Current state of play

  • Real estate law is one of the few legal branches which have remained essentially national and in which differences amongst national laws remain the greatest. As such, the implications of a possible Brexit on market conditions and inward investment are greater concerns to the industry than the pure legal ones.
  • There are however areas which are particularly relevant to real estate investors and transactions by virtue of the UK’s membership of the EU, including the regulatory environment surrounding investment funds (such as the Alternative Investment Fund Managers Directive (AIFMD)), planning requirements such as environmental impact assessments and EU directives relating to improving energy efficiency. 
  • At present, Britain is Europe’s choice for commercial property investment. It remains the preferred market and London the top European city. 

What should I be thinking about now?

  • There is a divergence of opinion in the market as to the potential commercial effects of a Brexit on the property industry. Would it fundamentally change the UK’s status as Europe’s primary choice for commercial property investment, causing the flow of foreign capital to reduce? Or is the UK such an attractive global market that ceasing its EU membership would have limited impact for overseas investors?
  • There is a question whether a Brexit would change the fundamental basis on which investors can access (and exit) the UK property market. If trading across borders becomes more difficult, will this have a negative impact?
  • London’s influence and power is linked to its status as Europe’s largest financial centre; would this change following a Brexit? Would banks and financial institutions look to relocate to other EU financial centres to guarantee business continuity? 
  • Would the rest of the occupier market suffer? Would global organisations and companies consider reducing their UK operations? Would a Brexit (or the possibility of one) result in occupier nervousness, with a resulting reduction in take-up?
  • Changes to freedom of movement provisions could have an impact on the industry, for example restrictions on workers’ migration could potentially affect the cost of construction projects, and the ease of movement of goods and services could affect property owners, tenants and developers. 
  • Would there be substantial changes to relevant legislation that I need to be aware of? This is unlikely, the majority of the UK legislation affecting the property industry which emanates from the EU (including construction and planning and environmental issues) is likely to be retained. 

The answers to many of these questions will depend on the nature of a post-Brexit UK/EU relationship.