Real Estate Legal Update - Spring/Summer 2020

A welcome from the editor....

Welcome to the latest edition of the Real Estate Legal Update.Since our winter update, the world has been turned upside down and all of us at Freeths hope you and yours are keeping well. In an effort to maintain some semblance of business as usual, and to make sure you're kept up to date on the latest legal developments (they are still happening!), this quarter, we look at cases on easements and covenants, witnessing deeds (something that has become something of a logistical issue under lockdown) and operator rights under the Electronic Communications Code. The Supreme Court has been busy thinking about material considerations for planning purposes and statutory incompatibility for town or village green purposes.These are difficult times for landlords and tenants alike, so we look at pre-lockdown cases that have even greater implications now. The tax tips look at relief from CGT and the meaning of a 'transfer of a going concern' for VAT.

---

CASE LAW UPDATE

Easements - actionable interference: Singhson Ltd v Kanendran

Key points:

• For an interference with an easement to be actionable, it must be substantial
• The issue is not whether what the beneficiary of the right is left with is reasonable, but whether an insistence on being able to continue to use the whole of the right granted is reasonable
• It is not for the owner of the burdened land to dictate how the beneficiary should exercise their rights, provided they are not behaving unreasonably in doing so

SL was the tenant of shop premises and had the benefit of certain easements, granted in a lease, over land owned by K. The easements included rights of way at all times and for all purposes over K's land, and the right to load and unload vehicles. There were four storage containers and some freezers on K's land; SL complained that their presence was preventing it exercising its easements, and so applied for an interim injunction.Because of a lack of evidence backing up SL's claims (only witness statements from SL's solicitors were put before the Court), the judge did not grant the injunction, but did refer the matter to be heard in the County Court.Practical implications:Although not a full decision, the case does serve as a reminder of the test for actionable interference with easements, which is useful if you are either looking to bring a claim or having to defend one. If it should come to a dispute, evidence will be key to establishing the extent of the alleged interference - photographs will definitely help, as will a robust statement of truth from the claimant(s) setting out how long the obstruction has been in place.

Easements - dominant tenement: Bate v Affinity Water Ltd

Key points:

• One of the requirements for an easement is that there is a 'dominant tenement' or land that benefits from the right
• Where such a right is expressly granted in a deed, that deed will describe the dominant tenement, usually by reference to a Land Registry title number or a plan
• However, in certain cases, the dominant tenement need not exclusively comprise land

Land owned by B had a water main running under it and an underground chamber housing a service pipe, stop tap and meter. A dispute arose and the Court had to consider whether water company, AWL, had an easement or was trespassing.AWL put forward various alternative arguments refuting the allegation of trespass: that the apparatus had been installed pursuant to statutory powers; that alternatively, in relation to the water main, that had been installed pursuant to a deed of grant in 1947; or that AWL had acquired a prescriptive easement by long use.B argued that the 1947 deed only granted a licence, which prevented an easement arising by prescription. B also argued that the 1947 deed did not identify any dominant or benefiting land belonging to AWL and that, even if such land did exist, the right claimed wouldn't actually accommodate that land.The judge admitted extrinsic evidence that did in fact identify a small area of benefiting land, which contained a borehole and a pumping station, and found that this land did, albeit indirectly, benefit from the right, as it facilitated the provision of water by AWL to properties in the vicinity. Therefore, an express easement did exist.However, the judge also went on to look at what the position would have been if no benefiting land had been identifiable, by going back to a case decided in 1938, which held that the whole undertaking of a water company could amount to the dominant, or benefiting, 'tenement'.Practical implications:This case demonstrates that, in relation to statutory undertakers, the dominant 'tenement' can consist of land and of the undertaking of the company itself. The decision is clearly helpful to the likes of water and gas companies, but is worth being aware of where you are looking to buy land that has pipes running under it, the existence of which should be revealed by searches and title investigation.

Covenants - modification: Owen & Richards re 141A Dunstans Road, East Dulwich

Key points:

• It is possible for the owner of land that is burdened by restrictive covenants to apply to the Upper Tribunal to have them discharged or modified
• The Tribunal will consider whether the covenants provide protection for and value to the beneficiary and balance this against the inconvenience caused to the burdened owner
• The fact that the restrictions may be very one-sided is not, of itself, sufficient reason for the Tribunal to discharge them

141A Dunstans Road was created when one larger house was divided into two self-contained units. When No. 141A was sold off in 1984, the then owner of what had been the larger property (No. 141), imposed certain covenants on No. 141A, restricting its use to a private dwelling to be occupied by a single family, with a single pet and no musical instruments to be played after 11pm (by the family members, not the pet) without permission. There were also restrictions on carrying out certain works without the consent of the owner of No. 141. The owner of No. 141 did not enter into any similar, reciprocal covenants restricting her use of her own property, which she ultimately sold.In 2017, the current owners of No. 141A, O and R, tried to sell the property, but claimed that the unduly restrictive covenants had caused potential sales to fall through. They also claimed they were not aware of the covenants until they came to sell. O and R approached their neighbours, the current owners of No. 141, for a release. Unfortunately, the neighbours had also been unaware of the restrictions, but, having found out about them, liked the sound of them as it gave them a certain degree of control over the use of No. 141A, so they refused.O and R then applied to have the covenants discharged or modified; unsurprisingly, the neighbours also opposed this application. The basis of O and R's application was that the covenants reflected the 'personal sensitivities' of the original owner and that they were not appropriate, given that she no longer had any interest in either property and had not entered into reciprocal covenants at the time. O and R were partially successful; the Upper Tribunal refused to discharge the covenants altogether, because they continued to provide valuable protection to the owners of No. 141. But the Tribunal did modify the covenants so that the owners of No. 141A could have more than one pet (with permission), and so that the neighbours could not unreasonably withhold consent to late night musical interludes or to the carrying out of alterations or other works that were in keeping with the character of the locality - for example, many property owners in the neighbourhood had created parking spaces in their front gardens.

Practical implications: Whilst it is not always easy to work out which property has the benefit of restrictive covenants (Land Registry does not routinely note them on the title registers of the benefiting property), it is easy to see if a property is burdened by restrictions.

Covenants - planning agreements: Payne & Others v Maldon District Council

Key points:

• As well as having the power to modify covenants imposed by agreement between private landowners, the Upper Tribunal can modify covenants imposed by public bodies in certain types of statutory agreement
• The appropriate mechanism for modifying such covenants will depend on the nature of the planning agreement

P owned land on which it wanted to build 30 houses, and had obtained outline planning permission on appeal. The land was subject to a 1984 planning agreement made under section 52 of the Town & Country Planning Act 1971 (now repealed), between the person who owned the land before P and MDC. The agreement prevented the erection of any permanent buildings or structures except for agricultural use. P applied to the local authority, MDC, for modification or discharge of the restriction under section 106A of the Town & Country Planning Act 1990, but MDC refused on the basis that this was not the appropriate mechanism for amending the section 52 agreement. P then applied to the Upper Tribunal for discharge under section 84(aa) of the Law of Property Act 1925. This application was successful and P was not required to pay any compensation either. The covenant impeded a reasonable use of P's land and although there was a practical benefit to MDC in being able to control residential development through enforcement of the covenant, this benefit was not one of 'substantial value or advantage', which is the test under section 84.

Practical implications: Having ultimately followed the correct procedure, the finding was good news for P. Section 52 agreements were replaced by planning obligations in section 106 of the Town & Country Planning Act 1990 with effect from 25 October 1991, so if you are looking to modify these obligations, you should seek the agreement of the relevant local planning authority.

Deeds - attestation by witness: Wood v Commercial First Business Ltd (in liquidation)

Key points:

• In order to be valid, a document in the form of a deed needs to meet certain statutory requirements
• One of those requirements is that an individual signatory must sign the deed in the presence of a witness, who should also sign the document (this is known as 'attesting')
• The witness does not need to sign in the presence of the signatory

W borrowed a substantial amount of money from CFBL, which was secured, by separate mortgages, over two farms that W owned. W got into financial difficulty and CFBL obtained possession orders in relation to both of the farms. There was a lot of litigation as between W and CFBL. W claimed the mortgages were invalid or unenforceable for various reasons, one of which was that her signature on one of the mortgage deeds had not been properly attested, because although W had signed the deed in the presence of a witness, that witness did not sign the document until later, and not in W's presence. Although W had been successful in relation to other claims against CFBL (based on secret commission and unfair relationship), the High Court did not find for W in this particular case.

Practical implications: The statutory provisions around witnessing do not require the witness to sign a deed in the presence of the signatory, although in reality (or, at least, in pre-Coronavirus reality) the witness would usually sign the document at the time, but it's helpful to have a court ruling on the subject. Of course, in these times of lockdown and social distancing, the very act of witnessing a signature has become much more difficult. Given the importance of properly executing deeds, particularly in a real estate context, always follow your lawyer's instructions when you receive documents for signing.

Deeds - (lack of) attestation by witness: Signature Living Hotel Ltd v Sulyok and Cocarla

Key points:

• As we saw in the case above, individual signatories must sign deeds in the presence of a witness, who needs to attest the signature
• Where the signatory is a company, the requirements are set out in the Companies Act 2006
• Sometimes, even where a document fails as a deed, it can still be enforceable as a contract

SLHL had purportedly executed a guarantee agreement to support a loan arrangement between borrower, Signature Heritage (Belfast) Ltd, and lenders, S and C. SLHL and the borrower were associated companies; both had a sole director, who was the same individual. Ultimately, the borrower defaulted on the loans and S and C served statutory demands on SLHL, which submitted that the guarantee was not enforceable because it was intended to take effect as a deed, but the formalities hadn't been complied with and the document hadn't been correctly executed. The sole director had signed the document for SLHL, but his signature had not been witnessed, so did not comply with the requirements of the Companies Act. S and C argued that the guarantee was still enforceable as a contract. The High Court agreed and refused to grant SLHL an injunction to restrain S and C from presenting a petition to wind up SLHL (which would be the next step if SLHL did not comply with the statutory demands).

Practical implications: The Companies Act 2006 introduced a change such that a company can execute deeds by one director signing, rather than two directors or one director and the company secretary having to sign. Where this happens, the director's signature must be witnessed. Whilst it is always better that a document that is intended to be a deed, is executed such that it actually is a deed, all may not be lost if the document has also created a contract.

Deeds - remote attestation by witness: Yuen v Wong

Key points:

• In order to effectively attest a signature, the witness must be physically present when the signatory puts their pen to paper
• Witnessing cannot therefore be done by video conference

Y and W were joint owners of a property in London. In 2012, the property was purportedly transferred into W's sole name. Y alleged that W had become the sole registered proprietor on the basis of a forged transfer and that he, Y, had not actually signed the document. Y also argued that, even if he was found on evidence to have signed the transfer, it was invalid because the person who witnessed the signature did so by Skype (so was not physically present) and then added her signature to the document some days later, when she received it through the post from Hong Kong, where the parties were when they signed. In order to protect his interest in the property, Y registered a notice against the title and W subsequently applied to have the notice removed; this registration point was the focus of the litigation, and ultimately, the First Tier Tribunal ordered that Y's notice be taken off the register because, on the facts of the case, it was not necessary. However, from a formalities perspective, the Tribunal did comment that Y would have had a reasonable prospect of persuading a court that the transfer had not been validly executed as a deed because the witness had not been physically present.

Practical implications: Prior to March, the issue of remote witnessing was probably not on the minds of many people other than Mr Yuen and Ms Wong. Now, in these times of social distancing, the ability to do so might seem like a helpful solution to a novel problem. However, for now, the position remains that - particularly for documents that will be presented to the Land Registry for registration - a witness must be in the room when the signatory executes the document. At a push, witnessing could take place through a window or from a safe distance, where this is within the social distancing rules generally.

Development - material considerations for planning purposes: R (on the application of Wright) v Resilient Energy Severndale Ltd and Forest of Dean District Council

Key points:

• When considering planning applications, local planning authorities can take account of 'material considerations', including benefits offered by the applicant
• Material considerations must serve a planning purpose and be related to the development for which planning permission is sought
• Planning permissions cannot be bought or sold

In January 2015, REL applied for planning permission to install a single 500 kW community-scale wind turbine on agricultural land in Tidenham. It proposed a package of socio-economic benefits, including an annual donation to a local community fund, to be based on 4% of turnover for 25 years. The turbine was intended to meet the local community's electricity needs (it was to be run by a community benefit society) rather than on a large commercial scale. REL had installed a turbine on a similar basis at nearby St. Briavels, where the community fund had been able to finance various projects, including a defibrillator and playgroup equipment. FDDC granted planning permission for the turbine in September 2015, having taken the donation into account as a material consideration. W challenged the decision, on the ground that the donation was not a material consideration that FDDC could lawfully take into account when deciding whether to grant planning permission. This was because the donation did not serve a planning purpose, was not related to land use and had no real connection with the proposed development. This case has been rumbling through the courts since 2016 and has made its way to the highest court in the land. Unfortunately for REL, all of the courts, including the Supreme Court, decided the planning permission should be quashed.

Practical implications: Even the intervention in the appeal of the Secretary of State for Housing, Communities and Local Government did not help REL (let's hope the people of Tidenham have been connected to the grid and not without power for the past five years...). It's worth bearing in mind that any off-site benefits will only be 'material considerations' if they are related to or connected, in a meaningful sense, with the development in question and serve a planning purpose. This is the case no matter how well-intentioned the offer, or how beneficial a particular scheme is going to be for a local community.

Development - town or village greens - statutory incompatibility: R (on the application of Lancashire County Council) v Secretary of State for the Environment, Food and Rural Affairs

Key points:

• If land has been used 'as of right' for lawful sports or pastimes by a significant number of the inhabitants of a locality or of a neighbourhood within a locality, for a continuous period of at least 20 years, it can be designated as a town or village green under s15 of the Commons Act 2006
• It is a criminal offence to interrupt the use of a town or village green for exercise or recreation or to encroach or build on it, unless the purpose is to improve the enjoyment of the green
• It is possible to object to the registration of land as a town or village green on the basis of 'statutory compatibility' - this was decided by the Supreme Court in the 'Newhaven' case in 2015

LCC owned land adjoining a school.  Part of the land had been used occasionally for educational purposes, but most of the area had not.  B applied for the land to be registered as a TVG.  LCC objected and the matter was referred to the Planning Inspectorate.  The Planning Inspector found that most of the land should be registered as a TVG.LCC applied for judicial review, arguing that registration would impede its ability to provide educational accommodation and to safeguard pupils, it would mean the council could not use the land to build a new school or extend the existing one and would not be able to hold open-air classes due to the presence of members of the public. The High Court, however, drew a distinction between a specific statutory function, which required use of specific identifiable land, and a general statutory function, which could be performed without the land in question.  Not being able to use the land would be an inconvenience to LCC, but it could not be said that the council required this specific land for educational purposes. The Court of Appeal upheld this decision, so LCC took the matter to the Supreme Court, which decided, albeit not unanimously, to allow the appeal.

Practical implications: This is the first case since the Supreme Court's decision in the Newhaven case, where it was confirmed that land cannot be registered as a village green if registration would be incompatible with the statutory purposes for which the land is held. Notwithstanding the decision, landowners could save themselves the time and cost of going to the Supreme Court by managing their land in a proactive way to prevent rights arising. At the beginning of the saga, the High Court heard evidence that teachers at the school had from time to time asked members of the public to keep to the perimeter of the land, i.e. not to use the areas used by the school, and had moved classes back inside if they felt it was unsafe to be on the area in question. There were no signs prohibiting the use of the land (which would imply the land was used 'with force'), nor were there signs granting permission to use the land in certain circumstances. In this particular case, LCC had not helped itself from the start from an administrative perspective either - it provided insufficient evidence of the use of the land for educational purposes to the Planning Inspector.  Initially, it had not undertaken a very thorough search of its records, but later found further evidence to show the land had been acquired for educational purposes.  However, this evidence was inadmissible, so bodies objecting to registration on the grounds of statutory incompatibility need to have exhausted their archives.

Telecommunications - interim rights: University of London v Cornerstone Telecommunications Infrastructure Ltd

Key points:

• It is not unreasonable that telecoms operators might wish to carry out on-site surveys to assess whether a particular location is suitable for installing apparatus
• The wording of the 2017 Electronic Communications Code is not clear as to whether operators have the 'right' to conduct surveys, so the courts have intervened with clarification

CTIL installs and maintains apparatus for electronic communications networks. It wanted to have access to the roof of a student accommodation building owned by UoL, as it believed it would be the most suitable venue in the locality to install apparatus. CTIL wanted to carry out a survey and some other non-intrusive investigations (known in the industry as a 'multi-skilled visit') to establish whether the site would in fact be appropriate. Access would be required three or four times during a 28-day period, but UoL refused to allow CTIL access. CTIL took the matter to the Upper Tribunal to establish whether it had operator rights under the Code to access a property for the purpose of carrying out surveys for the potential installation of apparatus and whether it was possible for CTIL to seek interim rights without also seeking permanent rights in the same location. Both the Upper Tribunal and, subsequently, the Court of Appeal, confirmed that the right to carry out an MSV is a 'Code right'. In addition, given that the nature of what CTIL was seeking was time-limited in any event, it was possible to apply for interim rights as a standalone application (which has certain procedural advantages for an operator).

Practical implications: Ultimately, the government is committed to delivering an improved communications network for the country, so public interest will weigh heavily where there is a dispute. It's always best to agree access for surveys on a consensual basis, but this is a useful case where landowners are reluctant, for whatever reason, to allow them.The operations necessary to carry out MSVs amount to 'works' for the purposes of the Code, even if they are non-intrusive, and operators can seek access rights on an interim basis. Where permanent rights are required (i.e. if the operator decides, as a result of the MSV, that it does wish to install apparatus), these can be applied for in the usual way.For advice on all things-telecoms, please contact Philip Myers in our Property Litigation Team or Barry Richards in our Real Estate Team.

LANDLORD AND TENANT ROUND UP

Agreement for lease - personal obligations: Bella Italia Restaurants Ltd v Stane Park Ltd & Others

Key points:

• Parties commonly enter into pre-let agreements, or agreements for lease, so that a tenant is committed to taking a lease once the landlord has built a property
• Given the length of time some developments can take to complete, a landlord may sell its interest in the property before the property is built and the lease is granted...and a tenant may no longer want the lease by the time the property is finished
• Some of the landlord obligations in these agreements may be expressed to be personal to that named party, others will pass to the buyer on the sale

BIR was in ongoing litigation in relation to a proposed lease of a new unit that was being built by the landlord, under an agreement for lease exchanged in 2014. In 2017, BIR had tried to terminate the arrangement on the basis that the landlord (the previous freehold owner) had not complied with a condition in the agreement by the specified long stop date. Having failed in that claim, BIR tried a new tack: once the unit had been completed in 2018, BIR served a notice to complete on the previous landlord and then refused to complete the lease, on the basis that the agreement required the landlord named in the agreement to grant the lease, and as the original landlord could not do so (having sold its freehold interest during the build), BIR could walk away and not take the lease. The High Court didn't think much of this particular claim either. The obligation to grant the lease was not personal to the previous landlord and BIR did not have the ability to walk away.

Practical implications: Even prior to lockdown, we had seen the demise of several casual dining operators and it is not a surprise to see tenants who signed up for new premises a few years ago looking for ways out of further lease commitments. It is common for certain landlord obligations in an agreement for lease to be expressed as being personal to that named party (things like the construction obligations and the covenants to remedy defects); indeed in this particular agreement for lease, various obligations were expressed to be personal to the original landlord (and the developer). However, the obligation to actually grant the lease was not - and would not normally be. This is also something for landlords to look out for - if the obligation to grant the lease is a personal one, this will put the original landlord at risk of being in breach of contract if it sells its interest in the meantime. Nothing if not persistent, BIR is actually appealing this decision, although the group that owns the chain is up for sale so it remains to be seen whether a potential buyer would pursue the litigation further or be in a better position to take the lease after all. 

Rent deposits - expense of administration: Shinners & Another (joint administrators of London Bridge Entertainment Partners LLP) v London Trocadero (2015) LLP

Key points:

• Landlords will often ask a new tenant for a rent deposit, which provides them with a ring-fenced pot of cash they can withdraw from should  certain agreed events of default happen
• Tenants will usually be under an obligation to 'top up' the deposit account if the landlord makes withdrawal
• This topping up obligation does not pass to the administrators as an expense of a company's administration

LT owns The London Pavilion, a large five-storey building in a prominent location on Piccadilly Circus. Parts of the building were let on various leases to a company, LBEP, which operated an 'Odditorium' trading under the name Ripley's Believe It or Not! LBEP had paid a rent deposit of over £2M when it entered into the lease in 2007.LBEP went into administration in September 2017. Rent that was due on 1 October was not paid, so LT withdrew the required amount (some £520,000) from the rent deposit account and gave notice to LBEP, under the terms of the rent deposit deed, to replenish the account. Unsurprisingly, this didn't happen and LT forfeited the leases, with the consent of the administrators (S).From the date on which LBEP went into administration until the leases were forfeited (December 2017), the premises were retained for the benefit of the administration, so rent would ordinarily have been payable during this period as an expense of the administration...but of course, the rent had been paid, insofar as LT had taken it out of the rent deposit.LT maintained there were other sums due under the leases, such as dilapidations and losses arising from the forfeiture and sought to enforce the topping up obligation in the rent deposit deed against S, arguing this was also an expense of the administration. Regular readers of this bulletin may recall the history of the litigation in this matter, which goes towards explaining the Court's ultimate decision in the current case - which was that S was not liable to top-up the rent deposit. The main reason LT wanted the deposit replenishing was to maximise the money available to satisfy a dilapidations claim against LBEP, but as LT was already proving for this in the tenant's administration, ordering the top-up would allow LT two bites at the cherry.

Practical implications :The expenses of an administration fall to be paid in priority to preferred creditors, floating chargeholders and other unsecured creditors, which is why landlords are keen to see as many things covered by this definition as possible. However, whilst unpaid rent can qualify as an expense of an administration (assuming it is, in fact, unpaid), because it is referable to the administrators' occupation of premises, replenishing rent deposit accounts cannot. 

Remedies - Commercial Rent Arrears Recovery - forfeiture: Brar & Brar v Thirunavukkrasu

Key points:

• Commercial Rent Arrears Recovery (CRAR) is a self-help remedy that allows landlords to take control of a tenant's goods to cover rent arrears
• Landlords need to be aware of how using this remedy might impact on other options available in the event of tenant default
• Note that the government has introduced temporary restrictions on landlords' ability to exercise CRAR due to Coronavirus

We covered the High Court decision in this case in our Winter 2018-19 Bulletin. T had a 21-year lease of commercial premises in Middlesex. The lease contained standard provisions that T pay rent quarterly in advance and that the landlord, B, could forfeit the lease if rent was unpaid for 21 days. Readers may recall that T fell into arrears and B exercised its rights under CRAR. An enforcement agent took goods from the premises that covered some of the outstanding amount, but as an earlier cheque written by T had bounced, there was a shortfall. B subsequently re-entered the premises and forfeited the lease. T successfully challenged this in the High Court, which found that B's re-entry was unlawful. B appealed to the Court of Appeal, but was again unsuccessful. 

Practical implications: Landlords need to be aware of how using this remedy might impact on other options available in the event of tenant default - any action that suggests the landlord is treating the lease as continuing means the right to forfeit is lost. You can hear the thoughts of our Head of Property Litigation, Paul Tomkins on the case in this #TomkinsTalks video on YouTube, but bear in mind that the case was heard in more usual times and there are new restrictions on landlord remedies as a result of Coronavirus, including changes to the CRAR regime. You can find out more information about what remedies are available to landlords here, but should always take legal advice on the specific facts of your case from a member of our Property Litigation team. You can find out more information about the impact of Coronavirus generally on your business by visiting our Hub.

TAX TIPS

Capital Gains Tax - principal private dwelling relief: HMRC v Higgins

Key points:

• It is possible for a taxpayer to claim principal private residence relief from capital gains tax
• Relief is calculated by dividing the length of time that the property in question was the taxpayer's only or main residence by the length of the period of ownership
• The Court of Appeal has clarified the meaning of 'period of ownership'

H entered into a contract to buy a leasehold apartment being built on the site of the former St Pancras station hotel. Contracts were exchanged on 2 October 2006, but the apartment wasn't actually built until December 2009. Legal completion of the purchase took place on 5 January 2010, at which point H moved in to the apartment. In December of the following year, H exchanged contracts to sell the apartment; that sale completed on 5 January 2012. H made around £640,000 on the sale and H claimed entitlement to full private residence relief from Capital Gains Tax. HMRC assessed a CGT liability of £61,000 on the basis that H had not occupied the property as his 'only or main residence' for the whole period of his ownership, which it viewed as being from 2006 until 2011. The Upper Tribunal agreed with HMRC, but H appealed and the Court of Appeal had to interpret the meaning of the words 'period of ownership' in the Taxation of Chargeable Gains Act 1992. The Court decided that, applying the ordinary meaning of the words used, a buyer of a property could only really be described as its 'owner' after completion, rather than from exchange of contracts.

Practical implications: The Court's approach makes particular sense when you take into account that H's flat didn't actually exist at the time of exchange (it was described in the hearing as just a 'space in the tower'), although the situation would be different if H had purchased a plot of land for the subsequent construction of a property, as the land would've existed throughout. One other practical point to note, for people who are selling residential properties now, is that on 6 April this year, new rules on when taxpayers must pay any CGT came into effect. Previously, you had to report any chargeable gains on your self-assessment tax return, with any tax due being payable by 31 January following the end of the year in which the sale took place. Now, taxpayers have to pay CGT within just 30 days of completion and submit a separate 'residential property return'. For further advice, please contact a member of our Tax Team.

VAT - back-to-back transactions: General Distribution & Storage Ltd v HMRC

Key points:

• If an asset sale amounts to a transfer of a going concern (TOGC), it is treated as not being a taxable supply for VAT purposes
• A number of conditions have to be met for a transaction to qualify as a TOGC
• One of those conditions is that the buyer must use the asset to carry on the same kind of business to that carried on by the seller

GDSL owned the freehold of a building that was let to Starbucks. GDSL sold the building, subject to the lease, to a buyer (HSL). HSL had already agreed to sell the building on to another company, FIL and both sales took place on the same day. GDSL had opted to tax the building, so received VAT of £160,000 on the purchase price of £800,000; HSL had also opted to tax the building, and charged VAT on the sale on to FIL.GDSL did not account to HMRC for the VAT it had received on the sale and HMRC issued an assessment to recover the tax. GDSL argued that the sale was a TOGC so no VAT was due. Unfortunately for GDSL, the First Tier Tribunal did not agree.

Practical implications: The problem for GDSL was that one of the conditions for TOGC treatment had not been met - it was not possible to say that HSL intended to carry on the business being transferred (i.e. of letting the building) because it immediately sold the property on. TOGC treatment does not apply where there is a series of immediately consecutive transfers.The decision seems quite logical, but it's a useful reminder that the VAT treatment of any transaction needs to be considered at the outset, and to be provided for appropriately in the sale documentation. The onus is on a seller to ensure the VAT is properly dealt with, so for further advice on what can be a very complex area, please contact a member of our Tax Team.