Following the EU referendum result, we have seen many questions raised with our solicitors as everyone tries to get a handle on what this means for them. Please see below. Our teams address and answer the most frequently asked post-Brexit questions which we have seen. The views expressed on this page do not constitute legal advice. If you have queries relating to your particular circumstances, please do not hesitate to speak with your usual contact at Hunters.
Hunters’ Art Law Department is a team of leading Art lawyers based in central London. Lawyers in the art law team have specialist experience in the area of art and antiquities, where they advise on title disputes, on questions of mis-attribution and authenticity of works of art, about illegally excavated and/or exported goods, and in relation to treasure. The team specialises in litigation relating to cultural and heritage property, advising and representing dealers, collectors and various private and public institutions in a variety of cultural property related disputes.
Q How is Brexit affecting the art market?
A There are no immediate changes in the law while the UK still remains a member of the European Union. However, market sentiment appears to have been affected and there is anecdotal evidence of lots having been withdrawn from auction because of the uncertainty created by Brexit. Foreign buyers were able to pick up a few bargains in London in the immediate aftermath of Brexit as Sterling lost in value against the US Dollar and other reserve currencies. By contrast, foreign galleries will have to increase their prices significantly when they exhibit at the autumn fairs in London, which will likely suppress demand from local buyers. What will happen in the long-term is largely still speculation. The deteriorating economic outlook for the UK is likely to continue to dampen demand in an already stagnant market. Whether international buyers will continue to be attracted to the UK as an art market hub will to some extend depend on future customs and tax arrangements including, for example, the VAT treatment of art works for the purpose of temporary import.
Q Hurray, no more ARR?
A Well, it is true to say that many dealers and galleries hate Artist’s Resale Right with a vengeance and voted for Brexit for this reason alone – but artists and their families may disagree with them. ARR has been incorporated into national UK law and that law will prima facie continue to apply, even after the UK ceases to a member of the European Union, unless and until amended or repealed. It is well possible that the relevant regulations will eventually be repealed in due course in order to redress the perceived imbalance between the London and New York art market but we don’t know yet.
Q London will always be a centre for the arts and are people not just scaremongering about the consequences of Brexit?
A Creative industries need creative people (whether music, film, visual arts or computer games) and if the free movement of people to the UK will be limited following a Brexit, foreign artists may well decide to take up residence elsewhere and London may well be a less colourful place in future. Likewise, European funding for the arts will fall away. There has been much talk about that funding simply being replaced by national funding but will the UK be able to afford funding the arts if there is an economic downturn and tax take decreases? Government funding for the arts has already seen dramatic budget cuts in the last few years.
Q If I am a foreign art collector resident in London, should I be worried about my personal tax position?
A Matters such as income and capital gains tax are regulated by national UK tax law and bilateral double taxation treaties between individual countries and they will not directly be affected by Brexit. However, in future there may well be financial implications and changes to customs procedures when art is moved across borders, in particular, between EU member states and the UK.
Hunters’ Business Department is a team of leading corporate lawyers based in central London. The team develops close relationships with our clients and have acted for many as their on-going principal advisers through the generations. The lawyers in the business services team bring legal expertise and commercial perspective to the most complex transaction or project. Where appropriate, the team works closely with our other teams to provide a comprehensive service. The team is available at short notice to meet any sudden need, and is committed to giving speedy and practical business advice.
Q What will the impact of Brexit be on my business as a whole?
A No one knows what the outcome of the Brexit negotiations will be. The one certainty is that the UK remains a full member of the EU for the time being and no changes to the legal system will occur unless and until the UK ceases to be a member of the EU. Once notice has been given to the EU under Article 50 of the Lisbon Treaty, there could be two years of uncertainty during which inward investment will reduce, and domestic investment plans will be put on hold and some investors will become risk-averse. On the other hand, a cheaper pound helps our exports and might offset some of the negative effects of leaving. Overall, we should not panic, but consider rationally the likely impacts of the likely changes. We discuss below some of the specific potential impacts that a withdrawal from the EU will have on our commercial clients.
Q How are my contracts affected?
A Contracts with an international dimension should be reviewed for any effect of leaving the EU. Could such an event be a material adverse change or other trigger for termination by either party? Will a supplier be able to pass on any increase in tariffs imposed between the EU and the UK? If your business is denominated in a foreign currency, have you hedged your exposures sufficiently? If not, how will such things affect your cash flow and profitability? Will you be able to hire the seasonal labour you need to fulfil your contracts? Whatever the outcome of the political debate, businesses need to hope for the best but plan for the worst.
Q Which law governs my contract?
A If you contract with someone in another country, the contract should always specify the law by which it is governed. A contract entered into after 17th December 2009 would be governed by the Rome I Regulation. Where it applies, a court must recognise the parties’ choice of law, but this is subject to mandatory rules applicable in the relevant country. For example, the Unfair Contract Terms Act 1977 (itself based on EU law) contains mandatory protections for consumers and businesses contracting on standard terms; and the Financial Services and Markets Act 2000 contains overriding provisions which may apply notwithstanding a choice of a different law in a country. English employment law also contains mandatory overriding provisions to protect employees which cannot be derogated from by agreement. Where no choice of law has been made in the contract, the Rome I Regulation provides a mechanism for determining which law should apply in order to create greater certainty. The Rome II Regulation allows the parties to choose the law which is to govern their non-contractual obligations. Whether these rules will continue to apply in the future if the UK leaves the EU remains to be seen.
Q What will the impact be on the Financial Services Industry?
A This sector could be very significantly affected because much of the regulatory framework is now based on EU law. Banks and firms providing financial services based in one member state can be “passported” to work in other member states. If they were to lose the passport system, their ability to operate in Europe would be materially curtailed. Equally, the right of a foreign bank to operate in England would have to be separately regulated.
Q Can I export goods to the EU after leaving?
A This is a key question. Of course exports will still be possible but, depending on the terms of the exit deal between the UK and the EU, they may become subject to tariffs. The UK would like to remain in the single market which allows goods and services to be sold without tariff barriers within member states. The EU is likely to link any right to remain with the other fundamental principle of free movement of labour.
Q How will my multi-national workforce be affected?
A If you employ people from outside the EU, you will already have had to apply for a work permit for them and they will not be affected by leaving the EU. The position of EU citizens working in the UK (and UK citizens working in Europe) is currently the subject of intense political debate. One would hope that those people already living in another member state will be allowed to remain but the Brexiteers seem determined to impose restrictions on immigration from the EU.
Hunters’ Charities Department provide a comprehensive service covering all legal aspects for charities including their creation and regulation, business and property affairs, tax, fund raising, mergers and dissolution. Hunters has strong links with both the Charity Commission and the Privy Council, and also act for numerous clubs, societies, institutions and not for profit organisations.
Q What are the legal implications for charities?
A The legal implications for charities and not-for-profit organisations will be similar to businesses based in the UK. European law has been incorporated into and influenced many areas of life in the UK and law since the European Communities Act 1972 was enacted.
Any changes relating to the freedom of movement (assuming we also leave the EEA) will also be important. This will almost certainly have an impact on charities (including universities) that employ staff from other European countries and send their staff to Europe. This could also have an impact on the treatment of refugees and economic migrants on entering the UK, which will naturally have implications for charities working with these groups.
Q How will charities be affected by tax post Brexit?
A When leaving the EU, the Government will have the scope to set its own VAT regime which could benefit charities by replacing exempt supplies under the various social exemptions, with zero-rated or super-reduced rated supplies, in effect releasing VAT recovery on costs. To do this the Government would have to make changes to the law which could leave the Treasury out of pocket, which is therefore unlikely if the UK economy is placed in recession. Any such changes are likely to be slow to materialise.
European law has (having been incorporated into the Finance Act 2010) allowed British taxpayers to make donations to European charities while at the same time being able to claim any available UK tax relief. European charities have also been able to benefit from UK tax reliefs including Gift Aid provided they are registered with HMRC, a process easier said than done. Similarly, UK charities have to-date been able to benefit from donation made by European donors, in accordance with the relief available for charitable giving in the donor’s own country. Given that the result of the referendum was to leave the EU, the UK’s charities will at some point become ineligible to receive tax-relief donations directly from most EU-resident donors.
Q How will the political implications of Brexit affect charities?
A Unfortunately, charities (and any new policies on charity reform that are not already making their way through Parliament) are likely to be towards the bottom of the list of priorities for Ministers and Civil Servants for some time to come. Therefore it will be even more important for your charity to consider making representations and to carefully examine policy initiatives in the next budget as much may change, for example, a possible reduction in rate relief or gift aid.
Constitutionally, charities registered in England and Wales that also operate in Scotland will need to monitor developments very carefully. Scotland (along with Northern Ireland) voted overwhelmingly to remain in the EU. The Scottish Executive are considering a second referendum to leave the UK and are in the process of discussions with Brussels. A new referendum to leave the UK may have a very different outcome. There is also speculation as to whether the Scottish government will also seek to remain in the EU itself.
- Charities/voluntary organisations should review their fundraising strategy as well as their risk, financial management processes or any proposed major changes to the charity;
- If you haven’t already done so, if your charity depends upon income from an investment or property portfolio, you and your trustees ought to review your investment strategy (and any planned investments) with advisers on a more frequent basis to position yourselves as best you can to ride out the current turmoil;
- Review all sources of income and consider the impact that any loss of funding from the EU or those which currently come from the EU through a third party donor. If you are concerned about the loss of funding to your charity, there is still time to start researching potential new funders and funding streams and whether this would be possible through the acquisition of a European entity.
- Build strategies to cope with increased demand on your services and possible reform within the landscape in which your charity operates, for example, free movement of people, immigration and asylum. At the same time, review the strategic direction and governance of your charity. Is this an opportunity to consider greater collaboration or a possible merger with other charities in your sector?
- Review existing contracts in light of Brexit negotiations when they commence – how will these contracts be affected when the UK leaves the EU? Are you able to protect your position?
- What will the implications of Brexit be to any contracts that you may negotiate or seek to enter into in the coming months? For example, what will the likely impact be on any legislation that currently applies to these contracts? The applicable governing law or appropriate jurisdiction?
- What will any future restriction on the free movement of workers have on your employees or volunteers? If your charity does employ EU nationals or UK nationals working in the EU, you may need to review the implications of any changes to their right to free movement across the EU.
- Strengthen closer working relationships with Civil Service and/or local government Officials to voice any concerns and highlight any issues affecting your charity or the objects of the same;
- Keep an eye on the discussions between the Scottish Executive and Government. If there is to be a second Scottish referendum for independence from the UK (and possible continued membership of the EU), be prepared to prepare for and highlight the effect that this may have on your charity;
- Look out for any briefings on and be ready and prepared for the forthcoming Autumn Statement and budget by the Chancellor of the Exchequer;
- It is important that your charity continues to observe and comply with all of its existing legal obligations. Until any withdrawal agreement between the Government and EU comes into force, the UK together with all UK charities continue to be bound by all EU laws.
At present, London is one of the leading centres for international litigation and arbitration due to the following:
- the English language;
- Our rule of law which is considered to be comparatively certain, stable and predictable;
- The good reputation of our legal profession and judiciary; and
- Our excellent international transport links.
None of this has changed following Brexit. However, potential barriers to entry to EU markets and the freedom of movement for people may make our jurisdiction less popular for international litigation in the future.
At present, we are in a state of flux. The British Government is yet to invoke the Article 50 procedure that will trigger a two-year time window for the UK and EU to negotiate our exit. The reality is that, for the time being at least, Brexit will have no immediate effect on a party’s ongoing litigation matters and this will remain the case until the UK has formally left the EU. Nobody knows for certain what this will mean for the country but we have a fair idea how Brexit will affect dispute resolution in the UK and, in particular, cross-border disputes involving other member states of the EU and EEA.
In due course however, the following issues will need be addressed: –
Q Service of proceedings in Europe?
A Today, a great many high court disputes involve an international element, be that where a party is located or where performance of a contract is to take place. Although, there are separate rules and procedures for dealing with service outside of the EU, the rules and procedures for jurisdiction and service within the EU (and when the English Courts can hear such proceedings) are enshrined in the Recast Brussels Regulation and the 2001 Brussels Regulation (together the “Brussels Regulations“) both of which are to be considered in conjunction with the EU Service Regulations (Regulation (EC) 1393/2007). The practical effect of these European procedural rules is the streamlining of the procedure for commencing proceedings in civil and commercial matters within the EU by the creation of a unified procedure without the need to seek the permission of the Court where the claim is first issued.
Although not an immediate issue, were the UK to formally exit Europe without agreeing to still be bound by the Regulations, the Regulations would no longer apply in relation to the UK, resulting in the process of service outside of the jurisdiction becoming a more costly and time consuming exercise with the permission of the English courts being required on each and every occasion. Further, were the UK government forced to negotiate new service agreements with all of its EU neighbours this could, as a worst case scenario, result in us having different service rules for different countries thereby making these procedures even more complex and therefore more time consuming and costly.
Given that the courts generally have a zero tolerance policy regarding defaults in complying with the rules for service, claims can collapse before they have begun and therefore it is vitally important that such rules are clear and easy to follow. Accordingly, one hopes that our government will take a pragmatic approach to the Regulations failing which parties may need to specifically address this issue in their contracts (see below).
Q Enforcement of judgements in Europe?
A As with the service of proceedings, the Regulations also govern the enforcement of a judgment originating from one member state in another, which makes the procedure for enforcement within the EU a simple process. Again, if the Regulations cease to apply to the UK upon our formal exit from Europe, this would leave the position of enforceability of judgements by our courts in other EU member states uncertain.
This could lead to a drop in litigation in England and Wales if litigants are then confronted with lengthy and expensive satellite litigation against opponents based in other EU member states regarding the enforcement of English judgments. One would expect the Government to take action to protect the interests of litigants in the English courts by championing the continued application of the Regulations in relation to the UK, failing which parties may need to specifically address this issue in their contracts (see below).
Q What about appealing a judgement?
A At present, the European Court of Justice (otherwise known as the ECJ) is the highest court in the EU on matters of European law. As such, it is tasked with interpreting EU law and ensuring its equal application across all EU member states. However, the ECJ has no remit on national law and it is therefore not possible to appeal a decision of a national court to the ECJ unless the national court itself refers an issue of EU law to the ECJ.
Therefore, although the ECJ will cease this function upon our formal exit from Europe, the reality is that this change will have virtually no impact on parties involved in commercial disputes in the English courts who will still be able to appeal a high court decision in the normal manner, firstly to the Court of Appeal and then, if necessary, to the Supreme Court.
Q What should I be doing now to protect my position?
A Given the comments above, the inevitable question is whether parties should be looking to amend their contracts on the issues of governing law and jurisdiction?
The Rome I and Rome II Regulations (the “Rome Regulations“) provide a uniform set of rules that the courts of each Member State apply when determining which law applies to a dispute. These require the courts to respect party autonomy on the choice of law meaning that they will generally uphold English governing law clauses subject to a few limited exceptions. Although the Rome Regulations will cease to be applied by the English courts upon our formal exit from Europe, the English courts have always historically respected party autonomy over the choice of law governing commercial contracts and one cannot see any reason for this changing. Further, the Rome Regulations will continue to be applied by the rest of the EU on the issue of choice of law irrespective of our status within the EU meaning that nothing in reality will change.
That does not mean however that parties who continue to choose English law to govern their commercial contracts should continue to contract in precisely the same form post Brexit. Commercial contracts can refer to EU legislation on issues of service or enforcement should the parties wish to and such additions might well be worth considering once the formal exist process commences and we know what EU law our government is committed to remain bound by.
In relation to jurisdiction clauses, the Recast Brussels Regulation EU 1215/2012 (the “Recast Regulation“) makes it clear that where the parties have contractually agreed a jurisdiction of a particular Member State court, that Member state will have jurisdiction over the proceedings and the courts of other Member States will respect the contractual arrangement and decline to hear the same proceedings. Upon our formal exit from Europe it is entirely plausible that the UK and EU will agree that the Recast Regulation should continue to apply. However, even if one were to assume a degree of cooperation between the UK and EU, such agreement will not be quick and the reality of the situation is that there is growing competition within the EU to attract litigation due to the increase revenue streams this entails.
The reality of the situation however is that most if not all Member States will continue to respect English jurisdiction clauses, even where there is no reciprocal arrangement in place as the English courts may otherwise revert to the practice of granting anti-suit injunctions preventing other Member States from exercising jurisdiction contrary to an exclusive jurisdiction clause in favour of the English courts. Accordingly the only real changes that a party may wish to consider making to their contract on this issue would be (a) to ensure that the English courts had exclusive jurisdiction or (b) consider opting for arbitration as arbitral awards are enforced through the New York Convention, which falls outside of the EU framework and would therefore not be affected by Brexit.
The prospects of a UK government revoking each and every EU law upon our formal exit from Europe is unfeasible given the strong trading links between the UK and Europe and the real need and desire for there to be some measure of consistency and reciprocity between our respective legal systems.
Although EU law has had a dramatic effect on certain aspects of English law, such as employment, free movement of workers, consumers and commercial agency, English Law remains one of the most popular choices of law for parties entering into cross-border commercial contracts and is seen as the market-standard choice for most commercial parties.
Accordingly, where parties envisage resolving their disputes in the English courts, English Law and the exclusive jurisdiction of the English courts will remain the sensible choice.
Hunters’ Employment Department is a team of leading employment lawyers based in central London. Hunters’ employment team gives detached, focused and practical advice. The team cares about their clients, strong or weak, employers or employees, and provide objectivity and practicality for them, whilst being sensitive to their needs. Where a dispute cannot be resolved amicably by the parties themselves, the employment team will represent their client in any dispute resolution forum – mediation, arbitration, the Employment Tribunals or the Courts.
Q Has the referendum changed my contract of employment?
A No. The referendum did not change the law and your contract will be unaffected. However, a lot of employment rights are based on principles of European law and we will have to watch whether the government will seek to modify or repeal these rights. They include discrimination rights, collective redundancy consultation obligations, the “TUPE” rights when a business is transferred, rights to family leave, working time.
Q I am about to accept a job in the UK. How can I protect my position?
A If you are one of the thousands of EU citizens who are coming to work in the UK, the terms of your contract of employment are likely to protect you against any detrimental legislative changes. Thus, you should consider requesting that issues that are important to you or your family are specifically addressed in your contract. For example, you may need to agree specifically your working hours, the number of paid holidays, the requirement for the employer to obtain a work permit for you or to transfer you to another country of your choice, relocation expenses, and a special exit payment if your employment has to be terminated because you are required to leave the UK.
Q As an EU national, can I still work anywhere in the EU?
A For the moment, yes. The UK is still a full member of the EU and the right of free movement of EU citizens still applies. Thus, all EU citizens (including the British) can work anywhere in the EU. Whether this changes will depend on what deal the UK government can negotiate with the EU. At present, powerful EU countries such as Germany and France are insisting on the principle of free movement of workers in return for access to the single market. We would hope that a sensible compromise will be reached whereby, as a minimum, foreign nationals living in the UK, and UK citizens living in the EU, will be allowed to remain where they are. They may be able to acquire local rights of citizenship.
Q As a farmer, can I continue to employ seasonal migrant labour from the EU?
Q Will my personal data be secure following Brexit?
A The Data Protection Act 1998 implements the Data Protection Directive (1995) and personal data is currently protected against transfer to a country outside the EU unless there are adequate protections. It would be astonishing if the data protection rules were repealed without equivalent safe harbour arrangements (as with the USA) being put in place.
Hunters’ Family Department is a team of leading family lawyers based in central London. The team provides specialist legal advice to clients all over the world, with expertise in many different facets of family law. More specifically, Hunters’ lawyers have particular experience in handling divorce cases, both the financial issues and child custody disputes that may arise. The lawyers in the Family Department guide and provide advice to clients throughout every stage of their legal engagement, whether it be regarding divorce, pre-nuptial agreements, adoption, etc.
Q My job is relocating to an EU country. I have children living in England but am no longer with their father. Will I be able to take the children with me as I relocate?
A You will need his permission or a court order. The law is based on what is best for the children. Good planning is key. Investigate possible homes, schools, child care. It is particularly important to plan how they will see their father and he will be part of their lives.
Q I am getting married next year, and we both want a prenup. We are both nationals of other countries. Has anything changed if the UK comes out of the European Union?
A Yes, there are a few of changes you should incorporate into your prenup. They are all related to what happens if your marriage breaks down, and there is a dispute over the prenup’s provisions. You want to control the timing and the law to resolve the dispute.
- Both agree to private arbitration, rather than to go to court. In some countries it can take years to get a court ruling on such dispute. This also applies to choice of jurisdiction (ie where to resolve the dispute)
- Both agree which country’s laws apply. In parts of the EU, the law on prenups and on division of assets is very different to ours. Wherever you are when you break up, you want to decide now which country’s law is used. In some countries you can ask a court to apply foreign law.
Q I want to divorce and to use the English courts, as I have heard they are more generous to wives. Is it just a case of getting the divorce started here before it is started against me somewhere else in the EU?
A Right now, you are right. But for any country outside the EU, if there is a challenge, you must be able to establish a real connection with England. This is called “forum shopping” and a challenge can be made by your spouse if you don’t really have a connection here, and your spouse is entitled under European family law to use a different EU court.
Q We are getting divorced and have enough money for a “clean break”, with no more claims at all. We have decided to split our capital in a way that means not having to share income. But with interest rates dropping, how do I work out how much extra should be paid on top of the equal share of capital?
A In times of fluctuation of interest rates, whilst there are standard tables lawyers use, you will need an actuarial report tailored to your personal situations. The same will apply for pension sharing.
Hunters’ Intellectual Property Department is a team of leading IP lawyers based in central London. The team offers a wide range of transactional services to help companies foster innovation through the creation, protection, commercialisation and management of their intellectual property and related rights. The team can also offer a world-wide trade mark and design right filing and watch service, as well as a domain name registration service in conjunction with our network of trusted trade mark attorneys and domain name registrars.
Q How does Brexit affect my Intellectual Property Rights?
A IP protection is based on a mixture of national UK, European and international treaty law. For now, the United Kingdom remains a member of the European Union and there are no immediate changes to the protection of intellectual property rights until the United Kingdom ceases to be a member of the European Union, even after the so-called Article 50 procedure has been invoked, which triggers a two year time window during which the UK and the European Union will negotiate exit terms.
Patents are governed by the European Patent Convention, which is not an EU treaty and will not be directly affected by the UK leaving the European Union. However, the UK will probably no longer be able to participate in the Unitary Patent and Unitary Patent Court system, which applies only to EU member states.
National trade mark law has been harmonised across the European Union based on EU directives. These directives have been implemented in the UK through national legislation which will be unaffected by the UK leaving the European Union unless and until it is amended or repealed. This is unlikely to happen in the short term because the law works well and IP rights will not be near the top of what will no doubt be a busy post-Brexit legislative agenda. What is more likely to happen is that trade mark law in the UK and the member states of the European Union will start to diverge over time. EU Trade Marks will be directly affected by the UK leaving the European Union. Once the UK leaves the European Union, new EU Trade Mark applications will no longer extend to the UK and a separate application for a national UK trade mark will then become necessary. The way in which customs authorities will deal with counterfeits based on EU customs border seizure procedures is also likely to change. The cost and administrative burden of managing a trade mark portfolio is therefore bound to increase.
Q What should I be doing now as a brand owner to protect my position?
A It may be prudent for brand owners already now to file new trade mark applications both for EU trade mark and UK national trade mark protection to avoid possible gaps in future brand protection coverage. European design rights will likewise be affected. Clients should undertake a review of distribution and licensing agreements as soon as possible to ascertain how these arrangements will be affected by Brexit.
Q At least I can always still bring a claim based on the English common law tort of passing-off?
A Yes, that is correct. However, the enforcement of English judgments in other EU member states will be affected by Brexit once the Brussels Regulation ‘Recast’ will cease to apply in relation to the United Kingdom. It is unclear for now what rules will apply to the enforcement of English judgments in member states of the European Union going forward.
Q And what about copyright law?
A The harmonisation of copyright law has traditionally been driven by international treaties rather than by European Community law. However, EU law has been gaining in importance in a number of areas related to copyright, for example, though the InfoSoc Directive and in the area of collective rights management. The biggest impact though of Brexit on UK copyright law will probably be that it will miss out on the future Digital Single Market.
Hunters’ Private Client Department is a team of leading private client lawyers based in central London. Many of the families looked after by the private client team have been private clients of Hunters for a number of generations: the team has provided a wide range of services to meet the needs of our private clients since 1715 and we are very proud of our reputation in this field. The team assists clients in tax, trust and probate matters, dispute resolution, landed estates, heritage assets, family and residential property.
Q Should I be doing anything with my investments?
A This is not strictly a legal question, and you must take specialist investment advice before taking any action. The weak Sterling means some asset classes have risen in value but others have suffered. In some cases the current relatively low capital gains tax rate combined with reductions in value in the short term may present an opportunity for succession planning. If you want and can afford to make gifts to the next generation, but were previously put off by the capital gains tax liability that would be triggered, this could possibly be a good time to reassess.
Similarly, there may be an opportunity to wind up some trusts where previously the capital gains tax charge would have been prohibitive. Trustees should continue to review trust investments and other arrangements on a regular basis.
Q What is the impact on my overseas property?
A There is no immediate legal impact – no laws have actually changed yet. However, if the UK proceeds to leave the EU, the UK’s status under the EU Succession Regulation will be clarified as a ‘third state’ and your Wills and succession plan should be reviewed in light of this.
Q Should I be putting any succession planning on hold for the time being?
A Perhaps, but not necessarily. Firstly, English succession law is not generally affected by EU law (with the notable exception of the impact of the EU Succession Regulation, the impact of which has always been uncertain in relation to the UK). Secondly, with capital gains tax rates relatively low and inherent gains in some assets reducing, there could be opportunities for intergenerational gifts. Thirdly, there may be some merit to taking action now if you want to rely on current tax rules, given the uncertainty of what the Autumn Statement or a Budget following an early General Election may bring.
Q How will my farming business be affected?
A With so many landed estate clients we are very much alive to the issues surrounding farming. Right now, of course, nothing has changed legally and there is no point speculating until the future becomes clearer. If you wish to take advantage of the current tax laws in terms of succession planning, it may be prudent to take action before the Autumn Statement/next Budget. On these and other matters, including subsidies, we will be monitoring developments closely and are always here to answer any questions or concerns you or your agents may have.
Q Is my ability to reside in/move to the UK affected?
A Nothing has changed legally yet. We do not advise on immigration law, but have been advised by experts in the field that it may be prudent to make applications for permanent residence and/or citizenship if you are eligible. From a tax perspective, the laws on residence and domicile are unchanged and we would be happy to advise on these matters, whether you are considering a move to or from the UK.
Hunters’ Residential Property department is a leading team of property lawyers based in central London. The team handles all legal matters relating to the sale and purchase of freehold and leasehold property in England and Wales, and are well accustomed to liaison with lawyers in Scotland in relation to land transactions. The residential property team also advise on the myriad legal issues that arise out of the ownership or management of residential property.
Q I have exchanged a Contract to Sell / Buy a residential property. Has the Brexit vote result changed the terms of my Contract?
Q How do I know which commentary to read and rely upon?
A Do treat all commentary carefully. For example, selling agents have good reason to talk up the market; whereas buying agents have every reason to say that good property, correctly priced, is very scarce. Reliable data can be obtained from HM Land Registry which (broadly) records all of the transactions that have actually completed; and the prices that were actually paid.
For your interest, some selected Land Registry data states that:
The average price of a detached house in London in July 2015 was £787,783; and in April 2016 (latest available date) was £854,209
The average price of flat / maisonette in London in July 2015 was £385,416; and in April 2016 (latest available date) was £413,963
The volume of transactions in London (all properties) in July 2015 was 10,076; but in February 2016 (latest figure) was 6,926.
Q Are property values going to collapse?
A The majority of commentators think that residential property asking prices will decline as a result of the Brexit vote. However, that majority view seems to be based on the “uncertainty” principle rather than on any inherent down-valuation of residential property as a result of the vote. For those sellers who have a need or desire to sell this year, it is important to consider or revisit your agents’ advice on the price that you are asking buyers to pay.
Some buyers have withdrawn from buying a property in the last 10 days, because they feel that the same amount of money will enable them to buy something larger in a few weeks’ / months’ time. These buyers tend to be from Europe or the Rest of the World – and expect to benefit from any drop in the value of sterling against the Euro / RoW currency.
Q Are property values going to rise? If so, when?
A It is very hard to find a commentator who thinks asking prices will rise as a result of the Brexit vote outcome. But feel free to ask a selling agent or a buying agent (or other investment advisor) that question!
Q Is the volume of residential property transactions going to decline?
A The majority view seems to be “yes”. Again this is based on the “uncertainty” angle. At the moment the political and economic future of England & Wales is uncertain; and uncertainty tends to make people behave cautiously. Which tends to mean that many property transactions will be “put on hold” until the situations become clearer.
It is worth remembering that the events of 2008 did not lead to the anticipated collapse in property values (in contrast they kept rising); but the volume of transactions certainly declined after 2008. Borrowing money became harder; Lending money became harder. Volumes were starting to pick up. The Brexit vote might have a similar effect to the 2008 events: uncertainty, caution, decline in transaction volumes.
Q Is a decline in property values an all-round “bad thing”? Are there any opportunities?
A Presumably the lettings market (particularly at Investor level) will enjoy a surge in demand. Investors holding cash deposits (earning zilch in bank interest) may invest in property where they can achieve high yields instead.
If you own a flat with a short lease (and if you think the valuation of your property has just declined because, say, European or RoW buyers are shying away from your locale since the Brexit vote) then now might be the time to obtain a valuation for a lease extension. The main legal element of that process is triggered by the service of a Notice of Claim. The legal process can take months or years thereafter; but the valuation date will remain as the date when you served your Notice of Claim. And the current open market value of your leasehold property is a critical element of that valuation.
Q Some months ago I exchanged a Contract to buy a property “off plan”. I think the value will / has collapse(d). Can I walk away?
A The answer will lie in the Contract – but it is very rare to find a “Brexit Clause” in a residential context; so the answer is very likely to be No. (Brexit clauses are marginally less rare in Commercial Property contracts.) However, if you are about to exchange a contract to buy a residential property “off plan” now is the right time to contemplate the future political and economic uncertainty very carefully and ask yourself what our property market (and property values) will look like in a few years’ time … when that property has been built.
This information is based on the law in force as at 26 July 2016. Although we endeavour to ensure that the content is accurate and up to date as at that date, it is designed to provide general guidance only and is not intended to be comprehensive or to constitute professional advice. Specific advice should always be sought, and you should only rely on advice which is given, by reference to particular facts and circumstances.
If you have any further questions, please do not hesitate to contact our Solicitors, who will be able to assist you further.