Yearly Archives: 2019

Commercial property agents who are members of the Royal Institute of Chartered Surveyors (RICS) or who are regulated by RICS (RICS’ Agents) will need to comply with the RICS Professional Statement ‘Service charges in commercial property (1^st edition)’ (‘the Statement’) which came into force on 01 April 2019.

The Statement replaces the RICS Service Charge Codes which were previously only guidance around best practice for the operation of service charge in commercial properties occupied by more than one tenant. The Statement imposes mandatory requirements on RICS’ Agents which are supported by core principles.

RICS’ Agents who fail to comply with the mandatory requirements could face legal and/or disciplinary action, such as negligence claims, if they commit a repudiatory breach of these requirements. A RICS’ Agent can only depart from these requirements for justifiable reasons.

In short, the Statement aims to make service charge costs transparent, hold agents to account, and ensure that service charge budgets and end of year demands are issued in a timely manner.

Nine Mandatory Requirements

(1) All expenditure to be recovered from tenants must be in accordance with the lease;
(2) Owners and managers must not seek to recover more than 100% of the proper and actual costs of the services;
(3) Each year owners and managers must be provided with service charge budgets, including appropriate explanatory commentary;
(4) Service charge monies (including reserve and sinking funds) must be held in one or more discrete (or virtual) bank accounts;
(5) Interest earned on these bank accounts must be credited to the service charge account (after any necessary deductions have been made);
(6) Owners and managers must ensure that an approved set of service charge accounts (which have been certified by an appropriately qualified person) are provided annually to tenants;
(7) Owners and managers must ensure that a service charge apportionment schedule is provided annually to tenants;
(8) In respect of disputes when acting for a tenant, the manager must advise the tenant that if money is being withheld, it is only the amount in dispute which is being withheld; and
(9) In respect of an accounting error when acting on behalf of the landlord, managers must inform the landlord that the service charge has been raised incorrectly and will be adjusted without any undue delay.

The Statement vs the Lease

The Statement does not override the service charge provisions of an existing lease, however; the Statement is to be read in conjunction with the terms of an existing lease. The purpose of the Statement is to help to identify the best approach in interpreting a lease and is likely to assist in resolving disputes that may arise in relation to service charge management.

If a landlord will be engaging a commercial property agent to manage the service charge and they are a RICS’ Agent, then the lease should be compliant with the Statement and service charge provisions in new leases or renewal leases should be drafted by reference to the Statement.

The Statement may cause increased administration for landlord and RICS’ Agents who may need to make changes to their current accounting procedures. However, these changes are likely to be well received by tenants who are likely to benefit from increased transparency and communication as a result of these changes.

Are you a commercial landlord/property agent and do you welcome these changes? Your comments are, as ever, welcome!

The Client Money Protection Schemes for Property Agents (Requirement to Belong to a Scheme etc.) Regulations came into force on 01 April 2019.  Under these regulations, all private sector letting agents and property managers in England who hold client money are required to be members of a government approved Client Money Protection Scheme (CMP Scheme) from the 01 April 2019 or face fines of up to £30,000.

Client money does not include tenancy deposits, which are protected under an approved tenancy deposit scheme.

These regulations give landlords and tenants the confidence that their money is safe, and that they will be compensated in the event of the monies being misappropriated or if the agent becomes insolvent. This is one of several legislative changes being introduced to protect customers against rogue letting agents and to regularise this industry.

These regulations only affect agents operating in England. Letting agents and property managers in Wales are already required to be a member of a CMP Scheme before they can obtain a license to operate in Wales.

Agents who belong to a professional body such as ARLA will already be members of a CMP Scheme.

In order to comply with the regulations, agents must:

(1) Be a member of an approved or designated CMP Scheme;
(2) If they’ve been provided with a certificate from the scheme administrator:
(a) Obtain a certificate confirming membership of the CMP Scheme;
(b) Display the certificate at the agent’s premises and on their website; and
(c) Produce a copy of the certificate to any person who may reasonably require it, free of charge;
(3) Notify all clients within 14 days if their CMP membership is revoked, or they change to a different approved CMP scheme; and
(4) Notify all clients of the name and address of the CMP scheme.

Financial Penalties for Non-Compliance and Right to Appeal

Every local authority in England is under a duty to enforce these requirements.

In respect of a breach of point 1 above, an agent can be fined up to £30,000.

In respect of a breach of points 2-4 above, an agent can be fined up to £5,000.

An agent can appeal against a decision to impose a penalty and the amount of the penalty.

Only one financial penalty may be imposed on the same property agent in respect of the same breach unless:

(1) the breach continues after the end of 28 days after the final notice is served and the agent hasn’t appealed the final notice within that period; or
(2) the breach continues 28 days after an appeal is finally determined (excluding the day on which the appeal is decided).

At the time of writing there are five government approved CMP Schemes:

(1) UK Association of Letting Agents (UKALA);
(2) Money Shield;
(3) Client Money Protect;
(4) Propertymark; and
(5) National Approved Lettings Scheme (NALS).

Agents will be required to pay an annual membership fee to join a CMP Scheme. The amount of the membership fee will vary depending on the sum of money that the agent holds from time to time.

Requirements vary from scheme to scheme, but the current approved schemes all require agents to:

(1) show that they have a designated client account in which to place client monies which is separate from their business account;
(2) Professional Indemnity Insurance; and
(3) Bank statements for the designated client account.

Are you already a member of a CMP Scheme? Have you had any problems joining a CMP Scheme?  As a letting agent/property manager operating in England, do you welcome these changes? Your comments are, as ever, welcome!

The Homes (Fitness for Human Habitation) Act 2018 (‘the Act’) comes into force on 20 March 2019.

The Act introduces a new implied covenant in tenancy agreements (whether written in the agreement or not) that social housing landlords, private residential landlords, and agents acting on their behalf, must ensure that the property is fit for human habitation both at the beginning and throughout the tenancy.

These obligations extend to the property and all parts of the building (including any common or shared areas) in which the landlord has an estate or interest.

The Act gives tenants a direct cause of action against the landlord if the landlord fails to do the necessary maintenance. Prior to the Act, a tenant would have to rely on local authorities to challenge a landlord about the condition of their rented property.

Whilst the Act extends to England and Wales, its practical changes only affect properties in England.

The Act applies to any lease of a property of less than 7 years made on or after 20 March 2019.

The Act will initially only apply to new or reserved fixed term tenancies. It will apply to all periodic tenancies from the 20 March 2020.

Is Your Property ‘Fit for Human Habitation’?

It is ultimately for the courts to determine whether a property is fit for human habitation.

The question put to the courts is whether the property is so far defective in one or more of the following matters that it is not reasonably suitable for occupation:

1. 1. Standard of repair;
2. 2. Stability;
3. 3. Freedom from damp;
4. 4. Internal arrangement;
5. 5. Natural lighting;
6. 6. Ventilation;
7. 7. Water supply;
8. 8. Drainage and sanitary conveniences;
9. 9. Facilities for preparation and cooking of food and for the disposal of waste water; and
10. 10. Hazards prescribed in the Housing Act 2004.

Exemptions from the Implied Covenant

A landlord will not be held liable for breach of this implied covenant where a property is in an unfit state arising from certain instances including:

1. 1. A tenant failing to use the property in a tenant-like manner;
2. 2. The property is damaged as a result of a natural disaster (fire, storm or flood); or
3. 3. Consent for works was requested but not obtained from a third party (i.e. superior landlord).

Consequences of Breach

This legislation is unlikely to affect most landlords who are already providing dwellings which are fit for human habitation; however, it is important that landlords ensure that they comply with these obligations as their tenants can now sue them directly if they don’t comply.

If the property is not fit for human habitation, the tenant has the right to bring a claim against their landlord for breach of contract and issue court proceedings against their landlord. It is possible that landlords could potentially be sued for damages for the entire length of the contract.

Next Steps

In order to ensure that you don’t fall foul of these obligations, the following best practices should be adopted by both landlords and letting agents:

1. 1. Take photographic inventories at the start of the tenancy, during the tenancy (mid-term inspection), and at the end of the tenancy on check-out;
2. 2. Landlords or agents should consider whether more frequent inspections are required to ensure the property remains fit for human habitation;
3. 3. Keep a paper trail of all correspondence with the tenant relating to the repair and condition of the property (and use photos where possible to evidence the repair and condition);
4. 4. Respond quickly and thoroughly to any requests, issues, or reports made by the tenant regarding the state of the condition of the property; and
5. 5. In respect of common areas or other shared parts of the building owned by a third party, the landlord and/or letting agent should make sure these areas are kept in a state fit for human habitation.

Are you a landlord or letting agent? Are you concerned about the new powers the Act gives to tenants to sue landlords for breach of contract? Are there any steps or internal procedures that you will be adopting to ensure you do not fall foul of these obligations? Your comments are, as ever, welcome!

No-Deal Brexit

As at the time of writing, the UK is due to leave the European Union on 29 March 2019 (as a result of having served a formal notice under Article 50 of the Treaty on European Union to terminate its membership of the EU), but whether this will be delayed or will take place in a ‘no-deal’ scenario it is still not clear. For the purposes of this post, we assume there will be an exit in a no-deal scenario, but this is a fluid situation that could change rapidly.

General Impact on Contracts of No-Deal

This note looks at the potential impact of a ‘no-deal’ exit on your existing and future commercial sales, purchases, or other contracts. (Note that it does not cover any contracts that you have with consumer customers.) Since contract terms will differ from contract to contract, and the subject matter and circumstances of each contract will also differ, it is impossible to provide any specific guidance or advice. We can, however, highlight some areas that you might need to focus on and so this note concentrates on a few issues that you should be considering.

Consider the Effect of No-Deal on Each of Your Contracts

In relation to an existing or a future contract, you will need to form a view as to whether Brexit might have an adverse impact, and whether that impact might be on you or on the other party to the contract. Whilst Brexit itself will have limited impact on contract law (except in relation to agency and other specialist types of contract), Brexit might have an effect in relation to the parties’ obligations set out in a contract.

Brexit might give rise to greater expense being incurred in order to perform the contract; for example, costs might rise due to new or increased (import or export) tariffs or customs checks applying to trading between the UK and the EU, due to currency exchange rates fluctuating, or due to there being restrictions on the free movement of people. In each case, this could affect the overall costs of buying or selling goods, products, or materials.

Brexit might make it more difficult or even impossible to perform the contract, or it might be that performing it will be commercially unattractive or that it will produce a different outcome from that required or expected by one or both parties. If a party is unable to perform a contract due to Brexit, it could find itself in breach of contract, and, as a result, liable for that breach.

Taking Steps to Mitigate Any Problems

We suggest that you consider firstly those contracts which will still be in existence when Brexit occurs (either on 29 March or any later date on which it is to occur), and secondly, contracts yet to be entered into either before or after it occurs.

Existing Contracts

Taking existing contracts first, if you conclude that a particular contract will be more onerous or expensive due to effects of Brexit, you might decide that you cannot afford to continue with it as it stands, or that, if possible, you would like to mitigate the adverse effects of Brexit on that contract.

What are your options, if any? If the contract has a termination clause allowing you to terminate in stated circumstances which include Brexit, you could use the clause to end the contract, but this will only be an option if the stated circumstances clearly cover Brexit.

You might instead consider renegotiating the contract if the other party is willing to do so.

If they are not, then you would do well to examine the contract to see if it is possible for you to unilaterally take some other step.

If you are seeking to be excused from performance of the contract and your contract includes a ‘material adverse changes’ clause (“MAC”), you might be able to demonstrate that a no-deal Brexit or its effects is an event or amounts to circumstances falling within the terms of the MAC clause, but all will depend on the precise wording of the MAC clause. If in effect you are looking to the MAC clause for relief from financial hardship due to Brexit, you would need to consider whether the MAC clause provides that relief. It might not allow relief where the relevant event (i.e. Brexit) was an anticipated one.

Many contracts contain ‘force majeure’ clauses which excuse performance where it is prevented or delayed by a cause beyond the reasonable control of the party relying on the clause, but it is more likely that you could make use of a MAC clause than a force majeure clause for several reasons.

Unlike a MAC clause, the scope of wording of a typical force majeure clause is confined to a case where it is not possible to perform obligations under the contract, not merely where it is more expensive or onerous to do so. In order to make use of a force majeure clause, a party would first have to show that when properly interpreted it clearly covered a no-deal Brexit, and that it covered Brexit as an event having a permanent, not temporary effect. Furthermore, a typically drafted force majeure clause would only allow reliance on it if a no-deal Brexit were not reasonably foreseen and the affected party could not reasonably have taken steps to avoid the adverse effect of it. It would seem very difficult to argue that Brexit could not be foreseen unless perhaps the relevant contract was entered into many years before it became apparent that it might occur. However, if the effect of Brexit were to make it impossible to perform the contract (a relatively rare case), it might be possible to make use of a force majeure clause. Where the clause does apply, you need to consider what relief it applies, for example, it might suspend the requirement to perform the particular obligation for a period or indefinitely, or it might give a right to terminate the contract.

Where the contract is incapable of being performed, it is possible, but very unlikely, that the doctrine of ‘frustration’ under the law of contract would apply. Where it does apply, the doctrine would have the effect of rendering the contract void. However, it is a very narrow doctrine and for it to apply, it would require the very purpose of the contract to have been removed by the occurrence of Brexit (i.e. the obligations would have to have been transformed by Brexit into something radically different or performance of the contract would have to be commercially sterile) or it would be physically impossible or illegal to fulfil the contract. Further, the relevant event (Brexit) must have been unforeseen by the parties as a possibility at the time of entering into the contract, and not covered by a term of the contract catering for the impact of Brexit. Although context will be important, then, only in quite rare cases will there be ‘frustration’.

Where there is no ‘frustration’ and there is no term written in the contract which helps in the circumstances, is it possible to argue that as a matter of law, a term is to be implied in the contract whose effect is to provide relief against some adverse impact of Brexit on the contract? This is very unlikely given the strict approach that the courts take when interpreting commercial contracts.

Future Contracts

Turning to contracts yet to be signed, if you conclude that carrying out the obligations under a proposed contract would or might be negatively impacted by Brexit, you might first consider the above points about existing contracts. If you reach the conclusion that you need to provide for some relief from certain effects of Brexit, then you would be well advised to include provisions in the contract catering for your needs. For example, you might insert a clause specifically referring to Brexit allowing for rapid termination of the contract upon its occurrence, or dealing with certain stated consequential effects of it. It might provide that no liability will arise from termination, or it might provide for financial adjustments to be made on termination. Alternatively, you might decide to include a MAC clause which states that it comes into play upon Brexit. If relevant, the MAC clause could provide a mechanism to adjust prices where tariff, customs, or exchange rate changes arise from Brexit. You might decide to include a force majeure clause which very specifically deals with Brexit.

It is worth emphasising, however, that the task of identifying what a Brexit clause should cover and then drafting it in a way that is effective to meet the particular requirements identified is not likely to be an easy one.

A possible option might be to enter into only a very short-term contract, but it might only mitigate and not necessarily avoid a problem arising on occurrence of Brexit.

It is also worth bearing in mind that one party (or even both parties) might not accept that Brexit should have any legal effect on the contract or give rise to any relief in relation to obligations under the contract. If that is the case, then, even if nothing in the contract states or suggests that Brexit might have an impact on the contract in any way, it would be prudent to include suitable wording in the contract whose effect is to make clear that Brexit will not have any effect on the contract.

Food for Thought

This is a complex subject, and we can only offer suggestions as to what you might need to address. A Brexit clause in a contract will not solve all Brexit-related problems. Your particular circumstances and the nature, subject matter, and terms of contracts will dictate what you should consider and what you might do, and as always, you should take professional legal advice in relation to existing and future contracts.

In answering this question, this post – the latest in our series of ‘no-deal’ Brexit Notes – will consider the impact of a no-deal departure from the EU on the legislative framework governing property ownership and transactions, as well as taking a brief look at the commercial impact on the property market.

Impact on the Legislative Framework

There has been minimal intervention from the European Union on the laws which govern how property is held in England and Wales. In short, leaving the EU will have little impact upon the legislation governing property ownership and transactions in England and Wales.

Some EU law does impact upon the way in which property is held in England and Wales, most notably the Energy Performance of Buildings Directive 2010 and the Energy Performance of Buildings (England and Wales) Regulations 2012 (EPB regulations), which implemented the EU Directive on the energy performance of buildings.

There will be a review of legislation which implements EU directives following our departure from the EU. It is unclear to what extent the UK government will depart from the EPB regulations and it is arguable whether indeed any change will be made to these regulations after Brexit. If any change is made it is unlikely to be made for some time whilst the UK Government addresses other more complex issues following Brexit.

Feeling Frustrated?

One other aspect that sellers or landlords need to be aware of, is whether Brexit is a ground upon which a buyer or tenant can argue frustration of a contract. If a contract is frustrated, it is incapable of being performed due to unforeseen events and consequently becomes void. A party to that contract would have to argue that at the time the lease or contract was signed, they had no idea that the UK would leave the EU and that the whole basis of their business and the contract was based upon the UK being an EU Member State.

There may be several reasons why a contract and/or lease cannot be performed as a result of Brexit.  This could be for regulatory, staffing, and/or financial reasons.

Individuals may also seek to get out of assured shorthold tenancies (ASTs) on the grounds of Brexit if, for example, their jobs cease to exist.

Commercial Impact on the Property Market

It is hard to predict what the impact will be on the real estate market due to the ongoing uncertainty of what Brexit will look like and the terms of our departure, which are to be agreed with Europe. There is likely to be some volatility. There is also a risk that a potential relocation of businesses from the UK to other countries is likely to affect supply and demand, which will impact upon pricing, and the property market will surely be affected by how the wider economy fares following our departure from the EU.

In summary, until there is some certainty as to the what the terms of Brexit will actually be, the impact upon the property market remains to be seen. There will be little impact upon the legislation governing property ownership and transactions in England and Wales, save for any regulations implementing EU directives, such as the EPB Regulations. What, if any, changes will be made to these regulations remains to be seen.

Are you a landlord or estate agent? Perhaps you are concerned about the potential impact of a no-deal Brexit on your commercial property? How are you preparing for Brexit? Your comments are, as ever, welcome!

The UK is scheduled to leave the European Union on 29 March 2019 by virtue of having served a formal notice under Article 50 of the Treaty on European Union to terminate its membership of the EU.

At the time of writing, it is still not clear whether this departure will be delayed, accompanied by a ‘deal’ smoothing the exit through a transition period or whether the UK will leave the EU in a ‘no-deal’ scenario.

This note focuses on the potential company law impact to UK private limited companies of exiting the EU in a no-deal scenario. It is important to remember that this is a fluid situation with events changing rapidly; however, the good news for UK incorporated private limited companies is that whilst many other legal areas may be subject to quite significant change, UK company law is not expected to be immediately affected even in the event of a no-deal exit.

The Companies Act 2006

The key legislation governing and regulating English and Welsh companies is the Companies Act 2006. This includes the types of companies that can be incorporated, their liability, the role of Companies House, directors’ duties, and the rules on accounts and audit. Whilst some parts of the Companies Act 2006 are derived from EU Directives such as shareholder rights, the majority of English company law is not derived from EU legislation. The Companies Act 2006 will, therefore, continue in force as at present and no-deal will not of itself change the legal status of UK incorporated companies. However, the company law form of a European Company (‘Societas Europaea’) will no longer be available in the UK.

Third Country Companies

Notwithstanding the expected limited effect on private limited companies, it is worth noting that following Brexit, UK incorporated companies will become ‘third country’ entities as far as European law is concerned. The significance of this is that Member States will not be obliged to recognise the legal personality and limited liability of companies which are incorporated in the UK but have their central administration or principal place of business in another EU Member State. There may be recognition by individual Member State’s national laws or under international law, but this is a point of uncertainty.

UK companies being considered third country entities will also affect a UK company’s ability to undertake a cross-border merger within the EU and rely on group company account exemptions if it has an EU parent. Similarly, UK incorporated companies with branches in other EU Member States will no longer benefit from favourable rules applicable to branches of third country companies. These are, however, issues that will most likely affect large companies or listed PLCs, rather than SMEs operating solely within the UK.

Trading and Commercial Impact

As the legal impact (at least initially) is expected to be limited, probably the biggest issue that UK private limited companies face is the commercial uncertainty that Brexit and particularly a no-deal Brexit may bring.

As yet, no one knows the trading terms that will take effect post-Brexit, and this could lead to both broader economic uncertainty within the UK as well as specifically impacting certain companies whose business model and strategy is more vulnerable to certain goods and exchange rate fluctuations. This is of course not something that anyone can yet predict with any certainty.

UK companies can therefore only adopt a ‘wait and see’ approach whilst trying to be aware of the vulnerabilities that their companies may face in the light of a potential no-deal Brexit.

Stamp Duty Land Tax (“SDLT”) is a tax on land transactions payable on the purchase of land or property (including leases) over a certain price in England.

The time limit for filing an SDLT return with HM Revenue and Customs (“HMRC”) and paying any tax due to HMRC is being reduced from 30 days to 14 days for those property transactions in England with an ‘effective date’ on or after 01 March 2019.

The ‘effective date’ is the date of completion; however, it may be brought forward where a contract has been substantially performed, for example, when a tenant takes early occupation of a tenanted property.

Improvements will also be made to the information to be provided in the SDLT return, and these will be in place when the new time limit begins (01 March 2019).

The Welsh Land Transaction Tax (“LTT”) replaced SDLT in Wales in April 2018. Under the LTT, the time limit for filing the return and submitting a payment to the Welsh Revenue Authority is 30 days from the effective date of the transaction.

The SDLT rules and LTT rules are complex, with many exceptions, exemptions, and reliefs. If your transaction is not straightforward you should take specialist tax advice to ensure that you pay the correct amount of SDLT or LTT (whichever applies).

At the end of 2018, the Government published details of its Good Work Plan, setting out its plans to introduce a number of reforms designed to improve protection for agency workers, zero hours workers, and others with atypical working arrangements.

The Good Work Plan is the Government’s considered response to Matthew Taylor’s report:  Good Work: the Taylor Review of Modern Working Practices, published in July 2017.

The main proposals included in the Good Work Plan are:

• • Employment status clarification. The Government says it will bring forward “detailed proposals” as to how the employment status frameworks for the purposes of employment rights and tax will be aligned. There will also be legislation to “improve the clarity of the employment status test, reflecting the reality of modern working relationships”. This is a problematic area for employers and employees alike and has the potential to be a significant development, but the Good Work Plan is light on detail as to what this will involve.
• • Extending the right to a statement of particulars to all employees and workers from day one. This right currently only applies to employees, and the statement can be provided up to two months after employment starts.
• • Extending the relevant break in service for the calculation of the continuous service qualifying period from one week to four weeks. This is intended to help workers who work intermittently for the same employer and find it difficult to build up employment rights.
• • Removal of the ‘Swedish derogation’ in the Agency Workers Regulations 2010 and banning this sort of contract from being used to withhold agency workers equal pay rights.
• • A ban on employers making deductions from staff tips.

The Good Work Plan also includes proposals to improve the enforcement of employee rights, including:

• • Introducing a ‘name and shame’ scheme for employers who fail to pay Employment Tribunal Awards.
• • Implementing stronger sanctions for employers who have previously lost similar cases.

The Government has not given a timetable for introducing this legislation and, with the ongoing Brexit negotiations, may have other things on its mind for the foreseeable future. It is, however, useful to be aware in a general sense of what is likely to happen.

As 2019 dawned, there was hope in some quarters that a renewed commitment to common sense might have dawned with it and that our intrepid politicians might return to work determined to agree upon a way forward for Brexit. It is quite clear, not least in light of the House of Commons’ rejection of the Government’s Brexit deal on 15 January, that this is not to be.

Talk of ‘no-deal’ is far from new; however, for a long time, it has been reasonably easy to dismiss a no-deal scenario as unrealistic. Now, however, with less than three months before the UK leaves the EU, a no-deal Brexit is starting to look like a realistic possibility after all.

Opinions on a no-deal Brexit are wide-ranging and, of course, it is still entirely possible that the scenario will play out in some other way. Nevertheless, the Government has been making preparations for a no-deal Brexit, including the publication of a range of Technical Notices and an even broader range of draft secondary legislation.

In this post, we look at the impact of a no-deal Brexit on consumer rights in the UK and offer some comments on what this will mean for consumers and businesses in real terms.

No-Deal Brexit: The Basics

Before we get into the detail, it is as well to briefly outline exactly what ‘no-deal’ means. The UK is scheduled to leave the EU at 11 pm local time on 29 March 2019. If there is no deal in place at this point, EU law ceases to apply in the UK unless the UK has expressly adopted it. Unlike the alternative ‘deal’ scenario, there is no transition period within which EU law and the ‘four freedoms’ would continue to apply.

No-Deal Preparations for Consumer Rights

The Government has published a Technical Notice entitled ‘Consumer rights if there’s no Brexit deal’ and two draft statutory instruments: the Consumer Protection (Enforcement) (Amendment etc.) (EU Exit) Regulations 2018, and the Consumer Protection (Amendment etc.) (EU Exit) Regulations 2018.

In addition to the general changes outlined in this post, the Technical Notice also sets out some specific changes relating to package travel, timeshares, textile labelling, and footwear labelling.

The first set of regulations deal with cross-border enforcement while the second would implement the following changes:

• • Limit the applicability of responsibilities set out in the Consumer Rights Act 2015 (currently applying to importers into the EEA) to importers into the UK;
• • Put choice of law clauses referring to the laws of an EEA state on the same footing as those referring to non-EEA countries;
• • Limit consumers’ rights to redress from importers engaging in practices prohibited by the Consumer Protection from Unfair Trading Regulations 2008 to importers into the UK (as opposed to importers into the EEA);
• • Put users of EEA-based payment service providers on the same (less-protected) footing as users of payment service providers based in non-EEA countries; and
• • Remove the current obligations on UK ADR providers to deal with disputes involving consumers resident in EU Member States. This would also end the operation in the UK of the European Commission’s Online Dispute Resolution Regulation for consumer Alternative Dispute Resolution.

Current UK consumer law is derived from EU law and, in the form of the Consumer Rights Act 2015, in fact provides better standards of protection than the ‘basic’ EU provisions. At least initially, therefore, UK consumer law and EU consumer law will be essentially the same. Cross-border enforcement would become more difficult in the event of a no-deal Brexit, however.

Put more simply, life for UK consumers would continue largely as normal, at least where their consumer rights within the UK are concerned. What would change is the ease of enforcing those rights if a trader is not based in the UK.

Cross-Border Enforcement and Dispute Resolution

At present, as an EU Member State, the UK’s consumer protection regime is supported by a reciprocal cross-border enforcement framework. A no-deal Brexit would mean the UK’s immediate departure from that framework.

Moreover, UK consumers would no longer be able to use the UK courts to take action against traders based in the EU effectively. Even if a UK court were to rule in a consumer’s favour in such a case, enforcing that ruling would be more difficult. By the same token, consumers based in the EU buying from UK-based traders could find enforcing their rights similarly difficult if we leave without a deal.

Access to alternative dispute resolution (‘ADR’) stands to be reduced. The European Commission provides an Online Dispute Resolution Platform for use in disputes between traders and consumers; however, a no-deal Brexit would mean UK-based traders and consumers no longer having access to it. Nevertheless, within the UK, the Government has said that it is taking steps to ensure that consumers and traders will still be able to use ADR for UK disputes. ADR obligations for businesses will not change; however, if your website makes any reference to the EU Online Dispute Resolution Platform, such references should be removed in the event of no-deal.

Final Thoughts

It goes without saying that regardless of how our departure from the EU proceeds, consumer rights will be affected in some way, but the impact of a no-deal Brexit could be more significant and would, of course, happen much sooner.

That being said, UK-based consumers and UK-based traders doing business within the UK should not need to be overly concerned and should expect the same rules that apply now to apply even if there is a no-deal Brexit. Those engaged in cross-border trading, however, should expect things to become less straightforward and prepare accordingly.

For consumers with questions about cross-border transactions in the event of no-deal, the UK’s European Consumer Centre will be available to help, and the Government has committed to funding the Centre for at least one year from April 2019.

From a business perspective, those selling only within the UK should not expect a great deal (no pun intended) to change. Those selling to consumers in EU Member States, however, must remember that, once the UK has left the EU (especially in a no-deal scenario), changes to EU consumer law will no longer necessarily be reflected in UK consumer law in the same way that they are now. In such cases, it will be important to keep up-to-date with EU law and the laws of any Member States sold into.

Do you trade with consumers in other EU Member States? If so, how are you preparing for Brexit, no-deal or otherwise? Are you expecting business to become more difficult or have you got it covered? As always, your comments are welcome!

[This post was edited on 16 January to reflect the outcome of the Meaningful Vote in the House of Commons on 15 January]

Approved Documents are statutory guidance published by the Government on how to meet the Building Regulations for building work carried out in England only.

The Government has published changes to Approved Document B (Volumes 1 and 2) of the Building Regulations, which deals with fire safety. These changes come into force on 21 January 2019.

Approved Document B Volume 1 deals with dwellinghouses.

Approved Document B Volume 2 deals with buildings other than dwellinghouses.

The changes to Approved Document B seek to clarify the role of desktop fire safety assessments.

In the wake of the Grenfell Tower fire in 2017, a consultation took place in 2018 to consider whether the use of desktop assessments (in the absence of full fire safety tests) to assess fire safety regulatory compliance should be restricted or indeed banned entirely.

The amendments state that desktop assessments in lieu of tests are only to be used where necessary and are to be carried out in an appropriate way. Desktop assessments should not be used instead of tests where a test is necessary. Tests and assessments should be carried out by organisations with the requisite expertise and qualifications.

The Government has launched a Call for Evidence for a broader technical review on the guidance of fire safety (Approved Document B). Landlords, builders, developers, residents, and property managers are all invited to respond. The consultation closes on 1 March 2019.