The Geo-blocking Regulation (EU) 2018/302 (the “Regulation”) is now in force across the European Union (including the UK). Traders selling goods and services to customers within the EU need to ensure they are aware of the new Regulation, as changes may need to be made to business websites and other online interfaces in order to comply with the Regulation.

The Geo-blocking Regulation

The Regulation came into force in December 2018 in all EU member states. Its aim is to address unjustified geo-blocking: where a trader in one EU member state blocks or limits the access to their online interfaces to customers accessing from other EU member states. It also covers other methods of discrimination which are based on a customer’s nationality, location of residence or place of establishment.

The hope is that this Regulation will encourage cross-border commerce.

Applicability of the Regulation

It is important to note, initially, that there are some activities the Regulation does not cover. These include: audio-visual services (such as streaming films), transport and retail financial services.  In addition, the Regulation only applies to cross-border situations. For example, a UK trader selling to a UK customer would not be caught by the Regulation.

Traders

A trader is defined in the Regulation as any natural or legal person who acts for purposes relating to that persons trade, business, craft or profession. A key point to note is that the trader does not need to be established in the EU to be subject to the Regulation. What matters is whether they offer their goods and services to customers within the EU.

Customers

The definition of customer is a consumer who is a national or resident of an EU member state or an undertaking established in a member state (which means businesses fall under the scope of the Regulation). It should be noted however, that the Regulation does not apply when the customer is not the end user of the goods or services they are purchasing.

Brexit

The impact of Brexit will be quite different for customers and traders. For customers in the UK, at the withdrawal date, they will no longer be able to rely on the Regulation for protection. For UK based traders however, the Regulation will continue to apply to them if they operate within the EU; it does not matter that they are not based in the EU themselves.

Prohibitions under the Regulation

The following types of activities are covered by the Regulation and traders should ensure that they are complying with the requirements.

Access to online interfaces

One of the key intentions behind the Regulation is market transparency: that is, that consumers should be able to access and, if they wish, compare, goods and services availability and price across the EU.

A trader cannot block or limit the access of a customer to their online interface (e.g. website or other mobile applications) on the basis of their nationality, place of residence or place of establishment. This also covers the inability of a trader to reroute the customer to a different version of their website, which the customer did not try and access, without their explicit consent or because they have to in order to comply with EU law.

By way of example, a consumer in France cannot be geo-blocked from accessing a trader’s website for customers in Italy, even if that trader also has an online interface intended for customers in France. That customer should not be automatically re-routed to the trader’s French website.

Traders should also note that even when a customer does give their consent to be rerouted, they must have easy access to the previous version of the website and that the customer needs to be able to withdraw their consent at any time.

Delivery

Traders can choose which countries they deliver to and there is no obligation under the Regulation to deliver to different member states. However, the trader cannot choose which EU countries they sell to on the basis of a customer’s nationality, place of residence or establishment. An example of how this works in practice is if on a UK website the trader offers delivery to the UK, then a French customer has the right to access the UK website and get the goods delivered to an address in the UK. They cannot though, demand that the product be delivered to France if the trader does not offer delivery there.

Payment

Again, traders can choose which methods of payment they will accept. However, they are not allowed to apply different conditions on payment on the basis of: the customer’s nationality, place of residence or establishment. They also cannot discriminate based on the location of the payment, the place of establishment of the payment service provider or the place of issue of the payment instrument. This applies when the following conditions are met:

• The payments are made electronically by a credit transfer, direct debit or card based payment which falls within the same brand and category;
• Any authentication requirements have been fulfilled; and
• The payments are in a currency which is accepted by the trader.

It should be noted thought, that the Regulation does not prevent traders from withholding delivery of the goods or the provision of services until they have confirmation that the required payment has been made.

Restrictions of passive sales

Traders will need to be aware that if in a commercial agreement there are passive sales restrictions that infringe the Regulation, these will be void automatically. There will be a transitional period in relation to this Regulation, as there are a few instances where passive sales restrictions are permitted and these new rules can in some cases exceed the current framework for competition law.

What next?

If your business does operate across more than one EU territory, or if you are looking to offer cross-border goods and / or services, care should be taken to ensure that you comply with the Regulation.

Keep in mind the restrictions on geo-blocking / automatic re-direction of consumers to territory-specific online platforms.

For more information on the Geo-blocking Regulation please contact Tom Torkar in our Commercial Team.

Usually, non-exempt charities must follow a statutory procedure when looking to sell property or grant a lease (amongst other dispositions). This Michelmores Real Estate Soundbite considers some of these procedures. (Statute does provide for various transactions to which these procedures do not apply, for example, a lease granted by a charity in accordance with its trusts for less than market rent to a beneficiary under its trusts who will occupy the land for the purposes of the charity. Other excluded transactions are not covered further in the scope of this Soundbite).

A non-exempt charity is a charity which is registered with and subject to regulation by the Charity Commission. Under the Charities Act 2011 (CA) a non-exempt charity must obtain an order of the court or the Charity Commission to dispose of land, unless the charity follows the procedure contained in section 119, 120 or 121 of the CA. This is assuming the disposal is not made to a connected person; in which case an order of the court or the Charity Commission will always be required.

The Section 119 Procedure – Sales and Long Leases

Before the trustees of the charity enter into any agreement to sell property, grant a lease for a term of more than 7 years or other disposition of the land, they must obtain a qualified surveyor’s opinion on the proposed disposition. This is sometimes referred to as a “Section 119 Report“.

For these purposes, a “qualified surveyor” will be a fellow or professional associate of the Royal Institution of Chartered Surveyors, specifically with experience of valuing similar kinds of property or land in the same geographical area. The surveyor must be instructed by the trustees and be acting exclusively for the relevant charity.

The Section 119 Report must contain certain prescribed details laid out in statute; these include a description of the land and any relevant easements and the surveyor’s opinion regarding the value. Crucially, the charity must be satisfied that, based on the report, the proposed terms of the relevant disposition are “the best that can reasonably be obtained for the charity”; this generally alludes to best value for money.

If the Section 119 Report recommends that the proposed sale or lease be advertised in a particular way, the charity must also follow this recommendation.

The Section 120 Procedure – Short Leases

The procedure is more straightforward where a non-exempt charity intends to grant a lease for a term of 7 years or less. Before entering into any agreement to lease the property for such a short term, the charity trustees must be advised on the disposition by “a person who is reasonably believed by the trustees to have the requisite ability and practical experience to provide them with competent advice on the proposed disposition”. In practice, this advice does not need to be written and the advisor does not need to be a qualified surveyor (although, generally, a surveyor may still be the best person for the job).

Based on this advice, the charity trustees must satisfy themselves that the proposed terms on which the short lease is proposed to be made are “the best that can reasonably be obtained for the charity”. This is a similar standard to that described above.

The Section 121 Procedure – Land Held for the Purposes of the Charity

In addition to the section 119 or 120 procedure and unless the Charity Commission orders otherwise, where the land to be disposed of is used for the purposes of the charity (usually in accordance with a trust), the charity trustees must also notify the public and invite representations for or against the proposed disposition. The charity trustees must then consider any such representations which are made within one month of the notification, before proceeding to agree the disposal.

It should be noted that public notification is not required if the charity intends to procure replacement land to be used for the charity’s purposes under the same trust; or if the disposal is the grant of a lease for a term of 2 years or less without a premium or fine.

In a previous edition of our Agricultural Lore publication, we reported on the case of Habberfield v Habberfield [2018]] where a daughter inherited her parent’s farm. Since then, two more farming estoppel cases have hit the press: Thompson v Thompson [2018] and Gee v Gee [2018]. These cases demonstrate the Court’s broad discretion when deciding how to satisfy the equity and the Court’s preparedness to award the entirety of a family farm to a child.

Estoppel elements

To bring a successful proprietary estoppel claim the following elements must be established:

• A representation or assurance has been made to the Claimant, raising the reasonable expectation that he/she will be given an interest in land
• The Claimant relies on the representation or assurance
• The Claimant suffers detriment in consequence of their (reasonable) reliance on the representation or assurance
• It would be unconscionable for the promise-giverto resile from the promises or representations made.

Thompson v Thompson

Mr and Mrs Thompson acquired Woody Close Farm (“the Farm”) in County Durham in 1989. It comprised a farmhouse, bungalow, outbuildings, 115 acres of owned land together with 120 acres of tenanted land.

The Claimant, Gilbert Thompson (“Gilbert”), is the youngest of 5 children and the only son. He farmed with his father since finishing school, aged 15, working full time 7 days a week, and at times, up to 18 hours a day. He was paid £20 a week, increasing to £40, when he was 19 or 20 and then later to £70. He also received free board and lodgings. By 1989, Gilbert’s sisters had all left home.

In 1994 Mr Thompson brought Mrs Thompson and Gilbert into the business, creating a partnership, where they each held 1/3 shares (with effect from 1 August 1992). A written agreement was completed, under which Gilbert was required to devote his full time and attention to the business, whereas his parents had discretion as to how much time and attention they devoted.

Mr and Mrs Thompson lived in the bungalow. Gilbert lived there most of his life, moving out permanently in 2003, before moving to the farmhouse in 2013. In 1992 the bungalow was transferred into Mrs Thompson’s name.

The Farm, excluding the bungalow, was shown in the accounts as an asset of the Partnership.

On the death of Mr Gilbert in 2012 his partnership interest passed to Mrs Thompson. In 2014 relations broke down between Gilbert and his mother. Gilbert moved out of the Farmhouse. There was a difference of opinion as to the reason Gilbert stopped working on the farm after this time. Certainly by May 2015 he ceased working there completely. Thereafter, Gilbert’s position was that he was too ill to work on the Farm between July 2015 and January 2017 and when he attempted to return to work in January 2017, he was prevented from doing so.

Gilbert claimed that throughout his working life, representations were made to him by his parents that, on their death, the Farm, including the bungalow, would be his. He claimed that, in reliance on those promises, he worked on the farm all of his life for a very low wage, never purchased his own property and gave up the possibility of a life outside of the Farm. He contended that it would be unconscionable for Mrs Thompson to be able to dispose of her 2/3 interest in the Farm as she saw fit.

Mrs Thompson’s position was that no representations were made to Gilbert about any inheritance.

Gee v Gee

This case concerned a 600 acre farm near Oxford known as Denham Farm (“the Farm”). The Claimant was John Michael Gee (“JM”), the son of John Richard Gee (“JR”) who was the First Defendant. The Second Defendant was JM’s brother, Robert. The farming is undertaken by the family company, which farms the land under a tenancy.

JR has worked on the farm all of his life, taking over running the Farm in the 1970s with the help of employees. JM started working on the farm in the 1970s and worked there until 2016, when he was dismissed.

JM lived in a caravan on site until 1982, when JR had a house built for him on the Farm, which JM has lived in ever since.

JM was paid the minimum wage for agricultural workers set by the Agricultural Wages Board. By 2008/2009 this was £20,000 p.a. – broadly the same as one of the long term employees.

Robert did a diploma in agriculture, but until 2014 was a builder and property developer.

The company comprises 24,000 shares. By 2014 JR owned the entire shareholding (save 1 share owned by his wife, Pamela). The property was held beneficially between JR (7/18), Pamela (7/18) and the company (4/18).

JR transferred all his property and the company shares to Robert in November 2014. At the same time, Pam transferred her share in the property and her company shares to JM. Since then Robert has managed the farm. JM said that since he was 30 years old until recently, JR repeatedly assured him that he would inherit the’ lion’s share’ of the farm. This stopped because JR took against him, influenced by Robert and Robert’s wife.

JM said that he relied on those representations to his detriment by working long hours for low wages and had given up the chance to better himself by working elsewhere. JM recalled 6 specific instances where representations were made, including being told by JR that he could use some of the land as collateral to buy out his siblings and being told that he could not build a new dwelling on the Farm until it was his.

JR and Robert denied that any representations were made and argued in any event, JM had not suffered any detriment. JM was offered a directorship in the company in 2012, but turned it down. JR and Robert said that this was inconsistent with having been promised the farm.

The Outcome – Thompson

In Thompson the Judge determined that promises had been made by Mr and Mrs Thompson. Gilbert had relied on those promises and dedicated his whole life to the Farm, which had an effect on his lifestyle in terms of working hours, financial independence and ability to buy or live in his own house. This was in spite of the fact that Gilbert was unable to give evidence of specific promises that had been made.

Mrs Thompson is still alive and the promise was that he was to inherit the Farm on his parents’ death. The Judge awarded Gilbert the Farm and the bungalow, the interest in which he would receive on Mrs Thompson’s death. The gift was not accelerated.

The Judge outlined that the equity could be satisfied by giving Mrs Thompson a life interest in her two thirds share in the partnership with a gift over to Gilbert of her share on death. Mrs Thompson was given a right to occupy the bungalow for life.

The Outcome – Gee

In Gee the Judge found that over a 20 year period representations were made that JM would succeed JR, but with some provision for Robert and their sister.

The Judge accepted representations were made and although not frequently repeated or a stock phrase, they were a material consideration in him staying on the farm. Whilst the representations did not detail the shareholdings and the land holdings, it didn’t render them ‘insufficiently certain to be relied upon’.

The Judge found that JM was constantly on call and was expected to work as and when required. As an employee, he should have been paid overtime. Whilst JM was provided with his house, that benefit was not enough to compensate him for detrimental reliance on the representations. If JM had left and set up on his own account, he would have been running a viable farming enterprise today.

On the offer of directorship, the Judge said it was meaningless because the practical management of the company was not going to change and the offer did not involve the shareholdings or land ownership.

The award in this case was more nuanced than that which we have seen previously. The Judge awarded JM a 52% shareholding in the company and 46% of the land, which he suggested should be effected through a series of transfers.

Conclusion

What both cases demonstrate is the breadth of the Court’s discretion when determining the remedy in estoppel cases. The Courts are not afraid of awarding successful Claimants the entirety of a family farm, when it is justified.

Despite the recent run of successful farming estoppel cases, it remains extremely difficult to predict the outcome of such cases. Each one turns on its own facts and the credibility of witness evidence is crucial. It remains to be seen whether either of these cases will be appealed.

Douglas Hawthorn has contributed an article to the December edition of Corporate Rescue and Insolvency on the new Model Law on recognition and enforcement of insolvency-related judgments (MLIRJ). As a speed-read, the MLIRJ is intended to compliment the Model Law on Cross-Border Insolvency (MLCBI) (enacted in the Great Britain under the Cross-Border Insolvency Regulations 2006 (CBIR)), but also to patch a perceived gap in that Model Law, namely, to provide a framework for the recognition and enforcement of insolvency-related judgments. Readers might recall that in Rubin v. Eurofinance SA [2012], the Supreme Court concluded that the CBIR extended only to procedural matters, and could not be used as a means to recognise or enforce insolvency-related judgments. The MLIRJ fixes that, but also, under Article X, makes clear that Article 21 of the MLCBI could be used as a means to recognise or enforce cross-border insolvency-related judgments. You can read a copy here with LexisNexis’ kind permission.

What is an ACV?

Assets of community value (ACVs) are areas of land which, in the opinion of the local authority, has a use which furthers the social wellbeing or social interests of the local community. This can include historic use or use that is realistically anticipated in the next five years.

Properties that have been listed as ACVs include pubs, parks, nature reserves, car parks and sports stadiums (Manchester United Football Club’s stadium, Old Trafford, was listed in 2013).

How is an ACV listed?

Under the Localism Act 2011, ACVs must be formally listed by the local authority. Areas of land can be nominated by the community as an ACV, but the local authority has complete discretion to list areas of land as ACVs.  When listing an ACV, the local authority must notify the property owner; the owner may seek a review of the local authority’s decision.

Listed ACVs will usually retain their place on the list for five years. It is important to note that listing an ACV does not create any private rights and is purely to provide a public benefit.

Buying and Selling an ACV

Community interest groups (CIGs) have a right to bid for any ACV which is proposed to be sold.

An owner of a listed ACV must notify their local authority of their intention to sell the ACV. This notification triggers a period of six weeks during which CIGs can ask to be treated as a ‘potential bidder’ for the ACV. If no request is made by the end of the six weeks, the owner can sell the ACV to another party.

If a request is made, a moratorium period will commence and last until the date six months after the local authority was notified about the owner’s intention to sell. During the six month moratorium, the CIG can raise capital and prepare a bid to purchase the ACV; the owner cannot exchange contracts on or sell the property to anyone other than a CIG during this period. It should be noted that the owner is not obliged to accept the CIG’s offer nor sell the ACV to a CIG on any terms. If, after the six month period, no acceptable bid is made by a CIG, the ACV can be sold by the owner to any other party.

ACVs in the Courts

Recently, the Court of Appeal ruled that use of land for community benefit need not necessarily mean “lawful use” when a local authority considers listing an ACV.

In Banner Homes Ltd v St. Albans City and District Council and Another [2018] EWCA Civ 1187, the land in question was privately owned but used by the community for recreational games and activities which, in law, amounted to trespass. The Court clarified that the context must always be considered when listing an ACV. In this case the owner knew about the community use for 40 years and never previously objected before the local authority’s decision to list the land as an ACV, so the fact that the use was in-fact trespass did not prevent the local authority from listing the ACV.

Update

Since the Court of Appeal decision in Banner Homes, St. Albans City and District Council have refused a number of further applications for planning permission at the same land.

In its most recent decision, regarding an application to change the use of the field to a horse paddock, the Council refused planning permission primarily on the basis that the land is located within the metropolitan green belt.  Contrasting the Court of Appeal decision, the Council were of the opinion that the proposed change of use was not inconsistent with the listing of the site as an ACV.  The ACV status would not itself have prevented a grant of planning permission in this case.

This is an interesting decision, as it shows that the ACV status of the land was not a conclusive point in deciding whether or not to grant planning permission.

Even by the standards of most lawyers, Compulsory Purchase Orders (CPOs) are technical and complex. The relevant law is fragmented across numerous Statutes, and is then further layered with additional regulations and guidance.

The historic appetite for CPOs shows that their use goes in cycles – sometimes popular, sometimes not. Well CPOs are coming back into vogue, driven by a desire to build new homes, and by a raft of new legislation including the Housing and Planning Act 2016 and the Neighbourhood Planning Act 2017.

Further evidence that the rise of the CPO is firmly on the Government’s agenda is provided by the proposals in the Letwin Report – the output of a review panel looking at improving the build out rate of planning permissions.

The recent budget on 29 October included reference to the Letwin Report (which was released on the same day). One of the key long-term boosts to build out rates is the proposal to give local authorities statutory powers to compulsorily purchase the land designated for large sites (over 1,500 units) at prices which reflect the value of those sites once they have planning permission, but at a hugely reduced residual development value (due to diversity rules in the Report).

The Government has promised to respond to the Letwin Report by February 2019. However, we suspect that the adoption of these proposals is likely to be very dependent on the way that the economic wind is blowing in February. If the economy needs a Brexit-related boost then the view could be taken that the opening up of some new large scale developments might just be the boost that the economy needs?
In the meantime the prospect of statutorily enforced maximum land values is something that will be keeping landowners awake at night.

For more information on this topic please contact Mark Howard.

Crossrail 2 is a proposed new railway, using a tunnel through London to link the rail networks in Surrey and Hertfordshire. It would connect the South Western Main Line to the West Anglia Main Line, via Victoria and King’s Cross St Pancras, with the intention to alleviate severe overcrowding that would otherwise occur on commuter rail routes into Central London by the 2030s.

The current proposals anticipate submission of an application for planning consent in 2020. However, the new rail route is already the subject of safeguarding, and this may have the effect of effectively prohibiting certain types of development along the route. Clearly, this is causing some concern among real estate investors and developers. Worse still, the safeguarded route has yet to be finalised, and this is causing additional uncertainty over development proposals and the tenanting of buildings on safeguarded (or potentially safeguarded) sites.

The Crossrail 2 scheme is intended to be delivered by an Act of Parliament, rather than as a nationally significant infrastructure projects (NSIPs).

Until the draft legislation is published there will not be any certainty on the final proposals. It is at that point that the companies affected by the project can begin to negotiate protective provisions in an effort to minimise the real impact on them.

So uncertainty is currently the order of the day. We are seeing an increasing number of clients approaching us for advice on the impact of Crossrail 2 on maintaining or expanding their real estate portfolio. At this stage of the process, we are often left with little scope for meaningful advice other than to highlight worst case situations and potential impact on value – so as to provide at least some certainty in deal negotiations.

Mark Howard is a Partner at Michelmores LLP Solicitors.  He has acted for a number of clients in relation to infrastructure schemes, including Crossrail. He has commented upon and drafted legislation, negotiated with scheme promoters, drafted Petitions to Parliament, and dealt with House of Commons Select Committee to secure protective provisions for affected clients.  He acted as a Parliamentary Agent for the previous Crossrail scheme.

Name

Chris Daniel

Your current title / role

Business Development Manager for South Dartmoor Multi Academy Trust

Brief career background

I Studied Education Studies at Durham University, and always wanted to work in education, but not as a classroom teacher.  I came into South Dartmoor Community College as a Project Manager of sorts leading on a transfer of ownership and operation of a Local Authority Sports Centre to the College.  From there, I have led on generating new income and creating new opportunities and partnerships, before moving into a Trust-wide role to take a wider operational view.  I now look after operations and compliance across the MAT.

What does a typical working day look like?

No two days are ever the same.  I like to try and get some office time each day to touch base with the team around me and my CEO, but with 8 schools to support I’m often heading out for site visits, meetings and catch ups or delivering training and monitoring compliance.  In my role I come across pretty much everyone with any interest in education – from teachers, directors and parents to architects, contractors, salespeople – and of course solicitors!

What did you have for dinner last night?

Last night was a late one, so it was just Pasta Bolognese from a pre-made weekend batch!

What was the last piece of music you listened to?

I have a very random Spotify playlist in the car that has a huge range of songs I’ve enjoyed over the last 15 years or so – Craig David features on it a few times.

What was your favourite and most hated subject when you were at school?

The best were definitely History and PE – I had good teachers who weren’t afraid from deviate from the curriculum to go further and spend more time on things I was interested in and that’s had a lasting impression on me.  I did the absolute minimum I could in Science.

What is the best thing about your job?

I like every day being different and the vibrancy of working in schools with so much going on constantly.  It is rewarding knowing I am making a difference, and I’m working in a role where every decision I make has the intention of improving something for children.

If you could change one thing about the current education system what would it be?

Obvious funding issues aside, the level of scrutiny on schools from all angles is intense.  It would be nice to feel the outside world wanted to see positives rather than negatives sometimes and a little more belief that everyone within education has chosen that career because they want to try and improve the lives of other peoples children!

If you’re interested in taking part in our Head to Head feature please get in touch.

We may not have expected the last pre-Brexit budget to focus on housing, but there were several elements which underline the government’s continuing commitment to the housing industry.

Outlined below are the key points:

Help to Buy scheme extended

The Help to Buy equity loan scheme, which offers a 20% government loan (40% in London) to buyers of new-build properties, has been extended to 2023. The extended scheme will be restricted to first time buyers and new regional price caps for a property to be eligible will be introduced. The price cap for a property in the South West to be eligible for the scheme is £349,000 from April 2021 to March 2023. This is 1.5 times the current regional average first time buyer price. It is recognised that no industry should be reliant on government assistance indefinitely and it is positive that we now have some clarity on the term of this scheme.

Review of build out rates

Alongside the budget, Sir Oliver Letwin has published his independent Report on how the government can raise build out rates and why there is gap between housing completions and the amount of land allocated or having planning permission. The Report found no evidence that speculative land banking is part of the business model for the major housebuilders, nor that this is a driver for slow build out rates. It found that greater diversity in the types and tenures of housing on large sites would increase the market absorption of new homes into the market and that developers should be required to build a wider range of properties so as to increase sales and accordingly build out rates.

In addition, the Report recommends that the government adopt primary legislation to enable local authorities to purchase land compulsorily at prices which reflect the value of the sites once they have planning permission. Guidance is proposed limiting land value uplift to a fixed multiple of circa ten times existing use value through new large site ‘diversity planning’ rules.

The government will respond to the review in full in February 2019. If implemented these recommendations could instigate a significant intervention into the housing and land market.

Homes England launch five-year plan

Homes England is the government’s housing accelerator. It is responsible for increasing the number of new homes that are built in England, including affordable homes and homes for market, sale or rent, increasing the supply of public land and speeding up the rate that it can be built on.

Alongside the budget, Homes England has set out how it will improve housing affordability through a new five-year Strategic Plan. The plan, which runs to 2022/23, outlines Homes England’s ambitious new mission and the steps the national housing agency will take to respond to the long-term housing challenges facing the country – in partnership with all parts of the housing industry sector.

The new plan sets out far-reaching delivery objectives including to:

• unlock public and private land where the market will not, to get more homes built where they are needed
• ensure a range of investment products are available to support housebuilding and infrastructure, including more affordable housing and homes for rent, where the market is not acting
• improve construction productivity.

Housing Revenue Account cap abolished

The Housing Revenue Account (HRA) cap which controls local authority borrowing for house building in England has been abolished, enabling councils to increase house building to around 10,000 homes per year.

Many local authorities have already pledged to build thousands of new homes in anticipation of this move.

New development rights for high street homes

A consultation has been launched to breathe new life into the high street by proposed new permitted development rights to allow upward extensions above commercial and residential properties, and to allow commercial properties to be demolished and replaced with homes. Developers have reacted with some caution over the use of such rights which have in the past created pockets of poor quality private rental homes.

Land value uplift payments simplified

The government will introduce a simpler system of land value uplift payments that provides more certainty to developers and local authorities, while enabling local areas to capture a greater share of uplift in land values for infrastructure and affordable housing. The proposals include simplifying the process for setting a higher zonal Community Infrastructure Levy rate in areas of high land value uplift and removing all restrictions on s 106 pooling towards a single item of infrastructure. The government will also introduce a Strategic Infrastructure Tariff for Combined Authorities and joint planning committees with strategic planning powers.

The detail of these proposals will be eagerly awaited.

Support to the SME housebuilding sector

The government has earmarked £1bn of guarantee capacity to support lending to the SME housebuilding sector, via the British Business Bank working with Homes England.

This confirms the government’s long standing commitment to help the smallest scale builders.

SDLT relief for shared equity properties

A welcome correction is that first time buyer’s relief from SDLT has been extended so that first time buyers of shared-ownership homes priced up to £500,000 will be exempt from SDLT,  whether or not a market value election has been made.

Previously, the initial purchaser of a shared ownership lease had the choice of how to pay SDLT. It could elect to pay SDLT on the market value of the whole of the property at the outset (known as the ‘market value election’), in which case no further SDLT would be due on staircasing transactions. Alternatively, the initial purchaser could elect to pay SDLT on each separate share as it was purchased. A market value election could only be made on grant of the lease and could not be withdrawn. This change has also unusually been implemented retrospectively for any shared-ownership buyers since November 2017.

Discounted sales to local residents

The government wants to support parishes and communities to provide more affordable homes for local people to buy. The government will provide £8.5m of resource support so that up to 500 parishes “can allocate or permission land for homes sold at a discount”. Neighbourhood plans and orders are approved by local referendums.

The government will update planning guidance to ensure that neighbourhood plans and orders approved by local referendums cannot be unfairly overruled by local planning authorities. The government will also explore how it can empower neighbourhood groups to offer these homes first to people with a direct connection to the local area.

Housing Infrastructure Fund increased

The Housing Infrastructure Fund (HIF) will increase by £500m to a total of £5.5bn, which is expected to unlock up to £650,000 new homes. The HIF is a capital grant programme for new physical infrastructure under which funding is awarded to local authorities on a competitive basis. The fund provides Marginal Viability Funding where the costs of putting in the infrastructure are unviable, and Forward Funding aimed at providing initial funding for large strategic schemes which will then give the market confidence to provide further investment.

The housing crisis will not be solved by this budget alone. However, the Autumn Budget 2018 is building on the foundations laid in the 2017 Budget – and these measures show that the government is following through in a very positive way.

Ian Holyoak considers HM Government’s technical notice setting out the potential impact on low-carbon electricity generation in the event that the UK leaves the EU without an agreement. In this article we outline the content of the notice and the impact for renewable energy market participants.

What does the notice cover?

The notice itself is very specific – the areas covered are those which interact or have a direct connection with the EU’s Renewable Energy Directive 2009/28/EC, which, following Brexit, will have no direct application in the UK.

Given the narrow focus, unlike notices issued in other sectors, this technical notice gives little insight into the government’s view on the impact of Brexit on business in the renewable energy sector, and the energy market generally, or indeed the wider questions relating to energy pricing and security of supply.

These broader questions are likely to remain unanswered until much further down the line in the Brexit negotiations and deal (or no-deal) implementation.

Impact on electricity suppliers, traders and small-scale renewable energy installers

The note touches on certain points of relevance to electricity suppliers, traders and small-scale renewable energy installers.

Guarantees of Origin and REGOs

One of the key areas covered by the notice is the potential impact of a no-deal Brexit on accreditation on Guarantees of Origin (GoOs) under the Renewables Obligation, which includes Renewable Energy Guarantees of Origin (REGOs).

REGOs are primarily used by electricity suppliers to comply with their fuel mix disclosure obligations, which form part of the standard licence conditions for suppliers. These were introduced in 2009 to ensure compliance with the EU’s directive on renewable energy generation and to stimulate growth in renewable energy generation.

In short, the guidance confirms that in the event of a no-deal Brexit:

• GoOs issued in the EU and Northern Ireland will continue to be recognised in Great Britain. Currently, this occurs via an OFGEM-regulated process whereby the GoO is audited, cancelled in the issuing country, and then re-issued in Great Britain.
• GoOs issued in Great Britain and Northern Ireland will no longer be recognised in the EU. As pointed out by the guidance document, this will mean electricity suppliers or traders may be compromised if their contract terms require the transfer of GoOs recognised by the EU. The above is most likely to affect the fifteen or so energy suppliers and traders who currently utilise OFGEM’s overseas-issued GoOs certification process.

Contractual arrangements should be revisited in the event parties are under any binding obligations to utilise either of the above mechanisms. It may be the case that relief can be sought through supervening events or change in law provisions in contracts.

Renewable Electricity Support Schemes

The notice also considers the impact of a no-deal Brexit on UK Renewable Energy Support Schemes. The potential impact described in the notice is again limited in scope and of a technical nature.

Currently, to receive support under the Renewables Obligation scheme generators must demonstrate that bioliquids used in those generation activities comply with certain sustainability requirements. Separately, GoOs interact with the Feed-in Tariff (FIT) scheme and the Contracts for Difference (CfD) scheme, as the cost of these schemes is levied on electricity suppliers in proportion to their market share. A supplier can reduce its exposure to this levy through the use of overseas GoOs that confirm a relevant proportion of electricity was generated by renewable energy sources.

On these two separate issues, the guidance confirms that:

• The current sustainability requirements under the Renewables Obligation will continue to apply for bioliquids, solid and gaseous biomass.
• GoOs will still be accepted for the purpose of calculating the applicable levy under the FIT and CfD schemes.

We would not expect the above to be of much concern to entities operating in this market. It should be noted however, that this notice does not bind the government in relation to future legislative change. The key point to note is that while the above confirms that the status quo will be maintained in the immediate term, given the decoupling of UK and EU energy policy, there could well be regulatory divergence in the not-too-distant future.

Installers of microgeneration technologies

Microgeneration technologies are small-scale generation technologies used to produce power from renewable energy sources, primarily in domestic and light industrial contexts. Biomass boilers, heat pumps and solar PV are all examples of microgeneration technologies.

Currently, the UK is required to recognise the certifications of installers of these microgeneration technologies issued by states in the European Economic Area (EEA). Similarly, installers accredited in the UK have been provided with recognition of accreditation in the EEA. In the event of a no-deal Brexit, this recognition is at risk.

The guidance confirms that:

• The UK will continue to recognise installer certificates issued by the EEA.
• Installers certified in the UK may need certification in the EEA to continue to install microgeneration technologies.

Installers should ensure all certifications are up-to-date, noting that any EEA-based operations of UK companies will require a review and refresh in the event of a no-deal Brexit.

Wider considerations

It should be noted that HM Government’s notice covers only a narrow area, and there are a number of wider considerations not addressed in it that may affect those operating or investing in the renewables market when looking at Brexit-related scenarios.

Foreign exchange risk is high on the list of potential concerns. At the very least, we would expect a no-deal Brexit to lead to more volatility in the GBP/EUR currency pair, if not outright devaluation of the GBP.

European supply chain and technology costs are likely to be of particular concern to UK-based developers and investors in projects reliant on components commonly manufactured in Europe: e.g. Combined Heat & Power (CHP), anaerobic digestion, gas peaking, wind. Developers and financiers in such projects should consider their contractual and commercial options if and when a no-deal Brexit becomes more likely.

A no-deal Brexit also puts Britain’s access to the EU’s Internal Energy Market (IEM) at risk. Market commentators expect that Britain losing access to the IEM would result in higher and more variable wholesale energy costs. Although this may in fact stimulate investment in generation projects, higher energy costs are unlikely to dampen calls for regulatory and legislative change in the market.

While we do not expect such changes to threaten revenue streams for those projects already locked in to receiving legislative support (e.g. CfD, Renewable Heat Incentive (RHI)), they could very well alter the revenue landscape fundamentally for projects in the pipeline. Ultimately, losing access to the IEM is likely to add to the difficulty of making robust investment decisions in the GB energy market.

If you would like more information on this topic, please contact Ian Holyoak.

Douglas Hawthorn, Partner in Michelmores’ Banking Restructuring & Insolvency team, has contributed an article to the October issue of Corporate Rescue & Insolvency journal, describing the outcome in Videology Ltd [2018] EWHC (CH).

In a nutshell, the case concerned a company incorporated in England and subject to Chapter 11 proceedings in the United States applying for recognition of those proceedings in Great Britain under the Cross-Border Insolvency Regulations 2006. Click the link below to view the article in full, reposted with kind permission of LexisNexis.

View article

Anna Thompson considers whether the consequences of the Brexit vote have contributed to the recent trend of insolvencies in the hospitality and retail sectors.

Throughout 2018 the news has carried a continuing stream of stories about high-profile retailers and restaurant businesses that have faced financial difficulty. Michelmores’ Restructuring & Insolvency team has advised a number of struggling businesses (and their creditors and other counterparties) within these sectors. Can the blame be laid at Brexit’s door?

A common theme in matters reported in the press and those in which we have been directly involved is that the effects of Brexit are increasingly being cited as a factor in why these businesses have failed.

While the UK remains a member of the EU more cynical observers may remark that Brexit is simply a convenient excuse to cover other failings of those businesses (see for example recent comments made by Dominic Raab MP concerning John Lewis and Bernard Jenkin MP concerning Jaguar Land Rover), encouraged by the media fanfare on the topic. However, Brexit has been linked to the falling value of the pound and lower consumer confidence, both of which have caused difficult trading conditions for retail and hospitality businesses.

Hospitality

A large number of high-profile hospitality businesses have been reported to be under pressure or failing, including:

• Byron Burgers, which announced the closure of up to 20 sites following approval of a CVA (Company Voluntary Arrangement) in January.
• Barbecoa, which appointed administrators and, in the same group, Jamie’s Italian, which announced the closure of 12 sites following approval of a CVA, both in February.
• Prezzo, which announced the closure of almost 100 restaurants following approval of a CVA in March.
• Carluccio’s, which was reported to have sought advice from restructuring experts in March.
• Casual Dining Group, owner of chains including Café Rouge and Bella Italia, reported a £60m loss, despite a small rise in sales.

Michelmores’ Restructuring & Insolvency team has acted in relation to a number of insolvency-related matters in this sector, including the sale of a local restaurant and bar business via a pre-pack administration deal. We have also advised a multi-site operator on how it might capitalise on the failure of stressed restaurant businesses to acquire new sites.

The ‘casual dining crunch’ is not just a 2018 phenomenon. According to accountancy firm Moore Stephens, 984 restaurant businesses entered insolvency proceedings in the year to September 2017, a 20% rise on the same period a year earlier.

Commonly cited reasons for financial difficulties in these cases include falling revenue due to poor consumer confidence, and the rising price of imports due to the weakened pound. Both can be linked back to Brexit. The cost of imports has hit mid-market Italian chains particularly hard as, in search of authenticity, ingredients are often purchased from Italy in Euros.

Staffing is another key issue. The rising minimum wage may not be attributable to Brexit, but Brexit is a factor in the shortage of staff due to high levels of employment and the decreasing numbers of economic migrants from the EU. The falling number of EU workers has been widely blamed on the outcome of the Brexit vote and has also been cited as causing significant difficulties in the agriculture sector.

Other important factors in the poor health of the hospitality sector include rising business rate liabilities and over-competition for sites (driving up rents). The saturation of the casual dining market is now also being hit by the increasing popularity of takeaway and delivery food services.

Retail

Within the retail sector notable businesses battling financial difficulties have included:

• Toys “R” Us, and Maplin, which both entered into administration in March
• New Look, which announced 980 job cuts and 60 store closures following confirmation of a CVA in March
• House of Fraser, whose creditors approved a CVA in June, only for the chain to appoint administrators in August
• Mothercare and Early Learning Centre, whose creditors approved CVAs and their fellow group company, Childrens World, entered administration
• Debenhams was reported to have called in KPMG to help the retail chain to assess how best to adapt to a changing and challenging market place
• Moss Bros, B&Q, Homebase and Laura Ashley, all of whom have been reported to be wrestling with falling profitability.

Whilst pure or predominately ‘bricks and mortar’ retailers have struggled to keep up with online and more forward-thinking multi-channel retailers, a number of retail businesses and commentators have cited Brexit-related factors such as the cost of importing goods and falling consumer confidence as leading to ever tougher trading conditions.

Some fashion retailers have also reported stock shortages as a result of changes made to the way clothes are now being sourced by retailers looking to off-set Brexit-driven inflation costs. There has been discussion in the media of the ‘just in time’ principles under which many businesses now operate. This practice is not just employed by car manufacturers, but also by fast fashion retailers such as Zara.

Our Restructuring & Insolvency team has advised insolvency professionals, major landlords, creditors and group companies in relation to a number of recent retail insolvencies, including some of those mentioned above.

Our involvement has been not just with businesses who are struggling in a difficult market. We have advised a number of key suppliers to House of Fraser in relation to their negotiations with Mike Ashley’s successor business, for example in relation to retention of title, concessionaire staffing and brand reputation management issues.

Conclusion

It is clear that the sole blame for the failure of these businesses cannot be laid at Brexit’s door. However, the consequences of the Brexit vote appear to have compounded the problems of many businesses within the hospitality and retail sectors.

Earlier in the year the EU and the UK agreed the main terms of a transition deal, which will largely keep the current status quo until the end of 2020. It is not yet clear whether this will help to allay consumers’ concerns and assist businesses which rely on European imports. It seems more probable that the current uncertain trading conditions will continue until the terms of the final Brexit deal are known, and possibly for some time thereafter.

Our Restructuring & Insolvency team regularly assists businesses and individuals affected by a company’s insolvency. This includes struggling companies themselves, their creditors, their insolvency advisers or other interested parties. Should you require any advice in relation to a business which is struggling and/or at risk of insolvency, if you have been appointed an office-holder of an insolvent business, or if you are concerned with the solvency of your own business, please do not hesitate to get in touch with the team.

If you would like more information on this topic, please contact Michelmores’ Restructuring & Insolvency team.