Commercial Route Blog

Local authorities (usually by their Trading Standards Officers) are responsible for enforcing the requirement to have an EPC on sale or let of a building. Failure to make available an EPC when required by the Regulations means you may be liable to a civil penalty charge notice. Trading Standards Officers may act on complaints or undertake investigations. They may request you to provide them with a copy of the EPC and recommendation report that you were under a duty to provide. If asked, you must provide this information within seven days of the request or be liable again to a penalty charge notice. A copy of an EPC can be requested at any time up to six months after the last day for compliance with when the duty was to make it available.

When a building is being constructed or modified (see details below) it is the responsibility of the person carrying out the construction to give an EPC and recommendation report to the building owner and to notify Building Control that this has been done .

As soon as a building is in the process of being offered for sale, it is the responsibility of the seller to make available an EPC to prospective buyers free of charge.

As soon as a building is in the process of being offered to let, it is the responsibility of the prospective landlord to make available an EPC to prospective tenants.

The penalty for failing to make an EPC available is fixed, in most cases, at 12.5 per cent of the rateable value of the building, with a default penalty of £750 where the formula cannot be applied. The range of penalties under this formula are set with a minimum of £500 and capped at a maximum of £5,000.

So for a fast competitively priced service within London and the Home Counties do contact MAP Assessors:  epc@mapsurveyors.co.uk or www.mapsurveyors.co.uk or call Jo or Dorothy on 0845 63 44 187

Sir Stelios Haji-Ioannou, used two million shares in the low-cost airline easyJet as collateral on loan for £7.5 million. The money is expected to be used on further expanding business interests, but he will retain his voting rights in easyJet, with 38% shareholding.
The Greek-born entrepreneur was speaking with The Times newspaper earlier this year, and he stated that the recession had created many opportunities that he was looking to exploit, particularly investment in Commercial Property in London, so that he can expand his easyHotel and easyOffice ventures.

Sir Stelios’s easyGroup holding company has given up any equity gain if the share price of easyJet rises above 444p but will be protected against losses if it falls below 340p.  Sir Stelios believes that commercial property prices have fallen so far in the recession, that the market has bottomed out and that it makes more sense to buy assets than lease them.

An easyJet board dispute over growth plans for the airline was also recently resolved. The dispute stemmed from Sir Stelios being concerned about the speed of expansion, but a compromise was reached which will limit the airline to an annual growth of 7.5%.

The recent fundraising is an indication that business is returning to levels not seen since before the collapse of Northern Rock.  Barratt raised £720.5 million, which is to pay off debts, purchase land and continue with building developments, while their rival Redrow raised £156 million from shareholders.

Liberty International, the firm that owns Covent Garden and shopping centres across the whole UK added to the City fees with a £305 million share placing. Barratt shares rose to 276p (up 7.5p), and Redrow rose to 240p (up 6.5p), and Liberty fell to 545p (down 19p).

Mark Clare, chief executive of Barratt was convinced to make the move following “stability in the housing market over the last eight months.” This was a bold step considering that the housing market suffered massively following Northern Rock’s collapse and Lehman Brothers following suit a year later.

Barratt has reported losses of over £670 million for the 12 months to end of June 2009, having made a profit of over £137 million the previous year.  Mark Clare stated that it was an intensely difficult year, and revenue fell 36% to £2.29 billion.

This fundraising — £175 million through today’s share placing at 240p and £545.5 million from a rights issue at 100p — was far greater than City experts expected and will help to further cut Barratt’s debt from £1.28 billion to £700 million.

After paying fees Barratt will receive £693.5 million, while Redrow’s lower fees will leave them with £150 million.

The recent sale of the Bullring and its instantly recognisable Selfridges store has indicated a turnaround for the fortunes of the property industry.

The Australian government fund paid Land Securities £210m for their share of the Bullring, after a series of property deals over the last couple of weeks.

The share of the shopping centre that Land Securities owned was said to be 5% higher than its value in March. King Sturge stated that almost the entire rise in Value of the Bullring centre came in the last month, which was the first noteworthy increase in over 18 months.

Andrew Burrell, Land Securities’ research partner said that the long road back towards growth was attributed to the return of UK property investors, as they had helped to put a bottom under the prices.
The value of Land Securities’ portfolio fell by £4.7bn this year with the share price falling from £20 per share to just £3.24. Many other property firms suffered similar falls in value, and a flight of investors.

Reaching the bottom of the market is unlikely to cause a fast return to boom times however, warned Mr Burrell. He also went on to advise that if the recession continues, then many property firms’ finances could continue to worsen, particularly if tenants go bust. This would be particularly worsened by the existing restrictions in bank financing.

“We have clearly seen the bulk of the investment market correction. Investors seem to be confident and fund managers have begun to raise money to buy. So there is bound to be a short-term bounce over the next six to 12 months as investors come back into the market,” said Kelvin Davidson, property economist at Capital Economics.

“But at the same time the lack of credit is a distinct problem and looks like going on for the next five years, which isn’t really a surprise if you look back at the last recession when the market took at least that time to recover.”

Commercial property firms borrowed billions of pounds from banks from 2005-2007, spending the majority on purchasing offices and shop premises at record high prices. The unwinding of bank debt over the past two years has taken up much time, and taken the demand away from the market.

Savills shares fell by over 8pc recently after they said it was unable to forecast the recovery of the commercial and residential markets.

Wealthy City financiers and foreign investor boosted activity in the prime London residential market which prevented Savills falling into the red in the first half.

The weak drop in the value of sterling has attracted many overseas buyers, and domestic City based buyers are looking at homes or flats despite the financial crisis and bonus cutbacks.

The chief executive of Savills, Jeremy Helsby warned that despite increasing optimism it was too early to predict whether the improvement would spread outside of London. This is due to property investors still exercising caution, citing continued pressure from a ‘lack of debt financing and continued rise in unemployment’.

In addition to this, it was noted that there is a “shortage of quality product” – with banks holding on to distressed assets while those companies bolstered by equity railings, are hanging on to their assets for when they believe values could rise. A rise was forecast by Mr Helsby in sale-and-leaseback deals, due to businesses seeking to offload properties.

“Against this backdrop we continue to adopt a cautious outlook as predicting the timing of sustainable improvement in our markets remains difficult,” Mr Helsby said.

In the first 6 months of the year, Savills’ revenue fell by 11pc to £247.6m, making pre-tax profits tumble to just £100,000.

New research claims that the market will take over 5 years to get over the losses suffered since the downturn.

According to BNPRE (BNP Paribas Real Estate), offices, warehouses and shops suffered heavily with falls in value of approximately 45pc in just two years. While a recovery has been forecast, it is set to take over 5 years to reach the pricing of 2007. This delay in the recovery in capital values has been attributed to weak occupier demand.

Offices are set to suffer further, with forecasts showing that they will rise in value by only 13.7pc by 2014. There is also an estimated fall in rental values of 20.5pc this year, and 14.4pc next year as related parts of the market feel greater pressure.

Some high-profile investors have returned to the market in recent times to pick up distressed assets that they believe are attractively priced but that is not enough to help the market pick up any sooner.

BNPRE is forecasting that in all sectors, there will be a rise of 31.5pc from the end of the year to the end of 2014 in capital values. BNPRE’s head of research, Keith Steventon said: “[Capital] values should rise next year as long as a slow economic recovery does not hold rents down for longer, and investor enthusiasm for property continues to push values up.”

We all recall the time, trouble and expense we took over buying our company assets which in the main are the very buildings we occupy to conduct our business from. Over the years we have become familiar and aware of the characteristics of the buildings and what maintenance needs to be done. So, like all things we are familiar with we know and remember the quality of the buildings and often forget the price paid in acquisition and cumulative repairs.

Most insurers of our buildings will often ask about the state of repair of any flat roof or unique features which our buildings may have. Occasionally we may glance through the local commercial property for sale section in our local newspaper or a website such as Commercial Route. Comforted with figures quoted for similar buildings and perhaps with the knowledge that for the past 5, 10 or 15 years we have index linked the insured value of our buildings we are happy to pay the premiums set by our insurance company.

What a shock it would be if your insurer called and said not to bother checking the reinstatement value as long as you are happy to take on say 60% of the risk to repair or replace your building after a disastrous flood or fire. This would be met with your comment of “Do you think I have loads of money to take such a mad risk with my business?”

A recent survey conducted by one of the world’s well respected leading management and construction consultants found that a majority of those buildings checked for their reinstatement values were 40 to 60% below what they should be set at. OK so we are all trying to save money on premiums but this has to be balanced with other considerations and obligations we have made say to the bank who hold a mortgage or charge over the business assets. At a stroke we may be breaking our agreements with lenders, risking the total loss of the business even for a minor incident where the insurer will only pay a proportion of the claim matching our chosen value and premium.

Apart from the obvious the trouble under insuring can cause our businesses it is even worse when you discover, that as a tax payer, you could have saved more by addressing this problem particularly if maintaining your building to a high standard is key to your success such as hotels. It is vital to be kept well informed and safeguard your business in these difficult trading conditions and what better way than protecting and maintaining the most valuable asset your business owns.

If you would like further details on how to safeguard your buildings or a copy of the report please email; info@bluecygnet.co.uk or call us on 08450 21 21 48