Sykes Anderson Perry Limited

Our Newsletter contains information you can use. You do however need professional advice on the facts of your case and you should not take any steps or refrain from taking any steps without advice from Sykes Anderson Perry Limited. It is also a chance for you to provide us with feedback on the services we have provided you.

Firm News

Our 30th Anniversary

The 4th July 2019 marks the 30th Anniversary of when Sykes Anderson Perry (or Sykes Anderson as we were then known) opened its doors for business. When Chris Sykes and David Anderson set up the firm in 1989 they had a vision to have a practice that individuals and businesses could come to for a quality service and pragmatic straightforward advice. Our clients remain the heart of what we do; providing excellent customer service along with sharing our legal expertise.

As part of our celebrations we are dedicating this year to fund raise for four charities that have been chosen by staff. The chosen charities are Great Ormond Street Hospital, Macmillan, Alzheimer's Society and Young Minds. We would be grateful for any donation you can make to our fundraising page, all donations will be split between the four charities at the end of the year. https://uk.virginmoneygiving.com/SAPlaw

For our first event we are returning to the decade that the firm was established with an 80s celebration as part of the Great Ormond Street Hospital 'Then Now Always' campaign. Check out our social media pages on 22nd March to see us jump back in time.

Since our last newsletter we are delighted to have appointed a new litigation/dispute resolution solicitor, Patricia Wollington. We welcome back from maternity leave, Katie Mear, our commercial property solicitor and Andinee Perry, our employment and commercial solicitor.

Feedback

Whilst we believe that we offer a high-quality service to all our clients we are always looking for ways in which this can be improved. We appreciate feedback from all clients and contacts who have experience of working with us. If you would like to provide us with some feedback of your experience with us please email them to Managing Director Graeme Perry: Graeme.Perry@saplaw.co.uk

Property

What is a Licence to Assign?

A licence to assign is a very common provision found in both residential and commercial leases. It is a requirement for the Tenant to obtain the Landlord's prior consent to any transfer (assignment) of the Lease.

This is usually qualified by stating that the Landlord cannot withhold or delay their consent unreasonably. The Landlord and Tenant Act 1988 also requires Landlords give consent within a reasonable time (except where it is unreasonable to do so).

The consent itself is referred to as the Licence to Assign.

How 'reasonable' consent is defined has been recently considered in the case of No. 1 West India Quay (Residential) Ltd vs East Tower Apartments Ltd, 2018.

Practical points for Landlords to consider

• Before giving a written decision on a Licence to Assign, a Landlord should carefully review the terms of the lease and consider what conditions they would like a tenant to satisfy before they will agree to the sale of the property. They should ensure that each condition is justifiable and evaluate whether the overall all the conditions imposed would be viewed positively by the courts.

• It is reasonable for a Landlord to request bank references in order to ascertain whether a proposed assignee will be able to perform its obligations under the lease. If you are concerned about a new tenant being able to pay service charges and ground rent, then this would be an advisable request to make of new tenants.

• A Landlord can reasonably require inspections of a property prior to giving consent, and it is also reasonable for this to be done by a surveyor, with the Tenant to reimburse the Landlord for any surveyor's fees. This is recommended to ensure that the existing tenant has not breached any terms of the lease, for example making alterations to the property which may not be permitted.

• Landlords should be cautious regarding professional and administrative fees. Any fees should be justifiable and relate to actual work being undertaken, and the Landlord should be able to produce specific breakdowns if required.

• Landlords should also consider requests for a Licence to Assign in a timely manner so as not to be seen to be unreasonably delaying the process.

Please get in touch if you would like us to review your current procedure and the conditions attached to providing Licences to Assign to ensure that you are reasonably vetting new tenants.

Important Brexit decision

In a highly anticipated decision, the High Court has ruled in the case of Canary Wharf (BP4) T1 Limited and others v European Medicines Agency that the European Medicines Agency ("EMA") cannot terminate its lease of premises at Canary Wharf due to Brexit.

EMA argued that the lease had been frustrated due to Brexit. For an agreement to be legally frustrated there must be an unforeseen event or change in circumstances which makes the agreement impossible to fulfil.

Mr Justice Marcus Smith said: "The lease will not be discharged by frustration on the UK's transition from member state of the European Union to a third country, nor does the EMA's shift of headquarters from London to Amsterdam constitute a frustrating event. The EMA remains obliged to perform its obligations under the lease."

Whilst this is no doubt an important property law decision, the key point of the decision, that Brexit does not frustrate an agreement or release a party from their obligations thereunder, is likely to be applied in a wider context, for example in respect of general contract law. This may leave some tenants in a vulnerable position; if their revenue drops because of Brexit they will still be liable to pay rent. The decision is however good news for landlords.

High Court rules right to rent checks are discriminatory

Right to rent checks were introduced in 2016 as part of the right to rent scheme. These checks require private landlords to check the immigration status of potential tenants before renting a property to them. Landlords with reasonable cause to believe their tenants are unlawfully in the UK face unlimited fines and even imprisonment.

The High Court has ruled that the checks cause racial discrimination and that the scheme not only provides opportunity for private landlords to discriminate, but actually causes them to discriminate by causing them to favour renting to white persons with British passports to reduce the risk of renting to a person who is not lawfully in the UK.

Brexit uncertainty means that landlords have become more reluctant to rent to EU nationals, as if there is a no-deal Brexit it is not clear what rights EU citizens will have to remain and to rent in the UK. The Government has said that in the event of a no-deal Brexit, they will still implement the EU Settlement Scheme meaning EU citizens living in the UK will be able to apply for settled status and therefore have a right to rent, although it is unclear what their status will be in the period between the exit date and when such status is granted.

The High Court ruling is a welcomed step in protecting the rights of ethnic minorities and non-British passport holders who have the right to rent in the UK.

If you have any property concerns or questions then do get in touch with any of our property solicitors and they will be happy to help:

Chris Sykes – Chris.Sykes@saplaw.co.uk
Gemma Wright – Gemma.Wright@saplaw.co.uk
Laurie Davison – Laurie.Davison@saplaw.co.uk
Michelle Goodrum – Michelle.Goodrum@saplaw.co.uk
Katie Mear – Katie.Mear@saplaw.co.uk

Leasehold Enfranchisement

Reinvigorating commonhold: the alternative to leasehold ownership

It would not be surprising if you had never heard of "commonhold", let alone come across a property owned under a commonhold structure. But could the new Law Commission consultation paper "Reinvigorating commonhold: the alternative to leasehold ownership" see this change.

Very briefly, the commonhold regime enables flats to be owned on a freehold basis with the remainder of the building or estate owned and managed by a commonhold association which is collectively owned by all the flat owners. The association control how the building or estate is run and managed without the involvement of a landlord or other third-party. The owners also own their flats outright, there is no lease (a depreciating asset) which needs to be extended at a cost and no ground rent.

Commonhold was introduced in 2002 as new way to own property (in addition to the freehold and leasehold ownership structures), however in the sixteen years since its introduction fewer than twenty commonholds have been created.

In recent times there has been a great deal of bad press about the leasehold ownership regime, reports of exorbitant ground rent charges on new build flats and developers selling houses on a leasehold structure (opposed to freehold) with the aim of future financial gain. The Law Commission has already opened a consultation reviewing the leasehold enfranchisement provisions with the aim of improving leasehold rights but has itself identified that 'whilst these projects will improve the position in leasehold, they cannot remove the inherent problems with leasehold ownership'.

This recent activity has cumulated in people looking for alternative ownership structures which has led to a revival of interest in the commonhold ownership regime.

In December 2018 the Law Commission published its consultation paper "Reinvigorating commonhold: the alternative to leasehold ownership". The consultation is now open, closing on 10 March 2019. It will be interesting to see the outcome of the consultation and whether there will be a shift in mindset away from leasehold towards the commonhold structure.

If you have any lease enfranchisement concerns or questions then do get in touch with any of our solicitors and they will be happy to help:

Chris Sykes – Chris.Sykes@saplaw.co.uk
Michelle Goodrum – Michelle.Goodrum@saplaw.co.uk
Katie Mear – Katie.Mear@saplaw.co.uk

Corporate / Commercial

What is your company worth on your death - Cross Option Agreement?

A morbid thought but necessary unfortunately. If you have worked hard to get your business up and running then no doubt you will want your family to benefit from it after you have gone and/or want the business to continue to exist.

Whilst your family members will usually inherit your shares in the company and may receive dividend income from time to time, this will only apply if the business continues to be successful. In most cases, your family members will have nothing more to do with the business and/or have no experience in running the business. There may be other shareholders who will neither like the fact that there are shareholders not contributing to the business nor have enough cash to buy the shares from your family member.

This is where having a life insurance together with a cross option agreement could be very sensible. It is possible to structure a life insurance to pay out a sum of money to the company or other shareholders on your death and this money can then be used to buy your shares from your family in accordance with the terms of a cross option agreement. Your family members get a cash lump sum (which should be free of inheritance tax) and the other shareholders gain full control over the running of the company without having to find the cash to acquire your shares.

It is relatively easy to put a cross option agreement in place and the life insurance need not cost the earth. If you would like further information on this then please do get in touch and we will be happy to help.

What Brexit means for GDPR?

In short, after Brexit, persons will still need to comply with their obligations under the GDPR. This is because both the EU Withdrawal Act 2018 and the Data Protection Act 2018 incorporate the GDPR into domestic legislation.

At the moment GDPR allows personal data to be shared freely between member states without restrictions but not to be shared with third countries unless the relevant country is deemed to have an adequate level of protection for personal data, or in the absence of this, appropriate safeguards. An example of an appropriate safeguard would be the inclusion of standard data protection clauses in contracts as prescribed by the Commission. Once the UK leaves the EU it will no longer be a member state but will be a third country for these purposes and therefore personal data will not be able to be shared freely between member states and the UK. The Commission will have to assess the UK on this as it would any other third country.

There is a distinction to be made between data moving from the UK into the EU, and data moving from the EU into the UK. To allow personal data to move freely from the UK into the EU after Brexit the UK would need to recognise members states as providing an adequate level of protection for personal data. The UK has said it will do this from the Brexit date and therefore persons in the UK will be able to pass personal data into the EU without the need for further appropriate safeguards. For personal data to move freely from the EU into the UK after Brexit the EU would need to recognise the UK as providing an adequate level of protection for personal data. The EU has said it will look to adopt this position but will not begin the process of assessing whether the UK has an adequate level of protection until after the exit date when the UK becomes a third country.

Therefore, in the short term after the Brexit date and if the UK leaves without a deal the UK will not yet be deemed to have an adequate level of protection and so in the absence of this EU countries wishing to pass data into the UK will need to put into place adequate safeguards when before they were not required to do so.

Given the unique position the UK is in and given that it has adopted the GDPR provisions, it is hopeful that following Brexit the Commission will decide promptly that the UK has adequate levels of protection in place for personal data which would allow personal data to be passed from the EU into the UK freely as is the case now.

If you have any commercial concerns or questions the do get in touch with any of our commercial solicitors and they will be happy to help:

David Anderson – David.Anderson@saplaw.co.uk
Andinee Perry – Andinee.Perry@saplaw.co.uk
Graeme Perry – Graeme.Perry@saplaw.co.uk

Litigation/Dispute Resolution

More upfront work for landlords with the introduction of The Homes (Fitness for Human Habitation) Act 2018

This new legislation takes effect from 20th of March 2019. It applies to all landlords who let properties wholly or mainly for human habitation for a period of less than 7 years. This will include assured shorthold tenancies (ASTs). The legislation only applies to any new tenancy entered on or after 20 March 2019 and any existing tenancy renewed from 20 March 2019.

The Act places more responsibility on landlords to ensure that the properties leased out are fit for human habitation at the time the tenancy is entered and throughout the term of the tenancy. In practical terms, this means that the landlord needs to be more pro-active. The landlord should have a strategy in place to be able to prove that he has undertaken routine inspections throughout the duration of the tenancy and where applicable, he has investigated disrepair complaints from tenants in a timely manner and is satisfied that the minimum standards for human habitation are consistently being met.

Section 10 of the Landlord and Tenant Act 1985 sets out the criteria to determine if a property is 'unfit'. A property will be deemed to be 'unfit' if at least one of the listed criteria results in the property being not reasonably suitable for occupation in that condition. This could be lack of proper drainage, heating, hot water or lack of adequate cooking facilities. The list is extensive, so my advice to landlords as follows;

Prepare a detailed checklist for each property prior to each tenancy which the landlord/agent can tick on each inspection to ensure every item on the list has been checked and is in order. The landlord can then retain this document as evidence of compliance.

Plan staged inspections of the property in advance so that the tenant has proper notice of the visit and any potential breaches can be picked up and dealt with at the earliest opportunity.

If you use Managing Agents, remember it is the landlord who is ultimately liable for any breaches even if the responsibility was delegated to the agent. It is therefore imperative that you note in your diary dates to check in with your agents (around the key inspection dates) to ensure that the property has been checked and continues to remain in a fit and habitable condition.

Relearning our ABCs post-Brexit: Arbitration, Brexit, and Commercial Agreements

A report by the House of Commons at the end of last year found that the EU, taken as a whole is the UK's largest trading partner. UK exports to the EU were £274 billion (44% of all UK exports). UK imports from the EU were £341 billion (53% of all UK imports). Although the UK will cease to be a member of the EU on 29th March 2019, it is inevitable that the UK will continue to be one of the EU's largest trading partners. However, the legal implications of Brexit on UK‑EU commercial agreements are still unclear whilst the political wheels on either side of the Channel keep turning.

Businesses could minimise uncertainty in their commercial dealings by including an arbitration clause in future agreements. This type of clause in a contract requires that the parties resolve any disputes arising out of the contract through an arbitration process—simply put, arbitration is a way to resolve disputes outside of the normal courts. Considerable time and effort are often required to obtain a judgment from the court that says that the other side owe you money. However, a judgment is only a record the fact that you are owed money—it does not compel the other side to pay you. If the other side to do not pay you after the court issues its judgment, you will need to take enforcement action. At present, judgments of the English courts can be easily enforced in EU member states and vice-versa. If the UK leaves the EU with no provision in place to continue this arrangement, it may become considerably more difficult to enforce English judgments in EU member states' courts.

On the other hand, enforcement of awards from arbitration has nothing to do with EU laws. It is instead governed by international law which sits above the laws of the UK and EU and will remain the same regardless of the UK-EU relationship after 29th March 2019. An added benefit of being able to use arbitration to resolve disputes is that arbitral awards should be enforceable in jurisdictions such as the USA, Russia, China and Japan, as well as EU member states if you also wish to do business with those countries. Using arbitration to resolve disputes also gives more certainty than using normal courts because the loser's options for appeal are more limited. This is more cost effective as you will not be faced with responding to the loser's appeal (and the risk that they could win the appeal).

If you have any concerns or questions then do get in touch with our litigation/dispute resolutions solicitors and they will be happy to help:

Patricia Wollington – Patricia.Wollington@saplaw.co.uk
Andinee Perry – Andinee.Perry@saplaw.co.uk

Employment

UK citizens moving to the EU to work after Brexit

For EU citizens living and working in the UK, the UK government has confirmed that it will run the EU Settlement Scheme regardless of a deal or no deal Brexit. This allows EU citizens in the UK to apply for settled status in order to retain a right to continue to reside in the UK.

Unfortunately, for UK citizens living and working in EU countries, the position is less clear. This is because it is largely be up to each EU country to decide their own immigration policies and after Brexit it is likely UK citizens will become subject to these individual policies.

The European Commission has published a no deal contingency action plan and in this it urges EU member states to take a generous approach to the rights of UK citizens in the EU, provided that this approach is reciprocated by the UK and that EU member states should adopt a pragmatic approach to granting temporary residence status. This is likely to be the case given UK confirmation to run the EU Settlement Scheme!

Flexible working – your rights

The right to request flexible working was first introduced in the UK for parents and carers in 2002 and extended in 2014 to all employees. Flexible working includes working from home, job sharing, compressed hours, flexible start and end times and part time work.

Employers do not have to agree to flexible working requests, but they do have to consider the request and act reasonably. If an employer refuses a request, it must do so based on certain grounds. If the employer does not follow the correct procedure or makes its decision based on incorrect facts, then the employee can challenge the decision in the employment tribunal.

The consequence and compensation for breaching the Flexible Working Regulations (Regs) is 8 weeks' pay. In addition, a breach of the Regs could enable the employee to resign and claim constructive unfair dismissal, and in certain cases bring a claim for direct and/or indirect discrimination.

There are many advantages to agreeing to flexible working arrangement and businesses should not be dismissive of it without proper consideration. Denying employees flexible working could have significant impact on morale and could result in employers losing a very valued employee. Equally, many employees are now seeking businesses which offer flexible working. So, having a blanket policy not to offer flexible working could mean losing potential talent.

If you are unsure of your rights to request flexible working or dealing with a flexible working request then do get in touch.

If you have any employment concerns or questions the do get in touch with our employment solicitor and she will be happy to help:

Andinee Perry – Andinee.Perry@saplaw.co.uk

Tax

Property Tax Changes – April 2019

It used to be the case that non-residents could invest in UK property with few (if any) UK tax obligations. This position has shifted significantly in the course of the past decade and continues to evolve with further changes coming into force in April 2019.

The first notable change which will come into effect in April 2019 is that capital gains tax will begin to apply to non-residents when they dispose of UK commercial property (up to now this has only applied to residential property). At present it is only the capital gains tax regime being applied to commercial property rather than the ATED and inheritance tax regimes, which apply to residential. Non-resident companies will be taxed at the prevailing corporation tax rate in the UK and individuals will be taxed at the same rates as UK individuals (which for commercial property disposals has a top rate of 20%). To soften the blow, the values of commercial properties can be re-based for these purposes as at April 2019 so only future capital growth is taxable on disposal.

Further, the capital gains tax regime for non-residents will be extended to apply to disposals of major interests in companies which are "property rich". This would include, for example, shares in special purpose vehicles which are used to hold UK property. Again, this be based only on the increase in value from April 2019. Broadly, a company will be property rich if 75% or more of its gross asset value is derived from UK property (either residential or commercial). The new tax will apply to disposals of interests of 25% or more in such companies (the interests of connected parties will have to be taken into consideration when assessing whether this 25% limit has been exceeded).

Given the number of considerations now at play, it is even more crucial for non-residents to seek advice about structuring their UK property purchases, including in respect of commercial property. There will still be scope to carry out legitimate planning to mitigate the exposure to these various UK taxes which now apply to property ownership.

Those with existing structures should also review what steps could be taken to improve their tax position. Certainly anyone with UK property within a corporate structure should look at this as soon as possible as it may be beneficial to carry out any re-structuring in respect of the shares prior to April.

If you have any tax concerns or questions then do get in touch with any of our tax solicitors and they will be happy to help:

Graeme Perry – Graeme.Perry@saplaw.co.uk
David Anderson – David.Anderson@saplaw.co.uk

French Tax

Social Charge Claims in France

Since 2012, France has attempted to apply social security charges (the equivalent to UK national insurance contributions) to rental income from French real estate and capital gains on the disposal of French properties. The original position was already judged illegal by the European Court of Justice leading to tens of millions of Euros being refunded by the French state. Their amended position has also now been judged illegal in local courts and legislation has now been introduced to alter the position significantly.

The French administrative tribunal, and now an administrative appeal tribunal, have held that the social charges regime, as applied since 1 January 2015 to rental income and since 1 January 2016 to capital gains, is illegal. It is likely that the French authorities will appeal this decision to the French Supreme Court and the matter may again be referred to the European Court of Justice. In the event that this decision is maintained, individuals who have received rental income or made capital gains in this period should be in a position to claim a refund from the French authorities (plus interest). This is likely to follow the same process as the refunds relating to the pre-2016 legislation. Broadly if you can demonstrate that you pay social security in another EU country at the relevant time, you will be entitled to a refund. Due to strict limitation periods in France it may be worth filing a protective claim now.

The 2019 French Finance Law makes a significant change to the way in which this regime operates. From 1 January 2019, individuals who are within the scope of another EU social security regime will not pay the full social charge amount in France. Their charge will be limited to 7.5% on rental income or capital gains (in addition to the usual income tax or capital gains tax rates). This means that individuals who pay social security in another EU country should see their effective tax rate in France lower compared to when social charges were applied. Individuals not within such a regime will face the same level of charge as before.

For the most part, individuals in the UK will be within the UK national insurance regime. This means that they should be entitled to refunds for social charges paid up to now. Under the new law and depending on the eventual outcome of Brexit negotiations, individuals will be treated as not within another EU social security regime. As a result, the social charges are likely to continue to apply. The legality of this position is also likely to be challenged before the French tribunals. It will also be necessary to consider the terms of any social security agreement which is eventually negotiated between the UK and EU.

If you have any tax concerns or questions then do get in touch with any of our tax solicitors and they will be happy to help:

Graeme Perry – Graeme.Perry@saplaw.co.uk
David Anderson – David.Anderson@saplaw.co.uk

Private Client

A new style of grant of probate will be introduced from 4th March. The Probate Registries across the country will be issuing the new style featuring: a hologram, a digital seal (instead of an embossed seal), a digital signature (instead of a 'wet' signature), and a validation telephone number for people processing the document to call.

Brexit and the EU Succession Regulation. The UK did not ratify the EU Regulation 650/2012, commonly known as the EU Succession Regulation. Therefore, this is one area where there will be no major changes after Brexit.

Probate fees: Labour is aiming for a vote in the House of Commons to object to the statutory instrument which passed the new probate fees structure. If there is an objection it will be possible for the House of Commons to vote on the proposals. The current probate fee is a flat fee of £155 (when solicitors are instructed), in the new scheme fees will vary from £155 to £6,000 depending on the value of the estate. Most experts feel this amounts to an additional tax and not a fee.

Probate disputes

Death changes everything. Emotions become much stronger and family disputes which have been simmering for years can come out into the open. The deceased's intentions may make little sense to a disappointed beneficiary reading the Will. Action taken now can affect the relationships between family members until the end of their lives.

Common reasons for wanting to challenge a Will are (1) incapacity of the deceased, (2) undue influence on deceased, (3) existence of a later Will, (4) defects in the signing and witnessing of the Will, (5) forged Will, (6) constructive trusts i.e. property although in the name of the deceased actually belongs to someone else, (7) poor administration of the estate by the executors and (8) that a dependant has not been sufficiently provided for under the terms of the Will.

It is almost always best to act early on. This is because it usually takes some time for the executors to obtain a grant of probate and in straightforward cases putting a caveat on the estate should bring matters to a head. This prevents executors from obtaining a grant of probate but can be "warned off" with costs warded against you if there is no legitimate reason for entering it at the Probate Registry. In many cases putting a caveat on the estate will not be the appropriate way to proceed.

English Wills may purport to deal with foreign property. This is an area where unexpected problems often arise. Specialist advice at the outset usually results in a substantial saving. Sykes Anderson Perry solicitors can assist with probates involving French and Spanish assets.

If you have any international property concerns or questions then do get in touch with any of our property solicitors and they will be happy to help:

Nicole Gallop Mildon – Nicole.GallopMildon@saplaw.co.uk
Álvaro Aznar Azcárate – Alvaro.Aznar@saplaw.co.uk
Graeme Perry – Graeme.Perry@saplaw.co.uk
David Anderson – David.Anderson@saplaw.co.uk

Please feel free to contact us with any questions on the above matters or any other legal query you may have. If it is on a topic we do not deal with we will almost certainly know someone who can. Our website contains a lot of information and articles on our practice areas.

March 2019

Sykes Anderson Perry Limited