ICLG The International Comparative Legal Guide to: 2019

14th Edition A practical cross-border insight into real estate

Published by Global Legal Group with contributions from: ALTIUS Maples and Calder Anderson Mori & Tomotsune Marval, O’Farrell & Mairal Blenheim Meyerlustenberger Lachenal AG Brulc, Gaberščik and partners, Law Firm, Ltd. Norton Rose Fulbright South Africa Inc. Cordero & Cordero Abogados Pepeliaev Group Eric Silwamba, Jalasi and Linyama Legal Practitioners Project Law Attorneys Ltd Ferraiuoli LLC Ropes & Gray International LLP Gianni, Origoni, Grippo, Cappelli & Partners Shepherd and Wedderburn LLP Greenberg Traurig Grzesiak sp.k. Simon Reid-Kay & Associates Greenberg Traurig, LLP Taras Burhan Law Office LLC Hogan Lovells Tirard, Naudin Kapellmann Tughan Kubes Passeyrer Attorneys at Law Valmas Associates L&L Partners Wintertons Legal Practitioners Machado, Meyer, Sendacz e Opice Advogados Ziv Lev & Co. Law Office Mantis & Athinodorou LLC The International Comparative Legal Guide to: Real Estate 2019

General Chapter:

1 Forward Funding Now! – Iain Morpeth, Ropes & Gray LLP 1

Country Question and Answer Chapters:

2 Argentina Marval, O’Farrell & Mairal: Diego A. Chighizola 5 Contributing Editor Iain Morpeth, 3 Austria Kubes Passeyrer Attorneys at Law: Dr. David Kubes & Mag. Tina Vollmann 17 Ropes & Gray LLP 4 ALTIUS: Lieven Peeters & Kathleen Verbiest 27 Sales Director Belgium Florjan Osmani 5 Brazil Machado, Meyer, Sendacz e Opice Advogados: Maria Flavia Seabra & Account Director Juliana Ribeiro 36 Oliver Smith 6 Costa Rica Cordero & Cordero Abogados: Hernan Cordero B. & Rolando Gonzalez C. 45 Sales Support Manager Toni Hayward 7 Cyprus Mantis & Athinodorou LLC: Michael Mantis 55

Senior Editors 8 England & Wales Ropes & Gray International LLP: Carol Hopper & Partha Pal 63 Caroline Collingwood & Suzie Levy 9 Finland Project Law Attorneys Ltd: Matias Forss & Sakari Lähteenmäki 75 CEO Dror Levy 10 France Tirard, Naudin: Maryse Naudin 83

Group Consulting Editor 11 Germany Kapellmann: Dr. Florian Kirchhof & Dr. Max Mommertz 94 Alan Falach 12 Greece Valmas Associates: Ioannis Valmas 104 Publisher Rory Smith 13 Hong Kong Simon Reid-Kay & Associates: Simon Reid-Kay 113 Published by Global Legal Group Ltd. 14 India L&L Partners: Amaresh Kumar Singh & Manjul Mantri 122 59 Tanner Street London SE1 3PL, UK 15 Ireland Maples and Calder: Diarmuid Mawe & Craig Kenny 140 Tel: +44 20 7367 0720 Fax: +44 20 7407 5255 Email: [email protected] 16 Israel Ziv Lev & Co. Law Office: Moshe Merdler & Ziv Lev 156 URL: www.glgroup.co.uk 17 Italy Gianni, Origoni, Grippo, Cappelli & Partners: Davide Braghini & Domenico Tulli 166 GLG Cover Design F&F Studio Design 18 Japan Anderson Mori & Tomotsune: Kenichi Yamamoto 177 GLG Cover Image Source iStockphoto 19 Netherlands Blenheim: Mark van Weeren & Tim Pruntel 186 Printed by Stephens & George 20 Northern Ireland Tughans: David Jones & Luke Thompson 196 Print Group November 2018 21 Poland Greenberg Traurig Grzesiak sp.k.: Agnieszka Stankiewicz & Barbara Pancer 204 Copyright © 2018 Global Legal Group Ltd. 22 Puerto Rico Ferraiuoli LLC: Eduardo Tamargo-Motroni & María del Rosario Fernández-Ginorio 214 All rights reserved No photocopying 23 Russia Pepeliaev Group: Alexey Konevsky & Vladislav Ivanov 223 ISBN 978-1-912509-47-8 ISSN 1749-4745 24 Scotland Shepherd and Wedderburn LLP: David Mitchell & Scott Ritchie 232

Strategic Partners 25 Slovenia Brulc, Gaberščik and partners, Law Firm, Ltd.: Damijan Brulc & Marjetka Kenda 246

26 South Africa Norton Rose Fulbright South Africa Inc.: Pieter Niehaus 255

27 Spain Hogan Lovells: Emilio Gómez Delgado 265

28 Switzerland Meyerlustenberger Lachenal AG: Wolfgang Müller & Denise Läubli 275

39 Ukraine Taras Burhan Law Office LLC: Taras Burhan & Zvenyslava Kit 284

30 USA Greenberg Traurig, LLP: Christina Braisted Rogers 294

31 Zambia Eric Silwamba, Jalasi and Linyama Legal Practitioners: Joseph Alexander Jalasi, Jr. 306

32 Zimbabwe Wintertons Legal Practitioners: Cordellia Nyasha Midzi & Peter Moor 314

Further copies of this book and others in the series can be ordered from the publisher. Please call +44 20 7367 0720

Disclaimer This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations.

WWW.ICLG.COM EDITORIAL

Welcome to the fourteenth edition of The International Comparative Legal Guide to: Real Estate. This guide provides corporate counsel and international practitioners with a comprehensive worldwide legal analysis of the and regulations of real estate. It is divided into two main sections: One general chapter. This chapter covers the topic of forward funding. Country question and answer chapters. These provide a broad overview of common issues in real estate laws and regulations in 31 jurisdictions. All chapters are written by leading real estate lawyers and industry specialists and we are extremely grateful for their excellent contributions. Special thanks are reserved for the contributing editor Iain Morpeth of Ropes & Gray LLP for his invaluable assistance. Global Legal Group hopes that you find this guide practical and interesting. The International Comparative Legal Guide series is also available online at www.iclg.com.

Alan Falach LL.M. Group Consulting Editor Global Legal Group [email protected]

PREFACE

It is a pleasure to have been asked to provide the preface to The International Comparative Legal Guide to: Real Estate for 2019, which is now in its fourteenth edition. The Guide has become a well-established benchmark for international real estate transactions and is one of the most comprehensive available. The 2019 edition now contains contributions covering 31 countries round the globe. With investment capital flowing round the world so much more freely than in the past, an understanding of the diverse ways in which transactions in the real estate market are dealt with in different jurisdictions has become an increasingly important requirement for the international investor. We hope you find the Guide a useful reference point when faced with a question concerning cross-border real estate transactions and we encourage you to contact us with suggestions to improve future editions.

Iain Morpeth Partner Ropes & Gray LLP Contributing Editor Chapter 20

Northern Ireland David Jones

Tughans Luke Thompson

restrictive covenants or inhibitions on the title to individual 1 Real Estate Law properties that impose restrictions.

1.1 Please briefly describe the main laws that govern 3 Real Estate Rights real estate in your jurisdiction. Laws relating to leases of business premises should be listed in response to question 10.1. Those relating to zoning 3.1 What are the types of rights over land recognised in and environmental should be listed in response to your jurisdiction? Are any of them purely contractual question 12.1. Those relating to tax should be listed in between the parties? response to questions in Section 9.

Specific rights over land will include rights of way, rights of The main real estate legislation is the Landlord and Tenant Law support, rights to light and/or air, wayleaves and -à-prendres. Amendment Act (Ireland) 1860 (or “Deasy’s Act”); the Rights that are expressly included or implied into a will be Acts, 1881–1911; and the Settled Lands Act 1882–1890. The purely contractual between the parties unless it is stated that they Prescription Act 1832 deals with prescriptive in Northern are given by and for the successors to the parties. These rights can Ireland; 20 years being the length of time required to acquire an also be acquired by necessity or prescription. A grant of a licence or through prescription. The most significant modern real tenancy at will also creates contractual rights over land. estate legislation includes the Property (NI) Orders 1978 & 1997 and the Criminal Damage (Northern Ireland) Order 1977, along with the Business Tenancies (Northern Ireland) Order 1996. 3.2 Are there any scenarios where the right to land diverges from the right to a building constructed thereon?

1.2 What is the impact (if any) on real estate of local No, there are not. in your jurisdiction?

Northern Ireland is a common law jurisdiction and therefore the 3.3 Is there a split between legal title and beneficial title courts do have an impact on real estate law. The Lands Tribunal in your jurisdiction and what are the registration has extensive powers to extinguish historic covenants that would consequences of any split? Are there any proposals to change this? “unreasonably” affect the enjoyment of land. The case law of England will also be persuasive, but not binding, in Northern Ireland; save for where Northern Irish law specifically differs. Yes, there are two ways in which legal title can be held. Firstly, legal title can be held as joint tenants meaning that should one tenant survive the other, the deceased’s share will automatically pass to the survivor 1.3 Are international laws relevant to real estate in your by the right of survivorship. However, if the title is held as tenants in jurisdiction? Please ignore EU legislation enacted common there is a split between the legal and beneficial title and the locally in EU countries. right of survivorship no longer automatically applies. For example, if property is held as tenants in common the beneficial interest may No, save for certain UK-wide legislation in areas such as tax and be held by a beneficiary under a will or a third party under a contract. competition law that can impact on real estate. Trustees can also hold legal title on trust for beneficial owners, who do not appear on the public register. 2 Ownership 4 System of Registration 2.1 Are there legal restrictions on ownership of real estate by particular classes of persons (e.g. non-resident persons)? 4.1 Is all land in your jurisdiction required to be registered? What land (or rights) are unregistered?

There are no general restrictions on ownership of property, for Not all land in Northern Ireland is registered. From 2003, there has example to overseas entities. However, it is possible to have been a system of compulsory first registration in place – when a

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transaction takes place involving unregistered land, the title must be Good Fee Farm Grant – title will be registered as good fee farm registered at the Land Registry post completion. The exceptions to grant when land is held by way of a fee farm grant that commenced this rule are: transactions with no consideration; mortgages; leases 15 years prior to registration, but the title of the grantor has not been for a term of less than 21 years; exchanges or partitions of land proved. The only difference from absolute fee farm grant title is (involving no consideration); dealings with reversionary interests; that registration will not prejudice any estate arising by virtue of any and the surrender of leases. There are also a number of burdens as superior grant. set out in Schedule 5 of the Land Registration Act (Northern Ireland) Good Leasehold Title – in Northern Ireland, only a lease with a 1970 that will affect registered land without being registered. term of more than 21 years remaining outstanding can be registered at the Land Registry, although shorter term leases can still be 4.2 Is there a state guarantee of title? What does it voluntarily noted against superior titles. A lease will be registered guarantee? with good leasehold title when the leaseholder has not proved the superior title. The only difference from absolute leasehold title is Information contained on the Title Register at the Land Registry is that registration will not affect the enforcement of any rights adverse Northern Ireland considered to be conclusive of title. This is supported by a to the title of the lessor to grant the lease. state guarantee of title, which enables compensation to be claimed for Qualified Title – granted to either freehold or leasehold title if the errors and omissions in the Title Register. However, although the Land title is unable to meet the requirements for an absolute, good fee Registry provides a map-based system to support the Title Register, farm grant or good leasehold title. The Land Registry may also the boundaries shown on the Land Registry maps are not guaranteed. confer a qualified title if they are not satisfied that registration with an absolute, good fee farm grant or good leasehold title is justified. 4.3 What rights in land are compulsory registrable? What Possessory Title – granted for an application to register land that has (if any) is the consequence of non-registration? been acquired by way of . Possessory title will not affect the enforcement of any right adverse to the title of the owner. In Northern Ireland, rights in land are registered at the Land Registry as burdens on title. Part 1 of Schedule 6 of the Land Registration 4.6 On a land sale, when is title (or ownership) transferred Act (Northern Ireland) 1970 has a list of the burdens registrable to the buyer? on the Title Register. If two burdens are created at the same time (after first registration), the burden that is registered first at the Land A transfer/conveyance/ documents a transfer, but Registry will receive priority over the other burden and any burden does not operate to validly transfer the land until the transferee created subsequently. If a registrable burden is not registered, a is registered as the owner at the Land Registry, if such transfer is bona fidepurchaser for value without notice will not be subject to it. registrable. If unregistered land is transferred and the transaction meets the 4.4 What rights in land are not required to be registered? criteria for compulsory first registration, an application to register the title must be made within three months. An application not In Northern Ireland, rights in land are registered at the Land Registry made within this timeframe will become void and title can revert to as burdens on title. Part 1 of Schedule 5 of the Land Registration the seller. Although the seller, having received the purchase money, Act (Northern Ireland) 1970 has a list of the burdens that will affect should then hold the land as a trustee for the buyer; and it is possible registered land without registration on the Title Register. As not that the buyer’s equitable interest in the land can be defeated by all land in Northern Ireland is registered, rights in land that affect prior equitable interests. unregistered land will not be registered. 4.7 Please briefly describe how some rights obtain 4.5 Where there are both unregistered and registered land priority over other rights. Do earlier rights defeat later or rights is there a probationary period following first rights? registration or are there perhaps different classes or qualities of title on first registration? Please give Rights affecting registered land will receive priority in the order details. First registration means the occasion upon in which they are registered. This rule of priority does not apply which unregistered land or rights are first registered to rights over registered land created prior to first registration in the registries. of the title or those included in Part 1 of Schedule 5 of the Land Registration Act (Northern Ireland) 1970. Depending on the nature of the title held, an applicant for first registration may apply to be registered with one of the following five classes of title: 5 The Registry / Registries Absolute Title – generally refers to freehold title and is the best class of registered title. It is usually only granted if an applicant can demonstrate that their title commenced with a disposition made at 5.1 How many land registries operate in your jurisdiction? If more than one please specify their differing rules least 15 years previously. and requirements. A recent practice direction issued by the Registrar of the Land Registry has introduced an exception – where an application is made There is only one Land Registry in Northern Ireland. In order to in relation to freehold land acquired under the Ground Rents Act have title to land registered, a solicitor will need to inspect the title (NI) 2001, the applicant will receive absolute title. and certify it before submitting a registration application to the There is also a class of absolute title for land held by way of a fee Land Registry. Registered titles are considered conclusive and are farm grant or lease. This will only be granted if title commences backed by a state guarantee. However, the mapping system that with a fee farm grant or lease made at least 15 years prior to accompanies the register is not considered conclusive and therefore registration and the grantor’s/lessor’s title has been fully examined. is not backed by a state guarantee.

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A branch of the Land Registry is known as the Registry of , running in tandem with the main land register. The Registry of 6 Real Estate Market Deeds is simply a register of deeds. It is not tied to the land; it records details of deeds by noting them against the entities who are 6.1 Which parties (in addition to the buyer and seller parties to the respective documents. This is the only register that and the buyer’s finance provider) would normally can be searched when dealing with unregistered property. be involved in a real estate transaction in your jurisdiction? Please briefly describe their roles and/or duties. 5.2 How do the owners of registered real estate prove their title? Real estate transactions will also involve a solicitor acting for the buyer, a solicitor acting for the seller and, at times, a surveyor/estate An application for first registration of a title in Northern Ireland must agent. be made by a solicitor. The application must contain a certification Northern Ireland from the solicitor, to the Land Registry, that the title has been It is a requirement for any conveyance of land to be carried out reviewed and accurately reflects the application for registration. by a solicitor in this jurisdiction. The role of a solicitor will vary depending on which party they are acting for. In very brief terms, On completion of the registration, information about the title to a the solicitor for the seller will provide title to the real estate, draft property may be obtained from the Land Registry, and information the contract, provide search results and negotiate terms on behalf of contained on the title register is backed by a state guarantee. the seller. The solicitor acting for the buyer will review and report on the title and negotiate terms on behalf of the buyer. 5.3 Can any transaction relating to registered real estate Although it is not a requirement, a seller often uses a surveyor/estate be completed electronically? What documents need agent, whose role will typically involve valuing and marketing the to be provided to the land registry for the registration property and liaising with potential interested buyers at the pre- of ownership right? Can information on ownership of registered real estate be accessed electronically? contractual stage.

It is not possible for a transaction relating to land, registered or not, to 6.2 How and on what basis are these persons be completed electronically. The relevant physical documents to any remunerated? transaction must be executed or signed by the parties to the transaction. If the title is registered, a transfer of ownership will be registered Surveyors/estate agents are generally remunerated following when the Land Registry is provided with a correctly completed completion, based on a percentage of the sale price. transfer in the prescribed form. In relation to lawyers, a common basis for remuneration is connected If the title is unregistered, the process of first registration must be to time spent, based on an hourly rate. However, an agreed fee based completed, meaning all relevant title to the land must be provided on a predetermined scope of work is also common. The solicitor and certified by a solicitor. and their respective client should agree a basis for payment prior to a transaction commencing, with payment of all such fees generally The information on ownership of registered land is publicly made upon completion, unless interim billing is necessary. accessible and can be accessed electronically for a fee.

6.3 Is there any change in the sources or the availability 5.4 Can compensation be claimed from the registry/ of capital to finance real estate transactions in registries if it/they make a mistake? your jurisdiction, whether equity or debt? What are the main sources of capital you see active in your The information contained on the Title Register is considered market? conclusive title to land and is backed by a state guarantee. Therefore, compensation for loss arising out of a mistake on a registered title There is a definite increase in the availability of capital to finance is recoverable, but not in relation to the mapping system, as referred real estate transactions in Northern Ireland. The local banks are to previously. starting to appear in the market again, albeit quite tentatively. There is a significant growth in funds, new private investors and mezzanine 5.5 Are there restrictions on public access to the lenders in the local market, across various sectors. register? Can a buyer obtain all the information he might reasonably need regarding encumbrances and 6.4 What is the appetite for investors and/or developers other rights affecting real estate and is this achieved to invest in your region compared to last year and by a search of the register? If not, what additional what are the sectors/areas of most interest? Please information/process is required? give examples.

The information contained at the Land Registry relating to registered Both developers and investors are slowly moving back into the land is publicly accessible. Any potential buyer can obtain all the secondary and tertiary real estate markets. Tughans has acted in the information they should reasonably need regarding encumbrances majority of the most significant examples of such transactions in the and other rights to land provided that information is registered. last 12–36 months – e.g. the acquisition of the Flagship Shopping However, there is still a significant amount of unregistered land Centre, Bangor and the acquisition of the Tower Centre, Ballymena. where it can be impossible to access any details. Castlecourt Shopping Centre in Belfast has also changed hands recently.

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6.5 Have you observed any trends in particular market 7.5 Does the seller retain any liabilities in respect of the sub sectors slowing down in your jurisdiction in property post sale? Please give details. terms of their attractiveness to investors/developers? Please give examples. In Northern Ireland the principle of “caveat emptor” or “buyer beware” applies to real estate transactions. Therefore, there are Most sub-sectors are still in recovery/growth mode at present. limited circumstances in which a seller will retain liabilities in Although political and economic uncertainty around Brexit and respect of a property, post completion. However, depending on the other global factors has created a lull in prime investment activity. nature of the property and transaction, post completion liabilities can be negotiated between the buyer and seller. 7 Liabilities of Buyers and Sellers in Real One continuing liability of note would be those concerning Estate Transactions environmental matters. In Northern Ireland, there is a principle of “the polluter pays”. The result if this is that where contamination Northern Ireland is found in land, those in ownership or possession of the land at the 7.1 What (if any) are the minimum formalities for the sale time of the pollution will be deemed responsible. and purchase of real estate? 8 Finance and Banking Any sale or purchase of real estate must be completed by way of a written contract. A Law Society produced standard form of contract, tailored by the inclusion of special conditions, is often used on lower 8.1 Please briefly describe any regulations concerning value, more straight forward transactions. However, it is really the lending of money to finance real estate. Are the designed for residential conveyancing, rather than commercial. rules different as between resident and non-resident persons and/or between individual persons and corporate entities? 7.2 Is the seller under a duty of disclosure? What matters must be disclosed? The same financial regulations that affect England and Wales apply in Northern Ireland, including the same anti-money laundering A seller has a duty to provide a good and marketable title but the regulations. principle of ‘caveat emptor’ also applies to real estate transactions. There is a responsibility on the buyer to carry out its own due diligence. Therefore, as a general rule, the seller has no duty of disclosure; but 8.2 What are the main methods by which a real estate there are exceptions and a degree of disclosure is standard practice. lender seeks to protect itself from default by the borrower? The seller has a duty to disclose latent physical defects or latent defects in its title which it is aware of or should reasonably be aware of. A latent defect is a defect which is not reasonably discoverable Lenders will generally seek security through a fixed charge registered from inspection of the property or the materials supplied to the buyer. against the real estate and in some cases will go further and require debentures, personal guarantees, cross company guarantees, funder warranties from contractors and a professional team, etc. 7.3 Can the seller be liable to the buyer for misrepresentation? 8.3 What are the common proceedings for realisation of mortgaged properties? Are there any options for a For a seller to be liable to the buyer for misrepresentation, three mortgagee to realise a mortgaged property without grounds must be proved: (i) the misrepresentation occurred prior involving court proceedings or the contribution of the to the contract being formed; (ii) the misrepresentation was of fact mortgagor? and not opinion or law; and (iii) the misrepresentation induced the purchaser to enter into the contract. The most common method is the appointment of a fixed charge The seller can be liable for either fraudulent or innocent receiver, who can sell the property without requiring lengthy court misrepresentation. If liable for fraudulent misrepresentation, the proceedings or a mortgagor contribution. Depending on the nature buyer can seek damages or rescission prior to completion of the of the security, an administrator or administrative receiver can also contract; or apply to have the contract set aside or seek damages after be appointed, or the lender can exercise a power of sale itself. completion. If the seller is liable for innocent misrepresentation, the remedies available are more limited. However, the buyer may still 8.4 What minimum formalities are required for real estate seek rescission and the Misrepresentation Act (NI) 1967 provides lending? the courts with discretion to award damages in lieu of rescission. The minimum formalities are an offer letter/facility letter from the 7.4 Do sellers usually give any form of title “guarantee” lender, the lender familiarising itself with the title and a mortgage/ or contractual warranties to the buyer? What would charge deed. be the scope of these? What is the function of any such guarantee or warranties (e.g. to apportion risk, to give information)? Would any such guarantee or 8.5 How is a real estate lender protected from claims warranties act as a substitute for the buyer carrying against the borrower or the real estate asset by other out his own diligence? creditors?

In general, warranties are only used when there is a corporate The principle lender will usually have a first ranking fixed charge element to the transaction – i.e. the transfer of shares in a company registered against the title, along with an inhibition, preventing any that owns the real estate. dealings with the title without the lender’s consent.

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8.6 Under what circumstances can security taken by a 9.2 When is the transfer tax paid? lender be avoided or rendered unenforceable? Within 30 days following the effective date of the transaction Depending on the circumstances, security taken by a lender may (generally the completion date). be avoided or rendered enforceable where documents have not been executed correctly by the necessary parties. In addition, if 9.3 Are transfers of real estate by individuals subject to security documentation is not registered with the appropriate body income tax? (i.e. Land Registry of Northern Ireland and Companies House (if applicable)) it may not have priority over future dealings with the Income tax will only be payable on the sale of real estate by an real estate. Also, where independent legal advice is not provided individual if the individual operates a business for the purpose when circumstances dictate (e.g. spouse using the family home as of buying and selling properties and that individual operates the

Northern Ireland security for capital investment into company). business as a sole trader or partner.

8.7 What actions, if any, can a borrower take to frustrate enforcement action by a lender? 9.4 Are transfers of real estate subject to VAT? How much? Who is liable? Are there any exemptions?

A borrower may try to frustrate enforcement action by providing The rules in Northern Ireland are the same as England and Wales, and evidence in court of their ability to make repayments; that they so real estate is exempt from VAT. However, an owner can choose were pressurised into executing the security documents; that the to waive the exemption and charge VAT on commercial property, lender has treated them unfairly; that the lender has not followed the this is called an ‘option to tax’. Once this option is exercised, it correct pre-action protocol; that the security is defective and does cannot be revoked for 20 years, but the option is personal and does entitle the lender to take the proposed action, etc. not transfer with the property. Commercial property that is under three years old will also be subject to VAT. If payable, VAT will 8.8 What is the impact of an insolvency process or a generally be charged at the standard rate, currently 20% and the corporate rehabilitation process on the position of a buyer will pay it on top of the purchase price. The most common real estate lender? exemption from VAT on investment transactions is to treat the deal as a transfer of a going concern. The position of the real estate lender will be subject to the nature of the security held. It is of paramount importance to register any security that is capable of registration. Not only will this ensure 9.5 What other tax or taxes (if any) are payable by the seller on the disposal of a property? that during the insolvency or rehabilitation process, those involved will be on notice of the security, but also there may be a concern the security is not valid if not properly registered. Depending on the seller’s circumstances and the nature of the transaction, capital gains tax or income tax may be payable by the During either process, the lender will become one of any number seller. The tax rules follow England and Wales and specialist tax of creditors to the borrower. The lender’s ability to recover is advice should always be sought. dependent on the security granted by the borrower.

9.6 Is taxation different if ownership of a company (or 8.9 What is the process for enforcing security over other entity) owning real estate is transferred? shares? Does a lender have a right to appropriate shares in a borrower given as collateral? If so, can shares be appropriated when a borrower is in Yes, if the shares in a company are transferred, rather than the real administration or has entered another insolvency or estate itself, stamp duty will be payable by the buyer on the share reorganisation procedure? price at a rate of 0.5% currently.

The approach to enforcing security over shares will depend on 9.7 Are there any tax issues that a buyer of real estate how the security is drafted, and the constitutional documents of the should always take into consideration/conduct due borrower. There are a number of factors to consider in the security: diligence on? a debenture should contain a share charge, the security should be enforceable and the directors of the borrowing entity should have Yes, a buyer should always consider the value added tax position, the waived any rights to refuse the registration of the transfer of the stamp duty land tax position, the availability of capital allowances shares. The borrower’s constitutional documents should also be and capital gains tax implications. reviewed to ensure that there is nothing that may affect the transfer of shares to a lender, i.e. are the shares subject to a right of pre- emption in favour of another party? 10 Leases of Business Premises

9 Tax 10.1 Please briefly describe the main laws that regulate leases of business premises.

9.1 Are transfers of real estate subject to a transfer tax? ■ Criminal Damage (Northern Ireland) Order 1977 – deals with How much? Who is liable? damage caused to premises as a result of civil unrest; and ■ Business Tenancies (Northern Ireland) Order 1996 – deals Stamp duty land tax is payable in accordance with the same with security of tenure rights for business tenants and legislation as in England and Wales. bringing such leases to an end.

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10.2 What types of business lease exist? 10.7 Green leases seek to impose obligations on landlords and tenants designed to promote greater The most typical types of business lease are: a lease of a whole sustainable use of buildings and in the reduction of the “environmental footprint” of a building. Please building, with the tenant taking full repairing liability; or a lease of briefly describe any “green obligations” commonly part, with the landlord responsible for looking after the structure and found in leases stating whether these are clearly common parts, then recharging a fair and reasonable proportion of defined, enforceable legal obligations or something such costs to the tenant through a service charge. not amounting to enforceable legal obligations (for In both cases, the landlord will generally insure and recharge the example aspirational objectives). premium to the tenant as insurance rent. Tughans has attempted to encourage the use of such leases in Northern Ireland and a couple of landlords have adopted some light- 10.3 What are the typical provisions for leases of business touch aspirational objectives, but nothing too hard-hitting yet. Northern Ireland premises in your jurisdiction regarding: (a) length of term; (b) rent increases; (c) tenant’s right to sell or sub-lease; (d) insurance; (e) (i) change of control of 10.8 Are there any trends in your market towards more the tenant; and (ii) transfer of lease as a result of a flexible space for occupiers, such as shared corporate restructuring (e.g. merger); and (f) repairs? short-term working spaces (co-working) or shared residential spaces with greater levels of facilities/ (a) Typically three to 20 years depending on the deal. activities for residents (co-living)? If so please provide examples/details. (b) Typically open market or index-linked rent reviews every five years. Belfast, Northern Ireland, is staring to follow certain trends in (c) Typically permitted, subject to landlord approval and other restrictions, but subletting is more restricted. flexible space for occupiers as seen in other major UK cities. In the commercial sphere, there is an increase in demand for serviced (d) Landlord generally insures and charges tenant insurance rent. office spaces. This is driven by smaller start-up companies that have (e) Leases are often silent on change of control and restructuring. different demands compared to those of the traditional office letting (f) Repairs can be dealt with in a number of ways and are very market. A client is currently in the process of letting a number of deal/property-specific. floors of a prominent, recently refurbished office building in Belfast to a company to provide serviced office space. This will supplement 10.4 What taxes are payable on rent either by the landlord a number of sites already in the city centre. or tenant of a business lease? In the residential market, a number of ‘build to let’ projects are underway in Belfast city centre. This is a first for this type of VAT can be payable, along with income/corporation tax. accommodation in Belfast, and is seen as a solution to more housing for the increasing numbers of graduate level workers in the city; this level is seen to require low maintenance and a high degree of 10.5 In what circumstances are business leases usually terminated (e.g. at expiry, on default, by either party flexibility in their accommodation. etc.)? Are there any special provisions allowing a tenant to extend or renew the lease or for either party to be compensated by the other for any reason on 11 Leases of Residential Premises termination?

11.1 Please briefly describe the main laws that regulate Leases can terminate at expiry, following default, upon exercise of leases of residential premises. a break option, or following a refusal to agree a renewal under the Business Tenancies Order. The main legislation that regulates residential leases is the Landlord The Business Tenancies Order provides the tenant with security of and Tenant Law Amendment Act (Ireland) 1860 (or “Deasy’s Act”) tenure rights, allowing it to remain in occupation after the expiry of and the Conveyancing Acts, 1881–1911. However, following the the term. The landlord can only refuse to grant a new lease to such Property (NI) Orders 1997, a residential lease for a term greater than a tenant on a number of statutory grounds, some of which require 50 years can no longer be granted. Typically, long-term residential compensation to be paid to the tenant. It is not possible to contract leases are used for apartments given their nature. out of such security of tenure rights.

11.2 Do the laws differ if the premises are intended for 10.6 Does the landlord and/or the tenant of a business multiple different residential occupiers? lease cease to be liable for their respective obligations under the lease once they have sold their No, the laws do not differ. interest? Can they be responsible after the sale in respect of pre-sale non-compliance?

The parties are no longer liable once they have transferred their interest.

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11.3 What would typical provisions for a lease of 12.5 Are building/use permits and licences commonly residential premises be in your jurisdiction regarding: obtained in your jurisdiction? Can implied permission (a) length of term; (b) rent increases/controls; (c) the be obtained in any way (e.g. by long use)? tenant’s rights to remain in the premises at the end of the term; and (d) the tenant’s contribution/obligation Generally, planning permission is obtained, but enforcement to the property “costs” e.g. insurance and repair? action cannot be taken once a change of use or development has been in existence for a certain period of time, depending on the (a) Typically short-term lettings would have a term of 12 months. circumstances. (b) No statutory controls, but these can simply be renegotiated at the end of the term. (c) This depends upon the nature of the occupation. 12.6 What is the typical cost of building/use permits and the time involved in obtaining them? (d) The landlord will usually cover buildings insurance, the Northern Ireland tenant will be obliged to keep the property in repair and rates will be the landlord’s responsibility if the rent is below £800 The cost and time involved are dependent upon the nature of the per month, with tenant paying if the rent is above this figure. application and the timing is very dependent on the particular local authority involved.

11.4 Would there be rights for a landlord to terminate a residential lease and what steps would be needed 12.7 Are there any regulations on the protection of historic to achieve vacant possession if the circumstances monuments in your jurisdiction? If any, when and how existed for the right to be exercised? are they likely to affect the transfer of rights in real estate or development/change of use? A tenant will have peaceful enjoyment of the land subject to payment of rent and breach of covenants. In the event of non-payment of rent Buildings and monuments can be listed to varying degrees, restricting or breach of , the landlord may exercise its power of re- what can be done to them and imposing repairing obligations. Such entry and take possession of the property. restrictions run with the property, so will apply to a buyer when the property is transferred.

12 Public Law Permits and Obligations 12.8 How can e.g. a potential buyer obtain reliable information on contamination and pollution of real estate? Is there a public register of contaminated land 12.1 What are the main laws which govern zoning/ in your jurisdiction? permitting and related matters concerning the use, development and occupation of land? Please briefly describe them and include environmental laws. An environmental survey can be requisitioned prior to entering into contract. The main laws are the Planning Act (Northern Ireland) 2011 and the Planning (Use Classes) Order (Northern Ireland) 2015, along with 12.9 In what circumstances (if any) is environmental clean- EU-driven environmental legislation. up ever mandatory?

12.2 Can the state force land owners to sell land to The NI Environment Agency can force pollution to be cleaned up. it? If so please briefly describe including price/ compensation mechanism. 12.10 Please briefly outline any regulatory requirements for the assessment and management of the energy Certain public sector bodies have compulsory purchase powers, performance of buildings in your jurisdiction. with compensation based on the rateable value of the property. The energy performance regulations follow those in England and 12.3 Which bodies control land/building use and/or Wales. occupation and environmental regulation? How do buyers obtain reliable information on these matters? 13 Climate Change The local authorities control the planning system and the NI Environment Agency controls environmental regulation. Buyers 13.1 Please briefly explain the nature and extent of any obtain reliable information on such issues through the local regulatory measures for reducing carbon dioxide authority and regional property certificates, along with statutory emissions (including any mandatory emissions charge searches that the seller will order and pay for as part of the trading scheme). title pack provided pre-contract. The position follows that in England and Wales. 12.4 What main permits or licences are required for building works and/or the use of real estate? 13.2 Are there any national greenhouse gas emissions reduction targets? Planning permission and building regulation approval. In some cases, conservation area consent and listed building consent may This follows the UK, with separate regional targets. also be required.

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13.3 Are there any other regulatory measures (not already mentioned) which aim to improve the sustainability of both newly constructed and existing buildings?

Building regulations attempt to incorporate some sustainability measures where buildings are being constructed or renovated and legislative changes are due that will prevent buildings with poor energy performance ratings from being sold or let until the rating is improved. Building regulations attempt to incorporate some sustainability measures where buildings are being constructed or renovated and legislative changes are due that will prevent buildings with poor energy

performance ratings from being sold or let until the rating is improved. Northern Ireland

David Jones Luke Thompson Tughans Tughans Marlborough House Marlborough House 30 Victoria Street 30 Victoria Street Belfast BT1 3GG Belfast BT1 3GG Northern Ireland Northern Ireland

Tel: +44 28 9082 0531 Tel: +44 28 9055 3316 Fax: +44 28 9055 0096 Fax: +44 28 9055 0096 Email: [email protected] Email: [email protected] URL: www.tughans.com URL: www.tughans.com

David has experience of all aspects of commercial property in England Luke began working in Tughans in August 2013. Luke spent two and Wales and Northern Ireland, including the acquisition and disposal years training in different practice areas before qualifying into the Real of development and investment properties, leasing and property Estate department. management (acting for both landlords and tenants) across all sectors. Luke has experience in a wide range of real estate transactions. This David also works with colleagues in the corporate department on the includes the acquisition and disposal of investment property and the property aspects of business and company sales and acquisitions. leasing of retail, industrial and office space; acting for both Landlord and Tenants. David is dual qualified in England and Wales and Northern Ireland and is on the committee of the Northern Ireland Commercial Property Luke works closely with other departments within Tughans, advising Lawyers’ Association, along with being a member of the Institute of on all property aspects. Recently, Luke provided property advice Directors. for a high value business acquisition which saw a client purchase a number of wind farms from a leading independent national operator of Trained with City of London firm Nabarro Nathanson (now part of renewable energy projects. CMS) and qualified into the commercial property department, working at the firm from January 2002 until September 2007, when he moved back to Belfast to work for Tughans. He now leads the real estate team at Tughans.

Tughans was established in Belfast in 1896 and is the largest full-service commercial law firm in Northern Ireland, with a full range of clients across all major industry sectors, ranging from the largest global businesses (such as Apple), to local, family-owned operations. The real estate team is the largest in NI and has been involved in 90% of all the major real estate transactions in the jurisdiction, since the market started to recover and major deals started taking place again.

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