring the expenditure is not in a profit making position, the relief can even be surrendered to HMRC, which will make a cash payment equal to 16% of the expenditure surrendered.
Our Budget review can also be found here.
Final office letting for landmark Rolls Building
Mishcon de Reya acted for funds advised by Delancey and Invista on the final letting of office space in the Rolls Building, their prime 110 Fetter Lane development. Weil, Gotshal & Manges has taken 75,000 sq ft in the building, with the balance of the office space having been let to the Government for the new Commercial Court. The team was led by partners Nick Minkoff and Stephen Hughes.
Mishcon supports real estate lawyers association
Associate Jason Tann has helped to launch an association for lawyers who undertake non-contentious real estate work. The Commercial Real Estate Legal Association (CRELA) provides a networking forum for transactional and advisory real estate lawyers to share knowledge and promote best practice. As a founding member, Jason sits on the committee and acts as Honorary Treasurer.
Latest issue of Property Matters now online
"Catching the wave", the theme of this edition of Property Matters, is about opportunity and timing. Amid a current of uncertainty around the new Government's plans and with the possibility of a double-dip recession on the horizon, it is the bold who will be looking to seize the moment. Here at Mishcon de Reya we are certainly doing so... Click here to view our magazine online.