1E9Ct5D

V Property, planningand environmentalconsiderations1. Property1. The mechanics of propertytransactionsThere are no controls on foreigners buying UKproperty. Generally the terms of a propertyacquisition are agreed on a subject to contractbasis and thereafter searches and enquiriesare raised and title is investigated. When thisprocess has been satisfactorily concluded,contracts will be exchanged for the sale andpurchase, or the grant of the lease, of theproperty (as appropriate). At this point bothseller and buyer are contractually bound toproceed to complete the transaction.Completion normally follows some weeks afterexchange, when the transfer or grant of theinterest is completed, any capital monies dueare paid and possession is granted.The whole of England and Wales is subject toa system of compulsory registration of varioustypes of disposition, most notably transfers orlettings or 7 or more years of land.This will eventually result in all freehold andlong leasehold property titles being registeredat the Land Registry and most title rights andinterests may be checked simply by referenceto the register. Where land is stillunregistered, title rights and interests must bechecked in the Land Charges register and byreference to the documents of the title held byexisting landowners.The above system does not apply in Scotlandwhere, although registration is alsocompulsory, an entirely different procedure isused (see pages 30-31).2. TenureProperty interests in England and Wales fallinto two classes of tenure: freehold andleasehold.Freehold amounts effectively to absoluteownership of the land and buildings on it andthe airspace above it. There is no time limit onfreehold ownership. Freeholders maynevertheless be subject to restrictivecovenants in favour of adjoining owners (whichlimit the absolute rights of the freehold owner)or to rights in favour of adjoining owners (egrights of way, services or light and air) whichmay be noted on the title.Leasehold interests are lesser interests in landin that they exist for a defined period (which forexample may be as little as a week or as muchas 999 years) and are often of only a buildingor part of a building on the land. At the end ofthe defined term the lease comes to an endand the land reverts to the landlord. Althoughsome commercial organisations in the UK ownthe freehold interest in their premises or, lesscommonly, a “long” lease, many businessorganisations occupy their commercialpremises on a rack rent lease for termscommonly between 5 and 10 years. The usualcharacteristics of such a lease are as follows:A rack rent is the best rent obtainable for theproperty in the open market subject to thelease terms.The initial rent is determined throughnegotiation and it will be subject to review tocurrent market rent at periodic intervalsthroughout the term of the lease.Generally such reviews are on an upward onlybasis and do not, therefore, result in areduction of rent at a review taking place at atime when the market is in decline.Note, however, that the code for commercialleases, which sets out various industry bodies’views on best practice, strongly recommendsthat landlords should offer alternatives toupwards only rent reviews priced on a riskadjustedbasis. To date, the existence of thiscode has dissuaded the UK Government fromlegislating to outlaw upwards only rent reviews.Additionally a modern commercial lease willpass on to the tenant the cost of insurance andmaintenance of the property (including itsstructure and plant). The latter will be achievedeither by imposing a direct obligation on thetenant to repair and maintain the property or byrequiring the tenant to contribute towards thecosts of repair and maintenance (particularly ina multi-let building) via a service chargecalculated and administered by the landlord.Calculation of service charges andmanagement of service charge accounts issubject to the guidance issued by the RICSand which came into effect on 1 April 2007.The lease will usually require the tenant tohand back the property at the end of the leasein good repair or pay compensation instead.PAGE 23