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 Cleaning
up the corporate act
Tyser
It is a near certainty that
companies in Europe will face an eventougher regime over the
next decade as regards their environmental liabilities. Mathew
Hussey looks at what may lie ahead.
Please Click
Here
to read this article.
Author: Mathew Hussey
Associate Director Tyser UK
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Less is
More
Searchwells
When it comes to buying a new
home, size isn't always everything. Leonora Wollner reveals why
downgrading your square footage could help you to substantially
upgrade your lifestyle.
For many people, a house purchase
is driven by a life change - whether that might be a new job,
new baby, or simply a change in direction. While it's generally
accepted that we all want to climb the housing ladder, there
may be a time when actually stepping back a couple of rungs makes
more sense. That's not to say that downsizing should be thought
of as a backwards movement; it's actually a chance to fulfill
your heart's desires by ensuring that your home suits your current
and future lifestyle.
Scale Model
The desire to downsize is most common among empty-nesters and
the older generations, since they're most likely to be living
in a home that exceeds their actual need for space. At such stages
in our lives, we may well want to re-evaluate what makes the
perfect home in order to better enjoy the fruits of our labours.
But you might also want to consider moving to a smaller home
if you're planning a new business venture and need to release
some capital, have separated from your partner, suffered a bereavement,
or simply want to move closer to other friends and family members.
If you've lived in your home
for some time, it's value will probably have increased significantly
over the years. By downsizing, you can unlock this equity and
use the capital either to fund your dream or save for a rainy
day. Alternatively, you could purchase a smaller house for the
same value as your current property, giving you the option to
choose an abode that's either in a more desirable area or that
simply looks better.
The good news is that a smaller
home doesn't have to be a compromise. There's no need to skimp
on the size of your principal rooms - you simply opt for fewer
of them. You should find a petite place easier to manage and
maintain too. No longer will you have to dust and vacuum bedrooms
that only see guests once or twice a year, or dining rooms that
only get used at Christmas. Heating bills, too, will be cut down
to size. You can also take the opportunity to choose a property
to suit the way you want to live your life now. For example,
if you were once a keen horticulturalist, but no longer want
the responsibility of tending a large garden, you could opt for
a house with a smaller plot. If you're a more mature downsizer,
you might want to select a property which that will help you
to maintain your independence - for example, one without a staircase,
or something that's close to family, shops and the doctor's surgery.
Heads Up
So, could downsizing be a smart choice for you You'll need to
think carefully and appraise your lifestyle honestly before you
plan ahead. Ask yourself whether you'll be happy with less space
and, critically, whether you will be able to streamline your
cherished belongings to fit into a smaller property. Next draw
up a wish-list for your new home, as well as a corresponding
manifest of absolute no-goes. This will help you to sort through
all the property particulars that come your way and create a
shortlist of possible for viewings.
Before you get too carried away
with your dream, get at least three valuations of your home from
experienced local agents. And be sure to find out if there are
any improvements you could carry out to maximize its market price.
Knowing exactly the amount of money you have to play with will
make planning your future considerably easier. It may sound obvious,
but amid all the excitement don't forget to keep family and friends
up to speed with your plans! This is particularly important if
you live in a home that holds childhood memories for your relations
- you don't want to add extra stress to your move by creating
friction in the family. Of course some of you may specifically
be looking for properties that can be sub-divided to suit several
generations, allowing you to downsize whilst simultaneously giving
your children a foothold on the property ladder.
Prior to starting your house
hunt in earnest, try to ensure you've got an offer on the table
for your existing home. It may sound odd to virtually render
yourself homeless, but by doing this you'll be putting yourself
in a strong position to make a move on your dream property. There
are plenty of characterful period homes of a suitable size on
the market - from cosy chocolate-box cottages to elegant city
apartments, quaint gatehouses to stunning stable conversions.
They're all highly desirable, so if you want to secure your ideal
property, it pay's to be able to exchange quickly.
Personally, I'm a big fan of
what I call 'little big houses' - basically properties that were
built as grand edifices on a small scale for second and third
sons or dowager aunts. With some disciplined searching it's possible
to find some wonderful Georgian, Victorian and Edwardian examples.
I'd also recommend considering a barn conversion, as they're
often developed in groups and are therefore fantastic if you're
after a rural home set within a small community.
Lodge house living
After more than four decades in the family home, 80 year-old
Rose Wright decide it was time to downsize. "The five bedrooms
and steep stairs were proving too much, but I didn't want to
change my way of life," she says. "Top of the list
for a new home was for it to be on one level, but big enough
to cater for family gatherings - without giving them the opportunity
to stay overnight!"
Rose came to Searchwells to talk things over. The first step
was to get her current property under offer, before concentrating
on finding her dream home. "She had set her heart on a particular
street on the outskirts of Oxford," explains Leonora."
We sent a letter to the occupants of single-storey houses on
that road and, luckily, received a positive response." The
Victorian gate lodge they'd found needed a complete refurbishment,
so Searchwells arranged for Rose to rent whilst the work was
carried out.
"I hadn't lived in a period property since childhood, so
I was delighted with the lodge," she reveals. "It even
had a charming old apple orchard out the back - because I've
downsized, I can afford to employ a gardener to help me out."
As Rose wanted to hold on to the majority of her belongings,
maximizing storage was a priority. "The kitchen was designed
aroung my needs, and I've even got an additional shed in the
garden to keep extra chairs for entertaining," she smiles.
"I've also been able to put aside a financial nest egg that's
secured my future quality of life.
Leonora Wollner was possibly
one of the original property finders, as in the mid 1980s she
advised members of the Kuwaiti royal family on purchasing their
London homes and English country houses and estates. Having been
involved in the purchase and sale of a variety of houses (including
unusual and listed ones) and because she has a rental property
portfolio of her own, she has the experience to understand exactly
what it is her clients need. She has also renovated and restored
a number of properties herself over the years.
Leonora and her husband, Mark,
run Searchwells from their 18th century Grade II listed mill
in central Chelmsford. Leonora searches proactively for the very
best properties available (both on and off market) for private
clients who wish to find their next home across East Anglia,
the South East and the Home Counties. For further information
Click Here.
Author: Searchwells
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Is now a good time to buy property in
Essex?
Searchwells
As property finders this is a
question we are always asked as soon as we meet anyone new! Due
to feverish and rather glum reporting on the property market
for many months now, many are genuinely surprised when we answer
'Yes!'
Let me explain:
The national property market is fragile, it does lack confidence
and is definitely slower than this time last year. Good mortgages
are more difficult to find, there are fewer buyers and the media
does keep saying that home values are likely to go down even
further.
Yes, the Essex property market
is also relatively fragile, but the best located, well appointed
homes are holding their values well due to our proximity to London,
the quality of local schools and the high standards of living
we enjoy.
But from these negatives, come
the following real positives for house purchasers:
- There is a good choice of quality
properties available NOW to purchase. Many more than this time
last year. Choice is vital when you are searching for a new home.
Please note however, that not all properties will be openly available
for sale.
- Vendors who need to sell will
be willing to consider a fair offer for their property. In the
recent past most vendors would expect you to offer more than
the asking price to secure the very best property.
- Good Estate Agents are advising
their clients that to achieve a sale, they have to offer their
properties at fair and realistic market values, not at inflated
prices. Therefore many properties are offered at a great deal
less compared to this time last year. However, please don't automatically
think that all property prices can be reduced by up to 25% -
it depends on when they were valued, where they are, their condition
and the vendor's circumstances etc.
- Because it is a buyer's market
and there are fewer buyer's around now, it is less likely that
you will be in a race to purchase a property, so your ideal home
may become yours at a good price, with careful negotiation. A
rare opportunity indeed.
- Thankfully, and at long last,
better mortgage products are being marketed by lenders. Literally
in the last few days we have become aware of improved rates;
simply do your research to ensure you get the best offers for
you.
Our advice, in summary, is 'do
your homework and be prepared.' Obtain independent advice to
ensure that you minimise your risks and maximise your opportunities.
Make sure that you are a 'good buyer.' By this we mean that you
can move quickly to exchange once you find your ideal home.
And finally, don't panic about
the market dropping too much more. On the whole, unless you are
a property speculator, you will stay in your next home for at
least five years. Therefore if you buy well now, you will be
well placed to maximise your investment when you choose to move
next time round.
Searchwells Independent Property
Finders work on behalf of the purchasers to take away a lot of
the hassle and stress of moving home as well as provide good,
up to the minute advice on the market in the area you want to
move too. Additionally, Searchwells can also manage the sale
of an existing property. Their service is about saving client's
time and making sure they get to view and acquire the best properties
available, in their timescale and at the best possible prices.
Author: Searchwells
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Is now a good time to sell property in
Essex?
Searchwells
Every morning (yes including
Sunday's!) when I turn on my computer I have at least five messages
from local East Anglia estate agents advising me of new, quality
properties for sale (both on and off markets). So properties
are coming to market, even in this current marketplace of property
doom and gloom.
Perhaps the market isn't that
bad then, or are those selling now selling because they have
to?
The answer lies somewhere in
between! The Essex property marketplace, especially at the mid
to top end, is faring OK when compared to some other regions
in the UK. Our close proximity to London and the good travel
connections, make Essex a 'more house for your money' option
for those who work in London (and especially those who work in
Canary Wharf and the City). Add to that the good local schools
and amenities in Essex, plus its proximity to countryside and
even the coast, and it's a good place to live.
Also add to that the booming
local economy and the history of house price increases over the
last 10 years or so - and Essex remains a good property investment
opportunity over the longer term.
Additionally, selling your home
is usually as a result of you wishing to change your lifestyle.
There are relatively few of us who are property speculators!
You may want to downsize as the children have now flown the nest,
you may be relocating due to work or you simply need a larger
home for your growing family. Sadly, society views property as
simply an investment opportunity, when our home, in essence is
at the very heart of our day to day lives.
If you want to sell because you
want to 'trade up or upsize' then, whilst you'll get less (probably)
now than you would of last year for your current home, you'll
win because the property you want to buy will cost less to purchase.
Proportionately, you'll gain.
If you are looking to downsize
(and most larger, quality homeowners/vendors are) then, again,
you'll probably get less now for your home than you may have
last year. But, you probably bought your home many years ago
and will be able to invest the 'nest egg gain' and benefit for
the high interest rates currently available. And, do you want
to wait possibly years for the prices to hit the same level as
at the top of the market, or do you want to make your desired
lifestyle change now and move forward with your life?
The question of selling now in
a so-called 'falling market' could also be asked of people who
decide to sell their home in a 'rising market.' In times of good
property prices, why should people sell, if they could perhaps
make more the following year? Likewise, now, why sell in a falling
market? Why not wait until the market picks up? The answer is
generally an emotional one. Your life has changed or needs to
change. You want something different. So why wait? And, don't
forget, interest on savings is extremely good at present!
In the current market, to sell
your house 'well' you need to be prepared to offer it at a fair
market price. Talk to your agent, gather opinions and look up
local house sale values on the web. Be realistic. There are very,
very few houses that currently sell in excess of their offer
price. But they do exist! These properties are 'prime properties'
and are the best located quality properties. They are always
in a desirable area and generally are well and tastefully appointed.
They are rare gems and will always sell well and quickly.
When you've set a fair market
price, then make sure that all viewers see your home at its best.
That doesn't mean a new kitchen, bathrooms, carpets etc. It simply
means a clear, uncluttered and clean home that has a 'good feel'
about it when it's approached from the outside and viewed from
the inside.
When selling, research and plan
thoroughly, ensure your home views well and is seen by committed
purchasers and ensure you have the best advice about how best
to market your home. When a buyer comes forward, then make sure
they are a 'good' buyer and that they are committed to proceeding
forward to exchange.
Author: Searchwells
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Tax Aspects of Property Investment.
BirdLuckin
Income arising from land and
buildings is generally treated as investment income unless it
is from furnished holiday lettings or from property development
or provision of services such as hotels and guest houses, in
which case it would be classified as trading income.
From an accounting and tax point
of view, all rental income (except furnished holiday lettings)
is treated together as from one Schedule A business, regardless
of the terms of letting. Profits and losses are calculated using
the same general accounting rules as for trading, including accruals
to cover the timing differences of rent or expenses in advance
or arrears. A cash basis is allowable for total annual rents
under £15,000.
Allowable expenses
Expenses allowable in calculating income include interest incurred
on loans used towards the purchase of the property (adjusted
for any part private use), business rates or council tax, rent
payable to a higher landlord, insurance and management expenses
including advertising for tenants, and maintenance, repairs and
redecorations. Management expenses can also include costs of
travelling exclusively for property letting purposes.
Expenses on improving the property
(such as extensions or installing central heating) and those
which were necessary to bring newly acquired property to a state
where it could actually be brought into use all form part of
the capital cost of the property.
Allowances for equipment
In general it is not possible to claim capital allowances for
plant and machinery in a dwelling house. By concession, an allowance
is available to cover the wear and tear on items such as suites,
beds, carpets, curtains, linen, crockery, cutlery, cookers, washing
machines and dishwashers. For such items it is possible to claim
either the cost of replacement (but not the original purchase)
or instead to claim a global annual wear and tear allowance of
10% of the rents received on furnished lettings (excluding items
such as council tax and water rates which would normally be payable
by the tenant). In addition to this 10% allowance it is also
possible to claim a deduction for the cost of renewal of fixtures
such as baths, washbasins and toilets.
For commercial properties, capital
allowances may be claimed in respect of plant and machinery supplied
by the landlord. The landlord may also claim industrial or agricultural
buildings allowance, where appropriate for the business of the
tenant. The allowances are calculated in the same way as for
trades, and are deducted as an expense.
Rent a Room relief
Owner occupiers and tenants who let furnished rooms in their
only or main residence may claim rent-a-room relief. This is
available both for Schedule A businesses and where substantial
services are also provided, for instance guest houses and bed
and breakfast businesses where the rent would be chargeable as
trading income. No tax is payable for gross annual rents (for
accommodation and related goods and services) up to £4,250
(£2,125 each for a couple). Where rents exceed £4,250
you can choose to pay tax on the excess, or on the total rent
less expenses in the normal way.
Furnished holiday lettings
Schedule A businesses which comply with the relevant conditions
can qualify for some very important tax concessions. Furnished
holiday lettings are treated for tax purposes as if they were
trades. Unlike other domestic lettings, the expenses can include
capital allowances on furniture and kitchen equipment. The income
counts as relevant earnings for pension contribution purposes,
and there are other advantages relating to the disposal of such
properties (see below).
Other considerations
Where there is mixed use of property, business rates may well
be payable as well as council tax, unless the business use does
not materially detract from the private use. Non-domestic properties,
such as commercial premises and boarding houses, are in any event
subject to business rates. Provision of bed and breakfast in
your own house is not caught if there are no more than six guests.
Staff accommodation is counted as domestic and therefore subject
to council tax.
Value Added Tax on land and buildings
is a complicated area. Generally sales of commercial buildings
less than three years old are standard rated, sales of new residential
properties are zero rated and most other sales or leases are
exempt. The VAT provisions on property letting are particularly
complex.
There is no charge to Stamp Duty
Land Tax if residential property is purchased for £125,000
(£150,000 in disadvantaged areas) or less, or on non residential
property for £150,000 or less. Any excess is charged at
1%, 3% or 4%, as appropriate.
Special incentives
Support for disadvantaged areas is actively being encouraged,
and investment in Enterprise Zone properties can be extremely
tax efficient, so long as the prices are not artificially inflated.
Landlords installing loft insulation, floor insulation, cavity
wall insulation, hot water system insulation and draught proofing
up to 5 April 2015 may claim an income tax deduction of up to
£1,500 per property (Landlord's Energy Saving Allowance).
Initial allowances of up to 100%
are available for expenditure by property owners and occupiers
on the renovation or conversion of empty or underused space above
qualifying shops and other commercial premises to provide residential
flats for leases of not more than five years.
Disposal of properties
If the purchase and sale of properties amounts to a trade then,
of course, property disposals will be taxed as income in the
normal way.
In all other cases, disposals
will be subject to the normal rules for the calculation of capital
gains. Most let properties will count as non-business assets
for taper relief purposes. However, business asset taper relief
is available in respect of furnished holiday lettings and properties
where the tenant carries on a qualifying trade (even though there
is no connection with the landlord).
The situation may be complicated
where a principal private residence has been let other than during
the last three years of ownership or during a period of allowable
absence. In these circumstances, the associated lettings relief
of up to £40,000 could be brought into play.
Furnished holiday lettings may
also qualify for rollover relief or gifts relief. In some circumstances
they may also trigger inheritance tax business property relief,
in which case they would pass free of any inheritance tax charge.
Whilst some of the principles
of property taxation may seem relatively straightforward, there
are many traps for the unwary, and professional help is definitely
advisable. Please contact us for more information.
Author: BirdLuckin
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Buy-to-Let
Properties.
BirdLuckin
At one time, investing in
the Stock Market was looked upon as the sure-fire way to achieve
long-term growth, but the ups and downs of the Market over the
last 20 years have caused many people to look at alternative
forms of investment.
The property market has also
had its ups and downs, but the public perception is that these
are less extreme than has been witnessed with the Stock Market.
This perception has spawned a
significant expansion in the Buy-to-Let sector. Basically this
involves investing in property in the expectation of capital
growth, and in the meantime earning rent which can be applied
to cover the costs of ownership.
Many investors were encouraged
by soaring house prices, but it must be recognised that prices
cannot continue upwards at such a rate, nor can rent levels always
be sustained, and there could well come a stage where it may
not be possible to cover mortgage repayments out of rents.
Typically a rental yield of about
6% is required to cover mortgage interest of about 5% and any
additional costs such as letting agents' fees, but yields can
be as low as 3% (and as high as 9%). Please remember that the
greater the borrowing, the greater the risk.
However, experts believe that
Buy-to-Let investors can expect a reasonable rate of return on
their capital if they take a long term view of at least seven
years. Properties should be chosen with care, in areas where
tenant demand is high. The cautious investor will build up a
cash reserve to be able to cut rents or go without a tenant for
a couple of months, if necessary.
The Student Scene
One special area where Buy-to-Let makes very good sense is in
the provision of accommodation for student members of the family.
Traditionally, this has involved paying out fairly high rents
over a period of three or four years and seeing nothing in return
(except perhaps a sizeable student loan).
By buying a house in the university
area, your children can be assured of somewhere decent to live
and should be able to cover most of the costs by renting rooms
to other students.
The situation presents significant
tax saving opportunities, but the correct formalities need to
be observed. One of the most important is that the property should
be bought by the student, not the parent. Lenders are normally
happy to offer a mortgage to a student if the parents act as
guarantors, and good rates should be available to the student
first time buyer.
The property should then qualify
as the student's principal private residence and so capital gains
tax (CGT) exemption will be available on any profits from the
eventual sale.
The rental income is potentially subject to income tax under
the Schedule A business rules, which allow a proportion of the
running costs (including mortgage interest) to be claimed against
the rent. Alternatively, the provisions of the Rent a Room scheme
allow the first £4,250 of rent in each tax year to escape
tax, with any excess rent over £4,250 being taxed in full.
Furnished Holiday Lettings
The purchase of a dwelling with a view to short term letting
for at least part of each year can give rise to some quite striking
tax concessions.
The qualifying conditions are
that the accommodation must be let on a commercial basis (ie
not merely to offset the costs of ownership). It must be available
as holiday accommodation for at least 140 days in the tax year
and actually let as such for at least 70 of those days. It must
not normally be in the same occupation for a continuous period
of more than 31 days during at least seven months of the year,
which need not be continuous but includes any months containing
any of the 70 let days.
If these conditions are met,
then the income is broadly treated as trading income, even though
it is strictly a notional Schedule A business. Interest paid
on a loan to purchase or improve the property is allowed as a
trading expense (restricted if necessary by any private use proportion).
Capital allowances and loss relief may be claimed and the income
qualifies as relevant earnings for personal pension purposes.
This last point has become of less significance since the personal
pension contribution regime was relaxed.
Properties used for qualifying
furnished holiday lettings count as business assets for the purpose
of CGT taper relief, though it is very unlikely that they would
attract business property relief for inheritance tax. Such properties
are eligible for CGT rollover relief and business gifts relief.
Main residence
If a property has, at any time, been your main residence for
CGT, it may also be possible to claim the residential lettings
exemption as well as exemption for the period of occupation as
your main residence and the final 36 months exemption
A significant CGT saving can
result from occupying a property as your main residence for a
relatively short time - consult us about this, and any queries
you have about residential letting.
Author: BirdLuckin
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Brownfield Briefing - Developers Guide
to Brownfield February 2006
The Brownfield Risk Jungle. Don't Fall into the Trap
Tyser & Co Limited
- UK Division
In 1996 I
spoke at a conference about partnering in the construction industry.
There was to be a new atmosphere of collaboration in an integrated
fashion; the old adversarial ways didn't work and the industry
was wasting a fortune as a result. Last year I spoke at another
conference where the topic was, yes you guessed it…….partnering.
Some speakers enthused as though it was a great new idea but,
in reality, almost a decade later, nothing had changed. For most,
partnering remains a myth, the confrontational approach continues,
unabated.
The major problem, I believe,
is the traditional structure of construction contracts. Take
the most common, JCT, for example. JCT is all about what will
go wrong. It perpetuates an acutely defensive approach. On the
one hand, you have the client who wants a "Rolls Royce"
job at a "Mondeo" price. On the other you have the
poor contractor who, to win the tender, has had to cut cost to
a suicidal price to hang on to his miserly 1% margin. No wonder
the trouble starts!
About 20 years ago, the industry
created a wonderful new concept "design and build".
Instead of suing the entire professional team when a defect manifested
itself, you just sued the contractor to whom all the professional
skills had been novated. A classic case of risk being passed
down to the entity least able to embrace it. Is it any wonder,
therefore, that today 80% of all construction insurance claims
consist of legal and forensic costs only. It doesn't take much
to figure who takes the real margins out of the industry.
So many of today's construction
professionals have been brought up in this adversarial culture
and they just can't see that, when it comes to risk, the traditional
procurement route is utterly flawed. So, chances are when clients
say "I'm risk averse: I pass all risk to clients and consultants",
they are probably being advised by the "luddite" project
managers and quantity surveyors and perhaps lawyers who have
a vested interest or perhaps, don't know any better. Even worse,
many of the banks who provide the project financing, are often
paying a lot of money for this suspect advice.
Traditionally procured insurance
mirrors the construction industries fault lines. It protects
individual firms, not integrated teams and the "blame culture"
perpetuates a protectionist approach. There are various mechanisms
which underpin the client's false sense of security; the most
common being professional indemnity insurance (PI).
Many clients possess a kind of
"machismo" when it comes to PI. One will say "I've
got £5,000,000 PI from the contractor" while the other
upstages him with "I've got £10,000,000 from the consultants".
The sad thing is they don't why they want £5,000,000 or
£10,000,000. Even worse, they don't know what it covers.
It is likely that a huge amount
of potential remediation work will be undertaken in the next
few years; the Thames Gateway area is the largest regeneration
opportunity in Europe and the winning of the 2012 Olympics has
had the construction industry generating a fervour of anticipation.
Chances are, much of the work will be inappropriately insured
or not insured at all, with potentially disastrous consequences.
Once I was amazed (now I just
shrug my shoulders) that remediation contractors, tasked with
the actual work of cleaning up contamination, are being asked
for high levels of PI cover which is of no value to anyone. PI
essentially protects consultants against negligent professional
advice. The principal risk associated with a remediation contractor's
work is that its activities mobilise residual contamination to
create a pollutant linkage. In such circumstances, a site can
be brought into Part llA of the Environmental Protection Act
1990. If sued as a result, the client will have no remedy under
a PI policy. This is a Public Liability (PL) risk but crazily,
most remediation contractors have "pollution" exclusions
under their PL policies.
Within the construction industry,
there is an institutional obsession with collateral warranties.
To have any effect whatsoever, they have to be backed by PI.
Even in circumstances where a PI policy may respond, clients
should be reminded that PI is no benefit to them; it is a defence
mechanism for the consultant. The chances of proving negligence
under someone's PI policy, within 5 years, if at all, are remote.
In my view, collateral warranties are a complete waste of time
and money. In over 20 years I never known a client, a tenant
or a third party successfully seek redress under a collateral
warranty.
Why are they getting it so wrong?
Well, many professionals believe they know better than the few
specialist insurance brokers in the market who are often not
consulted until it is too late. We are better placed than anyone
to understand how risk should be managed, mitigated or transferred.
We should be seen as a member of the professional team; not as
a bunch of used endowment salesmen.
The client, with the assistance
of the professional broker, is best placed to handle risk, not
the contractor or consultants. There are too many prevailing
uncertainties to pass the liability parcel. Many of these uncertainties
can be removed with controlled risk transfer through the use
of specialist environmental insurance. This market has developed
dramatically during the past few years and now provides cost
effective solutions to the technical, legal and financial uncertainties
associated with brownfield development. Much of this insurance
is triggered by funders and institutional investors who are not
prepared to expose their investment to such risk. The Law Society's
"warning card" focusing on the importance of environmental
due diligence has resulted in increasing numbers of law firms
recognising the value of insurance. We collaborate with many
in designing and delivering bespoke insurance solutions, which
make a solid contribution to real risk transfer.
Author: Graham De
Roy, Director Tysers
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Contaminated Land Redevelopment - Safe, Secure
and Sustainable?
Tyser & Co Limited
- UK Division
With the multitude
of committees, working groups, brownfield targets and billions
spent on regeneration you would expect most people to be thinking
along the same lines ('joined up thinking') and the future of
England's regeneration safe, secure and sustainable. However
the fundamentals of science, law and policy, in the realm of
contaminated land redevelopment, are increasingly complex and
one could argue increasingly divergent.
A key issue is a lack of clarity
and uncertainty that prevails with both the regulators and private
sectors - mainly due to the fact that the science, specifically
Soil Guideline Values (SGV's) or lack of them, that is supposed
to underpin the whole process has yet to arrive to a significant
degree.
To further exacerbate problems
the first case under the contaminated land regime (Circular Facilities
(London) Ltd v Sevenoaks District Council) has raised more issues
rather than brought clarity. As a result local authority progress
in the enforcement of contaminated land legislation is likely
to slow.
What is 'safe and secure' is
still in reality yet to be resolved to any degree of confidence
in either the legal or scientific fields and it is prehaps not
surprising then that environmental consultants professional indemnity
insurance (PI) is coming under increased pressure as clients
seek protection.
In response to market pressures
on PI both the Association of Geotechnical Specialists (AGS)
and Environmental Industries Commission (EIC), through the working
group on contaminated land, have at the end of 2005 started initiatives
to promote standardisation of terms and agreements in place for
consultants and their clients.
Consultants PI - Safe, Secure
and Sustainable?
Clients seek consultants
PI as a safeguard against historical contamination problems often
under the misapprehension that PI offers them a benefit, in the
form of environmental insurance. There is an increasing awareness
of the limitations of this approach, a brief summary of some
of these is provided below:
- PI is negligence based cover,
incepted primarily for the protection of the consultant against
claims that they have been negligent in their work or professional
duties. The burden of proof for negligence is extremely onerous.
- Collateral Warranties are usually
non-transferable, so persons outside of the original client will
not receive any benefits from the warranty. If the collateral
warranty is in breach of the terms of the PI policy then the
policy is invalidated and the contractor or consultant will be
left to defend and settle the claim themselves.
- Collateral Warranties require
PI insurance to be renewed annually for a period of 12 years
provided it remains "available at economic cost". Many
consultants and contractors have relied on this "concession"
in recent years to reduce cost and consequently, quality of cover.
- PI cover is usually placed as
annual cover rather than a 'one-off' cover for the period of
the contract, and the basis of the policy is 'claims made'. This
means that any claims have to be made during the policy period.
- The majority of environmental
PI policies are placed on an "aggregate basis" thus
if the consultant has offered an identical limit of indemnity
backing collateral warranties for a number of contracts over
the policy period and suffered a claim or claims, there is a
possibility that the aggregate limit of indemnity has been exhausted.
- Many contractors and consultants
have exclusions under their PI policies for claims arising from
"gradual pollution" - the most likely cause of claims
associated with intrusive site investigations or remediation
activities.
Tysers have responded to PI market
needs by initiating in 2006 the first known market wide survey
of environmental consultants PI with the objective of providing
some clarity to market standards, patterns in claims etc. A summary
of the survey results is expected to be available to the industry
by April 2006.
Contaminated land insurance
- Secure and Sustainable?
Increasingly contaminated
land insurance is being used to 'take the risk' rather than put
it onto another party or retaining the risk. The risk is transferred
to an insurance company that is strictly controlled by the Financial
Services Authority with a suitable credit rating. The insurance
industry is the most regulated industry for the transfer of liability
and risks. Most other companies have very limited requirements
to keep long term financial reserves in place for potential environmental
liabilities.
Policies can provide cover for
10 year duration that includes protection against change in either
UK or EU law. Polices can cover for third party and regulatory
claims and can include consequential loss, property damage, bodily
injury and remediation costs, technical and legal defence costs.
Cover can be extended to both the vendor and the purchaser, funders
and tenants with relative ease.
In addition commercial benefits
can be gained by the client with an insurance policy which may
include:
- Achieving maximum asset value
for sales;
- Long term policies that can
be transferred with site ownership;
- FRS12 provisions, insurance
cover for a potential liability can improve the companies profit/loss
sheet;
- High credit rating and protection
can secure funders and in some instance; reduce level of the
funders risk rating and therefore loan interest rates;
- Long term and sustainable approach.
Insurance remains intact even if member of the project becomes
insolvent.
Currently a number of government
and corporate contracts ask for unlimited transfer of liability
in terms of time and duration. This approach has flaws, it is
not sustainable business practice and arguably not secure. 'Blue
chip' companies (Enron, Marconi) have spectacularly hit the wall
and few companies can sustain large claims.
In lieu of sufficient science,
guidelines or provision of environmental security clients should
consider environmental insurance as a method of protection. Indeed
to protect against the risks presented by contaminated land redevelopment
councils should consider as a policy the mandatory purchase of
insurance for contaminated land redevelopments at least where
housing is involved. This could be argued as the only real way
of providing long term protection to the community on a sustainable
basis.
Author: Mathew Hussey,
Associate Director, Tyser
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BUSINESS
CONTINUITY "What will they
think?"
ClientAct
TIPS: - Internal
& External Public Relations
A crisis - what crisis?
A fire in a neighbouring building, a flood from tenants in the
block, delay in completing a new building or other disaster may
interrupt your business may cause loss of earnings, dissatisfied
customers, bad press. Tips that could help your business:
- Be prepared for the unusual, unexpected, the unwanted
and the unbelievable; plan your business continuity strategy,
test the plan and review it..
- Listen and learn from the experts, there are a number
of specialist Crisis Management companies offering advice or
select your own experts to fill your knowledge gap.
- Identify target audience - who needs to know: everything, the
essentials
- Belt & Bracers: take a hard copy of essential information
off site as well as electronic backups: staff contact numbers
(next of kin), media contacts, top clients/customers, stockists,
suppliers, banks, transport, payroll, builders, electricians,
engineers, staff agencies, caterers
- Staff - need to be kept informed - they need to know
that you care about their safety - what will happen to them,
their job, their personal possessions lost in the building.
- Customers - need reassurance that their business
will not suffer as a result of your problems - effective communications
is essential.
- Be as accurate and as honest as the circumstances permit
- Do not give people false
hope - telling them the
restaurant will be open at 6 p.m. or the factory will be producing
goods by 2 p.m. when you know this is not possible, creates mistrust,
frustration and could result in lack of future loyalty.
- Use the media to your advantage. Talk to the press, when it is appropriate,.
Avoid "no comment". Seek professional P.R. advice before
the crisis.
- Set up a strict procedures for dealing with the media:
For detailed advice on working
with the media contact ClientAct
PR
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Thames gateway reaches out to South Essex
Lambert Smith Hampton
Although still
in its embryonic stage in South Essex, new research into the
investment potential of the Thames Gateway has outlined a number
of industrial and business space developments which will transform
the region.
The 'Thames Gateway Report',
published by commercial property consultant, Lambert Smith Hampton
(LSH), highlights the regions proposed developments.
Stuart Mowle, director at LSH's
Chelmsford office, said: "The extension of the Thames Gateway
into South Essex will provide opportunities for growth in the
large sub-regional centres of Basildon, Castle Point, Southend-on-Sea
and Rochford."
"The Thames Gateway transformation
is still in its early stages in South Essex. The proposed developments
will create business hubs with improved economic growth complimented
by appropriate transport, business and community infrastructure."
At Castle Point, one of the key
objectives is to reduce the necessity for people to travel out
of the Borough for work purposes. To that end 50 acres of land
has been allocated for industrial and business development to
the south of Northwick Rd, Canvey Island.
One of the biggest sites at Gardiners
Lane South in Basildon, predominantly owned by English Partnerships,
is earmarked for residential, headquarter development, office
and light industry and hotels and leisure space. A further site
at Courtauld Road is also being considered for development.
Mowle comments: "The Gardiners
Lane South development will provide 1.2m sq/ft of new business
space in Basildon alone. We have yet to see whether this space
will satisfy customer requirements. At LSH we are experiencing
more demand for freehold self-contained property rather than
the leasing of mid-terrace properties with absentee landlords."
This consideration holds true
for the development of the Rochford Business Park 10 acre site
adjacent to London Southend Airport. Once complete the business
park will provide a further 38,000 sq m of commercial floorspace.
Mowle continues: "Whilst
the demand for commercial properties continues to outstrip supply,
it is likely that, despite investor and lessor preferences for
freehold units, these new developments will be acquired."
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FLOOD RISK - Resident
demands satisfaction!
Ducks
swimming past the front door were one of the photographs used
to illustrate the reality of coping with floods, during the Essex
Property Forum's Debate on Flood Risk & Development in Essex
held in Chelmsford last week. Speakers from the Environment Agency,
a flood victim from the National Flood Forum and a representative
of the insurance industry joined chairman Maurice Rozario from
MDR Developments Ltd in a lively
debate.
Left to right - Maurice
Rozario, Aaron Dixey, Gillian Holland &Simon Barlow
Simon Barlow and Aaron Dixey
(from Development Control and Planning Liaison) at the Environment
Agency set out their reasons for flooding discussed the assessment
of risk and gave hints to developers. They reported that flooding
could be related to:
- historic development with
more building on flood plains,
- regeneration of brown field
sites,
- reducing land availability
- the ever increasing need
for new housing stock.
They reported that the dramatic
influence of climate change with increased winter rainfall draining
onto fewer flood plains had had a devastating affect in certain
areas of the country and this was illustrated by flood victims.
Simon and Aaron discussed the
need for sustainable development and explained that the onus
was with developers to prove land was safe. Developers must:
- assess risk of flooding
- inform planners of that risk
- demonstrate how minimum standards
of safety will be put in place.
"If you don't prove it's going to be OK (to build)"
warned Aaron, "It
must be assumed it is not." He
then gave hints to developers to consider:
- Will the development be at risk
of flooding or will there be a risk of flooding elsewhere?
- Could the risk be overcome?
- How much will it cost and how
does this affect the land value?
Gillian Holland, Operations Director,
National Flood Forum presented her first hand experience of flooding
as the ducks had drifted down her street in the floods of 2000
at Bewdley. Gillian has used her knowledge and practical experience
to liaise with a network of groups seeking advice and information
on flooding and practical ways to assist the less mobile. The
media coverage of the Bewdley floods ensured their constant high
profile resulting in the installation of flood defences.
Facing floods from river, salt
water or over stretched drains each householder or business faces
their own personal trauma of lost property, polluted homes or
factories due to overflowing sewers or fuel or chemical leaks.
Gillian reported that it has been
deemed that it is the householder's
duty to protect their home. "How?" she asked, "Can any individual
protect their home from invasion by a fast flowing flooded river."
"We think that the only way forward is for all the
agencies to sit down together to assess the problem. Without
Multi Agency Partnerships everyone will pass the buck and no
one takes responsibility,"
concluded Gillian Holland.
Louise Warren, Area Underwriting
Manager, Axa Insurance briefed the audience on factors considered
during the underwriting process and reported that 1.8 million
residential and 130,000 commercial properties were at risk from
inland or coastal flooding. Louise reported that insurance companies
in general used the following solutions to manage the risk of
flood risk properties:
- limit the risk through deductibles
- physical risk management - flood
defences
- control damage - claims management
procedures
- transfer of risk - through reinsurance
or a government fronted scheme
- quoting the right price for
the risk.
The new ABI statement of the
Principle of Flood Insurance referred to the following:
- In future Environment Agency
maps would be used to identify flood risk areas
- Individual consideration of
risks would be undertaken by underwriters
- Insurers would continue to write
flood cover
- Insurers would work with the
government in improving defences.
A lively debate followed the
formal presentations. Concern was expressed that Planning Authorities
were going against the recommendations of the Environment Agency
and it was suggested that the Agency needed to be more forceful
and gain greater public support. Despite assurances that properties
that had been flooded could be covered by insurance, the additional
costs were sometime excessive; a frustrated speaker from Coggeshall
reported that his home had been flooded for the first time and
that he was now liable for a £5,000 excess - and he found
the current insurance system, less than helpful.
During the wide ranging discussions,
it was suggested that selling a house that is on the "at
risk of flooding register" is becoming a major problem for
some home-owners. Details of the environment agency maps can
be seen on www.environment-agency.gov.uk - your environment -
my back yard - insert post-code.
Maurice Rozario closed the meeting
by inviting members of the audience to join the Essex Property
Forum and strengthen its voice in Essex.
For Details about the next debate or to
reserve a place please Click Here.
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Networking Tips!
by Sally
Carpenter, ClientAct
- SELECT - be Selective - choose the right event for you
and your business -
2 hours at the wrong event can be a waste of time and money
- PLAN - know your objectives - set a target e.g. 2 new
contacts, leads, info etc
- PREPARE - check that you have: cash, and sufficient cards.
Check venue location, speakers' background, what to wear (to
some people: "formal dress" can mean lounge suit or
black tie)
- WEAR - check your name badge or take your own quality
badge (print should be large enough to read without a specs)
- MARK - look at the guest list and identify "who"
you really want to meet
- WHAT to say - listen & learn - opening line - read
badges - ask questions
- USE your body language - eyes - hands - feet. Learn
to read other people's body language.
- GIVE - 2 cards if they suggest passing it to a colleague
and read their card
- DON'T GET CORNERED - if you are stuck with someone - learn
how to escape and leave the other person feeling good.
- ACTION - Follow-up - make your first impression - a good
lasting impression
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