IFM22030 | Real Estate Investment Trust : Conditions And Tests: The Property Rental Business Condition: Condition A: Single Property: CTA2010/S529(1)

Single property

Condition A of the property rental business condition requires the company or group to have three or more single properties involved in its property rental business. ‘A single property’ is defined by reference to whether a property or part of it is available for rent under a separate lease. Where property is used for trade purposes rather than involved in its property rental business such properties must be excluded for the purposes of condition A. Some examples are given below to illustrate how this definition of 'single property' applies in practice.

Office block

If a four-storey office block has its stairwells and common parts designed so that each floor can be occupied by a separate tenant, and it is available for rent as such, this would count as four single properties even if in fact the whole block is let out to single tenant.

Shopping centre

Where a shopping centre contains multiple retail units all available to be rented out under a separate lease, each unit will count as a separate property.

Part of property used for property rental business

The company may own a whole building, occupy four floors as its head offices and rent the remaining floor out to unconnected tenants. The floor rented out is a separate property from the four floors that are owner-occupied and will count as a single, separate property for the purposes of the property rental business condition. As a matter of fact, it is rented out separately from the other part of the building.

Ownership of part of a property

Part ownership of a shop would not however count as a 'single' property as it is not possible to rent out part of a shop. For example, a company is the co-owner of three properties. The company holds 40% of each, and the remaining 60% is owned by one of the company directors. The company would not meet the three or more properties condition, since it would own 40% of three properties, rather than three properties that it could rent out as three units separate from any other unit.

Halls of residence

Where students have exclusive use and access to their rooms or flats for the rental period then each unit of student accommodation will count as a separate property.

Hotel

A hotel is a single property and may be part of the property rental business if it is let to an operator who has no connection with the owner of the property.

If, however, the hotel is run by the company, or by a member of the Group REIT, then it is owner occupied and the income is trading income. It is therefore excluded from the property rental business.