Laytons Brexit: Legal Considerations for Real estate & Construction

Brexit: Legal considerations for Real Estate & Construction

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Brexit | Legal considerations for Real Estate & Construction

Brexit: Legal considerations for Real Estate & Construction In this note we consider some of the legal issues (and related commercial questions) which may arise for clients operating within the Real Estate and Construction sectors, following Britain’s vote to leave the EU. It is important to note at the outset that, until the UK completes the formal procedure for exiting the EU, all existing EU laws will continue to remain in force.

Tom Cawcutt Solicitor | Real Estate tom.cawcutt@laytons.com +44 (0)20 7842 8000

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Brexit | Legal considerations for Real Estate & Construction

Environmental Protection

Energy Efficiency

One potential area of concern following the referendum,

Similarly, there are other regulations that will have an effect

result is the legislation on environmental protection deriving

on the UK housing sector that may now be subject to change.

from EU law (including the Environmental Protection Act

For example, the Energy Efficiency (Private Rented Property)

1990). Environmental protection considerations often

(England and Wales) Regulation 2015 (‘the Regulation’) is

impact, for example, developers in the planning stages of a

due to come into force from April 2018. In short, the effect

development (as various mitigation schemes, environmental

of the Regulation will be to require landlords to improve the

licences or designs incorporating carbon reduction could

energy efficiency of buildings to a rating of ‘E’ or higher or

be required). The future status of environmental regulations

face civil penalties for failure to comply. There are also similar

deriving from EU law is not yet known, and it will be a decision

provisions relating to commercial property.

for the UK government.

It remains to be seen whether the government will keep this As noted above, any legislation that had been passed by the

implementation date, or remove or delay the legislation to

UK Parliament will remain in force unless expressly repealed,

appease landlords who have been the target of several tax

but any Regulations passed by Brussels have direct effect and

changes recently.

may, depending on what ‘Brexit’ actually looks like, cease to have effect immediately following our withdrawal. It is likely that the government will want to keep the Regulations in place (by passing identical legislation), as there is unlikely

‘Brexit Clauses’

to be much appetite to dilute the environmental protection regime in the UK. It is worth noting that other international

For parties who have entered into Real Estate contracts

treaty obligations will continue to bind the UK following

subject to English law, it is important to note that the rules of

Brexit and it is likely that the requirements in relation to

contractual construction, and the laws governing contractual

environmental assessment as part of the planning process will

provisions generally, do not change as a result of the

remain.

referendum result. However, parties should be cognisant of the potential impact of so-called ‘Brexit’ clauses on current transactions.

There have been recent reports that purchasers have invoked clauses allowing them to either pull out of a deal, or reduce the agreed purchase price, within certain agreed time limits contained in ‘Brexit’ clauses. Whilst these clauses are a matter of negotiation between the parties, investors especially could consider using a Brexit clause to buy time, contemplate the likely direction of the market, or to explore the viability of funding options. Parties on both the ‘buy’ and ‘sell’ side of Real Estate contracts should remain live to the possibility of such clauses being activated.

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Brexit | Legal considerations for Real Estate & Construction

Construction Whilst there has been significant news coverage of the impact

Accordingly, for now, businesses should continue to comply

of Brexit on the Construction industry, there are few legal

with their obligations under the DPA while taking practical

changes specifically effecting Construction companies. In

steps to prepare for the new GDPR rules that should apply

addition to the EU and domestic legislation cited above, the

from 25 May 2018.

uncertainty relating to free movement of workers is likely to be the biggest legal concern for the industry.

Undoubtedly, the rules governing free movement of workers greatly benefit Construction companies in the UK. Not only do these laws give companies access to skilled workers from all EU member states (without having to sponsor work visas), they also provide a supply of unskilled but essential workers for major projects. It is not clear whether existing workers will be able to remain in the UK following Britain’s formal exit from the EU, or what rules will govern immigration once Brexit is complete, and Construction businesses will likely find it difficult to plan ahead for pipeline or upcoming projects where skills are required from outside the UK.

Conclusion: implications for UK businesses At present, data protection law is governed primarily by the DPA, and this is likely to remain the case up until 25 May 2018.

From 25 May 2018 (assuming that the two-year Brexit process has not yet completed) the GDPR should apply to the UK. Around the time the UK leaves the EU, it is anticipated that the UK will enact national legislation which is closely comparable to the GDPR.

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