Real Estate newsletter — March 2013

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This month’s Real Estate newsletter from Nabarro discusses residential tenancies, explains how to avoid stopping up and explores the various types of tenant security. This issue’s tax update focuses on residential tax attack and the preservation of legal professional privilege.

By definition, an investor in commercial property should not need to worry about residential tenancies. However, mixed-use buildings are surprisingly common, particularly in towns and cities, and a predominantly commercial investment with even a small residential element can be an expensive trap for the unwary investor. The implications for a purchaser of a mixed-use building will depend  largely on the type of residential element involved.

Modern, purpose built mixed-use developments tend to comprise an element of commercial space let on rack rent leases coupled with long residential leases at a premium. In order to create a clean freehold investment, the residential element and common parts of the building are often let to a residential management company on a long lease at a peppercorn. The freehold investment can then be sold with the benefit of the residential ground rents and commercial rack rents without the need to consider the rights afforded to long residential leaseholders under the Landlord and Tenant Act 1987. If properly structured, this type of development should not cause an investor much trouble…

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