Irish Commercial Property – Recent Legal Developments

SIMON HANNIGAN20th June 2013

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CONTENTS

•Modernisation of Irish Property Law

• Compulsory First Registration (S.I. 516/2010)• Property Services (Regulation) Act 2011• Multi-Unit Developments Act 2011

•Emerging Themes In Legal Practice

• Loan Portfolio Sales• Commercial Lease Negotiations

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COMPULSORY FIRST REGISTRATION

• Legal requirement – extended nationwide from 1 June 2011• Obligation to register unregistered title in the Land Registry• Application - within 6 months of acquisition

• Why it works?• Digital mapping• E-conveyancing – folio is public record• State guarantee / conclusive evidence of title• Transparency

• Land Registry• Investigates title• Reviews application map• Updated searches against property and purchaser• Title acquired – only when registration completes

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PROPERTY SERVICES (REGULATION) ACT 2011

• Control of property service providers in Ireland

• Purpose – to control and supervise the providers of property services i.e. auctioneers, estate agents, letting agents and property managers.

• Established the Property Services Regulatory Authority.

• Obligation under Act on all persons/entities “established” in Ireland involved in the provision of property services to obtain a licence.

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PROPERTY SERVICES (REGULATION) ACT 2011 continued…

• Residential Property Sales Register

• Imposes duty to maintain and publish details of residential property sale prices.

• Property sale prices now available on internet for all interested parties to view free of charge.

• Commercial Lease Database

• Obligation to maintain comprehensive database relating to all commercial property leases.

• Onus on tenant under Act to ensure information regarding address, date of lease, term and rent payable is recorded in database.

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• Aim – to address and regulate ownership and management of common areas in residential developments.

• Applies to multi-unit developments (“MUD”) of at least 5 residential units containing shared amenities, facilities and services.

• Each MUD to have an owners’ management company (“OMC”). The OMC is controlled by the home buyers in the developments. The interest in the common areas of the MUD must be transferred to the OMC.

• Establishment of Sinking Fund required which may be applied towards refurbishment, improvement or maintenance of the common areas.

• NAMA, receivers and developers prevented from selling off apartments unless control of the common areas in the developments are handed over to the OMC.

MULTI–UNIT DEVELOPMENTS ACT 2011

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LOAN PORTFOLIO SALES

• STAGE 1 – INITIAL DUE DILIGENCE

• Review of title deeds and original files and carrying out searches.

• STAGE 2 – REPORTING

• Categorisation of title and/or security issues in accordance with level of materiality.

• Reporting on material title and/or security issues and assessment of the impact of such an issue on the purchase price/value on the property.

• STAGE 3 – REMEDIATION OF SECURITY AND/ OR TITLE DEFECTS• Co-operation/interaction with the following third parties:

• Borrower’s solicitor• Property Registration Authority of Ireland• Law Society of Ireland• Third Party Financial Institutions• Bank’s in house legal department and accounts managers• Bank’s title insurers

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LOAN PORTFOLIO SALES CONTINUED…

• STAGE 4 – PREPARATION OF SALE DOCUMENTS

• Preparation of replies to Requisitions on Title - these will be limited (unless there is borrow engagement) and will be based on a desktop review of: (i) the title, (ii) the searches results and (iii) the origination files of the Bank.

• Preparation of Conditions of Sale with a view to facilitating the preparation of Contracts for Sale for future disposal of the Properties.

• Discharge of outstanding sums due and owing to accelerate remediation (e.g. payment of (i) Architects/Engineers fees, (ii) small prior ranking judgements/charges, (iii) unpaid stamp duty, (iv) PRAI fees etc.).

• Recent experience:

We have recently undertaken a remediation process which has involved reporting on a weekly basis to a client in relation to the remediation of 350 ‘problem’ loans resulting in a 75% success rate after 6 months.

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Current Trends in Commercial Lease Negotiations

• BREAK OPTIONS • Service of Notice • Penalty Payment• Compliance with Lease Covenants• Vacant Possession – What does it mean?

• SERVICE CHARGETenant Concerns• Landlord’s Financial Strength• Service Charge Voids• Tenant’s Seeking Visibility on cost of ServicesExamples:• Cap on Annual Service Charge• Exclusion of capital sums • Exclusion of Contribution towards a sinking fund

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• ALIENATION

• Deeds of Renunciation• Restrictions

• Assignee / Sub-Tenant of ‘Good Financial standing’• Sub-Letting at market rent• Sub-Letting of Part• Assignment with Landlord’s Consent – Position in UK• Bank consent

• Recent Issues arising on Sub-Lettings / Assignments

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• LANDLORD BANKING ISSUES

• Landlord Works – who’s paying?

• Tenants requiring Bank / NAMA Group Entity to Join Lease

• Concessions in Lease, no side letters

• Full Disclosure a precondition to Consent

• What if Receiver Appointed during Lease Negotiations?

• MISCELLANEOUS ISSUES

• Surrender Negotiations

• VAT treatment

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