IFM22043 - Real Estate Investment Trust: Conditions and tests: The Property Rental Business Condition: Condition C : CTA2010/S529(2A) and (2B)
To join and remain in the regime, a UK-REIT is required to meet the property rental business condition (IFM22020). Both conditions A and B, or, alternatively, from 11 July 2023, condition C, must be met throughout each accounting period of the company or group.
From 22 February 2024 onwards condition C of the property rental business condition is that the property rental business involves at least one commercial rental property which is valued at £20million or more at any time from ‘the relevant time’ onwards. The value of £20million initially only applied at the relevant time. This was changed from 22 February 2024 to ensure that failure to meet the condition would not arise simply as a result of subsequent fluctuations in value. For example, if a REIT company acquires a property when it is worth £25m in 2024, Condition C would still be met by the company in 2027 even though the property is only then worth £18m.
At least one property
CTA2010/S529(2A) enables a REIT company or group REIT to meet the property rental business condition where it only holds one property, but that this property must be:
- designed, fitted or equipped for the purpose of being rented as a commercial unit, and
- rented or available for rent as a commercial unit.
In addition, the property must have a value of £20million or more either on or after the relevant time.
The relevant time
The relevant time for valuation of the property for the purpose of condition C is defined in CTA2010/S529(2B).
From 22 February 2024 the relevant time is the later of:
- entry to the REIT regime, and
- when the property was acquired
Prior to this, the relevant time was when an existing REIT group or company ceased to meet property rental business conditions A and/or B, or, for a company entering the REIT regime, the date of entry.