Designing Buildings - User contributions [en]

Remedies for late payment in the construction industry

2012-12-13T12:49:19Z

Martincantor: Created page with " '''Remedies for Late Payment''' Late payment of invoices is a problem for a large majority of suppliers of goods and services. In tough economic times the problem gets worse a..."

'''Remedies for Late Payment'''

Late payment of invoices is a problem for a large majority of suppliers of goods and services. In tough economic times the problem gets worse as cash retention becomes a greater priority.

And it is frequently the largest and most powerful client groups who are the worst culprits.

In the construction industry squeezing sub-contractors and suppliers is almost “accepted practice”. A recent survey (November 2012) of 250 small construction companies found that 97% feel unfairly treated by main contractors, and just 5% of all work is paid for within 30 days.

However all suppliers of services have statutory rights as well as those provided by contract.

The most obvious statutory right is provided by the [http://www.legislation.hmso.gov.uk/si/si2002/20021674.htm Late Payment of Commercial Debts Regulations 2002] which allows an interest charge of 8% over Base rate to be levied where a supplier is not paid in accordance with his contract. Furthermore additional penalties can also be levied.

The EU is currently consulting on a new Directive which will provide a Europe – wide regime to tackle the problem. This could become effective during 2013.

Fort small debts – below £5,000 – the Small Claims Court offers a simple and inexpensive route to obtain judgment where a sum remains outstanding beyond the contractual position.

For statutory or contractual rights to be capable of being enforced swiftly it is imperative that a contract sets out explicitly terms and conditions for payment for the services or goods to be supplied.

It should also clearly set out what must be done in the event of a dispute over an invoiced amount.

All suppliers should read contracts carefully and ensure that they are content with payment terms and conditions before signing. A judgment must, of course, be made as to the merits of taking such action, particularly if the client is a source of on-going work but in the absence of best practice being adopted more widely, the problem of late payment will have to be tackled, at least in part, by suppliers standing up for their legal rights more vigorously than in the past.

In the almost total absence of any form of bank funding for small suppliers and sub-contractors the need to maintain cash flow through prompt payment for work carried out cannot be over-stated and recourse to legal rights is an important part of seeing that businesses do not fail through non-payment of invoices which have been properly rendered..

[[Category:Other_legislation]]

Personal service company

2012-11-16T09:26:14Z

Martincantor: Created page with " '''Personal Service Company (“PSC”)''' There is no single definition of this term, which was coined by HMRC to describe companies which are set up so that individua..."

'''Personal Service Company (“PSC”)'''

There is no single definition of this term, which was coined by HMRC to describe companies which are set up so that individual(s) can offer their services via the medium of a company, rather than in a personal capacity.

The design and construction industries are sectors where the use of PSCs is widespread and for this reason attract significant attention form HMRC.

There are a number of reasons why an individual may choose to offer his or her services in this manner but the context in which this term is often seen is that of IR35 and HMRC’s suspicion that many such companies are created for the purpose of tax avoidance.

So what are the reasons for setting up a company to offer one’s professional or personal services?

'''Creating a clear ownership structure'''

The share structure of a company creates a clear and unambiguous ownership arrangement that is publicly visible at Companies House. Where an individual wishes to share ownership with a spouse or business partner, the company’s Memorandum and Articles of Association set out rules which govern share ownership in a way which is often less clear in an unincorporated arrangement.

'''Planning for the future'''

Passing on ownership of a business can be simpler when it is a matter of transferring shares. In family –owned enterprises this can assist issues of succession as well as enabling the value of the business to be spread as appropriate amongst family members. This is undoubtedly beneficial from an Inheritance Tax point of view.

'''Facilitating a sale of the business'''

It may also be the case that a sale to a new owner may be easier to effect if the business ownership is clearly defined via a simple shareholding structure.

'''Minimising risk to personal assets'''

The risk of being sued for providing negligent advice or workmanship is ever- present. Providing services through a limited liability company protects personal assets from being exposed to being lost in a court case. Insurance can, of course, be taken out to provide protection in such circumstances but many people see a limited liability company as a the logical way of addressing this risk.

'''Efficient remuneration planning'''

All companies, including PSCs, may pay dividends to their shareholders in addition to or instead of a salary. Paying dividends '''can''' result in less tax and national insurance being paid to HMRC. Using a company can also enable an owner to spread personal remuneration over a longer period of time and this can be a very effective and perfectly legal way of minimising tax payable over a period of years. This is done by holding earnings within the company and paying salary and/or dividends over a period of years.

'''To obtain work'''

It is a fact that many clients – typically the largest companies – will only award work to individuals or contractors who offer their services through a company. There is a general perception, often misguided, that this minimises risk to the client. It is often a case of “No company, no work”.

'''Advantages for Clients'''

Increasingly clients wish to distance themselves from any potential arguments as to whether or not an individual could be deemed to be an employee rather than an independent provider of services. Using a PSC reduces such risk although it does not necessarily eliminate all IR35 – related considerations.

'''Summary'''

PSCs undoubtedly serve a valuable purpose for those who wish to offer their services with the benefit of limited liability. Other options e.g. Limited Liability Partnerships could be considered but for simplicity PSCs have many advantages. They are inexpensive to set up and annual costs for accounting, HMRC and Companies House requirements should be modest. Small companies are exempt from complex reporting requirements so the administrative burden should be relatively light.

The main potential pitfall of using a PSC is embodied in IR35 and it is absolutely the case that, in structuring one’s business affairs, an individual must be fully cognisant of the provisions of IR35 and must ensure as far as possible that its provisions do not apply.

With the trend to self-employment increasing the use of PSCs is likely to grow in the future and, with sensible planning at the outset, there is no reason why their use cannot confer advantages to those who own them.

[[Category:Taxation]]

Law of Property Act 1925 Receiver

2012-11-08T11:12:34Z

Martincantor: Created page with " '''Law of Property Act 1925 Receiver (LPA Receiver)''' A LPA Receiver may be appointed under the terms of the Law of Property Act 1925 to take charge of a mortgaged property w..."

'''Law of Property Act 1925 Receiver (LPA Receiver)'''

A LPA Receiver may be appointed under the terms of the Law of Property Act 1925 to take charge of a mortgaged property when the borrower is in default.

The purpose of so doing is to take control of the property in question with a view to either selling the property to recover the outstanding debt, or to collect rental income for the lender.

'''''Direct Powers'''''

Under the 1925 Act the direct powers of a LPA Receiver are:
*To demand and recover all income due on the property to which they are appointed receiver. Such recovery can be by action, distress or any other means.
*If directed to do so, to insure (and keep insured) the property against loss or fire damage. Any premiums can be paid from sums collected.

'''''Delegated Powers'''''
*The Lender can also delegate its contractual powers to the receiver under S 109(3) of the 1925 Act. This must be done in writing. Such contractual powers are:
*The power to sell the mortgaged property on terms that the receiver sees fit
*The power, once in the lender’s possession, to cut and sell timber after consulting with an arboriculturalist
*The power to make leases

'''''Insurance Money'''''

The lender can demand that all monies received in connection with insurance of the mortgaged property be applied either towards the discharge of the mortgage balance or to recoup monies, loss or damage to which the funds relate.

'''''LPA Receiver’s remuneration'''''

The receiver is entitled to retain from monies received up to 5% unless specified otherwise

'''''Application to the Court for directions'''''

The LPA Receiver or Lender may apply to the Court on matters of uncertainty relating to the appointment, powers or remuneration.

[[Category:Property_law]]

The use of email in contract negotiations

2012-10-29T21:42:43Z

Martincantor: Created page with " '''The use of email in contract negotiations''' Recent case law has, once again, revealed the dangers of protracted email correspondence creating an unintended contractual rela..."

'''The use of email in contract negotiations'''

Recent case law has, once again, revealed the dangers of protracted email correspondence creating an unintended contractual relationship between two parties.

Email is ubiquitous and is used increasingly as the means to convey “pre-contract” requirements and terms between parties who envisage entering into a formal contractual relationship. However, unless care is taken it is quite possible for a contract to be formed between the parties based upon that email correspondence.

It is frequently the case that one or both of the parties fails to appreciate what is needed for the formation of a binding contract. At law a contract does not need to be signed for it to be enforceable. A contract can be verbal.

Even where a contract does need to be signed it does not necessarily mean signature with a pen. And the word “signature” has been sufficiently widely interpreted to include e-mail names or nicknames.

And modern practice whereby the use of the “reply” or “reply to all” email buttons is widely used can create a situation where a long chain of correspondence can be construed as forming the basis of a binding contract.

This is amply demonstrated by the case of Golden Ocean Group v Salgoacar Mining Industries (2012), briefly described below:

 '''''The case''

''The Court of Appeal had to consider whether a chain of emails constituted an agreement ‘in writing’ between parties -Golden Ocean Group (GOG) the owners of a vessel that it offered to hire to a subsidiary of Salgaocar Mining Industries (SMI) who would act as guarantor of their subsidiary.''

''Negotiations were mostly conducted by email. The purported guarantee was not discussed in any depth, but referred to in the description of the charterer. But the final emails exchanged on behalf of the parties made no reference to SMI’s guarantee and no formal document was drawn up.''

''Shortly before the vessel was due to be delivered, SMI’s subsidiary denied the existence of a charter party and said it was unable to proceed. GOG sought to bring proceedings against SMI as the guarantor. SMI contended the guarantee was unenforceable because it was not in writing and not signed by the guarantor.''

''The court disagreed and held the requirements necessary for a contract of guarantee had been satisfied. It found an exchange of emails could constitute an agreement in writing provided the transacting parties intended to be bound by it. The lack of a signature was not a barrier.''

''''' Preventative Measures''

''Conducting negotiations by email may expose a party to the possibility of entering, unintentionally, into an agreement. Parties should make it clear when negotiating in writing that they only intend to be contractually bound when a formal contract is drawn up and executed. In the meantime all email should be marked – “subject to contract”. Even this is not foolproof but does provide a large measure of protection in the vast majority of cases.''

''Also avoid long strings of email correspondence''

''State at the outset that you have no intention to be bound by a contract until one is formally drawn up and executed in a specified form.''

[[Category:Other_legislation]]

Harrison & Others v Shepherd Homes Ltd (2011)

2012-10-26T09:24:04Z

Martincantor: Created page with "Defective_Premises_-_Liability_and_Measure_of_Damages Category:Other_legislation"

[[Defective_Premises_-_Liability_and_Measure_of_Damages|Defective_Premises_-_Liability_and_Measure_of_Damages]]

[[Category:Other_legislation]]

Defective premises - liability and measure of damages

2012-10-26T09:22:31Z

Martincantor: Created page with "DEFECTIVE PREMISES '''Harrison & Others v Shepherd Homes Ltd (2011) EWHC 1811 (TCC)''' '''''Correct approach to measurement of damages''''' The Claimants were owners of houses..."

DEFECTIVE PREMISES

'''Harrison & Others v Shepherd Homes Ltd (2011) EWHC 1811 (TCC)'''

'''''Correct approach to measurement of damages'''''

The Claimants were owners of houses on an estate in Hartlepool which were built by Shepherd Homes Ltd.

'''Summary Background'''

The house on the estate were built over a period of years up to 2004. The site was a former landfill site and so the properties were constructed on piled foundations. These piled foundations had been negligently designed and constructed with the consequent result that the properties on the estate showed varying degrees of damage. Some of the properties suffered only minimal damage but had, nonetheless, proved virtually impossible to sell or re-mortgage.

A trial of 10 sample cases took place in 2010.

Those claimants who were original purchasers of their properties relied upon their original contracts of sale, whilst all claimants relied on the provisions of the Defective Premises Act 1972 and the NHBC Buildmark guarantee. Shepherd Homes Ltd denied liability arguing that it owed the claimants no obligations under the original contracts of sale, that breach of duty under the Defective Premises Act required unfitness for habitation, which did not apply here, and that the required written notice under the NHBC Buildmark scheme had not been provided.

'''The Judgment'''

Giving judgment Ramsey J held that the foundations were defective and that Shepherd Homes Ltd was responsible for the defects as a consequence of its breach of both express and implied terms of the contracts of sale. On a proper construction of the sale contracts, Shepherd Homes was obliged to carry out the design with proper skill and attention and ensure that the houses were fit for habitation. Alternatively such a term would be implied. Furthermore, if the sale contracts were to be interpreted as argued by Shepherd Homes then they would be unfair within the meaning of the Unfair Terms in Consumer Contracts Regulations 1999 and the Unfair Contract Terms Act 1977

As to the provisions of the Defective Premises Act, it was held that these existed a single duty to ensure that the houses were fit for habitation when completed (Alexander v Mercouris (1979) 1 WLR 1270). The defective piles meant that the houses were unfit for habitation notwithstanding the minimal physical damage.

And with regard to the NHBC Buildmark scheme the problems of the estate generally meant that Shepherd Homes had had constructive notice of these problems and they therefore could not rely upon an absence of notice to avoid liability under this scheme.

'''Damages'''

'''''Reinstatement'''''

*There will generally be an award of the cost of reinstatement provided that reinstatement is reasonable
*Reinstatement will be unreasonable if it is out of all proportion to the benefit to be obtained
*Reasonableness has to be determined on a case by case basis
*It is not necessary for recovery of the cost of reinstatement to show that the claimant will reinstate the property, but the intention to reinstate may be relevant to the question of reasonableness

'''''Diminution in value'''''

If reinstatement is unreasonable, the measure of damages will generally be diminution in value.

'''''Loss of amenity'''''

Where reinstatement is unreasonable and there is no diminution in value then modest damages may be awarded for loss of amenity.

The following considerations would be applied:

*There is a general rule, that a claimant cannot recover damages for injured feelings arising from a breach of contract. There is an exception where the object of the contract is to afford pleasure, relaxation or peace of mind.
*Damages may be recovered for physical inconvenience or discomfort and mental suffering associated therewith.

This judgment will be viewed as unhelpful to construction professionals and their insurers as it raises the distinct prospect that the value of defective premises claims will rise in the future with a consequent increase in costs for insurers and premiums for professional indemnity insurance cover.

[[Category:Property_development]]

3D animation for building insurance risk analysis

2012-10-16T10:41:52Z

Martincantor:

'''3D animation for construction & property insurance risk analysis'''

The use of sophisticated software animation techniques to provide images of how proposed developments will look are now established practice. “Walk- throughs” enable viewers to see detailed internal layouts and how landscaping will blend a new development into an existing environment.

Similar techniques can now be applied to the insurance of construction risks with obvious benefits accruing as a result.

This is particularly true when it comes to insuring complex development or engineering projects where construction activity is sequenced over a long period of time and, as a result, the level of risk, actual or perceived, can vary significantly from one stage to the next.

The use of animation to “bring to life” the actual sequencing of events, the positioning of key engineering elements e.g tower cranes, and the storage proposals for valuable or flammable components results in a better process of evaluation of risk analysis and pricing.

And the use of such techniques is just as valid for owners of property owners where animation can be used to show exactly who occupies which space, what is stored there, what the sums insured for each area are and so on. A “Walk – through” or aerial display (or both) can be deployed so that, again, underwriters can virtually “see” what they are being asked to insure even though it may be located on the other side of the World.

And just as the cost of assembling a development proposal increasingly includes the cost of producing a 3D model, so will the cost of “insurance animation” increasingly become part of the cost of obtaining best value from the insurance market.

[[File:3_Dimensional_Insurance_Animation_for_Insurance_Underwriting.pdf|File:3_Dimensional_Insurance_Animation_for_Insurance_Underwriting.pdf]]

[http://martinfabry.vvhosting.co.uk/leyland/appAnim/Leyland_iPad.mp4 example of a 3DI animation]

''The attached article is made available with the kind permission of 3 Dimensional Insurance Limited and Post Magazine''

[[Category:Procurement]]

3D animation for building insurance risk analysis

2012-10-16T10:38:58Z

Martincantor:

'''3D animation for construction & property insurance risk analysis'''

The use of sophisticated software animation techniques to provide images of how proposed developments will look are now established practice. “Walk- throughs” enable viewers to see detailed internal layouts and how landscaping will blend a new development into an existing environment.

Similar techniques can now be applied to the insurance of construction risks with obvious benefits accruing as a result.

This is particularly true when it comes to insuring complex development or engineering projects where construction activity is sequenced over a long period of time and, as a result, the level of risk, actual or perceived, can vary significantly from one stage to the next.

The use of animation to “bring to life” the actual sequencing of events, the positioning of key engineering elements e.g tower cranes, and the storage proposals for valuable or flammable components results in a better process of evaluation of risk analysis and pricing.

And the use of such techniques is just as valid for owners of property owners where animation can be used to show exactly who occupies which space, what is stored there, what the sums insured for each area are and so on. A “Walk – through” or aerial display (or both) can be deployed so that, again, underwriters can virtually “see” what they are being asked to insure even though it may be located on the other side of the World.

And just as the cost of assembling a development proposal increasingly includes the cost of producing a 3D model, so will the cost of “insurance animation” increasingly become part of the cost of obtaining best value from the insurance market.

[http://martinfabry.vvhosting.co.uk/leyland/appAnim/Leyland_iPad.mp4 example of a 3DI animation]

''The attached article is made available with the kind permission of 3 Dimensional Insurance Limited and Post Magazine''

[[Category:Procurement]]

3D animation for building insurance risk analysis

2012-10-16T10:37:35Z

Martincantor:

'''3D animation for construction & property insurance risk analysis'''

The use of sophisticated software animation techniques to provide images of how proposed developments will look are now established practice. “Walk- throughs” enable viewers to see detailed internal layouts and how landscaping will blend a new development into an existing environment.

Similar techniques can now be applied to the insurance of construction risks with obvious benefits accruing as a result.

This is particularly true when it comes to insuring complex development or engineering projects where construction activity is sequenced over a long period of time and, as a result, the level of risk, actual or perceived, can vary significantly from one stage to the next.

The use of animation to “bring to life” the actual sequencing of events, the positioning of key engineering elements e.g tower cranes, and the storage proposals for valuable or flammable components results in a better process of evaluation of risk analysis and pricing.

And the use of such techniques is just as valid for owners of property owners where animation can be used to show exactly who occupies which space, what is stored there, what the sums insured for each area are and so on. A “Walk – through” or aerial display (or both) can be deployed so that, again, underwriters can virtually “see” what they are being asked to insure even though it may be located on the other side of the World.

And just as the cost of assembling a development proposal increasingly includes the cost of producing a 3D model, so will the cost of “insurance animation” increasingly become part of the cost of obtaining best value from the insurance market.

[[3D_animation_for_construction_&_property_insurance_risk_analysisSearch|3D_animation_for_construction_&_property_insurance_risk_analysisSearch]]

[http://martinfabry.vvhosting.co.uk/leyland/appAnim/Leyland_iPad.mp4 example of a 3DI animation]

''The attached article is made available with the kind permission of 3 Dimensional Insurance Limited and Post Magazine''

 

[[Category:Procurement]]

3D animation for building insurance risk analysis

2012-10-16T10:36:50Z

Martincantor: Created page with "'''3D animation for construction & property insurance risk analysis''' The use of sophisticated software animation techniques to provide images of how proposed developments wi..."

'''3D animation for construction & property insurance risk analysis'''

The use of sophisticated software animation techniques to provide images of how proposed developments will look are now established practice. “Walk- throughs” enable viewers to see detailed internal layouts and how landscaping will blend a new development into an existing environment.

Similar techniques can now be applied to the insurance of construction risks with obvious benefits accruing as a result.

This is particularly true when it comes to insuring complex development or engineering projects where construction activity is sequenced over a long period of time and, as a result, the level of risk, actual or perceived, can vary significantly from one stage to the next.

The use of animation to “bring to life” the actual sequencing of events, the positioning of key engineering elements e.g tower cranes, and the storage proposals for valuable or flammable components results in a better process of evaluation of risk analysis and pricing.

And the use of such techniques is just as valid for owners of property owners where animation can be used to show exactly who occupies which space, what is stored there, what the sums insured for each area are and so on. A “Walk – through” or aerial display (or both) can be deployed so that, again, underwriters can virtually “see” what they are being asked to insure even though it may be located on the other side of the World.

And just as the cost of assembling a development proposal increasingly includes the cost of producing a 3D model, so will the cost of “insurance animation” increasingly become part of the cost of obtaining best value from the insurance market.

[http://martinfabry.vvhosting.co.uk/leyland/appAnim/Leyland_iPad.mp4 example of a 3DI animation]

''The attached article is made available with the kind permission of 3 Dimensional Insurance Limited and Post Magazine''

 

[[Category:Procurement]]

File:3 Dimensional Insurance Animation for Insurance Underwriting.pdf

2012-10-16T10:34:34Z

Martincantor:

Professional indemnity insurance clause in conditions of engagement

2012-10-15T08:33:39Z

Martincantor: Created page with "'''Ampleforth Abbey Trust v Turner & Townsend Project Management Ltd [2012] EWHC 2137 (TCC)''' ''Conflict between liability clause and insurance clause in conditions of engageme..."

'''Ampleforth Abbey Trust v Turner & Townsend Project Management Ltd [2012] EWHC 2137 (TCC)'''

''Conflict between liability clause and insurance clause in conditions of engagement''

''The Claimants'' alleged that The Defendants had been negligent in their management of a construction project, and that their limitation of liability clause was unenforceable.

The liability clause said:

"''Liability for any negligent failure by Us to carry out Our duties under these Terms shall be limited to such liability as is covered by Our Professional Indemnity Insurance Policy terms... and in no event shall Our liability exceed the fees paid to Us or £1million whichever is the less"''

The insurance clause said:

''"We shall take out a policy of Professional Indemnity Insurance with a limit of indemnity of £10 million for any one occurrence or series of occurrences arising out of any one event"''

The amount of the claim as determined by the court was £226,667. The liability cap if effective would have capped liability to £111,321, the amount of the Defendants’ fees.

The Defendants agreed their terms were "standard terms". This meant that s 3(2) of the Unfair Contract Terms Act 1977 applies which requires an exclusion or limitation of liability to be reasonable. If not reasonable it will be unenforceable.

The Defendants claimed the liability cap was reasonable and therefore enforceable because:

*The terms were clear, unambiguous and would have been understood by their client if the client had taken the trouble to read them.
*No inequality of bargaining position.
*The Claimants had not received an inducement to accept the terms.
*The Claimants had the time, opportunity and freedom to turn to an alternative project manager.
*Generally commercial parties should be left to apportion risks as they see fit.

The Judge decided the limit was unreasonable and therefore unenforceable. This was because The Defendants had contracted to hold £10 million professional indemnity insurance which exceeded the liability cap. The Judge felt that The Claimants had in effect paid for access to £10 million of PI cover, and so it was unreasonable to deny access to that insurance:

"The effect of upholding the limitation clause would be that, although the parties had contracted for the insurance of the risks and (implicitly) for the Trust to pay for that insurance, far the greater part of that insurance would be rendered illusory."

[[Category:Appointments]]

Ampleforth Abbey Trust vs Turner & Townsend Project Management Limited

2012-10-15T08:04:01Z

Martincantor: Created page with "'''Ampleforth Abbey Trust (“The Claimants”) v Turner & Townsend Project Management Ltd (“The Defendants”) [2012] EWHC 2137 (TCC)''' '''''A letter of intent or a formal b..."

'''Ampleforth Abbey Trust (“The Claimants”) v Turner & Townsend Project Management Ltd (“The Defendants”) [2012] EWHC 2137 (TCC)'''

'''''A letter of intent or a formal building contract and a Project Manager’s Duty.'''''

'''The Case: '''The High Court has considered whether a project management company was at fault by proceeding with a building project without ever putting a formal contract in place with the contractors. .

Between 2000 & 2005, the Defendants acted for the Claimants as project managers on 3 separate building projects for the provision of new accommodation at the College. The final project was significantly delayed and a dispute arose with the contractors, Kier, as to liability for liquidated damages in the sum of £750,000.

Kier were able to rely on the fact no building contract had ever been entered into and were able to negotiate a settlement whereby the Claimants and Kier did not pursue each other for any further sums or damages due to the delay.

However, the Claimants then commenced proceedings against The Defendants arguing that they were liable for allowing all of the works to be undertaken by Kier under letters of intent and that they should have ensured that Kier entered a building contract expressly incorporating liability for liquidated damages for delay. The Claimants argued that it was extraordinary and unacceptable to just rely on issuing a letter of intent from time to time and that The Defendants had failed to exercise reasonable care and skill or comply with the standards and practice of the construction industry.

The Defendants argued that there were numerous reasons why it had not been possible to conclude a building contract with Kier during the project and they relied on the fact that it was accepted by the Claimant that, due to the need to complete the works as quickly as possible, it was legitimate to start the works on the basis of a letter of intent only..

The Court described a project manager as the representative of the employer for the purpose of co-ordinating the different aspects of the project. In this capacity a project manager's role involves acting as guardian of the client's interests. This includes dealing properly with the procurement of the building contractor and the building contract and, insofar as the project manager did not have the expertise to deal with legal, insurance, or other issues, it is his duty to advise the client to take expert advice in this respect from a relevant expert or professional.

Although the Court recognised the difficulties involved at the time, it held that The Defendants failed to appreciate how fundamental a contract is and the need to resolve the obstacles raised by Kier so as to ensure the contract was completed in or about April 2004 after the expiry of the initial letters of intent. By proceeding on the basis of a letter of intent only The Defendants put the Claimants at real risk because there were no detailed provisions covering the works and, in particular, no agreed provision for compensation in the event of delay.

Insofar as legal advice was required to deal with the contract, or the risks of proceeding without one, the Court held that The Defendants should have advised the Claimants to obtain such advice and it could not blame the Claimants for failing to do so.

It also held that, the longer The Defendants allowed the works to continue without any contract, the more difficult it became to make the contractor enter one.

The Court then had to consider what would have happened if The Defendants had advised the Claimants that Kier should be required to complete the contract.

It held that there was a two-thirds chance Kier would have done so and, if it had, that the Claimants would have had a far better negotiating position re liquidated damages as they could have relied on an express provision rather than having to argue there was some implied liability.

The Court concluded that, with the benefit of a contract, Kier could have been held liable for£340,000 by way of damages so, after factoring in the one-third risk that no contract would have been completed, this left damages of £226,667 payable by The Defendants

[http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWHC/TCC/2012/2137.html&query=ampleforth&method=boolean http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWHC/TCC/2012/2137.html&query=ampleforth&method=boolean]

[[Category:Other_legislation]]

Squatting

2012-10-14T13:31:36Z

Martincantor: Created page with "'''SQUATTING''' Since September 1st 2012 squatting in residential premises is a criminal offence, punishable by a prison sentence or a fine of up to £5,000. This is ..."

'''SQUATTING'''

Since September 1st 2012 squatting in residential premises is a criminal offence, punishable by a prison sentence or a fine of up to £5,000. This is all as a result of S 144 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 coming into force.

For many this is a long overdue reform which will go a long way towards ending the scourge of squatters occupying residential premises. However it does not address a similar problem in commercial premises and may, indeed, lead to more squatting taking place in such premises.

S 144 provides that a person commits an offence if:

*The person is in a residential building as a trespasser, having gained access as a trespasser.
*The person knows, or ought to know, that he is a trespasser.
*The person is living in the building or intends to do so.

A building is residential if it is “designed or adapted, before the time of entry, for use as a place to live” This is an important definition as it means that an offence will not be committed if such adaptation takes place AFTER the time of entry.

Thus commercial premises will be outside of the new offence and commercial premises owners will not be able to rely upon this new legislation if faced with squatters in their premises. They will therefore have to continue to rely upon existing civil procedures to evict squatters.

[[Category:Other_legislation]]

Rent in administration

2012-10-12T08:45:58Z

Martincantor: Redirected page to Goldacre (offices) vs Nortel Networks UK Limited (in administration) 2009

#redirect[[Goldacre_(offices)_vs_Nortel_Networks_UK_Limited_(in_administration)_2009|Goldacre_(offices)_vs_Nortel_Networks_UK_Limited_(in_administration)_2009]]

[[Category:Cost_/_business_planning]]

Goldacre (offices) vs Nortel Networks UK Limited (in administration) 2009

2012-10-12T08:41:55Z

Martincantor:

'''''Goldacre (offices) Limited v Nortel networks UK Limited (in administration) [2009]''''' '''The Basic Facts'''

 Goldacre (Offices) Limited (the Landlord) applied to the court for clarification as to whether the rent due under a lease between the Landlord and the company in administration (the Tenant) should be treated as an expense of the administration. Part of the premises in question had since the date of administration been used for the more efficient conduct of the administration, whilst the remaining parts had been occupied by sub-tenants who continued to pay rent which was paid on to the Landlord.. '''The Ruling'''

 The High Court decided that if a company in administration uses leasehold property for the benefit of its creditors, any rent that falls due during the period of use automatically ranks as an expense of the administration under Rule 2.67 (1) (a) of the Insolvency Rules 1986. It was decided that if the rent was not an expenses under Rule 2.67 (1) (a) then it was one of the necessary disbursements of the administration of the Tenant as per Rule 2.67(1)(f) of the Insolvency Rules. Furthermore The High Court held that the full amount of rent that had fallen due since the date of the Tenant’s administration, was payable as an expense and not just that proportion of the rent that applied to the part of the premises occupied by the Tenant.

Before Goldacre, the treatment of rent in administrations would be assessed by the balancing exercise established in the case of ''AIB Capital Markets Plc & Anor v Atlantic Computer Systems Plc & Ors [1990] EWCA Civ 2'' (better known as the Atlantic Computers case). Atlantic Computer’s approach followed the pre-Enterprise Act 2003 regime under which the treatment of rent was to balance the prejudice to the landlord in being denied the benefit of his property against the benefit to the creditors of the insolvent company arising from the continued use of the property. In Goldacre, it was held that it was not bound to follow Atlantic Computers in relation to the ranking of the rent because there was no equivalent to Rule 2.67 under the pre-Enterprise Act Administration Regime. Consequently the reasoning in Atlantic Computers was not applicable to Goldacre. What Goldacre established is that henceforth there is no question of balancing the interests of landlord against the interest of the creditors as a whole in determining rents payable in administrations. The matter is decided by a simple question as to whether the company in administration uses the leasehold premises for the benefit of its creditors. It must be noted however that Goldacre has not changed the principles set out in Atlantic Computers as applies to applications to lift a moratorium. '''What does this mean for Administrators?'''

 This ruling will certainly alter the relationship between administrators and landlords. In many cases the administrator will now have to assume that he will have to provide for the full amount of rent that falls due whilst the company continues to use the premises However, the rent will not become automatically by the tenant just because it enters an administration. Two criteria will need to be met before rent becomes payable as follows: '''1. Use for the Benefit of Creditors''' Firstly, the company in administration must use the premises for the “benefit of creditors” although trhe definition of this term is open to interpretation. In this case, partial occupation of the premises was held to constitute a use. . 2. '''Payment in the period of use''' The second criteria is that the rent falls due for payment in the period in which the company uses the premises for the benefit of its creditors Arising from this decision are the following key facts:

Where rent falls due for payment '''before''' the company in administration begins to use the premises for the benefit of its creditors, it will not rank as an expense even if it relates to the period in which the company occupies the premises. Where rent falls due '''in '''the period during which the company uses the property for the benefit of its creditors, the full amount of rent will be payable irrespective of what proportion of the premises are occupied by the company in administration. Thus, payment dates in leases will increasingly determine the timescale for administrations because administrators are now likely to plan administrations to take effect immediately after the rent falls due under a lease to get around this.

 '''Implications for Landlords?'''

 Landlords can expect to be paid in full for rent that falls due whilst the company in administration uses leasehold premises for the benefit of its creditors. Landlords are likely to be able to claim the full amount of rent payable irrespective of the length of the period occupied if the rent is payable in advance. Following Goldacre, where the company in administration occupies only a proportion of premises, the landlord may still be able to claim the full rent. However, one should note that the High Court’s decision in Goldacre to this effect was based on the fact that the Landlord’s surveyor had demonstrated that the premises were not capable of being sub-divided and re-let as a whole as long as the administrators remained in occupation of that small part.

Consequently where the unoccupied parts of premises are capable of being sub-divided and let separately, a court may hold partial rent is payable only. And in accordance with the Insolvency Rules, administrators will not be obliged to discharge any rent deemed to be payable unless and until they have sufficient assets to do so. Landlords may well also try to claim to other sums under the lease which are defined to be payable as rent e.g.insurance premiums. 

[[Category:Other_legislation]]

Goldacre (offices) vs Nortel Networks UK Limited (in administration) 2009

2012-10-12T08:41:26Z

Martincantor: Created page with "'''''Goldacre (offices) Limited v Nortel networks UK Limited (in administration) [2009]''''' '''The Basic Facts''' Goldacre (Offices) Limited (the Landlord) applie..."

'''''Goldacre (offices) Limited v Nortel networks UK Limited (in administration) [2009]''''' '''The Basic Facts'''

 Goldacre (Offices) Limited (the Landlord) applied to the court for clarification as to whether the rent due under a lease between the Landlord and the company in administration (the Tenant) should be treated as an expense of the administration. Part of the premises in question had since the date of administration been used for the more efficient conduct of the administration, whilst the remaining parts had been occupied by sub-tenants who continued to pay rent which was paid on to the Landlord.. '''The Ruling'''

 The High Court decided that if a company in administration uses leasehold property for the benefit of its creditors, any rent that falls due during the period of use automatically ranks as an expense of the administration under Rule 2.67 (1) (a) of the Insolvency Rules 1986. It was decided that if the rent was not an expenses under Rule 2.67 (1) (a) then it was one of the necessary disbursements of the administration of the Tenant as per Rule 2.67(1)(f) of the Insolvency Rules. Furthermore The High Court held that the full amount of rent that had fallen due since the date of the Tenant’s administration, was payable as an expense and not just that proportion of the rent that applied to the part of the premises occupied by the Tenant. 

Before Goldacre, the treatment of rent in administrations would be assessed by the balancing exercise established in the case of ''AIB Capital Markets Plc & Anor v Atlantic Computer Systems Plc & Ors [1990] EWCA Civ 2'' (better known as the Atlantic Computers case). Atlantic Computer’s approach followed the pre-Enterprise Act 2003 regime under which the treatment of rent was to balance the prejudice to the landlord in being denied the benefit of his property against the benefit to the creditors of the insolvent company arising from the continued use of the property. In Goldacre, it was held that it was not bound to follow Atlantic Computers in relation to the ranking of the rent because there was no equivalent to Rule 2.67 under the pre-Enterprise Act Administration Regime. Consequently the reasoning in Atlantic Computers was not applicable to Goldacre. What Goldacre established is that henceforth there is no question of balancing the interests of landlord against the interest of the creditors as a whole in determining rents payable in administrations. The matter is decided by a simple question as to whether the company in administration uses the leasehold premises for the benefit of its creditors. It must be noted however that Goldacre has not changed the principles set out in Atlantic Computers as applies to applications to lift a moratorium. '''What does this mean for Administrators?'''

 This ruling will certainly alter the relationship between administrators and landlords. In many cases the administrator will now have to assume that he will have to provide for the full amount of rent that falls due whilst the company continues to use the premises However, the rent will not become automatically by the tenant just because it enters an administration. Two criteria will need to be met before rent becomes payable as follows: '''1. Use for the Benefit of Creditors''' Firstly, the company in administration must use the premises for the “benefit of creditors” although trhe definition of this term is open to interpretation. In this case, partial occupation of the premises was held to constitute a use. . 2. '''Payment in the period of use''' The second criteria is that the rent falls due for payment in the period in which the company uses the premises for the benefit of its creditors Arising from this decision are the following key facts:

Where rent falls due for payment '''before''' the company in administration begins to use the premises for the benefit of its creditors, it will not rank as an expense even if it relates to the period in which the company occupies the premises. Where rent falls due '''in '''the period during which the company uses the property for the benefit of its creditors, the full amount of rent will be payable irrespective of what proportion of the premises are occupied by the company in administration. Thus, payment dates in leases will increasingly determine the timescale for administrations because administrators are now likely to plan administrations to take effect immediately after the rent falls due under a lease to get around this.

 '''Implications for Landlords?'''

 Landlords can expect to be paid in full for rent that falls due whilst the company in administration uses leasehold premises for the benefit of its creditors. Landlords are likely to be able to claim the full amount of rent payable irrespective of the length of the period occupied if the rent is payable in advance. Following Goldacre, where the company in administration occupies only a proportion of premises, the landlord may still be able to claim the full rent. However, one should note that the High Court’s decision in Goldacre to this effect was based on the fact that the Landlord’s surveyor had demonstrated that the premises were not capable of being sub-divided and re-let as a whole as long as the administrators remained in occupation of that small part.

Consequently where the unoccupied parts of premises are capable of being sub-divided and let separately, a court may hold partial rent is payable only. And in accordance with the Insolvency Rules, administrators will not be obliged to discharge any rent deemed to be payable unless and until they have sufficient assets to do so. Landlords may well also try to claim to other sums under the lease which are defined to be payable as rent e.g.insurance premiums.

Day & Another vs Hosebay Limited

2012-10-10T15:48:47Z

Martincantor: Created page with "#rediredtLeasehold_Enfranchisement Category:Other_legislation"

#rediredt[[Leasehold_Enfranchisement|Leasehold_Enfranchisement]]

[[Category:Other_legislation]]

Day and Another v Hosebay Limited

2012-10-10T15:47:29Z

Martincantor:

Please refer to the attached Supreme Court Judgment dated 10 October 2012

[[File:Day and Another v Hosebay LimitedHoward de Walden Estates LImited v Lexgorge Limited.pdf|File:Day_and_Another_v_Hosebay_LimitedHoward_de_Walden_Estates_LImited_v_Lexgorge_Limited.pdf]][[File:Day and Another v Hosebay LimitedHoward de Walden Estates LImited v Lexgorge Limited.pdf|File:Day_and_Another_v_Hosebay_LimitedHoward_de_Walden_Estates_LImited_v_Lexgorge_Limited.pdf]]

[[File:Judgment_-_Day_and_Another_v_Hosebay_LimitedHoward_de_Walden_Estates_LImited_v_Lexgorge_Limited.pdf|File:Judgment_-_Day_and_Another_v_Hosebay_LimitedHoward_de_Walden_Estates_LImited_v_Lexgorge_Limited.pdf]]

[[Category:Property_law]]

File:Judgment - Day and Another v Hosebay LimitedHoward de Walden Estates LImited v Lexgorge Limited.pdf

2012-10-10T15:46:25Z

Martincantor:

Day and Another v Hosebay Limited

2012-10-10T15:32:24Z

Martincantor:

Day and Another v Hosebay Limited

2012-10-10T15:29:48Z

Martincantor:

Please refer to the attached Supreme Court Judgment dated 10 October 2012

[[File:Day_and_Another_v_Hosebay_LimitedHoward_de_Walden_Estates_LImited_v_Lexgorge_Limited.pdf|File:Day_and_Another_v_Hosebay_LimitedHoward_de_Walden_Estates_LImited_v_Lexgorge_Limited.pdf]]

[[Category:Property_law]]

File:Day and Another v Hosebay LimitedHoward de Walden Estates LImited v Lexgorge Limited.pdf

2012-10-10T15:20:01Z

Martincantor: uploaded a new version of "File:Day and Another v Hosebay LimitedHoward de Walden Estates LImited v Lexgorge Limited.pdf"

Day and Another v Hosebay Limited

2012-10-10T15:19:05Z

Martincantor: Created page with "Please refer to the attached Suprme Court Judgment dated 10 October 2012 Category:Property_law"

Please refer to the attached Suprme Court Judgment dated 10 October 2012

[[Category:Property_law]]

File:Day and Another v Hosebay LimitedHoward de Walden Estates LImited v Lexgorge Limited.pdf

2012-10-10T15:18:05Z

Martincantor: uploaded a new version of "File:Day and Another v Hosebay LimitedHoward de Walden Estates LImited v Lexgorge Limited.pdf"

File:Day and Another v Hosebay LimitedHoward de Walden Estates LImited v Lexgorge Limited.pdf

2012-10-10T15:13:02Z

Martincantor:

Whessoe Oil and Gas & Cleveland Bridge UK Limited v Dale

2012-10-05T08:03:26Z

Martincantor: Created page with "'''Whessoe Oil and Gas & Cleveland Bridge UK Limited v Dale [2012] EWHC 1788 (TCC) - 29/06/12''' ''The Defendant sought to strike out the First Claimant's Particulars of Claim a..."

'''Whessoe Oil and Gas & Cleveland Bridge UK Limited v Dale [2012] EWHC 1788 (TCC) - 29/06/12'''

''The Defendant sought to strike out the First Claimant's Particulars of Claim and seek summary judgement against the First Claimant on the basis that they disclosed no reasonable grounds for bringing the claim or otherwise, as amounting to an abuse of the Court's process''.

'''Summary'''

The Claimant issued proceedings against its managing director, who was the construction project manager on an unsuccessful project. The Claimant claimed the Defendant had breached his statutory duties as a director and his contract in respect of management of the project. Following exchange of expert reports into project management, the Defendant argued the claim should be struck out because the expert's report was insufficient to support a case of breach of duty.

The Court considered ''Pantelli Associates v Corporate City Developments [2010] EWHC 3189 (TCC)'' where it had been held that an expert's report was necessary to plead professional negligence. In this case the Court held that the expert report was not a necessary preliminary as the Defendant's obligations were as employee and director and differed from the question of an assumption of responsibility by an independent contractor considered in Pantelli, even though both involved the issue of reasonable skill and care.

''The Judge therefore adjourned the Defendant's striking out application on terms that the Claimants must provide full particulars of the breaches of duty relied upon, of the losses claimed and of causation of such losses, such particulars to include all material facts upon which the Claimants rely.''

[http://www.bailii.org/ew/cases/EWHC/TCC/2012/1788.html http://www.bailii.org/ew/cases/EWHC/TCC/2012/1788.html]

[[Category:Other_legislation]]

Construction industry acronyms

2012-10-03T11:27:22Z

Martincantor:

Help us create a comprehensive list of acronyms commonly used in building design and development. Just click on EDIT above and add to the list.

----

AI Architect's Instruction

ABS Acrylonitrile butadiene styrene

ACA The Association of Consultant Architects

ADR Alternative Dispute Resolution

BCIS Building Cost Information Service

BER Building Emission Rate (see emission rates)

BIS Department for Business Innovation and Skills

BIM Building Information Modelling

BMS Building Management System

BOOT Build Own Operate Transfer

BPF British Property Federation

BPRA Business Premises Renovation Allowance

BRE Building Research Establishment

BREEAM Building Research Establishment Environmental Assessment Method

BS British Standard

BQ Bill of Quantity

CAD Computer Aided Design

CAM Computer Aided Manufacturing

CE Constructing Excellence

CEMP Construction Environmental Management Plan

CERT Carbon Emissions Reduction Target

CESMM Civil Engineering Standard Method of Measurement

CIOB Chartered Institute of Building

CIBSE Chartered Institution of Building Services Engineers

CICES Chartered Institute of Civil Engineering Surveyors

CIRIA Construction Industry Research and Information Association

CDM Construction (Design and Management) Regulations

CFC Chlorofluorocarbon

CIC Construction Indsustry Council

CIS Construction Industry Scheme

CLG Department for Communities and Local Government

CM Construction Manager

CMS Construction Method Statement

CMS Common Minimum Standards

COBie Construction Operations Building Information Exchange

COSHH Control of Substances Hazardous to Health

CPA Critical Path Analysis

CPL Continuous Pressure Laminate

CPN Critical Path Network

CPM Critical Path Method

CRBO Community Right to Build Order

CSCS Construction Skills Certification Scheme

dB Decibel

DB Design and Build

DBFO Design Build Finance Operate

DBO Design Build Operate

DCF Discounted Cash Flow

DECC Department of Energy and Climate Change

DEFRA Department for Environment, Food and Rural Affairs

DER Dwelling Emission Rate (see emission rates)

DRB Dispute Resolution Board

EA Environment Agency

EIA Environmental Impact Assessment

EMP Environmental Management Plan

EN European Standard (N for Norm)

EPC Engineer Procure Construct

EPCM Engineering, Procurement and Construction Management

EPD Environmental Product Declaration

EU European Union

EMAS Eco-Management and Audit Scheme

EMS Environmental Management System

FIDIC Fédération Internationale des Ingénieurs-Conseils

FM Facilities Management

FSC Forest Stewardship Council

GC Government Contracts

GCS Government Construction Strategy

GDPO Town and Country Planning (General Development Procedure) Order

GGBS Ground Granulated Blast-furnace Slag

GMP Guaranteed Maximum Price

GRP Glass Reinforced Plastic

H&S Health and Safety

HA Highways Agency

HCFC Hydrochlorofluorocarbon

HDF High Density Fibreboard

HFC Hydrofluorocarbon

HPL High Pressure Laminate

HSE Health and Safety Executive

HMRC Her Majesty's Revenue and Customs

HVAC Heating Ventilation and Air Conditioning

ICC Infrastructure Conditions of Contract

ICE Institution of Civil Engineers

IChemE Institute of Chemical Engineers

ICT Information and Communications Technology

IDM Investment Decision Maker

IET Institute of Engineering and Technology

IFC Industry Foundation Classes

IMechE Institute of Mechanical Engineers

IPT Integrated Project Team

IST Integrated Supply Team

ISO International Organization for Standardization

ITT Invitation to Tender

JCLI Joint Council for Landscape Industries

JCT Joint Contracts Tribunal

JV Joint Venture

KPI Key Performance Indicators

LABV Local Asset Backed Vehicle

LEED Leadership in Energy and Environmental Design

LEP Local Education Partnership

LEP Local Enterprise Partnership

LDF Low Density Fibreboard

LDO Local Development Order

LIFT Local Improvement Finance Trust

LOI Letter of Intent

LPA Local Planning Authority

M&E Mechancial and Electrical

MC Management Contract / Management Contractor

MDF Medium Density Fibreboard

MFC Melamine Faced Chipboard

MPA Major Projects Authority

nbs National Building Specification

NC Noise Criteria

NDO Neighbourhood Development Order

NDP Neighbourhood Development Plan

NEC New Engineering Contract

NPPF National Planning Policy Framework

NPV Net Present Value

NRC Noise Reduction Coefficient

O&M Operations and Maintenance (See Building Owner's Manual)

OGC Office of Government Commerce (no longer in existence)

OH&P Overhead and Profit

OJEU Official Journal of the European Union

PACE Property Advisers to the Civil Estate (no longer in existence)

PAS 91 Publically Available Specification

PAYE Pay As You Earn

PC Prime Cost

PCA Pre-Construction Agreement

PCI Pre-Construction Information

PCSA Pre-Construction Services Agreement

PE Polyethylene

PEFC Programme for the Endorsement of Forest Certification

PFA Pulverised Fuel Ash

PEP Project Execution Plan

PEST Pest Analysis - "Political, Economic, Social, Technological"

PFI Private Finance Initiative

PP Polypropylene

PPC Project Partnering Contracts

PPE Personal Protective Equipment

PPG Planning Policy Guidance

PPP Public Private Partnership

PPS Planning Policy Statement

PRINCE PRojects IN Controlled Environments

PS Provisional Sum

PS Project Sponsor

PTE Pre-Tender Estimate

PTFE Polytetrafluoroethylene

PQQ Pre-Qualification Questionnaire

PVC Polyvinyl Chloride

QA Quality Assurance

RC Recycled Content

RC Room Criteria (acoustics)

RCA Recycled Crushed Aggregate

REIT Real Estate Investment Trust

RIBA Royal Institute of British Architects

RICS Royal Institution of Chartered Surveyors

RPC Regional Prime Contracts

RSJ Rolled Steel Joist

RT Reverberation Time

SBCC Scottish Building Contract Committee

SMM Standard Method of Measurement (Engineering)

SPV Special Purpose Vehicle

SSSI Site of Special Scientific Interest

STC Sound Transmission Class

SUDS Sustainable Urban Drainage Systems

SWOT Swot Analysis - "Strenghts, Weaknesses, Opportunities, Threats"

T&M Time and Materials

TER Target Emission Rate (see emission rates)

TPO Tree Preservation Order

Uniclass Unified Classification for the Construction Industry

VAT Value Added Tax

VE Value Engineering

VFM Value For Money

VOC Volatile Organic Compounds

VM Value Management

WDA Writing Down Allowances (See Business Premises Renovation Allowance (BPRA))

WI Work Instruction

WRAP Waste & Resources Action Programme 

 

[[Category:Contracts_/_payment]]
[[Category:Construction_management]]
[[Category:Design]]
[[Category:Appointments]]
[[Category:Procurement]]

Business premises renovation allowance

2012-10-01T17:27:46Z

Martincantor: Created page with "'''Business Premises Renovation Allowance (BPRA)''' '''Introduction''' Business Premises Renovation Allowance ( '''BPRA''') was introduced by Finance Act 2005 and ..."

'''Business Premises Renovation Allowance (BPRA)'''

 '''Introduction''' Business Premises Renovation Allowance ( '''BPRA''') was introduced by Finance Act 2005 and came into force in 2007 and currently provides for relief on qualifying capital expenditure incurred at any time before April 2017.

BPRA is intended to give an incentive to bring derelict or unused properties back into use. Such expenditure must be incurred in a “disadvantaged area”

BPRA gives an initial allowance of 100% for expenditure on converting or renovating unused business premises.

 '''Disadvantaged areas''' At the time of writing (September 2012) The following are the areas that are disadvantaged areas for BPRA.

*Areas specified as development areas by the Assisted Areas Order 2007(SI 2007/107)
*Northern Ireland.

For the Assisted Areas Order 2007 go to [http://www.opsi.gov.uk/si/si2007/uksi_20070107_en.pdf http://www.opsi.gov.uk/si/si2007/uksi_20070107_en.pdf]

 '''Conditions''' A person must incur qualifying expenditure in order to claim BPRA. '''Qualifying expenditure''' is capital expenditure on

*converting a qualifying building into qualifying business premises, or
*renovating a qualifying building that is, or will be, qualifying business premises, or
*repairs to qualifying business premises.

Expenditure only qualifies for BPRA if the building is situated in a disadvantaged area and has been unused for a year immediately before the conversion or renovation begins. The last use must not have been as a dwelling. A '''qualifying building''' is a commercial building or structure situated in a disadvantaged area. 

'Qualifying Business Premises' means any building or structure, which must be used, or available and suitable for use, for the purpose of a trade, profession or vocation, or offices

The following are '''not''' qualifying business premises

Premises

*used or available for use as a dwelling
*the relevant interest in which is held by a person carrying on a relevant trade or
*used wholly or partly for the purposes of a relevant trade.

'''A relevant trade''' is a trade in the following sectors –

*fisheries and aquaculture,
*shipbuilding,
*the coal industry,
*the steel industry,
*synthetic fibres,
*the primary production of certain agricultural products, and
*the manufacture or marketing of products which imitate or substitute for milk and milk products.

 Expenditure on acquiring land, extending a building or developing land next to a building does not qualify for BPRA. '''Allowances and charges''' There is an '''initial allowance ''' equal to 100% of the qualifying expenditure. If the 100% initial allowance is not claimed, or is not claimed in full, the person that incurred the qualifying expenditure and holds the relevant interest in the qualifying building in relation to the qualifying expenditure may claim writing down allowances (WDAs) which are given at an annual rate of 25% on the straight line basis to the person holding the relevant interest until all the qualifying expenditure has been allowed. The '''relevant interest''' in the building in relation to the qualifying expenditure is the interest to which the person incurring the qualifying expenditure was entitled when the qualifying expenditure was incurred. There is a balancing adjustment if there is a balancing event within 7 years of the first use of the building after conversion or renovation. A '''balancing adjustment''' is a balancing charge or a balancing allowance. The main balancing events are the sale of the relevant interest and the grant of a long lease for a premium out of the relevant interest. 

'''How allowances are given and charges made''' If the person entitled to BPRA has a trade, profession or vocation the allowance is treated as an expense and a balancing charge is treated as income of that trade, profession or vocation. If the person entitled to BPRA has a property business, that is if the person is the landlord of the building, the allowance is treated as an expense and a balancing charge is treated as income of that property business. Where the person entitled to BPRA does not have a trade, profession or vocation or a property business the person is treated as if he, she or it were carrying on a property business (a virtual property business) and the allowance is an expense of that virtual property business. This means that the allowance can be set against the person’s other income. Again, a balancing charge is treated as income of that virtual property business.

For full details go to:

[http://www.hmrc.gov.uk/manuals/camanual/CA45100.htm http://www.hmrc.gov.uk/manuals/camanual/CA45100.htm]

[[Category:Taxation]]

VAT - Option to tax

2012-09-26T18:49:54Z

Martincantor: Created page with "'''VAT – OPTION TO TAX (OR TO ELECT TO WAIVE EXEMPTION FROM VAT)''' For anyone who has an interest in land or buildings and who makes supplies which are normally VAT exempt th..."

'''VAT – OPTION TO TAX (OR TO ELECT TO WAIVE EXEMPTION FROM VAT)'''

For anyone who has an interest in land or buildings and who makes supplies which are normally VAT exempt the question of how to recover any VAT incurred in relation to that building or land needs to be considered.

Where the supply of land and buildings is VAT exempt, as is usually the case, any VAT incurred on making that supply is irrecoverable and is thus a cost to be borne.

Sch 9 of the VAT Act provides that the following supplies of land (or buildings) are exempt from VAT:

• the grant of any interest in or right over land; or

• the grant of any licence to occupy land; or

• in relation to land in Scotland, the grant of any personal right to call for or to be granted any

such right or interest

The inability to recover input VAT on such exempt supplies represents a real cost burden for land owners or developers so HMRC permits a property owner to charge VAT at the standard rate (currently 20%) on supplies of property which would otherwise be exempt.

This is known as the “option to tax”

Schedule 10 to the VAT Act deals with the option to tax on land and buildings.

In general the option to tax is limited to non-residential property. However, where the land or buildings are intended to be converted for dwelling, residential or charitable use, there are limits to when an option to tax can have effect

The option to tax has important consequences as it means that a property owner can recover all or part of its input tax. However, the property owner will also have to charge VAT at the standard rate on the supplies which it makes, for example on the sales price if the property is being sold or on the rent if the property is being leased. If a purchaser or tenant is registered for VAT and can recover VAT on the purchase price or rent the exercise by the property owner of the option to tax should not be problematic other than from a cash-flow perspective.

'''''However, if the purchaser or tenant does not have full VAT recoverability then it must bear the irrecoverable element. This may affect the marketability of a property to the detriment of the owner. In highly competitive market conditions it may lead to the owner being forced to absorb an element of the VAT which is irrecoverable to the purchaser or tenant in order to complete a transaction.'''''

There were amendments to the option to tax rules introduced in June 2008 and the VAT

(Buildings and Land) Order 2009 of July 2009 has introduced further amendments to those rules.

The changes are contained in Schedule 10 to the VATA and give a property owner the ability to do the following:

• make a ‘real estate election’ - an option to tax will automatically apply to all properties which are subsequently acquired by the entity which exercises the option to tax;

• revoke an option to tax in the first six months after it is exercised without the need to obtain

permission from HMRC (previously three months);

• revoke an option to tax after 20 years without the need to obtain permission from HMRC

provided certain conditions are met. In addition, there is an automatic lapse of the option to tax

where no interest in an opted property has been held for over six years (subject to certain anti avoidance provisions);

• treat the option to tax as continuing to apply to the land after the opted buildings on the land

have been demolished; and

• exclude new buildings on land which has been opted provided that notice of the exclusion is given to HMRC as necessary.

The exercise of an option to tax involves the following:

Firstly, an option must be exercised and secondly the HMRC must be notified of the exercise of the option. An option is not valid if it has not been notified to HMRC.

Where a property owner makes a ‘real estate election’ (which must be in a prescribed form) the option to tax will apply automatically to all properties which are subsequently acquired without having to send notification of each election to HMRC and the option will be deemed to apply to the property with effect from the date the interest in the property is acquired.

There is no provision for the revocation of a real estate election. Individual properties within the real estate election can be taken out of the scope of the election under the normal revocation rules.

[[Category:Taxation]]

Internal rate of return for property development

2012-08-10T14:59:00Z

Martincantor: Created page with "Calculating the IRR of a project is a widely used method of assessing a potential project’s viability. It is similar to Net Present Value (“NPV”) and Discounted Cash Flow (..."

Calculating the IRR of a project is a widely used method of assessing a potential project’s viability. It is similar to Net Present Value (“NPV”) and Discounted Cash Flow (“DCF”) calculations in that anticipated future income and expenditure amounts are used to assess whether or not to proceed with a project.

The IRR is the percentage which, when applied to future capital costs and receipts, results in a Net Present Value of £Nil. If Project 1 has an IRR of 12% and Project 2 an IRR of 8% then Project 1 would be selected to proceed as it has a higher IRR. Usually the Project IRR must exceed the cost of capital by an agreed amount so that the risk of proceeding is seen to be within acceptable commercial parameters.

It can be seen, therefore that an accurate cash flow projection for a prospective project must be developed before an accurate IRR assessment can be made.

Because the IRR is expressed as a percentage per annum it can be used to assess the Yield of a particular investment.

Most spreadsheet packages have an “IRR” function which, when applied to a project model cash flow, will calculate the IRR for you.

--[[User:Martincantor|Martincantor]] 15:59, 10 August 2012 (BST)

[[Category:Cost_/_business_planning]]

Construction VAT

2012-08-06T10:28:14Z

Martincantor:

Value Added Tax (VAT) is a tax added to the cost of certain goods and services. It is only accountable where the party raising an invoice is VAT registered. It is necessary to register if “VAT- able turnover” exceeds a minimum threshold in any 12 month period.

When VAT is added to a sales invoice it is “output tax” in the hands of the party raising the invoice. To the recipient of the invoice the same tax is “input tax”.

Supplies of certain goods may be “Exempt” or “Zero – rated”. In both of these categories VAT is not added to the value of the supply but there is differing treatment with regard to input tax incurred with regard to making that supply.

In the design and construction sectors most supplies are “standard – rated” and therefore VAT is added to the value of supplies at the prevailing rate of VAT. But certain types of work can sometimes be charged at a reduced rate of 5 per cent, or at the zero rate (see the table below).

From the perspective of a party wishing to undertake development of any sort it is vital that, in calculating the budget for the job, VAT is correctly accounted for:

*Are prices quoted inclusive or exclusive?
*Are you, the client, able to recover VAT or not?
*Is the work in question exempt from VAT or Zero - rated?

If you run a VAT-registered construction business it is important to charge the right VAT rate. You can normally only charge the reduced or the zero rate if certain conditions are met. So if you think either rate applies, you should check the details to make sure.

The conditions can relate to different aspects of the work, including:

*The type of building worked on.
*The type of work you do and the equipment you instal.
*When you do the work.
*Who you do the work for.

{| border="0" cellpadding="0"
|-
! colspan="2" |
Zero-rating and reduced-rating work on ordinary domestic dwellings

|-
!
'''Type of work'''

!
'''VAT rate'''

|-
|
Construction of a new house or flat

|
zero

|-
|
Converting a building into a house or flat

|
reduced rate

|-
|
Renovating or altering an empty house or flat

|
reduced rate

|-
|
Supplying and installing certain mobility aids for elderly people

|
reduced rate

|-
|
Supplying and installing certain energy saving materials and equipment

|
reduced rate

|-
|
Supplying and installing certain heating systems and security goods when funded by a grant

|
reduced rate

|-
|
Connecting or reconnecting to the mains gas supply - first time connections and grant-funded connections or reconnections

|
Can sometimes be zero or reduced rate

|-
|
Supplying or installing goods for a disabled person in their home

|
zero

|-
|
Making alterations to suit a disabled person

|
zero

|-
|
Converting a residential building into a different residential use - for example combining two cottages into a single house

|
reduced rate

|}

Ref HMRC: [http://www.hmrc.gov.uk/vat/sectors/builders/construction.htm#1 Work on ordinary homes that may be reduced-rated or zero-rated].

Any construction work on an ordinary house or flat that isn't listed in the table above is always standard-rated at the current standard rate. This would include, for example:

*Building an extension, annex or granny annex.
*Converting a loft.
*Carrying out repairs or renovations.

----

= See also =

*[[VAT - Protected Buildings|VAT - Protected Buildings]].
*HMRC: [http://www.hmrc.gov.uk/vat/sectors/builders/construction.htm Building and construction work and VAT].
*HMRC: [http://www.hmrc.gov.uk/vat/sectors/builders/construction.htm#2 Work on buildings other than ordinary homes that may be reduced-rated or zero-rated].
*HMRC: [http://www.hmrc.gov.uk/vat/sectors/builders/construction.htm#1 Work on ordinary homes that may be reduced-rated or zero-rated].

--[[User:Martincantor|Martincantor]] 11:28, 6 August 2012 (BST)

 

 

[[Category:Contracts_/_payment]]
[[Category:Taxation]]
[[Category:Cost_/_business_planning]]

Competition law

2012-08-06T10:27:07Z

Martincantor: Created page with "In June 2012 the Office of Fair Trading announced the introduction of a new right fro businesses to apply to have restrictive covenants and exclusivity arrangements in favour of ..."

In June 2012 the Office of Fair Trading announced the introduction of a new right fro businesses to apply to have restrictive covenants and exclusivity arrangements in favour of large supermarkets excluded from land agreements when these provide unfair protection.

The right becomes effective from July 1st 2012 and is provided pursuant to the Groceries Market Investigation (controlled Land) Order 2010 issued by the Competition Commission.

Large supermarkets frequently benefit from such restrictions and the OFT hopes that this measure will enhance local competition by protecting land for use by smaller retailers.

A new challenge procedure enables the OFT to examine releavnt local conditions with a view to removing any contractual of lease condition conferring an unfair advantage to any of the following supermarket groups:

Asda Stores Limited

Co-Operative Group Limited

Marks and Spencer PLC

William Morrison Supermarkets PLC

Sainsbury PLC

Tesco PLC

Waitrose PLC

[[Category:Planning_permission]]

Ir35

2012-08-06T10:06:33Z

Martincantor:

IR 35 (or “Intermediaries Legislation”) was introduced by [http://www.hmrc.gov.uk/ HM Revenues and Customs] (HMRC) in 2000.

The reason for the introduction of IR35 was HMRC’s belief that the Exchequer was losing substantial amounts of tax and national insurance due to the use, by individuals, of service companies or self-employed status in circumstances where, in reality, they were employees who should be subject to full Pay As You Earn (“PAYE”) rules.

This is because the tax and national insurance collected by HMRC via PAYE is greater than it would be from self-employed individuals or from those who route their income through service companies.

In particular HMRC were concerned about these practices in the IT and construction industries where the use of consultants is widespread.

IR35 sets out the general rules which individuals must apply to their own circumstances. There are a variety of tests which should be applied in considering whether or not PAYE applies and it should be emphasised that these are matters which are of relevance to both sides of a contract to perform services. This is because there are potentially costly consequences for both parties in the event that IR 35 is not applied correctly.

For the party paying for the services there is the possibility that HMRC will deem amounts paid to be net of tax and National insurance and thereby “gross up” these amounts and demand the difference from the paying party.

And for the party providing the services there could also be additional tax to pay as expenses incurred in providing those services would be severely limited and, of course, the likelihood would be that the employing party would seek to recover from the service provider any additional tax it had to pay to HMRC .

So it is important to ensure that these rules are understood and observed. Guidance is provided by HMRC and as part of this guidance a number of "business entity" tests have been published any of which could be used as part of any assessment as to whether someone is employed or self-employed.

These tests are:

*Does the business have any premises?
*Does the business buy its own professional Indemnity insurance?
*Does the business use other workers?
*Does the business spend more than £100 per month on advertising?
*Was the business owner previously working for the same customer under PAYE?
*Would the business have to bear the cost of rectifying its own mistakes?
*Does the business stand the risk of incurring bad debts?
*Is there negotiation over pay rates?
*Can the business substitute one person for another, and have they ever done so?
*Can the business make more profit by changing the way it works?
*Does the business have a business plan? 

IR35 does not threaten those who have set up their own businesses and who are genuinely self-employed. It targets those which would otherwise be classed as “employees” when carrying out a particular contract. It applies on a “contract by contract” basis so it is not the case that if a self-employed person has only one client, IR35 automatically applies. What matters are the terms and conditions which apply to each individual contract so it is perfectly possible for an individual to have several contracts running concurrently, one of which falls within IR35 and to which PAYE rules apply.

Care is therefore essential in drafting contract terms in order to ensure that a contract does not inadvertently become subject to PAYE as a consequence of failing to take full account of IR 35

--[[User:Martincantor|Martincantor]] 11:06, 6 August 2012 (BST)

----

= See also =

*HMRC: [http://www.hmrc.gov.uk/ir35/ Intermediaries Legislation (IR35) - Working through an intermediary, such as a Personal Service Company].

 

[[Category:Other_legislation]]
[[Category:Taxation]]
[[Category:Appointments]]

Residual value insurance

2012-08-01T09:29:42Z

Martincantor: Created page with "A Residual Value Insurance policy is designed to underwrite valuations of assets at the date of termination of a lease or other type of financing arrangement. Potential beneficia..."

A Residual Value Insurance policy is designed to underwrite valuations of assets at the date of termination of a lease or other type of financing arrangement. Potential beneficiaries of such policies are predominantly providers of asset finance or manufacturers. However business owners and shareholders can also be seen to be potential beneficiaries as shareholder value can be protected or enhanced if balance sheet asset values are protected in this way.

The policy itself could perhaps be better described as a financial hedging instrument rather than a typical insurance policy and its primary purpose is to support asset financing transactions.

It only exists to guarantee the difference between an '''anticipated''' residual value and an '''actual''' residual value and thus removes asset risk from the equation as far as funding institutions are concerned.

A variety of assets can be insured in this manner including commercial property. Because the existence of such a policy means that lending risk is reduced it may assist in in obtaining improved credit terms as well as offering a degree of protection for any lease balloon payments which may be included as part of the overall finance transaction.

[[Category:Cost_/_business_planning]]

Money laundering

2012-07-26T10:19:11Z

Martincantor: Created page with "<div> '''Definition''' Money Laundering may be defined as: "The techniques, procedures or processes used to convert illegal funds obtained from criminal activities into other a..."

<div>
'''Definition'''

Money Laundering may be defined as:

"The techniques, procedures or processes used to convert illegal funds obtained from criminal activities into other assets in such a way as to conceal a fund's true origin so it appears the money has come from a legitimate or lawful source."

'''The Law'''

In recent years there has been an increased emphasis in using legislation to pass the burden for identifying money laundering acts from statutory authorities to financial institutions and businesses. At the same time the scope of legislation has widened significantly with draconian penalties available to the Courts for those who break the law.

Currently the law providing the framework for money laundering is to be found in:

The Proceeds of Crime Act 2002

The Terrorism Act 2000

The Money Laundering Regulations 2003

FSA Money Laundering Sourcebook.

''The Proceeds of Crime Act 2002''

This act is the principle piece of legislation governing money laundering. This Act covers '''all '''types of crime, not just those arising directly from organised crime. It effectively creates notifiable incidents arising in situations that many of us would not consider as falling within the terms "Money Laundering". There is also no de minimis limit. Thus a deliberate under-declaration of one's own tax liability, even of only a few pounds, is a money laundering offence.

There are '''''three primary offences''''' under this Act

'''CONCEALING'''

Where someone knows or suspects that property is a benefit from criminal conduct or it represents (directly or indirectly) such a benefit, then they commit an offence if they conceal, disguise, convert, transfer or remove that criminal property from England, Wales, Scotland or Northern Ireland.

'''ARRANGING'''

An offence is committed by a person if they enter into or become concerned in an arrangement which they know or suspect facilitates the acquisition, retention use or control of criminal property by, or on behalf of, another person.

'''ACQUISITION USE AND POSSESSION'''

An Offence is committed if someone, knowing or suspecting that property is a person's benefit from criminal conduct (directly or indirectly) acquires, uses or has possession of property.

There are '''two "third party'''" offences

''FAILURE TO DISCLOSE A PRIMARY OFFENCE'', and

''TIPPING OFF OF PERSONS ENGAGED IN MONEY LAUNDERING OR TERRORIST FINANCING AS TO ANY INVESTIGATION''

'''The Terrorism Act 2000'''

S18 - 23 refer to the money laundering offences which could be committed in relation to terrorist funding. For example, S18 states that a person commits an offence if they enter into or become concerned with an arrangement which facilitates the retention by, or control of, another person of terrorist property. ''Also an offence would be committed if a person did not know, but should reasonably have suspected, the funds involved were terrorist property.''

'''Implications for Practitioners'''

It follows from what is stated above that the consequences of committing either primary or third party offences could be serious. Without direct involvement, however, it is difficult to see how a practitioner could be guilty of committing a primary offence under the Proceeds of Crime Act. It must, however, be emphasised that failure to report a suspicion could be an offence.

Individual employees in regulated sector firms can discharge their disclosure obligations under POCA and avoid committing a criminal offence by making a “required disclosure”. This may be in the form of a report to the firm’s MLRO in accordance with internal procedures. It is important to note here that if an individual does not make a required disclosure and subsequently a court determines that the individual had reasonable grounds for suspecting that a transaction involved money laundering only two general defences are available:
<ol style="list-style-type:upper-alpha;">
<li>the individual had a “reasonable excuse” for not making a required disclosure, or</li>
<li>The individual has not been provided with suitable training by his employer and did not have knowledge or suspicion of money laundering.</li>
</ol>

'''Implications for Companies'''

The regulated company carries the responsibility to ensure that all staff, and in particular those who perform client-facing roles, are fully aware of the law relating to money laundering and have been trained to identify potential money-laundering scenarios. It is also the company's responsibility to implement procedures for reporting suspicious transactions internally and to escalate the matter on to the National Crime Intelligence Service (NCIS) if necessary.

The company should appoint a money laundering reporting officer (MLRO) to whom all suspicious transactions must be reported. The company must maintain a log of all such reports. It will be the MLRO's responsibility to decide whether the transaction is suspicious, whether it may proceed and, if not, to make a formal Suspicious Activity Report (SAR) to the NCIS.

'''Identifying suspicious transactions'''

There is no clear definition of what may constitute a suspicious transaction. Attached at Appendix A is a list of areas of vulnerability and factors which may give rise to suspicion.

''Applying common sense is a valuable element in identifying transactions that are unusual''.

'''Summary'''

Robust anti money laundering procedures are essential in order to comply with legal obligations. These obligations fall on each member of staff personally as well as upon the Company.

'''APPENDIX A'''

''Examples of possible money laundering scenarios''

A new corporate/trust client where there are difficulties encountered in obtaining copies of accounts or other incorporation documents

A personal customer where ID verification proves problematical.

Difficulty in verifying information provided by a customer

Complex offshore structures

Any transaction involving an undisclosed third party.

A request to insure goods in overseas locations known to have drug-trafficking, organised crime or terrorist connections.

Attempts to pay large sums in cash.

Extensive use of Bank Giro rather than cheque/DD

Use of a third party cheque to purchase.

Apparent involvement of complex intermediary chain.

</div>
 

[[Category:Other_legislation]]

Equity and loan capital for property development

2012-07-24T08:23:30Z

Martincantor: Created page with "'''EQUITY AND LOAN CAPITAL''' If we cut through the jargon associated with different types of funding we can see that, essentially, there are two distinct types of funding avail..."

'''EQUITY AND LOAN CAPITAL'''

If we cut through the jargon associated with different types of funding we can see that, essentially, there are two distinct types of funding available not just for development projects but for all commercial activity. These are:

Funds provided in return for a share in the ownership of the project (“Equity” ), or

Funds provided in the form of loans which will carry a coupon and will be repayable at some future point in time (“loan capital”)

There are also various “hybrid” types of funding which contain elements of both equity and loan capital or a right to convert a loan into equity.

Equity

Equity can take many forms, for example Ordinary Shares, Preference Shares or Partnership Shares. Howsoever such shares are described, the capital provided in return for such shares will be to acquire ownership or part ownership of the project itself and, for that reason, those funds are considered to be most at risk in the event that the project fails to become financially viable.

All shares carry rights and obligations. For example, In certain circumstances one type of share may be converted into another, so in building the capital structure for a development it is vital that risk and reward are measured carefully and properly reflected in the types and proportions of shares issued.

Ordinary Shares

The riskiest form of equity which will only provide a return if the development is profitable. The return on these shares can then either be in the form of income i.e dividends or by way of a capital gain if and when the shares are sold.

The key point to remember however is that there is no guarantee of a return on the amount invested.

Preference Shares

This type of share usually provides for interest to be paid on a regular basis. If the company does not generate sufficient income to pay the interest it is often the case that such unpaid interest will accrue and will become payable as and when the company has sufficient income to do so. This type of share will also rank ahead of ordinary shares in the event that the company is liquidated. Holders of these shares may not have a vote on the manner in which the company is managed so in many respects a preference share is similar to providing loans.

Preference Shares are no longer as popular as they used to be having been largely replaced by loans and hybrid forms of funding.

Partnership Shares

It is increasingly the case that developments are procured via the use of Special Purpose Vehicles (“SPV”) which are often constituted in Limited Liability Partnership form. This type of structure is increasingly popular, mainly because of way in which it is treated for U.K. tax purposes. In particular it is beneficial where the investors in a project may come from all over the World and whose individual tax circumstances may well be very different from their co-investors.

Investing in a LLP for such a purpose usually involves issuing investors with a minimal shareholding, which represents the capital investment into the venture, together with Loan Notes bearing an agreed coupon.

Holding Partnership shares confers certain rights to the holders although day to day management will be undertaken by the Managing Partner.

Loans

Loan capital is likely to be the form in which a project’s funding is largely provided. Loan capital is more flexible than equity capital. It can be introduced and withdrawn more readily and does not confer any ownership rights to those who are providing the loans.

However, loan capital is likely to be more problematical if the project does not succeed as non-payment of interest or a failure to make capital repayments can result in the loan providers taking control of a project, usually wiping out the value of any equity investment.

Loans can be provided in many different ways; from simple overdraft – type facilities to complex mezzanine finance deals which can involve convertibility of loans into capital upon certain events occurring.

Loans can also be referred to as “corporate bonds”.

As with differing types of equity, differing types of loan will carry differing conditions and levels of security. It is generally the case that the less security provided to a particular class of loan, the higher the interest rate payable. On complex deals there may be differing classes of loan finance whose security may be set out in a clear order of precedence. By this it is meant that in the event of the project failing, holders of primary loan notes, for example, would be repaid in full before the holders of secondary loan notes and so on.

[[Category:Cost_/_business_planning]]

Tax relief

2012-07-23T10:13:56Z

Martincantor:

Tax Relief describes a situation in which an individual or company's liability to tax is reduced as a result of an entitlement to claim allowances or offset certain permitted expenditures against income.

Individuals are entitled to personal allowances which provide tax relief by reducing taxable income. They can also obtain tax relief if they are able to utilise other allowances which HM Revenue and Customs permit in certain circumstances.

Companies and non-incorporated businesses obtain tax relief by setting business running costs against income. They can also obtain relief by claiming capital allowances when they purchase assets for use in their businesses.

'''Individuals'''

''Personal Allowances''

These are set by HM Government and usually change each financial year to take account of changes in the cost of living. From time to time however these allowances may remain unchanged for a longer period of time. Depending upon the particular circumstances of each individual, the amount of the allowance is free from assessment to tax. The level of personal allowance depends upon age and also income.

For 2012/13 Personal Allowance:

*under 65 years of age £8,105
*65 - 74 £10,500
*75 and over £10,660

If an individual's income exceeds £100,000 the amount of the allowance reduces by £1 for every £2 income exceeds £100,000. Thus it can be seen that at an income level of £116,210 the allowance for an individual under 65 disappears completely.

Equally the higher allowances for older individuals are gradually reduced in much the same way as is the case for the basic personal allowance above £100,000. For 2012/13 the age related allowances begin to reduce at a rate of £1 for every £2 of earnings above £25,400 per annum.

Married Couples Allowance of £7,705 (for 2012/13) is available where one partner is at least 75 years of age in the financial year in question. Married Couples Allowance provides tax relief at 10% thus reducing tax payable by £770.50.

''Pension Contributions''

Individuals may obtain tax relief by contributing to personal or occupational pensions schemes with a view to building up a fund to provide income in retirement. Contributions made in this way entitle the individual to tax relief at their marginal rate of tax. For a 40% taxpayer therefore, tax relief of £20,000 may be obtained against a contribution of £50,000. There are detailed rules and limits governing pension schemes and amounts that may be contributed, more details of which are available from [http://www.hmrc.gov.uk/incometax/relief-pension.htm HM Revenue and Customs].

''Gift Aid/Deeds of Covenant''

Tax relief is available to support charitable giving. For a U.K. taxpayer the amount of the gift is deemed to be net of basic rate tax. In "grossing up" the value of the gift, relief is obtained at the taxpayers marginal rate. At the same time, the recipient of the gift can reclaim the basic rate of tax deducted at source.

''Enterprise Investment Schemes (EIS)''

Tax relief is also available to individuals who are prepared to invest in new businesses. The EIS pemits relief of 30% on the investment into shares in approved companies upto a maximum of £500,000. Thus maximum tax relief of £150,000 is available if the investor has sufficient taxable income against which the EIS relief can be set. There is also a carry - back provision which permits the tax relief to be set against income tax liability arising in the tax year immediately prior to the year in which the share acquisition is effected. Shares must be held for a mnimum of three years otherwise the tax relief granted will be withdrawn.

----

= See also =

*Capital allowances.
*Funding options.

 

 

 

[[Category:Other_legislation]]
[[Category:Taxation]]
[[Category:Cost_/_business_planning]]

Tax relief

2012-07-23T10:07:30Z

Martincantor:

Tax Relief describes a situation in which an individual or company's liability to tax is reduced as a result of an entitlement to claim allowances or offset certain permitted expenditures against income.

Individuals are entitled to personal allowances which provide tax relief by reducing taxable income. They can also obtain tax relief if they are able to utilise other allowances which HM Revenue and Customs permit in certain circumstances.

Companies and non-incorporated businesses obtain tax relief by setting business running costs against income. They can also obtain relief by claiming capital allowances when they purchase assets for use in their businesses.

'''Individuals'''

''Personal Allowances''

These are set by HM Government and usually change each financial year to take account of changes in the cost of living. From time to time however these allowances may remain unchanged for a longer period of time. Depending upon the particular circumstances of each individual, the amount of the allowance is free from assessment to tax. The level of personal allowance depends upon age and also income.

For 2012/13 Personal Allowance:

*under 65 years of age £8,105
*65 - 74 £10,500
*75 and over £10,660

If an individual's income exceeds £100,000 the amount of the allowance reduces by £1 for every £2 income exceeds £100,000. Thus it can be seen that at an income level of £116,210 the allowance for an individual under 65 disappears completely.

Equally the higher allowances for older individuals are gradually reduced in much the same way as is the case for the basic personal allowance above £100,000. For 2012/13 the age related allowances begin to reduce at a rate of £1 for every £2 of earnings above £25,400 per annum.

Married Couples Allowance of £7,705 (for 2012/13) is available where one partner is at least 75 years of age in the financial year in question. Married Couples Allowance provides tax relief at 10% thus reducing tax payable by £770.50.

''Pension Contributions''

Individuals may obtain tax relief by contributing to personal or occupational pensions schemes with a view to building up a fund to provide income in retirement. Contributions made in this way entitle the individual to tax relief at their marginal rate of tax. For a 40% taxpayer therefore, tax relief of £20,000 may be obtained against a contribution of £50,000. There are detailed rules and limits governing pension schemes and amounts that may be contributed, more details of which are available from [http://www.hmrc.gov.uk/incometax/relief-pension.htm HM Revenue and Customs].

''Gift Aid/Deeds of Covenant''

Tax relief is available to support charitable giving. For a U.K. taxpayer the amount of the gift is

''Enterprise Investment Schemes (EIS)''

Tax relief is also available to individuals who are prepared to invest in new businesses. The EIS pemits relief of 30% on the investment into shares in approved companies upto a maximum of £500,000. Thus maximum tax relief of £150,000 is available if the investor has sufficient taxable income against which the EIS relief can be set. There is also a carry - back provision which permits the tax relief to be set against income tax liability arising in the tax year immediately prior to the year in which the share acquisition is effected. Shares must be held for a mnimum of three years otherwise the tax relief granted will be withdrawn.

----

= See also =

*Capital allowances.
*Funding options.

 

 

[[Category:Other_legislation]]
[[Category:Taxation]]
[[Category:Cost_/_business_planning]]

Tax relief

2012-07-22T09:06:59Z

Martincantor:

Tax Relief describes a situation whereby an individual or company's liability to tax is reduced as a result of entitlement to claim allowances or offset certain permitted expenditures against income.

Individuals are entitled to personal allowances which provide tax relief by reducing taxable income. They can also obtain tax relief if they are able to utilise other allowances which HM Revenue and Customs permit in certain circumstances.

Companies and non-incorporated businesses obtain tax relief by reducing income by setting business running costs against that income. They can also obtain relief by claiming capital allowances when they purchase assets for use in their businesses.

''Individuals''

Personal Allowances

These are set by HM Government and usually change each financial year to take account of changes in the cost of living. From time to time however these allowances may remain unchanged for a longer period of time. Depending upon the particular circumstances of each individual, the amount of the allowance is free from assessment to tax. The level of personal allowance depends upon age and also income.

For 2012/13 Personal Allowance

under 65 years of age £8,105

65 - 74 £10,500

75 and over £10,660

If an individual's income exceeds £100,000 the amount of the allowance reduces by £1 for every £2 income exceeds £100,000. Thus it can be seen that at an income level of £116,210 the allowance for an individual under 65 disappears completely.

Equally the higher allowances for older individuals are gradually reduced in much the same way as is the case for the basic personal allowance above £100,000. For 2012/13 the age related allowances begin to reduce at a rate of £1 for every £2 of earnings above £25,400 per annum.

Married Couples Allowance of £7,705 (for 2012/13) is available where one partner is at least 75 years of age in the financial year in question. Married Couples Allowance provides tax relief at 10% thus reducing tax payable by £770.50.

Pension Contributions

Individuals may obtain tax relief by contributing to personal or occupational pensions schemes with a view to building up a fund to provide income in retirement. Contributions made in this way entitle the individual to tax relief at their marginal rate of tax. For a 40% taxpayer therefore, tax relief of £20,000 may be obtained against a contribution of £50,000. There are detailed rules and limits governing pension schemes and amounts that may be contributed more details of which are available from HM Revenue and Customs.

Enterprise Investment Schemes and Venture Capital Trusts

Tax relief is also available to individuals who are prepared to invest in new businesses.

----

= See also =

*Capital allowances.
*Funding options.

 

 

[[Category:Other_legislation]]
[[Category:Taxation]]
[[Category:Cost_/_business_planning]]

Tax relief

2012-07-20T16:45:27Z

Martincantor:

Tax Relief describes a situation whereby an individual or company's liability to tax is reduced as a result of entitlement to claim allowances or offset certain permitted expenditures against income.

Individuals are entitled to personal allowances which provide tax relief by reducing taxable income. They can also obtain tax relief if they are able to utilise other allowances which HM Revenue and Customs permit in certain circumstances.

Companies and non-incorporated businesses obtain tax relief by reducing income by setting business running costs against that income. They can also obtain relief by claiming capital allowances when they purchase assets for use in their businesses.

''Individuals''

Personal Allowances

These are set by HM Government and usually change each financial year to take account of changes in the cost of living. From time to time however these allowances may remain unchanged for a longer period of time. Depending upon the particular circumstances of each individual, the amount of the allowance is free from assessment to tax. The level of personal allowance depends upon age and also income.

For 2012/13 Personal Allowance

under 65 years of age £8,105

65 - 74 £10,500

75 and over £10,660

If an individual's income exceeds £100,000 the amount of the allowance reduces by £1 for every £2 income exceeds £100,000. Thus it can be seen that at an income level of £116,210 the allowance for an individual under 65 disappears completely.

Equally the higher allowances for older individuals are gradually reduced in much the same way as is the case for the basic personal allowance above £100,000. For 2012/13 the age related allowances begin to reduce at a rate of £1 for every £2 of earnings above £25,400 per annum.

Married Couples Allowance of £7,705 (for 2012/13) is available where one partner is at least 75 years of age in the financial year in question. Married Couples Allowance provides tax relief at 10% thus reducing tax payable by £770.50.

Pension Contributions

----

= See also =

*Capital allowances.
*Funding options.

 

[[Category:Other_legislation]]
[[Category:Taxation]]
[[Category:Cost_/_business_planning]]

Rate relief schemes for small business

2012-07-20T11:02:44Z

Martincantor: Created page with "'''Small business rate relief''' You will be eligible for a discount under the small business rate relief scheme in England if you only occupy one property and it has a rateable..."

'''Small business rate relief'''

You will be eligible for a discount under the small business rate relief scheme in England if you only occupy one property and it has a rateable value below £12,000. 

The Government has temporarily doubled the level of relief available. Between 1 October 2010 and 31 March 2013, eligible ratepayers will receive small business rate relief at 100 per cent on properties up to £6,000 (rather than 50 per cent), and a tapering relief from 100 per cent to 0 per cent for properties up to £12,000 in rateable value for that period.

The temporary Small Business Rate Relief increase will therefore apply throughout the whole of the 2012-13 billing year (until 31 March 2013). The relief was originally doubled by the government until September 2011, but this was extended by the Budget in March 2011, and then extended again in the 2011 Autumn Statement to take account of economic conditions.

If you have more than one business property, the discount is only available if the rateable value of each of the other properties is below £2,600. If this is the case, the rateable values of all the properties will be combined and the relief is applied to the main property based on the total rateable value.

However, if you occupy a property with a rateable value below £18,000 (£25,500 in London) and you are not receiving a different mandatory relief, you will be eligible to have your bill calculated using the small business multiplier, regardless of the number of properties you occupy.

The Government has also simplified the process for claiming the relief by removing the legal requirement for an application form in order to claim the relief. However, if you are not receiving the relief and you think that you are eligible, you should contact your local billing authority.

'''Small business rate relief in Wales'''

You will be eligible for small business rate relief if your rateable value is below certain levels:

*If you have business premises with a 2010 rateable value up to £2,400 (except beach huts, adverts or car park spaces, sewage works or communication sites), your bill will be reduced by '''50 per cent'''.
*If you have business premises with a 2010 rateable value between £2,401 and £7,800 (excluding beach huts, adverts or car park spaces, sewage works or communication sites), your bill will be reduced by '''25 per cent'''.
*If you have a post office with a 2010 rateable value up to £9,000, your bill will be reduced by '''100 per cent'''.
*If you have a post office with a 2010 rateable value between £9,001 and £12,000, your bill will be reduced by '''50 per cent'''.
*If you have registered child-care premises with a 2010 rateable value up to £12,000, your bill will be reduced by '''50 per cent'''.
*If you have retail premises with a 2010 rateable value between £7,801 and £11,000 (including restaurants, pubs and petrol filling stations), your bill will be reduced by '''25 per cent'''. If you occupy more than one property, only one can be chosen to receive relief.
*If you have a property occupied by a registered Credit Union with a 2010 rateable value up to £9,000, your bill will be reduced by '''50 per cent'''.

Between 1 October 2010 and 31 March 2013, eligible ratepayers will receive small business rate relief at 100 per cent on properties up to £6,000 (rather than 50 per cent), and a tapering relief from 100 per cent to 0 per cent for properties up to £12,000 in rateable value for that period.

There are a small number of instances where businesses received a higher rate of relief under the scheme operating before 1 October 2010 than under the current scheme - in these instances they will receive the rate of relief that is most beneficial to them.

The following will not be affected by the temporary changes:

*premises with rateable value between £10,501 and £11,000 in receipt of 25 per cent retail relief
*post offices in receipt of 100 per cent or 50 per cent relief
*registered child care premises with rateable value £9,001 - £12,000 in receipt of 50 per cent relief

[[Category:Cost_/_business_planning]]

Business rates

2012-07-20T11:01:45Z

Martincantor: Created page with "Business rates is a local tax that is paid by the occupiers of non-domestic property in England and Wales. Business rates are calculated and collected by your local authority. ..."

Business rates is a local tax that is paid by the occupiers of non-domestic property in England and Wales.

Business rates are calculated and collected by your local authority. They are put in a central pool and then redistributed to local authorities to meet the needs of particular authorities

Business rates help to pay for local services. How much you pay will depend on:

*the rateable value of the property, which is set by the Valuation Office Agency (VOA)
*what multiplier is set by central government
*what rate relief schemes you are eligible for, which are applied by your local council

[[Category:Cost_/_business_planning]]

VAT - Protected Buildings

2012-07-19T15:06:54Z

Martincantor: Created page with "Work on certain types of building may be zero – rated. This means that that no VAT is payable on such work. For these rules to apply the building in question must be a “prot..."

Work on certain types of building may be zero – rated. This means that that no VAT is payable on such work.

For these rules to apply the building in question must be a “protected building”, a “listed building” or a “scheduled monument”. And for such works on these types of building, the works themselves are subjected to a variety of tests as to whether they are “approved alterations”

There are clear definitions which apply to each of these categories of building.

Consultants’ fees associated with such works are not, however, zero – rated although some consultants services which are supplied via for example, a design – build contract may be zero –rated depending upon the nature of such services and the contractual arrangement under which these services are supplied.

Your services can be zero-rated when '''all''' of the following conditions are met:

{| align="center" border="0" cellpadding="0"
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'''Condition'''

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'''Description'''

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1

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Work is carried out to a ‘protected’ building.

| style="height:32px" | 
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2

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The work is an ‘alteration’ of a protected building and is not work of ‘repair or maintenance’.

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3

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The alteration is ‘approved’.

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4

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Your services are made ‘in the course of the approved alteration’ of that building.

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5

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Where necessary, you hold a valid certificate.

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6

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Your services are not specifically excluded from zero-rating.

| 
|}

'''What is a ‘protected’ building?'''

A building is a ‘protected’ building when the following conditions are met:

{| align="center" border="0" cellpadding="0"
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'''A protected building is a building that is'''

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'''and is'''

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designed to remain as or become a dwelling or number of dwellings – see paragraph 14.3,

intended for use solely for a relevant residential purpose – see paragraph 14.6, or

intended for use solely for a relevant charitable purpose – see paragraph 14.7

|
either a listed building – see sub-paragraphs 9.2.2 and 9.2.3, '''or'''

a scheduled monument – see sub-paragraph 9.2.4.

|}

'''What is a listed building?'''

A listed building is one included in a statutory list of buildings of special architectural or historic interest compiled by the Secretary of State for National Heritage in England and by the Secretaries of State for Scotland, Wales and Northern Ireland.

In England and Wales there are three categories of listed building, Grade I, Grade II*, and Grade II. In Scotland the equivalent categories are Grade A, Grade B and Grade C(s). In Northern Ireland the equivalent categories are Grade A, Grade B+ and Grade B.

Buildings within the curtilage of a listed building such as outhouses or garages which, although not fixed to the building, form part of the land and have done so since before 1 July 1948 (for example, an outhouse) are treated for planning purposes as part of the listed building.

Unlisted buildings in conservation areas, or buildings included in a local authority's non-statutory list of buildings of local interest, which used to be known as Grade III buildings, are not ‘protected’ buildings for VAT purposes.

'''What is a Scheduled Monument?'''

A scheduled monument is one included in a statutory schedule of monuments of national importance as defined in the Ancient Monuments and Archaeological Areas Act 1979 or the Historic Monuments and Archaeological Object (Northern Ireland) Order 1995.

You can only zero-rate an approved alteration to a scheduled monument if it is a building that meets the certain tests set out by HM Revenue and Customs.

The underlying purpose of these provisions is to facilitate the repair and protection of nationally important buildings as well as to make the provision of certain types of dwelling easier less financially demanding than would otherwise be the case.

'''However, at the time of writing, these zero – rating rules are being reviewed by HM Government and it may be the case that this favourable treatment is removed for approved alterations to approved buildings'''.

For more infomration visit [http://www.hmrc.gov.uk/vat http://www.hmrc.gov.uk/vat]

[[Category:Taxation]]

Stamp duty land tax SDLT

2012-07-19T10:25:55Z

Martincantor: Created page with "'''STAMP DUTY LAND TAX (SDLT)''' This tax is payable on the purchase or transfer of property or land situated in the U.K. and which has a value above a certain minimum figure T..."

'''STAMP DUTY LAND TAX (SDLT)'''

This tax is payable on the purchase or transfer of property or land situated in the U.K. and which has a value above a certain minimum figure

The way in which the tax is calculated can vary according to a number of considerations ''inter alia'' whether the property which is the subject of the transaction is commercial or residential, is leasehold or freehold or is part of a series of associated transactions.

It can be seen, therefore, that this is a tax which arises on property transactions but given the rates of tax it is important that it is fully factored in to any appraisal where appropriate.

For transactions that are classed “non- residential” the rates of tax are as follows:

{| border="0" cellpadding="0"
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'''Purchase price/lease premium or transfer value (non-residential or mixed use)'''

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'''SDLT rate'''

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Up to £150,000 - annual rent is under £1,000

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Zero

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Up to £150,000 - annual rent is £1,000 or more

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1%

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Over £150,000 to £250,000

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1%

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Over £250,000 to £500,000

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3%

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Over £500,000

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4%

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Whilst for transactions that are classed “residential” the rates of tax are as follows:

{| border="0" cellpadding="0"
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!
'''Purchase price/lease premium or transfer value'''

!
'''SDLT rate'''

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Up to £125,000

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Zero

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Over £125,000 to £250,000

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1%

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Over £250,000 to £500,000

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3%

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Over £500,000 to £1 million

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4%

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Over £1 million to £2 million

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5%

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Over £2 million from 22 March 2012

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7%

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Over £2 million (purchased by certain persons including corporate bodies) from 21 March 2012

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15%

|}

(Rates current at July 2012)

Other rates apply where properties are located in “disadvantaged areas”.

There are a variety of exemptions – for charities for example – from liability to the tax and professional advice should be taken to ensure that the correct tax treatment is applied in each case.

There have been a variety of schemes promoted in recent years with the intention of avoiding SDLT. In particular the use of Special Purpose Vehicles (SPVs) to hold property has enabled purchasers of property to acquire it by purchasing the shares in the SPV rather than the property itself and in so doing reduce tax payable.

Participation in any such scheme should only be considered after taking full professional advice.

Full details of SDLT are available at [http://www.hmrc.gov.uk/sdlt/index.htm http://www.hmrc.gov.uk/sdlt/index.htm]

[[Category:Taxation]]

Depreciation

2012-07-17T21:52:08Z

Martincantor: Created page with "Over time the value of assets decline or depreciate, ultimately to the point where the value is Nil. For businesses it is important to recognise this fact by reducing the value ..."

Over time the value of assets decline or depreciate, ultimately to the point where the value is Nil.

For businesses it is important to recognise this fact by reducing the value of assets shown on the balance sheet in accordance with the depreciation policy set by the directors. Because different types of asset lose value at a faster rate than others it is usually the case that a business will have different rates of depreciation for different classes of asset.

The value of a company car may be reduced over 4 years or at 25% per annum whilst fixtures and fittings may be depreciated over 10 years or at 10% per annum.

Businesses are free to decide their own depreciation rates and because depreciation is merely an accounting entry which does not involve expending actual funds, but which still reduces profit, it effectively provides a fund for replacing the asset at the end of its useful life.

However, in calculating taxable profits the value of the depreciation is ignored and is replaced by capital allowances which are set according to statutory rules. The reason for this is simply that H M Revenue and Customs do not allow businesses to set their own depreciation in such a way that would reduce provide tax relief earlier than they believe should be the case.

For example if electrical equipment is purchased for £10,000, and the business decides to depreciate the value by 100% in year 1, leaving the full depreciation in the calculation would provide tax relief upon the entire value of that equipment in the year of purchase. Instead, by using pre-determined capital allowances the equipment may be depreciated in full - but over a much longer period of time. Tax relief is therefore available over the same extended period.

Where equipment has capital allowances applied at a rate of 25% on a “reducing balance” basis it results in the entire value being written off for tax purposes over 7 years.

It can be seen therefore that there is a connection between depreciation for accounting and replacement purposes on the one hand, and the use of predetermined capital allowances set by H. M. Revenue and Customs on the other for the calculation of tax payable by a business.

[[Category:Taxation]]

Talk:Top ten tips for building design and construction projects

2012-07-10T15:10:28Z

Martincantor:

What about ...

Know your costs from the outset. The only way to make a building cheaper, is to make it smaller. --[[User:Designing Buildings|designing buildings]] 08:48, 10 July 2012 (BST)

Know what's in your budget and what's not. Equipment may not need to be in the budget, but what about fitting the equipment? --[[User:Gregor Harvie|Gregor]][[User:Gregor Harvie|Harvie]] 08:52, 10 July 2012 (BST)

No planning permission means no project. Get planning permission early, otherwise you could spend a lot of money for nothing.

And be very careful with VAT. is it recoverable or not? Are there some items where it is not recoverable in any event?

Talk:Top ten tips for building design and construction projects

2012-07-10T15:09:58Z

Martincantor:

Rent free period

2012-07-05T09:00:05Z

Martincantor: Created page with "A rent free period is often offered by landlords under the terms of a commercial lease in the U.K. with a view to encouraging a prospective tenant to sign a new lease, or to enco..."

A rent free period is often offered by landlords under the terms of a commercial lease in the U.K. with a view to encouraging a prospective tenant to sign a new lease, or to encourage an existing tenant to remain in occupancy of premises. In existing leases rent free periods are often linked to the non-exercise of a break clause. i.e by not exercising a break clause a tenant is rewarded with a rent free period.

They are particularly visible in times of economic difficulty when incentives become necessary to encourage tenants to sign leases.

It may be asked why instead of offering rent free periods a landlord does not reduce the level of rent so that, over the period of the lease, the income to the landlord is broadly the same. The answer lies in the fact that the “headline rent” being paid is used as a valuation metric to value the property producing the rent. This is, in turn, based upon the rental yield and for this purpose the presence of a rent free period is ignored.

To take an example:

If the headline rent is £40 per square foot and the estimated yield for the property in question is 5% then the capital value so calculated is £800 per square foot.

The fact that a rent free period may reduce “the effective rent” earned over the period of the lease to, say £37 per square foot does not affect the capital valuation of the property although, at first sight, it would suggest a reduction in capital value to £740 per square foot. i.e a reduction of 7.5%.

This fact is of vital importance to institutional investors and funders whose interests could be adversely affected by a consequent reduction in capital values if the lower effective rent was to be used.

So whilst the offer of a rent free period is attractive to a tenant and costly to a landlord it does not impact the capital valuation of the leased property.

[[Category:Cost_/_business_planning]]

Break clauses in leases

2012-07-03T08:02:48Z

Martincantor: Created page with "Break clauses are commonly found in commercial leases and permit tenants to terminate their lease on an intermediate date during the term of the lease. Unless the terms on offer..."

Break clauses are commonly found in commercial leases and permit tenants to terminate their lease on an intermediate date during the term of the lease.

Unless the terms on offer from a landlord are so favourable, prospective tenants will not commit to a long – term lease. Increasingly, prospective occupiers wish to retain flexibility with regard to their occupancy of premises and break clauses provide this flexibility. Business needs change over time and so do premises requirements.

Break clauses thus help in attracting tenants whilst granting those tenants the ability to relocate or renegotiate lease terms at these break points.

Depending on the overall lease term, break clauses may operate after three, five or ten years. They usually require the tenant to provide a minim period of notice to exercise the break and if this is done it usually triggers a process of negotiation with the landlord who will usually be keen for the tenant to remain in occupancy for a further period.

Providing notice to exercise the break clause is, therefore, often used as an opportunity to renegotiate the rent payable. New terms are often agreed which involve the granting of a rent free period.

However, if the notice to break is served on the landlord, and the landlord accepts it, then the tenant must vacate the premises by the due date.

Careful consideration must therefore be given to the question as to whether to break or not as the outcome for the party giving notice may not be the desired one

[[Category:Contracts_/_payment_/_payment]]

Rent review

2012-07-02T15:01:54Z

Martincantor: Created page with "Virtually all commercial leases issued in the U.K. will contain a provision whereby the landlord may periodically adjust the rent payable by the tenant. This rent review clause ..."

Virtually all commercial leases issued in the U.K. will contain a provision whereby the landlord may periodically adjust the rent payable by the tenant.

This rent review clause represents a significant safeguard for the landlord as it enables him or her to adjust the rent to reflect current market conditions. Many leases are granted for considerable periods of time and without a rent review clause, the rent payable could fall significantly behind levels prevailing in the market at any particular point in time. And, of course, inflation erodes value over time.

Even more significant than the existence of the clause itself is the fact that these clauses provide for “upwards – only” reviews. Should general market rents be lower, the tenant will not benefit as the rent will be unchanged – not reduced.

This is one of many reasons why, for many years, commercial property has been such an attractive prospect for investors. With a financially sound tenant in occupation, there is clear visibility of income for years ahead with no risk of reduction until the lease comes to the end of its term, or is ended by virtue of the exercise of a “break clause”

[[Category:Cost_/_business_planning]]