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The Week That Was - 24 September 2021

24 September 2021. Published by Ben Goodier, Partner and Sarah O'Callaghan, Associate

Welcome to The Week That Was, a round-up of key events in the construction sector over the last seven days.

Richmond Hill Developments (Jersey) Ltd v HMRC [2021] UKFTT 290 

The First-tier Tribunal (FTT) has dismissed a taxpayer's appeal against HMRC's decision that the redevelopment of a listed building, with retained internal features, could not be construed as a "substantial reconstruction" for the purposes of note 4, group 6, Schedule 8 to the VATA 1994.   The consequence of this was that the redevelopment was exempt rather than zero-rated, meaning the input tax incurred on the development was irrecoverable.

The development in question was the conversion of a former nursing home into a block of flats.  The development retained the external walls and roof, as well as internal features including marble entrance and staircase, concrete floor slabs and the building's steel frame. 

The FTT referred to HM Customs & Excise Commissioners v Zielinski Baker & Partners [2004] UKHL 7.  The FTT observed that there were stringent requirements for newly constructed dwellings to be zero-rated, and the requirement for the zero-rating of dwellings constructed from listed buildings, where only the external walls and features may be retained, should therefore also be interpreted stringently.  The tribunal considered that both the steel frame and concrete floor slabs were internal features.  They also noted that, the marble entrance and staircase amounted to c.7% of the floor space. 

The FTT also noted that there were no similar flats whose sale had been treated differently, and furthermore the policy behind the provisions did not extend beyond protecting the exterior of listed buildings. 

A copy of the judgment can be found here.

Countryside Properties releases tenants' onerous ground rent clauses 

Buyers who purchased properties from housing developer, Countryside Properties, have been released from a draconian contractual term which saw ground rent double periodically.  The decision was made following an investigation by the Competition and Markets Authority (CMA). 

The CMA has been investigating the practice by which housing developers would include onerous ground rent clause that saw the doubling of ground rent every 10 to 15 years.  Countryside Properties gave a voluntary commitment to remove the onerous clause from its leasehold agreements following the investigation of the CMA.  The developer has also confirmed that they no longer sell properties with doubling ground rent clauses.  The CMA has stated that they will take further action against developers who refuse to remove the onerous ground rent provisions from their leasehold agreements. 

The news will come as welcome relief for leaseholders.  The increasing costs have left some leaseholders struggling to sell or mortgage their homes, while their right to buy can also be affected if they fall behind on payments. 

For further information, please click here

Government publishes Infrastructure Roadmap to 2030 and National Project Pipeline 2021

On 13 September 2021, the UK government published both the Transforming Infrastructure Performance: Roadmap to 2030 (TIP) and the National Infrastructure and Construction Pipeline 2021. 

TIP is the Infrastructure & Projects Authority's (IPA) flagship programme to lead system change in the built environment. It sets out a ten-year action plan based on five key themes including "Data & Insight" and "Environment and Sustainability", and identifies a "digital-by-default" focus for infrastructure delivery in order to use digital technologies to improve productivity, efficiency and quality. 

The National Pipeline 2021 sets out a forward-looking pipeline of projects and programmes in economic and social infrastructure alongside workforce strategy, which will support the industry in short term business planning and long term strategy.  The procurement element of the plan contains details for more than 400 contract opportunities, with the largest number of projects being in the education and transport sectors.    

For more information click here and here

Remote hearings guidance to help the Business and Property Courts

For hearings under half a day, the default position will be for such hearings to take place remotely.  The Court will consider a live hearing only if there is a particular reason why this would be more appropriate – for instance, in the case of adjudication enforcement in the Technology and Construction Court (TCC).  For longer hearings, whether hearings are remote or live will always be a discretionary judicial decision, although the parties will be asked to express a preference.  The overall criterion must be the interests of justice in all the circumstances of the case. 

Remote and hybrid hearings can range from proceedings that are fully remote (accessible to anyone with a link) to those where remote access is afforded to a single participant, with everyone else being in court.  Bundles will be electronic by default, with hard copy bundles being used only if requested by the judge hearing the case. 

For more information click here

Construction Vacancies hit 20 year high

 Vacancies in the construction industry have hit a 20 year high in the three months to the end of August.

Vacancies up to the end of August stand at approximately 37,000, surpassing the previous 20 year high of 35,000 which was reported in the three month period to the end of June.  Labour availability has been a consistent problem in the construction industry over the last few months, with 40% of SMEs surveyed noting that sourcing labour was a "significant challenge".  Rising labour costs are adding to the issue, with the results of August's PMI survey showing that respondents had reduced hiring, in part due to increased labour costs.

While a fall in the labour supply over the summer is typical, the issue appears to have been exacerbated by both Brexit and the pandemic.  

For further information, please click here.

Policyholders v China Taiping Insurance (UK) Co Ltd (Ad hoc arbitration under the English Arbitration Act 1996, 10 September 2021)

China Taiping Insurance (UK) Co Ltd (the Insurer) has successfully defended a Covid-19 Business Interruption arbitration (BI) claim brought against a large group of policyholders operating in the hospitality sector.  Lord Mance, sitting as sole arbitrator in this non-confidential, non-appealable arbitration funded by insurers, held that the UK government was not a "competent local authority" and thus the Insurer did not have to meet the policyholder's BI claim.  The outcome of this case (although not binding on third parties) should be contrasted with that of the FCA test case (here), where the wording "competent local authority" under an Ecclesiastical policy was held to include central government.  This highlights the importance of context when interpreting policy wording, and the dangers of trying to apply the Court's interpretation of certain wording under one policy to another policy. 

For further information, please click here.

Thank you to Charles Underwood and Alastair Stewart for contributing to this week's edition