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Hot Topic Highlight - Summer 2019

Updated: Jul 17, 2019

RICS APC and AssocRICS mandatory competency business planning

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What is today's blog about?

This week, we will be looking at some of the hottest topics for this Autumn's RICS APC assessments.

  • Government intention to outlaw new ground rents and leasehold houses

  • Government Advice Note on residential building balconies

  • Changes to VAT on construction services

  • Changes to CIL and Section 106

  • New Modern Methods of Construction (MMC) Definition Framework

  • Changes to the Model Commercial Lease

Essential reading for AssocRICS and RICS APC candidates.

You can also listen to our CPD podcast on Anchor for more free AssocRICS and RICS APC training and support.

Government intention to outlaw new ground rents and leasehold houses

The Government have confirmed their intention to ban new ground rents and leasehold houses.

The original proposals capped ground rents in residential leases at £10 p.a., but this has now been reduced to £0 p.a., i.e. banning residential ground rents.

There are likely to be exemptions for retirement properties and community-led developments.

The ban on leasehold houses will apply to leases over 21 years for both newly built and existing freehold houses. There will be limited exemptions, e.g. shared ownership properties and community-led developments.

Government Advice Note on residential building balconies

The Government have published an Advice Note relating to the risks arising from balconies on residential buildings. This is in partial response to the issue of fire risk in high rise residential buildings following the Grenfell Tower fire.

Balconies constructed of combustible materials are a potential source of rapid fire spread on the external walls of residential buildings.

The Advice Note provides the following key advice:

  • 'Building owners should be aware of the materials used in the construction of their external wall, including the construction of balconies and the potential for any horizontal and vertical fire spread due to their arrangement on the external wall. These should be considered as part of any fire risk assessment

  • The removal and replacement of any combustible material used in balcony construction is the clearest way to prevent external fire spread from balconies and therefore to meet the intention of building regulation requirements and this should occur as soon as practical

  • Building owners should inform residents about the risks arising from the presence of combustible materials on balconies. They should make clear that smoking, the use of barbecues and storage of flammable property on balconies can increase that risk. Advice from fire and rescue authorities is clear that barbecues should not be used on balconies'

Changes to VAT on construction services

From 1 October 2019, HMRC's domestic reverse VAT charge for construction services will come into force. This will require the recipient, not the supplier, to account for the VAT on certain construction services, with the aim of tackling missing trader fraud.

The services covered by the charge generally relate to 'specified services' between VAT registered businesses, defined as construction operations for purposes of the Construction Industry Scheme (CIS). Examples include construction, alteration, painting, civil engineering and the installation of M&E equipment.

Specialist tax advice should be sought in all instances, as VAT legislation is complex and the implications on accounting and invoicing will need to be considered by businesses.

Changes to CIL and Section 106

In June 2019, the Government announced proposals to reform developer contributions, i.e. Section 106 and the Community Infrastructure Levy (CIL) from 1 September 2019.

These include:

  • CIL Regulations 2010 simplified to remove the requirement for two consultation rounds when a charging schedule is being implemented by a Charging Authority

  • Section 106 pooling restriction removed completely to allow Charging Authorities to combine Section 106 and CIL contributions to fund the same item of infrastructure

  • Regulation 123 lists replaced with annual infrastructure funding statements to increase consistency in reporting of how contributions are spent

  • Changes to Section 73, whereby a planning permission can be amended under the provisions of the Town & Country Planning Act 1990

New Modern Methods of Construction (MMC) Definition Framework

The Ministry of Housing, Communities and Local Government MMC Working Group published the new MMC Definition Framework in April 2019.

This builds on the Government's Housing White Paper, as MMC is considered to be one of the key ways that the housing crisis could be tackled. The Framework aims to define and clarify issues relating to the use of MMC within the wider industry.

The Framework comprises 7 categories and covers all types of pre-manufacturing, site-based materials and process innovation.

Building types covered include houses, low-rise apartments (under 5 storeys), mid-rise apartments (6-9 storeys) and high-rise apartments (10 storeys and above).

The RICS are likely to include the definitions within forthcoming professional guidance relating to the new Home Survey Standard and valuation of new build homes.

Changes to the Model Commercial Lease (MCL)

The MCL is a free framework of commercial lease documentation, available online. It was developed by the British Property Federation and a working party of leading legal firms, clients and trade organisations.

It is largely compliant with the Code for Leasing Business Premises 2007 and seeks to remove unnecessary negotiations for routine transactions.

The MCL framework was last updated in April 2019, with a number of key changes being made:

  • Reference to new RICS service charge Professional Statement

  • Reinstatement provisions amended so that the 'tenant must reinstate all alterations and additions that it has made to the premises unless the parties otherwise agree that alterations and additions can remain at the end of the term'

  • Definition of Main Rent clarified

  • Changes to loss of rent insurance period

All of the changes and guidance on interpretation can be read online.

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Stay tuned for our next blog post to help build a better you

N.b. Nothing in this article constitutes legal or financial advice.