HMRC states that, following the introduction of the classification of integral features in respect of relevant plant and machinery expenditure incurred on or after 1 April 2008, it is now necessary to distinguish between (i) fixtures that are integral features (thereby qualifying for allowances at the 10% rate), and (ii) other fixtures that qualify for the 20% rate in the main plant and machinery pool. HMRC say that, following Finance Act 2008 changes, it is now less likely that an election covering all the fixtures in a particular property without requiring an apportionment of value between groups (i) and (ii) above will be acceptable. See HMRC Guidance - CA26850 - PMA: Fixtures: Election procedure.

Accordingly, changes have been made to Property PSL agreements containing section 198 elections so that amounts apportioned to integral features, and to other plant and machinery, can be dealt with separately.

More and more fee earners are wondering whether their clients are likely to qualify as CRC participants for the CRC Energy Efficiency Scheme and will be required to register with the Environment Agency prior to the commencement of CRC in April 2010. The scheme will apply to large public sector and commercial bodies – basically, any organisation that used more than 6,000MWh (mega watt hours) of electricity from half-hourly metered electricity supplies in 2008. To assist, the Environment Agency has published guidance which provides information to organisations to help them understand what they need to do during the CRC registration period (April – September 2010). Click on: CRC Guidance.

One for the near future: the Perpetuities and Accumulations Bill has passed its third reading in the House of Commons and is now awaiting Royal Assent before its implementation by commencement order on a date still to be fixed.

The new rules will restrict the long-standing rule against perpetuities to trusts, simplifying its operation by introducing a single 125 year perpetuity period - whether specified or not. The rule against perpetuities would only apply in the trust cases listed in section 1 of the Bill, and would therefore cease to apply to future rights over property such as options, rights of pre-emption and future easements. To this extent, it will simplify property drafting, and avoid potential, though rarely encountered, perpetuity traps.

It seems to be.

In Exeter City Council v Bairstow [2007] EWHC 400 (Ch), the court held that business rates were to be treated as an expense of an administration, whether premises were occupied or unoccupied, and were therefore to be paid by the administrator.

What about rent? In a liquidation, rent can be seen as an expense of the liquidation, payable with priority. In Re Toshoku Finance UK plc [2002] 1 WLR 671, Lord Hoffmann said that: "The court will … interpret rule 4.218 [Insolvency Rules 1986] to include debts which, under the Lundy Granite Co principle, are deemed to be expenses of the liquidation. Ordinarily this means that debts such as rents under a lease will be treated as coming within paragraph (a) [expenses properly chargeable or incurred by the official receiver or the liquidator in preserving, realising or getting in any of the assets of the company], but the principle may possibly enlarge the scope of other paragraphs as well.”

But what about rent as an administration expense? In the recent case of Lomas & Ors v RAB Market Cycles (Master) Fund Ltd & Ors [2009] EWHC 2545 (Ch) Mr Justice Briggs says: “In my judgment that dictum [of Lord Hoffmann] is no less applicable to administration expenses than it is to liquidation expenses, subject to two caveats. The first is that the court habitually deals flexibly with applications for permission by, for example, secured creditors of a company in administration to enforce their security, or by landlords to forfeit a lease of property to the company. In such circumstances it is commonplace for the creditor to be restrained, for the better functioning of the administration, provided that the administrator discharges what would otherwise be unsecured liabilities, as they arise. The imposition by the court of such a condition for the refusal of permission to the creditor to enforce his security or forfeiture could convert a debt which might otherwise not be an administration expense into one that was. Furthermore, under the Lundy Granite principle itself, the retention by administrators of property for the benefit of the administration may mean that liabilities incurred by reason of that retention, although unsecured, become administration expenses.”

Hence, so it seems, rent payable during an administration should be seen as an expense “properly incurred by the administrator in performing his functions in the administration of the company” under rule 2.67.

The July/August issue of the CPI Update reported on the ECJ case of RLRE Tellmer Property (Case C-572/07) in which the ECJ suggested that payment for the cost of cleaning the common parts of a residential block was not part and parcel of the cost of the supply of land interests to tenants, but should be treated for VAT purposes as a separate VATable supply.

In relation to residential leases, paragraph 12.1 of VAT Notice 742 has always stated that: “Service charges relating to the upkeep of common areas of an estate of dwellings, or the common areas of a multi-occupied dwelling, are exempt from VAT so long as: they are required to be paid by the leaseholder or tenant to the landlord under the terms of the lease or tenancy agreement. This is because the service charge is treated as ancillary to the main supply of exempt domestic accommodation.” We commented at the time that we were still waiting to see if HMRC felt the need to revise its treatment of service charges in the light of this decision. It doesn’t. HMRC has confirmed, in Revenue & Customs Brief 67/09 (dated October 27, 2009), that its current policy on the VAT treatment of residential service charges is to remain unchanged following this case.

The November 2009 edition of the Commercial Property Information Update is published today on this website.

Further to the last post (see below) on the effect on the 1954 Act of the Companies Act 2006 changes, there is, in fact, no need to rely on section 1297(5) Companies Act 2006 to effect a change to section 42 (etc) of the 1954 Act. Paragraph 7 of Schedule 1 to the Companies Act 2006 (Consequential Amendments, Transitional Provisions and Savings) Order 2009 (SI 2009/1941) deals specifically with the group company provisions of the 1954 Act. In paragraph 7, it is provided as follows:

“In section 46(2) of the Landlord and Tenant Act 1954: (a) in the definition of “company” for “section 735 of the Companies Act 1985” substitute “section 1(1) of the Companies Act 2006”;
(b) in the definition of “subsidiary” for “section 736 of that Act” substitute “section 1159 of that Act”. Thanks to Michael Callaghan of Eversheds LLP for pointing this out.

Much use is made, both in statute and in the drafting of group sharing and assignment provisions in leases, of section 42 LTA 1954. This deals with cases where a lease of premises is granted to one company in a group, but occupation is taken up by another company in the same group. To work out whether the companies are within the same group, use is made of the definition of “subsidiary” in section 46(2) LTA 1954, which refers in turn to section 736 Companies Act 1985. Of course, the latter provision has been repealed by the Companies Act 2006, but the former provisions do not appear to have changed.

In fact, section 42 LTA 1954 has changed. It (or, rather, section 46(2)) has been automatically amended by virtue of section 1297(5) CA 2006. This reads as follows:

"Any reference (express or implied) in any enactment [i.e. the 1954 Act], instrument or document to a repealed provision shall be construed (so far as the context permits), as respects times, circumstances and purposes in relation to which the corresponding provision of this Act has effect, as being or (according to the context) including a reference to the corresponding provision of this Act."

Hence, section 42 LTA 1954 now effectively makes use of the new definition of a subsidiary company to be found in section 1159 CA 2006.

Land Registry has announced on its website, under the item "Land Registry five year transformation programme" significant staffing cuts and re-organisation. Click on http://www.landregistry.gov.uk/ and read the top article (today) in the latest news section.

The Times, this morning, suggested that this is the first stage towards privatisation. See Land Registry to shed 1,500 jobs ahead of possible sale. Now, surely that would be a mistake...

Firms are beginning to report receiving telephone calls from the Land Registry who are seeking confirmation that the conveyancer who purportedly signed a Land Registry ID form in connection with a registration application did indeed sign the form. It seems that, following this initial ID check made by the Land Registry, it then serves notice on the unrepresented party itself to double-check that the transaction is authentic. In one case heard of recently, the ID form turned out to be a forgery. A buyer who acquires title on the basis of a forged disposition, and succeeds in obtaining registration, may be safe from subsequent rectification of the register if it qualifies for the “proprietor in possession” protection of the LRA 2002, provided that it has not contributed to the mistaken registration through its own fraud or lack of proper care. However, if the Land Registry is checking that the conveyancer who signed an ID form did indeed sign it, it must be easily arguable that the buyer who relied on the ID form without carrying out its own check that the named conveyancer did actually sign it may be guilty of a lack of proper care?