Real Estate

Welcome to Louise Loveless
12 April, 2017

The PDR team is delighted to announce that Louise Loveless qualified as a solicitor into the team on 3 April.  I asked Louise a few questions, to continue our series of PDR team interviews:

 

Q1:  What do you remember about your first day at Cripps?

A:  Being taken for lunch at a steak restaurant, being asked “you’re not a veggie are you” as a rhetorical question and awkwardly having to say yes.

 

Q2:  What did you want to be when you were growing up?

A:  A journalist.

 

Q3:  Tell us something about yourself that may surprise us.

A:  I can make my own cheese.

 

Q4:  What would your super-power be?

A:  Time travel.

 

Q5:  What is your favourite pastime when not in the office?

A:  Cooking.

 

Q6:  What is your guiltiest pleasure?

A:  Trashy tv.

 

Q7:  What is your favourite book?

A:  The Book Thief.

 

Q8:  What is top of your bucket list?

A:  To visit the Albuquerque hot air balloon festival.

 

Q9:  Who would you invite to your dream dinner party (alive or dead)?

A:  Hugh Grant, Mick Jagger, Kate Moss and Nigella.

 

Q10:  What is your go-to karaoke song?

A:  I avoid karaoke, I sound like a drowning cat.

 

Congratulations on qualifying and a warm welcome to the PDR team Louise!


Electricity Connections: A Guide for Developers and Landowners
7 April, 2017
by: Cripps

This article provides a short but practical overview of the electricity 
industry in England and Wales. 

Although its aim is to inform developers
and landowners, anyone with an interest in how energy connections work should find the following information useful.

1.  Where is electricity generated?

The majority of electricity produced in the UK is generated at a small number of large scale stations.  The owners and operators of power stations are referred to as “generators”.

2.  How does the electricity infrastructure work?

The electricity produced at a power station is approximately 25,000 volts, but it is passed through a transformer before transportation to increase the voltage to either 275,000 or 400,000 volts.  Once that
happens, the electricity enters a series of transmission systems consisting of a network of towers, cables and substations spread across the country.

Electricity is then supplied through infrastructure controlled by Distribution Network Operators (DNOs).  Supply companies use the DNOs’ infrastructure to supply and sell the electricity to the consumer.

3.  Do DNOs have a duty to make a connection?

Under the Electricity Act 1989, DNOs have a duty to make (and maintain) a connection, and to provide the electrical lines/plants required.

A request for the new connection should be made by:

  • the registered owner of the land;
  • the person occupying the land; or
  • a licensed company acting with the authority of the owner or occupier.

4.  What if I require only a temporary supply?

Requesting a temporary builder’s supply is possible.  Electricity will often be required by builders and contractors while the developer awaits the main connection to be finalised.  Each supplier has different mechanisms in place and so it’s worth contacting them directly.

Alternatively, you might consider renting a generator, although its usefulness and cost-effectiveness will depend on the type of job you are doing on site.

5.  Can the DNOs refuse to make a connection?

DNOs have a general duty, under statute, to make and maintain a connection.  However, a DNO can refuse to do so if:

  • it is prevented from making/maintaining a connection by circumstances outside of its control;
  • making the connection would or might involve a breach of safety regulations;
  • it wouldn’t be reasonable to require it to make the connection (perhaps because of safety reasons).

6.  How does the process of requesting a connection work?

You should send a notice to the DNO, specifying:

  • the premises for which a connection is required;
  • the maximum power of electricity required;
  • the date on (or by) which the connection is to be made; and
  • any other information that the DNO might reasonably require.

As the developer, you will have very little say over the process and chances are you will need to accept the DNO’s terms and costs (so long as they are reasonable).

Depending on your location, you will most likely find a pro-forma notice on your DNO’s website, which you can use in place of a personalised notice.

7.  What are the next steps?

Once your notice has been received and reviewed, the DNO must tell you if your proposal is acceptable, and set out any counterproposals it may have (if reasonable and necessary).

The DNO will also have to explain what payment it will require from you to cover the (reasonable) costs it incurs in providing the connection, and the terms which you will need to accept before it carries out the work.

8.  Will I require planning permission?

Planning permission is not generally required when installing or replacing electrical circuits (unless your building is listed, in which case you should contact the local planning authority as you may require listed building consent).  However, compliance with the building regulations is compulsory.

Unless you use a registered competent person (who can self-certify their work is compliant with the building regulations), any ‘notifiable’ job (such as the installation of a complete new circuit) will need to be inspected, approved and certified by an electrician registered with a third-party certification scheme, or a building control body.

For more information on planning, please contact your local planning authority and/or seek advice from a specialist planning lawyer.

9.  What if a dispute arises with the DNO?

A specific dispute resolution process must be followed under s.23 of the Electricity Act 1989.

Essentially, certain unresolved disputes are referred to Ofgem to determine whether a party is at fault.  However, a developer or landowner should be advised to speak with their legal advisers as early as possible, if the situation warrants it.

10.  The line will require access through a third party’s land.  Must they comply?

If this is the case, our advice would be to seek independent legal advice as early as possible, so as to avoid delaying development on your site unnecessarily.

Unless the DNO can agree an access right with the third party landowner, an application for a ‘necessary wayleave’ will need to be made to the Secretary of State.

A necessary wayleave allows entry for installation and subsequent access for the purpose of inspecting, maintaining, adjusting, repairing, altering, replacing or removing the electric line.

11.  Can works be carried out on any land, even streets?

DNOs have power to carry out any works that are requisite for, or incidental to, the installation.  This includes opening or breaking up any street, or any sewers, drains or tunnels within or under any street.

If the street is not publicly maintainable, the power can only be exercised with the consent of the street authority or the Secretary of State, except in cases of emergency.

It is important to note that the DNO must cause as little damage as possible, and compensate the owner for any damage done in the exercise of its powers.

Need specialist advice?

Whether you are a landowner or a developer, our specialist property development team (which comprises development, construction and planning lawyers) can help.  For more information, please see our team’s information page and contact details here.


Letting rooms – Airbnb and the bed and breakfast
3 April, 2017

The traditional way of starting up a bed and breakfast has been given a new slant in the modern world.  The rise of Airbnb has provided the opportunity for those with vacant properties or room to spare to let space out for short periods of time to travellers and holidaymakers on a casual basis.  How does this fit in with our rules and regulations on use of residential and commercial properties?

 

Permitted use of property is governed by the Town and Country Planning (Use Classes) Order 1987.  This provides classes or groupings of properties, and authorises use of particular buildings for particular uses.  The use classes relevant here are classes C1 and C3.  C1 use is granted for hotels, (including boarding and guest houses).  C3 use is granted for dwellinghouses.  Planning permission is required for a material change of the use of premises in some cases, and necessitates an application to the local council.

 

The question here is whether use as a bed and breakfast, for example through the Airbnb scheme, necessitates a change of use application from C3 to C1 use.  This will be determined by whether a “material” change of use has taken effect.  For example, if a room is let out on an irregular basis in a dwellinghouse occupied by a family, it is unlikely that the one room let will be material or substantial enough to require a planning application for a change of use.  The difficulty is that the decision on material changes lies with the local borough or district council.  This can result in different decisions being made by different councils in borderline cases.

 

One area where this sort of use has been discussed is in Greater London.  Prior to 2015, under the Greater London Council (General Powers) Act 1973 the provision of temporary sleeping accommodation would constitute a material change of use.  The Deregulation Act 2015 amends this so that the letting of short term sleeping accommodation will not constitute a material change of use provided the total annual number of nights does not exceed 90.  This amendment was introduced specifically to adapt to the growing temporary accommodation sector and such sites as Airbnb.  This gives a specific, measurable amount for the Council to base their decisions on.  Unfortunately, this only applies in Greater London.  In other areas, the discretion of the Council remains.

 

Following on from the change in the law in Greater London, Airbnb are now banning any hosts in London from renting out entire homes for more than 90 days unless they can show they have permission from the Council.

 

What practical difference does the classification from residential use at C3 to commercial use at C1 make?  Commercial properties are governed by different regulations for health and safety, building regulations and tax, amongst many other areas.  The required compliance with these aspects for commercial property owners are unintended consequences for most casual Airbnb members, who won’t anticipate having to comply with a range of commercial property requirements when letting out part of their home.

 

It is best and safest to seek the advice of the local planning authority before embarking on an Airbnb, bed and breakfast or hotel scheme to get a better idea on their view of the use classes and the distinctions between them.  Those living in Greater London will benefit from a little more certainty than the rest of us, who will need to look carefully at the materiality of the usage when making their business plans.


Recoverability of cost of improvement works
17 March, 2017

On 2 February 2017 the Court of Appeal heard a landlord’s appeal from the Upper Tribunal (Lands Chamber) regarding recoverability of a landlord’s costs in relation to discretionary improvement works (The London Borough of Hounslow v Waaler [2017] EWCA Civ 45).  This case will make interesting reading for landlords and leaseholders alike, not only because of the distinction which was drawn by the Court of Appeal between obligatory repair works and discretionary improvements but also for the criteria, put forward by the Upper Tribunal and now approved by the Court of Appeal, which should be applied by the landlord when considering carrying out improvement works to a building.

 

Ms Waaler lived in a block of flats on an estate in Hounslow owned by the London Borough of Hounslow (“the council”).  Approximately 140 residents in the flats were long leaseholders whose leases were created under the right-to-buy scheme (including Ms Waaler’s) and a further 850 residents were secure tenants.

 

In 2004 the council served a section 20 notice  indicating an intention to carry out major works which included replacing the wood-framed windows with metal-framed units, which in turn necessitated the replacement of the exterior cladding and the removal of underlying asbestos.  Whilst the works were to be partly paid for by government loans under the Decent Homes initiative, the council’s intention was to recover the remaining cost from leaseholders through the service charge provisions in their leases.  The works were completed in 2006, after which time Ms Waaler and the other leaseholders were each issued with a bill for £55,195.95.

 

Ms Waaler applied to the First Tier Tribunal under section 27A of the Landlord and Tenant Act 1985 for a determination of her liability to pay this service charge.

 

The First Tier Tribunal holding that the sum demanded was payable, Mr Waaler appealed to the Upper Tribunal, which was allowed.  The question for the Upper Tribunal was whether or not the costs had been reasonably incurred.

 

The Upper Tribunal (UT) held on appeal that the works to the window frames and cladding constituted improvements which the council had only a discretion, not an obligation, to carry out under the terms of the leases.  They held that, in the case of improvements, in determining whether the cost of the works was reasonable under section 19 of the Landlord and Tenant Act 1985 the appellants should have taken into account three factors:

 

  1. the extent of the interests of the leaseholders;
  2. the views of the leaseholders on the proposals; and
  3. the financial impact upon them.

 

The council appealed this decision.

 

The Court of Appeal dismissed the appeal.  They held that the purpose of section 19 of the Landlord and Tenant Act 1985 was to provide protection against costs which otherwise would have been contractually recoverable.  Whilst they were careful to point out that the same legal test applied to all categories of work falling within the definition of “service charge” of the 1985 Act, they made the point that the application of the test did not mean that the legal and factual context applicable to each category of works should be ignored.  There was a real difference between works which the landlord was obliged to carry out and, on the other hand, work which was an optional improvement.  They approved the factors applied by the Upper Tribunal.  They held that the extent of the leaseholders’ interests, measured by the unexpired term of their leases, was a relevant factor.  With regard to the views of the leaseholders, where it was exercising a discretionary power at the leaseholders’ expense, it made sense that their views should be more influential than where the landlord was simply complying with its obligations.  In terms of the financial impact of the works, they held that whilst the landlord was not obliged to investigate their financial means, they were likely to know what kinds of people were leaseholders in a particular block or on a particular estate.

 

The decision will undoubtedly not be welcomed by landlords.  Not only will the requirement to apply the criteria as set out by the court when considering improvement works impose an additional administrative burden on landlords, but the decision could lead to greater scrutiny of service charge requests and potentially more litigation on this topic in the future.


Property Crowdfunding: a savvy investment strategy? Or, is it better to stay far from the madding crowd?
24 February, 2017

So, you have reached that distant point in your life where you have saved enough cash, and you are ready to invest in something. Maybe you already own your own home and want to invest in a buy to let property, but you don’t want to have the burden of answering unsolicited midnight telephone calls from your tenants about their broken boiler. Maybe you have saved a good amount of money, but it is still not enough to fund a property purchase on your own, when the house-price-to-income ratio in the UK is at a record high. Or, perhaps you have just won £10 on a scratch card and instead of buying that bottle of wine that is beckoning you from your local off-licence, you have the oh-so-sensible thought of investing your modest winnings on bricks (or should I say, brick) and mortar… Surely that is impossible?

 

It is called property crowdfunding; the new phenomenon that is set to change the UK property market over the next decade. This is how it works:

 

  • An investment platform (usually on the internet) advertises either a.) Undervalued but high rent yielding properties in areas that have not shown significant house price growth (for example Durham, Merseyside etc.); or b.) (Removing focus from rental income) properties in regions that are predicted to have high house price growth (for example properties within the Crossrail development). The properties can be commercial or residential.
  • You invest your £10, along with other people, into your chosen property inside a specially created limited company and voila! The limited company now own the property and you are the landlord of a buy to let property.
  • You receive returns from the rental income of the property, or even a capital sum from an ownership transfer, equal to the value of your share in the limited company.
  • For a 15% fee, the management company deals with the tenants so you don’t have to deal with that broken boiler. Instead, you are free to focus your energy on making other investments – slowly building up a diverse portfolio of small property investments around the UK.
  • So, what’s the catch?

    In a world of “over phishing” and scam artists regularly trying to part you with your hard earned money, this sort of investment platform is a breeding ground for fraudsters. Therefore, do your diligence on your chosen investment platform.

    However, even with the most popular and trusted platform, remember that it takes a lot of £10 scratch card winners to buy a property together. If the platform folds, it will be administratively complex to recover your share of the property along with the other thousands of other investors. Even then, you have to sell the house in the first place to recover your share, the legal transaction process usually taking between 3 and 6 months. Liquidity has never been an advantage of owning property and especially not with so many other joint owners. In addition, the multiple person ownership of the property would not be attractive to a prospective buyer.

    You will also have no control over the selection of your tenants, nor for the amount of rent that they will be charged. The management company deals with this as well as the management of the property. This lack of control means that, potentially, an irresponsible tenant could be placed in the property which means that there may be delays in receiving your rental income, and there could be extensive repairs that have to be made to the property after the troublesome tenant has vacated.

    In addition, be careful of the investment platform’s terms and conditions. Some platforms reserve the right to borrow against the property in certain situations. This could mean that your share in the property may decrease, and there is nothing you can do about it.

    Lastly; “What are the investment platforms gaining from this?” I hear you cry.

    Aside from the management fee, there is a “finder’s fee” which is 5% of property price. Then you are charged between 15-25% of the rental yield or any final capital increase in the property. So your £10 share may be more hassle than it is worth.

    However, despite the negatives, property crowdfunding could be a credible alternative to the traditional approach of property investment. It is a growing sensation in the crowd funding world, real estate accounting for more than [1]20% in the UK crowdfunding market – so it obviously works. However, the risk of not being able to be in complete control of your investment, and the costs of making that investment, might just be enough to stuff that £10 note back in your pocket.      

 

[1] http://www.propertyweek.com/data/real-estate-crowdfunding-poses-challenge-to-market/5086716.article


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