MH Article

Finding the right commercial property legal advice

The importance of sourcing specialise commercial property legal advice has never been more keenly felt than in the last few years. And the value of securing the services of a legal team with an integrated commercial property offering can be huge.

The increasing profile of commercial property investments in recent years can be largely attributed to a wealth of funds awaiting investment and a shortage of investment destinations in the finance and private equity markets. In the retail sector in particular, 2006 and 2007 showed clear evidence that investor demand for properties has increased despite continued weakening in the requirement of shop space.

Market performance
An obvious cause of the increased investment interest in commercial property is the fact that property investment has shown almost unmatched levels of performance in recent years. In 2006 in particular the commercial property market of the UK was irrepressible, while things have cooled decidedly in 2007 in the wake of the credit crunch and related caution over lending.

Now that the market has turned slightly, and its previous perceived invincibility has evaporated, many have questioned whether investors into commercial property projects forgot the fundamentals of property investments while the market was strong. Perhaps chief among these fundamentals is the innate volatility of property markets. Another is obsolescence, particularly of office buildings. Now more than ever, the right kind of commercial property advice is essential in order to ensure success rather than failure.

Office sector slowdown
Indeed, the office sector slowed noticeably throughout 2006, a trend that has continued through 2007. This may reflect the general slowdown in the economy. It may also be a sign of the generally diminishing need for large office spaces that has accompanied the increased potential for people to work from home, thanks to advances in technology.

Over supply is another possibility, with many solicitors firms now rarely if ever working on straight-forward commercial leases for companies taking office premises. If there is an over-supply, the natural consequence will be a driving down of rents, a least to a level of zero rental growth.

Regulatory change
From a legal viewpoint, the last couple of years have seen a number of regulatory changes that companies will need to take advice on. While REITs, the big story at the end of 2006, have largely failed to live up to the anticipation of their introduction in January 2007, other incoming changes require expert guidance.
The increasing use of op/co prop/co structures and the benefits that this can have, particularly for property rich organisations, should not be overlooked. This may become increasingly important after April of this year, when the Chancellor’s projected changes to the Capital Gains Tax regime comes into force. The amended regime is expected top have an impact on organisations holding property for extended periods, and companies should seek advice now to avoid problems later on.

Another factor that is predicted to have a continued significant impact on commercial UK property markets is regulation from the European Union. Recent years have seen a raft of new regulation coming into effect in the UK, relating to numerous issues above and beyond the contaminated land concerns that have been the main concern in the past.

With action on climate change still very much at the top of the political agenda, legislation on carbon emissions and energy efficiency are expected to take their toll. The way in which companies cope with regulatory changes will depend largely on the quality of their legal advice.

Partner led advice
One of the key benefits of engaging a regional firm is the partner led style of operation. In many of the larger firms the partner will meet the client in the early stages and then disappear until the champagne party at completion. In his place a host of constantly changing junior lawyers will advise the company.

In the regional firms you are pretty much guaranteed a partner led service from the outset to completion. Appropriate parts will be delegated to junior lawyers so as to avoid unnecessarily increasing fees but partners in these firms play a much more involved role within the firm and therefore the deal. With competition among the regional firms fierce, practices must consistently deliver excellent service if they are to retain their clients. This means that, should a problem arise, it will be dealt with immediately by a senior player.

However, the days of the one-man-band legal firms offering corporate advice are over. The regional advisory markets are maturing and dominant players are emerging in every UK district. These firms retain the partner led service but have expanded across a number of specialities to offer a one-shop for corporate advice.

The use of a firm with an integrated property division can prove invaluable to a client. By offering a joined up approach to the various commercial and property issues that can arise during an M&A transaction, firms can ensure that their legal advice is robust and comprehensive enough to meet the challenges that may lie ahead.

See overleaf for the Corporate UK map of local commercial property legal advisers.

Property Legal Advisers Map

MARRIOTT HARRISON
Contact –Andrew Astachnowicz
Tel – 0207 209 2035
Email – astacha@marriottharrison.co.uk
Web – www.marriottharrison.com London