DATED: 16 DECEMBER 2020

Commercial Property expert, Simon Stempien takes a lookat two recent government policies.

After a closure of the residential property market for a number of months and some initial hesitation from some parties who work in commercial property, it has been positive to see how everyone has looked to evolve, grow and move on where possible. That being said, it is not always possible and the government have completed two recent policies which may affect some people’s departure from a property:

Commercial Property Surrenders – VAT on the premium

On 2 September HMRC published a further Brief and updated its other support documentation to clarify that certain sums (including those paid to terminate a lease) are generally liable to VAT. Often if a Landlord agrees for a tenant to surrender their lease they will look for a Surrender “Premium” and that premium appears to be caught by the this clarification. The advice is even more general and fees and compensation paid for the early termination of a contract are normally caught as they are to be “consideration” (the following of a benefit from one party to an other) for a supply of the goods or services. Whilst the Landlord can still look to forfeit the lease, this clarification could add further costs to tenants who look to release themselves from a lease through negotiation.

That being said there is no comment as to:

• Whether a landlord has to be VAT registered, but we consider that it appears reasonable to assume they would have to be, or
• the relevance of whether an election has been made to charge VAT on the property. This is the traditional way that the Landlord can charge VAT on receipts from the tenant under a lease.

Further delay to residential forfeiture proceedings.

The Government has further amended the position when it comes to bringing a case to remove a residential tenant from a property let on an assured shorthold tenancy (AST). These changes have increased the notice period that must be given when seeking possession of such a property in England (under section 21 of the Housing Act 1988) to six months. This is positive news for a tenant, but may cause further issues for Landlords with troublesome tenants. It should be noted that the Form 6A Regulations are temporary (relating to the period up to 31 March 2021) and are not retrospective (so do not affect notices served before 2 September 2020), therefore current applications will not be bound by the new timeframes.

For further advice on this and commercial property matters, contact Simon Stempien at our Herne Bay Office.

Girlings has offices in Ashford, Canterbury and Herne Bay.