London Landlords Hit By Brexit Clause On Deposits
30 June 2016
As Britain recovers from last Thursday’s shock exit from the European Union, many experts are trying to ascertain what the fallout could spell for the country’s economy as well as the housing situation. One issue that has already been noted is that in the capital, commercial property sellers may lose out on deals worth up to an estimated £100 million, due to a clause in the event of the UK leaving the EU.
According to an article in the Evening Standard, property sellers in London may be forced to give back around £100 million in refundable deposits to buyers who have walked away from purchases as Britain has voted to leave. The EU referendum saw a surprise result last week, as the Remain camp had been ahead in polls prior to the vote, but the reality of the Leave side’s victory has left everyone unprepared, including those involved in the property sector.
The estimate of £100 million comes from a real-estate lawyer at Nabarro; Ciaran Carvalho. He mentioned that many deals that were agreed upon before the referendum had clauses attached to them in the instance that Britain would depart. Landlords selling office blocks and shops in Central London had decided to give in to demands for potential refunds to maintain momentum as the property market is at a tentative stage.
However, Carvalho believes that what has happened to the UK’s economy as a result of the exit is only a brief blimp, and it will recover. He says :”With the pound taking a hit, overseas investors may actually find values become more attractive in the short term.” Another estate agent was also optimistic. Toby Courtauld, of Great Portland Estates, stated that there are ”billions of dollars of investable capital looking for income and a home,” which indicates that the decrease in purchases in property is a short term occurrence, not a trend.
The article goes on to mention that there are also questions over whether the vote could trigger a material adverse change clause in City deals which could cause their collapse. Even though all what has been said is not a certainty, it could still have a major impact on the property sector. The market is touch and go at the moment, meaning will we have to wait and see what the long term ramifications of the exit has been for the UK’s housing market and economy.