Droit Fiscalité belge

Introduction

For anyone thinking of developing property in England and Wales, the following guide sets out some practical tips which should be taken into consideration.

Land Acquisition

Structure

Once identified, a site may be acquired by a straight land transfer or may be secured for a period of time by way of a conditional contract or an option. With a conditional contract, the buyer will usually be obliged to buy the land when the conditions are fulfilled. A common condition would be the grant of planning permission for development of the site. Options are more flexible and give the buyer the ability to acquire the land subject to giving notice within a specified time. The terms of conditional contracts and options are a matter for negotiation between the parties, but the details of the documents will generally be negotiated by solicitors, who will also effect the land transfer.

Due Diligence

Prior to the signing of a contract for the acquisition of land, the buyer will usually instruct a solicitor to carry out a full due diligence on the land. This would reveal whether the use of the land is subject to any restrictions or whether there are any other matters which could prevent development of the land.

Costs

In addition to the purchase price for the land, any surveyors' fees and legal fees in connection with the acquisition, the following costs should also be anticipated:

a) VAT will in most cases be charged on the purchase price for the land. It may be possible to recover VAT if the purchasing entity is registered for VAT purposes.

b) Stamp duty is payable on land purchased at the following rates:

- where price is £60,000 or less, nil

- where price is £60,000 to £250,000 at 1%

- where price is £250,000 to £500,000 at 3%

- where price is over £500,000 at 4%

c) Land Registry fees will also be payable for registration of the transfer of land subject to a maximum payment of £800.

Environmental

For any land to be acquired, it is important to be aware of the state and condition of the land, since clean up may be required as part of the development process. This due diligence will usually be carried out by independent environmental consultants although legal advice should be sought as to the terms of the appointment of such consultants.

Planning Process

Once the site has been acquired, or as part of the acquisition process, planning permission will need to be obtained for the proposed development.

Responsibility for application

The application may be made and progressed by the architect, by specialist planning consultants or by planning solicitors depending on the developer's preferences. Planning solicitors will usually be involved in negotiating the terms of any formal planning agreement with the planning authority.

Judicial Review

Once a planning permission has been obtained, it can still be challenged for a period of three months from the date of grant of the permission. To be completely safe, the developer should wait for the three month period to expire before accepting that any contract is unconditional or before building on the land.

Occupier

Before building, a developer will often wish to secure an occupier for the development. This will generally be done by way of a "pre-let agreement" which will commit the occupier to taking a lease of the building once the construction is completed. The most important characteristics of such an agreement from the developer's point of view are set out below.

Liability for quality of work

While the developer will generally try and limit its liability for the quality of the workmanship, it would normally expect to be liable for any defects in the building for at least 12 months from the date the works are completed and sometimes the developer will accept liability for up to 12 years.

Liquidated damages

The developer will generally have some commitment to deliver the building to the occupier within a specified timeframe, but subject to extensions due to external factors outside the developer's control, for example bad weather. However, the developer may have to commit to paying liquidated damages to the occupier of a specified amount for each day that delivery of the building is late.

Determination provisions

The developer will try and limit the circumstances in which the occupier can terminate the pre-let agreement, but it would be usual for the occupier to be able to terminate if the developer has not delivered the building by an ultimate long stop date, if the developer becomes insolvent or the size of the completed building is substantially different from that anticipated originally.

Construction

Building contract/Professional Appointments

The developer will enter into a contract with the construction company and, depending on the type of building, possibly a separate appointment with the architect and other members of the professional team, although these may be appointed direct by the building contractor. The developer will usually be advised by a solicitor on the terms of the building contract and professional appointments.

Warranties

The liability of the building contractor and professional team for the quality of the building is to the developer. Any occupier and any investor purchasing the development from the developer will generally require a direct contract from the building contractor/each member of the professional team in the form of a warranty enabling such occupier/ purchaser to sue the contractor/professionals direct in the case of a defect in the building.

Construction costs

Construction costs will generally be subject to VAT and advice must be sought on the recoverability of that VAT by the developer.

Funding

The developer may fund the construction costs itself or may enter into an agreement with a funder, the terms of which will be a matter for negotiation between the parties. The developer may also enter into a forward sale agreement whereby the developer agrees to sell the investment once it is built and let, thus securing the developer's profits on the transaction.

Lease

The terms of the lease between a developer and the occupier are a matter for negotiation, but there are certain standard terms which would be required to ensure that the investment created will be acceptable to institutions.

Term

Traditionally a 25 year term has been the norm, although shorter terms are becoming more common, or a 25 year term with a break option for the tenant after 15 years.

Full repairing and insuring

The standard institutional position will be that the tenant takes full responsibility for the repair of the building and for the cost of insurance. In a multi-let building, the landlord may repair but recover the cost through the service charge, but ultimately the landlord would expect the tenant to take on all repair, maintenance and running costs in connection with the building including rates and other occupier costs.

Rent review

The institutional norm is for 5 yearly upwards only rent reviews to open market rent.

Break clauses

Other than one off breaks at a specified time, the tenant will usually be expected not to be able to terminate the lease during the term.

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