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 - September 2014
30 September 2014

REAL INSIGHTS - Property Update - September 2014

As part of The Big Think on the Future of London, the series of linked debates developed by Central and Mishcon de Reya on the changing face of London, we co-hosted a dinner debate with Central and the Greater London Authority (GLA).

The topic for the evening was the GLA's long-term infrastructure investment plan for the capital (London Infrastructure Plan 2050). Introducing this early consultation on the draft plan, Jeremy Skinner (Head of Strategic Projects and Policy Evaluation at the GLA) spoke about the Authority's vision before handing over to a group of industry leaders and policy makers to discuss London's future infrastructure needs.

Click here for a selection of photos from the evening.


Developers and investors are increasingly looking to the private rented sector (PRS) for opportunities.  There is an obvious wish to protect investor margins by shifting the burden of maintenance and services onto the residential tenants where appropriate.

Nevertheless, landlords must navigate carefully through a stream of codes and legislation designed to protect residential occupiers.

Code of practice

RICS has released a code of practice to promote best practice in the letting and management of PRS housing.  The code covers matters such as marketing, tenancy deposits, handling client money, rent collection, repairs and maintenance.  A copy of the code can be seen here.

Model form tenancy agreement

The Government has launched a model assured shorthold tenancy agreement.  A copy is available on the website.

This agreement incorporates a full set of guidance notes, with helpful checklists for both landlord and tenant.  Unusually for an assured shorthold, it includes provision for rent review, a tenant's rolling break clause and landlord's breaks.  While some of the clauses may not always be to taste, they can be removed or amended.  The agreement will provide a useful standard for the industry.

Consumer Protection Regulations

The Consumer Protection (Amendment) Regulations 2014 come into force on 1 October.  They will apply to assured tenancies, including most PRS agreements.

Misleading actions or aggressive practices may entitle the tenant to terminate the agreement and require the return of any rent and deposit paid up front, or to claim a discount or damages.

The drafting of the regulations does not sit easily with tenancy agreements but a misleading action would, for example, include failure to comply with a commitment in the PRS code of practice if the landlord/agent had confirmed that it would comply with the code.

Alison Taylor is a Professional Support Lawyer in the Real Estate Department.


September saw the granting of the Development Consent Order (DCO) for the Thames Tideway Tunnel, billed as a 'super sewer' to prevent waste water being washed into the Thames.  The benefits of the DCO process are becoming increasingly clear and infrastructure developers and landowners alike will have to become familiar with them.

The Thames Tideway Tunnel extends across 15 local authorities, which would make a standard planning application almost impossible.  A DCO, however, constitutes more than just a grant of planning permission.  The Order safeguards the route, requiring local authorities to consult with Thames Water about applications which might have an effect on the project.  It also includes provisions regarding street works, trees and, crucially, compulsory purchase.

A Thames Tideway Tunnel application is one of 105 currently in the Planning Inspectorate's hands and took 17 months from acceptance by the Inspectorate to final decision, just within the statutory time limit of 18 months.  Given the same system can apply to airports, certain railway infrastructure and other water treatment facilities, we are likely to see far more of these in the coming years and more and more landowners are going to have to engage to ensure that they are protected.

The government has already passed a statutory instrument to extend the scheme to significant commercial projects ranging from office to warehousing to sport and leisure.  Fracking is excluded along with other oil, coal and gas mining.  Housing was ruled out previously as too controversial but it is possible that this may be revisited for strategic schemes as the housing agenda and election fever hots up.

Daniel Farrand is an Associate and Head of Planning and Environment.


The Robinson case in 2012 forced HMRC to change its rather intransigent position regarding whether grants of leases could be transfers of going concerns (TOGCs).  Up to that point, HMRC had always argued that whilst the sale of a freehold or lease with the benefit of an occupational tenant could be a TOGC (so that no VAT arose on the transaction), it did not accept that the grant of a lease could ever be a TOGC.  This was the case even if it was the grant of a long lease for a premium (i.e. the grant of a "virtual freehold").

The Robinson case blew this orthodoxy out of the water and HMRC accepted for the first time that the grant of a long lease for a premium (with the benefit of a tenancy) could constitute a TOGC.  HMRC has recently expanded on this new approach in Revenue & Customs Brief 27/14 as follows:

  • HMRC accepts that the grant of a lease can be a TOGC provided that the landlord does not retain more than 1% of the value of the property immediately before the grant.  HMRC has confirmed the 1% test refers to the relevant part of a building.  For example, A owns the freehold of a let 4 storey building with a total value of £4m, with each floor worth £1m.  A grants a 999 year lease over one floor to a third party purchaser, with a ground rent of £100 p.a.  Assume that the value of the interest retained by A in that floor is £2,000.  In this case, the grant of the lease can be a TOGC, since A has only retained a 0.2% interest in the relevant floor – below the 1% referred to above.  The fact that A has retained the value in the remainder of the floors does not adversely affect this analysis.
  • In addition to the grant of a lease, HMRC now accepts that the surrender of a lease can constitute a TOGC.  So the surrender of a headlease to a landlord (with the benefit of an underlying tenancy) can constitute a TOGC.

Taxpayers should therefore consider this guidance in light of past and future transactions (as Stamp Duty Land Tax "SDLT" reclaims may be possible as SDLT is always due on the VAT-inclusive price).

Jonathan Legg is a Partner and Head of Real Estate Taxation.