Brexit: the implications for real estate
Whilst the legal implications of the UK referendum vote to leave the EU will be wide ranging, the direct implications for property law and procedure in the UK are limited. Real estate/property law, perhaps more than any other branch of law, varies widely between Member States and has not been subject to harmonisation. Indeed, there are significant differences within the UK, with Scotland and Northern Ireland having different regimes from England and Wales. The UK has voted to leave the EU, but property law is not expected to change in any fundamental way and there are relatively few legislative changes required to maintain the legal status quo.
However, there is of course legislation which is relevant to the real estate sector and derives from EU law. For example, VAT is an important issue for investors and occupiers and derives from an EU requirement (see our tax commentary here). It is inconceivable that VAT will be entirely repealed following Brexit without being replaced by some equivalent UK sales tax, so, in substance, perhaps not much is likely to change. Other real estate taxes, such as stamp duty land tax (or land and buildings transaction tax in Scotland), are entirely domestic and do not depend on EU law.
Real estate fund managers may now be subject to a different regulatory structure following the vote for Brexit (see financial services).
Other possible legislative changes as a consequence of the vote for Brexit might include the repeal of UK legislation enacted to implement European directives should the Government of the day be so inclined. Planning law, and in particular the need for environmental assessments, has previously come under fire from developers looking to cut red tape and could now be prone to review. UK legislation relating to minimum energy efficiency standards (MEES), energy performance of buildings (including EPCs) and part L of the Building Regulations could similarly be subject to review, although a complete repeal without some replacement regime seems unlikely given the UK’s statutory commitment to reduce greenhouse gas emissions. One matter of relevance to property managers is compliance with the Asbestos Regulations, which are EU driven; complete repeal is highly improbable but, in time, the UK might adopt a different regime. An issue which frequently crops up on the sale and purchase of investment property is the operation of TUPE in relation to employment contracts - UK law is already “gold-plated” beyond what is required by EU law, and any changes in the wake of Brexit may result in some simplification of the processes involved in a TUPE transfer.
Of greater relevance to investors, funders and occupiers will be the market’s reaction to the UK’s vote to leave the EU. Occupiers in some sectors may be particularly affected by a leave vote. For example, many financial institutions may need to establish new operations in other EU member states (see here). Any corresponding downsize of their UK presence might mean putting acquisition of UK premises on hold, not renewing existing leases, and seeking to exercise break options; such changes in occupier sentiment will have clear implications for investors. There was a consensus that the uncertainty caused by the possibility of a Brexit in the run-up to the referendum had an adverse impact on the number and size of investment deals in the market whilst parties put plans on hold pending the outcome, but, now that the outcome is known, the market will need to adjust to the new circumstances in the UK.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.