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Property litigation update
Welcome to the latest property litigation update from Charles Russell LLP.
Looking back over the last quarter the tentative improvement in the property market has slowly continued, much as expected. One of the biggest real estate developments in recent years has been a huge wave of overseas capital being invested into UK property. Whilst there has long been a trend of overseas investment (as far back as the mid-1990s) this source of capital has increased dramatically. Recently we have seen a surge of capital from the pension funds of small to medium-size countries such as Malaysia and South Korea which are said to have had a significant impact on the UK investment market. These investors have tended to target core London assets. The overseas demand for residential property in the UK remains strong but is also now rising in the commercial market. Demand for UK property is increasing from both ends of the price spectrum. This has kept the Property Litigation team focussed on work arising from receivership sales, a major target for overseas investors. The banks are, at last, selling significant quantities of distressed stock through receivership auctions.
Many commercial property owners are facing difficulty with receivership and other issues without being able to exit their borrowing arrangements as a consequence of dramatically high swap termination fees. This continues to be the focus of the thousands of portfolio owners going through the FCA/FSA redress scheme with their respective banks. This has created an unprecedented surge of dispute in relation to commercial mortgages (which might never be seen again).
The chancellor's spending review last month appeared to be good news for housing. George Osborne announced a £3.3bn investment in affordable housing (although other cuts were made to promote a new £400m scheme to boost home ownership). Under the new "affordable rent-to-buy" initiative, 165,000 new homes will be let by housing associations at lower rents (up to 80% of market rent, in line with the affordable rent regime in social housing) for a fixed period of up to a decade. After this period the houses will be sold and the tenant will have first right of refusal. This is the latest measure to provide impetus to the housing market since the bubble burst in 2008. Hopefully this scheme will have more impact than the schemes launched in 2009 which failed to be the successful stepping stone to home ownership that had been promised. Conversion rates, from renting to ownership, are running at 5% or below. The failure to convert was probably due largely to wider economic conditions. The success of rent-to-buy schemes depends on the wider economy. As a result of slowly improving conditions generally, many property commentators have revised their forecasts for the year upwards, predicting price rises of up to 5%.
All of this adds up to an expanding volume of work for property litigators, as the market re-emerges and the appetite grows to resolve the problems of the last 5 years.
This is a newsletter from Charles Russell LLP. These pages contain general information only and do not constitute advice on any specific matter. We recommend you seek professional advice before taking any action. No liability can be accepted by Charles Russell LLP for any action taken or not taken as a result of this information.
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