Tag Archive: commercial property

Northumberland Commercial Property Update

Victoria Huntley gives an update on Northumberland Commercial Property.

Certain parts of Northumberland have suffered greatly post-recession, particularly areas such as Berwick and Blyth. As a result, Northumberland County Council have been making efforts such as creating public forums and focusing on regenerating towns which have struggled to recover from the economic downturn.

Northumberland

Morpeth is a prime example which now boasts a thriving town centre with the popular Sanderson Arcade as well as the addition of Next, Pets at Home and Home Bargains at Stanley Terrace. We were instructed to sell The Terrace site on behalf of Northumberland County Council and received some excellent offers, however, the Council decided to retain the site and utilise it for the relocation of their leisure centre.

Furthermore, the Berwick Regeneration Commission was introduced by the Council to assist in the revitalisation of the town and they have plans for a new £20 million leisure centre. Due to the struggles in the town centre, we have been involved in interesting opportunities such as acting on behalf of landlords in negotiating compensation for dilapidations of retail units in Marygate.

The Berwick office market is showing signs of improvement and we have recently marketed Bridge Street Offices, an extensive refurbishment project of a Grade ll listed building which will include the conversion of part of the ground floor into a café and delicatessen, subject to obtaining planning permission.

Amble has also seen improvements, primarily due to Advance Northumberland who, in partnership with Morrisons, are developing an out of town retail park comprising a 25,000ft2 food store, circa 35,000ft2 of further retail space, a drive-thru restaurant and filling station. The harbour area has also grown in popularity due to the addition of retail pods, established restaurants and the Coble Quays development of luxury apartments and holiday lets which we have been involved in valuing and marketing.

The general downturn in the retail market which has impacted upon Alnwick over recent years has lifted with the out of town retail park development almost complete; which will be anchored by Marks and Spencer. In the town centre, Iceland was replaced by the Yorkshire Trading Company which appears to be performing well and the decline in retail rental values appears to have ended with the letting of the former Yorkshire Bank premises to Card Factory which achieved a higher Zone A rent than has been experienced in the town for some time. Moreover, the three retail units to the ground floor of the McCarthy and Stone development in Bondgate Without successfully let quickly after the new owner refurbished the properties.

Aiding in the revival of the town, the former Alnwick Station was sold by George F. White on behalf of Coates to Northumberland Estates who have exciting plans to enhance the leisure offering of the town which will attract more visitors to Alnwick and enhance the growth of tourism.

In line with the rest of the UK, the industrial market has remained strong throughout Northumberland. The next phase of the Lionheart Enterprise Park in Alnwick is well underway and the infrastructure is complete. It has been reported that sites are selling for circa £150,000/acre and the intention is to direct all industrial users from the town centre to the Park.

Capital Gains Tax: Why do you need to be aware of it?

Capital Gains Tax causes a lot of confusion in the United Kingdom. Currently, what are you required to pay capital gains tax on and how much are you required to pay? James Carruthers, Associate, explains the basics.

 

What is Capital Gains Tax?

Capital Gains Tax is a tax on the sale profit when you dispose of something that has gone up in value. Disposing of something means:

  • a sale
  • gifting or transferring it to someone else
  • trading it in exchange for something else
  • getting compensation for it i.e. an insurance pay out

Capital Gains Tax

Capital Gains Tax in Property

Let’s say you bought some land for £50,000 and subsequently sold it for £150,000; Capital Gains Tax would be due on the £100,000 profit. Don’t worry, you only have to pay if you make a profit when disposing of a property that isn’t your home. For example:

  • buy-to-let properties
  • business premises
  • land
  • inherited property

It is very common for property to be transferred as inheritance. When inheriting an asset, any application Inheritance Tax will usually have been paid by the deceased estate, however, you may be required to pay capital gains tax if you later dispose of the asset you inherited.

Capital Gains Tax

What am I Likely to Pay?

The amount you pay depends on the level of your annual taxable income, the level of profit/gain you have achieved, as well as any tax reliefs that you may be entitled to.

If you’re a higher rate taxpayer, Capital Gains Tax is equal to 28% on any profit/gain from residential properties which are not your main residence, and 20% on any profit/gain from other assets. You may still also need to pay capital gains tax on assets which sold at a loss if your total taxable gains for the year exceed the tax-free allowance.

For any property assets that have been owned for a long period of time, any Capital Gains Tax due will be based upon the property’s value as at the 31st of March 1982 rather than the date of acquisition.

Reliefs from Capital Gains Tax are available to help defray the amount of tax that is to be paid; including the likes of Entrepreneurs Relief and Retirement Relief.

Capital Gains Tax

How can we help?

If you have disposed of a property asset using any of the aforementioned methods, you need to submit a market valuation of the property which will be reviewed by the Valuation Office Agency (VOA) on behalf of Her Majesty’s Revenue and Customs (HMRC).

It’s therefore vital that robust valuations are prepared that can stand up to scrutiny under the VOA review process, and that provide an appropriate depth of evidence in which to challenge or raise a dispute if necessary.

At George F. White, we have a skilled team of RICS-Registered Valuers who have the experience and expertise of preparing high standard Capital Gains Tax valuation reports that accord with the necessary industry standards.

For more information about our commercial property services, please visit our commercial property pages.

s.18 of the Landlord & Tenant Act: why do you need to be aware of it?

With BREXIT on the horizon and with no certainty as to what impact it may have upon the economy or property markets; both landlords and tenants need to ensure they’re not going to be surprised with any significant costs whilst there are such high levels of uncertainty in the market.

This is something to particularly bear in mind when dealing with terminal dilapidation claims, which can frequently be an area of dispute between Landlords and Tenants of commercial property, which can result in sizeable costs being incurred. Unfortunately, the role that s.18 of the Landlord & Tenant Act 1927 can play in mitigating such cost is often overlooked or misunderstood.

s.18

James Carruthers, Associate, explains what the s.18 of the Landlord & Tenant Act 1927 is and why it is detrimental to dilapidation work.

 

What is a dilapidation?

When looking at it simply, the term ‘dilapidations’ refers to a claim generated by a landlord relating to repairs that must be made to their property (breach of a covenant relating to the physical condition of a given property) at the end of a tenancy; whether in respect of repairs, decoration, reinstatement or replacement.

 

What is ‘The Dilapidation Schedule’?

It is actually a professional schedule of procedures that must take place in order to establish standards of conduct and content relating to dilapidations claims to help provide a uniform procedure for dealing with such cases as well as to try and prevent the incidence of exaggerated claims being made.

Under the provisions of the protocol, advisers for both Landlords and Tenants should each have a good understanding for the principles of calculating loss in accordance with repairing covenants, stemming from common law; specifically, s.18 of the Landlord & Tenant Act 1927.

 

What is the s.18?

The wording of s.18(1) of the Landlord & Tenant Act 1927 is set out below:-

“Damages for a breach of a covenant or agreement to keep or put premises in repair during the currency of a lease, or to leave or put premises in repair at the termination of a lease, whether such covenant or agreement is expressed or implied, and whether general or specific, shall in no case exceed the amount (if any) by which the value of the reversion (whether immediate or not) in the premises is diminished owing to the breach of such covenant or agreement as aforesaid; and in particular no damage shall be recovered for a breach of any such covenant or agreement to leave or put premises in repair at the termination of a lease, if it is shown that the premises, in whatever state of repair they might be, would at or shortly after the termination of the tenancy have been or be pulled down, or such structural alterations made therein as would render valueless the repairs covered by the covenant or agreement”.

 

What are the implications of s.18?

S.18 of the Act sets out two main limbs, both of which must each be addressed in any dilapidation valuation work.

The first limb assumes a hypothetical sale of reversionary interest (sale of freehold or leasehold) in a given property at the end of a tenancy (even if the actual landlord would never have sold, or the premises are unsaleable because of the market at the time or even because of the nature of the reversionary interest).

The overriding question is, what difference does the actual disrepair falling within the covenant makes to the value of that reversionary interest.

For example, let’s take a property that is valued at the end of a tenancy at £50,000, however, it has been identified that repairs must be made in order to restore the property to its original state. Those repairs are going to cost £100,000. However, the Valuer identifies that if the repairs are carried out, the property will only be valued at £100,000. In accordance with s.18, the measures of damage would only be £50,000 rather than the full estimated repair cost.

If the impact on value is less than the cost of the repairs, then it is only this lesser sum, and not the full cost of repair that the Landlord can recover in their dilapidations claim.

 

And the second limb?

The second limb places greater focus on Landlord’s intentions at lease term date. The landlord is prevented from recovering damages for any disrepair which will be superseded by demolition or structural alterations that are intended to be made.

To take an extreme example; if the Landlord was planning to demolish a warehouse to make way for a new housing development at the end of a tenancy, it would be determined that any repair works carried out by the Tenant would be rendered obsolete.

It seems entirely reasonable that damages cannot be recovered for any such works that would be rendered useless by the Landlord’s intended use of the property upon recovering possession.

Clearly in reality circumstances will be more nuanced, as in certain events some repair works may still withstand any proposed redevelopment works. Yet it remains of key importance that Valuers and other advisers have a focus whether any of the required repairs set out in a Schedule of Dilapidations are likely to be superseded.

 

What does this mean for you?

Any valuation exercise carried out in respect of terminal dilapidations claim will typically be linked to the first limb of the s.18(1) definition.

The issue is often an objective one and does not depend on the works the landlord actually performs, but relates to the work that a hypothetical purchaser would factor into its bid for the reversion.

A frequent mistake made by advisers in carrying out valuations in accordance with s.18 of the 1927 Act is in erroneous assumptions that all items within a Schedule of Dilapidations constitute repairs (as opposed to decoration or reinstatement) and that they will have a material effect upon value; with the result being that the whole repair cost is incorrectly included within the calculation. Whereas in fact s.18 valuations are as much an art as a science and should not simply be treated with a formulaic valuation approach.

It is therefore of great importance that advisers are familiar with the principles of s.18 in order that appropriate advice is given. At George F White we are able to offer highly skilled staff in both the realms of Building Consultancy and Valuation, who have knowledge and experience of dealing with terminal dilapidations claims and the associated s.18 valuation advice, to provide our clients with in-depth tailored advice to help achieve their objectives.

Building Survey: Would you buy a property without one?

Buying a property is quite possibly the biggest financial investment you will ever make… James Cullen, Head of Building Surveying, explains why you should instruct a full building survey before acquisition.



What is a Basic Valuation Survey?

  • Required by the Mortgage lenders prior to approving a loan;
  • Confirm to the lender whether or not they can recover their investment if the property be repossessed;
  • This survey is not completed to provide detail on key structural and maintenance issues.


Pitfalls of Basic Valuation Surveys…

I have often been reminded that Basic Valuation Surveys are completed in less than 15 minutes… some of which do not incur a site visit or even involve entering the property or the roof space.

Similarly, with the rapid uptake of lump sum pension payments; there are a number of buyers on the market purchasing buildings outright without additional sources of finance. In this case, there is no minimum valuation survey requirement.

Consequently, purchasers are often exposed to a high level of risk. They are liable to commit the funds to maintain and repair the properties under their ownership. More often than not this liability is realised when it is too late to digest and plan for such issues.

Building Survey

Why Instruct a Full Building Survey?

According to research undertaken by consumer group ‘Which’; at a time when a purchaser is already expending funds, a survey can seem like another painful expense.

Typically, 20% of property buyers fail to commission a building survey prior to going ahead with a property transaction. This alarming figure identifies that the majority of property buyers run the risk of buying a property that could present major and costly defects which are unidentifiable to the untrained eye.

It is far better to be aware of any issues before purchasing a property so that informed decisions about how much the property is worth can be made and that the cost of any repair works can be considered at the outset.

This detailed survey can often be used to negotiate the purchase price down with the vendor, or can be set aside as a useful plan to target repairs, budget and recourse in the future.



Why instruct George F. White?

We pride ourselves on offering high quality, detailed and informed Building Surveys to reassure purchasers and identify the clear concerns with any building and where to target resources for repairs in the future.

Only the highest level of RICS compliant building survey is offered to our clients for the very reason that their security and protection is our highest priority. Moreover, this saves the unnecessary expense of revisiting and undertaking further investigation works which are often referred to in surveys such as a homebuyer’s survey.

For more information, a friendly service and advice tailored to meet your requirements, please contact James Cullen.

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