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. 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.

VAT

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 It is inconceivable that VAT will be entirely repealed following Brexit without being replaced by some equivalent UK sales tax, so, in substance, perhaps not much is likely to change.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 taxes

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.

Regulatory structures

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.

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.