Welcome to the Morisons Solicitors newsletter.

In this Issue

	February 2010 eNewsletter
	Borrowing in the Upswing - What's the prognosis?
	Retail Rents - BRC Keeps Campaigning
	Will Writer in the Dock
	Biology only a Contributor in Child Custody
	Things actually said in Court

In Other News

Sheriff's Ruling could be devastating for bank charges: http://tinyurl.com/yedkt8x

Drink drivers' cars crushed...can they take your TV if you fail to pay the licence? http://tinyurl.com/y9v56lc
 

Poaching on the rise as food prices go up: http://tinyurl.com/ycjexng
 

Moves to tackle the law on Stalking: http://tinyurl.com/ybcgtnp
 

February 2010 eNewsletter

Borrowing in the Upswing - What's the prognosis?

The last eighteen months have seen some of the most difficult trading conditions for British businesses since World War II. With the economy taking tentative steps back to growth, many businesses will be budgeting for increasing sales for the first time in more than two years.

The ‘credit crunch’ earned its name because the market for short-term borrowing collapsed and a feature of 2009 was the difficulty in obtaining commercial credit. Many businesses have found negotiating the retention of their existing borrowing facilities difficult and customers have been demanding (or just taking) even longer to pay.

Now, it seems, there is light on the horizon. House prices are reported to be on the up, which means that a secured loan offers less risk to your lender. Trade is slowly improving, so increased sales should mean increased profits. A falling pound is good news for exporters as UK-made goods should be more competitive in their home market. Even labour costs are falling, with the result that some call centres are being brought back to the UK from the Third World. Although taxes will clearly need to rise, consumers are willing to spend if the price is right.

Before you get too excited, however, remember two maxims:

• Insolvency risk is greatest in the upswing phase of the economy; and
• Most businesses fail not because of lack of profitability but because of poor cash flow.

These are important to remember, because your bank is acutely aware of them and the fact is that, at some point, the Government is going to have to rein in public spending – hard – which will inevitably mean that consumer demand is affected. This will be compounded by the need for interest rates to rise, which is widely predicted for later in the year.

This combination of factors makes it difficult to predict whether bank lending will get easier to negotiate in 2010. However, what we have seen in deals that are taking place is that banks are looking more carefully at the security offered and are trying as hard as possible to improve their lending margins.

Borrowing Tips

With the economy seeming to be slowly improving, businesses will be thinking about financing the expected expansion of trade. Borrowing cost often dominates the thinking, but it isn’t all about the cost of the loan. In order to negotiate the right deal, here are some tips on other things to think about:

Borrowing Generally

• Make sure your lending proposition stands up on a cash flow as well as a profitability basis, and be able to defend your sales forecasts;
• Overdraft or loan? With an overdraft, you pay interest only on the amount you borrow plus an annual renewal fee – if the bank agrees to renew your overdraft. With a loan, you pay interest on the whole sum from day one, but normally at a lower rate, and the loan cannot normally be recalled. Many loans have, in effect, penalties built in for early repayment. It is common advice for ‘hard core’ borrowing and borrowing to finance assets to be by way of a loan and for overdrafts to be used for short-term borrowing;
• Don’t forget to read the small print. It may one day be important to fully understand the legalities. Don’t just sign the loan agreement and forget it – take advice first;
• If you are borrowing only to finance greater sales, factoring or invoice discounting may be for you. These agreements are complicated and often impose significant extra accounting costs, but can be a good way of reducing risk;
• If you are self-employed, the lender’s ‘long stop’ is you and your assets. Take advice on how to minimise your risk before you borrow;
• If you are worried about being able to stay within your overdraft limits, it is often worth borrowing on loan to make sure you do: penalty charges and interest rates on unagreed overdrafts can make them a very expensive way to borrow;
• Credit cards. You may be tempted to use your credit cards for finance. This can be very risky as if you incur interest charges on a credit card, these will be much higher than for normal commercial lending – and you won’t get tax relief on the borrowing;
• Never borrow from an individual (particularly friends or family) unless you have a proper legal agreement in place (or want to risk a falling-out); and
• Remember that the greater your exposure in respect of any loan, the less ‘spare credit’ you will be regarded as having for other borrowing.

Company Borrowing
If you are borrowing for a company, the following should also be considered:

• Whether you are prepared to give a floating charge for the loan. A floating charge will give the bank security over all the company’s assets. This improves the bank’s security but makes missing loan repayments dangerous, as the bank will have the right to appoint a receiver. Giving a floating charge may reduce the cost of the borrowing, however;
• You may be asked to give a personal guarantee. Take advice before agreeing. Again, your assets are on the line; and
• If you borrow money personally and put it in your company, tax relief on the interest might not be available. This can make a cheap loan quite expensive after tax.

Borrowing sensibly isn’t just a matter of signing an agreement, taking the cash and making repayments. Negotiating loan finance successfully is easier if you are advised by experienced professionals who fully understand the legal implications of the documents you will be asked to sign.

For assistance in negotiating the right borrowing deal, contact Ross Hood, Head of Corporate at Morisons Edinburgh Office
 

Retail Rents - BRC Keeps Campaigning

The British Retail Consortium (BRC) has been campaigning for the past few years to try to encourage more commercial landlords to accept monthly rental payment arrangements instead of the quarterly payments commonly used. Although the BRC began pushing for changes to the way retailers pay landlords before the recession, it has become an even more significant issue as many retailers are struggling to make ends meet.

The BRC has had some success in persuading more landlords to accept monthly rather than quarterly payments of rent by retailers. According to the BRC’s Monthly Rents Survey, since January 2008 two thirds of new leases contain monthly payment terms. However, a BRC survey carried out at the end of last year showed that only 12 per cent of retail leases are on a monthly payment basis and 40 per cent of these are for a temporary period only, for example permitting the retailer to pay monthly for one year only. It was also found that 90 per cent of those who had switched to monthly payments had been, or would be, subject to extra charges.

Although the BRC’s campaign has made good progress, there is still a long way to go to convince more landlords to accept monthly payment terms and to reduce the charges levied on those retailers who switch to this type of payment plan. As the effects of the recession continue to impact on businesses, it benefits both landlords and retailers to keep shops open where possible, rather than have empty premises. This can be more easily achieved if retailers do not have to find the funds for quarterly payments.

Whether you are a landlord or a tenant, if you need advice relating to a tenancy agreement, we can help. Contact Robin Valentine in our Edinburgh Office

Will Writer in the Dock

The trial of an unqualified will writer took place in Bristol recently when a 45-year-old man was charged with the theft of £800,000 from a succession of elderly clients.

The man had duped childless elderly people into inserting a clause into their wills which ostensibly allowed him to determine to which charities money they intended to leave to good causes was to be allocated. Instead, he used the money to fund a lavish lifestyle for himself, including the purchase of expensive cars and a property in Spain.

He was charged with four counts of theft and one of forgery. On conviction, personal assets acquired by crime may be subject to forfeiture. However, in most such cases, the losses are never fully made good.

Using an unqualified will writer is a risky business. Recent research by the Law Society revealed the extent of the risks members of the public are being exposed to by using unregulated, unqualified and uninsured will writers.

The findings revealed instances of badly drafted wills that rendered the deceased person’s estate wholly or partially intestate, poor tax planning and cases where the will simply disappeared. In addition, the research found that there are often hidden charges which inflate the cost of the will writing service so that the final bill ends up being far higher than the advertised price.

Unlike solicitors, unregulated will writers do not have to be legally qualified or insured. As there is no regulatory body, there is no mechanism for bringing a complaint, and without insurance there may be no means of redress should things go wrong. Solicitors, on the other hand, are professionally qualified to do the work, are bound by a stringent code of professional conduct and, in the very rare event of a loss to a client, clients are protected by the solicitor’s professional indemnity insurance, which is compulsory.

For advice on Wills or any other aspect of inheritance planning, please contact Sandy McCreath in our Glasgow office or Alan Thomson in our Edinburgh Office

Biology only a Contributor in Child Custody

The Supreme Court has recently ruled to give the grandmother of a child custody over him despite the opposition of the boy’s father, who applied to have custody himself.

In the view of the Court, acting in the child’s best interests means that 'it is only as a contributor to the child’s welfare that parenthood assumes any significance’.

The child’s father was an ex-prisoner and his mother had problems with excessive drinking. The boy had been looked after by his grandmother since birth and a social worker considered him to be ‘thriving’ under her care.

When his biological parents applied for residence orders, the Court considered the boy’s bonds to his grandmother to be strong enough to reject their applications, despite the father having been assessed as capable of meeting the boy’s needs.

For information and advice on all aspects of Family Law, please contact Aileen Low in our Edinburgh Office

Things actually said in Court

Q: Doctor, how many autopsies have you performed on dead people?
A: All my autopsies are performed on dead people.
Q: Do you recall the time that you examined the body?
A: The autopsy started around 8:30 p.m.
Q: And Mr. Dennington was dead at the time?
A: No, he was sitting on the table wondering why I was doing an autopsy.

Q: Doctor, before you performed the autopsy, did you check for a pulse?
A: No.
Q: Did you check for blood pressure?
A: No.
Q: Did you check for breathing?
A: No.
Q: So, then it is possible that the patient was alive when you began the autopsy?
A: No.
Q: How can you be so sure, Doctor?
A: Because his brain was sitting on my desk in a jar.
Q: But could the patient have still been alive nevertheless?
A: It is possible that he could have been alive and practicing law somewhere.
 

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