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Commercial Property A New Industry for a New Century Property Litigation Association Conference Liz Peace, Chief Executive British Property Federation 8 April 2005 – Keble College, Oxford An old industry with a bad reputation “Property is theft” Proudhon 1860 Sharks! Government perceptions Threat of lease legislation Stamp Duty up to 4% Closure of tax loopholes Development Land Tax Planning Regulation The Customers’ View I am the LORD in landlord You are the ANT in tenant Anon Occupiers remain frustrated by the adversarial nature of the property industry Occupiers see the industry as ‘self-serving’ rather than customer serving BCO survey 2005 ‘On a day to day basis, UK landlords are typically uncomfortable to work with. Communication with landlords (which can be via the managing agent) tends to be very formal and invariably in writing’ RICS Tenant Satisfaction Index (39/100) Feb 2005 Investor Perspective Asset Performance 1994-2004 14 % per aunnum Why Property? 11.1 12 7.6 10 6.2 8 6 4 2 0 PROPERTY BUT Cost of entry too high Too complex/too lumpy No retail products The preserve of the wealthy Go for the easy BTL option UK EQUITIES GILTS Source: IPD But the industry is changing Provider of occupier flexibility Partner in urban and social renewal Servant of the customer Investors’ friend Supporter of environmental sustainability Customers flexible lease lengths flexible lease terms different types of tenure sub-letting/assignment speed and simplicity a range of services Landlord and Tenant Act Reform? simplified lease documentation reduced intermediary involvement basic business advice Investors £35 billion of potential retail investment a BTL industry worth £40bn Real Estate Investment Trusts Authorised Investment Funds simple structures/ speedy transaction transparency and information consumer protection Government and Society promotion of BIDs participation in neighbourhood/underserved markets programme partner in major regeneration schemes funding infrastructure through S.106 agreements novel forms of partnering and funding faster, better planning simplified S.106 negotiations Environment energy and utility efficiency – EPBD waste management security accessibility safe, sustainable construction modern forms of contract compliance with spirit & letter of environmental legislation better, more comprehensible information Government The commercial property industry is:- a major contributor to economic growth - 6% of GDP a significant source of taxation - £30.5bn or 7.7% of total tax take a creator of capital - £46bn per annum (30% of UK total) provider of £85bn of investment for pension funds/savers sound/swift transaction support tax avoidance, tax planning or simply pay up! corporate governance In conclusion ? the industry is changing the customer is becoming king part of sophisticated capital market a retail investment option an urban regenerator environmentally sympathetic How do lawyers support this change? providing solutions that are quick, simple and certain managing expectations in an increasingly litigious society avoiding litigation taking a holistic view