Real estate is a long-established asset class which is perennially popular with investors the world over. The English are renowned for our eccentric personalities, but the quirks extend to our property laws as well.
What are the five key eccentricities of English commercial property?
1. Just England! Scotland, Wales and Northern Ireland have their own legal systems and laws. The Welsh system is most like the English one, but there are important differences even there.
2. It’s all bespoke wording. There are concepts which are widely used across real estate but each sale contract or lease is negotiated individually.
3. The full repairing and insuring lease. This makes English real estate very attractive for international investors. In most cases, the tenant has to put the premises into good repair, even if they do not start in that condition, and keep them in good repair. This includes structural elements such as the roof and foundations. If there is more than one tenant in the building, the costs will be shared between them and the works administered by the landlord. The landlord will take out a building insurance policy and re-charge the cost to the tenant. This means that the rent received by the landlord belongs to the landlord with no requirement to use it for other costs associated with the property.
4. Rents normally only go up. English commercial rents tend to be reviewed every five years to open market levels. If the market has fallen, the rent will stay the same. Some leases, typically of supermarkets or warehouses in the logistics sector, have the rent tied to inflation, but this is unusual in offices or other stores.
5. Lenders have considerable remedies. In particular, a bank with a mortgage secured on the property can appoint a receiver and sell the property without needing a court order using the powers contained in the Law of Property Act 1925.
The commercial real estate team at Wedlake Bell are knowledgeable and experienced guides through the vagaries of the English legal system.