Much will be written in the coming weeks on the effect that the "leave" decision will have on the real estate industry. EU membership has long been associated with detailed regulations, often imposed centrally on member states by the European Commission. So, now that the UK's voters have made their decision, some of our real estate experts speculate on which EU rules they would love to ditch and which are so good that the UK should keep them, even though Brexit has become a reality.
England's membership in the EU has undeniably strengthened our environment and is an area where UK and EU law has become particularly interlinked.
As an EU member, the UK government is required to abide by a number of EU environmental directives which have strict, legally binding targets. These environmental directives include matters such as birds, habitats, bathing water, air quality, emissions, water and waste.
While some may view compliance with these directives as bureaucratic and obstructive, particularly in relationship to development and the economy, they serve a strong and positive environmental purpose which benefits us all. The environmental consequences of Brexit will very much depend on whether there is political will to continue to protect our environment by upholding the stringent environmental requirements imposed by EU directives.
While the UK does of course already have a number of laws to protect our environment (indeed some arguably more stringent than EU Directives), our forthcoming exit from the EU should not be seen or used as a vehicle to enable cost cutting on environmental matters, whether to stimulate the economy or not.
If you have any questions arising from this, please contact Anita Rivera; 020 3321 7901
Energy efficiency of buildings
The 2010 EU Directive on the energy performance of buildings requires member states to set minimum energy performance requirements for buildings and to establish a system for certifying the energy performance of buildings.
This has been translated into UK law through the Energy Performance of Buildings (England and Wales) Regulations 2012 and subsequent amendments requiring EPCs to be provided to purchasers and tenants of commercial and residential properties. Are these really of any interest to most recipients?
The Government has also taken things one step further (or possibly too far, depending on your viewpoint) with the Energy Efficiency Regulations 2015. These have placed future restrictions on letting buildings with an EPC rating lower than E. Certificates now have more relevance to investors in property.
Although, from a personal point of view, I welcome anything which will help move this country on from the environmental dark ages, the cost of this legislation to business and therefore our clients should not be underestimated. I wonder whether, once our Brexit has taken effect, there will be any appetite to relax energy efficiency requirements. However, bearing in mind the December 2015 Paris Agreement, in which 195 countries – including the UK – agreed targets to combat global warming, I suspect not.
If you have any questions arising from this, please contact Alison Taylor; 020 3321 7073
An EU miscellany?
My first thought was that when the UK leaves the EU, we should abolish the CRC energy efficiency scheme. This requires large organisations to record annual energy use and buy carbon allowances at over £16 per tonne of CO2. Except that this complex and bureaucratic scheme is a British invention, created by the UK Parliament and nothing to do with the EU. Anyway, the chancellor announced in his March 2016 budget that the CRC will be abolished in 2019, and replaced with a simpler scheme.
Then I wondered about the 2011 EU Consumer Rights Directive. Protecting consumers carries a cost for most businesses, but only parts of our consumer laws are dictated by EU Directives. The UK has been building up its own consumer protection laws since the 1970s, and much of the recent Consumer Rights Act 2015 was a UK creation. In any case, there is broad political consensus that consumer protection laws are a good idea. I do not expect these to be abolished when we leave the EU.
So how about the AIFMD? This is the EU Alternative Investment Fund Managers Directive 2011, which set up a detailed regulatory framework for managers of alternative investment funds. Fund managers must obtain prior authorisation, meet certain operating conditions (e.g. how they hold funds or pay bonuses to staff) and comply with transparency and reporting requirements.
The AIFMD was introduced across the EU as a reaction to perceived failings of hedge fund managers before the 2008 financial crisis, but it applies to real estate fund managers in the same way as to most other funds. It's well-intentioned, but detailed and bureaucratic. The UK might wish to abandon this Directive once we leave the EU. But even if we do scrap these rules, UK-based fund managers wishing to market to investors inside the EU will probably still have to comply with parts of the Directive anyway. And that, in a nutshell, is why many business leaders felt we should have stayed in the EU, so at least we could have influenced what these directives say.
If you have any questions arising from this, please contact Johnny Kelly; 020 3321 7230