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What to expect in 2017

17/02/2017

Property specialist Ravi Basra reports on some of the changes that will come into effect during 2017 for both Landlord and Tenant:

FBCMB | Ravi BasraRateable value

All UK businesses pay tax on the properties they use in connection with their business. From April 1, 2017, the Valuation Office Agency will introduce a new tax rating valuation list for all business properties. When calculating what rate a business must pay, the price of the business property is considerably taken into account. The new rates taking effect this year have been predicted to be the most noticeable as it will allow for the rise of property prices since the recession. 

It is believed that businesses across the country will be subject to anomalies in business rates, with businesses in London and the South East likely to face soaring rates whereas High Street shops north of the country, which have seen a decrease in property values, will pay less. With the prophesied hike in rateable values affecting businesses, including the NHS, it is thought that many business owners will look to move premises or try alternative business models in order to save on costs and budget for the future. 

Business tenants with security of tenure could be entitled to compensation

A tenant who occupies business premises has security of tenure when the fixed term of the lease has ended. If your lease has ended, you have the right to renew it if it satisfies the qualifying criteria under the Landlord and Tenant Act 1954. If a landlord opposes to renew the lease on a no fault ground, tenants are entitled to compensation, under the Landlord and Tenant Act 1954. 

Compensation is calculated by taking into account the rateable value of the property. As new rateable values will be introduced from 1 April 2017, taking into account the increase of property prices since 2008, Tenant’s should check  the level of compensation they are offered if their lease is ending this year, as it could be higher than what they would have been entitled to previously.  

Assignment of lease by tenant to the tenant’s guarantor 

During the case of EMI Group Ltd v O & H Q1 Ltd [2016] the High Court was asked to consider whether a Tenant could validly assign its lease to the guarantor of the lease. The High Court evaluated the Landlord and Tenant (Covenants) Act 1995 and held that that a Tenant is prohibited from assigning its lease to its guarantor. The Court therefore concluded that the lease remained vested in the original Tenant and that the guarantor remained bound as a guarantor of the original tenant’s obligations.

The case is likely to be particularly limiting to companies looking to reorganise their portfolios. Where a group company is already guaranteeing a lease, the Tenant company will not be able to transfer its lease to the guarantor, potentially limiting the options for restructuring. 

A few rather interesting changes to take note of in 2017. For more information please contact Ravi Basra in our Commercial Property Team on 01902 578084 or by email: r.basra@fbcmb.co.uk

 

 

 

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