Will the EU let you rent your home?

Will the EU let you rent your home?
Posted on 01/10/2014

Those who wish to let their former homes may be denied mortgages, following implementation of a new European Mortgage Credit Directive, which must be brought into UK law by March 2016.

The new EU directive sets common standards that EU members need to meet in order to protect consumers taking out loans to buy residential property.

This follows mortgage reforms already made earlier this year, which have seen tougher affordability checks on borrowers.

Under current rules, landlords are generally viewed as business borrowers requiring less regulation, and owner-occupiers are viewed as consumers who require more protection.

As it stands, it is relatively uncomplicated for occupiers to convert their regular mortgages into landlord loans, referred to as ‘let to buy’.

‘Accidental’ impact?

The new rules may put off banks and building societies from lending to owner-occupiers turned landlords. Due to particular circumstances, such as, being relocated for work or because they can’t sell their property, mortgages for these ‘accidental’ landlords will be regulated much more tightly. The new rules may also catch buy to let mortgages where the owner or a family member occupies part of the property.

As the directive does not draw a distinction between buy-to-let lending and lending to individuals who are buying their own home, it provides member states with the option to exempt buy-to-let from the detailed requirements of the directive, and instead put in place an alternative appropriate framework for the regulation of these mortgages. This has been recognised by the Government which is currently consulting on proposals for implementation of the Directive. The results of the consultation and draft rules on the Directive are expected this autumn.

Until then…

There is concern within the industry that lenders may struggle to distinguish between ‘consumer’ landlords and ‘business’ landlords making it more difficult and complicated for a home owner to let their property, whilst burdening lenders with the increased costs of compliance with the new rules.

This post was edited by Melissa Chantrill. For more information, email blogs@gateleyuk.com.

Who is knocking at the door? HSE Construction Inspectors targeting poor standards and unsafe practices

Who is knocking at the door? HSE Construction Inspectors targeting poor standards and unsafe practices

30th September 2014

We are now one week into HSE’s annual Safer Sites targeted inspection initiative. HSE inspectors are arriving unannounced at sites across the UK where refurbishment projects or repair works are underway. The inspectors are looking to ensure that high-risk activities are being properly managed. HSE is looking to reinforce its message that poor standards and dangerous practices are unacceptable as well as reducing ill health, injury and death in the industry. Immediate enforcement action is available to the inspectors where they find poor standards and unsafe practices.

The initiative will continue until Friday 17 October with the inspectors particularly looking for:
•risks to health from exposure to dust such as silica are being controlled;
•workers are aware of where they may find asbestos, and what to do if they find it;
•other health risks, such as exposure to noise and vibration, manual handling, hazardous substances are being properly managed;
•jobs that involve working at height have been identified and properly planned to ensure that appropriate precautions, such as proper support of structures, are in place;
•equipment is correctly installed / assembled, inspected and maintained and used properly; and
•sites are well organised, to avoid trips and falls, walkways and stairs are free from obstructions and welfare facilities are adequate.

Last year’s initiative found poor standards and dangerous practices at nearly half of the building sites visited. The main issues identified included failing to protect workers during activities at height, exposure to harmful dust and inadequate welfare facilities.

This initiative should be seen as an opportunity for those running construction sites to review their practices and ensure they comply with the standards expected by HSE. If you require any guidance on your obligations under health & safety legislation we would be pleased to hear from you.

For more information please contact Anne Struckmeier on +44 (0)131 222 9839 or AStruckmeier@hbjgateley.com

Return on investment… Not always!

Return on investment… Not always!

Posted on September 30, 2014

In recent months we have experienced a big increase in the number of potential negligence claims against advisers, typically accountants or other financial advisers that acted for a client on corporate deals that concluded at the height of the market.

With the economic outlook looking increasingly bright and having had the opportunity to assess the actual performance of businesses since acquisition, many companies have been able to stop concentrating on fire fighting to reassess whether the acquisitions made at the peak of the market have achieved the promised returns. Where they have not, businesses are increasingly reviewing the purchase process. Most importantly, they are assessing the advice provided by those assisting in the valuation of the expected benefits to see whether there has been a short fall in those benefits, and whether other losses suffered can be claimed from their financial advisers.

Whilst the improving economic position may explain why businesses are now taking this opportunity to reconsider past decisions taken, there is a much more pressing reason for all businesses to do so now. The height of the market in 2008 was six years ago. In circumstances where a business is purchased on the basis of negligent advice, the law allows you six years from the date you purchased that business to issue Court proceedings. There are some circumstances in which this time limit can be extended. If you are beyond this date, it may not necessarily rule out a claim. However, it is vital that if you purchased a business at the height of the market and the deal did not return the promised results, consideration should be given immediately as to whether any claims could be brought as a result to recover losses.

For more information, click the links below, or email blogs@gateleyuk.com.

What documents do we need from you to carry out an initial assessment and what will it cost?

A (very) brief guide to succeeding in a professional negligence claim

More work does not prevent a redundancy

More work does not prevent a redundancy
Posted on 30/09/2014

Think of redundancies and the first thought that usually comes to mind is a business that is facing hard times and having to make cut backs. We would all probably agree that the term redundancy is not often associated with a growing business.

However, the fact that a business is thriving may also sometimes surprisingly lead to an employee being dismissed on grounds of redundancy. This perhaps unusual outcome was highlighted in a recent case that came before the Employment Appeals Tribunal*.

The background to the case was that a HR Co-ordinator had been appointed to provide assistance for an existing HR Manager and the CEO of the business; in practice she helped out the Finance Director too. The company attracted investors and found itself forming part of an organisation operating 17 different offices. The HR Manager now faced with the task of providing HR services in all 17 offices, decided that a new post of HR Adviser should be created. This would require a qualified HR officer with experience of providing advice. The CEO and Finance Director also found that they were faced with a lot more work demands. They needed a full time Personal Assistant to help them out. It, therefore, followed that two new roles were created.

The increased work load and the creation of these new posts led to the role of HR Co-ordinator disappearing. As there would no longer be a need for an HR Co-ordinator it was decided to make the post redundant.

In dismissing the employee’s subsequent unfair dismissal claim, it was confirmed in the judgement that the statutory definition of redundancy was not concerned with just showing a reduced head count or simply establishing that there had been a reduction in work. The question to answer was whether there was a reduction in the requirement for employees to do work of a particular kind? The two jobs created in this case may have been similar to that previously carried out by the HR Co-ordinator, but they were sufficiently different in respect of the further qualifications and experience needed to allow it to be decided that there was a redundancy situation.

This post was edited by Christopher Davies. For more information, email blogs@gateleyuk.com.

*Hakki v Instintif Partners Limited (Formerly College Hill Ltd) 12 September EAT

High Court accuses MoJ of “illegality”

High Court accuses MoJ of “illegality”
26 September 2014

The Ministry of Justice has enraged the profession after claiming that illegal behaviour on its part was simply a technicality.

The MoJ is trying to cut legal aid spending by £220m a year. The profession has reacted angrily, with strikes and judicial challenges. The most recent was before Mr Justice Burnett, who held last week that the MoJ had refused to allow parties to the consultation process to comment on reports prepared by KPMG and Otterburn. He found that this was “so unfair as to amount to illegality”. Shadow Justice Secretary Sadiq Khan said that he knew the government was incompetent but that this “takes the biscuit”.

But Chris Grayling checked his bovvered bag and found it empty. The MoJ’s press office said that another challenge to the cuts had already failed, and tweeted that this most recent judgment “raises some technical issues on consultation process which we’re considering”. Cue fury from pretty much everyone, with a plethora of comments pointing out that “illegal” isn’t a “technical issue”.

Bill Waddington, Chairman of the Criminal Law Solicitors’ Association, said that this was a “damning indictment” of Grayling.

Keeping it confidential

Keeping it confidential
Posted on 29/09/2014

A recent case demonstrates some practical issues relating to confidentiality provisions, both from the perspective of those bound by their terms and also those attempting to rely on the benefit of the confidentiality obligations.

The facts

The case[1] concerned a company which had been set up by three doctors to carry out clinical drug trials. The doctors held the majority of the shares and an outside investor took a minority stake. The shareholders’ agreement between the parties contained a typical confidentiality provision under which (amongst other things) all commercially sensitive information, relating to the affairs of the company, had to be treated as strictly confidential. The provision went on to permit a party to disclose confidential information to its professional advisers, provided the adviser complied with the confidentiality provision.

Relations between the parties deteriorated and attempts to reach an agreement for the acquisition of the investor’s shares by the doctors failed. The investor then engaged a corporate finance adviser to market its shares to third parties. As is usual in any such process, the adviser disclosed information about the company to prospective buyers which included information in a ‘teaser’, a modified business plan and various statements about the company’s business and prospects.

The claim

The company subsequently brought a claim against the investor for breach of the confidentiality provision. The court held that the investor was permitted to disclose confidential information to the corporate finance adviser: the two directors of the adviser were an accountant and a solicitor who were clearly professional advisers within the meaning of the permitted exception in the confidentiality provision. However, the adviser (on behalf of the investor) then disclosed confidential information to prospective buyers. This was a breach of the confidentiality provision and therefore the investor was liable to the company for any reasonably foreseeable loss suffered as a result of that breach.

Potential losses

There were two main ways in which loss could have been caused to the company as a result of the breach:

firstly, the information could have cast doubt on the financial stability of the company, its ability to continue trading or the commitment of the doctors. If clients or prospective clients were concerned about rumours of financial or managerial instability, they would raise this with the company and therefore it should be relatively simple for the company to provide direct evidence that any decision not to use the company’s services had been influenced by the disclosed information. In fact, the company provided no such evidence; and
secondly, the information could have given the company’s competitors an advantage, enabling them to offer better terms and win business which would otherwise have gone to the company. The court accepted that it would be very difficult to obtain direct evidence of this type of loss but agreed that causation could be inferred from circumstantial evidence. Again, however, there was insufficient evidence to justify doing so in this case. Whilst there had been a reduction in the company’s business, this could be attributed to other matters such as price increases, loss of key staff and general market conditions.
The court therefore held that the company had failed to establish that it had suffered either type of loss as a result of the investor’s breach of the confidentiality provision and accordingly awarded nominal damages of only £1.

Difficulties in enforcing confidentiality provisions

Whilst confidentiality provisions are important and can offer valuable protection, the case demonstrates the difficulties that a party can face in practice when attempting to rely on them. Firstly, they must prove a breach has occurred – that confidential information (as defined) has been disclosed to someone it shouldn’t have been – and then they must prove that a loss has been suffered as a result of that breach.

Problems for potential sellers

The case is also a salutary warning to shareholders subject to a confidentiality provision who may wish to sell their shares. Such a provision would almost certainly prevent them from disclosing information about the company to prospective buyers, making it almost impossible to sell those shares without the board agreeing to a marketing process. The court held that this was not contrary to business common sense particularly where, in this case, any unreasonable refusal to consent to such a process by the board would have triggered deadlock provisions in the shareholders’ agreement, leading to the winding up of the company. The board would therefore have had a clear incentive to act reasonably when considering a request to commence a sale process.

For more information, email blogs@gateleyuk.com.

[1] Richmond Pharmacology Ltd v Chester Overseas Ltd & ors [2014] EWHC 2692 (Ch)