ISSUE 1 2016 Issued by UK Broker of the Decade*
Insurance News for Property Owners and Professional Advisers
New Law in Wales Requires Landlords to Register What you need to know
China’s Slumping Market How does it affect the UK property market?
Preventing Legionnaires’ Disease Protecting yourself and your guests
Purchase, Protect & Invest with Confidence Understanding the challenges affecting the market
Are You Missing Out on Tax Relief? What you could be claiming
Get Covered for Japanese Knotweed Avoiding the horrors of the invasive weed
Fire Safety Law in Properties with Paying Guests What actions must be taken
Launched on 23 November 2015, Rent Smart Wales is the product of the Welsh Government’s bid to ‘improve the image’ of the private rental sector. The new law applies to all landlords and agents of private residential property. If you own, rent out, manage and/or live in a rented property then this law will affect you. The new registration and licensing scheme is intended to regulate and improve the private rental sector in Wales. It will also raise awareness amongst landlords, agents and tenants of their respective rights and responsibilities. Landlords now have 12 months from the launch date to register with Rent Smart Wales and decide whether to apply for a licence or hand over management of their property to a licensed agent. With the introduction of this new legislation, landlords and agents must become registered and licensed via Rent Smart Wales. This will mean that:
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All private landlords who have a rental property in Wales must register themselves and the addresses of their rental properties in Wales Landlords who undertake defined letting or property management activities at a rental property in Wales must become licensed. If a landlord instructs an agent to do such work on their behalf, it is that agent who must become licensed In order to obtain a licence a person must be adequately trained and also declare themselves ‘fit and proper’ Licensing training can be accessed either from Rent Smart Wales or authorised training bodies
For further information on Rent Smart Wales please contact one of our property experts on: 02920 853 756 or visit www.rentsmart.gov.wales
Property Matters
CHINA’S SLUMPING MARKET In 2014, China’s economy grew by 7.3 per cent, its slowest rate in 24 years, according to the country’s National Bureau of Statistics. Then, in June 2015, its stock market began to decline and by January 2016 it had fallen by an estimated 40 per cent. in London. This could profoundly weaken UK property prices, because according to the Financial Times, Chinese buyers are now the biggest force in the UK property market.
To compensate for these financial deficits, the Chinese government has been forced to rely on its cash reserves. However, these reserves are not large enough to support the economy indefinitely during this recession. The UK and China have an interdependent relationship. This is because the UK is the largest European investor in China’s economy and infrastructure. In return, the UK has benefitted more than any other European nation from Chinese investment.
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It may reduce the number of potential investors interested in and capable of purchasing available residential properties, particularly in London, where Chinese property investors seeking foreign havens for their wealth have helped to drive up property prices to almost-unattainable levels.
For that reason, the UK is expected to experience repercussions as a result of China’s current economic state. The following are examples of the anticipated effects of China’s economic slowdown on the UK property market:
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The health of the UK economy is inextricably linked to that of China’s and, with China’s economy currently experiencing a downturn, the UK may have to endure negative repercussions.
It may weaken the ability of Chinese investors to successfully expand business operations or develop new businesses in the UK, particularly
It may expose the UK to a Chinese property market crash, which could lower the value of UK residential and commercial properties.
“Brexit – A leap into the unknown Following the UK’s vote to leave the EU, we are yet to witness the full effects of this decision. Thomas Carroll has noticed the early signs of lenders requesting further endorsements to be applied in order to cover their financial interests, or reviewing deals following the Referendum, which has delayed the completion of some transactions. There are solutions available to satisfy lender requirements.”
www.thomascarroll.co.uk
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Legionnaires’ disease is a form of ‘walking pneumonia’ caused by legionella bacteria, which is commonly found in the built-in water systems of hotels, hospitals, office buildings, flats and houses. While the fatality rate of those infected ranges from 5 to 30 per cent, the disease is fatal in roughly 50 per cent of patients who go untreated. As a landlord, you are obliged to follow the Control of Substances Hazardous to Health Regulations 2002 to ensure that the tenants living in your properties are protected against Legionnaires’ disease.
Susceptible environments The cooling towers, central air conditioning systems and hot and cold water systems installed in properties are just a selection of the many ideal environments for legionella bacteria to grow.
Conditions that increase the chance of contamination include:
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Water temperature of 20 to 45 degrees Celsius in all or some parts of the system, which is the optimal temperature range for bacteria growth Stored and/or recirculated water that has not been replaced or treated Tanks or pipes that contain deposits of rust, sludge, organic matter and other biofilms, which provide nutrients for bacteria growth People contracting Legionnaires’ disease by inhaling the contaminated airborne water and/or soil particulates that are dispersed through the air conditioning vents and/or water outlets
Properties are at a higher risk of contamination if they have a large number of cooling towers, air conditioning systems, shower heads and other water outlets that generate a sizeable amount of water droplets.
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Property Matters
How to safeguard against contamination As a landlord, there are six main preventive measures you can take to control the risk of legionella bacteria contamination:
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Perform regular quality testing of the water stored in the tanks. A water treatment company or consultant can perform the test Remove redundant pipework to ensure that water cannot stagnate anywhere in the system
Essential support The risk of a property becoming contaminated with Legionnaires’ disease is one that can be easily managed as long as you take the appropriate preventive measures. Regularly conducting inspections of a property’s pipework as well as its water quality can greatly mitigate the risk of infection to your tenants. Remember that you are responsible for managing this threat and protecting your tenants. For more information on your responsibilities as a landlord and on risk management guidance for safeguarding your tenants, please get in touch.
Ensure that water tanks have tight seals so that no debris can contaminate the system Set temperature control standards of the calorifier to ensure that water is stored at 60 degrees Celsius Treat the water stored in tanks or other systems to limit or control the growth of micro-organisms For housing units, completely flush the water tank prior to letting the property
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Purchase, invest and protect with
CONFIDENCE Buying any property is a substantial investment, whatever its size and location, so it’s important to understand the current challenges affecting the market. It’s also essential to protect your investment with the appropriate cover. Contact us today for guidance on the recommended and necessary covers.
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Property Matters
Are you missing out on tax relief? Many owners of commercial property have missed out on claiming tax relief on their acquisition costs.
Scope for tax relief Historical purchases According to research, more than 9 in 10 owners of UK commercial property — from the smallest newsagents to 30-storey office blocks — are entitled to tax relief from HMRC as a result of unused capital allowances. You can make claims for capital allowances on any commercial property you have purchased and still own. Significant tax rebates can be generated by making a claim.
New acquisitions Tax relief is not available against your trading profits for the bricks and mortar price you pay to purchase a property. However, subject to meeting certain conditions, you can claim tax relief by way of capital allowances for fixtures you acquire with a property. These include electrical, heating and ventilation systems, kitchens, sanitary ware and alarms. To be able to claim, the allowances must not have already been claimed by a previous owner and you need to still own the assets when you apply. Because identifying the capital allowances is complex and requires the skills of both surveying and tax professionals, many accountants have not had the awareness or ability to prepare claims. There is no time limit to make a claim and many businesses have taken advantage of the significant tax savings that can be obtained.
Capital allowances on fixtures acquired with a property need to be dealt with at the point of sale or they will be lost. Assistance during the conveyancing process is required to ensure that tax relief is optimised.
Example of benefit A company paying Corporation Tax at 20 per cent buys a commercial office block for £1 million. It is calculated that 25 per cent of the price paid for the property qualifies for capital allowances. Allowances are due on £250,000 of expenditure. At 20 per cent tax rates those allowances are potentially worth £50,000 in tax savings. If the property is owned personally by a 40 per cent tax payer, the tax savings would double to £100,000. The tax position on each property is different and the amount you can claim is largely dependent on the tax history and subsequent refurbishment works to a property. If you require further advice on this subject, please do not hesitate to contact your Thomas Carroll property professional, who can put you in touch with a local capital allowance specialist.
www.thomascarroll.co.uk
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Get covered for
Japanese knotweed Horror stories involving invasive Japanese knotweed have become increasingly widespread in recent years. Concern in the property industry has become so great that a question was added to the TA6 property information form for residential properties, asking if the property is affected by knotweed. Even with this new question added, buyers remain at risk of seller misrepresentation, whether deliberate or simply due to lack of knowledge, which may result in a nasty surprise when they move in. To provide protection for purchasers, the Thomas Carroll legal indemnities team can source a Japanese knotweed indemnity policy. If knotweed is found or recurs at the property after the policy commences, the buyers, their lenders, lessees and successors will be covered.
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Cover includes:
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The cost of obtaining a survey report from a knotweed treatment specialist Treatment costs to eradicate knotweed at the property Repair and restoration costs for any damage to the property caused by knotweed Legal defence expenses incurred in handling any claim from a third party affected by the spread of knotweed
Property Matters
Are you a property owner or small business with paying guests? If so, then fire safety law applies to you and action must be taken. Fire safety law applies to you if anyone pays to stay in your property. This includes small bed and breakfasts, guest houses, self-catering accommodation, inns and holiday rentals. Under the Regulatory Reform (Fire Safety) Order 2005, you are responsible for taking steps to protect the people using your premises from the risk of fire. To comply with the law you must:
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Arrange for a fire risk assessment to be undertaken by a competent person
By failing to undertake a fire risk assessment of your property you are breaking the law and you could be putting people’s lives at risk. Thomas Carroll Management Services can help you to comply with the Regulatory Reform (Fire Safety)Order 2005 by providing a competent consultant to complete a fire risk assessment of your property. If you would like to discuss your requirements and legal obligations in more detail, please call Victoria Vaughan on 02920 853752 or email her at: victoria.vaughan@thomas-carroll.co.uk
Improve your fire safety measures, if necessary Regularly review the risks and your fire safety measures
www.thomascarroll.co.uk
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Property Deals
Project 1
Project 3
Student development
Mixed investment portfolio
Overview: Existing structure: £8.3million Contract works: £3.8 million
Overview: Total reinstatement value: £8 million Multiple uses: Office, retail, manufacturing, leisure, unoccupied and residential.
Outcome: Full cover provided (excluding accidental damage) for the existing structure whilst undergoing works. A site specific contract works policy was put in place to cover an eightmonth build. We provided a title indemnity policy for breach of use covenant including chancel repair liability. With our strong insurer relationships, we also overcame complex lender requirements that had previously caused delays.
Outcome: After a full marketing exercise we consolidated 20 properties onto one policy with one renewal date. The client received a 12 per cent premium saving.
Project 2
Project 4
95,000 sq. ft. industrial building
£24 million residential development
Overview: Reinstatement value: £20 million Multi tenure use: Manufacturing / office
Outcome: Cover provided for mines and minerals being excepted from the title. The policy facilitated a deal that was ongoing for years and it satisfied lender requirements.
Outcome: Following a full marketing review we produced a premium saving of 20 per cent for our new client.
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Property Matters
Contact
Our Experts To talk to us about the potential issues and risks, and the solutions available, please contact your Thomas Carroll Account Executive or our dedicated teams:
Gareth Cotty
ACII
Director t m e
029 2085 5240 07887 944 772 gareth.cotty@thomas-carroll.co.uk
Property risk matters Jack Lane BSc (Hons) Cert CII Property Development Executive t m e
029 2085 3756 07527 268 178 jack.lane@thomas-carroll.co.uk
Legal indemnities Sarah Jones LLB (Hons) GCILEx
Cerith Bevan LLB (Hons) Dip CII
Associate Executive
Associate Executive
t e
029 2085 8602 sarah.jones@thomas-carroll.co.uk
t m e
029 2085 3763 07879 665 605 cerith.bevan@thomas-carroll.co.uk
Thomas, Carroll (Brokers) Ltd is authorised and regulated by the Financial Conduct Authority
www.thomascarroll.co.uk
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Caerphilly Office Pendragon House, Crescent Road Caerphilly CF83 1XX t +44 (0)29 2088 7733
Swansea Office Elm House, Tawe Business Village Enterprise Park, Swansea SA7 9LA t +44 (0)1792 795 265
Pembrokeshire Office 17 Victoria Place, Haverfordwest Pembrokeshire SA61 2JX t +44 (0)1437 776 775
Hereford Office Broadway House, 32 – 35 Broad Street Hereford HR4 9AR t +44 (0)1432 359 500
London Office Green Park House, 15 Stratton Street London W1J 8LQ t +44 (0)20 3036 0232
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info@thomas-carroll.co.uk www.thomascarroll.co.uk