Real estate law is generally governed by the jurisdiction of national authorities and not much influenced by European law. Brexit should therefore have limited impact on real estate law.
Legal procedures on UK real estate including property ownership, transfers, leasing, mortgaging and title registration are unlikely to change significantly.
Property taxes (including Stamp Duty Land Tax and rates) should not change materially as a result of Brexit. However, the UK’s VAT law is based on EU directives implemented through UK legislation. The existing UK legislation on VAT should continue to apply, but going forward after Brexit lawyers may want to revise property contracts to ensure VAT relates to a UK rather than EU definitions.
An important point is that real estate transactions are not isolated from business/legal areas that are more heavily influenced by EU requirements. For example, any changes to environmental liability, planning, procurement, completion law and employment law may have implications on both on UK property ownership and property transactions.
Currently EU planning legislation already has had a major effect on large development projects. For example, the requirements to undertake environmental impact assessments (EIAs) as part of the planning process arose from the EU and now form part of UK law. It remains to be seen what changes will arise from Brexit. If the UK retains very close trade ties with the EU then much of the existing legislation may be retained.
Certain contracts involving central or local government and other public bodies (‘’contracting authorities’’) are subject to regulated procurement law derived from EU directive and implemented by each EU member state. For example, this includes public works contracts, building contracts and certain development agreements entered ito by public bodies. Where regulated procurement applies the relevant contracting uthority is required to advertise the contracts in the Official Journal of the European Union (OJEU) and to follow strict EU ndering procedures before the contracts can be awarded. This is in addition to the general principles arising from the Treaty of fairness, equality, transparency and equality - and to award contracts regardless of nationality. Whilst there may be good reasoning behind the original legislation, many authorities and bidders have found these rules to be very bureaucratic - causing procurement to be slow, cumbersome and expensive. Depending on whether the UK remains in the single market there could be scope for change. A full repeal is unlikely but there is a potential opportunity to simplify these procedures. Any reduction in red tape may help authorities to be more proactive and efficient and for development projects to move more swiftly.
The passporting of managers of real estate funds within the EU allowed under The Alternative Investment Fund Managers Directive may no longer be available in the event of a “hard Brexit” with the result that funds managed in the UK would no longer benefit from this passporting system between EU member states incentivising affected management companies to move to other cities within the EU.
Real estate-related agreements such as real estate loan agreements could also be impacted by a hard Brexit. A hard Brexit could, for example, trigger material adverse change clauses or increased costs clauses specified in loan agreements; see the Commercial Contracts section.
- When entering into new contracts, consider the extent to which a hard or soft Brexit constitutes a material adverse change.