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Supply Pain: Who is responsible for delays on luxury resi projects?

In high-value luxury developments and refurbishments where materials are often sourced internationally from exotic suppliers, there is often little flexibility available to contractors who are required to procure those materials under the terms of their building contract. Any hold up …

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Purchasers and renters in England can move home if they want to – as long as they follow the new guidance

Last night the Housing Minister, Robert Jenrick, announced that “anyone in England can move home if they follow new guidance”.The latest updates to the Covid Regulations are a welcome relief to the housing market and will allow people to visit estate agents, lettings agents, developer’s sales offices and show homes. It is also now a ‘reasonable excuse’ to leave your home to “undertake any of the following activities in connection with the purchase, sale, letting or rental of a residential property:visiting estate or letting agents, developer sales offices or show homes;viewing residential properties to look for a property to buy or rent;preparing a residential property to move in;moving home;visiting a residential property to undertake any activities required for the rental or sale of that property”.The Ministry of Housing, Communities and Local Government have also set out proposals to:allow builders to agree more flexible construction site working hours with their local council, such as staggering builders’ arrival times, easing pressure on public transport;enable local councils and developers to publicise planning applications through social media instead of having to rely on posters and leaflets; andsupport smaller developers by allowing them to defer payments to local councils, helping those struggling with their cash flow while ensuring communities.These updates and proposals are a great relief to the housing market and should begin to unlock the market again. However, I would caution that it is unlikely to be completely smooth sailing for some time yet. Transactions will need to be tailored to each set of circumstances and will need to allow continued flexibility to purchasers and their changing circumstances. I also suspect there will continue to be some element of Buyer reluctance so soon after the announcement.But it is definitely a step in the right direction.

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Is it time to go back to work on construction sites?

The good news for this Friday morning is that developers such as Persimmon, Taylor Wimpey and Vistry are all looking to reopen their sites, with the encouragement of housing ministers and that those sites may reopen from as early as Monday.A word of warning however. Despite these contractors going back to work, there are likely to be difficulties. These will lie not only with the need for strict health and safety protocols and continued social distancing but there may also be difficulties with the supply of materials, transporting of workers and delays caused by existing social distancing requirements; build programmes will already have been delayed by at least 3-4 weeks by the cessation of work and are likely to be delayed further in light of these issues. It is therefore time to revisit your contractual obligations relating to your programme of works. If there are long-stop dates or damages payable if target dates are not met, then now is a good time to seek to vary your contractual commitments to give yourself more flexibility on the programming. If you need help or strategic advice on amendments to the build programme or force majeure provisions under development agreements, building contracts or subcontracts, or in the case of funding arrangements with your bank deferring maturity dates under the loan agreements, then please do contact us and we would be delighted to help.

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Ministry of Justice’s latest set of quarterly statistics on the work of the Family Court, for October to December 2019

The Ministry of Justice has published its latest set of quarterly statistics on the work of the Family Court, for October to December 2019. Overall, it shows that the family court system is still crying out for reform. Amongst the headlines are that divorce proceedings are taking longer which is symptomatic of the challenges family law faces at the moment. Interestingly, there is a decrease in the number of cases starting in the family courts generally. That may well be as a result of couples using alternative methods to resolve their issues such as mediation or arbitration. We note that the number of divorce petitions have decreased. This may be due to the fact that people divorcing are waiting for the no fault divorce to become law.One remains hopeful that the current situation forces the courts to address some of these issues in the near future; we have already seen a positive development in the courts in their reaction to the pandemic with their rapid implementation of electronic bundles and remote hearings so that urgent work can continue. It will be very interesting to see if the current situation leads to expediated reform in other areas, which also require improvement.

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Can construction continue on development sites following Boris Johnson’s announcement last night?

Last night, the Prime Minister addressed the nation and imposed restrictions on the nation with people only being allowed to leave their home for specific, limited purposes. He specifically referred to a number of business and retail sectors which must close. However, this has left quite a lot of uncertainty. Are your workers key workers? Are non-key workers able to work if they cannot do so from home? This is obviously of concern for housebuilders and their contractors. Work on-site clearly cannot be done from home but is it specifically restricted under this latest announcement?The Secretary of State for Housing, Robert Jenrick, has this morning tweeted to say that those in construction, building and maintenance industries should:Work from home if they are able to do so;Continue working on site if they are already doing so but make sure that Public Health England guidance on social distancing is followed; andStay home outside of work.Work can therefore continue on sites for now – but bear in mind that any ongoing work is likely to be subject to delays as suppliers, individual contractors, local authorities and utilities are changing their current service arrangements to reflect the latest guidance for their industry. If you do decide to keep your sites open, be aware that the situation is rapidly changing and you will need to keep your decision to continue under constant review. Consideration as to what you would require for a shutdown and how quickly you can put that into place should also be focused on at this time.

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Could a property ‘Logbook’ speed up the conveyancing process?

At the Annual mortgage Conference held earlier this month, government officials criticised the delays in current conveyancing processes.  It was stated that it takes an average of 19 weeks to get from acceptance of an offer to completion. One of the speakers, Matt Prior an official from the Ministry of Housing, Communities and Local Government, said that this was “a hell of a long time to wait”.The solution that was proposed was in the form of a logbook for your house. This logbook would provide a pack of information that is updated by each owner of the property and then provided to the new buyer at the start of the conveyancing process. The rationale behind this is that it would help avoid abortive transactions and therefore wasted costs for all parties – as the information is ready and available from the outset and not some horrible discovery later down the line. This approach is supported by the Conveyancing Association.You could compare the idea of a property logbook to the logbook of a car – which would work in theory. However, unlike with cars, residential homebuyers tend not to be repeat customers, with many people only moving once or twice in their lifetime. This would mean that you have homebuyers with limited knowledge of the conveyancing process being responsible for compiling the information they keep up to date in their own logbook. I would ask whether this is realistic or even possible? Particularly, as something that is a major issue and of real significance to one buyer could be a very minor detail to another. Equally, will property developers and homebuilders be required to produce hundreds of these logbooks when a new development is produced? Or would a central logbook for the development be sufficient, with each individual owner becoming responsible for the logbook to their flat when they come to sell?If this logbook is something that is going to become mandatory, it is going to require a lot more thought and a lot of support and guidance to make it effective in the long run.

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Downsizing? You may have no choice.

Now is the time to invest in companies that make small furniture! The City of Westminster in the City Plan 2019- 2040 has suggested that new developments and conversions will (unless necessary to protect a heritage asset) not be allowed to provide units of greater than 150 sq m (1,615 sq ft) to ensure developments provide the number of homes required over the coming years in the area.Whilst this is above the nationally described space standards by a whole 12 sq m (129 sq ft), for a family home, this would hardly be palatial. The City of Westminster has pointed out that it is also 50% larger than the average size of a private market tenure home in Westminster, although presumably this figure includes the large number of pied-à-terres in the area.Without doubt something needs to be done to ensure there are enough decent quality properties at the correct price, however how many ‘average’ buyers could afford even a modestly sized property in Westminster, and will this solve the problem?  This does seem like another situation where wealthy foreign buyers are being blamed for a property market that just simply doesn’t allow for affordable homes as everyone on the property ladder wants to pull the ladder up behind them and make money on their own home. Realistically, how many first-time buyers are pushed out of the market by each mansion built in prime residential London?Whilst it has less than most boroughs, Westminster still has brownfield sites suitable for redevelopment, which I would argue would be a good place to start to create a stock of new, and hopefully decently sized, properties.The plans are open to consultation so watch this (lack of) space!

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(B)R you allowed Council Tax relief on a Holiday Let?

The Ministry of Housing, Communities and Local Government have opened a consultation into the ability for holiday lets to register for business rates, rather than Council Tax which has allowed over 45,000 properties to qualify for small business rate relief and therefore escape a charge completely.Properties are valued for business rates when owners declare their property is available to let as ‘holiday accommodation’ for 140 days or more in a year. There is currently no requirement for any evidence to be adduced as to the property actually being let by third parties, which, some argue, leaves the system open to abuse.A property registered for business rates, rather than Council Tax, may qualify for small business rate relief which means that no tax is due at all. Areas with significant numbers of holiday properties could therefore be missing out on significant income, despite the property owners using the local facilities.Since many councils removed Council Tax discounts for second properties it may be that people looked to business rates to reduce the expenditure on their holiday home. Anyone with a view on this should ensure they respond to the consultation before the January deadline. 

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40% of young adults cannot afford to buy homes, even with a 10% deposit

Research produced by the Institute for Fiscal Studies has shown that house prices in England have risen by over 173% in the last two decades. With that comes the frightening statistic that 40% of young adults (those aged between 25 – 34) cannot afford to buy the cheapest homes in their area.The research, cited in an article by the BBC, offers other worrying statistics – such as only 35% of 25-34 year olds own a house. This statistic is only made worse when you consider that this figure is down from 55% in 1998.These new statistics make it ever clearer that more needs to be done to make homes affordable for young people. The question is how do you do so? The research suggests that the key is for the government to increase the number of homes available for young people and to allow construction in green belt areas. I would suggest that these are steps in addressing an ever increasing issue but that more much more will need to be done to make the properties affordable for young people. Sadly this is something which is more easily said than done.

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Try before you buy?

The Express has commented on the data released by trade lending body UK Finance which demonstrates that the number of first time buyers in August was the highest monthly level since June 2017.  Whilst this is not a particularly long time, it may demonstrate to the Chancellor that the changes to the taxation of properties owned by investors is working to assist people get on the property ladder.If the Chancellor decides the existing changes have not made enough of a difference he may well consider implementing the rumored proposal to give a capital gains tax exemption to landlords who sell property to tenants who have lived in the property for three years or more.  It has also been suggested that the exemption is split between the landlord and tenant so that the tenant has a contribution towards their mortgage deposit.This would put tenants in a very strong bargaining position if they wanted to buy the properties they have been renting, but the overall effect on the property market is something the chancellor will want to consider carefully.The fact that the phrase ‘housing ladder’ is thrown about so often demonstrates how we in the UK treat our homes – always an investment rather than just a place to live, waiting to move to the next ‘rung’.  The UK economy in turn in intrinsically reliant on the property market ‘working’ and further taxes on landlords could be the straw that breaks the camel’s back.Landlords and tenants alike will be waiting with baited breath for the budget to see if the proposals are to be implemented, however the effect of them will take far longer to be realised.

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