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Lawrence Stephens’ Real Estate Finance Borrower team drives summer success with a trio of transactions

Posted on: August 13th, 2024 by Hugh Dineen-Lees

The Borrower team at Lawrence Stephens, led by Nisha Saigal and supported by Claire Boyd and Aida Gashi, has been making significant strides this summer in the real estate market. They’ve taken on a diverse portfolio of residential and commercial properties, collaborating with various lenders.

Here’s a closer look at some of their July deals:

Deal 1: Refinancing of Residential Flats

The Lawrence Stephens team facilitated the refinancing of two residential flats, with a substantial loan amount of £2.45 million. Acting as the sole representative for the borrower, they collaborated with the Bank for Intermediaries/Professionals as the lender. Their expertise in navigating complex transactions played a crucial role in achieving success.

Deal 2: Refinancing of HMOs (Houses in Multiple Occupation)

The team successfully refinanced three Houses in Multiple Occupation (HMOs) with a loan amount of £1.45 million. Acting as the sole representative for the borrower, they collaborated with Hampshire Trust Bank plc as the lender. Their expertise in managing complex transactions ensured a smooth process for all parties involved.

Deal 3: Purchase of Freehold Property

The Borrower team also facilitated the acquisition of a freehold property, subject to tenancy, with a loan amount of £138,000. The transaction involved dual representation, and the lender was a specialist in Buy-to-Let financing. Their ability to navigate complex scenarios and find practical solutions was instrumental in achieving a successful outcome.

These transactions underscore their dedication to cultivating robust, enduring connections with borrowers. The team’s proactive mindset, industry acumen, and streamlined execution position them as a reliable ally in the real estate finance arena.

Residential Real Estate market update: navigating the current UK housing market

Posted on: August 9th, 2024 by Yvonne Uzoka

The Bank of England (the ‘BoE’) Monetary Policy Committee’s recent decision to cut interest rates to 5% and the anticipated government taxation regime announcement in October 2024 are likely to affect both the wider UK housing and Prime Central London (‘PCL’) markets. In this market update our Residential Real Estate team take a look at the possible effects.

Impact on Swap Rates and the UK housing market

Let’s dive in. The UK housing market continues to show robust price growth. Earlier analysts’ predictions of an expected 1.8% rise in housing prices in July 2024, prices have been surpassed by actual increases of 2.1%. This unexpected growth reflects strong pent-up demand as borrowing conditions improve. In anticipation of the BoE’s interest rate cuts, several mortgage lenders, such as HSBC, NatWest and Nationwide, have recently reduced their mortgage rates boosting approvals to around 60,000 per month.

Following the BoE’s decision, five-year swap rates fell to 3.6%, the lowest since February 2024. This is under the crucial 4% threshold and experts are predicting rates will stabilise around 3.25% above pre-pandemic levels.

Why does this matter? The current trends suggest that lenders expect long-term interest rate reductions, making 5 to 10 year fixed mortgages the most cost-effective options. This indicates that lenders are keen to secure borrowers at these lower rates, which are predicted to drop over the next few years – a positive signal for the housing market.

Overall, there is cautious optimism. While house prices are rising steadily, borrowing conditions are improving and no dramatic drops in rates are expected.

The contrasting trends in PCL: signs of recovery?

In the wake of 20+ months of economic fluctuations and high interest rates, the UK property market has shown a mix of different trends. In the broader market Q2 of 2024 saw a 22% increase over the previous quarter for properties valued between £3-15 million. However, during the same time period, PCL prices were falling, with valuations dipping slightly. The trend of increasing average discounts has continued for the seventh consecutive month after three years of declines. This suggests that PCL may be influenced by other factors and the recent interest rate reductions may have a limited effect.

Despite the ratio of available stock to monthly sales at 25:3 in Q1,2024 to 22:6 in Q2, 2024, supply remains high, with an above long-term average of 20. Consequently, sellers must maintain realistic expectations regarding property prices, especially as the market broadens and buyers are presented with more options.

Key takeaway:

  • Demand is rising, but price drops in PCL are likely to continue as supply remains high.

The Government’s taxation updates and potential impacts

Lastly, we address the central government’s upcoming taxation regime, due to be announced in October, and its potential impact on the housing market. The Labour Government’s mandate is pro-growth, with an expectation of coming into effect by 6 April 2025. However, the practical implementation remains uncertain.

They aim to boost public service investment and stimulate the economy without raising income tax, national insurance, or corporation tax, which constitute about 80% of tax revenue. Proposed changes include:

  • Taxation of non-UK domiciled individuals – individuals with 10 consecutive years of non-residence will be exempt on their foreign income and gains received in the first 4 years of residence in the UK. It is irrelevant whether the income and gains are remitted to the UK;
  • Introduction of VAT on private school fees;
  • Abolition of furnished holiday lets (FHL) regime;
  • Adjustments to taxation on carried interest; and
  • Changes to transfer of assets abroad.

It is unclear if the government can achieve growth with these mechanisms or if they will backtrack on promises. As such, borrowers, lenders, and property owners should stay vigilant in the coming months.

At Lawrence Stephens we are dedicated to helping our clients navigate these changes. If you have any questions or need assistance, please do not hesitate to contact our specialised Residential Real Estate team.

Abtin Yeganeh comments on landlord-imposed work from home bans in The Independent

Posted on: July 8th, 2024 by Natasha Cox

Senior Associate, Abtin Yeganeh, comments on landlords banning their tenants from working from home, as well as tenants’ protections in this area, in The Independent.

Abtin’s comments were published in The Independent, 07 July 2024.

“As a general rule, a landlord cannot stop a tenant from working from home as it would interfere with a tenant’s statutory right to quiet enjoyment of their property. The position is somewhat more complicated where a tenant seeks to run a business from their rental property. With that said, whilst landlords can seek to exclude a tenant’s right to work from home, The Small Business Enterprise and Employment Act 2015 (subject to several exclusions) provides that landlords cannot unreasonably refuse a tenant’s request to do so.”  

Landlord and tenant works – Construction Industry Scheme payments now made simpler

Posted on: June 13th, 2024 by Natasha Cox

In brief:

Regulations were introduced in April of this year which removed the uncertainty and complexity on which payments made by commercial landlords to tenants are covered by the Construction Industry Scheme (CIS). As a result,  the majority of such payments will now fall outside the scope of the CIS and the requirement for deductions as advance payments towards a sub-contractor’s tax and National insurance to HMRC.

The pre-April 2024 rules created a cumbersome legal and administrative obligation and the removal of these compliance burdens must be welcomed.

Legislation

The Income Tax (Construction Industry Scheme) (Amendment) Regulations 2024 (SI 2024/308)  introduced in April 2024 added a new Regulation 20A to the main CIS regulations which specify that payments made by a landlord to a tenant for construction operations in connection with a lease or agreement for lease are not contract payments and are, therefore, outside the scope of the CIS.

To fall within the scope of this exclusion, payments must meet the following conditions:

  • The payment is made by or on behalf of a landlord;
  • The payment is received by a tenant or prospective tenant (tenants include sub-tenants);
  • The payment is for construction operations agreed in connection with a lease or agreement for lease;
  • The tenant that occupies or will occupy the property will carry out the construction works themselves or contract with a third party to undertake the work; and
  • The payment must be for construction operations relating to works intended primarily for the benefit and use of the tenant that occupies or will occupy the property under the lease.

The definition of ‘landlord’ includes a person with the legal or beneficial ownership of the property, who granted the lease or who will grant the lease.

What does this mean?

Under the pre-April 2024 rules, and prior to entering into any agreement relevant to the construction operations, both the landlord and tenant were required to take legal and taxation advice in order to jointly agree and document that any payments from the landlord to the tenant regarding such construction works either fell within the exclusion for ‘reverse premiums’ in Regulation 20 of the main CIS regulations so that they fell outside the scope of the CIS – or they did not and deductions would need to be made. 

Although contributions made by a landlord towards the tenant’s own fit out works were easier to assess, it was far more difficult where a contribution was being made towards the tenant undertaking Category A fit out works. This led to some landlords being more ‘careful’ in requiring the operation of the CIS on such contributions. Tenants were being asked to take on the added cost of CIS deductions –  as well as the added administrative and cash flow burdens of having to reclaim the amounts deducted. 

The new exclusion under Regulation 20A should lead to most payments by landlords to tenants (or prospective tenants) for construction operations being defined as outside of the scope of the CIS. However,, the implications of Regulation 20A do need to be fully understood.  Most notably,is the requirement that the landlord’s payments must be for construction works intended primarily for the benefit and use of the tenant. This means that any payment which relates to works outside the property occupied by the tenant is likely to fall outside the new exclusion and will therefore remain within the scope of the CIS.

As a reminder…

The new regulations do not affect the application of the CIS to payments by tenants to landlords for construction operations. Take an example where where the landlord has agreed to undertake the tenant’s own fit out works., While these payments will continue to usually fall outside the scope of the CIS, if the tenant will be sub-letting part or the whole of the property or they are registered with HMRC as a so-called ‘contractor’, the CIS deductions would apply in accordance with  Regulation 24 of the main CIS regulations for payments in respect of property used for the purposes of the business of the tenant or another company in the same group.

If you need any advice on the Construction Industry Scheme or any other aspects of construction law, please contact our team of experts Anne Wright and Tom Pemberton.

 

The Leasehold and Freehold Reform Act 2024: What homeowners need to know

Posted on: June 5th, 2024 by Natasha Cox

The Leasehold and Freehold Reform Act 2024 marks a significant shift in the landscape of home ownership in England and Wales. This legislation is designed to empower homeowners, providing them with increased rights, greater transparency, and enhanced protections. As a law firm committed to supporting our clients in navigating complex property issues, we are here to break down the key aspects of this transformative Act. 

Empowering homeowners with greater rights and protections

One of the most notable changes is the simplification of the process for leaseholders to buy their freehold. Historically, this process has been both complex and costly. The new legislation makes it easier for leaseholders to secure ownership of their homes and reduces the expenses involved. Additionally, the standard lease extension terms have been extended to 990 years for both houses and flats, up from the previous 50 years for houses and 90 years for flats. This change ensures that leaseholders can enjoy long-term security without the ongoing stress and financial burden of future extensions.

Facilitating the Right to Manage and collective enfranchisement

Leaseholders will now find it much easier to take over the management of their buildings, with the floor space limit for Right to Manage and collective enfranchisement being increased from 25% to 50% of commercial space. This will allow more leaseholders to exercise control over their properties, by appointing their preferred managing agent or collectively buying the freehold.

Streamlined processes for lease extensions and freehold purchases

New leaseholders were previously required to own their property for two years before they could extend their lease or buy the freehold. The Act abolishes this requirement, giving new homeowners immediate rights to extend leases or purchase freeholds, thereby simplifying and expediting these processes.

Enhanced transparency and fairness in service charges

Transparency over service charges has long been a contentious issue between leaseholders and freeholders. The Act mandates that freeholders and managing agents issue bills in a standardised format, allowing leaseholders to scrutinise and challenge these charges more effectively. This move towards greater transparency is a significant step in addressing unclear and often unjustified service charges.

Increased rights to challenge unreasonable practices

The Act empowers leaseholders to challenge their landlords’ unreasonable charges at the Tribunal without the deterrent of covering their freeholders’ legal costs. This change is expected to encourage more leaseholders to stand up against unfair practices, fostering a more balanced relationship between leaseholders and freeholders.

Rights for freehold homeowners on private and mixed tenure estates

For freehold homeowners on private and mixed tenure estates, the Act extends similar rights of redress that leaseholders enjoy. This includes greater transparency over estate charges and the ability to challenge their reasonableness. The legislation ensures that homeowners are well-informed about the charges they incur and can dispute unfair costs.

Banning new leasehold houses and excessive insurance commissions

In a bid to curtail the practice of selling new houses as leaseholds, the Act bans this practice except in exceptional circumstances. This move guarantees that future homeowners will generally acquire freehold properties, ensuring full ownership rights from the outset. Moreover, the Act addresses the issue of excessive buildings insurance commissions by banning opaque and excessive fees, replacing them with fair handling fees.

Conclusion

The Leasehold and Freehold Reform Act is a landmark piece of legislation that significantly enhances the rights and protections for homeowners in England and Wales. By making it easier and cheaper to extend leases, buy freeholds, and challenge unreasonable charges, the Act aims to create a fairer and more transparent property market. 

However, while the Act has received Royal Assent, numerous pieces of secondary legislation will be needed in order to clarify the exact, day-to-day application of these changes in practice. It is currently unclear when this additional legislation will be passed.

At Lawrence Stephens we are dedicated to helping our clients navigate these changes and leverage their new rights effectively. If you have any questions or need assistance regarding the implications of this Act, please do not hesitate to contact our specialised Residential and Leasehold Enfranchisement team. 

 

Triple shortlisting for Claire Allan and the Lawrence Stephens’ Leasehold Enfranchisement team

Posted on: May 30th, 2024 by Natasha Cox

Now into its 15th year, the annual Enfranchisement and Rights to Manage Awards has evolved into a prominent event, recognising excellence in the leasehold enfranchisement and right to manage sector.  The eminent and independent judging panel has reviewed all the submissions made and they have now revealed the final shortlist.  This peer-reviewed judging process ensures independent quality in the decision-making. 

As well as the firm being shortlisted in the Solicitors Firm of the Year category, Director and Head of Leasehold Enfranchisement Claire Allan has been personally shortlisted in the Solicitor of the Year and Professional of the Year categories. This triple shortlisting acknowledges Claire and her team’s expertise in advising leaseholders and landlords in this complex field, navigating them through the statutory lease extension or collective enfranchisement process.

Claire’s arrival at the firm has brought together and given focus to work already being undertaken by others through formally establishing the firm’s Leasehold Enfranchisement department. Client feedback confirms the benefit of the enhanced perspective gained by the team through experience of and acting for freeholders, head landlords and tenants.

Claire is actively involved in the real estate market and an active participant in a number of initiatives, including raising awareness of issues identified in the proposed leasehold reform amendments. She mentors and guides less experienced members of the team and more widely through her involvement in industry organisations.

As a consequence of her energy and enthusiasm, the scale and complexity of cases undertaken by her team has increased markedly. Examples include acting for the landlords of a number of West London mansion blocks, head landlords where the freeholder is a significant landed estate, and acting for the tenants on a mid-sized complex collective claim in Covent Garden against a multinational PLC.

The winners will be announced at the awards dinner on 11 July at the Leonardo Royal Hotel, near St Paul’s in London.

Successful completion of another significant funding facility for Blue Shield Capital

Posted on: May 30th, 2024 by Natasha Cox

We are thrilled to announce the successful completion of another significant funding facility for Blue Shield Capital.

This £8.8 million facility supported the acquisition of a prime £11 million mixed-use site, featuring office spaces and a Premier Inn hotel, arranged over ground and five upper floors.

The transaction was carefully and painstakingly negotiated up to the deadline, with our dedicated banking and real estate teams showcasing incredible expertise and commitment to bring this deal to a successful close.

Ajoy Bose-Mallick Director and Head of Banking led the team with assistance from Senior Associate Ashley Wright & trainee Alex Ruder on banking and Paul Marsh Director and Rachel Coulthard Senior Associate on real estate.

Commenting on this transaction, Ajoy Bose-Mallick said “this highlights our firm’s capability to call upon its cross-departmental expertise under tight deadlines and the combined team’s dedication and expertise were instrumental in navigating the complexities of this high value transaction, ultimately securing a successful outcome for the Blue Shield Capital loan and a successful acquisition for the borrower.”

Stephen Messias and Goli-Michelle Banan ranked in Spear’s Property Index 2024

Posted on: March 13th, 2024 by Maverick Freedlander

We are delighted to share that Director and Head of Residential Real Estate Goli-Michelle Banan and Director in our Commercial Real Estate team and Co-Founder of Lawrence Stephens Stephen Messias have been ranked in the Spear’s Property Advisers’ Index 2024 as Top Recommended Property Lawyers.

The Spear’s Property Advisers’ index recognises the best advisers to buy, sell, manage and invest in super-prime property in London, the UK and abroad. 

These rankings are decided on the basis of peer nominations, client feedback, interviews, data supplied by firms, and extensive research by Spear’s.

Click here to see the full rankings.

Lawrence Stephens acts for Gibson on new Gibson Garage opening

Posted on: February 23rd, 2024 by Maverick Freedlander

We are delighted to share that Lawrence Stephens assisted Gibson, the world-famous guitar manufacturer, in the opening of its new retail concept, Gibson Garage, the first outside of Nashville on Eastcastle Street, in the heart of London.

Director and Head of Commercial Real Estate, Danny Schwarz, handled the leasing aspects. Tom Pemberton, Director in the Construction and Development Finance department, facilitated the construction element.

Lawrence Stephens has acted for Gibson for over 15 years and oversaw the move of its showroom from Rathbone Street to Eastcastle Street, which has been in the making for over two years, with the official opening taking place on 24 February. We are very excited to continue to be part of the Gibson journey.

Click here to learn more about the Gibson Garage London.

Goli-Michelle Banan comments on boundary disputes in The Telegraph

Posted on: January 30th, 2024 by Maverick Freedlander

Following JK Rowling’s recent dispute with neighbours over hedge maintenance, Director and Head of Residential Real Estate Goli-Michelle Banan comments on resolving boundary issues.

Goli-Michelle’s comments were published in The Telegraph, 26 January 2024, and can be found here.

“We had one where the neighbour of a client built a fence that was much higher than the one before. They said it was for privacy reasons but our client argued that it was not just unsightly, it also blocked the light coming into their garden.

“It’s more common in cases where neighbours have a shared pathway, larger properties or blurred boundary lines.”

 

Lawrence Stephens completes warehouse lease for LT Foods Europe

Posted on: December 6th, 2023 by Maverick Freedlander

We are pleased to announce that Lawrence Stephens’ Commercial Real Estate team have recently completed the new lease of a warehouse site for valued client LT Foods Europe Holdings Limited.

LT Foods, an established global food company, currently manufacture and distribute the leading rice brand in India and are the number one speciality food brand in the U.S.  Located in Harlow, the 90,000 square feet warehouse will be used for the storage and manufacturing of rice and other food products, allowing the company to fully establish its UK business and presence.

Working hard to get this deal across the line, the team from Lawrence Stephens was led by Directors Danny Schwarz and Nisha Saigal, with assistance from trainee solicitor Alex Ruder.

Nisha Saigal commented: “We are delighted to have completed this deal for LT Foods Europe. Through this new lease, the company will be able to substantially expand its offering and establish its UK business – a bright future ahead!”

Chairman, Vijay Arora at LT Food Holdings commented: “As we take the next steps for our company, the new warehouse lease will allow us to grow and strengthen our business in the UK. The assistance and advice from the team at Lawrence Stephens was truly invaluable in securing the swift and effective completion of this deal.”

Nick Marshall comments on downsizing in StartUps.co.uk

Posted on: August 23rd, 2023 by AlexT

Director Nick Marshall explores some of the key considerations businesses must bear in mind when looking to downsize or relocate, in StartUps.co.uk.

Nick’s comments were published in StartUps.co.uk, 22 August 2023, and can be found here.

“The decision for companies to relocate is now influenced by factors beyond just hard cash.

“For many businesses, there are a number of positives to downsizing and chief among these is the ability to bring down overhead costs, including rent, service charge, insurance premiums, business rates and utilities, as well as furniture and IT equipment.

“Other benefits include the flexibility offered to employees by hybrid working plans and the associated benefits for mental health and wellbeing, and a decreased number of trips to the office – cutting down on commute costs, time and carbon footprint.

“This is not to say the downsizing is purely beneficial for businesses and, in many cases, the decision to downsize is easier said than done, and businesses who rent their office space must be wary of the fact that they are tied down by often lengthy leases which they can’t get out of at short notice, simply to reduce overheads.

“Often there are also additional costs associated with leaving a lease early and, given it is usual for at least 6 months’ notice to be given to a landlord, cost savings are not going to be immediate. Tenants may also find themselves having to make a large payment to its landlord for dilapidations, even after they have relocated.

“Downsizing may also have a negative effect on office culture and wellbeing, alienating the very people that generate and process the business. Younger employees may also find their development stunted by the move to working from home on a permanent or semi-permanent basis, and it is vital that the decision to downsize does not have a negative impact on such staff.

“Finding the balance between these factors will no doubt be crucial in a company’s decision to downsize.”