1954 Act Renewals: A New Hope for Quicker Lease Renewals?

Written by Freeths on 22/11/2017

I have spoken to a number of my clients and contacts about uncontested lease renewals under the Landlord and Tenant Act 1954 over the years and asked them what their main bug bears with them are. “The court process is far too slow” said one with another commenting “I don’t want a judge with no sector expertise deciding what rent I should pay”. Both are fair points. However, perhaps now with a new pilot scheme about to commence, there could be some light at the end of the tunnel.

For 12 months from 1 December 2017, all uncontested lease renewal cases issued in the County Court at Central London will be transferred to the First Tier Tribunal (Property Chamber) who will actively manage the matters to deal with them swiftly. The Tribunal will issue standard directions providing for the draft lease to pass between the parties just once, experts’ reports on the rent to be exchanged and a hearing to be listed from just 12 weeks after the directions are issued. Whilst the Tribunal will offer a 3 month stay at the outset, it is unlikely to agree to any stay thereafter.

The Tribunal’s standard directions identify that the main issue between the parties is often the rent to be paid under the new lease. As such, the judge will sit with a valuer to provide assistance on valuation issues. This may give parties more faith in the determination process.

One point the directions do not deal with however is the exchange of witness evidence, which would be necessary if there are terms in dispute other than the rent. For example, what if the tenant wants a break and the landlord will not agree to one? Surely the Tribunal will need to hear witness evidence on that point to come to a decision as to whether to include a break right in the new lease. It appears the parties would need to make a specific application to the Tribunal for this to happen though.

We will need to see how the Pilot progresses, but I must say I am enthusiastic about it as I hope it will lead to matters being determined efficiently by the Tribunal and to parties seeking to resolve as many of the issues in dispute between them at an early stage.

To view the Practice Direction for the First Tier Tribunal Property Chamber, click here.

To view the Guidance Note, click here.

Paul Tomkins
Paul Tomkins
Real Estate Litigation

The Future of Property: Blockchain Technology

Written by Freeths on 13/11/2017

Traditionally used to underpin the use of the digital currency, Bitcoin, Blockchain technology is a method of recording data and creates a digital ledger of transactions, agreements and contracts. This innovative technology is being hailed as a ‘game-changer’ in a variety of sectors – from finance to the diamond industry – and could also be the way forward for the Real Estate market.

How does it work?

A Blockchain is made up of time stamped records put together in “blocks” and bound together chronologically in to a “chain”. A Blockchain is a ledger which is stored in multiple locations. Anyone with access to the ledger can update it and everyone else with access to the ledger will have their copy of the ledger updated at the same time. Construction, blocks gold silver concept building blocks

To look at the Blockchain, you will not only see the current record but every change to the record in the chain (a bit like a bank statement).

What are the benefits for the Real Estate Sector?

As abstract as this may sound, this technology would be useful in property transactions for the following reasons:

1. Transparency

All data necessary for a transaction is stored within the Blockchain and is easily accessible for interested parties. In terms of Real Estate, this could mean that the transaction history of a property could be followed through the Blockchain and could include matters usually explored in the due diligence process such as lists of refurbishments made to a building or projected costs associated with owning and running the property.

2. Reducing the risk of fraud

With a more transparent system and the ability to track the transaction history of land more easily, the risk of property fraud is reduced. The encryption process of each block in the chain means that each record is incorruptible and so forged ownership documents and false property listings would become a thing of the past.

The distributed nature of the Blockchain means that any fraudster attempting to amend a record would need to update every copy of the record in the chain stored in its multiple locations – the computing power required to do this acts a deterrent and with lengthy, complicated Blockchains would be virtually impossible.

3. Speed

Blockchains can be used to program smart contracts. Smart contracts are electronic agreements that trigger the execution of the contract automatically upon the occurrence of an event. For example, a transfer of title to a property could automatically take place upon receipt of the purchase monies in the Seller’s account.

How can it be used in the Real Estate Sector?

Land Registry

Given that records could be updated immediately on a purchase, lease or a mortgage then the time taken for the land registration process could be significantly reduced. This would reduce the problems associated with the ‘registration gap’ as discussed in our previous blog. Each property could be uniquely coded and linked to a secure user key held by the owner.

Property Management

A landlord or agency could manage a property portfolio using Blockchain ledgers. Smart contracts could be used to keep up to date information and to ensure proactive lease management. For example, certain dates could trigger action such as automatic rent reviews based on RPI increases.

Whilst Blockchain technology is an unfamiliar concept to most, with its increasing presence in other sectors building trust in the technology, it’s possible that we might unlock the benefits of Blockchain within the Real Estate Sector in the future. Given its success so far, it seems as though this technology could be the building blocks for property transactions becoming more streamlined, safer and more transparent.
Hannah Westcott 2015 H&S small (2)
Hannah Westcott
Legal Assistant
Real Estate Group …

The Future of Property: Watch this Space

Written by Freeths on 06/11/2017

Lots of things have shaped how people and businesses need and occupy space. Most of the time this is reactive. The sector responds to changes in customer demands and expectations. Gardens in new houses have become smaller as many people don’t want the hassle of maintaining a great vista beyond their patio doors.

Office space has changed from a segregated and partitioned feel with lots of closed doors, to open plan (settees are a must have…), minimal division between space and use of glass, Dyson Air Blades and other funky materials to ensure you’re ‘uber Google’. Linked to this is the development of ‘Smart Buildings’ which suit our every demand and need with more technologically-sophisticated properties. ‘Smart Cities’ could potentially have a major impact on the property sector and even more so in the way we work, however we’ll discuss that in a later blog…
Evolution man - technology

So what will change how we use and want to occupy space in the next 10 – 20 years? I’m not bold enough to make a prediction but I did read an article recently (admittedly from our friends on the other side of the pond) about how businesses must adapt to the expectations (and being frank, demands) of the ‘Millennial Generation’.

In short, Millennials want a greater work-life balance than the Baby Boomers or Generation X. They want to experience things and see new places. They will forgo more money and possessions and instead will strive for going to a continent they’ve not yet experienced or spending Christmas with their university friend who now lives in Colorado.

The article was really talking about how generational shifts will mean businesses need to totally rethink how they reward, engage with and ultimately employ their staff in the next 10 – 20 years.

I can’t help but think the ‘Millennial Factor’ will also shape how businesses use and take up space in the coming years. More flexible? Greater provision of services within space (like child care provision on site…)? If it can be proven that more flexible working on an individual level (such as working from home or different locations) leads to an increase in productivity, then perhaps more businesses may be encouraged to adapt. Could it be that less office space (and ultimately reduced overheads from utilities, rents etc.) with more people working remotely makes more business sense?

Just look at how us islanders have become Flat White lovers. We now have coffee shops on every corner like a Manhattan district and a lot of business meetings now are conducted with a Barista on hand.

Needless to say, watch this space….
James Clamp 2015 H&S large (3)
James Clamp
Senior Associate
Real Estate Group …

The Future of Property: The Sharing Economy

Written by Freeths on 07/08/2017

The Sharing Economy (where people share ‘assets’ via the internet) continues to grow with the associated issues of trust and regulation also making the headlines.

Airbnb is the giant of such collaborative consumption and allows anyone to list space (from studio apartments to castles) online. It is no longer just thrifty tourists using the service, but also business travellers and professionals looking for a different experience to hotels.
The advantage to ‘hosts’ are obvious – sharing their home helps to pay the mortgage. The website also provides another platform from which property owners can market second homes / investment properties. However, the disruptive effect on the hotel industry means that not everyone is quite so taken by the website’s success.

The rapid expansion of Airbnb since its inception in 2008 has inevitably resulted in the law playing ‘catch-up’ and there are therefore several legal issues to consider before becoming a ‘host’.

Mortgages – many residential arrangements prohibit subletting, whilst buy-to-let mortgages are normally predicated on the use of tenancy agreements with a minimum term of 6 months. Short term letting may breach the terms of existing arrangements and many lenders are struggling to keep up with this technology-based rental boom. If borrowers break their bank’s rules, they risk a rate rise, a credit file black mark and in extreme cases, the lender could seek immediate repayment of the entire mortgage debt.

Insurance – if ‘hosts’ do not tell insurers of their plans they risk invalidating their cover. Insurers may not pay out on the basis that such non-disclosure affects the overall level of risk. Some will now cover Airbnb hosting and others provide cover as an add-on. Airbnb itself offers a ‘Host Guarantee’ (with cover of £600,000) which provides protection against guest damage, but does not cover cash, valuables or pets!

Leaseholders – tenants should check their leases to see whether there is an absolute prohibition against alienation or use for any purpose other than a private dwelling.

In the recent case of Nemcova v Fairfield Rents Ltd the Upper Tribunal ruled that short term lettings via Airbnb breached such a covenant. It ruled that for a property to be considered an occupier’s ‘private residence’ there must be a degree of permanence going beyond being there for a weekend or a few nights a week. It should be noted that the ruling does not affect people renting out a room whilst they’re also staying in the property, but rather affects those who rent out their entire property.

Planning - if homes are let out for more than 90 days per calendar year in the Greater London area, planning permission for change of use will be required. Airbnb employ a system which will automatically prevent a property from being listed for the remainder of the year once the 90 day limit has been reached. However, the 90 day limit applies if you are using other home sharing services as well, so hosts should take responsibility for their own listings to avoid risking enforcement action being taken by the local authority. 

Using Airbnb may appear simple – just post your property details online – but the reality is more complex. At the very least hosts should check the terms of their lease, mortgage and insurance policy prior to listing.

Our blogs are only a summary of and / or commentary on the law in force at the present time and are not exhaustive, nor do they contain definitive advice. Specialist advice should be sought from a member of the Freeths Real Estate team in relation to any queries that may arise.

Ben Gant
Real Estate Group…

UK Gears up for the General Data Protection Regulation

Written by Freeths on 29/06/2017

Amidst the political and legal turmoil which surrounded the Queen’s annual state opening of Parliament last week, it is unsurprising that when she reaffirmed the UK’s commitment to modernising the nation’s data protection and online privacy legislation, the media’s reaction was, to say the least, muted. For those who work in the data protection field, the announcement came as no particular surprise – the General Data Protection Regulation (“GDPR”) is due to come into force in less than a year, and HM Government had already announced that the Regulation would find its way into the UK’s domestic law in some form. For any business which stores personally-identifiable information about its employees, clients or customers, the GDPR represents a significant compliance burden, and with fines of up to €20 million or 4% of global turnover (whichever is the greater), it is not one which can be safely ignored.
Lock Button

The most significant misconception about the GDPR is that it only affects companies which do business directly with consumers. This is not the case – data protection law regulates the collection, storage and processing of any data which could identify a living individual. Where your business holds identifiable information relating to any individual (e.g. landlords, tenants, one-man-band tradesmen or other contractors), the GDPR will apply – and one thing no business wants is to be the subject of the next front-page headline about data breaches and regulatory fines.

Although getting to grips with the GDPR can be daunting, the following key questions (though a far from exhaustive list) may help you focus on key compliance areas:

1. Breaches: How secure are your IT systems and processes, and if your personal data is hacked, would you know – and how quickly? Under the GDPR, all significant data breaches must be reported to the Information Commissioner within 72 hours.

2. Processors: Where you store personal data off-site, or where you pass it on to other companies e.g. property maintenance firms, as part of the services you provide to your clients, do the contracts you use properly govern how personal data is handled? The GDPR requires that all arrangements between businesses and those who process data for them, be captured in a written agreement that includes a range of specific criteria.

3. Marketing Consent: In order to send e-mails about your services to individuals, you will need specific and clearly-communicated consent. You will need to be able to prove that you have this consent, and where you got it. If not, most of your carefully-aggregated marketing data may be unusable after 25 May 2018.

4. Knowing your Data: Do you have a clear picture of how personal data flows through your organisation, and is this captured in an easy-to-find document? The GDPR requires not only that you be compliant, but that you are able to demonstrate that compliance at every stage, in the event that the Information Commissioner’s Office comes calling.

GDPR compliance takes time – starting now could avoid a costly surprise later on.

Matthew Johnson

Deryck Houghton

Birmingham on the brink?

Written by Freeths on 26/06/2017

In a brief departure from our current series: “The Future of Property”, Richard Beverley considers who can legitimately lay claim to being the UK’s second city.

Whilst the Manchester/Birmingham debate is far from resolved, in recent years the feeling has been that Manchester ‘shouts louder’, is achieving more and has ‘its act together’. On the flip side, whilst Birmingham has more natural advantages including its central location and proximity to London, it hasn’t been pulling its weight.Night Scene

Well, that may be about to change…

At long last there is genuine collaboration between Birmingham and the other large West Midlands major conurbations under the West Midlands Combined Authority heralding a regional approach with a Birmingham focal point. Add to that a new West Midlands Mayor (ex John Lewis boss, Andy Street) who understands business and seems determined to get things done.

The Brexit challenge is obvious to all and, indeed, the chickens are already coming home to roost. Greenfield investment (by companies previously without a UK base) fell an alarming 42% last year. That is worrying, but it is noteworthy that the West Midlands was the best performing region after the South East.

The arrival of HS2 is getting ever closer (2026), but on the more immediate horizon for Birmingham is the Commonwealth Games 2022 bid (where Birmingham goes head to head with Liverpool/Manchester) and the city also has its hat firmly in the ring so far as the relocation of Channel 4 is concerned (as does Manchester/Salford – of course).

What does this mean for the property investor/developer?

The growing population, particularly in respect of young people (Birmingham is, according to recent surveys, the youngest city in Europe) means that there is inevitably going to be a rising demand for housing. This is at all levels: from first time buyer to student/young professional renters, to well-paid employees of the likes of HSBC and Jaguar Land Rover. Whilst there are obvious questions as to supply meeting demand, there is also the question of whether the right type of housing is being developed to suit those coming into the area.

For investors, success breeds success. If the region can deliver on its quest to create more and better paid jobs (and all the indications are that it will) then not only will the new entrants need somewhere to live but also somewhere to work, shop, eat, drink etc. Again this raises questions as to whether what is currently available/in the pipeline, is fit for purpose in terms of meeting the anticipated demand from what is already a more sophisticated/cosmopolitan demographic than Birmingham has traditionally been used to.
Richard Beverley H&S small
Richard Beverley
Managing Partner (Birmingham)
Real Estate Group…

The Future of Property: Crowdfunding

Written by Freeths on 15/06/2017

Once upon a time, property funding meant a trip down the local high street to arrange a mortgage from your friendly bank manager. Over the years, more imaginative funding structures have emerged. Nowadays, it is common for property finance to be raised by private equity injection, joint venture schemes, sale and leasebacks, mezzanine funding to name but a few.

In recent years, with the advent of social media and the increased immediacy of the dissemination of information; crowdfunding has emerged as a viable source of funds. With the rise of platforms such as Kickstarter, Fig and MusicBee – crowdfunding made its ascent in the creative industries such as independent film, music and video games. More recently, property finance has also been raised by crowdfunding methods.

CrowdfundingIn short, crowdfunding is the financing of projects or ventures by way of widespread “donations”. Often, each donation itself is of a modest level, but the intention is to attract hundreds or even thousands of donors. Whilst historically a US phenomenon, in 2016 Forbes estimated that in the previous year crowdfunding raised US$34bn worldwide. Donations are made and registered primarily by online platforms, with projects and ventures gaining traction by word of mouth and social media interactions.

There are many types of crowdfunding models. The main types are ‘rewards’ crowdfunding where donors receive a product or service in return for investing or ‘equity’ crowdfunding where donors receive shares of the investee company. More recently, there has been the rise of ‘debt based’ crowdfunding where investors buy securities in a fund which then makes loans to borrowers with investors making profit by way of interest.

How does this relate to real estate? A sector notorious for due diligence and security. The emergence of real estate crowdfunding centres on a number of investors pumping funds into a central pot which is then used to fund property loans backed by mortgages. The loan could be used for property acquisition, development or investment. The crowdfunding platform will likely set out the terms of return on the mortgage and the fund will likely have a core team of advisors (including surveyors and lawyers) retained; their fees often being paid from the crowdfunding coffers.

To date, as you might expect, real estate crowdfunding is mainly seen in the US but is working its way further afield. So far, crowdfunding has been mainly seen in marque and creative real estate developments or high profile schemes that somehow do not tick the usual funding boxes (perhaps due to high risk).

Real estate crowdfunding investors are often investing relatively modest amounts as part of a wider network and therefore expect a modest return. It therefore has its limitations in terms of the interest and attitude of large scale property investors and REITS. The reduced ability to undertake due diligence could also be a barrier to the ascession of crowdfunding in the real estate arena.

It is likely that the UK and Europe will see an increase in real estate crowdfunding over the next few years – but in all likelihood only in certain specific transactions and deals.



Thomas Golding
Real Estate Group…

The Future of Property: Ditching the Daily Commute?

Written by Freeths on 06/06/2017

As Proptech gains momentum in an industry which is commonly viewed as being  slow to embrace new technologies, why do most of us still work in the office? The use of technology to facilitate hot-desking is already significantly reducing the space required per person by businesses operating in the professional services industry. However, such advances in technology do not yet appear to have led to the majority of us working from home or out of the office. So what is stopping us from doing so?

The advantages of remote working appear to be very appealing:

1. No commute – not only does this mean not being squashed, squeezed and stressed on the way into work, but it also means more money in your pocket: no travel costs, no work wardrobe and lunch and coffee at home.

2. Work at your own pace – more freedom to choose how and when to work on projects (provided of course that they are delivered on time). Whilst this requires a degree of self-discipline, studies have shown that remote workers are more productive than their office-based counterparts.

3. More time – aside from the obvious time saving in relation to the daily commute, working from home provides parents with greater flexibility to drop their kids off at school or to find time to nip out for a walk / jog to ‘re-charge the batteries’. All of this can help us improve and / or maintain the all important ‘work-life balance’.

So why is it not yet the norm?

1. From an employer’s perspective, perhaps companies and managers want to be able to see their employees. Whilst employers may not want to admit it, it could be that there is an underlying lack of trust. If this is the case, then perhaps companies need to provide managers with the training required to enable them to better assess output rather than input?

2. On the other side of the coin, it could be that employees are concerned that a lack of visibility will adversely affect their career progression. Is it still the case that employees need to spend more time in the office than others to get promoted? Is working longer working harder?

3. More generally, perhaps people want regular social contact and are concerned that working from home may result in feeling isolated. Additionally, whilst the technology to facilitate meetings over the internet has been around for a long time, many still believe that face to face contact is best as being able to physically sit and converse together better enables us to properly gauge people’s true reactions and thoughts.

Whilst there are certainly some disadvantages to working remotely, there are also many positives both in terms of productivity and economics (for individuals as well as businesses). It may well be that commuting becomes a thing of the past as businesses commit more time and effort into putting the necessary systems in place to facilitate remote working. This will further accelerate changes in the workplace as offices become more tech-enabled and based around services (such as connectivity, data harnessing and user experience) rather than space.

Something to think about when you’re stuck in traffic on the way home from the office tonight…

Ben Gant
Real Estate Group…

The Future of Property: PropTech (Guest Blog)

Written by Freeths on 30/05/2017

Judging by the 812 attendees at this year’s FUTURE: Proptech event in London, the future may already be here. The conference was originally founded in 2015 and has become the leading European event for those seeking to explore technology and innovation in the real estate sector.

I attended the conference in London last year, just as the term ‘PropTech’ was making its way into the institutional lexicon, and even then it was a large event with some 400 attendees. Notably however, most seemed to come from the ‘Tech’ side of the equation, with a strong focus on disrupting the real estate industry.

Twelve months is a long time in technology though and on May 4th this year, numbers had more than doubled with significant presence from landlords, solicitors and advisors from the commercial real estate sector. Clearly the C-suites of property consultancies and institutional investors are coming alive to the increasing importance of technology adoption in our sector.

At Aberdeen Asset Management, we’re actively monitoring developments in the PropTech arena and have formally launched a Global PropTech Team. As an institutional investor we are keen to pursue systems and strategies that enable us to be more agile, responsive and efficient, but the sheer number of new systems coming on-stream is astonishing, and often difficult to keep up with. So much so that we are already seeing the creation of PropTech advisory firms and the appointment of CTO’s (Chief Technology Officer) and Heads of Innovation within traditional property teams.

Wireless, technology, social media, ipad, phone, mobile

In terms of discernible trends, there are a few areas that gained repeated focus at FUTURE: PropTech and seem to garner press attention most weeks.

  • Big Data – can we gather data from real estate and analyse it to reveal patterns and trends? Is that data of commercial value?
  • Space as a Service – it’s no longer enough to just provide ‘space’. Modern tenants expect landlords to provide community services and to think more from a hospitality viewpoint than a rent collection one.
  • Collaborative Working Space – community services writ large. Flexible leases, attractive fit out and the ability to network and collaborate with similar businesses is critical for many occupiers.
  • AI and Machine Learning – refining property searches, deploying chatbots to engage with potential occupiers and providing proactive property management services are just some of the ways that AI is being used in CRE.
  • Virtual and Augmented Reality – a game changer for property viewings and buying off plan? Do we need offices if virtual meetings can take place from anywhere in the world?
  • Intelligent Buildings – can a building report it’s ‘health and wellbeing’ and that of its occupiers? Air quality, temperature and noise levels can all be measured.
  • Disintermediation – it may not be the end of the traditional agent but new skill sets will certainly be required in a more transparent, digitised letting process.

In an overwhelming sea of options though, it is worth remembering that PropTech is just one part of the property industry (albeit increasing in size each day) and focusing on why we use technology in the first place. The pace of digitisation is relentless, but for the time being, property remains a ‘people’ business and as we were also reminded at FUTURE: Proptech: “digital can’t do empathy”. On that basis, we must aim to leverage technology as strongly as we can but always with the aim of positive disruption, where we continually improve the space and service that we provide to our tenants and where we build relationships that will hopefully outlast the latest piece of tech.

Stephen Walker Corporate 090117
Stephen Walker
Deputy Head of Asset Management UK
Aberdeen Asset Management PLC



Stephen Walker is Deputy Head of Asset Management for the UK property department and Chairman of Aberdeen’s Global PropTech Team. He carries out investment and strategic asset management tasks and leads a team of asset managers responsible for £11.6bn of direct property assets. Aberdeen Asset Management has £20.4bn of direct property under management globally.

The Future of Property

Written by Freeths on 22/05/2017

Hot on the heels of our “Practical Property Guide” blog series is our new series “The Future of Property”.

We will be looking at how the property sector might be influenced by the latest technology and how this will impact on the way we work and transact in the years to come. “PropTech” (the adoption of hardware or software technologies to solve problems relating to property) is set to become one of the property sector’s buzzwords over the next few years as a wave of new property technologies wash over mainstream property transactions.
Evolution man - technology circles
PropTech has already grown into a multi-billion pound sector and created several household names (think Nest Labs and Airbnb) and is set to continue its rise to prominence in a property world that is often criticised for lagging behind in the adoption of new technologies.

The series will cover topics such as remote working, crowd funding, online transactions and the use of virtual and augmented reality and will look at some of the developments that are set to change the property landscape.

Whether or not businesses will survive and thrive in this brave new world will depend on their ability to adapt to these emerging technologies and we hope our new series will get you thinking about the challenges and opportunities ahead.

Sean Hallam
Real Estate Group…