virtual round table - mhmjapan...virtual round table. 2 3 ruc e 2014 atrick, who heads cleaver...

Construction & Real Estate 2014

virtual round table

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ROUND TABLE: CONSTRUCTION & REAL ESTATE 2014

atrick, who heads Cleaver Fulton Rankin’s Construction and Dispute Resolution teams, specialises in both contentious and non-contentious construction law which sets him apart from

most other lawyers in this jurisdiction. Patrick’s clients include project companies, banks, government bodies, contractors and construction professionals.

On the non-contentious side, Patrick has been involved in many high profile projects, for example, Patrick was the lead advisor to Titanic Quarter Limited in the construction of the recently completed Titanic Film Studios and he also advised Harcourt Construction (NI) Limited in their construction of the £90million iconic Titanic Belfast. Patrick has also enjoyed working on the new Lyric Theatre, the new PRONI headquarters and the new Belfast Met campus at Titanic Quarter.

In respect of contentious construction, Patrick regularly represents clients in the Commercial Court however in recent years has seen his practice develop into alternative dispute resolution and therefore has extensive experience in Mediation, Adjudication and Arbitration. Patrick has enjoyed success in enforcing adjudicator’s decisions in the Commercial Court.

eigh Duthie has over 15 years’ experience in the construction space and has acted on major domestic and cross-border construction claims. Leigh is widely recognised for his construction litigation

experience and his ability to lead on major projects. His practice focuses on acting for major Australian and multinational corporations in relation to complex contractual and non-contractual claims arising from infrastructure projects, defects in plant, and faults in heavy mining machinery. Leigh’s experience also includes serving as Baker & McKenzie’s Melbourne office Managing Partner.

MEET THE

Leigh Duthie - Baker & McKenzieT: +61 3 9 617 4254E: [email protected]

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Patrick Fleming - Cleaver Fulton RankinT: +44 (0) 28 9027 1328E: [email protected]

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Chambers & Partners ranks Cleaver Fulton Rankin as a Band 1 Construction firm with Patrick Fleming described as a “standout performer”. Cleaver Fulton Rankin is a Legal 500 top-tier ranked Construction firm described 500 as “excellent at attributing the correct level of expertise to the service requested.”

ohn Lurie is a partner in the Construction and Design Group. His practice focuses on risk management, procurement and dispute resolution advice in connection with construction and

engineering projects.

He represents owners, developers, contractors, investors, insurers and banks involved with projects in the United Kingdom, Continental Europe, the Middle East, Africa and Asia.

Mr Lurie drafts, negotiates and advises on building and engineering contracts, professional appointments, bonds, guarantees, warranties and ancillary documents. He regularly works with industry standard contracts including the FIDIC, NEC, JCT and ICE forms as well as bespoke forms of contract.

He also provides domestic and international dispute resolution advice in relation to adjudication, arbitration and litigation proceedings. In particular, he advises on international arbitration conducted under the rules of bodies including the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA) and the United Nations Commission on International Trade Law (UNCITRAL).

John Lurie - Dorsey & WhitneyT: +44 (0) 20 7031 3784E: [email protected]

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he principal practice areas of Eriko Ozawa are real estate and structured finance, with particular focus on property financing, private real estate funds and real estate trusts. She advises on all types

of domestic and cross-border real estate related transactions, such as real estate investments and financings, acquisitions, sales and real estate fund establishment and management. She has been recognized by various trade publications as a leading practitioner in both real estate and structured financing, and clients have highly spoken of her “high level of skill of complex deals”, “insightful business sense,” and hands-on approach to transactions.

000 to date : Gide law firm- Admitted to the Paris Bar since 2001. Graduated with a post graduate in French commercial law and with a LLM in

German Law - Advising and assisting international investors: acquisitions and arbitration involving underlying real estate assets (asset deals, share deals, joint-ventures)-Advising and assisting developers and investors: projects involving asset construc-tion, redevelopment or renovation- Advising and assisting property owners, asset management

MEET THE

Carol Santoni - Gide Loyrette Nouel A.A.R.P.I.T: +33 (0)1 40 75 22 15E: [email protected]

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Eriko Ozawa - Mori Hamada & MatsumotoT: +81 3 5220 1816E: [email protected]

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ark Fraser is Managing Partner of Taylor Wessing (Middle East) LLP and head of its construction and dispute resolution practices. Mark has advised on a range of development and

infrastructure projects in the Middle East, Asia and Europe covering the hotel and entertainment, transportation and energy sectors.

Mark has practiced in the UK, Hong Kong, Singapore, Thailand and Dubai over the past 27 years.

Outside of legal work Mark’s interests include football, rugby, guitar and salsa.

Mark Fraser - Taylor Wessing (Middle East) LLPT: +971 (0)4 309 1004E: [email protected]

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iego Chighizola specialises in banking and finance, real estate development and financing, capital markets, and M&A. He has drafted and negotiated domestic and cross-border agreements for

structured financings, syndicated loans, derivatives, acquisitions and joint ventures. He joined Marval, O’Farrell & Mairal in 2001 and became a partner in 2012. He worked in New York as foreign associate at Cleary, Gottlieb, Steen & Hamilton from 2004-2005. He graduated in 2001 as a lawyer from the Catholic University of Argentina, and obtained in 2004 a Masters in Law from Columbia University School of Law, New York and in 2007 a Masters in Finance from University of CEMA. He is admitted to the New York State Bar and is a member of the City of Buenos Aires Bar. He currently teaches Business Law at University of San Andrés and gives presentations at University of CEMA and Austral University.

Diego A. Chighizola - Marval, O’ Farrell & MairalT: +54 11 4310 0100E: [email protected]

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ew York office. Mr. Charney’s practice includes ongoing representation of contractors that are among the top ten as reported by Engineering News Record. Mr. Charney’s

background couples extensive academic and hands-on experience in the construction industry with decades of experience in litigating for and providing legal counsel to contractors and developers.

Throughout Mr. Charney’s career, he has handled numerous construction related disputes, in court, arbitration or in alternative dispute forums. Mr. Charney frequently handles multi-million dollar delay, lien, default, equitable adjustment, termination and construction and design defect matters. Mr. Charney’s experience includes the representation of contractors and owners in connection with some of the most prominent projects built throughout the United States. He represented the developer of the largest private building construction project ever to take place in New York City and represented contractors and design/builders in connection with numerous professional sports facilities (such as the Arthur Ashe tennis stadium and several National Football League and Major League Baseball stadiums). Mr. Charney led the Associated General Contractors of America to establish a task force to study mold related issues, and then vice-chaired that task force as it drafted the industry’s first guide to understanding this problem.

Before joining Peckar & Abramson, Mr. Charney served as Eastern Division Counsel for Turner Construction Company. Mr. Charney was employed by Turner Construction Company for nearly a decade, prior to entering private legal practice, and served in a number of operations related roles, including field superintendent, cost and scheduling engineer, and manager of litigation and claims, before serving as counsel.

Mr. Charney is a member of the Associated General Contractors of America and serves on both the Contract Documents and Risk Management Committees of this

MEET THE

Steven M. Charney - Peckar & AbramsonT: +1 212 382 0909E: [email protected]

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EXPERTS

leading national organization. He has often published commentary regarding issues applicable to the construction and development industries, including commentary in New York Construction. He is a member of the Association of the Bar of the City of New York and served on the Construction Law Subcommittee of that association. He is also a member of the American Bar Association and the New York State Bar Association.

In view of his accomplishments, Mr. Charney has been repeatedly recognized by Chambers USA, as a leading attorney in the field of Construction Law in New York. He has also been repeatedly named to Who’s Who of International Construction Lawyers, selected for inclusion in the publication Best Lawyers in America, and listed in New York Magazine, as a top construction attorney in the New York, New Jersey and Connecticut area. Mr. Charney is also a fellow in the American College of Construction Lawyers.

Mr. Charney is a graduate of Seton Hall University School of Law, where he attended as an evening student while working fulltime in the construction industry. In 1983, Mr. Charney received a Master of Science degree in construction management from the School of Civil Engineering at New Jersey Institute of Technology (where he also studied as an evening student while working full-time in the construction industry). Mr. Charney also holds a bachelor’s degree in accounting from Syracuse University, with a minor in construction technologies.

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1.What are the main opportunities and challenges currently facing the real estate and construction indus-tries?

Maher: The primary challenge is for government and industry to devel-op new cost-saving measures that in-crease the competitiveness of Austral-ia’s much-needed public infrastructure projects and attractiveness to foreign investors. By increasing productiv-ity, greater value for money outcomes will be achieved which can only be of long-term benefit for the public. With a glut of desperately-needed public in-frastructure projects – there is plenty to keep investors and contractors alike content for the foreseeable future.

Notwithstanding the opportunities, our clients are increasingly concerned about rising costs in the development sector and whether the planned pro-jects are adequate to meet Australia’s anticipated growth. The Australian Government Productivity Commission draft report on this issue highlights sig-nificant increases in the cost of con-

structing major public infrastructure due to rising fuel and labour costs on top of increased land values. In addi-tion, Australia’s bid costs are among the highest in the developed world.

Maguire: The real estate sector in Northern Ireland is still facing the chal-lenges arising from the downturn in the market in 2007, although we are seeing a marked increase in the volume and value of residential property transac-tions which is very encouraging.

We are also facing the challenges which will arise in April 2015 from the trans-fer of powers to local councils. Many functions will transfer to 11 new coun-cils from central government depart-ments, including planning, roads, ur-ban regeneration, community develop-ment, housing, local economic devel-opment and local tourism. The trans-fer will also include the delivery of the EU Rural Development Programme, spot listing of buildings and greater in-volvement of local government in local sports decisions.

Whilst the construction sector suffered badly during the financial crisis, there has been a brightening in the market over the past year. Although output is growing slowly, the industry is far from recovered. Overseas investors have tak-en an extensive interest in the UK with investors from China, the Middle East, Europe and the United States assisting growth.

Opportunities for the construction in-dustry currently lie in the residential market in the UK and also large infra-structure projects.

Although there are positive signs of recovery, the wounds of the economic downturn have left significant scars on the sector. There is still a sense of fear and uncertainty stagnating growth.

Lurie: London’s ageing infrastructure is desperately in need of a major over-haul. This includes, in particular, rail-ways, roads, airports, water and energy distribution networks. There is also an acute shortage of housing. Oppor-tunities will continue to arise for both

Construction & Real Estate 2014

domestic and international operators in the energy, transport, infrastructure and housing sectors.

Ozawa: The leading news for the Jap-anese real estate and construction in-dustries in the past year has undoubt-edly been Tokyo’s hosting of the 2020 Summer Olympics, which is expected to bring tremendous economic oppor-tunities to Japan.

Since before Tokyo’s winning bid, these industries have been facing rising con-struction costs due to labour shortage and increased cost of building materi-als caused partly by the Tohoku earth-quake disaster reconstruction needs. However, the upcoming Tokyo Olym-pics 2020 are expected to boost these industries through construction activi-ties and spending necessary to refur-bish and build infrastructure and other urban facilities of the Great Tokyo Area.

2.Have there been any recent regula-tory changes or interesting devel-opments in your jurisdiction?

In this roundtable we spoke with eight experts from around the world to discuss the latest changes and developments in Con-struction & Real Estate. Among the highlighted topics our chosen experts outline the main opportunities and challenges cur-rently facing the industry, discuss infrastructure for Tokyo 2020 Olympics and outline regulatory changes affecting the UK through to Australia.

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area, it intends to contain soaring rent prices. Some exceptions are provided by law to take into account specific fea-turing such as a garden or a balcony.

But for now, it is still not clear how the reference rent will be computed and upon which parameters, thus leading to an uncertainty on the rental market profitability. This topic is to be followed up.

Chighizola: Yes, according to Law 26,737, enacted on 2012, foreign own-ership of rural land shall not exceed 15 per cent of the total amount of “rural lands” in the Argentine territory. This percentage is to be calculated also in re-lation to the territory of the province or municipality where the relevant lands are located.

In addition, ownership by the same foreign owner (i.e. foreign individuals, foreign entities or local entities con-trolled by a foreign person) shall not exceed 1,000 hectares of the “core area”, or the “equivalent surface” determined according to the location of the lands. The Interministerial Council of Rural Lands (Consejo Interministerial de Tier-ras Rurales), the enforcement agency of the new law, has defined the “equivalent

Maher: An important regulatory change that we expect to see in the near future is the reintroduction by the Federal Government of the Australian Build-ing and Construction Commission (ABCC). The ABCC was established in 2005 as an industry watchdog tasked with monitoring the prevailing work-place laws and to ensure that building work was carried out fairly, efficiently and productively. With recent reports of corruption and criminal activity in the construction industry, the Federal Government has flagged its reintroduc-tion (it was abolished in 2012 under the previous Government).

However, despite the wide-ranging powers the ABCC possessed between 2005 and 2012, there was criticism at the lack of actual referrals it made to police and subsequent convictions for criminal activity within the construc-tion industry. We expect to see any reincarnated ABCC to be focused on avoiding similar criticism.

Maguire: From April 2014 there are changes to the ability of commercial property buyers to claim Capital Al-lowances. Changes will affect purchas-ers of second hand property containing plant and machinery and may prevent

them from obtaining capital allowanc-es. Capital allowances will only be avail-able to a purchaser of second hand fix-tures if the past owner had “pooled” the relevant expenditure for capital allow-ance purposes in a chargeable period when it owned the property. Purchas-ers need to be aware that they will lose valuable tax relief or maybe even suf-fer a reduction in property value where a Vendor has not pooled expenditure. The new challenge for Solicitors and other professional advisors is that they will be more at risk than ever if they fail to warn their clients of the impacts of these changes.

The UK Office of Government Com-merce has recommended the NEC 3 form of contract for all public sec-tor construction projects. NEC 3 has therefore become the standard form of contract for public sector procurement in Northern Ireland.

The recent sale of the National As-set Management Agency (“NAMA”) Northern Ireland property loan port-folio to Cerberus Capital reportedly for over £1 billion is predicted to increase certainty and confidence in the market.

Lurie: The public procurement regime

is being updated with a view to bring-ing clarity and efficiency to the procure-ment process. In particular, the regime will now apply to lower value contracts in order to promote small business participation in government projects. Also, the emphasis on Building Infor-mation Modelling (BIM) continues to grow, with the United Kingdom gov-ernment requiring all government pro-jects to utilise fully collaborative BIM by 2016. In relation to the English courts, certain refinements have been made to litigation processes including measures to streamline litigation costs, through budgeting and electronic discovery. Much of this is directed towards fur-ther enhancing England’s reputation, as a jurisdiction of choice, for the resolu-tion of both domestic and international disputes.

Santoni: Yes. The so-called “loi Alur”, which has already entered into force, aims at regulating the problem of high-level rents of residential premises in the most important cities in France, which has become a burden for most middle-class homes.

Through a scheme boarding rent prices with a maximum and a minimum com-puted from a reference rent in a bounded

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Parties to building projects should en-sure that they have the appropriate sys-tems in place to comply with the re-quirements of the Personal Property Securities Act 2009 (Cth) in relation to the registration of security interests. In particular, Owners need to thoroughly analyse their rights and interests in a project to ensure they meet their ob-ligations otherwise they will lose out in insolvency. It is important to real-ise that it is not only simple charges or liens that must be registered, but rights under contract, such as step-in rights that enable property seizure, as well.

In New South Wales, proposed amend-ments to the Building and Construction Industry Security of Payment Amend-ment Act 2013 (NSW) require the Small Business Commissioner to oversee a statutory trust fund in which head con-tractors will be required to pay their re-tention amounts. When disputes arise over releases, the Commissioner will facilitate mediation between parties be-fore the matter proceeds to arbitration.

Maguire: It is not possible in North-ern Ireland to contract out of business tenancies legislation, as it would be in England and Wales, and this should al-ways be borne in mind when granting

surface” considering: (i) the propor-tion of the “rural lands” in relation to the municipality, department and prov-ince; and (ii) the potential and quality of the rural lands for their use and ex-ploitation.

Ozawa: I would pick up three things: the amendment of the Real Estate Spec-ified Joint Enterprise Law (the “RES-JEL”), the progress towards launching a healthcare J-REIT and the submis-sion of a bill to legalise casino gambling within an integrated resort.

Effective 20 December 2013, the RES-JEL was amended to allow a new GK-TK structure, a typical real estate in-vestment structure in Japan, in acquir-ing outright ownership of a proper-ty. Before this amendment, a GK-TK structure could be used only to acquire a beneficial interest in a trust of a real property. Although this is a welcome development, the new GK-TK struc-ture will be subject to a different set of regulations and tax requirements and will enjoy fewer tax benefits than other structures. Therefore, the new GK-TK structure is not likely to become a first option for investors.

In March 2013, a government-backed

committee published a report encour-aging the launch of J-REITs focusing on nursing homes and senior housing, and the Tokyo Stock Exchange and the As-sociation for Real Estate Securitization (ARES) have been working towards this end. In fact, there are several ongoing projects to set up healthcare J-REITs or to provide bridging funds and the mar-ket anticipates the initial public offering of several healthcare J-REITs in 2014.

In December 2013, a bill on the “Act on the Promotion of the Development of Specified Integrated Resort Facility Areas” was submitted to the Diet. Al-though the proposed bill only provides a framework for promoting the devel-opment of integrated resorts, if this bill is enacted into law, this could lead to large-scale development projects in ap-proved areas in Japan.

Fraser: There have been a number of regulatory changes and developments relating to real estate in the UAE and, in particular, Dubai over the last six months. For example, the Central Bank of the UAE has introduced mortgage regulations which, inter alia, limit the loan to value and debt to income ratio criteria used in mortgage lending; the government of Dubai has amended the

fixed level of rent increases which can be imposed on tenants by landlords, in-creased the transfer fees payable to it by parties to real estate sales and purchases, and may be moving towards ultimately prohibiting offshore companies from owning real estate in the Emirate; and, most recently, the Dubai Land Depart-ment’s requirement that all real estate sale and purchases are to be completed using a standard form, which could be considered a move to reduce parties’ rights to contract freely.

3.Are there any compliance issues or potential pitfalls that firms need to be cautious about?

Maher: The rising cost of obtaining a project bond has become a recent issue for local contractors. Securing finan-cial guarantees from banks, of between 5-10 per cent of the Contract’s total value reduces the remaining borrowing capacity of the construction company. Where bonds are called on by owners for the Contractor’s failures (or alleged failures) the cost of insurance and bank-ing rises and strains the contractor’s business. As local contractors struggle with these costs, large foreign construc-tion companies, whose cost of security is much lower, are moving in.

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For example, most contractors under-stand, at least in a general sense, that if they bill for work that is inflated or not performed, they are probably violat-ing some state/federal regulation which governs false claims. Few contractors have the insight to realize that these downstream practices, which may seem benign, can create the same catastroph-ic results.

Contractors, for example, rarely under-stand that even though the owner ap-proves the initially agreed upon rates, they may still be subject to future au-dit. If that were to occur and an audit showed that profit or fee enhancement had been included in the rates, the con-tractor could be found guilty of false claims act violations.

Similarly, most contractors conceptu-ally understand that it is ill-advised to circumvent state/federal DBE require-ments on a publically funded project. However, few understand that they may be dragged into a disastrous false-claims mess by submitting payment applications that seek compensation where a DBE entity merely serves as a pass-through. That is to say, most pub-lic work contractors realise that a low-level DBE may be making a false claim

of taking a lease of commercial proper-ty. Advice should always be taken form a solicitor when dealing with business tenancy issues, so as not to miss any deadlines imposed by the legislation here.

There are a number of key issues that construction professionals should be aware of in order to avoid pitfalls. As construction projects are high risk, there are financial, infrastructural, lo-gistical and ethical considerations to be made at an early stage. Poor pro-curement strategy is a key concern in a market where there is aggressive com-petition for the somewhat limited work available.

Awareness and good relationship of sub-contractors is an important element for contractors to reduce risk. Delays and disruption often have serious financial consequences. It is therefore important to have knowledge of dispute resolution mechanisms.

Chighizola: In principle, acquisition of real property in Argentina by a foreign entity (in particular, when more than one asset is being acquired) may require the registration of a branch or represen-tation of such foreign entity before the

local Public Registry of Commerce.

Another requirement to take into ac-count is that, cross-border financings to Argentine residents – as a general rule – carry the obligation to repatriate and liquidate the funds into the foreign exchange market as well as the main-tenance for a one-year minimum term and, unless an exception applies, are also subject to the 30 per cent manda-tory deposit. However, there is an ex-ception commonly used for financing, i.e. the acquisition of real estate that requires the loan to have an average term (for the repayment schedule for principal and interests) of not less than two years and the investment of 100 per cent of the proceeds in fixed assets or inventory.

Ozawa: Investors should carefully con-sider Japan’s Financial Instruments and Exchange Law (the “FIEL”) which reg-ulates securities and should procure the necessary registered business op-erators because the two typical invest-ment structures (i.e., TMK structure and GK-TK structure) in the current Japanese real estate market involve var-ious financial instruments that are cat-egorised as “securities” under the FIEL. For the typical structures, please refer

to Question 15 below.

In the Japanese market, investments in commercial real property often take the form of a beneficial interest in a trust of a real property, rather than an outright purchase of the real property. A trust beneficial interest is a “security” under the FIEL, subjecting the activities of the acquisition SPCs (i.e., TMK or GK) and their asset managers to the FIEL.

Also, most of the financing methods used in a TMK or a GK-TK structure (such as preferred shares and speci-fied bonds in a TMK structure, and investor’s interest under a tokumei ku-miai agreement) qualify as “securities.” Therefore, all dealings with these secu-rities are subject to the FIEL.

Sippy: In the past five years, the major-ity of large construction projects that have actually gotten out of the ground have involved state or federal dollars. We are noticing that while contractors often understand the general require-ments and restrictions that govern pro-jects which use public funds, many are not aware of the intricacies of these regulations or how their day-to-day ap-plications can create or alleviate major problems down the road.

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In addition, successive Australian gov-ernments have been keen to facilitate foreign investment especially in new real estate development projects. Pre-2008 foreign investors were limited to purchasing 50 per cent of dwelling in new projects, however, that limit has since been removed. For investors in commercial real estate, all projects un-der $54 million are now exempt from foreign review board approval. Most state governments offer further incen-tive by significantly reducing stamp duty on off-the-plan sales.

Sippy: Mediation is a low-cost process that is designed to assist parties in ne-gotiating an early settlement and avoid expensive litigation fees. The success rate is often very high because the me-diator can focus the attention of the de-cision makers on their business inter-ests and facilitate a mutually agreeable resolution without the risk and cost of litigation.

Arbitration is a similar dispute resolu-tion process in which a neutral party, or arbitrator, renders a final decision in fa-vour of one party. The primary advan-tage of arbitration is the parties’ abil-ity to select the arbitrators, assuring a trusted expert as the judge. Parties may

if it is not performing a commercially useful function. However, the upstream contractor/construction manager may also run into trouble if he or she sub-mits the invoices of the pass-through DBE contractor as support for a sworn pay application.

It is clear that most contractors under-stand that their actions are subject to a variety of rules and regulations once they accept public dollars; however, it is also clear that many contractors do not understand that many of the more nuanced and seemingly innocuous sit-uations could give rise to contractor li-ability.

4.What are the most frequent dis-putes in your jurisdiction?

Sippy: Not including personal inju-ry lawsuits arising from job site inju-ries (which are prevalent but not what we understand to be the nature of the inquiry);we frequently see in the New York City area construction related dis-putes arising from (in no particular or-der):

1. Purely commercial, payment dis-putes, often involving mechanic’s lien claims, on both public and private pro-

jects, including those regarding disput-ed scope.

2. Design defect/construction defect claims, often involving building enve-lope issues such as leaks through roof systems, curtain wall systems and the like, although design/construction de-fect claims can touch any aspect of the design and construction of a building.

3. Delay and impact/inefficiency claims, often involving unanticipated subsur-face conditions, but also related to de-sign issues or the cumulative effects of significant numbers of changes to the scope of work of the project.

4. Adjoining property owner disputes over access required to facilitate con-struction and/or damage caused by construction operations to adjoining properties.

5. Disputes arising from subcontractor performance failures.

5.What are the best methods a com-pany can employ for conflict avoid-ance and dispute resolution?

Sippy: From a compliance standpoint, the best way to avoid conflict is to have

a robust compliance program, periodic training program, occasional internal audits to gauge the effectiveness of the program, and to conduct internal in-vestigations if you suspect malfeasance. Simply put, companies must foster a culture of ethical behaviour and com-pliance. This can provide significant protection if a company ever finds itself as the target of a regulator’s investiga-tion. A company will be able to show that it took reasonable steps to prevent problems and acted appropriately when it suspected deviation from it goals.

However, it is important that a com-pany does not merely wind up its com-pliance plan like a watch and let it run. The company must continually revisit the plan and modify it to address pro-ject specific issues.

6.Can you outline the advantages and disadvantages of Alternative Dis-pute Resolution (“ADR”)?

Maher: The Australian property market has undergone a long period of growth that has increased its attraction to for-eign investors. Factors such as relative price stability and regulatory certainty provide broad incentives for overseas investors.

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real estate market is having a knock ef-fect on the rents being charged by land-lords in the two Emirates, despite many new units coming onto the market, such as an estimated 28,000 units that will be completed in Dubai in 2014. The up-turn in the real estate market in Dubai is also evident from the number of new projects being announced as well as many projects which stalled during the economic downturn being resuscitated by new developers and taken to com-pletion.

8.Do you see urbanisation as the main long-term trend?

Lurie: Urbanisation is certainly an im-portant long-term trend, especially in many of the emerging markets. Indeed, the World Bank has described urbani-sation as the defining phenomenon of the century, with the locus of this de-mographic transformation in the devel-oping world. For example, large scale urbanisation is occurring in South Asia and Africa. In more developed econo-mies, there is obviously less focus on the movement of populations from rural to urban environments. However, many suburbs are being targeted for more concentrated urban development. At the same time, appetite is growing for

also design an arbitration process that fits the specific circumstances of their dispute. With reasonable parties and a good arbitrator, arbitration is often faster and less expensive than litigation.

With that said, many believe that arbi-trators split the baby and fail to grant motions for summary judgment, whereas litigation offers assured proce-dural protections and a rigid set of well-tested rules.

7.How has the real estate market changed for 2014?

Maguire: There has been a marked in-crease in the volume and value of resi-dential transactions which is very en-couraging. This is being helped by Gov-ernment incentives for social housing, such as the Shared Neighbourhood Pro-gramme, the New Build Programme, and Improving and Maintaining Social Housing. The Northern Ireland Co-Ownership Programme continues to play an important role in this jurisdic-tion in enabling many buyers to take the first step on the property ladder.

It remains to be seen how the recent sale by NAMA of its Northern Ireland loan portfolio will impact on the local

economy.

Santoni: To the best of our knowledge, the most significant change for now in 2014 is the global volume of sales and rents of offices in the Ile-de-France region (around Paris). At the end of March 2014, the supply of immediately available office has experienced a 19 per cent surge in one year, despite an eco-nomical environmental which is still not very buoying. In 2013, the volume had decreased by 24 per cent.

A particular deal around the Coeur Défense structure, in Paris business centre La Défense, which amount is estimated around 1.3 billion Euros, counts for most of the investment in-crease experienced since the beginning of the year. However, without consid-ering this deal, the Parisian real estate market remains stable (in investment volumes and in number of deals) com-pared with last year.

Chighizola: Real estate transactions are currently stagnated attributable to the increasing foreign exchange restrictions as historically real estate transactions involving the acquisition of real prop-erty were denominated and paid in for-eign currency. Reportedly, the value of

some properties has decreased almost 40 per cent since foreign exchange re-strictions strengthened in 2011. More-over, compared to previous years and other Latin American countries, for-eign investments are at a low level and do not play a major role whether in the recovery or in the mitigation of the cur-rent crisis in real estate transactions.

Ozawa: Significant developments in Ja-pan in 2013 had positive effects on the Japanese real estate market. Among them are “Abenomics,” representing the economic policies advocated by Prime Minister Shinzo Abe, and the anticipa-tion of the upcoming Tokyo Olympics 2020. The Japanese real estate market is continuing to become more active in 2014 and to attract increasing attention domestically and from abroad. In fact, many say that the market has become highly competitive and it is often diffi-cult to win an investment opportunity.

Fraser: There was a rapid increase in real estate prices in Abu Dhabi and Dubai during 2013 and this trend has continued in 2014. A number of prop-erty consultancies have commented that real estate values in Abu Dhabi and Dubai are likely to increase by 10 to 15 per cent in 2014. The current buoyant

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portunities.

Lurie: Investment opportunities vary significantly both within and between construction markets. They also vary across different industry sectors. For example, the oil and gas sector in South Sudan offers the prospect of significant investment returns. But this must be weighed against the major risks of po-litical and military interference. Con-versely, real estate assets in London offer one of the safer investment alternatives. Clean technology and renewable forms of energy production, such as wind and solar power, are key focus areas for more environmentally friendly forms of en-ergy production. In London, skyscrap-er developments and mixed use office, retail and residential schemes are also providing unique investment oppor-tunities. Some more recent examples include the Cheesegrater building, the Battersea Power Station and Royal Al-bert Docks, all of which have attracted significant international interest.

12.What should be included in a well-drafted construction contract?

Maher: Clarity over scope and respon-sibility are key to any construction con-tract. Parties should ensure that both

more energy efficient and liveable ur-ban environments. The development of “Smart Cities”, using technology to enhance living standards, whilst reduc-ing energy consumption, traffic conges-tion and environmental pollution, is in-creasing in both developed and emerg-ing markets.

9.Where are the high growth cities?

Lurie: The fastest growing cities are in developing countries such as Brazil, In-dia, China and Nigeria. However, es-tablished cities such as New York and Tokyo are also experiencing significant growth. In the United Kingdom, Lon-don growth continues to accelerate. Other key centres include Manchester, Leeds, Birmingham, Bristol and Glas-gow. Much of this growth is facilitated by investment in key infrastructure and energy projects such as those involving railways, highways, superfast broad-band networks, airports, power plants and activities involving the exploration, extraction, processing and distribution of natural resources such as oil and gas.

10.Can you outline the incentives for real estate buyers in your jurisdic-tion?

Maguire: Northern Ireland offers many attractive incentives for those looking to do business in this jurisdiction, such as grants from Government bodies like Invest NI. However, the tax regime here is the same as in the rest of the UK, and it remains to be seen if the political landscape can change this to offer fur-ther incentives for businesses to base themselves in Northern Ireland.

Chighizola: In 2012, the Government created a Financing Program called “PRO.CRE.AR” (Programa Crédito Ar-gentino) aimed to grant 400.000 credits in total for different purposes: (i) pur-chase of land for constructing real es-tate; (ii) expansion of real estate; (iii) re-pairs and finishing real estate; and (iv) purchase of real estate. Its main charac-teristics include: (a) loans of up to AR$ 500,000; (b) interest rates from two per cent to 14 per cent; (c) instalments not exceeding 40 per cent of the debtors in-come; (d) loans granted trough raffles made by the National Lottery.

Fraser: With the current rapidly in-creasing real estate values in Abu Dhabi and Dubai there is the possibility for in-vestors to make significant capital gains without the same being subject to local taxes, unlike most Western jurisdic-

tions. In addition to rapid increases in capital investment, landlords are tak-ing advantage of the economic upturn in the UAE and the increase in demand for rental properties to maximise their income from investment properties by increasing the rent being charged to new tenants. Rents in some areas of Abu Dhabi and Dubai have increased by twenty to 30 per cent in 2014 already.

11.Which construction markets are currently providing the best invest-ment opportunities?

Maguire: Whilst the construction sec-tor in Northern Ireland was severely hit by the downturn, it is an attractive place for investment. Northern Ireland has an excellent infrastructure, high-ly educated and young workforce and competitive cost advantages. Outside of London, Northern Ireland is attract-ing the most inward investment in the UK. Companies such as Allen & Overy LLP, Seagate Technology, Bombardier Aerospace, Liberty Mutual, Citi and the Allstate Corporation have all invested in the Northern Ireland economy in re-cent years.

Further afield, investors should look to emerging markets for investment op-

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Progress Certificates” in consideration for such payments).• The Performance Terms, including: (i) force majeure; and (ii) subcontractors. The Contractor shall be responsible for the non-compliance of its subcontrac-tors. Therefore, he may not invoke any delay other than force majeure events suffered by the subcontractors.• Civil Liability clause. The Contractor shall hire a (i) Civil Liability Insurance for the Owner’s account, covering per-sonal injuries and/or property damages for any damages that may be caused in the course of execution of the work by its equipment, visitors, personnel assigned to the execution of the works and third parties in general; and a (ii) Life and Occupational Risk Insur-ance (Law No. 24,557) covering all the personnel performing duties at the works whatever the duties discharged and until their full completion.

Sippy: In a contract setting, the prom-ises that are made by one party give rise to expectations in the other party and in complex construction contracts, since there are a large number of promises exchanged, there can be many expecta-tions on both sides and much potential for disappointment. Generally, to max-imise the chances that a contractual re-

are appropriately detailed so that there is little room for disagreement when matters start turning sour.

When matters do turn sour, parties should ensure that their contracts con-tain a clear and appropriate dispute-resolution process that facilitates a res-olution fit for the parties’ needs. For instance, it may be wise to have pro-gressive determination by experts or adjudicators before escalating matters to expensive litigation or arbitration. This can significantly narrow the issues in dispute and lead to much quicker resolution. Australia has lagged be-hind other jurisdictions in incorporat-ing dispute avoidance philosophy into standard form contracts. The UK’s NEC3 and the USA’s Consensus DOCS, by comparison, have developed clear-er language and facilitated more open communication between parties. Clear drafting is particularly crucial for ex-tension of time/ variation mechanisms so that both parties understand how delays will be handled.

A liquidated damages clause will help both parties streamline any disputes and reduce transaction costs for recov-ery. Liquidated damages clauses stipu-late a specific or ascertainable amount

that will be payable by the party breach-ing the contract. This means parties can avoid timely and complex investigations into questions of quantum or remote-ness of damage, which can significantly length court hearings. When liquidat-ed damages are thoroughly considered before entering a contract both parties have a greater understanding of the risk they assume and their maximum liabil-ity. If a dispute then arises the parties are less likely to proceed to litigation.

Maguire: The importance of a well-drafted construction contract should not be underestimated.

The contract should clearly define the scope of the work. Incomplete or mis-understood plans or specifications of-ten lead to disputes. Protective col-lateral agreements such as warranties, bonds, and guarantees should always be considered. Insurances and indem-nity clauses are extremely important as well as clauses relating to payment.

Santoni: Many items are to be secured carefully in a construction contract.A part from the building’s specifica-tions itself (i.e. its technical description that needs to be scheduled to the agree-ment) so to avoid any misunderstand-

ing on the building quality, one should pay deep attention to the following:• clearly indicate which instalment of

the purchase price is to be paid to the builder upon each construction step undertaken and completed,

• organise purchase price adjustments according to the indeed built surfaces (i.e. compared to those sold),

• set penalties in case the constructor does not respect the contractual dead-line for each part of the project,

• set retentions of some purchase price instalments so to secure the end of the contract’s execution (i.e. lifting the snagging items, granting of the ad-ministrative conformity documenta-tion within an agreed period of time, etc.),

• receive external securities (joint and several bank warranty) so to secure the achievement of the construction in case of constructor’s default.

Chighizola: In a well-drafted construc-tion contract, it should be included:• The General Project Description;• A thorough description of Contrac-tor’s Services (scope of works; addition-al engineering; union aid);• Contractor´s Fees (if partial payments are agreed, the contractor could be obliged to deliver the so-called “Work

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A well-drafted contract should ideally provide for a tiered dispute resolution procedure whereby issues can be ad-dressed with less confrontation during the construction phase before the ulti-mate weapons of litigation or arbitra-tion can be invoked.

13.Why is the indemnification pro-vision such an important element in a construction contract?

Sippy: Complex construction contracts frequently exceed several hundred pag-es in length and the contracts seem to grow exponentially in length in pro-portion to the complexity of the under-lying construction project. Generally, the contract will set forth the parties’ promises and legal expectations and al-locate and balance the risks and obliga-tions among the parties. These risks and obligations will be negotiated so they can be managed, controlled or trans-ferred in order to achieve a successful and profitable Project. The indemnifi-cation provision in a construction con-tract presents a potential for windfall or disaster. The risks and obligations so carefully negotiated in hundreds of pages of contract can be re-ordered and re-allocated by a single indemnification provision of no more than a few inches

lationship will be perceived as, and will in fact be, a successful experience, it is important that the promises be clearly and conservatively stated, while avoid-ing oversimplification, which can have dire consequences for a construction contract. Striking the right balance between a simple and comprehensive construction contract is sometimes an elusive goal – but should be the objec-tive. That said, the minimum elements of a well-drafted construction contract should include: • a scope of services and work, includ-

ing a limitation on that scope to work shown on the plans or specifications and to work that is reasonably infera-ble from the plans and specifications;

• the absence of the assumption of design risks by the general contrac-tor, unless the assignment is design-build;

• proof that the Owner has sufficient financing to complete the Project;

• reasonable payment terms setting forth the time that payment is due and release of retainage at substantial completion of the Project;

• a right to stop work if the Owner does not pay when payment is due and en-titlement to additional costs and an extension of time resulting from any stoppage or slowdown of work;

• a limitation on the general contrac-tor’s obligation to remove liens filed on the Project to instances in which the Owner has paid for the work that is the subject of the lien;

• a right to change orders measured by an objective standard (not based on the Owner’s or Architect’s opinion);

• a reasonable outside limitation on how much work must be done be-fore the terms of a change are agreed upon;

• a right to an extension of time and resulting costs from uncontrollable delays;

• additional time and costs extended if unknown risks are forced on the gen-eral contractor due to concealed con-ditions or hazardous materials;

• warranties limited to one year from substantial completion;

• maintenance of “All Risk Builder’s Risk” insurance by one of the parties;

• a clause precluding the general con-tractor’s liability for consequential damages and/or providing for liqui-dated damages that are reasonable;

• an indemnification provision that is limited to bodily injury or property damage (other than to the Project) and then only to the extent of the general contractor’s negligence; and

• an Owner’s termination right condi-

tioned on reasonable notice and an opportunity to cure.

Fraser: The key issues to be addressed in a well-drafted construction contract are time, quality and money. Put another way, the wording should seek to facili-tate procurement of the right building, at the right price, on time. Risk alloca-tion is a central feature, the golden role of risk allocation being to allocate risk to the party best placed to deal with or manage that risk.

From a quality perspective, the obli-gation to design and /or construct the project should be clearly framed and a detailed specification should be in-corporated. Scope for the contract to be changed without it being invalidat-ed should be addressed; the contract should cover how variations will be dealt with and how issues of loss and expense will be handled.

Particularly where liquidated damages can be levied in the event of late com-pletion, the contract wording should provide for an extension of time mecha-nism to ensure that the liquidated dam-ages do not constitute a penalty and be-come unenforceable.

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portantly the land.

There is very little capital market fund-ing available for single projects. Even for portfolio’s commercial mortgage backed security issuance remains con-strained.

For some developments the bank mar-ket is supplemented by non-bank ‘mez-zanine’ lenders. These typically provide short term financing at relatively high interest rates to bridge the gap between the amount than can be borrowed on the bank market and the amount of eq-uity a sponsor can arrange. They typi-cally focus on residential developments.

Maguire: Residential purchasers con-tinue to source the usual high street lending. Lenders are still being seen as very cautious when it comes to financ-ing commercial property transactions.

Lurie: With business confidence im-proving in the United Kingdom, the availability of debt financing is increas-ing after many years of very limited ap-petite from the banks. Equity financing remains subdued, although the Con-federation of British Industry suggests that greater levels of equity investment would significantly boost economic

in length. An overly broad indemnifi-cation provision can shift responsibility to one party (usually the general con-tractor) for almost anything that goes wrong during the Project. Sometimes overbroad indemnities hold the gener-al contractor responsible for damages, claims or losses that are not even con-nected to the performance of the work of the Project. A fair and reasonable indemnification provision does not re-trade the contractual negotiations, but rather protects the indemnitee (usually the Owner) from third-party claims of bodily injury or property damage to the extent of the contractor’s negligence. The potential of the indemnification provision to reallocate the burdens and benefits negotiated elsewhere in the contract is why the indemnity is often the most hotly and vigorously contest-ed provision in the entire construction contract.

14.Can you outline the different types of finance required (i.e. ear-ly stage development funding, re-serve-based lending through to project finance and secondary mar-ket acquisition)?

Ozawa: In Japan, the investment struc-ture in many large-scale development projects involves an SPC. The SPC fi-

nances the acquisition of the land and the construction of a building through debt financing and obtaining equity or equity-like investments.

I would say that there are roughly four types of debt financing, depending on the phase which a property is in, as out-lined below:

Phase 1 is the early stage of the develop-ment, where the SPC purchases the land and draws up a building plan. During this phase, the debt financier often re-quires the sponsor of the SPC (in most cases, the major investor) to provide a credit enhancing mechanism (such as guarantee or a covenant to make addi-tional equity investments) benefitting the financier.

Phase 2 is the stage where the SPC ob-tains building construction permits and thus becomes fairly certain of the con-struction details and schedule. During this phase, the financier may release the credit enhancing mechanism provided during phase one.

Phase 3 follows the completion of the building. This phase is often structured to be short, as it is deemed to be a pre-paratory period for selling the property.

In many cases, the debt financing mech-anism for phases 1 through 3 is agreed upon between the investor (borrower) and the debt financier at the beginning of phase 1.

The debt financing for Phase 4 is pro-vided for the secondary market acqui-sition of the completed property. The interest rates applicable during this phase are usually lower than the rates for phases 1 through 3 and the borrow-er is given more discretion, but the debt financier often requires various finan-cial tests such as DSCR test or LTV test to properly monitor the performance and value of the property.

Fraser: (i) Site financing, to acquire sites with no income stream but to hold, (ii)Development finance (explained be-low), (iii)Investment property finance (explained below).

15.What are the most popular fi-nancing methods in your jurisdic-tion?

Maher: For external debt requirements the principal financing market is the bank market under which essentially project specific financing is provided secured by the relevant assets, most im-

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ally a conversion of the facility from a development facility to an investment facility with lower margins but meth-ods to collect income stream to pay in-terest.

Development finance is typically for fi-nancing the construction of the follow-ing asset classes: residential, hotels and offices.

Investment real estate finance is aimed at income producing assets where the income stream issued to service the loan, including offices and hotels.

We are also seeing “last mile financ-ing”, either structured as a senior loan/mezzanine loan (either secured or un-secured in each case) and quasi equity. These loans usually have a high coupon and are purely designed to assist devel-opers on projects where the money has run out.

On the Islamic capital market side, we are seeing sukuk al ijara/sukuk al is-tisnaa structures to finance real estate deals.

health. Capital markets are providing a useful alternative for the larger cor-porates. Also, the insurance industry has recently stepped forward as a key contributor to long-term capital invest-ment. Indeed, a number of the United Kingdom’s major insurers have plans to invest £25 billion in United Kingdom infrastructure projects over the next five years. Approximately 75 per cent of infrastructure development is privately financed with the remaining 25 per cent contributed by the government.

Chighizola: Argentina’s most popu-lar financing methods include trusts, mortgages and loans. Loans however had decreased in number since the last decade when foreign exchange controls starting imposing restrictions on per-sons (or entities) to borrow from for-eign persons (or entities), or make pay-ments of principal or interest thereto. Furthermore, Central Bank registra-tions and approvals may be necessary.

On the other hand, mortgages and trusts are the most common collateral in con-nection with real estate. A mortgage remains in full force and effect until all secured amounts have been paid in full or the mortgage is otherwise cancelled by mutual agreement. However, unless

extended, the registration of a mort-gage will automatically expire 20 years as from the registration date.

Ozawa: There are currently two typi-cal investment structures which are called “TMK structure” and “GK-TK structure,” both of which use an SPC as acquisition vehicle. While these struc-tures are favoured for their tax efficien-cy, the “TMK structure” is more often preferred by non-Japanese investors.

TMK structure:A “TMK” is a tokutei mokuteki kaisha, a corporate entity specifically designed to issue asset-backed securities under the Asset Liquidation Law of Japan. It finances the real property acquisition by issuing two types of equity interests (specified shares and preferred shares) and taking out debt financing from a third party in the forms of specified bonds and specified loans.

The best feature of a TMK is that, by fulfilling certain requirements, a TMK will be eligible for special favourable tax treatments not available to ordinary corporations. The downside is that a TMK is subject to various regulatory requirements and special restrictions under the Asset Liquidation Law.

GK-TK structure:A “GK-TK structure” involves an SPC as a godo kaisha (“GK”) that obtains eq-uity-like financing through a tokumei kumiai (“TK”) agreement and takes out a loan from a third party financier.

For purely domestic transactions, it is easier to set up a GK-TK structure than a TMK structure. In our experi-ence, however, it is often difficult for a non-Japanese investor to use a GK-TK structure for various reasons (includ-ing tax considerations and regulatory requirements). Therefore, we tend to recommend, and our non-Japanese cli-ents tend to use, a TMK structure.

Fraser: General development finance either structured in a conventional manner or a Shariah compliant manner – using an Istisnaa structure or Paral-lel Istisnaa. The financing will include tranches for site acquisition, construc-tion costs (including materials and con-tractor/professional team costs) and in-terest capitalisation. Sometimes there will be an allocation for infrastructure costs. For hotels and real estate assets which are to be held by the developer (as opposed to being sold such as in residential developments), there is usu-

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16.What infrastructure and con-struction lessons can be learnt from the likes of Sochi Winter Olympics and the upcoming FIFA World Cup in Brazil?

Lurie: Hosting major sporting events, such as the Olympics and the World Cup, bring certain benefits to host countries. However, perceived benefits are often difficult to measure against the significant expenditure required to procure the necessary sporting facilities and infrastructure. It is hardly surpris-ing that these events provoke heated de-bate over responsibility for the financial burden. The Sochi Winter Olympics reportedly cost some US$50 billion, and many have questioned the justifi-cation for such expenditure. Of course, some of the concern can be alleviated where sensible decisions are taken on planning and design. The construction of facilities that can be adapted to suit future community needs is crucial. It is important to avoid simply catering for the Olympic moment, as was the case in Athens, a city subsequently burdened with many abandoned and dilapidated facilities. This can be contrasted with London’s Olympic facility conversion program and complementary east end regeneration efforts which have signifi-

cantly improved deprived areas of Lon-don.

17.What due diligence does an in-vestor need to take when looking to invest in a new project?

Maher: The immediate concern when starting due diligence is to ascertain the financial and legal status of the oth-er party. Credit checks are a necessary step to avoid later surprises. Informa-tion gathered at this stage will assist in deciding whether to seek additional se-curity or step-in rights to a project. For large projects it is important that due diligence is seen as a joint task and not one to be divided between different ar-eas of an organisation. Risks should be judged in relation to the project over-all and not simply in the current area of focus.

When considering investment in inter-national projects due diligence efforts should consider risks associated with bribery and corrupt practices. There has been increased policing of trans-national bribery and corruption under the US Foreign Corrupt Practices Act and UK Bribery Act. Authorities can issue large penalties under these acts and the principles that govern them are

should take a due diligence of all the ex-isting leases in the building he intends to acquire, and notably of their fixed-term duration and net rent due to be re-ceived following the acquisition, which will allow him to estimate the net cash-flows generated by its investment pro-ject.

In case of presence of litigation pro-ceedings or threatens of litigations, a specific due diligence and a particular contractual treatment shall be organ-ised between the parties.

Chighizola: When looking to invest in a new project, an investor should gen-erally review:

• Description, title deed and most re-cent valuation of all real estate prop-erty.

• Existence of mortgage, trust, pledge or similar agreements affecting the real estate property. Information on lease agreements on real estate prop-erty.

• Information on any kind of agree-ments that may affect the current or future use of the real estate property.

Existence of all the easements that af-fects the Real Estate Property, and all

often at odds with many local customs in developing countries. Depending on the location and client, checks should also be made about the impact of both current and potential trade sanctions.

Maguire: For real estate we would al-ways advise that an investor undertakes full due diligence including a full review of title, obtaining all public and local authority searches, although we appre-ciate in the current climate that not all budgets stretch to this.

Several due diligence questions that should be asked to mitigate any potential risks in construction projects. Investors should identify all those involved in the construction project including the de-veloper and examine their experience, financial standing and reputation. The position of planning permission and the current condition of the land are all issues that must be considered. If buildings are already constructed a full review of all documentation should be undertaken to get a clear picture of the liabilities and protections available.

Santoni: Alongside administrative au-thorisations and potential environmen-tal issues, which may quickly become very costly, a buy-and-hold investor

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tion sector is on the rise in Northern Ireland. Having officially exited reces-sion last October, there is a new sense of optimism in the market and hopefully that will be jostled by increased public funding.

Lurie: Construction activity will con-tinue to grow in most sectors as the Unit-ed Kingdom emerges from a lengthy recession. Diminishing activity in cer-tain areas, such as the North Sea oil and gas fields, will be offset by increasing appetite for alternative energy sourc-es, such as shale gas, nuclear, wind and solar power. Inbound investment into London will continue with increasing competition for real estate assets. Com-petition from foreign construction and engineering companies will intensify as they target involvement with some of the United Kingdom’s key energy and infrastructure initiatives. Overall, the outlook for the construction industry is positive with a range of interesting op-portunities in the year ahead.

Santoni: The French government is currently working on a law which will have impacts when entering into force on commercial leases and on the real in-vestment market (so called “loi Pinel”). In particular, this law intends to put an

the agreements, decree, orders, o judi-cial decisions that may, in any manner, limit, restrict, or be related, to the use of the Real Estate Property.

The improvement advises or possible improvements which, even do not exist right now, can result in rates or contri-bution on the Real Estate Property.

Agreements related to the management, operation and maintenance of the Real Estate Property that need the consent of a third party to execute the transac-tion or to sell the Real Estate Property.

Ozawa: The investor should first ob-tain publicly available materials from the relevant registration offices. These materials include a certified copy of the real estate registration, public drawings, registered land-area survey drawings, building location drawings and build-ing drawings.

The investor should ask from the sell-ers, and should thoroughly review, all contracts and other materials affect-ing the property. The review should include a determination of whether or not those contracts may be automati-cally assigned to the purchaser of the property concurrently with the acqui-

sition or are indispensable to operate the property. Investors are advised to engage the services of professionals to assess and deliver reports on the prop-erty, such as an appraisal report, engi-neering report, environmental report, seismic report and liquefaction report, to assist in property valuation.

Under current practice in Japan, it is for the investor to decide whether it wants a full-fledged legal due diligence exer-cise on the property.

In addition to documentary materials, the investor should conduct face-to-face interview sessions and other question-and-answer sessions with the seller or other parties involved in the actual op-eration of the property. These sessions may reveal, in particular, past and cur-rent disputes regarding the property. On-site inspection of the property is also important. The investor tends to bring to the on-site inspection an ap-praiser and a property inspector who is retained to prepare the necessary prop-erty-related reports.

Fraser: Focusing on a key feature of Dubai’s property market since the col-lapse in 2008, resuscitation of incom-plete structures, or “ghost buildings”,

requires careful consideration. These structures scar the skyline and have been left exposed to the elements for years with limited, if any, maintenance. The key factor on resuscitation is the interface between old and new design and construction and exposure to lia-bility is heightened by the ramifications of Article 880 of the Civil Code which imposes strict liability on contractors and designers where the structural in-tegrity of the building is impaired.

Anyone considering investing in the re-suscitation of an incomplete structure should ensure that a comprehensive survey of the structure is conducted by an experienced, reputable surveyor/engineer and that the risks of proceed-ing are fairly allocated to the designers, contractors and investors.

18.What key trends do you expect to see over the coming year?

Maguire: We expect to see a continued increase in the residential market, and hopefully a more cautious increase in the commercial property market, al-though the sale of loan portfolios will continue to impact on this.

Indicators suggest that the construc-

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end to the practice of the so-called “bail triple net”, which means for the land-lord (usually an institutional investor) a net rent, i.e. the different rental charg-es related to the maintenance and the taxes of the estate having already been paid by the tenant.

We expect that, in order to ward off the effects of a lower net rent, landlords will raise rent face value to achieve their ob-jectives of rental profitability. This top-ic is also to be followed up during the coming months.

19. In an ideal world what would you like to see implemented or changed?

Fraser: In short we need to see more partnering and less of the “nail to the wall” mentality.

Historically, there has been a tendency

for the stronger party in the contractu-al framework to impose unnecessarily onerous conditions on the weaker par-ty. This creates a contentious environ-ment from the outset, quality suffers; the weaker party invariably seeks to recover by making claims and disputes “blossom”.

A more enlightened approach would be to adopt a more partnering approach whereby risk is allocated so that it is mitigated for the benefit of all. Em-bracing incentivisation and the use of key performance indicators is far more likely to lead to successful delivery of the project, if the parties actually share in any savings, benefit from early com-pletion or produce an asset that exceeds client expectations or is easier and less costly to maintain than originally en-visaged.