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Market spotlight

Trends and prospects

What are the current trends in and future prospects for the real estate market (both commercial and residential) in your jurisdiction?

Despite a turbulent 12 months, property remains a fundamentally safe asset class. While the United Kingdom’s decision to leave the European Union led to an initial dip in transactional activity across the real estate market, confidence remains high in the UK real estate market, especially in London. The sterling devaluation has made UK property attractive for international investors and the market continues to be dominated by Asian, American and pan-European investors.

London’s position as a global financial centre is under increased scrutiny, with major financial institutions warning that they will scale back their activity in the United Kingdom in favour of continental Europe. As a result, there has been a tightening in the central London office market. The rise of co-working offers opportunities to landlords with surplus space, demonstrating that the property industry needs to work harder to meet the demands of the next generation of workforce.

Specialist assets with secure income streams are becoming more popular. Sectors such as logistics and data centres have entered the mainstream and this trend is expected to continue.

The impact of the Internet has left some investors concerned about traditional retail investment. The new landscape also presents a challenge for landlords to create compelling destinations to lure retailers, which could involve rearranging retail centres and creating areas for events or leisure activities. 

Following the Brexit vote, pressing on with proposals to encourage housing development would also be an appropriate policy response, in terms of addressing both the shortage of housing and the need to stimulate economic growth and employment.

The recently published Housing White Paper indicates that the government is not going to bulldozer through changes to suit its own political agenda, but is willing to take the bold step of formulating a carefully crafted, long-term strategy, informed by those best placed to help shape it.

The spotlight is currently on the build-to-rent market, marking a clear shift away from the fixation with owner occupation. There is open support from the government for the sector; however, much of the decision making has been left to the discretion of the planning authorities – many of which lack familiarity with the sector, which may deter investment. Nonetheless, the macro-requirement for a significantly increased rental market (given the affordability constraints on ownership) is focusing the attention of many key London real estate investors on this area.

As investors seek to diversify their portfolios, alternative residential assets – including student accommodation and senior living – are becoming increasingly popular investments. Less cyclical than other property classes, they provide investors with stable incomes, low voids and solid demand rates. 

Rights and registration

Rights

What types of holding right over real estate are acknowledged by law in your jurisdiction?

Freehold and leasehold are the two legal estates in England and Wales. A freehold is equivalent to absolute ownership and a leasehold is for a specified timeframe.

Commonhold is an alternative form of freehold ownership. However, it is rarely encountered in practice.

Are rights to land and buildings on the land legally separable?

No. Real estate includes land and buildings. It also includes the subsoil and airspace to the extent required for the ordinary use and enjoyment of the land. 

Which parties may hold and exercise rights over real estate? Are there restrictions on foreign ownership of property?

Any individual or entity – provided that it has a legal personality – may hold and exercise rights over real estate. Entitlement to exercise such rights may arise by way of an express grant, by statutory implication or by prescription (ie, use over a long period).

There are no restrictions on foreign ownership of real estate in England and Wales.

How are rights, encumbrances and other interests over real estate prioritised?

Earlier rights generally have priority over later rights, except in circumstances where the priority of the earlier right must be protected at the Land Registry (registered land) or the Land Charges Department (unregistered land). 

Registration

Must real estate rights, interests and transactions be registered in your jurisdiction? What are the legal effects of registration?

The majority of rights, interests and transactions must be registered or protected by notice at the Land Registry. The register is a conclusive record of the legal ownership of land. 

What are the procedural and documentary requirements for entry into the national real estate register(s)? Can registration be completed electronically?

The correct application form must be completed, evidence of payment of stamp duty land tax enclosed where appropriate and the correct registration fee paid. Documentation evidencing the transaction must also be sent. Depending on the nature of the transaction and the parties involved, additional documentation may be required and in some cases identity evidence will be needed where a particular party is not legally represented. A number of Land Registry applications can now be submitted online through the Land Registry Portal. However, an e-conveyancing system which facilitates the simultaneous completion and registration of a transaction is not yet available.

What information is recorded in the national real estate register(s) and to what extent is such information publicly available?

Each registered title has its own unique title number and the register for each title is divided into the following three parts:

  • Property register – this describes the extent of the title by reference to a registered plan and identifies any rights that benefit the land. It also indicates whether the land is freehold or leasehold and, if leasehold, gives brief details of the lease.
  • Proprietorship register – this identifies the owner and gives details of any limits on the owner’s powers to deal with the land.
  • Charges register – this gives details of any financial charges and other encumbrances affecting the title.

The Land Registry maintains a public register which can be inspected by anyone. It is possible to apply to the Land Registry to restrict access to certain information contained in registered documents on the basis that disclosure may be prejudicial to a party’s commercial interest. However, certain commercial information (eg, price paid) must always appear on the register. 

Is there a state guarantee of title?

Yes, for land registered at the Land Registry. A statutory scheme operates to indemnify any party which suffers loss as a result of the rectification of the register to correct a registration mistake – save to the extent that the claimant has contributed to the loss through its own fraud or lack of proper care.

Sale and purchase

Brokerage

How are real estate brokers regulated in your jurisdiction (eg, through caps on commission or disclosure obligations)?

Estate agents are regulated under the Estate Agents Act 1979 and the Consumer (Protection from Unfair Trading) Regulations 2008, which regulate how estate agents deal with private individuals. In addition, all estate agents who engage in residential estate agency work must belong to an approved redress scheme. The Business (Protection from Misleading Marketing) Regulations 2008 sit alongside the Consumer (Protection from Unfair Trading) Regulations 2008 and regulate misleading practices when estate agents deal with business customers.

Due diligence

What due diligence should be conducted before conclusion of a real estate sale contract?

Typically a buyer will investigate the seller’s title to the land, which includes a review of the registered title and all other title documents. A buyer will also usually carry out searches of the public registers and commission a building survey, environmental report and valuation. Further due diligence will include raising pre-contract enquiries with the seller, the local authority and utility providers.

Preliminary agreements

Are any preliminary agreements typically entered into before conclusion of a sale contract?

Head of terms are normally agreed in advance, recording the key commercial terms of the transaction. These are not legally binding, but will form the framework for subsequent negotiations.

The buyer may require an exclusivity period during which the seller agrees not to negotiate with other parties. However, while such an agreement gives the buyer an exclusivity period, it does not oblige the seller to enter into a contract with the buyer

Contracts

Must sale contracts be concluded in writing? If so, must they be notarised?

In order for a land contract to be enforceable, it must be in writing and contain all the agreed terms. It must also be signed by or on behalf of each party. Notarisation is not necessary.

Can sale contracts be concluded electronically?

English law-governed land contracts must comply with Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, which requires a contract for the sale or other disposition of an interest in land in England and Wales to be in writing and signed by – or on behalf of – each party. At present, it is unclear whether a land contract can be validly signed using an electronic signature. Guidance from the Law Society of England and Wales suggests that electronic signatures can be used for simple contracts, but a wet ink signature should be used for deeds and any document which is filed at the Land Registry. However, this is guidance only and not a statement of the law. 

What provisions are usually included in a sale contract?

The provisions vary widely, depending on the nature of the transaction and the level of due diligence that has been carried out by the buyer.

Obligations and liabilities

What are the seller’s disclosure obligations and other liabilities, and what are the consequences of breach?

The seller has no general duty of disclosure, except in relation to title matters which would not be apparent on an inspection of the land.

In the event of non-disclosure, the buyer may be entitled to compensation. If the non-disclosure is so serious as to deprive the buyer substantially of what it has contracted to buy, then the buyer may be able to rescind the contract.

If the buyer has been induced to enter into the contract on the basis of a misrepresentation (whether innocent, negligent or fraudulent), then the buyer can bring an action for misrepresentation

What contractual warranties are usually given by the seller?

The seller gives limited warranties under its title guarantee in relation to its right to dispose of the property and the absence of encumbrances other than those which have been disclosed.

Where a corporate vehicle owns the real estate that is being disposed of, the seller may need to provide warranties to the extent that the buyer has not carried out its own due diligence.

The buyer may rely on statements given in a certificate of title prepared by the lawyer acting for the seller. In this case, the seller will warrant that the information that it has provided in order to complete the certificate is correct.

Are there any other obligations on the buyer, aside from paying the purchase price?

This depends on the nature of the acquisition and the commercial terms agreed.

Taxes

What taxes are payable on the sale and purchase of real estate? Are any exemptions available?

Stamp duty land tax is chargeable on the purchase of real estate. The rate depends on whether the property is residential, commercial or mixed use.

Value added tax (VAT) is chargeable at the standard rate of 20% on the purchase of properties that are mandatorily standard rated (eg, a commercial freehold that is less than three years old) and properties that are subject to an option to tax. The VAT may be recoverable by the purchaser, depending on the types of supplies that the purchaser makes. Otherwise, the purchase is VAT exempt.

Corporation tax on chargeable gains or capital gains tax is payable by corporates and individuals respectively on any gains realised on the sale of real property, unless:

  • the realisation is in the course of a trade carried on by the seller; or
  • specific legislation treats it as a trading receipt.

An indexation allowance is available to corporates disposing of real property held as capital.

With effect from July 5 2016, non-UK resident persons are subject to tax on profits arising from trading in, or developing for sale, UK land – even where the person has no UK permanent establishment.

Transfer of title

When does title in the property transfer?

In registered land, legal title does not transfer until the transaction has been registered at the Land Registry.

Timeframe

What is the typical duration of a sale transaction?

There is no typical duration; it depends on the complexity of the transaction and the respective bargaining strength of the parties.

Leases

Contracts

Must a lease agreement be concluded in writing?

The general rule is that, to be effective at law, a lease must be by way of deed. However, an exception is made for leases not exceeding three years, provided that certain conditions are met.

Are there any regulations setting out mandatory or prohibited provisions in lease agreements?

No, save that the prevention of unfair contract terms provisions in the Consumer Rights Act 2015 are likely to apply to residential leases, as a tenant will normally be a natural person acting outside the course of a business (ie, a consumer).

In addition, provisions that exclude or restrict liability for misrepresentation are ineffective unless they satisfy the reasonableness test set out in Section 8 of the Unfair Contract Terms Act 1977.

What provisions are typically included in lease agreements?

The provisions are freely negotiated; however, key terms include:

  • rent and rent review;
  • length of term;
  • extent of demise;
  • rights and reservations;
  • use of premises;
  • repair obligations;
  • insurance provisions;
  • restrictions on disposal; and
  • restrictions on alterations.

What are the standard forms of lease agreement used in your jurisdiction?

A variety of suggested standard form lease agreements are available in the market, but adoption is voluntary and no one standard form is used exclusively.

Length of term

Are there any regulations on minimum and maximum terms of leases?

No.

Are long-term tenants accorded any special rights as to extension or renewal of leases?

In prescribed statutory circumstances, certain long-term residential tenants have the right to acquire the freehold reversion or to extend their lease. Commercial tenants also have statutory rights of renewal, provided that these have not been excluded by agreement.

Rent

What regulations (if any) govern rent increases?

There are no rent controls in the private rental sector.

What regulations (if any) govern rent security deposits?

Residential tenancy deposit protection applies to all newly created assured shorthold tenancies in England and Wales where a deposit has been taken after April 6 2007.

Can the tenant withhold rent payments on any legal grounds?

It is usual for the lease expressly to prohibit the tenant from exercising the right of set-off against any sums due under the lease.

Sub-letting

Under what circumstances is sub-letting typically allowed?

Sub-letting is usually permitted, provided that the superior landlord’s consent is obtained. Such consent must not be unreasonably withheld or delayed.  

Obligations and liabilities

What are the general obligations and liabilities of the landlord in respect of the property and what are the consequences of breach?

The landlord has an implied obligation not to derogate from grant and will give an express covenant of quiet enjoyment. The landlord will usually covenant to insure the building and provide services, subject to payment of the service charge.

If the landlord is in breach of its obligations, the tenant can claim compensation or bring an action for specific performance

What are the general obligations and liabilities of the tenant in respect of the property and what are the consequences of breach?

If the tenant is in breach of the lease, the landlord has a variety of options, which include seeking:

  • compensation;
  • specific performance;
  • forfeiture;
  • self-help for breach of repair obligations; or
  • injunction.

Taxes

Are any taxes payable on rental income? If so, are any exemptions available?

Corporation tax on property income or income tax is payable by corporates and individuals respectively on rental income or sums taxable as rents, although expenditure of a non-capital nature which is incurred wholly and exclusively for the purposes of the same business (eg, repairs and insurance costs) will generally be tax deductible.

Non-resident landlords incur a withholding tax (20%) on rental payments from the tenant or letting agent, unless the landlord has first applied and been permitted to receive gross rents under the Non-resident Landlord Scheme.

If the property is subject to an option to tax, value added tax must be charged on the rental payments.

Insurance

Are the landlord and tenant bound by any insurance requirements?

The lease will specify the obligations of both parties. The landlord generally insures the building for the reinstatement value plus loss of rent for a specified period (typically three years) and recovers the cost from the tenant.

The tenant is normally liable for all repairs to the let premises, except to the extent caused by an insured risk. Following insured damage, the landlord must apply the insurance moneys to reinstatement.

The lease also generally deals with the allocation of risk of damage as a result of an uninsured risk.

Termination and eviction

What rules and procedures govern termination of the lease by the landlord and the tenant’s eviction from the property?

Where the tenant is in breach of the terms of the lease (eg, non-payment of rent), the landlord normally has a right to terminate the lease. The circumstances in which the landlord can forfeit the lease are usually set out expressly in the lease. However, the landlord must follow the correct statutory procedure in order to regain possession of the premises. There are a number of statutory restrictions on exercising the right to forfeit a long lease of residential premises. It is also important that the landlord does not inadvertently waive its right to forfeit.

Provided that the premises are not residential, the landlord can regain control of the premises by peaceable re-entry as an alternative to obtaining a court order for possession. The tenant and any affected third parties (eg, undertenants or mortgagees) can apply to court for relief from forfeiture. The court will not automatically award relief – it may refuse or grant it subject to conditions (eg, payment of any outstanding rent arrears).

In cases where the tenant has statutory rights of security of tenure, the landlord must prove a statutory ground for possession. Strict statutory procedures must be observed, including the need to serve prescribed notices within designated timeframes. Security of tenure can be excluded by agreement, provided that the lease is of business premises and the parties have followed the correct contracting-out procedure.

Finance

Finance providers

What are the typical providers of real estate financing in your jurisdiction? Are there any restrictions on who may provide financing?

Typical providers include UK and foreign banks, real estate debt funds, insurers and pension funds. There are no restrictions on who may provide financing.

Financing structures

What are the most common structures used to secure real estate financing and how are these security interests perfected?

The security that a lender takes from a borrower will vary depending on the borrowing entity and the transaction structure. Typically, a borrower will grant to a lender a debenture incorporating fixed and floating charges over all of the borrower’s assets and undertakings.

The key elements of a security package include:

  • a legal mortgage over the property;
  • assignment of any key documents relating to the property, the rental income and the proceeds of any insurance claims relating to the property;
  • a fixed charge over moneys held in the account into which rent is paid; and
  • a floating charge over all of the borrower’s assets and undertakings.

If the borrower is a special purpose vehicle, the holding company will grant the lender a charge over the borrower’s entire issued share capital to facilitate selling the shares in the borrower rather than the asset itself.

What covenants are typically made in financing agreements?

The key covenants are:

  • the provision of certain financial information and information regarding the occupational leases and tenants;
  • financial covenants which typically monitor interest and cash-flow cover and leverage ratios;
  • covenants to ensure that the borrower remains a bankruptcy-remote special purpose vehicle, including a negative pledge that prohibits the borrower from granting security over any of the secured assets, prohibitions on incurring financial indebtedness and prohibitions on the disposal by the borrower of its assets;
  • property covenants dealing with:
    • property use and maintenance;
    • lease arrangements;
    • compliance with environmental laws;
    • prudent management of the property;
    • property insurance;
    • development of the property and applications for planning consent in respect of the same; and
    • management of the property (including the collection of rental income) by a third-party managing agent.

Enforcement of security

How are security interests enforced in the event of default?

The enforcement options available will depend on the nature of the secured asset and the rights contained in the security documentation. Statutory and common law principles will govern the security holder’s ability to enforce security in the absence of information in the security document.

Notwithstanding the fact that an event of default has occurred, it may not be possible to enforce security if, for example, there is a standstill agreement or a moratorium is in place.

Provided that there are no restrictions, the first step is usually to make a demand for payment – this is usually a prerequisite for an event of default to arise.

Thereafter, the various methods of enforcing the security include:

  • selling the asset;
  • appointing a receiver;
  • taking possession (a mortgagee rarely goes into possession); and
  • foreclosing (a process rarely used as it is lengthy, expensive and inflexible).

What is the typical timeframe for the enforcement of security?

The timeframe will vary considerably depending on the type of property secured and the method of enforcement employed. 

Investment

Investment climate

What is the general climate of real estate investment in your jurisdiction?

Data from Savills shows that the UK investment volume for 2016 was £51.4 billion, which represented a 28% annual fall. However, this level was 12% above the 10-year (2006–2015) average of £45.9 billion.

The UK property sector has stabilised after the Brexit vote and although it is still too early to say that the market has fully recovered, it appears that investor sentiment and the immediate outlook have improved.

London continues to benefit from capital flows from the Asia-Pacific region, led by Hong Kong and Chinese investors looking to increase their overseas exposure.  The alternatives sector received a higher-than-average proportion of investment over the past year, including in student and senior living assets, as investors seek to diversify their portfolios. 

The industrial and logistics sectors have delivered the highest investment returns of the commercial sector and investor appetite for both should remain high. 

International capital flows will continue to be swayed by global political events (including the upcoming elections in Europe); but while some activity and investment may be displaced to other global markets, the United Kingdom appears to have maintained its safe haven status ‒ at least for now.

Investors

Who are the most common investors in real estate?

Institutional investors include pension funds, insurers and private investors (eg, high-net worth individuals, sovereign wealth funds, private equity funds and publicly listed companies).

Are there any restrictions on foreign investment in real estate?

No.

Investment structures

What structures are typically used to invest in real estate and what are the advantages and disadvantages of each (including tax implications)?

Common investment structures include:

  • limited partnerships and limited liability partnerships (LLPs);
  • contractual joint ventures;
  • land trusts;
  • real estate investment trusts;
  • unit trusts;
  • limited companies; and
  • public listed companies.

Due to the lack of tax transparency, it is more common to use a limited partnership or LLP than a limited company.

Members of an LLP enjoy limited liability.

LLPs enjoy tax transparency, which means the following:

  • The activities of the partnership are deemed to be carried on by the members;
  • The income and gains of the partnership are deemed to arise to the members in proportion to their economic interest at the time that such income and gains arise to the partnership; and
  • Tax is assessed on the members, not on the partnership.

Limited partnerships enjoy tax transparency in a similar manner to LLPs. They must have at least one general partner which manages the partnership and which benefits from no limited liability (although this general partner can be a limited company). The limited partners may not participate in management of the partnership. 

Planning and environmental issues

Planning

Which government authorities regulate planning and zoning for real estate development and use in your jurisdiction and what is the extent of their powers?

The primary responsibility for granting planning permission and formulating planning policy lies with the local planning authority (LPA).

The parish council comments on applications relating to its area and has powers to prepare neighbourhood plans. The central government formulates planning policy which has nationwide effect.

The relevant secretary of state retains a power – through the call-in system – to determine certain planning applications; while in London, the mayor of London has planning powers in respect of applications of potential strategic importance. 

What are the eligibility, procedural and documentary requirements to obtain planning permission?

An application for planning permission can be made by any person. There are no requirements to have an interest in land or to have obtained the landowner’s consent. However, notification must be given to those with such an interest.

Various documents must be submitted, including:

  • a completed standard application form;
  • the correct fee;
  • a location plan;
  • a site plan; and
  • the correct ownership certificate.

For certain applications, additional documents may be required (eg, an environmental statement, a flood risk assessment or a design and access statement).

Once a valid application is received, the LPA must consider it within a prescribed timeframe; if it fails to do so, the applicant has a right to appeal. 

In certain cases, permitted development rights exist.

A separate regime exists for nationally significant infrastructure projects, as defined in the Planning Act 2008.

Can planning decisions be appealed? If so, what is the appeal procedure?

Appeals can be progressed in one of three ways:

  • written representations;
  • hearings; or
  • public inquiries.

These are normally dealt with by planning inspectors. In certain circumstances, the secretary of state may recover the appeal for determination.

The appeal process is commenced by the appellant submitting an appeal form and essential supporting documents to the Planning Inspectorate (PINS) and the LPA. For major development proposals, these documents must be received by PINS within six months of the date on the decision notice or six months from the date that the application should have been determined in the case of a deemed refusal.

The right to appeal is lost if PINS does not accept that a valid appeal has been made within the appeal period.

Following determination of an appeal, there is a limited right to challenge the decision in the High Court. The timeframe for such a challenge is six weeks.

Decisions to grant planning permission can be challenged by way of judicial review in limited circumstances.

What are the consequences of failure to comply with planning decisions or regulations?

LPAs have a number of powers to:

  • investigate alleged breaches of planning control – including rights of entry, service of planning contravention notices and service of temporary stop notices; and
  • deal with actual breaches – including issuing planning enforcement notices, stop notices and breach of condition notices.

Time limits apply.

Where a breach of planning control has been deliberately concealed and the statutory time limit for enforcement action has expired, the LPA can apply to the magistrates’ court for a planning enforcement order.

Injunctions can be used to prevent an anticipated breach of planning control and failure to comply can, in certain cases, be punishable by imprisonment.

What regime governs the protection and development of historic and cultural buildings?

Certain buildings and areas (ie, listed buildings and conservation areas) are protected because of their special architectural or historic interest under the Planning (Listed Buildings and Conservation Areas) Act 1990. 

Where a building is listed, the LPA must give listed building consent in order to demolish it or alter it in any way that would affect its character as a building of special architectural or historic interest, inside or out. This is in addition to any planning permission that may be required.

Carrying out unauthorised works to a listed building is a criminal offence, punishable by an unlimited fine or up to two years’ imprisonment, or both. A separate enforcement regime exists in respect of listed buildings.

Conservation areas are designated by the LPA where it is desirable to preserve or enhance an area’s special architectural or historic interest. In England, the primary effect of this is that permitted development rights will be restricted and the designation will form part of the considerations of applications for planning permission

Government expropriation

What regime applies to government expropriation of real estate?

Central and local government bodies have the power to acquire compulsorily interests in or rights over third-party land. Those bodies are known as ‘acquiring authorities’.

Where an acquiring authority wishes to exercise powers of compulsory acquisition it must have its decision confirmed by the appropriate central government department (ie, the ‘confirming authority’) before the power can be exercised. The decision to exercise powers of compulsory acquisition will be confirmed by the confirming authority only where the acquiring authority has demonstrated that there is a compelling case in the public interest for the use of compulsory purchase powers.

Landowners may object to the compulsory acquisition of their land interests. Those objections are considered by an independent examiner appointed on behalf of the confirming authority before determining whether to authorise the exercise of compulsory purchase powers

What is the required notice period for expropriation and how is compensation calculated?

Following a decision to confirm the exercise of compulsory purchase powers, notices must be published in a local newspaper, put up on site and served on all affected land owners. The acquiring authority then has three years from publication of the notices to exercise its powers, after which time they will expire.

Alternatively, the acquiring authority can exercise its powers by:

  • the more commonly used procedure of making a general vesting declaration; or
  • the service of a notice to treat and notice of entry. A three-month notice period applies.

A party which has had land (or rights over land) acquired through the use of compulsory purchase powers is entitled to compensation. The right to compensation and methods and procedures for assessing the correct amount are derived from the Compensation Code. This comprises primary legislation, case law and established practice. The principal statutes are the Land Compensation Acts of 1961 and 1973 and the Compulsory Purchase Act 1965.

The Compensation Code is based on the principle of equivalence, meaning that the affected party should be compensated on the basis that it is no worse off (but no better off) than if its land had been unaffected by the compulsory purchase. Affected parties are normally entitled to:

  • the value of the land taken;
  • the depreciation in the value of any retained land where only part of an affected party’s land holding is acquired; and
  • where the affected party also occupied the land, its costs and losses incurred as a result of being disturbed from occupation.

The value of the land acquired is normally based on market value, assuming a willing buyer and a willing seller. A dispute as to the correct calculation of compensation can be referred by either party to the Upper Tribunal (Lands Chamber) for determination.

Environmental issues

What environmental certifications are required for the development of real estate and how are they obtained?

This depends on the nature and location of the development. For example, certain types of development are subject to environmental impact assessment, which requires the submission of an environmental statement to the planning authority. Where protected species or habitats could be affected by the development, licences and conservation measures may be required. Where the development end use involves the storage of large quantities of specified hazardous substances, consent may be required from the relevant regulatory authority. 

Pre-development works and the construction process also usually require a suite of environmental permits, consents and registered exemptions. These are obtained by application to the relevant regulator or statutory undertaker.

What environmental disclosure obligations apply to real estate sales?

Generally, the onus is on the buyer to satisfy itself as to the state and condition of the property.

What rules and procedures govern environmental clean-up of property? Which parties are responsible for clean-up and what is the extent of their liability?

This depends on the trigger for clean-up. As well as regulatory regimes (outlined briefly below), clean-up can be triggered by other events, including:

  • the surrender of an environmental permit (liability usually falls to the operator under the permit) or lease (liability is determined under the lease); or
  • third-party claims in common law against the owner or occupier (eg, trespass, nuisance or negligence).

The contaminated land regime is a retrospective statutory regime which apportions liability for remediating contaminated land. It focuses on ‘appropriate persons’ who are causers or knowing permitters of contamination, and owners or occupiers where causers or knowing permitters of contamination “cannot be found”. Liability under the contaminated land regime can be apportioned or excluded. The clean-up of historic contamination is commonly undertaken on a voluntary basis as part of a development process. Remediation of contamination is usually governed by permission conditions which, in practice, require preparation of a remediation strategy and implementation plan, and regulators’ satisfaction with a validation report and – if necessary – a monitoring programme.

Regulatory clean-up liabilities may also arise under:

  • the Water Resources Act (anti-pollution works);
  • the Environmental Protection Act (waste removal or statutory nuisance abatement); and
  • the environmental damage regime (proactive duties to notify regulators and remediate environmental damage).

Are there any regulations or incentive schemes in place to promote energy efficiency and emissions reductions in buildings?

Measures to promote energy efficiency and emissions reductions in buildings include the following:

  • Energy performance certificates (EPC) – documents that provide information about the energy efficiency of a building and must be disclosed when a building is sold or leased. From April 1 2018 the Minimum Energy Efficiency Standards will make it unlawful for landlords to grant a new lease where the property has an EPC below an E rating. 
  • The Energy Savings Opportunity Scheme – a scheme that requires larger companies and non-public sector organisations to carry out mandatory energy-efficiency audits and identify opportunities for energy savings.
  • Feed-in tariffs – a UK scheme that incentivises small-scale generation of electricity using renewable technologies through cash payments.
  • The Renewable Heat Incentive – an incentive under which the government makes regular payments to individuals or organisations which install eligible renewable heating systems or inject biomethane into the gas grid.
  • The Carbon Reduction Commitment Energy Efficiency Scheme – a mandatory emissions trading scheme for large users of energy in the United Kingdom which need not otherwise reduce these emissions. The scheme will cease to apply after October 2019.