This newsletter provides a concise overview of the latest legal developments, from tax adjustments to sustainability initiatives affecting the UK property market. We highlight the key changes and how these changes could impact businesses.
What were the key property announcements in the Spring Budget statement?
The UK Spring Budget statement of March 2024 introduced significant changes targeting investors, aiming to stimulate growth and investment in the sector. One of the key changes was the abolition of Multiple Dwellings Relief (MDR) for Stamp Duty Land Tax (SDLT) for residential transactions effective from 1 June 2024, with provisions allowing those contracts exchanged before 6 March 2024 to still benefit from the relief.
Additionally, the government announced the creation of Reserved Investor Funds (RIF), a new tax-transparent vehicle designed to enhance the UK's investment funds regime, open to professional and institutional investors. This vehicle will grant to qualifying RIFs the benefit of certain tax reliefs relating to Capital Gains and Stamp Duty Land Tax and is expected to attract investment into the commercial real estate market. Specialist advice should be sought relating to the establishment of RIFs and entry and exit from the RIF market.
Turning to Business Rates, the Budget has provided an extension of business rates relief for Freeports. Existing reliefs currently offered to retail, leisure and hospitality have also been extended to film studios with the aim of boosting local economies by driving sector-specific growth. The relief operates through a central government incentive scheme to local government bodies. The government has also responded to the Business Rates Avoidance and Evasion Consultation by introducing measures requiring that properties now need to be occupied for a 13 week period (previously 6) in order to apply for 3 months’ worth of empty property business rates relief upon vacating. Where commercial owners or investors retain vacant commercial properties, it is important to seek specific updated tax advice on the management of ongoing business rates liabilities.
Is Biodiversity Net Gain (BNG) mandatory?
BNG is an approach to new development. BNG aims to ensure that development projects leave wildlife habitats in a measurably better state than they were before the development.
In England, BNG is now mandatory in all circumstances (unless exempt) via the implementation of Schedule 7A of the Town and Country Planning Act 1990 (as inserted by Schedule 14 of the Environment Act 2021). Developers must now deliver and ensure that a BNG of 10% is maintained for 30 years. In broad terms, this means that development of a site must either increase the size of or improve the quality of the natural site-based habitat following completion of development compared to the habitat of the site prior to development.
What changes can be expected from The Levelling-up and Regeneration Act 2023?
The Act received Royal Assent in October 2023, with further regulations expected in 2024 to bring the various aspects of the Act into force.
The Act includes wide-reaching changes affecting the real estate sector, including reforms to the planning system, (which amongst other changes will see enforcement periods extended from 4 years to 10 years for a breach of planning control) and the Community Infrastructure Levy. There are key provisions around rental auctions. The Act introduces the concept of compulsory rental auctions to revitalise town centres and high streets. The regime applies to persistently vacant high street commercial premises in areas significant to the local economy (excluding warehouses). Local authorities will have the power to oblige owners to rent out such properties. The aim is to fill vacant commercial property, such as shops, through these compulsory rental auctions. The specifics of how these auctions will operate are yet to be detailed.
Further regulations will set out how the rental auction process will work including details of the relevant rental auction lease terms.
Why is the government consulting on contractual control agreements?
The UK government's consultation on its proposals to capture information about Contractual Control Agreements (such as option agreements) closed last month. Should such a plan be implemented it is with the ambition that it provides transparency in respect to who holds practical control of property. Criticism of such an implementation is likely to come from commercial investors that hold “Land Banks” comprising ownership of undeveloped land or Contractual Control Agreements with the intent that they may develop it in the future. Any potential disclosure requirement may impact on commercial confidentiality advantage and relevant property valuations.
Is the government looking at transparency of land ownership involving trusts?
The government has also recently concluded a separate consultation on transparency of land ownership involving trusts. This consultation is an initiative aimed at improving the visibility and transparency of land ownership structures with a focus on the disclosure of trust information held on the Register of Overseas Entities (ROE).
How 3CS can help
For further information or help with any legal commercial property matter, please get in touch with your usual 3CS contact.
