POTENTIAL PROBLEMS FOR LANDLORDS WITH MINERAL LEASES

The implementation of the Aggregates Levy in April 2002 is expected to cause problems for landlords who have mineral leases with rent reviews based on turnover or a proportion of the selling price, together with those review clauses linked to standard aggregate indices.

With increases to the price of certain minerals caused by the new tax, it is thought that use of post tax figures/indices for review purposes are unlikely to be accepted by mineral operators. Clarification must be made of all figures used in review negotiations, or indeed on commencement of a new lease, to ensure that “like for like” comparisons are made. The Office for National Statistics is being pressed to produce separate indices, one including and one excluding the tax, but this is yet to be clarified.

Thus, any landowners with mineral leases should consider carefully with their tenants just how rents are to be agreed in the future.