Thank you! Sharratts celebrate 20 years in business

Last Thursday night in London, the team celebrated its 20th anniversary year – and the retirement of a founding partner – in true style, and we were touched that so many of our clients and colleagues joined us to mark this important, exciting milestone.

Around 150 guests gathered at The Postal Museum and we thoroughly enjoyed seeing so many familiar faces at this standout venue.

The reception also marked the end of an era for Sharratts as Richard Locke, founding partner, retires. He said, “The event was a fantastic way to celebrate the success we’ve had over the past 20 years and for me to say goodbye to friends. It has been a pleasure to be a part of this team, working alongside some great clients, partners and colleagues. Sharratts has come a long way since we first started out and I wish the team the best of luck for the next 20 years.”

Guests were also invited to participate in a charity raffle to raise money for Scope, our dedicated charity in 2019, with the lucky winner taking home a voucher for a dining experience at The Shard. In addition to the raffle, we will be participating in a charity bike ride from our offices in Kent to Paris in September in support of Scope, there is still time to sign up, contact our team on 01959 568000 if you are interested.

Here’s to the next 20 years!

The Employer’s Agent – Taking Sides

It is common place in contracts to see reference to the Employer’s Agent having to act impartially. This wording appears to be at odds with the very role of the Employer’s Agent on the basis they act on behalf of the Employer. It therefore makes sense that the Employer’s Agent acts solely in the Employer’s interests. However that is not always the case.

Typically, the Employer’s Agent is expected to act on behalf of the Employer when carrying out its contractual duties. When administering the works by issuing instructions and approving variations, the Employer’s Agent acts for the Employer and can make decisions that favour the Employer.

However, case law has placed certain limits on the loyalty of the Employer’s Agent whilst carrying out other duties. When acting as the decision maker in relation to extensions of time, loss and expense and applications for payment, the Employer’s Agent is required to be impartial and cannot make a decision based on the needs of the Employer.

This was set out in the Case of Scheldebouw BV v St James Homes (Grosvenor Dock) Ltd where it was provided that ‘Generally the decision maker is not, and cannot be regarded as, independent of the employer. When performing his decision making function the decision maker is required to act in a manner which has variously been described as independent, impartial, fair and honest. The decision maker must use his professional skills and best endeavours to make right decision rather than the decision that favours the interests of his Employer.’

Should you wish to discuss the role of your Employer’s Agent further, please contact your usual Sharratts Contact or the Office on 01959 568000.

Sharratts celebrates 20 years

Sharratts celebrates 20 years

2019 marks Sharratts’ 20th anniversary and we are delighted to be celebrating this milestone throughout the next 12 months.

Founded in 1999 by two partners with extensive experience in affordable housing legal work, Sharratts enters its 20th year with a much larger team of 26 staff, including seven partners.

As well as welcoming and working with new colleagues and clients, we’re planning a range of events and initiatives over the year to support a number of charities – including Scope and The Bridge Trust.  One of these initiatives will include a charity bike ride from our offices in Kent to Paris in September – there is still time to sign up, contact our team if you are interested.

Keep an eye out for more information on our 20th year celebrations!

If you are a social housing provider and you require a professional, affordable service from a firm of solicitors that specialises in your field, give us a call on 01959 568000.

Welcome to the team

Sharratts welcomes new partner Leo Stevens

We are delighted to welcome a new partner to Sharratts; Leo Stevens joined our Development team on 12th November and will specialise in Development site acquisition and related planning issues.

Leo was formerly a Partner at Batchelors where he headed the Property Department. A solicitor for more than eight years, he has extensive experience in legal property matters with clients who range from Registered Providers and Local Authorities to Private Developers. He is a specialist in site acquisitions and planning issues, commercial property transactions and all types of sales and disposals, including plot sales, staircasing, resales, auction disposals and lease extensions.

Leo comments: “I’m very pleased to join Sharratts. The practice has a very strong reputation in the affordable housing sector and is at an exciting stage of development as it approaches its 20th anniversary. It’s good to be joining now and I’m looking forward to working with this experienced team as they embark on their next 20 years growth of the firm.”

Leo can be contacted on 01959 568018 or leos@sharratts-london.co.uk

The Budget - SDLT for Shared Owners

The Budget – SDLT for Shared Owners

The government has extended stamp duty relief for first-time buyers purchasing shared ownership homes valued at up to £500,000.

In England and Northern Ireland, first-time buyers purchasing shared ownership properties costing up to £500,000 are now subject to the stamp duty relief available to other first time buyers. Previously, they still had to pay the tax even though all other first-time buyers were exempt on the first £300,000 on properties valued at up to £500,000 – a change which came into effect from the previous Budget last November.

Properties valued up to £300,000 are expempt from SDLT, 5% is then payable on any value above £300,000 up to and including£500,000.

Delivering his speech to MPs yesterday, Mr Hammond said 121,500 buyers have benefitted from the first time buyer exemption so far with the number of first-time buyers at an 11-year high.

He added: “Today I’m extending this relief to all first-time buyers of shared ownership properties valued up to £500,000 and I will make this relief retrospective so that any first-time buyer who has made such a purchase since the last Budget will benefit.”

The policy will apply to properties worth up to £500,000 with immediate effect and will include homes bought through shared ownership since last year’s Autumn Budget (22 November 2017).

If you have already purchased a shared ownership property and are entitled to a refund as set out above this can be claimed online at:

https://www.gov.uk/guidance/stamp-duty-land-tax-online-returns#claim-a-refund

If you buy a property which is part of the shared ownership scheme costing more than £500,000, you will not benefit from any change and will be buying under the standard system, which applies to non first-time buyers.  As this is an extension of the stamp duty exemption rules set out in the previous Budget, the same rules apply. So, if you’re a first-time buyer jointly purchasing a home with a non first-time buyer, you won’t qualify for the first-time buyer rates. You both need to be first-time buyers.

Chancellor's Briefcase

The Budget and its effect on Housing – A Brief Overview

Phillip Hammond has now released the 2018 budget, we have provided a brief overview of the key points relevant to the provision of Housing below:-

  • From today in England the government is lifting the cap on the amount of money local authorities are able to borrow to build housing.
  • The Chancellor of the Exchequer has confirmed a further £650m of grant funding will be made available for English Authorities for 2019-20.
  • SDLT relief has been increased to benefit First Time buyers of Shared Ownership properties up to £500,000.00 in value. This relief is retrospective and will also apply to buyers who have purchased Shared Ownership properties since last year’s budget.
  • Phillip Hammond has also promised a further £500m for the Housing Infrastructure Fund which will help deliver 650,000 homes.
  • The next wave of strategic partnerships with 9 Housing Associations will deliver 13,000 homes across England.
  • The Government has promised up to £1bn of British Business Bank guarantees to support the revival of small and medium Housebuilders;
  • Phillip Hammond has confirmed the Government is consulting on simplification of the process for conversion of commercial property into new homes.
  • Finally, the Government is providing funding to allow up to 500 neighborhoods to allocate or permission land for housing through the neighborhood planning system for sale at a discount to local people.

For the Budget in full please follow the link:

https://www.gov.uk/government/speeches/budget-2018-philip-hammonds-speech
Change in Social Housing Regulator

Change in Social Housing Regulator

From 1 October 2018, the Regulator of Social Housing (RSH) has been established as a standalone organisation meaning it is no longer part of the Homes and Communities Agency (HCA).

The separation is a consequence of the 2016 Tailored Review of the HCA which reaffirmed the Government’s commitment to create a strong, independent regulator for social housing.

All social housing providers in England are required to be registered with the regulator, including local authorities, housing associations, housing co-operatives, profit-making organisations and any other form of housing provider.

All local authorities are regulated, including those whose stock is managed by an Arm’s Length Management Organisation (ALMO) or a Tenant Management Organisation (TMO).

The separation has been formally effected through the Legislative Reform (Regulator of Social Housing) (England) Order 2018 (LRO) and the members of the HCA’s Regulation Committee have become the Board of RSH.

Further information can be found at https://www.gov.uk/rsh

Sharratts shortlisted for Best Legal Services award

Sharratts shortlisted for Best Legal Services award

As we look ahead to celebrating our 20th anniversary next year, we’re very excited to announce that we’ve been shortlisted at the National Housing Awards 2018, a national competition that recognises the best property experts in the business. Sharratts is one of three firms on the shortlisted for the Best Legal Services Firm category.

Many of our clients kindly shared their thoughts about Sharratts’ service as part of the award entry and we very much appreciate your positive comments and support, which clearly did the trick!  

The National Housing Awards celebrate excellence in home ownership and this is the first year that a legal services category has been included. Judges are looking for firms that deliver an ‘exceptional level of service to affordable housing providers’ in terms of high service levels, customer satisfaction, value for money, innovation and problem solving, and a measurable positive impact on the sector.

The winner will be announced at an awards event at the Grosvenor House Hotel in London on Thursday 6th September 2018. Fingers are firmly crossed!

Green Paper - A new deal for social housing

Green Paper – A new deal for social housing

A new deal for social housing

Government Green Paper

The Government released its long awaited Green Paper yesterday entitled “A new deal for social housing.”

“Affordable housing plays an important role in delivering new housing supply.”

The main elements of the paper were as follows:

  1. Ensuring homes are safe and decent
  2. Effective resolution of complaints
  3. Empowering residents and strengthening the Regulator
  4. Tackling stigma an celebrating thriving communities
  5. Expanding supply and supporting home ownership

The basis of a lot of the proposals in relation to safety a quality of homes stem from the Grenfell Tower tragedy which highlighted a number of failings with immediate measures being taken to make buildings safe.  As well as being safe, all homes should be of a decent standard, progress has been made in this respect but the Government want to ensure that all homes are safe and decent.  Part of this will be to review the Decent Homes Standard to ascertain whether it is demanding enough and delivers the right standards for social housing alongside other tenures.

Residents should have a stronger voice and be able to influence decisions and be able to challenge their Landlords.  Residents are not like regular consumers can do not have the power to leave if they are not happy with the service they are receiving. The Government want to ensure that residents voices are heard and in doing so will strengthen the Regulator.  Part of this will be looking at what can be done to improve the complaints process for social housing residents.

Residents have reported feeling like “second class citizens” and the “underclass.”  The Government will tackle this prejudice and ensure that the positive contribution that social housing residents make to their communities, and society as a whole, is recognised.

The Government aims to provide 300,000 homes per year by the mid 2020’s, a central part of this goal will be social housing.  The Government wish to continue to support people to become home owners but also acknowledge the need to replenish stock of subsidised housing for the foreseeable future.  “The fundamental challenge is to reconcile our ambition to extend the opportunity of home ownership to as many social tenants as possible, with the responsibility to maintain and increase the stock of social housing for those who need it.”

Key to Housing Associations are the proposals by the Government to provide longer term certainty to help housing associations to build more and helping people living in affordable home ownership schemes to progress more easily to owning outright.

Right to Buy

A consultation paper is also being published containing proposals on how local authorities can use Right to Buy receipts to deliver new home.   It is being considered that Local Authorities be allowed to keep the receipts for longer than the current three years so as the receipts can be used alongside the borrowing cap increase also announced.

Building on the 2016 Voluntary Right to Buy pilot, the Government are launching another pilot in the Midlands this summer, giving thousands of residents the opportunity to buy their home.

Shared Ownership

The Governments perceives that some shared owners struggle to buy more equity in their homes.  One of the barriers is the 10% minimum staircasing share together with increasing values in property making shares more expensive year on year.

The Government are looking at ways in which providers can enable people to build up more equity in their homes.  One suggestion is being able to staircase by 1% annually at a set value.  This would break down the barriers above but could well be seen as an administrative burden on providers who would need to recalculate rents on each occasion and also prepare the necessary legal documentation. 

Escalating Ground Rent – What will the future hold?

Escalating Ground Rent – What will the future hold?

The recent adverse publicity regarding ground rent is high on the agenda for Landlords (including developers) of new build flats and the effect that escalating ground rents within leases can have on both mortgage-ability and saleability of properties in the current market. 

We have set out below some background information on this complex issue.

Background

If ground rent in a lease is more than £250pa outside of London or £1000pa within London, in properties being occupied by a tenant as their only or principle home, current legislation means that any leases with a ground rent of above these limits could result in them being classed as an assured tenancy under the Housing Act 1988.   The issue has arisen as Leases have started to contain unfair ground rent escalation provisions such as doubling every 10/15 years over a term of 999 years.  This results in an extremely high ground rent which could affect the value and future marketability of the property.

The main issue

Ground 8 of the Housing Act 1988 allows a Landlord to apply to the court for an order to take possession of a property where the ground rent is 3 months in arrears, and as this is a mandatory ground for possession, the court cannot refuse such an order.   If the ground rent is very high there is more chance of a Tenant falling into arrears, allowing the Landlord to take possession.  In normal leases (i.e not shared ownership ones) there is no requirement for the Landlord in this situation to notify the mortgage lender that they are looking to take possession and as this is a mandatory ground and the court cannot refuse to grant an order for possession, a lender could end up losing their security without even knowing about it, by which point it would be too late for them to pay the arrears. 

To recap, leases which have ground rent above £1000 in London or £250 outside of London are currently classed as an “assured tenancy” under the Housing Act 1988. This means that the Landlord can seek to end the lease by an order of the court, and attempt to evict the Tenant if there is ground rent more than 3 months in arrears.  The Government is considering amending the Housing Act 1988 to exempt leaseholders from legislation that was intended to ensure that rack rent tenants in the private rented sector do not build up rent arrears.   Ground 8 is particularly relevant as it covers mandatory grounds for possession for an assured tenancy and concerns arrears of rent.  The mandatory nature of Ground 8 means a judge cannot refuse to make the order.   So effectively if any Tenants were more than 3 months behind in their rent, a Landlord could apply to the court for a possession order to evict the Tenant and this would automatically be granted.  

Ground 8 and the implications that it can cause on lenders security is the reason that most lenders now have guidance on the levels and future increases of ground rent that they will accept.

 What has been the response of lenders?

 A lot of lenders have now adopted the following:

  • the maximum ground rent at the start of the lease term must not exceed £1000 a year;
  • the ground rent must not be capable of being increased during the first 21 years of the lease, and not more frequently than every 21 years during the rest of the lease term;
  • when the ground rent is reviewed, any increase must not exceed the higher of 100% of the ground rent payable immediately before the date of the rent review: ii) a figure increased in accordance with the equivalent percentage change in the Index of Retail Prices since the date of the previous rent review.
  • With a number of lenders specifically also saying they will not accept ground rent provisions that contain unreasonable multipliers (i.e. doubling every 5, 10 or 15 years)

How this affects Landlords on a day to day basis

Until there is a legislative change buyer’s solicitors must generally report the ground provisions to the lenders and ensure that the provisions are in line with any guidance that the relevant lender has issued and if they have concerns to take out indemnity insurance or seek to amend the lease.  In shared ownership leases, this doesn’t matter as much at the beginning as the lease contains the mortgagee protection clause, but if the ground rent continues to be charged following final Staircasing, then whilst it may not be an immediate issue, it could cause problems on final Staircasing if the tenant needed to re-mortgage to final staircase, as if the level of ground rent became excessive and affected marketability the tenant could have difficulty in obtaining mortgage finance or indeed selling the property on in the future.  This is therefore something that buyers solicitors are raising as an issue from the outset of transactions.

The way forward

They government is now looking to change the Housing Act 1988 legislation so that long leases are not caught by it, as the original intention of this legislation was not to catch long leases.  They opened a consultation in July 2017 which looked at the “unfair and abusive practices within the leasehold system” and published the results in December 2017 which confirmed that they would look to introduce the following measures:

  • legislating to prevent the sale of new build leasehold houses except where necessary such as shared ownership
  • making certain that ground rents on new long leases – for both houses and flats – are set at zero
  • working with the Law Commission to support existing leaseholders and make the process of purchasing a freehold or extending a lease much easier, faster and cheaper
  • providing leaseholders with clear support on the various routes to redress available to them
  • a wider internal review of the support and advice to leaseholders to make sure it is fit for purpose in this new legislative and regulatory environment
  • making sure freeholders have equivalent rights to leaseholders to challenge unfair service charges

How long this legislation will take to change though is not known at this stage and given the complexities involved it is thought it could take some time to come forward.

What can be done in the interim?

While we wait for legislation to change there are a number of ways that Landlords can ensure that the ground rent provisions within leases are acceptable to both Tenants and their mortgage lenders including:

  • Starting ground rents to be below the current AST thresholds (i.e. £250 outside of London and £1000 inside of London);
  • Capping ground rent increases at the above levels;
  • Ensure that any escalation provisions only provide for increases in line with RPI; and
  • Including provisions within the lease to deal with serving notice on any mortgagee before commencing possession proceedings

Whilst the above measures may not bring in the desired income from ground rents that it used to – Landlords should consider whether changing their ground rent policies to be in line with the government’s proposals, and in line with current CML requirements, therefore allowing properties to be occupied, outweighs the risk of properties being un-mortgageable and therefore unsaleable.

Kate Anderson 

01959 568034 or katea@sharratts-london.co.uk         

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