Why is Trusted Novus Bank entering the Buy-to-Let market?
We spoke with Kasper Thy Jessen (Head of Corporate Banking) and Morten Jensen (Head of Mortgages) to determine where they see the property market (specifically the Buy-to-Let) heading in the future and what does this mean for Trusted Novus Bank (TNB).
The property market in Gibraltar has developed positively for a number of years. This is due to a combination of factors including high demand for rental properties, rental yield being 4%-6% on average and the absence of locally applied Capital Gains Tax.
With a high demand for Buy-to-Let properties, TNB recently developed a new product concept to support and facilitate the residential rental market.
Can you explain why TNB decided to explore the Buy-to-Let market?
This has been an interesting market in Gibraltar during the last few years; a big part of the property market where we have seen several developments geared specifically to the Buy-to-Let target audience (E1, Eurocity, West One, Marina Club etc.). We’ve also experienced that many property investors are interested in partners that can help fund these purchases and we are very interested in helping them with this.
Mike Nicholls, CEO of Chestertons (Gibraltar) mentions “Buy-to-Let landlords in Gibraltar have achieved consistent gross yields of 5% – 6% pa over recent years. These have eased to 4% – 5% pa recently with sale prices moving sharply ahead in 2021. Larger, more expensive properties tend to have lower yields.”
How does this align with the overall strategy?
TNB’s aim is to be the ‘Homeowners Bank’ and as part of this we also wish to support clients (and prospects) whose goals are to expand their property portfolio or are creating a portfolio in the Buy-to-Let market.
Our main focus is to grow our general lending book; hence we have been more active on marketing our residential mortgage and construction finance products. The Buy-to-Let market is a newer market for us and we’re hoping that by also focusing on this we can contribute even further towards the overall lending growth.
How does the Buy-To-Let product differ from our competitors?
Due to our highly personalised approach, we believe that we can find the right solution for our clients and be able to build strong long-lasting relationships. We want to be more than just a bank; we understand the importance of being partners.
We believe our products are highly competitive and, as we offer a broad range of banking services including investments, we are able to blend long term investments in financial markets with Buy-to-Let loans to offer low lending rates with flexible options for borrowers. This provides maximum rental yields whilst allowing diversification across a wider asset base.
How has Brexit affected our Buy-to-Let business?
Indirectly, and due to the potential new border agreement, Gibraltar has been seen as a popular area for investments.
Gibraltar’s Covid 19 vaccination program had the same effect, and this showcased Gibraltar as a country worth investing in. We received a large number of enquiries regarding Buy-to-Let mortgages earlier this year, this was from both local people and international (mainly UK).
Who is our target market for Buy-to-Let?
Our target market is primarily clients and prospects who have some previous knowledge and experience in the Buy-to-Let market.
TNB is taking a cautious approach towards clients with no or very limited experience in buy-to-let property activities. History in other jurisdictions shows that where there has been a rapid boom in the buy-to-let market, some clients exposed themselves to high-risk investments whilst not fully understanding the risks involved.
We also expect our clients to have good knowledge of Gibraltar, meaning that they either live in Gibraltar or visit on a regular basis.
Short-lets, beach of covenant?
Words by
Dustin E. Joyce
Patner, Attias & Levy
As we continue to deal with the devastating effects of a global pandemic, the arduous balancing act of resuming social and economic ‘normality’ while maintaining public health remains integral. A useful insight into this context is the recent emphasis on the resumption of the tourism and hospitality sector in particular, which is an industry that Gibraltar heavily relies on economically. Indeed, within the face of encouraging waves of tourism in Gibraltar which has seen accommodation return to full capacity, tourists have resorted to alternative means to accommodate their stays. This, in turn, has created the foundations for an interesting dilemma to consider – the steady development of short-term lettings and AirBnb’s, the impact this is having on residential estates throughout Gibraltar and whether there is a need for stricter legal regulation in an increasingly novel area which is surrounded by underlying legal ambiguity.
The question arises whether a short-term let would breach a covenant in a lease which prohibits a leaseholder from using their property for any purpose other than as a private residence.
The importance of this questions is obvious. With various listings on Airbnb and other sites, property owners are increasingly using such sites, to seek to make income from their properties. Yet leaseholders who utilise these sites are at a risk of having their leases forfeited if their actions are in breach of covenant.
We look at the pitfalls of ‘hosts’ not doing their homework on leasehold covenants.
From a legal perspective, it is therefore important to consider the legality of these short-term lettings in light of the legal instrument that governs the relationship between landlords, management companies and leaseholders – the Lease. Issues are raised when considering the wording of residential Leases in particular, where covenants often contain ‘user’ covenants that restrict the way in which leaseholders may use the premises. As set out in leading cases on the basic construction of leasehold clauses such as Arnold v Britton [2015], the general principles of contractual interpretation will also apply to leasehold covenants. The effects of this are that courts will likely adopt a strict interpretation of the language of each independent lease when considering whether short-term lettings will be legally permissible. Indeed, on the basis of this framework it is likely that courts will adopt a strict objective basis when interpreting these clauses when applying the applicable test of construing what “a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean,” as per Chartbrook Ltd v Persimmon Homes Ltd [2009].
Despite the logic with this approach to interpretation, the issue is that there is often ambiguity in the wording of these clauses which may create potential inconsistencies in the application of the law to these existing contracts. Clearly, under this interpretation the legality in which a leaseholder under a residential lease may use his property for short-term lettings will turn towards the actual wording of these clauses, rather than an adherence to what the parties’ themselves had actually originally intended. This becomes particularly problematic when interpreted within a current legal climate, where many leasehold contracts would have been drafted in a distinct legal and commercial context.
Recent cases have tended to introduce some clarity in this area. In particular, the case of Nemcova v Fairfield Rents Limited [2016] in what has become known at the ‘Airbnb ruling’ and represents the first decision of a superior court which tackled this question, where guidance was given on the circumstances in which short-term lets might amount to a breach of covenant prohibiting the use of a property for anything other than a private residence. The covenant to be observed by the tenant in the lease read “Not to use the Demised Premises or permit them to be used for any illegal or immoral purpose or for any purpose whatsoever other than as a private residence.”
Lawyers for the tenant urged in the appeal that the lease was to be considered as a whole. There were no restrictions on underletting or on granting short term tenancies or licences, no covenant prohibiting business use of the flat and no requirement for the property to be used as the tenant’s main residence. In dismissing the appeal the court commented that the transient use of the property by the tenant created a set of circumstances where the tenant would not consider the property their private residence and that by granting short term lets of the property for days and weeks at a time this did on the facts of that case breach the covenant under consideration.
In order for a property to be used as the occupier’s private residence, there must be a degree of permanence going beyond stays lasting either a weekend or a few nights in a week. Where one draws the line is, of course, a matter to be explored on a case-by-case basis; nevertheless, it is clear that, the shorter the duration of the lettings to third parties, the more likely it is that the leaseholder will be in breach of covenant.
The more recent case of Triplerose v Beattie and Anor [2020] held that the duration of a series of short-length lettings was material to determining whether there was a breach of user covenants in a lease. Indeed, what this development in the case law shows is that ultimately whether or not a leaseholder is in breach of its lease will be centred on a review made by the independent judge on a case-by-case basis.
The Courts are therefore applying long established principle to new commercial trends and it is the manner in which they do so that creates uncertainty at present, but which will be clarified as more cases in this area get decided.
Ultimately, it is important to take advise on lease covenants when purchasing property as a buy to let investment or before setting up as a host on a holiday site – failure to observe covenants in a lease could result in the loss of the property. Owners who are borrowers should also consider the terms and conditions of their mortgage before entering into short term lets as they could be in breach of those conditions by sharing occupation even for short periods of time.
Property Market Update
A year that began nwith news of yet further lockdowns; clearly not something that one would have wished for in their New Year’s wish list, but we hoped and expected that this was the last curve on this winding road for Gibraltar at least. What was certainly not expected was the buoyant mayhem that unfolded during the course of the first half of 2021.
The end of 2020 did bring with it some good news in the shape of the “New Year’s Agreement” with Spain and the UK, delivering a degree of certainty for Gibraltar’s political and economic status, something which, since 2016 we have lacked. This really (in our view) has been a gigantic catalyst to the events in the property market over recent months and which has seen an uplift in property prices averaging (in general terms) to approx. 7%, but up to 15%+ in some circumstances. Frightening to say the least, although we had alluded to this late last year and even prior.
Over the past decade we have regularly provided appraisals on our thoughts and forecasts on the property market. Since 2017 we have highlighted our concerns with the high volume of speculative developments steered by a “studio” segment delivering hundreds of these units to the market. We have also expressed our bullishness in the market on “owner occupier” properties within the mid to high end tiers of the market and the demand for these properties. This demand has in part, been steered by an expectation of a positive outcome with regard to Brexit, as well as real growth in the market driven by applicants seeking larger homes, in their quest to base themselves in a safe, English speaking, regulated, low tax environment. We seem to be cementing this attractive proposition toward the “ultimate residency” further.
As to the impact of forming part of the Schengen group may have on the property sector in Gibraltar, clearly the prospect of free movement with Spain under a safe political arena not seen in over three hundred years is an attractive and positive proposition, not least with a continued and underpinned financial services relationship with the UK; the future seems bright, and we welcome the agreement. We will as always review and comment on the impact of this agreement, it clearly promises to deliver a bright future for Gibraltar with a degree of political security and economic stability not seen before.
There is little one can say to try and sum up the happenings of the past year, let alone that of the past 4 years. Just when we thought that there could be nothing worse than the antics of Brexit, we are given the joys of Covid-19.
Without wanting to make jest out of what has been the biggest health crisis in entire generations – is it ok to say… “for the love of God, someone please make it stop”! Thankfully in Gibraltar we can rest slightly easier than most.
“where the world is in crisis, the Rock excels”.
A bullish comment spoken by yours truly at a presentation to some international investors who quite frankly are astounded by the success’ we are witnessing; and (if I may) so accurate when it comes to the experience, we have had over the past 4 years and ironically enough over the past 15months since March 2020. There is no question (and regardless of my banter), that we are and have been so incredibly fortunate, but to a larger degree so well placed and structured to have (in the main) done so well – and I am of course primarily referring to the property sector.
Against all the odds, we have seen price increases and sales volumes take a sharp rise throughout 2020 and an even sharper rise throughout the first half of 2021; as mentioned on so many occasions in previous updates, it has been the owner occupier markets, largely two-, three- and four-bedroom properties in mid to high end developments showing some truly spectacular gains with some increases in excess of 15%. The higher end and fourth tier in the market generally with price ranges upwards of £1,500,000 has also re-emerged with strong activity in this sector and sales in areas such as The Sanctuary (circa £6m and offers now reaching upwards of £7m), Buena Vista Park (average of £3.5m), Admirals Place and others. We have been fortunate to have been involved in the large majority of high value individual sales achieved to date. Interestingly we seem to be attracting high value profile clients who value privacy and a safe place to reside in, “safe” in all respects, and the Rock continues to be a beacon in this regard.
Without insight into circumstances surrounding us and an understanding of the dynamics of Gibraltar, the numbers are non-sensical and you may choose to take the view that this estate agent is quite frankly taking you for a ride.
Our view of the why’s and the how’s is best described in the extract below which we wrote some time ago:
Our views over the years maintain a trend: growth in owner occupier driven markets steered by a continuously growing gaming and finance centre, with stability and security adding further value.
Whereas we have been pleasantly surprised with the growth in a large part of the property sector, we also continue to remain cautious on the studio market sector given volumes under construction and imminent completions.
We took a view to stay out of this segment several years ago due to the high volume of proposed developments exclusively aimed at this product. We struggled with the prices being pitched and the marriage to an identifiable end user. It appears that to date it is the only sector that in general terms has not enjoyed the growth in capital appreciation attained by much of the market.
Please note that these numbers are solely based on BMI Groups performance and do not necessarily account for the market in general – we do however believe that it describes a scene and a trend true to the market in general terms.
The updated graph above now shows only the trend line for the first 6 months of 2021. This essentially is a guide based on completed and uncompleted sales throughout the period – it is nothing short of exceptional. We update our stats annually but due to the extreme hike in prices that we have witnessed during this period together with the volume of sales, we thought it worthy of note to use the graphic to exemplify the position.
To be clear, we are not suggesting that the average price in Gibraltar has reached close to £1,000,000, this figure has been reached only because BMI have achieved some out of the ordinary high value sales during this period, which are not representative of the market in General. The truer figure based on deleting these exceptionally high value properties is likely to be in the region of £780,000 which reflects an uplift of approx. 15-20% over the period.
Outweighing all factors and reasons for the uplift is the very evident shortage of owner occupier, larger properties on the market and the demand that exists in this segment. We have been stating this for some time and advising our clients and applicants that it is this sector that remains the driving force and has resulted in extraordinary capital appreciation. Our average top end rate per square metre has now reached approx. £6,600 from an average of £5,700 only a year ago. We have reached rates of up to £9,000/sqm in some instances.
The market has quite clearly pushed its boundaries once more, with average rates per sqm increased across all tiers, but in particular at the mid to high level tiers; we also believe that the fourth tier (upper high end) is firmly placed and here to stay, underpinned by a growing number of HNWI’s relocating and staying in Gibraltar – we are attracting real high value homeowners, no brass plating.
The economy remains difficult to forecast and our exposure to the cost of Covid should not be underestimated. However, unlike many other competitor jurisdictions we benefit from a multitude of sectors contributing to the economy, it’s not just financial services or e-gaming; Gibraltar enjoys a vibrant shipping sector, and we are at the forefront in the regulation of DLT / Crypto sectors which have added huge value to our suite of services – this in our view is only set to grow further.
Tourism is also an important pillar of our economy, but it has to be said that there is a great deal more to be done; we have enormous potential, but we have always remained behind the curve in what is a sector that should be developed to its full and in keeping with the times.
Having said all of the above, if one considers the timeline since the Brexit referendum and all the uncertainties surrounding this and Covid, it has to be said that we have done swimmingly and held our own immensely well. 2021 brings its own challenges and so far our position is truly quite special, our ability to overcome stands us in good stead to continue with our ever-growing economy and with it our property sector too.
We hope that with this recent write up we can give a small and educated snapshot of the market where we see the upsides, as well as some of the downsides.
Louis C. Montegriffo,
Managing Director,
BMI Group.
The soft touch
Words by Kathleen North
We all have a pretty clear idea about what furniture is, but what is soft furnishing?
Soft furnishings include items such as curtains, scatter cushions, bean bags, bean cubes and chair coverings that are used to decorate a room. When you talk about soft furnishing these items specifically add that extra colour, softness, and texture to your living room. It also helps to overcome any of the furniture flaws that might be there in the living room and help to give it a feeling of warmth and comfort. The fabric is like a compulsory and most essential part of soft furnishing.
It enhances your relaxing and ups a room’s tranquillity levels. Soft furnishing gives a room a complete makeover in an economical way. It even allows you to try out your DIY skills and show off your artistic/design side. It’s the easiest way to switch up a room’s look in terms of colours and contrasts
How should you select the soft furnishing items for your living room?
Deciding the items to choose while decorating your home is usually a time-consuming task. It varies from person to person depending upon their taste, likes, dislikes, your budget and so on.
When trying to choose the best furnishing item for your home it is essential to keep in mind that the items that you choose must make the surrounding attractive and elegant. You need to ensure that they add to the surrounding of the home as well as the item should be of a good quality.
Although soft furnishing is available in a wide variety, you should be aware of what should be selected and which item should complement his need most.
There will be a number of options available for you across colour, design, textures, patterns, etc. but you should be wise enough that which of the chosen pattern is going to complement the house most.
Soft furnishing items add liveliness and warmth to the house and make the surroundings feel more welcoming.
Steph Briggs is a TV Celebrity Interior Designer and Co-Founder of Interiors & Gifts Emporium, La Di Da Interiors.
Steph believes ‘Predicting design trends can take a lot of research and observation. The Catwalk fashion trends often influence interior design. Colours, patterns, materials and shapes of the season often influence what we see moving into commercial design and then home interior design via the High Street. World affairs and events also influence trends in design; think how much Covid has changed our interiors, with almost every home in the UK requiring at least one work from home station, if not two or three, depending upon the number of adults and children in the house.
The Biophilic design trend has continued to remain strong, embracing design inspiration by nature, as we crave bright skies, freedom, long carefree summer days.
There are professional trend forecasting companies out there for the major retailers. However, smaller design houses and retailers know their target market and utilise trend knowledge to create a product range in line with their customer’s needs and desires.
Not all trends are suitable for every brand (after all, if we were all the same, life would be so dull) so it’s all about knowing what works for you and your client base.
Social media has had a massive impact over the last few years. Instagram, along with the rise of ‘influencers’, has seen the achingly dull grey on grey palette sit alongside the shiny world of Mrs Hinch and influencers who create a reel out of each DIY project.
Interior trends are predicted up two years in advance – most of us in the trade will order at least 6-9 months in advance of the season. I usually order my Christmas stock in February.
The environment comes into play. For example, it is difficult to predict the weather; a long hot summer equates to increased alfresco living and leading an outdoor lifestyle. However, a cold, wet summer means more storage is required and a greater focus on a multi-functional space for indoor living.
For anyone designing their home without the benefit of an Interior Designer, neutral interiors are incredibly popular due to the perception that it’s easy to pull a scheme together without getting scared of getting it wrong.
The dull grey interiors of 2020 transformed into Greige in 2021 and are now more textural. Pale neutral interiors are popular as ever but richer in texture. Layers of chunky wool, heavy linens, porcelain, and dried botanicals feature heavily and add personality and a tactile nature.
Bolder and more confident, Navy blue is the colour to use in dark interiors at present. Soulful and deep, it works fabulously as a background for metallics for a luxe feel. This classic shade pairs beautifully with natural wood and tan leather for a sophisticated, relaxed look. And the traditional combination of soft white and navy gives a regal touch and works brilliantly with ‘Bright Skies’ Dulux Colour Of The Year for a simple contemporary style.
As we become more conscious of supply chain and environmental impact, refinishing and upcycling furniture is no longer seen as a “make do and mend” approach but is a beautiful way of achieving a bespoke look. Designer style with eco ethics is the future.’
The emphasis on natural and sustainability continues to grow from interior trends from previous years. It’s no wonder that their aesthetics are becoming even more refined and covetable. Moreover, we’re seeing a subtle merge of retro, natural, and zen elements in 2022 interior design trends. In addition, the importance of setting up home offices and keeping clean spaces play a substantial role in favoured looks.
Single-use spaces seem to be a thing of the past. In the light of architectural strides and design, we expect interior design trends in 2022 to feature nifty ideas on multifunctional rooms. Make the most of every nook and cranny with clean and innovative room-dividing tactics.
One clear reason why the calming neutral colours continue to infiltrate the interior design trends of 2022 is because we continue to strive for balance and harmony in the home. We want and need the home to be a place of recovery, a place where we feel safe and can heal after a troubled time.
Steph Briggs: La Di Da Interiors.
https://www.ladida-andover.com
Wills and Lasting Powers of Attorney
Words by by Natasha Pizzarello,
Associate,
Hassans International Law Firm Limited
For many people writing a Will and setting up Lasting Powers of Attorney can be a complex and daunting process. Although there is a lot of information out there on these important documents, not all of it may be accurate.
As life and responsibilities change, estate planning becomes more relevant and important. The COVID-19 global pandemic has focused some people’s minds on estate planning measures and putting in the necessary arrangements in place to protect their loved ones.
The biggest misconception surrounding Wills and Lasting Powers of Attorney are that they are documents for the elderly, and this could not be further from the truth.
Wills
A Will is a document that allows an individual to put in writing how they wish to distribute their possession when they pass away. For the Will to be valid it needs to be executed in a specific manner.
As long as you are over the age of 18 you are not too young to make a Will. In a Will you can outline your wishes in respect of your possessions (physical and digital ones) as well as your children, other dependants and pets.
Unfortunately, we cannot predict the future and having a Will in place that outlines your wishes can give you peace of mind whilst protecting and avoiding unnecessary stress for your loved ones during difficult times.
Even if your family are aware of your wishes the legal position on the distribution of possessions in the absence of a Will is very specific and this may not necessarily be in line with your wishes. It is important that a Will is therefore in place to clearly set your intentions with regards to the distribution of your estate. This ensures that potential future disputes are avoided, which could be unnecessarily costly, burdensome and distasteful for family members.
Wills are not a “one size fits all” and specific advice is usually required to cater for different circumstances and to protect your wishes.
If you already have a Will in place that is a great first step. It is however very important that you review it regularly or whenever you have any major life changing events to ensure that it always reflects your current circumstances and wishes.
Lasting Powers of Attorney
A Lasting Power of Attorney is a legally binding document that allows an individual to choose a person or people that they trust to make decisions on their behalf (called the attorney) if or when a person no longer has capacity to make decisions for themselves.
If you were to have a serious accident or change in your health that affects your mental capacity your next of kin would not have the automatic right to manage your financial affairs or make health decisions on your behalf.
Putting Lasting Powers of Attorney in place is like setting up a life insurance policy, you hope it never needs to be used but if the circumstances arise you have something in place to assist your loved ones. Having Lasting Powers of Attorney can help avoid the need for court proceedings in the future which can be costly and time consuming.
There are two types of Lasting Powers of Attorney:
• Property and Financial Affairs Lasting Power of Attorney.
• Health and Welfare Lasting Power of Attorney.
A Lasting Power of Attorney in respect of property and financial affairs gives the attorney the power to make decisions that may include withdrawing money from a bank account, dealing with property or re-investing assets. An individual can choose whether the Lasting Power of Attorney is valid from the moment it is entered into or only when the individual has lost mental capacity as prescribed by a medical practitioner.
A Lasting Power of Attorney in respect of health and welfare gives the attorney the power to make decisions that may include whether to keep the individual on life-sustaining treatment or whether the individual should live in care. The attorney’s authority under this document is only valid when an individual has lost their mental capacity. as prescribed by a medical practitioner.
At Hassans we offer specific advice and tailor-made Wills and Lasting
Powers of Attorney in order to safeguard our clients’ future wishes. For any further information please contact natasha.pizzarello@hassans.gi or abigail.cornelio@hassans.gi of Hassans International Law Firm Limited.
