Category: Articles

The Ban on Upwards‑Only Rent Reviews in England and Wales

Posted on by Joe Reeves

For decades, upwards‑only rent reviews (UORRs) have been a defining feature of commercial leasing in England and Wales. That position is now set to change fundamentally. The English Devolution and Community Empowerment Act 2026 (the Act) has received Royal Assent and includes provisions that will prohibit upwards‑only rent review mechanisms in commercial leases once brought into force.

Current status

Although the Act received Royal Assent on 29 April 2026, the ban is not yet in force. The relevant provisions will be commenced by secondary legislation and are widely expected to take effect no earlier than 2027. Accordingly, existing leases remain unaffected for the time being, subject to the limited retrospective provisions discussed below.

Leases within scope

The ban applies to business leases in England and Wales, broadly defined by reference to Part II of the Landlord and Tenant Act 1954, granted on or after the Effective Date (to be confirmed). This includes leases that are “contracted out” of the 1954 Act and superior leases where the tenant does not occupy but could do so for business purposes.   This will affect all commercial landlords, irrespective of sector.  

Specifically, the following will be caught by the ban:

  • New leases including renewal leases granted on or after the Effective Date;
  • Put and call options, where a tenant is contractually obliged to enter into a lease or a landlord is contractually obliged to grant a lease at a future date, where that arrangement was entered into on or after 17 March 2026; and
  • Underleases that are granted on or after the Effective Date even where the head lease provides that the underlease must contain UORRs and in this instance, control of rent review terms in sub-leases will fall to the parties.

The ban will not cover the following:

  • Existing leases currently in place (unless varied to include UORR provisions);
  • Agreements for lease entered into before the Effective Date where the lease was granted pursuant to that agreement;
  • New leases granted before the Effective Date; and
  • Put and call options where the arrangement was made prior to 17 March 2026.

Once in force, the Act will render ineffective any upwards‑only provision in a rent review clause where the reviewed rent is not fixed or fully ascertainable at the date of grant. In practice, this captures the most commonly used review mechanisms, including:

  • open market rent reviews;
  • index‑linked reviews; and
  • turnover‑based rents,

where these are coupled with an upwards‑only restriction.

The effect is not to remove rent reviews altogether, but to convert them into two‑way reviews, permitting rent to move downwards as well as upwards.

What is not prohibited?

The ban does not apply to rent mechanisms where the rent is known in advance. As a result, the following will remain permissible:

  • stepped rents or fixed uplifts;
  • fully predetermined increases; and
  • rent reviews that already operate on an upwards‑or‑downwards basis.

The Act also contains anti‑avoidance provisions, preventing parties from achieving the economic effect of an upwards‑only review through alternative drafting techniques.

Limited retrospective effect

As referenced above, while the ban is not generally retrospective, a significant amendment introduces a targeted retrospective element relating to renewal arrangements.

Where a tenancy renewal arrangement (such as an option or agreement for renewal) is entered into on or after 17 March 2026, any lease granted pursuant to that arrangement will be caught by the ban, even if the original lease predates commencement.

This point is particularly important for landlords and tenants currently negotiating renewal options, agreements for lease, or reversionary arrangements, as the rent on renewal (and any subsequent reviews) may be required to operate on a two‑way basis.

Practical implications

The ban represents one of the most significant changes to commercial leasing since the 1954 Act. Landlords, investors, and lenders will need to reassess:

  • valuation and funding assumptions;
  • portfolio risk in a falling market; and
  • the drafting of renewal options and agreements entered into now.

Tenants may welcome the potential for rent to reflect market conditions more accurately, but the change may result in exiting leases with UORR provisions commanding a greater premium.

Conclusion

The prohibition on upwards‑only rent reviews marks a decisive shift in English and Welsh commercial property law. While the ban is not yet in force, its future impact is clear, and parties entering into leasing arrangements now must consider carefully how the Act may affect renewals, subletting strategies, and long‑term asset value once the legislation comes into force.

The courts’ approach to the use of AI in litigation

Posted on by Jonathan Tyler

Artificial intelligence is rapidly changing the way legal work is carried out. From drafting documents to summarising evidence, AI tools are becoming a common feature of modern litigation.

The courts’ position is that whilst AI can be helpful, it must be used carefully and responsibility always remains with the lawyer.

Recent cases show that misuse of AI, particularly where it leads to inaccurate or fabricated legal material being put before the court, can have very serious consequences.

Use AI with caution but always verify

The courts recognise that AI has legitimate uses in litigation. It can assist with document-heavy exercises such as disclosure and can help lawyers work more efficiently.

However, judges are increasingly concerned about the risk, especially the potential for AI to produce confident but incorrect answers, sometimes referred to as “hallucinations”. Judicial guidance emphasises that any material produced using AI must be carefully checked before it is relied upon.

Personal Accountability

To enforce these standards, the courts rely on what is known as the Hamid jurisdiction, which allows judges to investigate and address poor conduct by lawyers directly.

This enables the court not only to determine the dispute between the parties but also to examine how the case has been conducted. Where there are concerns, such as misleading submissions or inaccurate legal authorities, the court can require the lawyers involved to explain themselves. This can lead to orders requiring lawyers to pay costs personally, referrals to professional regulators and, in serious cases, contempt proceedings

Importantly, this process focuses on individual responsibility. It is no defence to say that an error arose from AI or from reliance on another source. Lawyers are expected to verify everything that goes before the court.

Recent cases

The leading authority of Ayinde v London Borough of Haringey (2025) is the best illustration of the courts’ approach.

In that case, court documents contained references to at least five cases that did not exist and there were errors in the legal analysis presented to the court. The court considered that these issues may have arisen from the use of generative AI (albeit it did not make a definitive finding that AI was used).

Under the Hamid jurisdiction, the court found there had been serious failures of competence and scrutiny and emphasised that putting false material before the court is a breach of duty, even if not deliberate. It expressed wider concerns about training and supervision of junior lawyers. The court said that the Claimant’s lawyers’ conduct should be referred to the relevant professional regulators.

More recent cases show the courts taking an increasingly proactive approach.

In Elden v HMRC [2026], the tribunal imposed practical safeguards to prevent similar issues arising, including requirements to provide full copies of any authorities relied upon, use accurate quotations from judgments and confirm that all references have been independently checked

These developments demonstrate that the courts are moving beyond general warnings to actively policing how legal material is prepared and presented.

A widely reported US case, Mata v Avianca (2023), involved lawyers submitting a court document that relied on entirely fabricated case law generated by AI. The court imposed financial penalties and criticised the lawyers for failing to verify their sources. This case is frequently cited as a cautionary example of what can go wrong when AI outputs are trusted without proper checking.

What this means in practice

Parties involved in litigation should be reassured that the courts are actively safeguarding the integrity of the legal process as new technologies develop. For lawyers involved in litigation, AI must be approached and used with caution. Any legal authority or statement of law must be independently verified and our duty to the court remains unchanged.

If you would like to discuss a dispute or litigation matter, please contact Jonathan Tyler, our Group Head of Litigation, at jonathan.tyler@wellerslawgroup.com or on 01732 446361.

Renters Rights Act 2025 – A guide for Landlords

Posted on by Wellers

The Renters Rights Act 2025 introduces significant reforms to the residential rental market in England and was introduced to create a fairer, more secure private rental market for the benefit of both renters and responsible landlords.

Only a small number of the Acts provisions take effect immediately and the remainder of the Act will be implemented in three phases.

Here we provide an overview of the new tenancy regime to be implemented as phase one from 1 May 2026 and what this means for Landlords

Click here to read Renters Rights Act 2025 – A guide for Landlords

Employment Rights Act 2025 – a summary

Posted on by Wellers

In December 2025 the Employment Rights Act became Law.

It contains sweeping changes to employment law in Great Britain.

This table below contains a summary of the provisions of the Employment Rights Act 2025 and the proposed timings for changes.

If you are a small business owner or entrepreneur and would like to talk to us about how we can help to implement these changes in your business, or if you are an individual wondering how these changes will affect your employment, please talk to us on 020 7481 2422 or email enquiries@wellerslawgroup.com

Changes from April 2026

ProvisionPoints to Note
Statutory sick pay (SSP) to be paid to all workers from first day of absence at a rate of either 80% of weekly earnings or the flat rate, whichever is lowerCurrently, employees need to earn at least the lower earnings limit to get SSP and it’s paid from the fourth day of sickness absence. Will apply to GB and NI
Parental leave to become a day one right.Before an employee can take parental leave under the current rules, they must currently have one year’s service with their employer.
Paternity leave to become a day one rightPaternity leave is, under current rules, available to employees who have 26 weeks’ service with their employer counted at the 15th week before the expected week of childbirth, or in the week their partner is notified of being matched for adoption.
A new Fair Work Agency will be established to bring together different government enforcement bodies. The agency will have the powers to enforce payment of statutory payments, bring employment tribunal claims on behalf of individuals, and provide legal assistance, support, or representation where individuals have raised a claim themselves.There are currently various separate agencies that deal with enforcement, for example, HMRC, the Gangmasters and Labour Abuse Authority. Currently there are no provisions for someone to make an employment tribunal claim on behalf of someone else.
Increase the maximum protective award a tribunal can make when a business has failed to follow their obligations on collective consultation.The maximum award will increase from 90 days’ pay to 180 days’ pay.

Changes from October 2026

ProvisionPoints to Note
“Bullying” fire and rehire practices will be brought to an end.“Fire and rehire”, where an employer dismisses and re- engages an employee to push through changes to terms and conditions, will be an automatic unfair dismissal where it relates to certain “restricted variations” except where a business is in serious financial trouble affecting its continuation, and the employer could not reasonably have avoided the need to make the change.
Extended time limit for tribunal claims.The time limit for employees to bring a claim to a tribunal will be increased from three to six months.
Employers will be required to take all reasonable steps to prevent sexual harassment in the workplace.Under a proactive duty in place from October 2024, employers must take “reasonable steps” to prevent sexual harassment in the workplace. This obligation will be strengthened to taking “all reasonable steps”.
Employers to be liable for third party harassmentCurrently, employers are not liable for third party harassment (harassment from a client, customer, member of the public etc) although under a proactive duty in place from October 2024, employers must take reasonable steps to prevent third party
sexual harassment.
Trade union statement and right of accessEmployers will have to provide a statement to employees to inform them of their right to join a trade union. The right to access will be restricted to workplaces that are not also dwellings, and they must be a ‘qualifying’ trade union with an independent certificate.

Changes from 2027

ProvisionPoints to Note
Unfair dismissal qualifying service will be reduced from two years to six months from 1 January 2027, and compensation limits for unfair dismissal claims will be removed.Employees must currently wait for two years until they have protection from ordinary unfair dismissal. From 1 January 2027, employees who have six months service will be able to bring an unfair dismissal claim. Also, the cap on unfair dismissal awards will be lifted. This means compensation will no longer be limited to 52 weeks or £118,223.
A new right to bereavement leave of at least one week to apply from day one of employment.Parental bereavement leave is the only legal entitlement to time off to grieve, and this only applies to parents whose child, under the age of 18, dies. Under this, the right to unpaid bereavement leave will cover a wider set of circumstances including miscarriages before the 24th week of pregnancy.
Flexible working will be made the default unless the employer can show it’s unreasonable.Employers can currently decline flexible working requests if one or more of eight specific grounds apply. Under the new rules, they will also need to show why it was reasonable to refuse the request.
Collective redundancy procedures to be extended.A new threshold to trigger collective consultation will be introduced for multi-site redundancies.
Employees will be given more protection from dismissal whilst pregnant, on maternity leave and within six months of returning to work.This group of employees were given enhanced protection against redundancy in April 2024. The new provision will strengthen the position further and prevent dismissal in other circumstances except where specific rules apply.
Zero hours workers (including agency workers) will be entitled to reasonable notice of shifts and changes to their shifts, and compensation for shifts which are cancelled, moved or ended earlyThis will be a brand-new addition; there are no similar rules currently in place. Future regulations will set out how much notice the employer needs to give. These rules will apply to all shifts set by the employer, either ‘required’ or ‘requested’.
Those working on zero hours or ‘low hours’ contracts (including agency workers) will have the right to be offered a guaranteed hours contract to reflect regular hours they have worked over a defined periodEmployers will be required provide information upon employment, and continually throughout for workers who may later be eligible for a guaranteed hours offer. They will also be required to provide supporting information when making the offer. Workers will be able to remain on the zero-hour contract if they choose. Importantly, this law will apply to ‘low hour’ contracts too.
Large employers will be required to create action plans on supporting employees through menopause and reducing their gender pay gap.It is likely that “large employer” will be defined as those with 250+ employees. It’s worth noting that an action plan is different to a policy.

Source CIPD

The Smorgasbord Budget: Light on Good News, Heavy on Future Taxes

Posted on by Wellers

So, the budget finally arrived after what felt like weeks of waiting – but what did it include?

At first glance the measures were not nearly as bad as first feared, and some of the more worrying measures that were anticipated ahead of the official announcements, did not make the grade.

However, there are still many changes which will hurt workers, savers and investors and with the rise in alcohol duty, there was nothing much to be cheerful about in this Budget.

Some of the most notable measures announced in the Budget include:

  • Tax thresholds for Income Tax, National Insurance, Inheritance Tax and VAT are frozen, pulling more people and businesses into higher taxes over time through fiscal drag
  • Pension contributions above £2,000 made through salary sacrifice will attract National Insurance from 2029
  • Income Tax on savings, rental income and dividends will rise by 2%, adding pressure especially on landlords
  • A new “Mansion Tax” from 2028 will charge homeowners with properties over £2 million and £5 million an extra £2,500 and £7,500 in annual tax respectively
  • Electric and hybrid drivers face new per-mile charges from 2028
  • Relief on Employee Ownership Trust sales has been cut immediately, raising tax from 0% to 12%

Is there good news in the Budget?

As it happens, the good news, is actually what the Chancellor omitted this time:

It did not include a tax rise on companies – rates and reliefs stayed the same with a little extra for businesses that invest into certain qualifying assets

It did not include an exit tax – a relief for expats and anyone thinking of moving to sunnier climes

It did not include a tax on members of partnerships similar to employers’ National Insurance

It did not include a tax based on the value of your home when selling it – which was welcome news for homeowners who worried they would not be able to downsize if they wanted to release capital

It did not include an increase to income tax, National Insurance or VAT – or at least the rates themselves didn’t increase …

And it didn’t include an explicit wealth tax – although the lasting impact will be just that.

So what did it include?

Freezing tax thresholds

The freezing of Income Tax and National Insurance thresholds will drag more workers into higher rates of tax as wages grow.

The nil rate band for Inheritance Tax (IHT), below which an estate does not attract IHT, has been frozen. It last changed almost 20 years ago.

The VAT threshold above which a business must register was also frozen having been widely expected to drop. This may have discouraged businesses from growing their turnover above it, for fear of losing customers who seek out non VAT registered trades.

Pension and income taxes

Private sector employees will face further taxes on pension contributions that they make via salary sacrifice. Contributions that are currently exempt from National Insurance will now attract it above an annual £2,000 threshold.

The real nasty for savers and investors is income tax increases. Rates are going up by 2% on income from savings, rental properties and dividends.

For landlords, already struggling under increased regulation, it is another unwelcome burden.. It seems likely that these changes will encourage more savers and investors to consider Family Investment Companies where tax rules may be more attractive.

The “Mansion Tax”

From April 2028 those that live in a house worth more than £2 million will be liable for an additional tax burden, collected through the Council Tax, (although not given to the councils apart from a collectors fee). This starts at £2,500 and rises to £7,500 for homes worth more than £5million. It is estimated more than 140,000 homes will be affected by this by the time it comes in.

Electric vehicles

If you drive an electric or hybrid car, you will need to pay an extra 3p or 1.5p per mile from April 2028. The cost and complication of enforcing a mileage-based scheme is sure to be high.

Employee Ownership Trusts

Effective immediately, those selling their businesses to an Employee Ownership Trust now receive only half the relief they did previously, taking the tax rate from 0% to 12% while the ink is still drying on the contract.

What does it all mean?

This budget has been called a smorgasbord. It’s a haphazard collection of measures, with many not even coming into effect for years, perhaps even after the next election, in which case, you might ask, why cause all this anxiety ? It also feels very heavy on the costs of implementing some of the more complex workings out.

However, when, or possibly if, they do come into effect, the reality is that businesses, employees and investors will pay more tax.

At Wellers, we remain available to our clients and any business owners or individuals who would like our support interpreting what the Budget means for you and what actions you might take next to minimise the impacts.

Please contact us at enquiries@wellerslawgroup.com or phone 020 8464 4242

A new era for Worker’s Rights:

Posted on by Nina Francis

Understanding the Employment Rights Bill

The UK government has introduced what it calls the biggest upgrade to employment rights in a generation. The Employment Rights Bill, unveiled in October 2024, promises sweeping changes that will fundamentally reshape the relationship between employers and employees across the country. The main focus points are as follows:-

Protection from Day One

Perhaps the most significant change for workers is the removal of the two-year qualifying period for unfair dismissal claims. Under the new legislation, it is proposed that employees will have the right to challenge unfair dismissal from their very first day at work. While employers will still be able to use a statutory probation period to assess new hires, this change marks a substantial shift in the balance of power, particularly for those in precarious employment situations.

The bill also tackles the controversial practice of ‘fire and rehire,’ where employers dismiss staff and rehire them on worse terms. These dismissals will be considered automatically unfair unless businesses can demonstrate they genuinely had no alternative.

An End to Exploitative Zero-Hours Contracts

For the millions of workers on zero-hours contracts, relief is on the horizon. The bill introduces rights to guaranteed hours based on regular working patterns, reasonable notice of shift changes, and crucially, payments when shifts are cancelled at short notice. These measures aim to provide a baseline of security for workers who have long faced one-sided flexibility that benefits only employers.

Strengthened Sick Pay and Family Leave

The reforms to Statutory Sick Pay remove both the lower earnings limit and the waiting period, meaning workers will receive sick pay from day one regardless of their salary level. This change will particularly benefit lower-paid workers who have historically been excluded from statutory sick pay protection.

Family-friendly provisions receive a significant boost too. Paternity leave and unpaid parental leave will become day-one rights, while new mothers will enjoy enhanced protection against dismissal for six months after returning to work. A new right to unpaid bereavement leave acknowledges the need for time to grieve without fear of losing one’s job.

Better Flexible Working and Harassment Protections

The existing right to request flexible working, already a day-one entitlement, will be strengthened. Employers will need to provide clear explanations when rejecting requests and ensure their decisions are reasonable rather than arbitrary.

On workplace safety, employers will be required to take ‘all reasonable steps’ to prevent sexual harassment and will be held accountable for harassment by third parties such as customers or clients. These measures reflect growing recognition that workplace culture must change.

Easier Access to Justice

Workers will have twice as long to bring employment tribunal claims, with the deadline extending from three to six months. A new Fair Work Agency will consolidate enforcement of various employment rights and will have the power to bring cases on behalf of workers, potentially removing the financial and emotional burden many face when challenging their employers.

The Road Ahead

Most of these reforms are not expected to take effect until 2026 at the earliest, with consultations ongoing to finalise the details. The government insists it has worked closely with both businesses and trade unions to develop measures that are both pro-worker and pro-business.

For employees, these changes represent the most comprehensive upgrade to workplace rights in decades. From greater job security to better work-life balance and stronger protections against exploitation, the Employment Rights Bill promises to deliver meaningful improvements to working life for millions across the UK.

The question now is not whether these changes will happen, but how effectively they will be implemented and enforced. For workers who have long called for greater protection and dignity at work, this legislation offers genuine hope for a fairer future.

If you would like support in navigating these changes, please contact Nina Francis on 020 3831 2664 or email enquiries@wellerslawgroup.com

A Guide to Adoption

Posted on by Helen Warren

Adoption is the legal process by which a child or group of siblings who cannot be brought up within their birth family become full, permanent and legal members of their new adoptive family. An adoption order ends the parental responsibility of any person or local authority and gives the adopters sole parental responsibility for the child. Where a birth parent does not consent to an adoption, the court can dispense with that consent if it determines that the parent cannot be found, lacks capacity to give consent, or if the child’s welfare necessitates it. 

A recent High Court case has highlighted the finality of adoption orders, emphasizing that they can only be revoked under exceptional circumstances. The case involved the birth mother of two children, aged 12 and 6 who were adopted in 2019 and 2018 respectively. She sought to overturn the adoption orders and gain contact with the children, but her applications were dismissed.

She alleged procedural and legal irregularities during the original adoption process, including duress, racism and insufficient consideration of her children’s welfare. However, Mr. Justice Trowell found no evidence to support these claims.

“The jurisdiction to revoke adoption orders is strictly limited to cases of fundamental procedural irregularity,” stated Mr. Justice Trowell. He noted the adoption orders were made lawfully and could not be overturned on welfare grounds.

The birth mother also sought permission to apply for contact with her children. The court denied her request, finding her ongoing refusal to accept the adoption posed a risk to the children’s stability. The judge cited evidence of potential harm, including her past comments to one of the children, such as her claim that “adopters kill the children they adopt.” While rejecting her application, Mr. Justice Trowell permitted the continuation of existing indirect “letterbox” contact but urged the birth mother’s messages be reviewed before being passed on to the children.

Mr. Justice Trowell emphasised that the welfare of the children, who are now settled with their adoptive families, remained the paramount concern.

In a different case the Court of Appeal confirmed that the court, not the local authority, is responsible for determining the nature and extent of post-adoption contact with the birth family. 

The Court of Appeal gave its judgment in the case of Re S examining the circumstances in which the family court might be expected to make an order requiring a child placed for adoption to have contact with a sibling who is not being adopted. 

Commonly adoptive families have arrangements for indirect contact with birth parents or siblings. Increasingly there are arrangements for some direct contact with siblings or birth parents. Despite this, there has been little change in the court’s approach to making orders for contact with birth families when children are to be adopted. In 2019 Sir Andrew McFarlane, President of the Family Division, said  that “it will only be in an extremely unusual case that a court will make an order stipulating contact arrangements to which the adopters do not agree” (Re B (A Child) (Post Adoption Contact) [2019] EWCA Civ 29).

The recent case of Re S reiterates the requirement for family court judges to focus on what contact arrangements will be in the best interests of each and every child being placed for adoption and may point to a likelihood of contact orders being made more often in the future. 

The case centred on whether the family court should make an order for direct contact between a boy aged two, ‘S’, who is to be placed for adoption and his brother ‘R’, aged eight, who is in long-term care. Both children had been removed from their parents’ care in proceedings brought by the local authority because the judge was satisfied that they were at risk of significant harm from their parents. Whilst R is to stay in long-term care, the court made a placement order for S. This means the local authority can start the process of finding prospective adopters for him, matching S with them, and placing him in their care. The prospective adopters would then apply to the court for an adoption order to become S’s legal parents. 

The local authority’s plan for S was that once he was placed for adoption, he would have indirect contact with R, but also direct contact twice a year so that the sibling relationship could continue. The court approved that plan. However, the question was whether the judge should make an order under section 26 of the Adoption and Children Act 2002,  requiring the prospective adopters to ensure direct contact between S and R, or whether there would an expectation of direct contact, that is not legally enforceable, meaning it would ultimately be a decision for the prospective adopters.  The judge decided there should not be an order for contact between R and S. His main reason was that an order requiring that there must be direct sibling contact would make it harder to find adopters for S, reducing the chance that he could be adopted at all. The birth parents appealed. 

Although the appeal was unsuccessful, the Court of Appeal gives important guidance for the family court to consider when determining future contact arrangements which are required in every case where a child is to be placed for adoption, as follows:

  1. There needs to be a distinction between direct contact with siblings and direct contact with birth parents.
  2. The risk of an order for contact deterring potential adopters cannot be the determining factor in every case. There will be cases – like Re S – where the risk of deterring adopters will lead the court to decide there should be no order for direct contact, but the court will need to see evidence that this is a real risk for children and not just a theoretical or generic risk. 
  3. The court may consider making an order that allows for some flexibility in birth family contact depending on how things are going as the child settles with prospective adopters, or setting a minimum level of contact  or it might consider in cases where no order is made recording its views and expectations for contact as non-legally binding recitals to the order.

Whether you are an adoptive parent or a birth parent our team is here to assist you with sensitivity with the adoption process. Contact Helen on 020 8290 7955 or email enquiries@wellerslawgroup.com

Establishing Water Unite as a Charity

Posted on by Peter Spencer

In October 2024 Wellers Law Group successfully registered Water Unite as a charity with the Charity Commission. Water Unite are a grant-maker but also invest into a social investment fund ‘Water Unite Impact’, a fund established by Water Unite and Wellers’ investment management arm, Wellers Impact, which makes investments that align with Water Unite’s charitable objects.

Background

To give some context to this registration, in 2014, the Law Commission published a report on social investments being undertaken by charities following concerns regarding perceived “legal barriers” in the sector.

These barriers included cases such as Cowan v Scargill (1985) in which the High Court held that trustees must prioritise the “financial interests” of the beneficiaries above ethical considerations as well as the lack of an explicit statutory power allowing charities to make investments for both financial return and to achieve a social outcome.

The Law Commission’s report confirmed that this context had led to a “chilling effect” on trustees’ willingness to invest in social enterprises and recommended that a new power be granted to charities to specifically allow them to make social investments. As a result, the Charities (Protection of Social Investments Act) Act 2016 was enshrined in law.

The 2016 Act and other initiatives within the sector have led to considerable growth in the social investment space, with the value of the UK social investment market rising from around £830 million in 2011 to over £10 billion in 2023.

With this significant growth and the opportunities these afforded, Water Unite approached our firm and Wellers Impact, to establish both:-

  • Water Unite as a grant-making charity with the charitable purposes of tackling global water poverty, supporting sanitation projects and reducing plastic pollution in developing countries; and
  • A social impact fund (Water Unite Impact (WUI)) that invests in Small to Medium sized Enterprises (SMEs) globally, including the Global South, with the aim of both achieving both a financial return and furthering Water Unite’s charitable purposes.

WUI was to be established on a blended finance model, whereby Water Unite and other grant-making Charities would, through their investment, take on a greater level of risk (‘Catalytic Capital’) so as to attract Development Finance Institutions (DFIs) and other institutional investors, who ‘but-for’ the Catalytic Capital would not otherwise invest in WUI and make other social investments (the ‘But-For Principle’). 

Flow of Funds Structure

We structured Water Unite and WUI so that:-

  • corporates and individuals can make donations to Water Unite and obtain the relevant tax benefits in doing so. Water Unite looks, in particular, to attract donations from retailers through a micro-levy on sales of goods.

For example Co-op, Robinsons and Elior (amongst other – see a full list of Water Unite’s corporate partners here) have pledged a donation of 1p from every bottle of water sold;

  • Water Unite, charities, DFIs and other institutional investors can invest in WUI to both achieve a financial return, create impact in furtherance of WU’s objects and use those returns in furtherance of their own purposes;

Flow of Funds illustration:

Flow of funds 1

Decision Making Structure

With regard to decision-making powers, Water Unite and Wellers Impact entered into an agreement (the WUI Agreement) whereby:-

Water Unite have the right for individuals with the relevant skills and experience to attend WUI investment committee meetings with the purpose of:-

  • ensuring that investments being considered, further WU’s charitable purposes; and
  • reporting the social impact achieved by WUI back to the WU Board of Trustees.

decision making structure

Outcome

Water Unite achieved charitable status in October 2024 and WUI have as of today’s date made onward social investments in some of the following small to medium sized enterprises (SMEs):-

outcome

To further describe the activities of one partner, Jibu pairs financing with an innovative franchise model to empower entrepreneurs to provide clean drinking water for their communities.

With decentralised, on-site production, Jibu franchises are able to sell high volumes of water directly from their retail points to end-customers across Rwanda, Uganda, Kenya, Ghana, Tanzania, DRC, Zambia and Burundi.

For further information please see Water Unite’s Impact Report here

We are also very pleased to announce that the US International Development Finance Corporation (DFC) have made a commitment in principle of US$7.5million to WUI US Government Backs Water Unite Impact to Fund the Water Sector’s Missing Middle in Emerging Markets exemplifying that the But-For Principle is achieving its purpose. We wish Water Unite well for the future and continue to provide ongoing legal support.

If you are looking to establish a Charitable Foundation with an innovative financing model or an existing Foundation looking to undertake social investments, please do get in touch.

Contact Peter Spencer on 020 7481 6390

Or email enquiries@wellerslawgroup.com

What is Reasonable Financial Provision?

Posted on by Sasha Burl

What is ‘reasonable financial provision’ under the Inheritance (Provision for Family and Dependants) Act 1975 (‘the Act’) and what exactly is taken into consideration when making a claim?

The Act enables certain people who have not been left sufficient monies under a Will to bring a claim for reasonable financial provision from the Deceased’s Estate.

The Act sets out who is eligible to apply. They will need to be a “connected person” which includes a spouse or civil partner, a former spouse or civil partner, a child of the Deceased, a partner of the Deceased or any other person who was being financial maintained by the Deceased immediately before their death.

In a recent case, Wellers were instructed by Executors of an Estate to defend a claim made by the Deceased’s relatives who claimed that the Deceased was providing for their family financially before her death and that without any financial provision from the Estate, they would be living in poverty. They were able to bring a claim as “…any other person who was being financial maintained by the Deceased immediately before their death…”

The first question was whether financial provision was being made before the Deceased’s death, and if so, how much. We also needed to consider whether the payments being made immediately before death were considered reasonable financial provision. Reasonable financial provision is defined in the Act as “…such financial provision as it would be reasonable in all the circumstances of the case for the applicant to receive for his maintenance…”

Although the Claimants were able to show that the Deceased had in fact been making payments to them, they could not show that the payments being made amounted to reasonable financial provision as they were unable to produce evidence of their income and expenditure showing their needs.

There were also unable to show that regular payments were being made immediately before the Deceased’s death. In fact, the evidence revealed that no payments had been made by the Deceased to the Claimants for six months prior to death so the Court concluded that the limited payments made to the Claimants by the Deceased would not amount to reasonable financial provision based on the evidence supplied.

The Claimants produced thousands of pages of bank statements, which simply did not support their claim that they had been receiving any significant or regular payment from the Deceased before her death. The Claimants failed to show that any payments they had been receiving prior to the Deceased’s death amounted to a contribution towards their reasonable needs. 

Due to the Claimants lack of evidence in support of their claim, we made an application for the claim to be struck out on the basis that the Claimants did not have a real prospect of success. This application was successful, and the Claimants were ordered to pay our clients’ costs.

As stated above, for a Claimant to be successful in a claim for financial provision on the basis that they were being financially supported by the Deceased, they must establish that they are a “connected person” and then satisfy all other requirements under the Inheritance Act.

Every case is different, and what may be established as reasonable financial provision in one case, does not necessarily set the threshold for reasonable financial provision in another. The Court is required to consider all of the circumstances of a case to include the relationship the Claimant had with the Deceased, the financial position of them before the Deceased died, the financial position of the Claimant after the Deceased’s death and the financial circumstances of all beneficiaries.

Therefore, there is no specific threshold for what is deemed as reasonable financial provision. Every case should be assessed on its own merit, taking into consideration the circumstances of the case and potentially the financial position before and after the Deceased’s death, of all parties involved.  

Here at Wellers, we can help you navigate through these often difficult and sensitive claims whilst protecting your interests as each claim is considered carefully on a case-by-case basis.  Do not hesitate to contact Sasha Burl today on 01732 446372 or email enquiries@wellerslawgroup.com

Busting myths and misconceptions about Trusts

Posted on by Tara Edwards

Trusts can be an incredibly helpful tool when used correctly. They can be utilised for inheritance tax planning, family estate planning, tax mitigation, asset protection, to name but a few. However, we often find that people rely on common myths and misconceptions about trusts as a whole when deciding whether they are suitable for them, and these myths and misconceptions can be very misleading.

Before we dive into things, here’s a bit of background on Trusts –

Trusts can be created during your lifetime, via your Will and even by the beneficiaries in your Will, if they choose to execute a Deed of Variation. A Deed of Variation is a document that can be drawn up within 2 years of the date of death, which allows beneficiaries to alter their entitlement under the Will of the deceased person. A beneficiary could for example choose to set up a Trust for the benefit of their children, rather than receiving the inheritance themselves and it is then treated as if this came directly from the testator/testatrix.

Trusts, whether established during your lifetime or on your death, come in various shapes and sizes, which leads us on to our first common misconception: –

Trusts are one size fits all

It appears that a common belief is that a Trust is a one size fits all arrangement, whereas in reality, Trusts are a highly customisable tool that can be crafted in ways that are specific to each person’s requirements. Professional expertise is essential in ensuring that the Trust you are setting up is perfectly tailored to meet your personal circumstances and requirements

Trusts are only for the super wealthy

This is a comment we hear a lot but one that is not strictly true. Of course, there are costs associated with setting up and managing a trust, however, you could set up a trust with as little at £10 in it. These are known as Pilot Trusts and can be set up in preparation for assets to be transferred into in the future.

Trusts can also be used for asset protection, regardless of how big or small the asset(s). Trusts such as Life Interest Trusts can be ideal in scenarios such as second marriages, or when one spouse passes away and wants to ensure that some, or all, of their estate is protected for their ultimate beneficiaries, while also still providing for their widow.

Trusts are a tax avoidance scheme

The above is a very common misconception, normally in conjunction with point 2, however, Trusts are not a magical tax avoidance scheme. Can Trusts be utilised in effective tax planning in order to mitigate inheritance tax, yes, when used correctly, however, Trusts come with their own regimes and are subject to income tax and capital gains tax in similar ways to how a person is. Trusts even have additional tax charges such as 10-year anniversary charges and exit charges.

Furthermore, depending on the type of trust you are setting up, and how much you are gifting into the trust, you could potentially face a lifetime inheritance tax charge of 20% immediately upon gifting. This would be the case if you gift more than your available Nil Rate Band worth of assets into the Trust. The current Nil Rate Band is £325,000, so if you have made no gifts in the 7 years prior to setting up the Trust, then you can gift the full Nil Rate Band into the Trust without incurring a lifetime inheritance tax charge. If however, for example you gift £400,000 into the Trust, then you would be charged 20% on the £75,000 over the Nil Rate Band.

If spouses are both gifting into a Trust, both of their Nil Rate Bands can be utilised, so a total of £650,000 could potentially be gifted into the Trust without incurring the 20% lifetime inheritance tax charge.

You would then have to wait 7 years for this gift to be removed from your estate and to then be able to gift a further Nil Rate Sum balance in the Trust without incurring the lifetime tax charge.

I can give away my assets but still benefit from them

The government has a set of anti-avoidance legislation known as the Gifts with Reservation of Benefits rules. These state that a person cannot dispose of an asset e.g. gifting it to someone or into a trust, and retain a benefit from the asset, if their intention is to remove it from their estate, regardless of if they survive past 7 years.

 An idea that clients bring forward regularly is along the lines of ‘’my friend told me to just put our home into a trust or into our kids’ names, continue to live there and then we wont be taxed on it when we die’’ and this is categorically wrong. If you are to gift your main residence either directly to your children, or into a Trust and intend to still live at the property for free, then the whole value of your home would still be included in your estate for inheritance tax purposes, regardless of how long ago you gifted it away. This can cause massive problems for your estate, since the asset doesn’t legally belong to you, so therefore your estate does not have control over selling it to pay for the possible inheritance tax bill your estate could be liable for. The only way around this would be to pay a full market rent for the time that you are still living in the property that you have gifted away, but this is often not something people wish to do.

The same applies for if you gift assets such as cash into a Trust. If you were to benefit from the Trust that you set up, this is known as a Settlor Interested trust, because you as the creator (Settlor) of the trust are still receiving an interest in the Trust, and therefore the value of your gift would still be included in your estate upon your death. If you want the value of the gift to be removed from your estate after 7 years, then you cannot receive any benefit from it.

As soon as you give away your assets, you lose control

Now this ultimately depends how you intend to gift your assets. If you are outright gifting an asset to someone, then yes you would lose control over what happens with that asset going forward. However, if you were to gift assets into a Trust, for the benefit of your chosen beneficiaries, you can still retain control over those assets during your lifetime, by appointing yourself as a Trustee of the Trust upon creation.

It is still important to remember that you cannot retain a benefit from the trust while also removing it from your estate, however, simply acting as a trustee does not provide you with any benefit from the Trust, it simply allows you to make decisions regarding the Trusts assets and how they are to be utilised and distributed amongst your pool of beneficiaries. This could be especially useful if for example you are wanting to benefit your children and/or grandchildren, but you don’t fully trust them to be responsible with the funds absolutely. You could opt to put your assets into the Trust and then when you feel it appropriate to use the assets to benefit your beneficiaries, you can make the decision to do so.

Considering a Trust ?

Due to many of the above points, people often do not fully consider Trusts when it comes to estate planning. You do not need to have a complicated family situation or be particularly wealthy in order to benefit from the use of Trusts. Trusts are a flexible and practical tool to be used for planning, protecting, safeguarding and efficiently managing your estate.

If you wish to explore more about how a trust might work for you and your family, please get in touch with a member of our team at enquiries@wellerslawgroup.com or contact Tara directly at tara.edwards@wellerslawgroup.com

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