Members of Rosling King’s Real Estate & Real Estate Finance Teams (www.rkllp.com) will be attending MIPIM between 14 – 17 March (please contact James Walton at firstname.lastname@example.org to arrange a meet-up) to join this gathering of international property professionals to re-connect and forge new contacts within the RE markets.
Whilst real estate may be one of a number of asset classes competing globally for capital, it continues to hold-up against the usual comparatives (corporate bonds etc.). Furthermore, it doesn’t look like we are at the end of a cycle (reassuringly the credit exuberance from the last cycle in 2007 isn’t present although risks do remain) and this is reflected in reports (Property Week) that a minimum of €50 billion (over £45 billion) of capital has been earmarked for real estate investment globally in 2017.
Rosling King (no doubt along with many other attendees at MIPIM) will be championing the UK for being one of the biggest markets in Europe and that it benefits from transparency, time zone, language and (without a hint of braggadocio…well, maybe a little) law. On this last point, the UK government may be shortly triggering its notice to leave the EU (House of Lords willing) but the wheels have not stopped turning on the UK’s pipeline of legal developments be it in terms of statutory reform or cases in our commercial courts. Below are a few of the legal reasons to be cheerful for UK Real Estate and Real Estate Finance. See you at MIPIM!
Private Fund Limited Partnerships
In April 2017, new legislation amending the Limited Partnerships Act 1907 will introduce a new form of Limited Partnership – Private Fund Limited Partnerships (“PFLP”). This aims to reduce the administrative and financial burdens on funds set up as limited partnerships. Changes include:
• removal of the requirement for limited partners to contribute capital to a PFLP;
• limited partners in a PFLP not being liable for debts or obligations beyond the amount of partnership property made available to the general partners to meet such debts/obligations;
• limited partners in a PFLP will be exempt from the current duty to render accounts and information between partners and from the restriction on competing with the partnership;
• introduction of a list of actions which limited partners may take without falling foul of being deemed to be taking part in the management of the PFLP. This reflects a desire for limited partners to take a more pro-active role in the funds.
The move mirrors the steps taken in other jurisdictions where such funds are prevalent e.g. Luxembourg/Channel Islands. The idea is that these changes should make the UK a more attractive domicile for such funds.
The UK Government’s Housing White Paper
In February, the Government issued its long awaited White Paper entitled “Fixing our broken housing market” – belated sentiment perhaps but timely as part of Theresa May’s key aims to restore fairness in the UK by providing affordable housing for those just about managing to make ends meet. This includes the government’s consultation on support for Build to Rent (BTR) developments. BTR (the Private Rented Sector) has been gaining traction in the last year or so; representing as they do very attractive yield-led propositions for investors and involving a variety of models, some of which are similar to student accommodation investments which have become popular and stable investments in recent times. The Government’s signalling of support and express acknowledgement of this growth area is to be welcomed.
The primacy of English law
The English legal system is the backbone of many financial transactions across the world. Brexit will not change this. Our commercial courts have assisted in crafting a sophisticated body of law that provides certainty and stability to the financial markets. Case(s) in point, here are a selection of some key finance decisions from the last year alone:
• Credit Suisse Asset Management LLC -v- Titan Europe 2006-1 PLC and others – in this case, the Court of Appeal dismissed Credit Suisse Asset Management LLC’s appeal that Class X Notes issued by Titan Europe 2006-1 PLC, as part of a CMBS, hold an entitlement to the payment of interest calculated by reference to a default interest rate. The Court of Appeal held that it was clear that only the ordinary interest rate interpretation could prevail when calculating payments in relation to the Class X Notes.
• Tiuta International Ltd v De Villiers Surveyors Ltd – Rosling King is acting for the Claimant in this matter which is currently on appeal to the Supreme Court. The Court of Appeal held that liability for a negligent valuation relied upon by a lender in a refinance transaction of pre-existing loan extends to the entire refinanced facility and not simply any new funds advanced.
• Irish Bank Resolution Corporation Limited v Camden Market Holdings Corporation – The Court of Appeal upheld the principle that implied terms will only be imported into a contract where it is necessary to do so in order to give business efficacy to the contract. The Court of Appeal made clear that this is even the case where the implied term itself does not conflict with the express terms of the contract. This case reflects the promotion in English law of certainty in commercial contracts which benefits parties.