Impact on Legal & Regulatory Environment – The Small Print
Notwithstanding the UK’s membership of the EU, property law in England, Wales and Scotland has predominantly remained national with minimal intervention at the EU level. Consequently, Brexit is likely to have very little impact on UK real estate transactions.
UK property law is derived from common law and domestic legislation, and not from the EU. As a result, Brexit will not affect the legal formalities relating to property ownership, land registration, leasing and the taking of security over land. Businesses and individuals should take note that the body of UK property law is stable, certain, and commercially orientated. It is characterised by a transparent registered ownership system and investor friendly leases rendering UK property law highly appealing for real estate investors.
In relation to completed UK real estate transactions, Brexit is not set to impact upon the core of existing contractual rights and obligations. Any contracts or agreements which have been entered into will remain in full force and effect unless specific termination rights exist.
There is, however, some degree of uncertainty relating to the regulatory environment surrounding investment funds, environmental legislation, and planning legislation which will depend upon the nature of the post Brexit UK/EU relationship. For example, the Energy Performance of Buildings Directive which sets out minimum energy performance requirements for new and existing buildings might be impacted by Brexit. It is unlikely that the UK will turn away from these principles, and it seems probable that much of the legislation which has come from the EU (particularly in relation to environmental and planning matters) will be retained.
Financial and Tax Implications – The Bottom Line
The commercial impact of Brexit on the real estate market will be determined by the wider impact of Brexit on the UK economy and the sterling exchange rate. A drop in pricing combined with low interest rates and falling sterling could most definitely make the UK real estate market more attractive to international investors.
For long-term investors, property remains an attractive asset. Firstly, it continues to offers investors a high and sustainable income in an environment of “lower-for-longer” interest rates. Secondly, the Bank of England and the Government has made it clear that they will stimulate the economy through the uncertainty ahead. This could lead to a further cut in interest rates and lower corporate taxes.
Brexit is not set to have an impact on the UK property tax landscape as there are no immediate changes to domestic taxation or double taxation agreements.
Stamp Duty Land Tax is a UK tax on land transactions which bear no connection to the UK’s membership of the EU. As a result, Brexit is unlikely to have a direct impact on either the rules or the rates. On the other hand, VAT derives from EU law and so the rates and how VAT applies could be changed unilaterally post Brexit.
What does this mean for your business?
Businesses and individuals should take careful note of developments following Brexit. Whilst it is difficult to predict with absolute certainty what will happen to the UK commercial real estate market, there will, no doubt, be a plethora of opportunities. The factors which make the UK an attractive international business and cultural centre remain – a robust legal system, transparency, investor friendly leases and an open approach to overseas investment. Why would you not want to be part of it?
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Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.
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