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Section 32 of the comes into effect on 1 July 2014 (by virtue of ). The section applies to all sales/leases closing on or after 1 July 2014, irrespective of the date of the contract.

Section 32 introduces a number of important changes to the manner in which rates liabilities are to be treated, namely:

• It imposes a statutory obligation on a vendor to notify the rating authority that a sale has taken place and to discharge all arrears for which the vendor is liable (that is, six years). Where the rates due by the vendor are not discharged, those unpaid rates will be a charge on the property for a period of 12 years.
• It obliges a landlord to notify the rating authority that a tenant has transferred its interest (within two weeks of the assignment).
• It provides that a landlord will be liable “for a charge equivalent to no more than two years of the outstanding rates due” by a previous tenant where (a) the rating authority has not been notified by the landlord of an assignment, and (b) the tenant did not discharge the arrears on the assignment.

Any such charge will affect the property for a period of 12 years.

Leaving aside the statutory obligation to notify the rating authority of a sale, in practice, the first point should not have a material impact on day-to-day conveyancing as, generally, it is the case that all arrears of rates are discharged in conjunction with completion, the only exception to the foregoing being sales by receivers where the current practice until now has been to deal with rates arrears on the basis of the purchaser's legal liability for same (that is, up to two years’ arrears). This practice will no longer be possible, as any unpaid arrears will be a charge on the property.

The principal change, as a matter of law, is the potential for arrears of rates owed by a tenant to become a charge on the landlord's interest consequent on an assignment where any rates arrears have not been discharged. Practitioners should advise their landlord clients of the risk of consenting to an assignment unless the tenant provides evidence that all rates have been paid up to date.

In light of the provision for a charge, consideration may have to be given on the purchase of investment properties to enquiring as to the payment of rates by tenants where there has been an assignment of their lease post 1 July 2014, in order to establish that no charge may have arisen under this section. This will need to be considered further.

NB: While, for ease, this note refers to landlord and tenant situations, these are not terms used in the section, and practitioners should consider the application of the section to other circumstances where the owner is not the rated occupier.

The committee will continue to monitor this act and will issue further guidelines as required.