Qandor Property Magazine | Issue No. 11 | March 2021

Qandor. ®

PR O PERTY M AG A Z I N E

THE RISE OF THE FEMININE Michelle Lowe's perspective on International Women's Day 2021

RETAIL REAL ESTATE Heather Cunningham spotlights opportunity in this sector

TROPOLIS. TM

ISSUE No. 11 | March 2021

IN THIS ISSUE

THE FORMALITIES

04

FOREWORD A letter from our Founder, Matt Siddell

MARKET COMMENTARY

06 HOW IMPORTANT IS CONSTRUCTION TO ECONOMIC RECOVERY? Mike Bristow explains how it’s a crucial aspect of post-pandemic growth

10 SELLING DURING MARKET UNCERTAINTY Grazina Thompson explains how to grab the best price

12 NEW BUILDS: WHAT’S CHANGED?

Cover featuring Michelle

Rachel Geddes takes a look at the performance of

founding director of Redshell

the new build market over the past year

Consulting. Michelle provides a refreshing perspective on International Women’s Day for 2021, and why our conventions should be shifting (p.28).

ISSUE NO. 11

Lowe, quantity surveyor and

WOMEN IN PROPERTY

16 BUILDING FEMALE RELATIONSHIPS Philippa Somerset and Rachel Milliams explain why women should stick together

18 HISTORIC PROPERTY OF THE MONTH Emma Morby presents Seton Castle

24 COVER STORY The Rise Of The Feminine, by Michelle Lowe

DEVELOPMENT & CONSTRUCTION

30 HMOS: WHAT YOU NEED TO DO TO

COMMERCIAL, LEGAL & TAX

48 CONSTRUCTION TIME BOMB!

PANDEMIC-PROOF

Jonathan More explains the VAT Reverse

By Giovanni Patania

Charge, commencing this month

34 THE INS AND OUTS OF FORWARD

52 TRUST, TRANSPARENCY, TRACK

SELLING

RECORD

Dorian Payne explains what happens when the

Three Ts every development finance lender

market changes

38 THE HIGH STREET Richard Holland looks at where the opportunities lie

42 THE POST-COVID MARKET Jeremy Wormington looks at opportunities for SME developers

46 GET PRACTICAL! Martin Brooks lists 10 steps to help you mitigate risk on site

should have, according to Paul Watson

56 RETAIL SHIFT Heather Cunningham highlights 10 ways the sector is changing

60 TAX RELIEF

Architects need to be claiming back their R&D! Catax can help

64 MORTGAGES Lee Langley explains the importance of the right broker

THE VALUE OF INFORMATION Qandor Founder Matthew Siddell Managing Director Kevin Taylor Managing Editor Gabrielle Winandy QANDOR TEAM Membership Manager Rekha Patel rekha@qandor.org Videographer James Evans james@qandor.org For editorial and advertising enquiries, please email: magazine@qandor.org Visit our website: www.qandor.org Contributors Dorian Paynne Emma Morby Georgina Keys Giovanni Patania Grazina Thompson Heather Cunningham Jeremy Wormington Jonathan More Lee Langley Martin Brooks Michelle Lowe Mike Bristow Paul Watson Philippa Somerset Rachel Geddes Richard Holland Legal Qandor Ltd does not endorse any of the members or contributors to this publication. Always seek your own independent advice prior to investing or agreeing terms of business.

Towards the end of last year, my team and I strategised ways in which we could turn the volume of our members’ voices up. The ‘why’ was evident - we have several hundred members who are highly qualified and experienced in their respective fields, all of whom have much to contribute and much to share to others who may be looking to gain some valuable knowledge, learn more about their professions and avoid costly and time-consuming errors. The ‘how’ took a bit more consideration. After a few brainstorming sessions, the end result was that the club would launch a series of free public events and initiatives that amplified the voices of our members, but also served our sector’s thirst for real and easy-to-digest knowledge. First, we launched Qandor Case Studies, a series of short-fire, informationdense video presentations on various projects our members have delivered, which include granular detail on financial performance and showcase floorplans and before / after CGIs. Second came the Qandor Webinars - a bi-monthly series of presentations and conversations with experts in their fields presenting live to larger audiences and available to answer questions in real time. Lastly, and most recently, we launched the first volume of our e-book series, which breaks down the rights afforded to developers under the new permitted development policy. All three of these initiatives have been hugely successful, both for the club and its members. More importantly however, I hope that by Qandor offering this value to the public, we are contributing to a more transparent and enlightened sector as a whole.

In recognition of International Women’s Day coming up, this month’s cover features Michelle Lowe who has written an excellent opinion piece on what female success should and will look like in the 21st century (p.24). While the month of March celebrates women across all sectors and countries, this celebration shouldn’t be confined to just one month of the year. And so, in every issue, case study, webinar and ebook, we celebrate the fantastic contribution all of our female members and colleagues make towards bettering the property sector every day, every month!

Matt Siddell Founder

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E-BOOKS NEW PERMITTED DEVELOPMENT Do you know your propery rights?

Over 50 PAGES of relevant content Explore permitted development rights in detail, with chapters written by experts in their fields who give valuable advice and tips, including conversions from: • OFFICE TO RESI • RETAIL TO RESI

DOWNLOAD NOW www.qandor.org/books

MARKET COMMENTARY

THE CRUCIAL CONTRIBUTION OF CONSTRUCTION TO ECONOMIC RECOVERY. MICHAEL BRISTOW CEO CrowdProperty www.crowdproperty.com

2021 looked set to be a big year for housebuilding, with continued government support for the construction industry and news of a vaccine enabling cautious optimism for the prospect of a rebound in the global economy. As January 2021 saw the enforcement of a third national lockdown and the completion of Brexit, will this confidence endure?

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Following a rapid rise in infections, hospital admissions and case rates across the country, Boris Johnson announced the need for lockdown restrictions to be reintroduced on 5th January. Government guidelines stated that the housing market would remain open, with business secretary Kwasi Kwarteng penning an open letter to the construction industry stating: “It is vital that construction continues through these unsettling times… the government

values the crucial contribution [the] sector is making.”

I’ve mentioned before CrowdProperty’s belief that empowering the multitude SME property development businesses is the secret to delivering “build, build, build” and a key part of economic recovery. The latest IHS Markit / CIPS UK Construction PMI reported the continued recovery of the construction sector – led by house building – with Tim Moore, Economics Director at IHS Markit, commenting: “December data illustrated a positive end to the year for the UK construction sector, mostly fuelled by a sharp rebound in house building. Overall output growth has slowed in comparison to the catch-up phase last summer, but now it is encouraging to see the recovery driven by new projects and stronger underlying demand. A sustained improvement in construction order books resulted in a rise in employment numbers for the first time in nearly two years and the most optimistic growth expectations since April 2017.”

Whilst it’s not quite business as usual, experience gained through the previous lockdowns means that developers are able to progress projects thanks to the stringent safety measures in place. As Dr Howard Archer, EY Item Club’s Chief Economic Advisor, notes: “Over the course of 2020, the economy has become quicker to adapt to new COVID-19 restrictions and while new restrictions may still cause disruption, lessons learned from previous lockdowns are rapidly being put into place.” Indeed, the Construction Leadership Council (CLC) recently updated its site operating procedures – advising contractors to take

action if five or more cases are identified within 14 days, under new Public Health England guidance.

Rishi Sunak’s announcement in July last year that homes costing up to £500,000 would be exempt from stamp duty has been a key driver for housing market activity.

With the stamp duty holiday due to end on 31st March, Zoopla reports that there have been industry calls for the relief to be extended, with Property Week also claiming that there is cross-party support for an extension. Buyers who have agreed sales with a view to beating the impending tax deadline will be keeping their fingers crossed, as Rightmove estimates that the current “processing logjam” – created in part by the temporary stimulus measure – could lead to around 100,000 transactions missing out on the stamp duty savings.

The Financial Times suggests that an extension is unlikely: according to the Treasury, the “several billion pounds a year” that is typically raised through stamp duty is needed to fund essential public services with a view to restoring order to public finances. The policy succeeded in its aim of supporting the property market and protecting jobs in the industry – an extension of a few months would just defer the “cliff edge”, unless the reintroduction was tapered. The last time a stamp duty holiday was withdrawn, after the financial crisis in 2008, the surge in sales it prompted fell away sharply for a short while (as shown in the below graph) – little wonder then that estate agents and property professionals alike are asking for the deadline to be reconsidered. ➳ Issue No. 11 – Qandor – 007

The strong performance of the housing market last year in spite of the pandemic and recession may have been welcomed by sellers and the wider economy, but the impact on first-time buyers has not been as positive. The Financial Times asserts that the latest housing boom has been driven by wealthier homeowners, with the pandemic trend of richer city dwellers moving to more rural locations. News of rapidly increasing house prices during 2020 was rife, influenced by demand exceeding supply, leading Savills to report a rise in homes valued at £1m+ across the country.

Although the number of mortgage approvals soared to a 13-year high in 2020, Zoopla reports that there is an ongoing trend of the homeownership rate falling among young people – despite several recent government schemes aimed at supporting people to get on the property ladder. The proportion of people aged under 45 who own their own home has decreased by more than 10% during the past decade.

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This is not only due to house price growth outstripping increases to average earnings, but also as a result of changes in the mortgage m a r k e t , with lenders withdrawing low-deposit mortgages and affordability rules making it harder for those on lower salaries to qualify.

Whilst house prices were at a record high at the end of 2020, both Halifax and Nationwide comment that house price growth has now slowed with early signs that the market could start to cool in their latest House Price Index releases.

Russell Galley, Managing Director at Halifax, commented that “there may be enough residual strength in the market to sustain prices up to the deadline for the stamp duty holiday and the scaling back of Help to Buy at the end of March. However,

with the pace of the UK’s economic recovery expected to be constrained by the renewed national lockdown, and unemployment widely predicted to rise in the coming months, downward pressure on house prices remains likely as we move through 2021.”

Robert Gardner, Nationwide’s Chief Economist, supported this viewpoint: “If the stamp duty holiday ends as scheduled, and labour market conditions continue to weaken as most analysts expect, housing market activity is likely to slow, perhaps sharply, in the coming months.”

Regarding the outlook for economic recovery, EY ITEM Club has improved its estimate of the UK’s economic performance in 2020 – claiming that the UK economy shrank by 10.1% in 2020, an improvement on its December estimate of 11.6%.

Although GDP is expected to fall by 3% to 4% quarter-on-quarter in the first three months of 2021, the outlook is optimistic with forecasted growth of 5% in UK GDP in 2021 and 6.5% in 2022. Similarly, Capital Economics predicts that the economy will return to its pre-pandemic size in Q1 2022 – implying that the government does not need to tighten fiscal policy to reduce the budget deficit and that the Bank of England will not need to launch more quantitative easing or resort to negative interest rates in the next two years.

Unemployment remains a key concern, with the Office for National Statistics reporting that the unemployment rate had risen to 5% for September to November 2020. The government reacted by extending the furlough scheme to the end of April 2021 in an attempt to stem redundancies,

with EY ITEM Club now forecasting that the rate could peak at 7% around mid-2021 – significantly below the 9% to 10% that some forecasters were predicting.

The health of the property market is closely linked to the number of people in work – low unemployment levels mean increased certainty around job security and personal finances, typically boosting consumer confidence and leading to increasing demand. Whilst COVID-19 is having a greater impact on unemployment levels amongst renting demographic segments, research from Savills expects that falling unemployment and low interest rates in late 2021 will restore housing market demand with expectations of flat house price growth through 2021 as a whole, ahead of a return to growth through 2022 and beyond, which are views supported by all major agencies.

A strong housebuilding agenda remains underpinned by planning reform, fixed local housebuilding targets that seek to strike a balance between increasing delivery in areas of most need and where it can be accommodated and a focus on facilitating home ownership.

Housebuilding is a valuable contributor to the economy, and whilst it’s no secret that the sector consistently under-delivers on housebuilding needs, the dip in construction starts in 2020 will mean less new-build housing supply into the 2021 market, further mitigating short-term demand-side pressures. Q.

Find out more at www.crowdproperty.com.

Apply for property project finance in just 5 minutes at www.crowdproperty.com/apply.

Issue No. 11 – Qandor – 009

MARKET COMMENTARY

HOW TO MAKE SURE YOUR PROPERTIES SELL AT A GOOD PRICE DURING MARKET UNCERTAINTY. GRAZINA THOMPSON Investor & Partner Dapatchi Group www.dapatchi.com

With the COVID-19 pandemic still ongoing and Brexit uncertainty lingering around, how do we avoid properties being undervalued for those reasons, when we come to sell completed properties? Here are a few tips on how we are currently achieving valuations at the right levels and preserving our profits on some of our finished projects.

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If the completed units are sold on an open market, you are at the mercy of the panel of valuers that your buyer’s mortgage company will appoint to value them.

However, there are a few things that can be done to improve your and your buyer’s chances of achieving the right level of valuations.

It is really important to put a lot of effort into the valuations of the first sales, where

there are a number of units in the completed project. This is because the first valuations will set the precedent for the rest of the sales. If they come in at the right level, these can be provided to valuers of subsequent sales, which are likely to influence further valuations in a positive way.

So, the first thing we do is prepare a pack of information and as much comparable evidence as possible to assist the valuer. Of course, valuers are not obliged to look at your information, but most will be happy to do so. In particular, we speak to local agents and gather information on any similar sales that have exchanged or completed, but which would not otherwise be visible to the public and therefore valuers. These we pass on to the valuer through the sales agent.

If the valuation still comes in lower than expected, we would then have a conversation with the buyer to see if they could appeal it, or be prepared to go with another mortgage company and get a new valuation. Sometimes we shall even offer to contribute or pay in full for the new valuation. This way we manage to achieve enough valuations at prices that are not “cautiously” lowered by the valuers due to current market conditions.

If the valuation is to purchase a project, which you would want to get valued at the right level, start working both

with your financing broker and therefore indirectly your lender, as well as the agent selling the property, which is to be valued.

The agent will have a good grasp on which valuation companies are applying a more realistic as opposed to cautious approach at any one time, being exposed to many sales and valuations in the area. Then speak to your financing broker / lender to see if they would accept to instruct that particular valuation company or valuer. You would be surprised how many times they would.

Agents are really instrumental in facilitating these conversations and flow of information between all these various parties, so choosing the agent to sell your properties is also key.

Whilst it is not a given that you will always achieve the valuation at the desired level, by working as a team with all the parties, you have the best chance of getting close to your perfect outcome, even in uncertain times, like we currently have. Q.

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MARKET COMMENTARY

NEW BUILD MARKET UPDATE: WHAT’S CHANGED IN THE PAST 12 MONTHS? RACHEL GEDDES Business Principal Mortgage Advice Bureau www.mab.co.uk

We all know the past 12 months have been particularly turbulent and challenging, but like any industry, the new build sector has had to adapt and be agile when it comes to both the construction and sale of new homes.

During the first lockdown in March last year, the home building industry protected sites for a period of inactivity and quickly turned attention to the many opportunities presented by digital marketing – this 012 – Qandor – Issue No. 11

essentially forced any builders who weren’t doing so into utilising new technology.

It is now the norm to offer virtual viewings where possible and although we find ourselves in a third national lockdown, the housing market is still very much open for business and the pipeline full of buyers rushing to meet the cliff edge that is the stamp duty deadline on 31st March. This also coincides with the ending of the current Help to Buy Equity Loan scheme on the same date.

From 1st April 2021 in England, there will be a new Help to Buy scheme which is

only available to first time buyers of a new build property. The previous scheme was open to anyone purchasing a new build, so it will be interesting to see how the take up of the new scheme differs.

There’s a key element to ‘Help to Buy 2021-23’ – several regional property price caps have been introduced, meaning consumers can only borrow a maximum of 20% of the house price based on the region they’re purchasing in (see a summary of the caps below). Under the previous scheme, the maximum purchase price was £600,000 when using Help to Buy, with London buyers being able to borrow 40% of the overall house price and the rest of the country having access to a 20% government loan to put towards their new home.

Region

Price Cap

North East

£186,100

North West

£224,400

Yorkshire & The Humber

£228,100

East Midlands

£261,900

West Midlands

£255,600

East of England £407,400 London

£600,000

South East

£437,600

South West

£349,000

Due to delays caused by COVID-19, the government has also recently confirmed that for anyone using the existing Help to Buy Equity Loan scheme in England, they now have until 31st May 2021 to legally complete.

This also gives homebuilders an extra two months to finish the construction of new homes for those who had already secured their property using the current Help to Buy scheme.

In Scotland, the First Home fund was another incentive introduced in the past 12 months where the government loan can be used by first time buyers to put towards either a new or existing home. In Wales, buyers of a new build home can apply for a 20% loan on a new build property with a maximum purchase price of £300,000 but the builder must be registered with the scheme.

Clearly, these government incentives have been extremely positive for the sale and production of new build homes, and another real stimulus was announced by the Chancellor in the Spending Review last November – the intention to launch a Help to Build scheme specifically for the custom build sector.

Although the scheme isn’t live yet and we await further details and a timeline from the UK government, this is a particularly interesting one for developers to keep an eye on as under the current section 106 agreement, housebuilders could benefit by selling serviced plots to anyone using the scheme.

In the review, the government confirmed £2.2 billion of new loan finance to support house builders, which includes delivering a new Help to Build scheme for custom and ➳ Issue No. 11 – Qandor – 013

self builders, as well as funding for SME housebuilders and Modern Methods of Construction. In addition, £100 million of funding to support, among other things, the release of public sector land, including for serviced plots for self and custom builders.

A further development in the financing of new build homes, which has really gathered pace over the last six months, is green mortgages. Many more lenders are now offering financial incentives to customers if the home they purchase meets certain environmental standards – this could be in the form of a lower interest rate or cash back. With further investment promised into modern methods of construction and more sustainable building, if it’s good for the environment then it can also be good for the consumer’s pocket and the developer’s bottom line.

Another way in which lenders have responded to the changing new build landscape in recent times is to extend offer

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times for customers. With housebuilders facing longer than usual delays due to COVID-19 restrictions and implications such as Brexit for the sourcing of construction materials, these extensions allow developers to move forward on the build of new homes without having to worry the customer’s mortgage deal might fall through. This peace of mind offers greater certainty as we continue to move through uncertain times – it also means the builder doesn’t solely have to focus on cash buyers.

Whatever 2021 throws at us, the new build sector can be proud of the developments made over the past 12 months with lots of positive change and a drive by everyone involved in the industry to invigorate the production and sale of new build homes. If we continue at the same pace and with the same flexibility and ability to adapt to change, this will put the sector in an even stronger position. Q.

BUILD BETTER.

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+44 20 3327 0340 hello@hollandharvey.com www.hollandharvey.com

WOMEN IN PROPERTY

THE IMPORTANCE OF BUILDING STRONG FEMALE RELATIONSHIPS IN PROPERTY. PHILIPPA SOMERSET Director Somerset Estates

RACHEL MILLIAMS Property Manager Somerset Estates www.somersetestates.com Surrounding yourself with leaders has always been a golden rule in business, and this month in particular, we want to emphasise the role of female entrepreneurs in property, and look at how widening our professional circle increases our own abilities to succeed in the industry.

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Women in property and construction are constantly growing in their roles, within companies, as individuals, and as a gender group within a traditionally male-dominated field. This past year has reminded us all of both the impact and importance of togetherness, a lesson that applies to the property market and specifically to female professionals.

Ultimately, the sky is the limit in terms

of what we can give and gain from forming a solid and ever-expanding network. Whilst in an ideal world this network would be equal parts men and women, we still have a long way to go before attaining a perfect balance within the property and construction industries.

But we want to see this as more than just a challenge: rather, it is an exciting opportunity for female entrepreneurs to make prominent strides towards achieving gender parity in the residential field.

From female community leaders to community newcomers, exchanging stories is just as important as exchanging ideas. It’s the “How did you get to where you are now?” that ultimately brings meaning to the “What do you do?” We have all entered the property industry with different areas of focus, approaches, goals, points of view and experiences. Some clients and mantras share common points, while others contrast significantly. And whilst we might all bring different ideas to the boardroom, learning to think outside the box while balancing creativity and strategy involves a lot of listening.

Sharing your stories and hearing about

others’ experiences in turn is an experience in itself. Ultimately, we become well-rounded by having an accessible map of different routes both to and throughout the property industry – some that we have taken, some that others have paved, and some that are still in the works. Whilst women in the property industry have all experienced different challenges – some that we are still navigating and some that we have overcome – choosing to see obstacles as necessary character-building, learning experiences, is paramount in order to grow together and embrace our future with full force.

Gender diversity in real estate is not only essential from an inclusive point of view; it is also key to the success and growth of the industry. In building relationships with professionals based on a mutual focus on property, we expand our access to a diverse pool of leaders, and are thus continuously exposed to different perspectives and talents that strengthen teams and ultimately increase sales. Simply put, the success of women in property means the success of the industry itself. Q. Issue No. 11 – Qandor – 017

HISTORIC PROPERTY OF THE MONTH

SETON CASTLE: 18,000 SQ FT OF MYSTERY AND INTRIGUE. EMMA MORBY Director of Land Acquisition Heritage England www.heritageengland.co.uk

This amazing neoclassical castle is close to Edinburgh and is one of Scotland’s jewels. Seton Castle was built in 1789 by Robert Adam using the stone from Seton Palace.

His personal touch is evident in the beautifully executed ceiling plasterwork and dramatic bay windowed rooms.

There are secret staircases, curved doors, curved walls, arched windows and hidden doors which add to the charm and 018 – Qandor – Issue No. 11

sophistication of the architecture and design.

It holds national importance and is ranked as a category A building (similar to Grade I in the UK).

Seton was in the ownership of one family from the 1800s to 2003 and has been sensitively refurbished over the years to create a blend of both modern and historic features, including the installation of a full security system and the creation of a state-of-the-art gym, playroom, huge double AGA kitchen, magnificent silk-lined dining room, extensive billiard room, traditional old world ➳

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bar, cinema, guest cottages, apartments, helipad and a 10,000-bottle wine cellar… Yes that’s right! 10,000 bottles of wine!

The castle is approximately 18,196 sq ft, four stories high and has seven bedrooms, various reception and entertaining rooms and even a walk-in wardrobe. There are two U-shaped wings that lead out from the main castle onto a parterre courtyard, and the family home is surrounded by 13.4 acres of private gardens and parkland.

The accommodation doesn’t stop at just the castle. On the estate, there are three further properties: two 3-bedroom cottages and a hidden suite at the top of a turret spiral staircase. Adjacent to the stables lie a generous coach house and the stable bar – the castle’s authentic private tavern!

This property has a price tag of around

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£8,000,000 but it’s worth every penny for the right person.

Castles like Seton very seldom reach the property market for sale and, with the right vision, this beautiful property can be used as a spacious family home, a wedding or events business or perhaps a luxury hotel. After all, you have a built-in wine cellar for 10,000 bottles of wine. Q.

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COVER STORY

THE RISE OF THE FEMININE. MICHELLE LOWE Founder Redshell Consulting www.redshell.org

International Women’s Day. A day to celebrate the empowerment, the rise and the success of women around the world.

The rise and the success of women is not new. Millions of amazing women have achieved amazing feats for centuries, but it is also true that the fight for equal rights has indeed played out in shockingly recent times in terms of history. Recent enough, perhaps, for a national celebratory day.

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So, when asked to write to celebrate this very event, a huge wave of impostor syndrome washed over me. Over the last year I have not, not in the normal sense, achieved very much. Nothing to shout from the rooftops, no deals done, no goals smashed, no Redshell developments brought to life and no profit to calculate. In my quiet moments I have felt as far away from success, from embodying any traits of an international woman or quite frankly, as little of any value as could be. Why are you

asking me? I haven’t achieved anything of note. Feelings of inadequacy and distinct underqualification bubbled to the surface.

What I have achieved over these very tumultuous twelve months or so is simply to hold steady, just hold steady. Embodying as much grace as I could muster whilst the inner and outer world fluctuated wildly. A huge change for me in terms of stance and attitude as I surrendered. Take your hands off the wheel and let it spin. Breathe.

There isn’t one person in the world that hasn’t felt anxious or fearful and hasn’t lost their footing at some point over the last year, male or female. And it has brought with it an enormous far-reaching sense of compassion for everyone and everything.

The profits and successes of previous years seem insignificant now in the new world, and what matters most is people pulling together for the greater good to make this little spin on earth an easier ride for everyone, where we can. These more humanitarian traits are here to stay, I am sure, and are now becoming the traits to be respected. The traits required to lead.

Holding steady perhaps still counts as a success. Holding steady can be a strength.

It’s a move away from ego and into our selves. It’s a letting go of expectation of self and expectations of others. A relinquish of the drive for tangible achievements and a return to centre. New age speak? Well, maybe. But this is also the language of the modern woman.

Historically, for women to be successful in any business or academic sense, it has taken absolute balls of steel.

Imagine the epitome of an 80s power suit

and smart mouth, to out masculine any masculine that crosses your path. Fired up by bravery, determination and more probably, inherent anger. Pure aggression dressed up in a pencil skirt.

Rosa Parks, a finger up at the masses.

Emmeline Pankhurst, a bloody selfsacrifice.

Elizabeth I, the ginger was strong in this one!

The rebel, the mouthy, the quite righteously pissed off women that had been oppressed, silenced, controlled, bullied and abused and that absolutely had had enough. This was the gateway to equality, ➳

Issue No. 11 – Qandor – 025

undoubtedly. Women had to be brash, hard and aggressive to break through. And, let’s be honest, many of us that have played in the business arena over the last twenty or so years and certainly within the construction industry have and sometimes still embody some of these more bolshy characteristics.

But now, as women, we are evolving.

The attitude, style and skills of a successful woman are evolving. What it means to be successful is evolving.

“The attitude, style and skills of a successful woman are evolving.

What it means to be successful is evolving.”

It’s no longer the rise of the woman; it has become the rise of the feminine.

The last year has stripped bare many people and many things. The spotlight on success, and what it inherently means to be successful, is changing.

The number of women in positions of power has been dramatically rising in recent times. Currently, women serve as heads of state or heads of government in some 21 countries. Twenty-one countries 026 – Qandor – Issue No. 11

out of one hundred and forty of course is not yet equal, but it’s becoming a sizable portion. Statistics show that it was just four countries in the year 2000.

It’s not just the rise of women to these positions of power that is to be celebrated, positions which can affect change and growth and make considerable difference to the lives of the people that they represent.

But we should be celebrating the type of woman that is now succeeding. The character, the attitude, the very nature of the person. The inherent traits that are a precursor of power are now evolving.

The equality game is evolving Our current international woman of incredible power must be Jacinda Ardern.

The New Zealand Prime Minister. This one shoots straight from the heart. Jacinda is genuine, empathetic, graceful and kind.

And yet a powerful and most effective leader. Harnessing respect effortlessly – with great respect comes great compliance.

Compliance for the greater good, of course, there is no question here. At the tender age of just 40 and with a young child, Jacinda has successfully led New Zealand through crisis after crisis without wavering.

There has been no confusion, no uprising, no calls of no confidence. No bumbling here!

Jacinda delivers with such grace and compassion. We no longer need to be told what to do, threatened, coerced or controlled into compliance. These masculine type traits are dying out with the toxic masculine themselves.

We’ve all mocked at the Trump circus in recent times; well, we’ve been mocking

Trump the entire time, actually. The epitome of the toxic masculine right here. Big boy tantrums as a result of a fragile, dying ego.

These behaviour and character traits aren’t solely of the male gender, of course.

But they are of the masculine energy.

Women can behave in these manners sometimes too. Priti Patel has current accusations of bullying swiftly being swept under the carpet. Shouting and swearing at civil servants, having been reminded on how to speak to staff. Reminded? How does one even forget how to interact with other humans? She certainly hasn’t appeared as a kind or considerate secretary of state during our own home crisis and, as a result, ultimately lacks our trust and respect. She has a tough job, of course she has. But does she have the leadership skills and embody

the qualities we now align with? That’s a hell no.

With a sigh of relief, America now does have a more hopeful and indeed feminine future. Michelle Obama paved the way. Michelle delivered both brains and balls with a stylish grace and dignity.

The recently elected Vice President Kamala Harris is the lady to watch, not just for gender equality but for equality in all of its guises. True feminine energy does not section nor discriminate. True feminine energy is for the good of all, for ultimate fairness and balance. For the greater good.

Kamala’s career thus far has seen her advocate healthcare reform, supporting federal de-scheduling of cannabis and a ban on assault weapons. Kamala took a clear stand against Trump and his administration ➳ Issue No. 11 – Qandor – 027

during the frequent hearings as a result of their unbelievable behaviours. An administration that displayed with pure arrogance such toxic traits, behaviours and personalities that we couldn’t quite believe our eyes and ears. Surely the twisted depth of the toxic masculine couldn’t actually be real. The quiet but steadfast feminine voice of reason is now starting to take hold and by god are we relieved.

We’ve all had and have seen quite enough of the hard-line leaders, thank you. In both politics and businesses alike.

Of both male and female. No more control via aggression or manipulation, no more profit over people, politics and power over equality. The bullish and the bullies can bog off. No more ‘who shouts the loudest’.

Instead, it’s the rise of the wise. The mature and the grounded. The death of the ego and the rise of the feminine.

So perhaps, sometimes, holding steady is a symptom of the feminine energy. No pushing and shoving, no fighting against.

The timely and pure allowance of the ebb and flow of life and of business, the acceptance of the rise and fall. Water carves through rock, after all.

This international women’s day we do not celebrate women doing man things. We do not highlight, with surprise, that women are intellectual. That they can rise to the top of their field and lead. That they can be engineers, mathematicians, political leaders and astronauts. That they can succeed in an office of men in suits. This is not new news.

This is not a triumph or a feat that now requires a round of applause. This is the norm, and we should play the acceptance card now.

028 – Qandor – Issue No. 11

This international women’s day, we will celebrate the shift. A great shift. A shift towards the feminine energy embodied by the now great female leaders. The feminine energy that empowers and facilitates great change. Feminine energy embodies justice.

It carries with it balance and equality for all.

A move to instil an overall sense of fairness.

A more powerful lead when it’s led by the heart rather than the mind.

All hail the rise of the feminine. Q.

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HMO

PANDEMIC-PROOFING YOUR HMO. Giovanni Patania Director Windsor & Patania Architects www.windsorpatania.com/

The past 12 months have brought many social and environmental issues to the fore. The need for social distancing, an ability to work from – and enjoy spending time in – your home, and the lack of travel options have been just some of the challenges that global communities have faced throughout the coronavirus pandemic.

For owners of co-living spaces, it has been a testing time. Tenants are seeking more space, a desire for privacy but also to be part of a community when ‘normal’ socialising seems impossible for the near future.

However, the past year has also presented an opportunity for HMO landlords to get ahead of the competition and consider how their properties can entice a growing 030 – Qandor – Issue No. 11

generation of young professionals. This generation may not have the cash to put down a deposit on a house, but they still want a clean, modern, bright accommodation suitable for working from home, socialising and with easy access to a city centre once restrictions are lifted.

There could soon be an abundance of co-living spaces grappling for the attention of tenants, as more commercial properties are forced to shutter. A report from the Social Market Foundation released last year unveiled research suggesting that the UK government should aspire to renovate empty shopping centres into residential living quarters, a move which seems to be gathering pace across the UK. Our Team at HMO Architect put together ten simple ways to ‘pandemic-proof ’ your co-living space, to attract the best tenants

and ensure your HMO portfolio continues to thrive well into the future.

Offer a like-minded community of people…

Many start-ups offering the very best in modern-day co-living are marketing their HMOs as aspirational, convenient, and cost-effective ways to live with friends.

Common, Ollie, StartCity and many more offer ‘matchmaking’ services via their apps to ensure new tenants are matched with like-minded people with similar goals and interests. Having access to a shared kitchen and living room is a positive, sociable aspect to living in an HMO, and should be marketed as such. …but keep privacy in mind During a pandemic, we spend much more time inside, and much of that time alone.

Having a clean, bright and modern living space which makes the most of every inch of space is vital. Include an en-suite bathroom

in each room where possible. Comfortable furniture, decent curtains and locks on the doors will go a long way with privacyconscious tenants. You could even offer the use of a safe for an additional fee.

Accommodate the WFH revolution Working from home is here to stay, in some form or another. While we are likely to see a gradual return to the office for many over the next year, this will probably be staggered, and many companies are offering their employees hybrid options of working from home and in an office. When possible, a separate home office with 3-4 desks and bright, airy windows can collect a premium in rental income. If your HMO isn’t able to accommodate this set up, adding a desk with a comfortable chair and view from a window will also help tenants acclimatise to this new way of working.

Introduce ‘sanitising stations’ Creating a hand sanitising station in the ➳ Issue No. 11 – Qandor – 031

HMO entrance area and other communal areas is a great way to reassure your tenants that you take their health and safety seriously.

Posters hung throughout the property to remind tenants to build lasting habits around washing their hands and cleaning surfaces can also be helpful and can feature as part of the interior design if done by a specialist graphic designer.

Location, location, location With rental incomes feeling the pinch in cities like London thanks to the pandemic, landlords with properties in well-located areas are likely to still see interest from prospective tenants. As restaurants, bars and gyms re-open, tenants are likely going to be far more interested in easy access to these sites, alongside proximity to a good transport system in and around the city.

Get creative with suburban properties While the shift away from city living is likely to recover to a large degree, there will likely be tenants keen on community living with a private edge, who enjoy a lower cost of living outside of the city. Suburbs outside major cities like London, Liverpool and Cambridge could be ripe for development if shopping centres and warehouses become available for redevelopment. Landlords are likely to achieve high rental yield alongside a dedicated tenant base keen to sign longerterm contracts.

Value sustainability It’s no secret that millennial renters are tuned into all things sustainable and eco-friendly.

Introducing sustainable materials and products not only helps the environment, 032 – Qandor – Issue No. 11

but also often holds cost-saving benefits for landlords. For example, introducing solar panels on roofs, or a composting system for tenants to contribute to.

Adapt private spaces Installing tea and coffee making facilities in larger HMO bedrooms is another way to stop the spread of germs and give more privacy to those seeking their own space and personal equipment. Sinks, extra storage, a fridgefreezer and microwaves can also be added to individual rooms, so that tenants have fewer communal things to share.

Offer flexible payment structures It’s a good time to rethink and evolve your rental income structures in order to ‘futureproof ’ your HMO portfolio. Be creative in the way you format private rooms, adding in en-suites or balconies for a premium; charge less per week if tenants are willing to sign up to a longer-term lease; and be flexible on utilities providers and the way they charge.

Add a personal touch A weekly or monthly subscription to a fruit and vegetable box or flower deliveries can be an inexpensive but impactful way to keep your tenants happy. Alternatively, the installation of a coffee machine, Netflix subscriptions or vouchers for a monthly takeaway could really help bolster social relations within your HMO and create a long-standing community between tenants.

For professional advice on how to redevelop or upgrade your HMO portfolio, send us an email at info@hmo-architect.com. Q.

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PROPERTY DEVELOPMENT

PROPERTY DEVELOPMENT: FORWARD SELLING. DORIAN PAYNE Co-Founder Castell Group www.castellgroup.co.uk

Have you considered focusing on forward selling your developments?

All property developers can make money in rising markets; errors or omissions typically get masked by the rising value throughout the build. What happens if the market stagnates or declines?

This happened to me a few years ago when 034 – Qandor – Issue No. 11

I was developing for open market. It was only a small development site, but I made several mistakes which are very common for developers, especially when rushing or underestimating the market risk. Below are some of the key mistakes I made.

• Appraisal wasn’t thorough enough (Highlevel figures only).

• Assumptions used in the appraisal weren’t verified.

• Sale values and demand (exit) were too bullish.

• Underestimated the market risk / lacked sensitivity analysis to quantify what would happen if sales were delayed.

• Didn’t actually understand my own risk profile or appetite.

Thankfully the site sold and was only a few months behind, but it opened my eyes into what could go wrong and re-focused my attention on de-risking.

Keeping it basic, there are a few key elements that can turn a profitable project into a loss-making disaster: 1. Underachieve on sale price; 2. Delay (build or exit); 3. Overspend on build.

I highly recommend any sensitivity analysis at the appraisal stage takes these into consideration to ensure you are comfortable with the risk as the developer.

Forward Selling The first two risks could be mitigated through forward selling, which means pre-selling the finished unit / project to an end-buyer prior to commencement. The sales price is agreed, and in theory there shouldn’t be a delay on the exit.

It allows the developer to focus on the preconstruction, delivery and handover stages which a competent developer can control to a certain degree. As a caveat, property development can throw up unidentified issues at many points and requires consistent focus and good processes and a skilled team to deliver successfully.

A developer could look to forward sell to the following: 1. Registered Social Landlords (RSL) – This is what we focus on by building affordable, social and disabled housing.

2. Local Authorities (L.A.) – They are now able to borrow moneys to deliver more affordable housing.

Larger Investors – Developments which are purpose-built for larger or institutional investors, such as larger student housing or supported living accommodation. ➳ Issue No. 11 – Qandor – 035

3. Businesses – Expanding businesses are consistently looking for purpose-built commercial buildings to either buy or rent.

4. Off-plan to smaller investors or general public - Investing in up-front marketing to try and sell off-plan could help reduce the risk by agreeing the sales price on schemes intended for the open market.

Some positives of forward selling are: 1. Secured exit; 2. No delays on completion; 3. Potential ability to develop unviable sites; 4. Pre-agreed specification; 5. Scalability; 6. Potentially lower risk.

There are also some negatives to consider: 1. Can be a slow and tedious process drafting the contracts; 2. Additional upfront scrutiny; 3. Buyers can be demanding; 036 – Qandor – Issue No. 11

4.

5.

6.

7.

Buyers can become insolvent; Possible retentions, bonds and guarantees; Possible defect liability periods; Could be reliant on public resources (RSL/ L.A.).

It can work well and help a developer to de-risk. As with most things in property development, each deal will have its own intricacies and each buyer will have their own requirements which may be onerous or render the project unviable. Even though there’ll be an exchanged conditional sale contract, buyers should also be vetted as there will still be an exit risk.

The above article is not intended to be a complete and thorough guide to forward selling; instead, it’s intended to provide property developers with a highlevel perspective of another route they can consider. Q.

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HOMES

PROPERTY DEVELOPMENT

FINDING OPPORTUNITY ON THE HIGH STREET. RICHARD HOLLAND Director Holland Harvey www.hollandharvey.com

As both chain-retailers and independents suffer the imposed closures of the COVID pandemic, many businesses will not reopen. In addition, the continuing rise of online shopping puts our high streets at risk of becoming desolate landscapes, void of the hustle and bustle of daily life that we all currently crave.

Perhaps now is time for a new approach to help reimagine and sustain our 038 – Qandor – Issue No. 11

beloved town centres? Changes in planning legislation have unlocked new opportunities for development and are feared by some as a means of opening up the floodgates to a wave of unplanned, poor quality residential conversions – however, we believe there is another option.

Could the new ‘Class E’ be the saviour of the High Street and an opportunity to create truly mixed-use town centre communities? Imagine an empty retail unit effortlessly reimagined as a co-working space, a yoga studio, or a children’s nursery

– all with high density, high quality housing above to provide a critical mass of residents that support local businesses and breathe new life into the local economy!

Below we describe three examples where we have worked closely with landlords, planning authorities and local communities to reinvigorate some of London’s high streets using our three-point plan: • Intensify residential uses to generate value and create a critical mass of people • Seek innovative anchor tenants to complement traditional retail and service offerings • Strive to provide added community/ social benefit Going truly mixed-use in Westminster Our first case study is a failing corporate retailer on an otherwise independentled high street whose demise would have created a significant blight in a very prominent location: the property was in excess of 10,000 sq. ft. set over four storeys, in a conservation area setting.

A new anchor tenant was forthcoming with a visionary concept to create a familyfocused member’s club incorporating retail, restaurant, co-working space, member’s lounge and children’s nursery – all Class E uses. Critically, the development is set to attract a high volume of members, parents, shoppers and diners to the site, whose incidental patronage of other local businesses will help boost the local economy and bring life to the high street.

The business case required a substantial rooftop extension to the rear of the building – the principle of which was in direct contradiction to Westminster planning policy. However, through a strategy of active stakeholder engagement paired with a conservation-led approach to design, we garnered the support of local community groups and ward councillors.

Ultimately the enhanced environmental, social and economic benefits of the scheme won favour at committee – consent was granted in July 2020 and the club is due to open in the Spring.

Micro-development in RBKC A vacant and dilapidated ground floor retail unit with empty ancillary space upstairs in a constrained urban location provided us with a challenge – how do we unlock its value? The neighbourhood in question is dominated by boutique style retail but has been in steady decline. The site would require significant investment to make it habitable, and the owner was looking to increase the value of the asset. The ambition was therefore to retain a flexible mix of uses by re-providing a Class E retail space at ground floor, whilst adding value creating residential units above.

Our strategy was to develop a planning argument based on the principle that, under Class G, the existing A1 use could accommodate two flats, thereby establishing residential as an acceptable use.

From here we set about proving that extra mass could be achieved at the rear through consideration of daylight/sunlight ➳ Issue No. 11 – Qandor – 039

040 – Qandor – Issue No. 11

envelopes. We ultimately gained support for a part two-, part three-storey mixed-use building comprising a smaller Class E unit on ground floor and with 2 one-bedroom flats above, increasing the site’s GIA by 33%.

The retail unit was reduced by 40% to make it a more viable size for the type of retailer that the landlord was looking to attract; crucially this reduction did not go below the trigger for loss of employment space under RBKC policy – in fact the quantum of zone A retail was unaffected.

This new mixed-use ‘micro-development’ will also ensure new footfall on an otherwise declining high street creating a more buzzy, attractive place to live – in turn creating a further uplift in value for the residential units.

Preserving community assets in Lambeth Finally, a ‘Dickensian’ terrace of commercial buildings fronting a community centre on the quiet end of a south London high street.

Our application proposed a new eightunit mixed-use development over flexible commercial space and represented a 650% increase in the quantum of residential area on the site.

A critical element of the scheme was to

improve access to a much-loved community centre which had stood on the site since the 19th century. A secure, well-lit passage provided a new means of direct access, and new kitchen and WC facilities for the community centre itself were included as part of the application. The importance of preserving places of gathering as local assets has never been so pertinent, and we demonstrated that a commitment to community benefit and social value could go way beyond an s106 contribution.

The scheme re-provides all the commercial area at the perfect size for an independent offering – ensuring no loss of local employment. All the apartments achieve or exceed the London Housing Design Guide space standards, and the scheme included 80 sqm of private rooftop amenity space set over two levels offering dramatic views across London.

Conclusion According to the Financial Times, 2.8% of chain-owned outlets have closed during the pandemic, but only 0.5% of independent retailers: we believe the future is local!

Extensions to permitted development rights and the introduction of the new use classes E and F will create opportunities to further diversify the offering on the British High Street. Through conscientious design, pro-active engagement with communities and a little vision – the property industry can breathe new life, and value, into Britain’s greatest assets. Q.

With thanks to Daniel Rinsler & Co., Jon Dingle and Boyer Planning. CGI by Studio Archetype.

Issue No. 11 – Qandor – 041

PROPERTY DEVELOPMENT

WHAT ARE THE OPPORTUNITIES FOR SME DEVELOPERS IN A POST-COVID MARKET? JEREMY WORMINGTON Managing Director Ferrata Property Group www.ferrataproperty.co.uk

As much as one might wish for a crystal ball, what is certain is that there will be a huge opportunity for SME developers over the next couple of years as businesses restructure to the new ‘normal’ post COVID. I will not discuss the residential market and how that might move over the next 12 months, which has held up well while the government supports Help to Buy and SDLT thresholds.

042 – Qandor – Issue No. 11

There have also been some positive changes to the planning rules, with potentially an even bigger step change from August 2021 with air rights and the new Use Class E which looks to widen development opportunities and provide greater flexibility to alter the property’s use quickly rather than through the cumbersome planning process and its inherent risk. The following points are my musings over the commercial market in the coming months.

There is much in the public domain about the death of the high street and

how working from home will affect the requirement for large office space as companies rethink their working patterns.

I would rather view it as an evolutionary process that is right for the future rather than the past. Technology is having a huge impact on how we live our lives, and working patterns will alter accordingly.

For many, working from home has been a blessing with the reduced commute, which has meant many employees have actually worked longer hours and been more effective with fewer interruptions from colleagues (although equally the opposite does occur!).

Even so, the need for human contact remains and companies still need to engender a corporate ethos across their workforce, which is difficult from afar.

People will not want to commute as much, particularly if crowded onto trains, buses and the underground. Working locally will require more flexible office arrangements, whether companies downsize into a more hot-desking type of scenario or make use of serviced offices on a smaller scale than those operating in the centre of larger cities over the past few years, such as The Office Group. As this change occurs, there will be redundant office space ripe for redevelopment, especially when leases expire.

There has been a steady erosion of active retail space over the past decade, with vacant retail space now common in the more affluent towns and cities such as Guildford.

COVID has accelerated that process with many turning to online sales as shops remain closed or are not the places to visit as the risk of spreading the virus remains.

So, what will be the future? While consumer pressure will move in a certain direction, there will be diehard Councils that wish to maintain the status quo and prevent the changes that are necessary to rejuvenate their town centres, rather than looking forward to the long- term needs and support development. In the past 12 months, we have seen much more localised shopping focused on food retailers, wellbeing and socialising, where possible.

As retail space becomes more available, what are the opportunities? There is the obvious need to convert any upper floors, and potentially airspace, into much-needed residential use, which will hopefully get easier with the new use class. The downside is that large amounts of retail space are not suited to residential redevelopment due to access, lack of parking (in some instances) and how to make use of the ground floor which often ➳ Issue No. 11 – Qandor – 043

has poor natural light and cannot easily be converted to residential within a workable budget.

It’s one thing to create residential, but why would people want to move to more city central locations without the necessary social, health and grocery functions plus green space? In many instances, there is already a wide range of supermarkets within easy access, so the key is to set up more cafes, restaurants, gyms, health centres plus the aforementioned offices. However, many of these have been hit hard by COVID and may not rush back to levels seen only a year ago.

One of the conclusions from the pandemic is that people crave more outdoor space, and/or a more suitable home working environment.

Where possible, developers will need to factor these into any scheme to increase their sales/rental volumes.

Mixed use is the likely solution for many retail units with mainly residential uppers, or offices, and other uses for the ground floor depending on the local environment. There is talk of ‘dark spaces’ where the retail area can be used as a kitchen to fulfil home delivery meals, while the ‘final hour’ goal for online delivery will require smaller and more local storage solutions in the coming months. With larger retailers moving out, then covenants are likely to be much lower than previous with niche and independent retail prevailing.

Currently, lenders appear to be reluctant to place much emphasis on the commercial aspects of the development, with the overriding requirement to maximise the residential income while minimising

044 – Qandor – Issue No. 11

commercial income due to the risk that they will not survive for very long. Developers will need to tread carefully around this minefield in order to maximise their GDV or rental yield so that a development works financially.

While the government might provide more stimuli to assist SME developers, they have already injected staggering amounts into the economy, when compared to the crash of 2008/09, which will have to be repaid at some point. Vendors also need to get realistic with land values, particularly when properties have been vacant for some time, which reduces their commercial value.

This is exacerbated with rising development costs, which make finding a profitable deal increasingly difficult. An opportunity for developers could be to create a JV agreement with the vendor who takes some of the risk coupled with a good upside due, in part, to reduced finance costs.

This SME developer summarises that the opportunity over the next two years will be to: • Repurpose mainly retail and some office space into residential while determining the local need for the ground floor and develop accordingly.

• Maximise the residential aspects of the development to assist with funding.

• Provide surety that a development can take place by utilising the many planning changes, particularly the stimulus that the new Use Class E should provide.

• Provide a space where people would be either happy to work from home, or locally. Q.

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PROJECT MANAGEMENT

BEFORE YOU GET LEGAL, GET PRACTICAL (THE TEN STEPS!) Martin Brooks Project manager Martin Brooks Associates www.martinbrooksassociates.co.uk

With so much uncertainty still around, we have been prioritising the steps and measures that both identify and mitigate risk during COVID and Brexit, and ensure that before a construction project commences or moves into a new phase, we can step up and quickly and mutually identify and resolve issues and establish good lines of communication.

046 – Qandor – Issue No. 11

This is our approach and there are two scenarios to begin with. The rules apply to both. a) A contract exists already. b) A contract is to be entered into.

1. As Project Managers we must ensure that the Design Team are fully aware of the contractor’s procurement programme and they are resourced to supply that information on time, because this is often where the problems occur. The programme should take into account

2.

3.

4.

5.

the time for re-specifications and plan alterations.

The Design Team appointments should allow for time in re-specification and plan alterations, so the client has a fixed cost from the outset.

Use part of Contractor/site meetings to update and inform all parties on the status of all procurement. Detailed notes should be circulated and included in the PM’s report to the client.

Insist that the contractor prepares a detailed procurement schedule that verifies that suppliers and subcontractors are able to supply in line with the plan (seems obvious, but so often this is overlooked). This step ensures that the contractor cannot blame delays on a supplier.

Plan B! Make sure the contractor is contacting other sub-contractors and suppliers to ensure a swift fall-back option can be accessed.

6. A current reality but always applicable: run through and make clear the COVIDsafe operational plan for the site.

7. The cheque isn’t always in the post!

Payments for deposits should be discussed and agreed up front. A contractor will act faster if his business is not affected by cash flow.

8. Ensure that lines of communication with the client are open and that possible risks are discussed in advance and clearly.

9. Agree a schedule of payments from the client for forward deposits.

10. Use a simple vesting certificate or side agreement when going through the contract.

11. In the event of any legal proceedings, the client’s case will be stronger if the professional team have been seen to be proactive and taken practical steps before the men in wigs appear and now more than ever. Q. Issue No. 11 – Qandor – 047

CONSTRUCTION LAW

CONSTRUCTION TIMEBOMB? DETONATION DATE: 1 MARCH 2021.

JONATHAN MORE Construction Lawyer Spencer West LLP www.spencer-west.com

Think of one of the worst things that could happen to the construction sector at this moment in time.

What would it be? Something that takes cashflow out of the supply chain? New legislation which fundamentally changes tax regulations when there is limited money to ensure compliance with these changes?

You would be right on both counts and it’s happening. I introduce you to: the VAT Reverse Charge for construction services, with regulations due to commence on 1 March 2021.

This change impacts all stages of the 048 – Qandor – Issue No. 11

“construction chain”, including developers and end users. It is not just contractors and suppliers that need to be prepared.

What the VAT reverse charge is and means I deal with below, but for those who want to read or research the specific legislation change being invoked, I direct you to the amendment to the VAT Act 1994 by Order, the “VAT Reverse Charge for Construction Services”, issued under section 55A. Having been delayed twice since its anticipated initial “launch date” in October 2019 (due to Brexit and COVID-19 – and lobbying from construction industry groups), the new regime will “go live” on 1 March 2021, but there remains a concern within

industry bodies that this is simply not the right time to impose such dramatic change on the construction industry. The industry is potentially neither ready for the practical requirements of this change, nor the practical commercial consequences.

The background to the change Ignoring the timing, there is “reason” for this change, as the new legislation has been introduced to combat tax related fraud.

Over a number of years, an increasingly common unlawful behaviour has seen fraudsters “steal” VAT revenue from the Government.

This has been achieved by the fraudsters either setting up shell companies, or taking over trading companies, and charging VAT to customers in addition to the services provided

in the normal way. However, rather than flow the VAT money through the system such that this money is eventually received by HMRC, they keep it. As a result, HMRC are deprived of significant sums of tax.

This is not a problem specific to construction; indeed, the figures show that the construction industry is a relatively minor percentage of the wider problem.

The Government’s solution to this tax evasion, however, is one that is likely to have significant ramifications for companies across the construction industry.

What is a reverse charge?

In layman’s terms, a company that is in receipt of “specified services” (most construction supplies and works) will not pay VAT to its supplier; rather, it will account for the ➳ Issue No. 11 – Qandor – 049

appropriate amount of VAT on its VAT return. For the supplier, this means that it should not include, and should not receive payment for, VAT in its invoice.

The rules will apply to suppliers of certain construction “specified services” who are registered to the Construction Industry Scheme; the ultimate client/customer, defined in the legislation as the “end user”, will be the party liable to pay VAT to HMRC in respect of the services provided rather than the supplier(s).

The reverse charge does not apply to any of the following: • Supplies of VAT exempt building and construction services.

• Supplies that are not covered by the CIS, unless linked to such a supply.

• Supplies of staff or workers.

• Non-VAT registered customers.

• “End Users” i.e. VAT registered customers who are not intending to make further on-going supplies of construction (for example, businesses commissioning the services to build an office, or a main contractor that sells a newly completed building to a customer).

• “Intermediary suppliers” who are connected e.g. a landlord and his tenant or two companies in the same group.

The consequences of the new regime The Government has estimated this will impact up to 150,000 construction-sector businesses and admits that the administrative burden is likely to be significant.

Money paid for the VAT element of invoices will no longer flow between businesses. With each qualifying transaction, 050 – Qandor – Issue No. 11

VAT will be calculated as a paper exercise and registered on the invoice as a “reverse charge”.

It will be the responsibility of the “end user” at the top of the supply chain to pay the tax.

If an invoice wrongly adds VAT to the relevant amount due, it will have to be reversed (as will any monies paid).

The official guidance is that the reverse charge will not apply to all contractors, only applying to “specified services”. However, the definition of “specified services” mirrors those services defined as “construction operations” in the “Construction Act”. Thus, it will affect most construction companies to some extent.

If a supply contains a mix of specified and other construction services, it will be classed as a single supply of “specified services” and the reverse charge will apply.

Cost: There will, of course, at a time where liquidity is likely to be challenging at best, be one-off costs to affected companies, including familiarisation with the new rules and adapting VAT accounting systems and processes to enable reverse charge supplies to be calculated and reported.

There will also be ongoing costs which include: calculating the reverse charge, keeping records of all reverse charge supplies, checking the reverse charge is correctly applied, reporting reverse charge supplies on VAT returns, and, crucially, obtaining evidence as to whether or not a customer is an end user.

Planning for this should really be finished by now, and if not should be expedited. The Government is being lobbied to delay the start date again, but we are now very close to the date of implementation.

In addition to the more predictable costs

outlined above, the practical consequences of this new regime pose a number of risks to construction companies, with potentially significant consequences.

Risk 1: The requirement to reconfigure its accountancy practices and procedures.

Such a significant change to accounting processes will always carry a heavy practical risk.

Risk 2: Reduced cashflow. Many construction businesses will no longer be able to rely on VAT money for cash flow. It goes without saying that VAT money should not be used in this way, but it is common practice throughout the supply chain. Preparation for this loss of cash flow requires to be factored in by any company who relies on or uses VAT money received as part of their working capital.

Risk 3: Main contractors, if they fall under the definition of “end user”, as they will often do, will require to pay a significant VAT bill for all “specified services” provided through the supply chain below. With narrow margins, and a squeeze in the market continuing for such companies, this is a material risk to the industry as a whole.

Risk 4: Who is the “end user”? Where there is a defined term, there is often (not far behind) a legal argument about the interpretation of that term. This is a distinct possibility with the term “end user”, particularly with the responsibility falling on end users to pay significant amounts of money to HMRC. This contributes to the question of how will a sub-contractor know if its main contractor is the “end user” and what will be needed to evidence this? Current guidance from HMRC is unclear on such issues.

When I spoke to Alasdair Reisner, Chief Executive of the Civil Engineering Contractors Association (CECA) about this change in law when it was first due to commence in October 2019, he told me, “The new rules on reverse charge VAT are a timebomb for the industry with an increasingly short fuse. We are concerned that many businesses are still not aware that they will have to be compliant with the new rules this autumn, and that when they do have to change, they will find that the new model will mean that suppliers take a negative hit on cashflow.”

Right at the time when they are struggling with the biggest economic “hit” in a century, let alone still understanding the post-Brexit consequences.

The above risks have the potential to result in catastrophic consequences for companies that are not properly prepared this change. Specialist tax advice should be sought on this issue if not obtained already. Q.

For further information on the subject, please get in touch.

Issue No. 11 – Qandor – 051

DEVELOPMENT FINANCE

THE THREE T’S EVERY DEVELOPMENT FINANCE LENDER SHOULD HAVE. Paul Watson Head of Origination Blend Network www.blendnetwork.com

In today’s fast-moving property market, borrowers need to be building strong, lasting relationships with their lenders.

Paul Watson, Head of Origination at development finance lender Blend Network, explains what are the three Ts every development finance lender must have and how Blend Network have made it their mantra.

052 – Qandor – Issue No. 11

The late Emilio Botin, Santander Group Executive Chairman until his death in 2014, is one of my favourite all-time bankers. To me, his vision defined banking and made it what it is today. Botin’s speech to the 2008 Euromoney awards dinner, where Santander was named best global bank, has gone down in banking folklore. Botin reveled as a commercial lender from northern Spain picking up the biggest prize in banking in front of the big investment banking-

dominated institutions of bigger and richer countries, especially UK and the US. Alluding to a poem by colonial-era British poet Rudyard Kipling, the late Santander executive chairman declared: “If you don’t fully understand an instrument, don’t buy it. If you would not buy a specific product for yourself, don’t try to sell it. If you do not know your customers very well, don’t lend them any money. If you do these three things, you will be a better banker, my son.”

The reason I tell this story is because we at Blend Network deeply believe in the spirit of Mr Botin’s words, which in our case is translated into the three Ts: Trust, Transparency and Track record. The three Ts have become part of Blend Network’s DNA, embedded in its culture and allowed

it to build strong, lasting relationships with its borrowers and to double its volume of lending last year and the year before that. So, what are Blend Network’s three Ts? Trust As a property developer, investor or broker, you need to trust your lender as much as you trust your wife or husband. Trust is key in everything we do, but more so in property when one foot wrong can mean a deal collapses and ends up costing the customer thousands of pounds and/or a lost deal.

At Blend Network, our priority is to build relationships of trust with our borrowers to ensure their deals progress smoothly and they return to us for their future projects. A returning borrower, of whom we have many, is a borrower who trusts his lender. ➳ Issue No. 11 – Qandor – 053

Transparency Transparency is one of those things that is hard to appreciate until something goes badly wrong. How many of you have ever had to face hidden fees from a lender disguised into the small print? Or a lender who agreed to lend before unexpectedly pulling out of the deal at the last minute? Sadly, those things happen too often because many lenders lack transparency.

At Blend Network, we put transparency at the heart of everything we do. What you see is what you get and that’s why we also like to always meet our borrowers in person, because as Joseph Safra used to say, and as we also like to say, “eyes tell more than balance sheets.”

Track record And how about track record? Alternative finance and peer-to-peer (P2P) property lending has gained popularity in recent years due to its flexibility, enhanced customer service and speed. Yet still many P2P lenders lack enough liquidity and are unable to fund deals fast enough; many take up several days or even weeks to fund the property deals on their platforms.

However, other platforms such as Blend Network get the deals funded in a few minutes. For example, a £600,000 loan in December to part re-finance the conversion of a former shoe factory into 24 apartments in Northamptonshire was funded in 102 minutes. Before that, a £445,000 loan to part-finance the conversion of a site into four 4-bed houses in Norfolk was funded in 36 minutes. So, from a borrower’s point of view, track record is key to ensure that their deals get funded quickly and that their projects progress smoothly.

In today’s fast-moving market, more than ever before, property developers, investors and brokers need to build relationships based on trust, transparency, and track record. Whether you are buying at auction and need to move fast to secure funding, or whether you are trying to secure an off-market development site, make sure your lenders comply with the three-Ts. Q.

Blend Network is a peer-to-peer (P2P) property lending platform that provides development finance and bridging loans from £150,000 to £3,000,000 to experienced SME property developers and small construction companies. More information can be found at www.blendnetwork.com.

054 – Qandor – Issue No. 11

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RETAIL

10 WAYS THAT RETAIL REAL ESTATE IS CHANGING IN 2021.

HEATHER CUNNINGHAM Head Of Proptech Harold Sharp www.haroldsharp.co.uk

The retail sector is one that moves at an exceptional pace and, as we kickstart 2021, it is clear that we will continue to see significant change.

Head of Proptech at Harold Sharp Limited, Heather Cunningham looks at the top ten changes that might affect the sector, based on current trends.

1. A bricks and mortar presence will still be important Much has been made of the increase 056 – Qandor – Issue No. 11

in online sales during the pandemic – a lifesaver for many businesses, some of which were forced to launch an e-commerce presence to stay afloat.

UK consumers are some of the most enthusiastic adopters of buying online – way ahead of the rest of Europe.

This boost to online purchasing will inevitably level down post-pandemic, and a bricks and mortar presence will remain important so that retailers have an “omnichannel” offering. A physical presence not only provides a physical

shopping experience but also provides a “click and collect” and brand presence which a purely digital retailer misses out on.

2. Oversupply in the sector will mean winners and losers In the retail real estate sector, it is clear there is an oversupply. The US has a whopping 24 square feet of retail per person and whilst the UK is possibly closer to a quarter of that figure, there is, and there will be, more empty space.

Our prediction is that out-of-town retail will win over so called “malls”. This is on the basis that retail parks have easy access and curb side pick-up for “click and collect”. They are also perceived as “safe” given they are outdoors and offer wide aisle shopping. In fact, some of the more successful fashion retailers may

decide to move out of less attractive shopping centres with empty units to more attractive out-of-town spaces.

Once this pandemic is over, building on the customer experience at retail parks with enhanced leisure and dining offerings will also be important to success.

3. The Landlord / Tenant relationship will be key We have seen landlords have a much closer relationship with their tenants over the last few months, and it is that closer understanding of the tenant’s needs and the consumer experience which is key for the landlord.

Simon Property Group (SPG) is America’s largest shopping mall landlord. But with struggling and bankrupt chains among its biggest tenants, it has decided to take an unconventional route by buying some ➳

Issue No. 11 – Qandor – 057

of those failing retailers. In August, SPG acquired Brooks Brothers menswear, which had slipped into bankruptcy. Only a few days prior, SPG joined up with Black Rock-controlled Authentic Brands to buy jeans retailer Lucky Brand.

4. Landlords will adapt to consider a range of uses within an asset Many landlords will need to get creative in the repurposing of retail space. And developers will see opportunities in using retail to repurpose tired office, leisure and even healthcare settings.

Breaking up department stores into mixed use assets will prove a huge challenge to keeping some parts of the high street active. The recent acquisition of the Debenhams website and brand

by Boohoo excludes the remaining 118 Debenhams department stores, which the administrators intend to close once the stock is liquidated.

058 – Qandor – Issue No. 11

5. Turnover rents will rise in popularity Landlords were always historically of the view that the market would set the best rent purely on a demand and supply basis, and what the tenants could pay for the space, based on their profitability.

We are now seeing the beginning of an acceptance that turnover rents, particularly for fashion retailers, have their place. This brings its own challenges.

How is turnover measured and, in particular, how do you treat online sales collected from stores or generated by brand presence? The latter is probably unquantifiable and discounted, but the former must be of significance. One thing is clear: the nature of leases is going through change.

6. Something must be done about CVAs – they aren’t working Rather, in many cases, CVAs are just a stop gap to failure. So those landlords who have the opportunity and can line up

alternative tenants are working hard before the inevitable happens.

Many of those entering CVAs so far are those for whom the writing has been on the wall for quite some time. Those which happen now and going forward will be an important indicator.

7. There will be distressed asset opportunities in the second half of 2021 Every crisis brings with it opportunity, and this will be no different. However, we will need to wait at least six months before those opportunities start to flow.

8. Banks will pull out of the nonfood retail sector Banks will continue to finance food retail but because of their recent experience and exposure to non-food retail, many will pull out of this part of the sector in the immediate future.

9. Dark Kitchens will continue to appear around city centres How many takeaways have been eaten during lockdown? Cue the rise of the “dark kitchen” - shared ready purposed space rented on a weekly, daily or even hourly basis to food offerings keen to enter the market or increase their market share. It is not only the small independent “foodies” who take this space, but also some big

names in the takeaway market who see this as an opportunity to reduce their cost base. Why pay expensive restaurant rents for space to make food for delivery, when this can be done at a much cheaper, flexible price?

There is a lot of interest and investment in this sector, both from the likes of Deliveroo who are “doing it themselves” to investors creating their own portfolios of dark kitchen properties.

The kitchen space has not only been used for those just offering takeaway. It has been used by some well-known restaurants for the preparation and dispatch of their latest high-end menus. They allow restaurants to expand into certain locations without significant property commitments.

10. Technology and data will be key to success There will no doubt be huge interest when Amazon Go opens its first store in the UK. Perhaps where that novelty lies, however, is in the fantastic technology which removes the need for checkouts, rather than in the retail offer itself. If other retailers – such as Morrisons – can start to pilot and eventually adopt this technology, then maybe the novelty will wear off and consumers will concentrate on those food stores with the best offers and stock.

How can we help?

If you operate in the retail real estate sector and have concerns or queries about tax and accountancy as we move into 2021, please contact Heather Cunningham on this email: hc@haroldsharp.co.uk or by phone on 07881 781344. Q.

Issue No. 11 – Qandor – 059

TAX

LET’S LAY DOWN THE FOUNDATIONS – WHY ARE ARCHITECTS MISSING OUT ON HIGHLY BENEFICIAL TAX RELIEF? GEORGINA KEYS Senior Specialist Tax Consultant Catax www.catax.com

Georgina Keys, Senior Specialist Tax Consultant at market-leading specialist tax relief consultancy, Catax, discusses the world of architecture and misconceptions architects have when it comes to claiming tax relief.

Research & Development (R&D) is prevalent in almost every industry in the UK, and the construction industry is no exception. Many businesses throughout the sector are continuously undertaking R&D 060 – Qandor – Issue No. 11

activity without even realising – whether it’s creating new systems, products or materials.

Introduced in 2001, R&D tax relief is a government-backed incentive that enables businesses to receive money back on qualifying expenditure in the form of a cash injection. However, the construction industry – particularly businesses in the architecture sector – is often hugely overlooked when it comes to making such claims.

In today’s world, architects are creating some of the most stunning, innovative

their teams must create different methods to get the project over the line.

“But that’s just what we do…” says a director at an architecture practice I am working with. “True, but that doesn’t mean it’s not R&D”, I reply.

In my experience, there is an unfortunate misunderstanding that claiming R&D tax credits is reserved solely for the laboratories and people in white lab coats – that it does not apply to them.

In looking at the HMRC legislation, I can understand why this is the perception.

However, when you sit down and piece apart the legislation and look how it can be applied in a practical sense, you can see the depth and breadth of its application.

Essentially, the legislation boils down to two items:

and complex buildings from within city centres to remote areas, and everywhere in between. To design these unique properties, architects must be pushing the bounds of what is possible – or else we would all be sitting in standard square buildings.

Now more than ever, people are looking for bigger, better, stronger and more ecologically friendly properties. As I am sure architects will attest to, clients suggest crazy and “out there” design ideas, and it is up to the professional to bring these unique (sometimes what seems impossible) ideas to life. In some cases, the industry-standard way of approaching these designs just is not appropriate, or a standard approach may not even exist yet. Therefore, architects and

• How have you advanced the current state of the art?

• What challenges did you have to overcome to complete the project?

These advancements can be major – like achieving a high BREEAM rating through the development of new renewable technologies – or can be more modest, such as incorporating new building materials, new foundational techniques, or utilising/ re-purposing existing technologies in a manner that they were not designed to do.

Perhaps one of the most interesting cases I have come across is one of my clients who were instructed to completely refurbish a home, using only ethically sourced and sustainable materials for every single aspect in the home. This meant no plastic, no metal, no chemical coatings, no ➳ Issue No. 11 – Qandor – 061

synthetic insulation – all on a windy beach in the north of Scotland where it can get quite cold and rainy.

The architects were tasked with outfitting the entire home with completely natural materials, from the foundations to the attic and everything in between.

In addition, the home design has to be completed without detriment to the thermal, acoustic, water tightness and structural capabilities, and performance of the home. Quite the tall order.

Recent research and statistics from HMRC note that most architecture practices are not claiming. However, there are multiple things the firms can be claiming on, including: • • • •

Salary costs of staff involved in R&D; Subcontractors and external workers; Wasted materials; Software costs.

Footing the bill for software such as BIM/RevIT, CAD and AutoCAD is no small feat. The annual licence fees are extortionate and being able to recoup some of that money is definitely welcomed.

062 – Qandor – Issue No. 11

The aim of R&D tax relief is to reward companies that are innovating. Post-Brexit and the challenges COVID-19 has put all businesses through, the HMRC wants to continue innovation in the UK and wants to see companies stay afloat – such tax credits are a sure-fire way to fund this sustained advancement.

I have worked with many companies struggling to pay their employees or struggling to find the money to take a project to tender and, through this incentive, Catax has been able to unlock money to be further invested into the practice. By doing so, these practices have greater flexibility – some may hire other staff, or some take on more complex projects they otherwise would not be able to. This incentive is a way to ensure that architects have the funds to continue innovating to push the UK to the forefront of best practice in architecture worldwide.

For any businesses looking to claim for R&D tax relief, it is important to do so sooner rather than later if the company has a financial year end in March. This is because R&D can only be claimed for qualifying activity in the previous two financial years – any claims submitted after the 31st March will not include expenditure in 18/19 financial year, and could result in the company not receiving the largest possible refund! Q.

So many architects are missing out on this highly beneficial relief – please don’t be one of them. Visit www.catax.com for more information or call 0300 303 1903.

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MORTGAGES

IMPORTANCE OF DEVELOPERS HAVING THE RIGHT MORTGAGE BROKER ON THEIR SITE. LEE LANGLEY Principal OnPoint Mortgages www.onpointmortgages.com

Selecting the correct estate agent to act on the sale of a new development is essential, but how many developers consider who will be guiding potential purchasers on their mortgage options? Your agent may have their own specialist new build team; others have in-house general advisers or partner with an outside brokerage.

064 – Qandor – Issue No. 11

Data compiled from Google search trends by comparethemarket.com between October 2019 and September 2020 show that the length of an application is the biggest mortgagerelated concern of consumers. Prospective buyers speaking to the right financial adviser can speed up the process for all parties and ensure that units are sold in a timely manner.

Even some of the larger agents’ developers can sometimes insist on the use of a specific

mortgage brokerage. Here are some of the factors that you should consider.

Pre-qualifying buyers With a new build, the mortgage adviser should gather as much information as early as possible in the process to pre-qualify the client. The buyer, agent and developer should have the utmost confidence, prior to payment of the reservation fee and ideally before a viewing, that they will be able to raise the required funds.

Help to Buy equity loan Those purchasing through Help to Buy will have two applications to make.

One for the mortgage and another for the equity loan, each with its own processes and differing criteria. An adviser that can act and guide them through both parts will make the process smoother and ensure that there are no unnecessary delays or disappointments.

Exposure Individual providers will often lend on around 20% of a block and lending options can reduce further depending on factors such as height of the block, commercial units on the ground floor, location and even the amount of the ground rent and service charge. Using a broker that uses the whole of the market is vital where the major banks have reached their exposure limit.

Market knowledge People do not always fit neatly into the boxes that lenders require and with criteria becoming tougher during the pandemic, it

is important to have a broker that can think outside the box. This is particularly true regarding the self-employed and could make the difference in that person being able to raise the amount that they need, widening the pool of potential buyers. Q.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Some forms of Commercial Lending and Buy to Let advice are not regulated by the Financial Conduct Authority.

Lee Langley is the Principal Mortgage and Protection Adviser at OnPoint Mortgages.

OnPoint Mortgages a trading style of L&D Mortgages Limited is an appointed representative of The On-Line Partnership Limited which is authorised and regulated by the Financial Conduct Authority. Registered address: 25 Homefield Road, Bushey, Hertfordshire, WD23 3AP Issue No. 11 – Qandor – 065

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