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It’s nothing something that many business owners want to think about, but consider the following scenario:

John Smith, owner of Company X, takes out a loan for his business and uses it to fund a new product range. He plans to use the profits from this range to repay the loan at a rate of £500 per month.

Contrary to Mr Smith’s robust financial plans, the new product fails to make enough income to repay the loan.

After meeting his essential business costs, John Smith must default on his loan as he cannot spare £500 from his business accounts per month.

His loan provider is forced to commence recovery proceedings – putting John’s assets at risk.

Take a look at the facts

John is an amalgamation of any number of business owners who have taken out a loan to grow their operations and, for a range of reasons, cannot make the agreed repayments.

Depending on the type of security John has granted to the lender, his assets may be a risk.

Assuming he has granted a legal charge, debenture and a personal guarantee, the assets that are at risk if he does not comply with the terms of the loan agreement and the security documents would be the property over which the legal charge has been granted and all of John’s assets (including all properties).

Ultimately any assets that John owns in his name personally could be at risk if the lender instigates bankruptcy proceedings against him.

When his lender decides to commence enforcement action, any costs associated with this (including the costs and expenses of an insolvency practitioner) will be added onto the loan and will be deducted from the proceeds of the sale of assets.

If there is a surplus, this will be repaid to John, although there is rarely a surplus once all sums due to the lender have been paid.

Depending on the terms of the loan, the lender may be entitled to charge default interest if John fails to pay the loan.

In some circumstances, the lender could even charge a management fee for the time it takes the lender to manage John’s account.

Banking and Finance Associate Solicitor, Dashna Morarji-Sagoo, concludes: “In my experience, in order to prevent the lender from enforcing the security, it is best for borrowers to communicate with the lender and be transparent, otherwise there could be severe costs implications and assets put at risk.”

We can provide impartial, straightforward advice to anyone considering taking out a loan where there is increased risk to their business or assets.

Contact Dashna Morarji-Sagoo by emailing DashnaMorarji-Sagoo@palmerslaw.co.uk or calling 01375 484443 or BJ Chong by emailing BJChong@palmerslaw.co.uk

The contents of this article are intended for informational and educational purposes only.

When you create a Will, you do so on the understanding that your estate will be administered according to your wishes, so long as the Will is valid under the law.

This means that you are free to leave your assets to the people or organisations of your choosing, whether that be family, friends or a charity.

However, there are certain circumstances in which those not detailed in your Will may seek to make a claim against your estate. You’ll need to understand these and seek advice on drafting your Will in order to avoid disputes after your death.

Claims by dependents

The primary situation where claims may be made against your estate in addition to those detailed in your Will is when dependents claim under the Inheritance (Provisions for Family & Dependents) Act 1975.

The Act allows certain categories of people which have a relationship with you to make a claim where they feel that your Will fails to make sufficient provisions for them.

Claims may be made by:

• A spouse or civil partner, whether separated from you or not
• An unmarried former spouse
• Someone who has cohabited with you for two years prior to, and immediately up until, your death
• A child, whether biological or adopted
• A stepchild or someone else you treated as a child
• Someone who was fully or significantly financially dependent on you immediately before your death.

The Courts will decide what classes as ‘sufficient and reasonable’ provisions, taking into account circumstances such as the size of your estate, the needs of the claiming party and any existing obligations you hold towards them.

Claims under promises made and broken

If you have promised financial support to someone after your death, but your Will does not reflect this, then the person may be able to make a claim against your estate under promissory estoppel.

This is the concept within the law that states one party may be liable for financial harm as a result of broken promises.

The Courts may intervene in such a case, provided that the individual is able to prove that you made the promise, that it was not met, and that they have suffered financial harm as a result of relying on that promise.

Securing your Will

Want to make sure your assets are distributed according to your Will? The best way to achieve this is to anticipate whether your Will might trigger any claims in either of the above scenarios.

If you have someone who relies on you financially or family members which are classed as dependents, you should first consider how you can provide sufficient support for them in your Will – or the reasoning behind not wanting to do so.

It is your right to distribute your assets according to your own wishes, but it is also a good idea to identify why you have not made provisions for certain dependents in case a dispute arises.

This is also a discussion that you can have with your dependents while drafting your Will, if this is appropriate to your situation.

Whatever your circumstances and family dynamic, we can advise you on drafting a Will that works for you and your dependents. Contact our Wills and Probate team to discuss how we can help.

Achieving a new driving licence is an exciting milestone for anyone, but the law recognises that new drivers are at an increased risk of a collision due to a lack of experience.

A number of proposals have been made by the Government and legal campaigners to introduce restrictions on drivers within the first six months or first year – as new drivers are not currently restricted on how or when they drive.

Youth or experience?

One such suggestion included banning new drivers under the age of 25 from carrying other under-25s as passengers in the first year of having their licence.

However, such a ban does not fully address the issue of safety among new drivers, as it seems to target young drivers rather than new ones.

We understand the reasoning behind it, since we are no strangers to cases where incidents are fuelled by drivers distracted by friends, alcohol culture and inexperience in decision-making – but it fails to tackle the roots of the issue.

Research by AutoTrader suggests that new drivers are now at an average age of 26. An individual who starts driving at this age has no more experience on the road than one aged 17, so any change to the law would need to reflect this lack of experience, rather than penalising only young new drivers.

Six points and you’re out

The only restriction that currently exists for new drivers is not relating to how they drive or whether they drive with passengers or not, but to the points system.

The points system is a way of penalising certain driving offences without immediately punishing offenders, rather cautioning them against committing the offence again.

Most drivers will receive an automatic driving ban of at least six months when they receive 12 or more points.

However, under the New Drivers Act, drivers within the first two years will lose their licence after receiving six points – and will have to retake both the theory and practical tests in order to be able to drive again.

We should also note that the use of a mobile phone while operating a vehicle now carries a six-point penalty, so doing so could get a new driver banned for a single offence.

We specialise in road traffic law and can advise you on your rights and obligations as a driver. Contact our team to find out how we can help you.

By Elena Nicolaou, Head of Commercial Property

The drive to be ‘greener’

In line with international agreements, the UK government is striving to achieve a reduction of 78% in greenhouse gases by 2035 and net-zero emissions by 2050. As part of the government’s plan the rules on Energy Performance Certificates (EPCs) and Minimum Energy Efficiency Standards (MEES) in relation to commercial property are incrementally changing until 2030.

What is an EPC?

Energy Performance Certificates (EPCs) rate the energy efficiency of commercial and residential buildings in the United Kingdom.

How can Palmers help?

The rules relating to Energy Performance Certificates and the minimum standards are complicated and fast-changing.

The result of non-compliance, or failure to register a valid exemption, can be hefty fines and reputational damage to your business. If you wish to discuss this topic further or require advice in connection with your commercial property, please contact our Commercial Property Team.

The current rules

A commercial property with an EPC rating of F or G is said to be ‘sub-standard’. The current acceptable minimum energy efficiency rating is E (unless a valid exemption has been registered).

It is a legal requirement that a valid EPC Certificate must be available for all commercial properties that are sold or leased (including both new and existing leases) in the United Kingdom. There are also requirements for when your EPC must be visible on the premises.

If your property does not have a valid EPC, or you require your energy rating to be re-assessed, you should consult a Commercial Energy Assessor. The UK government website has a function that allows you to search for assessors local to you by inputting your postcode, which can be accessed here.

There is a publicly available government register of EPC Certificates (for both domestic and non-domestic properties) where you can search by postcode and download a free copy of any EPC which exists for a property, along with the recommendation report.

Future changes

The requirements will be changing further over the next couple of years. You should consider what steps you can take now to ensure you are ready for future changes in the MEES. The current guidance from the UK Government has set out the following staged increases:

• 2027 – Minimum ‘C’ Rating – By 2027, all commercial properties must have improved the building to an EPC rating of a ‘C’ or above, or have registered a valid exemption.
• 2030 – Minimum ‘B’ Rating – By 2030, all commercial properties must have improved the building to an EPC rating of a ‘B’ or above, or have registered a valid exemption.

Exemptions

There are various exemptions to the MEES, which are:

• Devaluation – where the necessary improvements would damage the property or devalue it by 5% or more you can register a devaluation exemption. You would need to obtain a report from a RICS assessor to rely upon this exemption and any recommendations not covered by the report must still be carried out.
• Seven-year payback – if the landlord can demonstrate that the initial costs of improvements would exceed the energy savings it would generate over the next seven years then this would not be considered a relevant energy efficient improvement.
• Consent – where the landlord cannot obtain the necessary consents to carry out the required improvements (such as from a superior landlord or the local planning authority).
• Improvements already carried out – if the landlord can show that they have carried out all cost-effective improvements to the property (or where there are none to be made) but the property still has a sub-standard EPC rating an ‘all-improvements’ exemption can be registered.

It is important to note that, if you intend to rely upon an exemption, for it to be valid it must be registered on the government register of exemptions. The registered exemption will need to be evidenced if you plan to sell or lease your property. Exemptions must be renewed every five years otherwise they will expire and the MEES will apply in the normal way.

If you are purchasing an exempt property, you should note exemptions are personal and do not pass upon sale. Any relevant exemption would need to be registered under the purchaser’s name.

Non-compliance

The main penalty for failing to comply with MEES is a fine. This fine is calculated by reference to the rateable value of the property and the length of the breach, subject to a maximum of £150,000 (per breach) under current rules. This may change in the future.

The UK Government can also publish the property owner’s details on a public register setting out specific details of the breach. Considering the general commercial drive to improve corporate social responsibility, this is likely to cause significant reputational damage to any business.

Non-compliance with MEES is not a criminal offence.

For further information and advice on commercial property EPC and MEES requirements, contact a member of our team today.