February e Newsletter

Welcome to our second e newsletter of 2011.

So much is happening in the property world that on occasion it is hard to decide which elements we should comment on. However here are a few which may be of interest.

We tackle a growing view that there may be a case to replace the open market rent review with a review linked to the Retail Price Index. We also take a look at draft proposals that allow local authorities to have a greater say in determining the level of business rates as a way of stimulating growth in the local community. How to introduce greater energy efficiency may allow an opening for the energy companies to fund such works. We also look at the increasing scarcity of water, the need for air conditioning inspections and finally the rules governing CCTV – not everyone seems to comply.


1. Is the Open Market Rent Review on the wane?

Recent reductions in the average length of lease terms, favourable tenant leasing conditions and the use of break clauses have led to increasing pressure on the traditional upwards only, open market review as a standard lease clause.

Traditionally, property is valued using a few primary factors one of which is the level of rent achievable. Where it is anticipated that rental levels will increase, due to open market forces of supply and demand, the value of an investment should appreciate and this is particularly important where the property is purchased with the use of bank finance.

However, owners who are free of debt restrictions are able to be less constrained in the way that they structure leases and the methods that they use to ‘review’ rent and, coupled with the introduction of the ‘Code’ (the Code for Leasing Business Premises in England and Wales) much greater emphasis is placed on looking for flexible alternatives.

So what are they and how widespread is this move away from the traditional method?

Looking at European models, they tend to favour Index-linked increases and in a low inflationary environment this may be acceptable to occupiers, but now, with inflation rising so rapidly one can imagine certain resistance in new lease negotiations. It must also be said that we are a long way from agreeing terms that would see a reduction in rent should inflation be negative.

So perhaps a fixed increase method is more equitable whereby both parties agree that the rent will rise to a pre-agreed figure after a certain amount of time, as a way for the Landlord to try to keep pace with inflationary pressures and rising rents and providing certainty for the occupier too. Some Landlords, however are not prepared to restrict themselves to such certainty and would rather speculate on rents rising, as has been forecast in Central London Office markets, for example, thereby trying to insist on regular open market reviews.

Turnover rents have often been popular in the Retail sector whereby the rent is linked to the trading success of the tenant, but again, in a downturn, this may not be great news for the landlord who owns retail centres with decreasing footfall and trading conditions, but it does mean the overall success of the Centre is shared with the landlord taking a keen interest in making the trading environment right.

As can be seen, timing and market conditions play an important role in rent review negotiations, but alongside this sits a trade-off in lease terms whereby concessions in some clauses (service charges/reinstatement/shared energy costs etc) might be appropriate for some parties dependent upon their view of the future; thus, the review of rent might not be the centre-stage issue that it once was.


2. Local Government Resource Review – It may affect you?

In January 2011 the Department for Communities and Local Government issued an Impact Assessment aligned to the Localism Bill concerning Discretionary Business Rate Discounts. We said in our November newsletter that we would follow events arising from the Localism Bill and this is one which may have an impact on business rates.

Currently business rates are collected locally, passed back to Central Government and then redistributed back to the local authorities as part funding of their services. The Government is looking at ways of allowing the local authorities the ability of influencing these business rates locally in an attempt to stimulate growth.

The ‘Barker Review of Land Use Planning’ identified that UK has some of the highest occupational costs in the world and that where industries are property dependant they will find it hard to compete and also stifle new business entry. The Government believes that by reducing this burden businesses may have more money to invest in their company’s expansion and so help to fuel a recovery in the economy. However, they do also accept that where rates may be lower this could assist in supporting increased rents and so the occupier may lose out on the benefit.

This would be a radical change to the current system and may see some businesses prosper as a result of the changes however as it’s just a discussion paper at the moment it may not happen, so let’s wait and see.


3. Leaving the cost of energy efficiency behind when you move...

The Energy Bill is making its progress through Parliament and one aspect which will grow in prominence is their ‘Green Deal’. As part of the Coalition Agreement’ the Government made a Commitment that: “through our ‘Green Deal’, we will encourage home energy efficiency improvements paid for by savings from energy bills”. It is intended that the Green Deal will also help to enable improved energy efficiency in non-domestic buildings. So, broadly how will this work?

The Green Deal Finance develops a new legal mechanism whereby the obligation to repay the costs of the energy efficiency measures is attached to the property and not the bill payer. This basis will enable the energy provider to develop various finance packages that can be utilised for projects that will improve a property’s energy efficiency. The over-riding principle is based on the assumption of making sufficient savings by introducing more efficient technology. So it is feasible that people can move out of a property and not only pass on the benefit of the works but also the costs involved on their installation. At the same time it is possible for a company to move into a property and inherit the costs associated with earlier works.

The dilemma a property owner has faced in the past is where do they get the finance from to undertake energy saving projects? We at TAP can see that this initiative from the Government will answer that question with one caveat; it must be able to show that enough savings can be achieved as a result of these improvements in the property.

This Green Deal will have provisions attached which may include:

The original and proposed assessments must be accurate to provide the comfort of knowing how much energy will be saved.

Only accredited measures can be installed.

Limits on how much finance is available.

The ability for the energy providers to collect the agreed repayment amounts

When is it hoped the Green Deal may begin? Well the literature on the subject suggests the second half of 2012 so let’s wait and see how this initiative develops.


4. Water; when will it become a scarce commodity?

The pressure on water resources is growing and according to the UN World Water Development Report, the quantity of water available could decrease by 30% in the next 20 years as demand increases. In the UK it is suggested that demand will be influenced by both climate change and population growth. With the population expected to increase to 65 million by 2018 (a rise of 5 million from 2008), this will lead to greater household use which will increase the strain on the available water. All this will lead to the need to have better water management both in houses and commercial premises.

Our ability to take the supply and availability of water for granted is no longer acceptable and Fiona Mannix, Associate Director of the RICS Land Group comments ‘Fresh water in the UK is now more precious than ever for its extensive use in essential activities.’ This view is supported by the Environment Agency (EA) who believes it is in part due to the increase in climate temperature and changes to the rainfall pattern. They say ‘Summers are likely to get hotter and drier, significantly increasing demand for water, and winters warmer and wetter’. Coupled with the change in the weather pattern whereby Britain is subjected to increased intensive rainfall which produces more frequent surface floods, the ability of water to infiltrate into vital ground stores is likely to decline.

With the ability to capture water efficiently ever decreasing, the water companies are having to try harder to extract this resource from the underground basins which in itself can cause further environmental damage. It won’t be long until the tables turn with the water companies looking to the consumer to be more prudent in how they use this vital resource. New developments, whether they are houses or commercial buildings, are already starting to incorporate water harvesting ideas such as using grey water for flushing toilets but more will be needed. This won’t be enough and before long there will be a need to retrofit water saving equipment to existing properties. TAP would advocate the need for managing agents to begin looking at ways of conserving the use of water in buildings as there is still time to reflect on the benefits of various projects in an attempt to meet this challenge head on. However, in the next decade the importance of water will become increasingly important in all of our everyday lives.


5. Air Conditioning Inspections – Are you too late?

You may have heard of the need for Energy Performance Certificates (EPCs) in both Commercial and Residential property, but the same EU Directive that brought you those also contained an obligation on the company who controls the technical functioning of Air-Conditioning systems to have them inspected by a certain deadline. Why? To make sure they function properly and, where possible, to reduce energy consumption.

For smaller systems, that deadline was January 4th 2011.

The key points to consider are:

Are you the company responsible for the system’s operation?

Is the system’s output over 12kW (i.e. the power required to air-condition an office or retail unit of approximately 1,500 sqft)

…if Yes to both then you should look to appoint an accredited assessor to inspect the system, with the intention of ensuring that it is functioning as efficiently as possible in a general drive towards maximised Energy Efficiency. The Assessor’s Report will indicate where the system can operate better.

You may not require a survey as in most multi-let buildings it will be the Landlord’s responsibility to ensure the central air-conditioning plant conforms to current legislation but if you have installed a separate stand-alone system, or occupy the entirety of a building, you are likely to be the responsible party.

For large systems, i.e. those with outputs greater than 250kW, the system should have been inspected by January 4th 2009; in both cases, Trading Standards Officers can and will check that Inspections have occurred, and fines will be applied for non-compliance.

For more information view our Guidance Note or alternatively contact us to discuss how you can arrange an inspection.


Question and Answer – CCTV; what are the rules for filming?

The UK is a heavy user of CCTV equipment and your image is probably captured and held on numerous systems as you go about your daily routine. Many of us have come to accept this ‘Big Brother’ society without question and recognise it’s a common means of keeping property and the environment safe. So what are the rules governing the operation of a CCTV system?

Helpfully the Information Commissioner’s Office has issued the CCTV Code of Practice (‘Code’). The ‘Code’ has been drafted to help ensure that good practice standards are adopted by those who operate CCTV systems and covers certain elements such as how to capture, store and when is it appropriate to release images to a third party. By doing so it overlaps with the requirements of the Data Protection Act 1998 which also plays a part in how information is managed.

For those who operate a CCTV system they must consider who is responsible for the control of the images and how it is used; they must notify the Information Commissioner’s Office that they are the data controller, and put in place a clear procedure on how the images should be handled and stored in practice.

Importantly an operator of a CCTV system must put in place sufficient signage which alerts a person they are in an area which is under CCTV surveillance. The signage has to be descriptive enough and mention who is operating the system, why it’s being used and who to contact should you wish to view the images.

The operator must also ensure that any information stored is done so in a way that maintains the integrity of the images. This then enables the information to be of a good standard should it be needed as evidence in court but there is no time scale for the length of time images must be held.

What everyone wants to know is can they view the images that have been recorded? Well, in general the answer is yes albeit an organisation can reject such a request if they believe there could be a risk to other people. Interestingly where you have had your image recorded, such as a shopping centre then those people have a right to have a copy of those images and these must be provided within 40 days of the request. The organisation can charge you for this service but the maximum charge is £10.


Should you want more information on this subject then please feel free to call us on 0800 865 44 50.

January e newsletter

Editorial:

Welcome to our first e newsletter of 2011.


We continue to draw your attention to topical issues affecting the occupation of commercial property and intend to complement these with Case Studies throughout the year which illustrate some of the points that we make, and in some instances with worked examples of how certain savings can be made.

Initially,however we start the year off with articles on:


Interest free Energy reduction loans, the impact of League Table positions for those within CRC, a VAT ruling for Hot Food retailers, a glance at the Service Charge Code, workplace and the mobile workforce and a Q and A on Greenhouse Gases. We hope you find it all of interest.




Would you find an interest free loan helpful?

2011 will see the start of the CRC Energy Efficiency Scheme and with it a renewed focus on driving down energy usage. Energy prices continue to rise with E-On being the latest to increase residential tariffs. Often, to reduce energy usage requires capital investment but in these austere times it can be difficult to get funding; why not take a look at the Carbon Trust?


Regardless of what business you operate, lighting may represent up to 40%1 of your annual electricity costs and so working towards improving the efficiency of your lighting system could provide worthwhile savings. Whether you are thinking about replacing all your light bulbs for a more efficient element or taking a more long term view and doing this as part of a larger energy efficiency overhaul considering a loan may prove beneficial. A small business can apply for a loan ranging from £3,000 - £100,000 but there is an eligibility criteria that will need meeting. The Carbon Trust has issued a useful eligibility flow chart that will assist in determining if you can apply for a loan and we have added a link to our Environmental page on our Knowledge Centre website.


So are you eligible?

• All Small or Medium-sized Enterprises (SME)
• Private sector organisations can apply for a loan. 
• Trading for at least 12 months

To qualify as a small or medium company you have to employ less than 250 full time employees. The loan is only available for projects that reduce CO2 emissions and £1,000 is available for every 2.5 tonnes that the project will save per annum. There are a range of projects the Carbon Trust would be looking to provide support for and these include Air conditioning and lighting, amongst others. A full list can be found on their website (www.carbontrust.co.uk).

With the growing need to be conscious of your energy usage, being aware of these types of services is important and where possible we will bring you more information on other initiatives as and when we are made aware of them.

Footnote - 1Carbon Trust Technology overview on Lighting



Will the CRC league table change the way you procure services?

Together with E.On, Imperial College Business School have researched what effect the Carbon Reduction Commitment Energy Efficiency Scheme (CRC) league table will have on business’ reputations. To be captured by the CRC programme a company has to have at least one half hourly electricity meter and be spending in excess of £500,000 on energy per annum. With this said, would you change your procurement habits based on a company’s league table position?


It would seem that high profile brands will need to be aware of their shoppers’ habits and always be conscious about their league position in the CRC league table, the first of which is planned to be published in October. It would be prudent for many well known brands to aim to hold a position as high as possible, with a minimum being the attainment of the highest rank amongst their peers. Those companies that are less well known may not be as concerned over their position unless they form an integral part of a procurement process where their environmental attributes are considered significant enough for scrutiny.


An interesting point to note was that those companies where their parent company name differed from their trading name felt their results would be cloaked in anonymity. However, how long this secrecy could last couldn’t be said and it would only be a matter of time before they would be exposed.

The conclusion to the Business School’s research is that a league table position IS likely to effect how customers perceive the company.Similarly,a company’s ethical approach to manufacturing could deal an adverse blow to their customers buying habits. Stacey Sunderland, an MBA student at Imperial College Business School, has found that some firms will take the league table extremely seriously and one large energy company said they were committed to being in the top quarter of the league table “at any cost”. Their fear of losing credibility was enough to warrant the expenditure. Consulting firms also felt they were being watched and believed that their reputation and validity were on the line.

Although the jury is still out it seems that people may vote with their feet and be more selective in how they shop.




Please Sir, can I have some more...VAT?

Whilst all the recent talk is all about the 2.5% hike in VAT to 20% from January 4th, a recent case has highlighted the importance of the definition of ‘HOT FOOD’ for VAT purposes with implications for TakeAway food operators and their rent negotiations.


The case involved the food retailer Subway and their efforts to avoid having their products deemed to be ‘’hot food’’ so that their supplies would be Zero Rated for VAT purposes. As their food is prepared for consumption off the premises it was seldom heated up but was stored, in what the Tax Tribunal claimed, was at a temperature above that of ambient air at the point of supply.

It is this specific point which, unfortunately for Subway, led the Tribunal to find that their heated products fell within the ‘hot food’ definition in the VAT Act 1994, and accordingly were Standard Rated. As a result Subway faces a bill for retrospective VAT on hot supplies made in preceding years and they now need to factor in ongoing VAT for such supplies in the future; now at 20%.

The case raises issues for both the supplier/Tenant and their Landlord, as there will clearly be turnover and profit implications which could become a negotiating point in certain leases, notably Turnover leases. This is something which is worth both parties considering.




The Service Charge Code; does it need revising?

The RICS has recently closed the door on a consultation of the Service Charge Code which was initially adopted in April 2007. Concern over disputes and apparent lack of transparency has resulted in a review of the current document. But why would it need revising?

The adoption of the Service Charge Code is not obligatory but should a dispute occur between a landlord or tenant then the courts may look at any documents which identify best practice; and certainly the Code is one such document. Graham Chase, President of the RICS in 2006/7 said of the original Code: “Poorly managed service charges are a frequent cause of disputes between landlords and tenants, owners and occupiers, and whilst the Code cannot override existing leases it provides the property industry with a clear set of recommendations which, if implemented, will benefit all sides.“

Even with the Code disputes continue to be arise and many are not as a result of monies being inappropriately spent but more because a tenant doesn’t necessarily have the time, inclination or experience of knowing what to look for in a service charge budget or reconciliation. In these current times costs are rising daily as a result of imported inflation and increases in commodity prices. Managing a service charge and getting it to balance at the end of the year can therefore be difficult, even for experienced property managers.


Generally disputes occur at specific points in the life of a service charge; drafting and issuing the budget, reconciling the annual expenditure, and where an over spend occurs. Why do disputes occur at these points? Primarily because service charges increase year on year and many companies either cannot afford the continual increase or that they haven’t budgeted for an increase. But is it all down to the property manager trying to fleece the tenant? Our experience is no.

It is important for an occupier or tenant to take a keen interest in the costs associated with managing a property and throughout the service charge year could do more to enquire how forecasted costs are performing against the budget. Understanding cost and the apportionment of expenditure is essential for any occupier and although the Code does outline the need for occupiers to be informed where costs vary this may not always happen.


Does the Code need revising? A revision to the Code will not necessarily remove any future disputes as there is more to it than just having a property manager feed information to the tenant. It has been highlighted that the tenant needs to take a keen interest on costs throughout the year and, where the opportunity exists, take action to reduce expenditure. Equally the property manager may wish to explain when costs are increasing and suggest ways of reducing annual expenditure. It is these measures which would promote a better working relationship between the landlord and tenant, not just revising a Code.



Making your space work harder!

These austere times make us think twice about the space we occupy and whether we can be more efficient in the way we use our workplace. The British Institute of Facilities Management and Leesman, the online survey data capture, and audit service provider for the workplace design and management industry have produced a piece of research entitled ‘The Role of the workplace environments in a post recessional British economy’ with the conclusion that many organisations will see more of their staff working remotely.


Traditionally the proven way to improve space efficiency is to reduce the amount of desk space an individual has; so for example replacing desks with a return with those of a bench style, or reduce the number of meeting rooms. However, this will only deliver a certain amount of saving and does remove the possibility of similar changes in the future. So could more people work remotely? Interestingly the research identifies that ‘Increasing numbers of European employees do not consider they need to be in an office, to be productive’. However, the research goes onto comment that ‘71% of respondent organisations positively supported the notion of a corporate workplace as a strategic asset in the development of the organisation’.


Again the research raises some interesting points, no less than the difference in working practices of the young and the old. With the Government changing the retirement age there will be a greater number of older people in the workplace and so the variation in working practices between the generations will widen. BIFM Strategy Director Stephen Bennett says ‘The oldest and youngest employee groups look for very different things in their workplaces. So those responsible for the workplace are going to have some big issues to address in the way that they create effective office spaces for an increasingly diverse workforce, not to mention an increasing mobile one’.

The biggest factor in planning space is to allow the individual the ability to choose where they can work for each task they perform. This increased mobility will have a huge impact on how workspace is used in the future and combined with increased travel costs organisations may have little choice other than to allow more of their employees to work from home.



Question & Answer – Greenhouse gases; what are they?

People use the phrase ‘’Greenhouse gas’’ but do they understand which gases are included and which ones are more harmful than others? We have drafted a short Guidance Note on Greenhouse Gases and Carbon Footprints which can be found on our website but here’s a brief explanation.


So what Gases make up the term Greenhouse Gas (GHG)? The Kyoto Protocol sets out the binding targets for 37 industrialised nations and the European Community for reducing GHG emissions. This Protocol defines the ‘gases’ which are considered harmful to the environment.

The Gases
 Carbon Dioxide Symbol (CO2) GWP 1


Methane Symbol (CH4) GWP 21


Nitrous Oxide Symbol (N2O) GWP 310


Hydroflurocarbons Symbol (HFC’s) GWP 140 - 11,700


Perflurocarbons Symbol (PFC’s) GWP 6,500 - 9,200


Sulphur Hexaflourides Symbol (SF6) GWP 23,900


In the UK, CO2 accounts for 86% of the climate impact while CH4 is 7%, N2O 6% and HFC’s 1%.


The Global Warming Potential (GWP) is the measure of how much a given mass of GHG is estimated to contribute to global warming and is usually based on a set period of years, such as 20, or more commonly 100. Evidently, Methane is worse than Carbon Dioxide,with Sulphur Hexaflourides substantially more detrimental than Methane and so we all need to be aware of how we work and what we work with, and how that can impact our Carbon Footprint.


A ‘Carbon Footprint’ is measured in tonnes of CO2 equivalent (CO2e). The qualification of ‘equivalent’ allows for different GHG’s to be compared on a like for like basis but how do you go about measuring your footprint?

1. Select your method of calculation as there are a few. Two such methods are Greenhouse Gas Protocol or ISO 14064.
2. Define what parts of the organisation should be included in your calculation.
3. Collate the data such as meter readings or fuel type if looking at vehicles.
4. Convert usage into CO2e by using credible conversion tables.
5. Have your data and calculations verified using a recognised organisation such as The Carbon Trust Standard.
6. Be transparent when reporting your carbon footprint.

Should you want more information on this subject then please feel free to call us on 0800 865 44 50.

December e Newsletter

Editorial
This is our final e newsletter of 2010 and it brings to an end our 12 Q&A’s which highlighted some of the events found in the life of a commercial lease. Rest assured we will continue with this feature and focus on other areas that people may find of use.

It seems that 2011 will be as much a challenge as 2010 with the possible introduction of new accounting rules, certain changes to the uniform business rates and the beginning of ‘Localism’. We take a quick look at all of these in this issue. We also look at the Snow Code and a quick look at a recent survey of business sentiment. Many of the smaller firms are in better shape as a result of the recession which can’t be bad.

Finally, from all of us at TAP we would like to wish you all a very Merry Christmas and Happy New Year.

1. Lease Accounting; leases to face radical new approach

The International Accounting Standards Board (IASB) has recently published its ‘’Exposure Draft’’ (ED), something it has been working on since 2006, in an attempt to harmonise accounting practices.

If the proposals are adopted there are likely to be profound implications for lessee’s financial statements in the manner in which leases are accounted for on a Company’s Balance Sheet, plus additional burdens in regard to data collection, controls and processes. A further knock-on effect is likely to be in key company performance metrics, i.e. asset turnover ratios, return on capital and debt to equity ratios.

At high level, and for certain companies, it may even result in assessing the merits of owning real estate rather than leasing it, and even if leasing were continued, the likelihood is that shorter leases are favoured, as the accounting impact reduces in line with shorter lease terms.

So, what are the major changes that the IASB are proposing?

Fundamentally, all leases are to be accounted for on the balance sheet, showing that the ‘’right of use’’ creates an asset and the obligation to pay rent creates a liability. Current procedure has it that neither assets nor liabilities are recorded on the balance sheet, that Rent is an expense in the Profit and Loss Statement and that minimum future lease payments are disclosed. Rent and its escalation, will have to be accurately profiled throughout the lease term which may lead to increased reference to recognised indices (i.e. RPI) or by adopting fixed stepped increases, rather than open market rent reviews, in order to negate the need for forecasting, thus avoiding accounting variances.

Initially, there will be onerous data collection requirements, especially for businesses with multiple leased assets, which may well require external advisors to assist. Whilst timings of implementation may not take effect until January 2013, there will be a need to re-state prior year figures in which case prudent businesses would need to introduce preparation systems during the course of 2011, to cater for opening balances for accounting periods starting on or after 1st January 2012.

TAP is not qualified to advise on the intricate details of the proposals although, as a lessee, you are encouraged to contact your Accountant about the scope of the changes, but suffice to say that, if implemented, they are radical enough to effect business behaviour and will add, initially, a further layer of administration, and potential cost, to businesses operating under property leases.

2. Lease terms favour the landlord despite business sentiment being low

New evidence indicatesthat whilst SME's business confidence is still low, the length of newly agreed lease terms seems to be growing.  During 2009 lease lengths and incentives reached a low point but since then lease lengths are beginning to rise.

The figures of the recent survey were presented by Malcolm Fordsham, Director of Research at IPD. It was stated that new leases are now longest in the retail sector, averaging 14.8 years (excluding break clauses), followed by industrials on 12.2 years and offices at 8.8 years. At the same time incentives seem to be reducing, which is not surprising. Mr Fordsham commented “The average rent free period for offices is now about 15 months, but City offices averaged 27 months for the first half of 2010”. The size of fall can only be realised when compared to the length of rent free periods in Q2 & Q3 in 2009 where in some cases, there were rent free periods amounting to 46 months.

Lease renewals have also strengthened over the last 2 years with strong growth in the retail and office markets. However, the outlook may not be so rosy when you consider the recent SME survey conducted by QBE where it’s suggested 74% of UK SME’s expect it to be 2 years before they see a full economic recovery. Half of the SME’s questioned felt the 2.5% increase in vat will have a negative impact on their business and SME’s are unlikely to come to the aid of the unemployed public sector workers with only 17% expected to recruit during 2011.

Overall, although the business sentiment may be low, 54% felt their business was in better shape and more resilient as a result of the recession, so confidence maybe returning.

3. The rising cost of small vacant space........

The ability to benefit from a business rates relief in small vacant properties is likely to expire at the start of April 2011. The Rateable Value threshold was increased from £2,600 to £18,000 for the year 2010 – 2011 to help small occupiers overcome the financial burden of holding their space vacant.

With the threshold at £18,000 any vacant properties with a rateable value below this have been exempt from paying business rates. However, the Government now believes that returning the threshold back down to £2,600 will save them approximately £400 million per annum.

Liz Peace, Chief Executive of the British Property Federation said “If the government is pinning its hopes on a private sector led economic recovery then this is a damaging and retrograde step.

“Empty rates is a tax on hardship at the worst possible time. The majority of the properties affected by this announcement will be in areas that are already economically disadvantaged, and so this will be a further blow.”

The reinstatement of the £2,600 threshold will place a greater financial burden on those companies who currently benefit from the higher threshold relief however we understand there may be some active lobbying against this move which may lead the Government to water down the proposals. It will be interesting to see what may come of these changes especially as the Government has always stated the significance of an SME driven boost in the UK’s economic recovery.

4. Snow – Do we really need telling?

The unexpected snow fall this side of Christmas has caught many of us off guard but now it’s here, and with more predicted, do any of us know of the ‘Code’? The Government has issued a ‘Code’ which gives guidance on how to clear pavements and paths.

The Code can be found on http://www.direct.gov.uk/ although the home page isn’t that helpful and you may be better entering ‘Snow Code’ into a search engine, such as Google or Bing. This will take you straight to the right page.

The main elements the Government suggest that a considerate occupier should do are: -

1. Clear the snow early in the morning as this prevents it from becoming too compacted.
2. Use salt or sand and not water to melt the snow.
3. Be careful where the snow is moved to.

This website does not just contain information about how to clear your path; it also facilitates access to your local authority which enables you to review their policy on pavement and road gritting/clearing. So in the City of London, for example the roads and paths are cleared by the Cleansing Department!

On the face of it the information borders on common sense but as a portal to understand how your local authority approaches this problem, then it may be useful.

5. Localism – What does it mean?

The Government has this week issued its Essential Guide to the Localism Bill and describes how it proposes to make the shift of power from a centralised state to local communities.

More than half of all government spending in our cities, towns and counties is ring-fenced, which means that while it is spent locally, what it is spent on is dictated centrally. The sums of money spent in this way are huge, for example the total annual spend in Birmingham is £7.5 billion, in Kent it’s approximately £9 billion and in Greater Manchester and Warrington it’s £22 billion. Much of the money earmarked for expenditure in this way is spent on social security, health and education. This localism approach strongly suggests the money can be better spent under local control and so the Government has outlined 6 essential actions that will assist in delivering this change in direction: -

1. Lift the burden of bureaucracy

2. Empower communities to do things their way

3. Increase local control of public finances

4. Diversify the supply of public services by ending public sector monopolies

5. Open up Government to public scrutiny

6. Strengthen accountability to local people

For property, this will result in more local benefits arising from large developments, for example, changes to the "community infrastructure levy"( charges that local councils impose on developers). Now developers will be required to make contributions towards local infrastructure. With regard to the granting of planning permission more autonomy will be given to the local community who can, where the support is greater than 50%, push through planning proposals that may otherwise have been resisted in the past.

This Localism Bill is a complete change to Government’s existing approach and, as with substantial pieces of legislation, the devil will be in the detail but for the time being if it delivers savings by streamlining bureaucracy then it can only be beneficial to the country. Let’s wait and see.

Q and A – Relax; your lease has expired, or can you...?

So your lease is coming to an end and you’re moving on to new premises. What do you need to agree with your landlord? You certainly do not have to agree when your liability to pay rent, service charge, business rates and utility liabilities ends as these will be determined by your lease. Assuming you are not ‘holding over’ then your lease will expire in accordance with its express terms.

That leaves just one remaining element, Reinstatement and a potential dilapidations claim. To follow the prescribed route will be complicated as it will rely on a thorough knowledge of the various references to legislation and case law, such as the Landlord and Tenant Act 1927, in particular s18 (1), and if you are prepared to defend your position, and on occasions this is the right thing to do, then you will need to engage a competent surveyor to act on your behalf. A surveyor specialising in dilapidations will approach the situation by looking at the lease (tenant’s repairing covenant), consider the licences to alter and maybe Schedules of Condition, agent’s original particulars, rent deposit deeds and possibly any deeds of variation. This will help him build up knowledge of a tenant’s responsibilities to maintain and repair the premises that they have been using.

As a tenant you may not want to become embroiled with a discussion on all these and would much prefer to avoid a long and protracted negotiation. If that is the case many tenants opt for negotiating a settlement based on a priced schedule. This is by far the easiest way but you will need a priced schedule so you may have to wait for this to be formally served on you by your landlord. Timing may be an issue as the landlord can serve this on you in the last week of your term so you may wish to request the document earlier.

It is normal for this Schedule to include costs for the rent and service charge for the duration of the works as any remedial repairs will undoubtedly be undertaken after the lease has expired. Once received then you may wish to open up discussions on a settlement.

However, should you wish to undertake your own works then a tenant would be prudent to have these carried out during the period of the lease but remember this will involve liaising with the building’s management to obtain the right permissions and permits to work. Think about what impact this may have on your fellow occupants if you’re in a multi-occupied property as this may increase the works programme.

There are one or two aspects which are important to note about dilapidations; the future use of the property and do you, as a tenant, have an ability to undertake the works after the lease has concluded. The first aspect relates to whether the property is likely to be the subject of a substantial redevelopment and this may make the dilapidation claim void.

Landlords won’t always be able to secure a successful dilapidation claim if it can be shown the property is going to be the subject of a substantial refurbishment or development. Secondly, a tenant isn’t permitted (unless it’s agreed with their landlord) to carry out the works after the lease expiry.

For an occupier it can seem unwieldy when a lease expires and you receive a detailed Terminal Schedule of Dilapidations; so be prepared for when it arrives. Remember this can arrive at any time before the lease expires so it may be prudent to request this Schedule at least 6 months before expiry.