CVS Solicitors LLP, formerly known as Courtenay van der Borgh Shah

Property UPDATE

Issue No.7 March 2007

Stamp Duty Land Tax Anti Avoidance

Before the Government’s next opportunity to alter the SDLT rules in the Budget on 21 March, a reminder of measures introduced in the November Statement to block a number of SDLT saving schemes. Although designed to stop schemes involving sub-sales, lease variations and the use of partnerships, the anti-avoidance measures are broad-brush and actually go much wider.

New Anti-Avoidance Rule

In brief the new rule provides that where:-

One person disposes of land (or an interest in it) and another acquires it and
there are a number of transactions involved in that disposal and acquisition (“scheme transactions”) and
the total SDLT payable in respect of the scheme transactions is less than it would have been had the seller sold directly to the buyer

then SDLT is payable as if there was a direct sale by the seller to the buyer for the total consideration paid under the scheme transactions. The rule is very widely drafted and in particular is not limited to schemes involving sub-sales and leases. The opportunities for SDLT planning are therefore much reduced. There also appears to be a risk that wholly innocent transactions could be caught.

New Tax on Land Sale Profits

The Government has confirmed its intention to introduce a Planning Gain Supplement (PGS) although this will not be implemented until 2009. Essentially the PGS will be a tax on profits made by landowners selling sites for development. No rate has been specified and the exact mechanics of the regime are yet to be settled.

RICS Code on Service Charges in Commercial Property

What ?	A voluntary code of best practice relating to the provision of services in commercial property
When?	The Code comes into force on 1st April 2007
Why?	The aim of the Code is to set standards of reasonableness, fairness and transparency in relation to services provided by landlords and property managers of commercial premises. The hope is that it will eventually be adopted as the norm
Where?	The Code applies in England and Wales only
Legal Effect?	Although the Code is voluntary, it will inevitably be relied on as a bench mark for answering the age old question of what is fair and reasonable by occupiers and investors in any litigation on service charge issues. It will also be cited in negotiations for the drafting of a new lease, including, no doubt the terms of a 1954 Act renewal lease. It will almost certainly set the standard for what is reasonable skill and care in negligence cases.
Why me?	Although the Code encourages landlords and managers to shift the weight of rights towards tenants, if the Code is adopted, a great deal of time and costs may be saved if disputes are avoided. Much of the Code might be seen as common sense. If adopted, the reasonable tenant is less likely to complain and tenants will have difficulty in showing that a service charge provision is unreasonable.

Basic principles

If the way services are managed and charged is reasonable and this is made clear to the tenant through proper accounting, (provision of service charge forecasts, up-dates and certificates) there will be less scope for dispute.

Key to the Code is that service charges should be a true reflection of the actual cost to the landlord, with the landlord making neither a profit nor a loss, and with each occupier paying a fair and proper proportion of the service charges in relation to his occupancy.

Scope

The Code deals with areas such as: Management, Communication, Transparency, Service Standards and Provision as well as Additional Shopping Centre Services.

We will comment further on a number of theses aspects in future issues. If you wish to see the Code in full, please see: www.servicechargecode.co.uk

Note:

Please note that this newsletter is not intended to be a comprehensive statement of the law and should be used for guidance purposes only. If you require specific legal advice please contact Alastair McClean, Michael O’Shea or Sharon Rutter or by telephone 020 7493 2903.

Property Update No.7 March 2007

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