This briefing note is only intended as a general statement of the law and no action should be taken in reliance on it without specific legal advice.

REAL INSIGHTS - Property Update - March 2015
31 March 2015

REAL INSIGHTS - Property Update - March 2015

Pre MIPIM Real Estate Party and MIPIM

Mishcon de Reya's annual Pre-MIPIM Real Estate Party, once again co-hosted with London Chamber of Commerce and Industry, kicked off the 2015 MIPIM season in style.

More than 300 guests attended our 'London Connections' themed champagne reception at Avenue Restaurant in St James's Street, Mayfair. Please see above for a short film which captures the energy of the event and click here to view a selection of photos.

Following the party, the Mishcon team attended MIPIM, the international real estate trade show in Cannes. To see photos from our client dinner and to read Real Estate Partner, Susan Freeman's Estates Gazette MIPIM blog please click here.


Until now, non-UK residents purchasing UK residential properties only had to pay UK Capital Gains Tax (CGT) on the sale of those properties if they were caught by the annual tax on enveloped dwellings (ATED) rules and did not qualify for any of the reliefs from ATED. New rules mean that non-UK residents will need to consider their UK tax position if they sell UK residential property after 6 April 2015.

The top rate of CGT will be 28% for individuals and trustees, and 20% for companies.

Some individual investors will be able to claim principal private residence relief. The relief means that they will not pay CGT on the sale of their main residence, to the extent that they meet the new conditions.  In order to claim the relief, the investor (or their spouse) must spend at least 90 midnights in the UK each tax year in their UK properties, and if they do, then that year qualifies for relief on a time apportioned basis. If they own more than one home here or abroad, the investor must also elect the UK property of their choice for the relief.

Individual investors should consider their personal circumstances and take tax advice before spending 90 midnights in the UK, as spending this much time in the UK could make many (but not all) individuals UK-tax resident under the statutory residence test.

An unwelcome complication is that the new rules will not override the existing ATED-related gain charge at 28% on companies which own residential property. Despite industry pressure, companies that purchase or hold residential properties within the ATED regime (which will include properties with a market valuation of more than £1 million with effect from 1 April 2015) and which do not benefit from any relief, will continue to pay the annual ATED payments and ATED-related CGT at 28% on disposals of residential property.

There are no published plans to apply CGT to disposals of commercial property by non-resident investors, but with an election looming, this may change.

Sarah Howes is a Solicitor in our Corporate Tax team.


Although the tax regime is less advantageous than it used to be, purchasers of high value properties are continuing to explore buying their holding companies rather than purchasing the property directly.  In doing so they often focus on tax issues and disregard the other risks they take in acquiring a company.

When a company is bought, the buyer takes on all of its history and liabilities. Commonly, a property holding company will have a limited history of trading activities (e.g. through letting the property); owing money to banks and its current owners; and having ongoing relationships with suppliers of goods and services on fixed contracts.

The company may also have done things that do not relate directly to the property. This could be anything from employing staff or owning artwork and cars, to a history of running a trading business. Nasty surprises can and do happen in these transactions, and buyers could find themselves having to take responsibility for all of these matters, not least paying any debts, unless otherwise agreed.

There are three ways for buyers to protect themselves against these risks:

  1. Conducting an accounting and legal due diligence exercise. Asking questions about the company can flush out information allowing issues to be addressed.
  2. Seeking warranties from the seller. A warranty is statement of fact included in the purchase agreement, and if it is not true the buyer can sue for any resulting loss.
  3. Obtaining indemnities from the seller. An indemnity is an agreement by the seller to recompense the buyer should any losses arise from specified known risks.

All of these steps require the input of experienced professional advisors, and it is essential to make sure that all potential risks are considered before proceeding with any purchase of a company.

John Young is a Legal Director in our Corporate department.


In February's Real Insight, we looked at the impact of the new regulations on commercial landlords. This month, we're looking at the rules for domestic properties.

The new Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 apply to any domestic property let on an Assured Shorthold Tenancy (AST) which means, for example, that they won't apply where rents are over £100,000pa nor where the property is let to a company.

Only energy efficient properties may be let

Where a property is required to have an Energy Performance Certificate (EPC), subject to some exceptions (broadly the same as those applicable to commercial properties), no new AST may be granted on or after 1 April 2018 UNLESS it has an EPC of E or above, and any AST granted before that date but still continuing on 1 April 2020 must be terminated. There is a six month grace period following a property transfer subject to an AST.

To let an F or G rated property, landlords will be required to ensure that all relevant energy efficiency improvements have been made, BUT, unlike commercial landlords, a domestic landlord cannot be required to carry out improvements unless they can be funded by way of government grants or schemes or by any other person, i.e. at no cost to the landlord.

Letting premises in breach of the regulations may result in a financial penalty to the landlord of up to £5,000 and a listing on the public PRS Exemptions Register for a minimum of 12 months.

Tenants may request energy efficiency improvements

Whether or not the property is required to have an EPC, residential tenants may serve notice on the landlord requesting energy efficient improvements be made. The proposed improvements must be funded entirely under government grants or the Green Deal or by the tenant himself.

Landlords cannot unreasonably refuse to allow the requested improvements but there are exceptions such as where the improvements would devalue the property by more than 5% or where third party consent is required and cannot be obtained – e.g. listed building consent. The landlord can also propose alternative improvements that deliver broadly the same savings on energy bills as the tenant's proposals. These, if accepted by the tenant, must be carried out within six months.

Strict notice periods apply to the response by the landlord to the tenant's requests, and should the landlord fail to provide a timely response, the tenant can apply to the First Tier Tribunal for consent to the improvements.

What this means in practice

According to government figures, around 3.8 million privately rented domestic properties are required to have an EPC, with under 10% having an EPC rating of F or G. Landlords can benefit from the Green Deal: with the agreement of any existing tenant, listed improvements can be made to a property with the benefit of a loan from a Green Deal provider. Repayments are made through the property's electricity bill for which the tenant will be responsible. Empty properties can be made more efficient and any new tenant will take on repayments through their electricity bill.

If, despite all relevant improvements having been made, the property still has a low EPC rating, the landlord can register the improvements which have been undertaken and will benefit from an exemption allowing letting for a period of five years.

Alison Taylor is a Professional Support Lawyer in our Real Estate department.