Description of sector

The real estate sector covers the buying, selling and management of property. We have used for this sectoral assessment the international definition of real estate in the SIC (2007) codes, which breaks down real estate into the following (see Annex A fora more detailed breakdown):
a. 68.1 Buying and selling of own real estate
b. 68.2 Renting and operating of own or leased real estate
c. 68.20/1 Renting and operating of Housing Association real estate
d. 68.20/2 Letting and operating of conference and exhibition centres
e. 68.20/9 Letting and operating of own or leased real estate (other than
Housing Association real estate and conference and exhibition services)
f. 68.3 Real estate activities on a fee or contract basis
g. 68.31 Real estate agencies
h. 68.32 Management of real estate on a fee or contract basis

The current EU regulatory regime

There is a complex legal framework governing residential and commercial real estate activities in the UK, with different property law frameworks for England and Wales,Scotland and Northern Ireland. In England and Wales, property law has evolved through centuries of common law, with major legislative reforms (including the Law of Property Act 1925 and the Land Registration Act 2002) over the last century rationalising key aspects. Scotland has its own distinct tradition and legislative provisions for property law, while Northern Ireland shares similar common law features as English and Welsh property law but has a different legislative basis.

There is no common EU-wide legislative framework for property law. This remains the competence of Member States, although EU law does shape the legal framework for residential and commercial real estate activities (including a Member State’s power to amend the domestic legislative framework) in several ways.

These include the general Treaty principles of free movement of capital and workers which prohibit arbitrary restrictions on the ownership and renting of properties by EU citizens, state aid and procurement rules which govern public bodies’ support for real estate activities, common VAT rules on real estate activities, general services directives which aim to remove barriers to cross-border trade in services and protect consumers, and energy efficiency directives covering buildings which are sold orrented out.

This EU legislation which governs real estate activity is generally applicable to Gibraltar, barring its being outside the Customs Union and common VAT area, but not the Crown Dependencies or other Overseas Territories.

See below C for a description of the principal domestic legal and regulatory arrangements which govern the residential rental and leasehold sector.Existing frameworks for how trade is facilitated between countries in this sector

The arrangements described in this section are examples of existing arrangements between countries. They should not be taken to represent the options beingconsidered by the Government for the future economic relationship between the UK and the EU. The Government has been clear that it is seeking pragmatic and innovative solutions to issues related to the future deep and special partnership that we want with the EU.

A range of preferential trade agreements and bilateral economic and trade arrangements exist between global trading partners. These agreements reduce and simplify the requirements for trade, providing benefits to exporters, manufacturers and consumers across the trading partners.

As noted above, real estate services are sparsely traded and consequently it is the general provisions on services trade which provide the framework for trade in these services outside of the EU. The baseline for trade in services, including real estate services is the World Trade Organisation’s (WTO) General Agreement on Trade in Services (GATS). All WTO Members are parties to GATS which sets out general rules, principles and obligations as a framework for trade in services; plus a schedule of commitments which set out how open and non-discriminatory parties commit to be
across the service sectors covered.

The UK is a member of the WTO in its own right, but its current commitments are listed in wider EU schedules. The Department for International Trade is leading a process to create UK-only schedules – reflecting our current level of openness.

GATS also sets out ‘how’ parties will allow services to be traded and this is split into four principal ‘modes’:
1) where a product rather than a service supplier/consumercrosses a border;
2) where the consumer of the service crosses a border (e.g. aninbound tourist);
3) where the company crosses a border (e.g. a chain of estateagents opening a new establishment in another country); and
4) where the service provider moves (e.g. a chartered surveyor spends nine months working in her firm’s office in another country). Commitments taken by parties vary and parties can unilaterally choose to improve their GATS offers at any point (subject to a certification procedure) or lower the level of their commitments, but in order to do so they will be expected to offer compensatory concessions.

Domestic Regulation of the Residential Rental and Leasehold Sector

Housing is a devolved matter within the UK, so different legislation applies in each of the four nations of the UK. For example, in England:
Private rented sector – in England, the Housing Act 1988 governs tenancies and Housing Act 2004 covering property conditions and licensing;
Social rented sector – The Social Housing Regulator sets standards that registered providers of social housing (local authorities and housing associations) are required to meet. The objectives of the Social Housing Regulator are set out in the Housing and Regeneration Act 2008. Eligibility for local authority allocated social housing and homelessness assistance (referred to collectively as “housing assistance”) in England reflects the Home Office’s Immigration Rules. The current legislative framework is set out in the Housing Act 1996 parts 6 and 7 and the Allocation of Housing and Homelessness (Eligibility) (England) Regulations 2006 (SI 2006/1294) as amended.

Leasehold sector – in England the Landlord and Tenant Act 1954, Leasehold Reform Act 1967, Landlord and Tenant Acts of 1985 and 1987, Leasehold Reform, Housing and Urban Development Act 1993, Housing Act 1996, Commonhold and Leasehold Reform Act 2002 and Housing and Planning Act 2016 have improved leaseholders’ rights to challenge charges, manage their property, extend their lease and purchase freehold interests.

Leasehold legislation in Wales is devolved. Similar rights apply there, although codes of practice relating to service charges and property management are different. Scotland and Northern Ireland do not use tenures based on a landlord and tenant relationship.

In Wales the Renting Homes (Wales) Bill, as passed by the Assembly on 17 November 2015, is based on the Law Commission’s Renting Homes recommendations published in 2006. The Bill makes provision for two types of contract (which will apply to both tenancies and licensees – hence the Bill refers to ‘contract-holders’);

The Scottish Government has introduced a significant regulatory framework for the PRS:
Landlord registration (2006)
Tenancy deposits (2012)
Tenant information packs (2013)
Specialist housing tribunal (2014)
Enhanced enforcement areas (like licensing – in place in Glasgow) (2014)
Letting agent regulation (2014)
New tenancies (from 2018)
Regulation of the PRS sits with (32) LAs but regulation of letting and property agents with Scot Govt.

In Northern Ireland The Rent (Northern Ireland) Order 1978 and the Private Tenancies (Northern Ireland) Order 2006 sets out the law on the current regulation of the private rented sector and provide councils with powers to enforce the legislation.

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