By Jackie Newstead
1. Has "Brexit" happened yet?
In short, no. The referendum was advisory only and the UK continues to be an EU member. In order to leave the EU, the UK must issue a formal notice of its intention to leave to the European Council (the so-called Article 50 procedure). The timing for triggering Article 50 is still under debate, but the UK government is currently in favour of conducting "informal" negotiations regarding the UK's post-Brexit relationship with the EU before formally triggering Article 50.
2. How will Brexit affect UK real estate law?
Real estate law varies widely between EU member states and is not subject to harmonisation. Indeed, there are significant differences within the UK (i.e. Scotland and Northern Ireland have different regimes from England and Wales). The fundamental laws surrounding the ownership of property, registration, and landlord and tenant law are domestic in nature. The direct implications of Brexit for property law and procedure in the UK are therefore limited.
3. What about environmental law?
Many real estate transactions are also affected by laws which do originate from the EU. UK legislation relating to minimum energy efficiency standards (MEES), energy performance of buildings (including EPCs) and part L of the Building Regulations could be subject to review, although a complete repeal without some replacement regime seems unlikely given the UK’s statutory commitment to reduce greenhouse gas emissions.
Note that some of the most stringent aspects of environmental law and regulation in the UK will be unaffected by Brexit as they are "home grown", e.g. strict liability for cleaning up contaminated land, the requirements for specific environmental permits and the potential for liability for harm caused by pollution under common law concepts such as nuisance and negligence.
4. Will we still need to pay Stamp Duty Land Tax and VAT on transactions?
Stamp Duty Land Tax ("SDLT") is a UK based tax on land transactions, and so, from a legal perspective, no changes to the rules or the rates will be required as a result of Brexit. However, the UK government may seek to lower the rates of SDLT in order to encourage continuing investment in the UK property sector.
The UK's VAT system is underpinned by EU law - VAT directives have been implemented in the UK through domestic UK legislation. Brexit will not cause this legislation to automatically fall away and it is unlikely that the UK government would choose to lose and/or reduce this income stream.
5. Why was trading in a number of property funds suspended?
The suspension of trading in some of the largest open-ended retail property funds in the UK has been widely reported in the press. These funds enable non-professional retail investors to invest in commercial property. Some investors – nervous about the prospect of a "leave" vote in the run up to the referendum - began withdrawing their money from these funds. It is difficult for the funds to return money to investors "on demand" as the underlying assets (real estate) are difficult to sell quickly. Furthermore, if a large number of properties are put up for sale in a limited period of time, it can have a negative impact on value. The ability to suspend trading to give time to realise assets is built into the constitution of the funds and by temporarily suspending investors' ability to withdraw their investments, the funds can undertake a more measured disposal of the underlying assets before redeeming the investors' investment.
Published in Estates Gazette's Autumn 2016 Global Investor Guide. Please click here to open the publication.