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.

TMG

 

Thomas Golding
Partner
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
Solicitor
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@aberdeen-asset.com
www.aberdeen-asset.com

 

 

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.

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Sean Hallam
Solicitor
Real Estate Group…

500 and Counting…

Written by Freeths on 17/05/2017

Our National Head of Real Estate, and current IPF Chairman, Darren Williamson kicked off the Annual IPF Midlands Lunch 2017 in Birmingham last Friday with a rousing introduction all about the IPF Midlands ‘Alternatives’ theme.

IMG_1043With over 500 guests in the room, and despite the current uncertainties around the UK general election, Brexit negotiations and the emergence of various new world leaders, the mood was broadly optimistic.

After dinner speaker Julia Hartley-Brewer got some cheers for her tales of a politician’s abruptness; and generally went down a storm. So much for “Have I Got News For You” Julia…

Darren Williamson H&S large
Darren Williamson
National Head of Real Estate
Real Estate Group
darren.williamson@freeths.co.uk…

Springing Forward

Written by Freeths on 28/04/2017

Happy New Year! Well, happy new financial year that is. Having announced the most successful financial performance (2016/17) in Freeths’ history, we’re now into the new financial year with a desire and commitment to further build on those achievements.Property Week

What better time to take stock, reflect and refresh? Among other initiatives, the new financial year signifies the commencement of our new advertising campaign in Property Week that demonstrates our innovative, fresh and interactive approach to service delivery.

In conjunction with Property Week, we are pleased to also announce the launch of our PropTech Survey - click here to take part. In our increasingly digital and connected world, it is undoubtedly going to be the case that technology will play a fundamental role in the delivery of real estate services across all professional disciplines. We are excited to see the results of our survey in due course.

We’re also at the end of our successful Practical Property Guide 2017 blog series. Many of you commented and interacted with us on our articles, and we hope you found them helpful and useful for your day-to-day real estate practice. In the coming week, I will be formally introducing our next series – The Future of Real Estate. Linking to our PropTech Survey, we’ll be looking at what the future holds for us all as real estate practitioners and professionals.

More on that soon, but in the meantime try to enjoy the Spring weather (!)…

TMG

 

Thomas Golding
Partner
Real Estate Group…

Deregulation – A Simpler Life?

Written by Freeths on 27/04/2017

As from 6 April this year, registered providers of affordable housing (“RPs”) are no longer required to obtain the Homes and Community Agency’s consent to disposals or mortgaging of housing stock. Less paperwork – hurrah!
Man & pile of paper, workload
For lawyers, it does indeed make life a lot simpler as we no longer need to worry about restrictions contained in section 172 of the Housing and Regeneration Act 2008 (amongst other requirements), but for RPs it is a different matter altogether.

The new system is one of notification. In most cases only quarterly reporting will be required rather than the previous transaction by transaction basis – but the guidance makes it clear that whilst RPs are now only expected to notify the HCA rather than seek consent, the HCA still expects RPs to act within the boundaries of the regulatory framework. In particular, where an RP is disposing of social housing, the HCA expects the following:

• To protect social housing from undue risk.

• To adhere to all relevant law and compliance with governing documents.

• To be accountable to tenants and carry out consultation with tenants when considering a disposal which would mean a change in the tenant’s landlord or changes that affect tenant’s statutory or contractual rights.

• To achieve value for money in how social housing is used.

As Fiona MacGregor, executive director of regulation at the Homes and Communities Agency, recently stated “this basically transfers quite a lot of the risk from [the HCA] to the sector. RPs have got to think carefully about what they are doing and whether it complies with their own rules, but at a much more strategic level about the long-term reputational risk”.

Only time will tell how well the new system will work.
Sarah Rowe H&S small
Sarah Rowe
Principal Property Manager
Real Estate Group…

Planning Permission: Drawing a line under Copyright Infringement

Written by Freeths on 24/04/2017

In a recent High Court case (Signature Realty Ltd v Fortis Development Ltd and Beaumont Morgan Developments Ltd) the court ruled that a property developer (Fortis) had infringed copyright in an architect’s drawings by using them without having commissioned the drawings and without having a licence to use them.

Background

The Claimant (Signature) identified a site in Sheffield city centre suitable for development into a block of flats for student accommodation and engaged architects, Corstorphine & Wright (“C & W”) to prepare drawings for the site. Signature obtained planning permission based on C & W’s drawings, but were unable to complete the purchase and development of the site. The site was subsequently sold to Fortis who developed the site in accordance with C & W’s plans.Architect Diagram

Although Fortis did engage their own architects, a condition of the planning consent required the development to be carried out exactly as illustrated in C & W’s drawings. The drawings were owned by C & W and were published on the Sheffield Planning Portal with a copyright notice limiting their use.

After Fortis purchased the site, C & W assigned the copyright in the drawings to Signature to enable them to bring a claim against Fortis for infringement of copyright. Signature claimed that copyright in the drawings had been infringed in a number of ways, including the construction and development of the site.

Judgment

The judge began by ruling that there are no statutory or intellectual property rights in a planning permission. The judge ruled that Fortis had infringed Signature’s copyright in the drawings on several grounds, including developing the building in accordance with the drawings. The judge made an order for an enquiry as to damages or an account of profits to be determined, but ruled against an order for additional damages. The level of award pursuant to such enquiry is still currently awaited.

Conclusion

This case is a warning to all developers of a potential issue which may arise when buying land which has already been granted planning permission. In order to avoid infringing copyright in an architect’s drawings it is essential to obtain a licence to use such drawings or obtain an appropriate assignment of copyright. If the appropriate licence or assignment cannot be obtained, then beware of potential copyright infringement…
James Woodcock 2015 H&S small (1)
James Woodcock
Trainee Solicitor
Real Estate Group…

Let your Light Shine Through

Written by Freeths on 10/04/2017

In a recent Court of Appeal case (Ottercroft Limited v Scandia Care Ltd and Dr Mehrdad Rahimain) the Court unanimously upheld an injunction to prevent a minor interference with a right of light, forcing the developer (Scandia) to alter, replace or remove a metal staircase it had erected as part of development works.

Background:
In 2011 Scandia undertook redevelopment works to its property without first consulting with its neighbour, Ottercroft, and without complying with the Party Wall etc. Act 1996. Ottercroft corresponded with Scandia and requested various undertakings in connection with the redevelopment works along with working drawings, neither of which were provided. Light Pic

Ottercroft made an application to the court seeking declarations about a claimed right to light, an injunction preventing Scandia and Mr Rahimain (Scandia’s director) from interfering with that right and other relief. In response, Mr Rahimain provided undertakings on his behalf and on behalf of Scandia which included an undertaking not to interfere with Ottercroft’s right to light.

Despite giving the undertakings, the redevelopment works continued and Scandia constructed a metal staircase which infringed Ottercroft’s right to light. At first instance the court ordered Scandia and Mr Rahimain to alter, replace or remove the staircase so that it ceased to interfere with Ottercroft’s right to light, even though the court accepted that the interference was only minor.

Scandia and Mr Rahimain appealed against the decision. The Court of Appeal unanimously upheld the decision to grant injunctive relief for the staircase to be taken down.

Lessons to be learnt:

1) After the recent decision of the Supreme Court in Coventry v Lawrence, many expected that it would be more difficult to persuade a court to grant injunctive relief to prevent interference with rights of light and that monetary damages would be more readily awarded. The decision in the Ottercroft case means that this may not necessarily be so.

2) The conduct of the Defendants (which was described as being ‘high handed’ and ‘oppressive’) appears to have played a significant role in the decision of the court to grant injunctive relief, even though the court accepted that the interference with Ottercroft’s right to light was ‘minor’. It would therefore be prudent to consult with any adjoining landowners whose rights of light may be affected by any proposed developments rather than ploughing ahead and worrying about the consequences later.

This is a complex area of law and if you are planning to undertake development works which affect light to adjoining properties, you should seek specialist advice before commencing works so that your plans can go ahead come rain or shine…

Beth Jenkins H&S small
Beth Jenkins
Solicitor
Property Litigation Group…