Planning and development club 2016, Nottingham

Planning & development club 2016

Overview

• Starter homes

• Overage

• Case of Stratford on Avon District Council v

Persimmon Homes Ltd

• Flood risk and its impact on planning applications

Starter Homes

Stephen Coult

Starter Homes - The Policy Commitment

• Conservative Party Manifesto commitment to

build more homes that people can afford

including 200,000 starter homes exclusively for

first-time buyers under 40.

The story so far

• Housing and Planning Bill puts starter homes on a

legal footing.

– Introduced 13th Oct 2015 to Parliament, now passing

through House of Lords.

– Will probably be enacted by end of March.

• Autumn Statement announces £2.3bn funding for

Starter Homes

• NPPF now subject to review.

So what is a Starter Home?

• Definition in S1 of the Bill

• Means a building or part of a building that—– (a) is a new dwelling,

– (b) is available for purchase by qualifying first-time buyers only,

– (c) is to be sold at a discount of at least 20% of the market value,

– (d) is to be sold for less than the price cap, and

– (e) is subject to any restrictions on sale or letting specified in regulations made by the Secretary of State. (Regulations may cover minimum age or nationality and limit purchases to owner occupiers.)

New dwellings

“New dwelling” means a building or part of a

building that—

(a) has been constructed for use as a single dwelling

and has not previously been occupied, or

(b) has been adapted for use as a single dwelling and

has not been occupied since its adaptation.

The Price Cap

Clause 2 specifies the maximum price that a starter home

may be sold to a first time buyer.

• the price cap is £250,000 outside Greater London and

£450,000 in Greater London.

• That price cap reflects the published proposed

maximum threshold for the Help to Buy ISA

• The Secretary of State can through regulations amend

these price caps and set different price caps

for different areas.

Regulatory content

• Requirements will be set out in regulations

including

– the proportion or number of starter homes

– commuted sums to be paid.

– discretionary powers for local planning authorities.

– thresholds for S106 Agreements providing starter

homes

– exemptions for types of housing.

Duties under Act.

• Clause 3.

An English Planning Authority must carry out its

relevant planning functions with a view to promoting

the supply of starter homes in England.

• Clause 4. An English planning authority will only be able

to grant planning permission for certain

residential developments if specified requirements

relating to starter homes are met.

Definitions applying to Clause 3.

• English Planning Authority can be either a Local Planning Authority or the Secretary of State

• Relevant planning functions include

(a) functions under Part 3 of the Town and Country Planning Act 1990, other than functions relating to the grant of permission in principle;

(b) functions under Part 8 of the Greater London Authority Act 1999;

(c) functions under Part 2 of the Planning and Compulsory Purchase Act 2004.

Enforcement

• Monitoring Provisions are contained in S5.

• Local Planning Authority is to prepare reports containing information about the carrying out of its functions in relation to starter homes.

• Form, content and timing or reports to be specified in regulations.

• Can be combined with normal monitoring reports.

• S6 allows Secretary of State to issue Compliance Directions

• Purpose is to dictate that Local Planning Authorities ignore their own policies which seek to frustrate the provision of starter homes.

Proposed changes to National

Planning Policy Framework• Consultation announced Dec 2015

• Proposals include:

– Allowing Councils to “allocate appropriate small-

scale sites in the Green Belt specifically for starter

homes”

– Land allocated to employment or commercial uses

should not be ring fenced indefinitely to enable

residential development

Proposed changes to NPPF

– Encouraging starter homes in mixed use

developments

– Increasing residential density around commuter

hubs, to make more efficient use of land in suitable

locations

Procedural issues arising from

NPPF Changes

• Move to new starter home regime duties not to be

subject to transitional arrangements so as not to

interfere with getting Local Plans in place.

• Fast track examination procedures should allow

subsequent policy changes to reflect Starter Home

initiative to be made quickly.

• Consultation closed 25 January 2016

Key issues

• How will the scheme operate in detail?

– Awaiting regulations.

• What is the £2.3bn funding for?

– £10m earmarked by HCA for Starter Homes Pilot

schemes proposed by Councils.

– No further reference in HCA Affordable Housing

Programme 2015-2018.

• Expect further announcements in March 2016

Budget.

Overage Clauses

Rebecca Toates

Purpose of an Overage?

• Proposed use of land undecided – so difficult to

accurately value land at date of sale

• Maximises income for landowner, ensuring best

value on a sale (important for charities, trusts and

public authorities)

• Sharing of profits from sales

• Spreads payments out for a buyer

• “Anti-embarrassment” for landowner

“Overage changed from being a promise of a spot of

“jam tomorrow” for landowners, to be a means of

deferring payment for developers, and a way of not

only sharing reward but risk as well”

The Age of Overage (Tomlinson and Leonard, 2012)

Key Considerations• Protection

• Overage Period and Percentage

• Trigger Events

• Planning Permission and Development

• Implementation

• Disposals

• Calculation of Base and Enhanced Market Value

• Profit Calculation

• One trigger or multiple triggers?

• Wording of restriction

Methods of Protection

• Positive Obligation + Restriction is most common

• Contractual Obligation

• Legal Charges

• Restrictive Covenant

• Ransom Strip

• Granting leases

Positive Covenant + Restriction

• Positive Obligation on Buyer to make payment

• Protect with a restriction on title

• Deeds of Covenant from successors in title

Overage Period and Percentage

• Commercial Terms

• Need advice from surveyor / agent producing heads

of terms

• Will depend on what landowner is trying to protect

through the overage and what value given to the

land at date of sale as undeveloped land

• There is no “standard” percentage or overage

period

Trigger Events

• Sale with Planning Permission

• Implementation of a Planning Permission

• Change of use

• Sale with Planning Permission where contracts exchanged

before overage period expires but completes after overage

period expires – watch out!

• Grant of Planning Permission?

• Plot Sales nb: Lowry Properties

• Change of control of company – relevant for SPV buyers of

property

What is a Planning Permission?

• Permission for either a specific Development or

permission for anything other than a specific Development

– depends how Development clause drafted

• Outline? Detailed? Reserved matters?

• Application by Buyer or on their behalf – see case of Micro

Design Group Ltd v BDW Trading Limited [2008] about

application by a Seller to push up overage payment

• Consider permitted development rights – no application

needed for planning permission

Relevant Development

• Specific type of development triggers overage v. all

development except for a specific development triggers

overage?

• Be clear about types of development permitted / triggering

overage

• Reference to Use Class Order – as at time of overage or as

varied?

• “Residential Development”? See Harris v Berkeley Strategic

Land Ltd re: care homes as residential

• “Agricultural”? What about a house for use of farm worker?

Implementation

• S.56(2) Town and Country Planning Act 1990: “Development

shall be taken to be begun on the earliest date on which any

material operation comprised in the development begins to

be carried out.”

• Pre-commencement planning conditions as triggers?

• Exclusion of preparatory works? e.g. demolition and site

surveys?

• Implementation by buyer or someone on their behalf

• Phased implementation of large developments – single

trigger for payment or staged payments?

Disposals

• Sale / Transfer – obvious one – of land or plots

• Grant of Lease? Consider long leases and short term

leases for a rack rent

• Easements

• Disposals to statutory undertakers – substation leases or

transfers of highways to highways authority

• Mortgages / Charges – if excluded then make sure to

include disposals by a bank pursuant to a power of sale

• Disposal of individual plots to end users?

Calculating Market Value

• Base Value: Value of land without planning permission

• Enhanced Value: Value of land with planning permission

• Seek surveyor advice – RICS guide for valuations as

applicable at date of Trigger Event

• Base Value: Sum sold for originally or value at date of

Trigger Event without planning permission?

• Fluctuations in land value since original sale or previous

Trigger? Index link the Base Value

Revenue / Sales Overage

• Payment on completion of sales

• Profit Based Sales:– Base Sales Price (per plot or per square foot)

– Actual Sales Price

– Incentives, Extras and Part Exchanged Property

– Forward funding/development – based on rent roll?

• Or just price per unit / per square foot sold

• Unsold Plots at end of overage period? Calculate

market value of unsold plots

• Sales to connected persons?

Deducting Costs

• Deduct costs of obtaining planning permission:– Professional Fees

– Survey costs

– Planning Obligations / CIL

• Deduct Construction Costs?– No if trigger is planning permission/implementation

– Yes if sales based overage or market value assumes units built

• Return on cost?

• Key Point: does enhanced valuation assume construction has taken

place or not?

Drafting Costs Deductions

• Limitation to “reasonable and proper” costs?

• Ability to veto or approve costs?

• Cap on costs deduction?

• What cannot be deducted?

• Deduction before or after applying percentage?– Before: costs divided equally

– After: one party bears all costs – beware accidental drafting

One Trigger or Multiple Triggers?

• May not have been discussed during negotiations –

can have big impact on purchase price

• One Trigger better for buyer – overage disappears

after first Trigger

• Multiple Trigger better for seller – overage catches

every Trigger during overage period

• One Trigger – risk of ‘soft planning permission’

• Multiple Trigger – need to re-calculate Base Value

each time

Restriction wording

• Refers to correct ‘disposals’ requiring certificate

• Certificate required confirming overage deed complied with

or does not apply

• Obligation to remove restriction at end of period

• Who can give certificate?

– Seller only: Seller can keep informed; no risk of fraudulent

certificate; but Buyer has to seek certificate every time with

increased costs and delays; what if Seller dies?

– Any conveyancer: More difficult for seller to monitor; quicker

process as Seller not approached every time; risk of negligent

or fraudulent certificate from a conveyancer

Disputes

• How will it be resolved?

• Court interpretation – willingness to look behind

contractual wording – Ross River

• Implied duty of good faith?

Questions?

Flooding and enforcement

Ben Standing

Overview

1. Case of Stratford on Avon District Council v

Persimmon Homes Ltd

2. Flood risk and its impact on planning applications

Stratford on Avon District Council v Persimmon

Homes Ltd (1)

• Persimmon Homes Ltd had planning permission for 85 houses

• Permission was subject to conditions re:

– hard and soft landscaping works; and

– the provision of a environmental construction statement.

• LPA served breach of condition notices relating to the above –

alleged breaches in relating to delivery hours, banking,

landscaping and the provision of a gate person

• LPA sought an order that:

1. deliveries between 8am – 9am and 3pm – 4pm “would be avoided”;

2. all deliveries to be banked;

3. a gate person at all times; and

4. implementing the soft landscaping works


Homes Ltd (2)

• Persimmon Homes Ltd argued that they had fully discharged their

obligations on a proper construction of the delivery provisions in

the method statement

• It was also submitted that there had been no breach of the banking

obligations

• LPA argued that the gate person had not been performing their

duties adequately and that the soft landscaping had failed to have

been implemented


Homes Ltd (3)

• The Court refused the application:

1. Deliveries

the wording was that deliveries were “to be

avoided” during those times: i.e. discouraged not

prohibited

“could not sensibly be regarded as having breached

obligations”

there was no reason to believe that deliveries would

be made within those hours and that if so,

conventional enforcement methods wouldn’t work


Homes Ltd (4)

2. Banking

no evidence to support LPA’s allegations

“unsatisfactory” for LPA to pursue injunctive relief and

rely on matters that were not specifically pleaded or

covered in the evidence

the application was “disproportionate and verging on

the oppressive”

3. Gate Person

allegation was without foundation

had made efforts to allay the LPA’s concerns

the application was “disproportionate and oppressive”


Homes Ltd (5)

4. Landscaping

there was no reason to suspect that Persimmon Homes

would not complete the landscaping in accordance with

the approved scheme

injunctive relief would be “unnecessary and

disproportionate” at this stage


Homes Ltd (6)

• Highlights that LPA’s must use proportionate

enforcement action. Injunction is most serious type

of enforcement action

• Importance for developers to keep on top of

planning permission conditions

• Early dialogue with LPA’s is essential to avoid

matters getting to the enforcement stage

Flood risk and planning applications

General approach

• National Planning Policy Framework (NPPF) sets tests to

protect people and property from flooding – para 100

“Inappropriate development in areas at risk of flooding should be

avoided by directing development away from areas at highest risk,

but where development is necessary, making it safe without

increasing flood risk elsewhere”

Flood Zones• Flood Zone 1 - comprises land assessed as having a less

than 1 in 1,000 annual probability of river or sea

flooding

• Flood Zone 2 - comprises land assessed as having

between a 1 in 100 and 1 in 1,000 annual probability of

river flooding, or between a 1 in 200 and 1 in 1,000

annual probability of sea flooding in any year.

• Flood Zone 3 - comprising land assessed as having a 1

in 100 or greater annual probability of river flooding, or

a 1 in 200 or greater annual probability of flooding from

the sea in any year (see also Flood Zone 3b)

Local plans (1)

• LPA’s must undertake a Strategic Flood Risk Assessment

(SFRA) as part of the preparation of Local Plans

• A SFRA is study carried out by one or more local

planning authorities to assess the risk to an area from

flooding from all sources, now and in the future, taking

account of the impacts of climate change, and to assess

the impact that land use changes and development in

the area will have on flood risk

• In areas at risk, developers undertake site-specific

assessments to accompany any planning permission

application

Local plans (2)

• When reviewing risk assessments LPA must look at:

– how flood risk affects the proposed development

– whether the development type is appropriate for the

proposed location

– whether the site’s flood risk is too great for the

development

– whether the proposed development will increase flood

risk elsewhere

• For developments in flood zones 2 & 3 the LPA must

check that the applicant has applied the relevant tests

Sequential Test (1)

• The Strategic Flood Risk Assessment will provide the

basis for applying this test

• Aims to steer new development to areas with a low

probability of flooding

• LPA’s will also take into account climate change and

the vulnerability of future use

• Does not usually need to be used for areas in Flood

Zone 1, minor developments or changes of use

• This test along with a flood risk assessment should be

submitted to the LPA

Sequential Test (2)

• Requires developers to look at alternative sites where

possible

• Contact LPA to identify areas for alternative sites

• Are there any ‘Windfall’ sites?

• Developers will have to identify any issues that would

prevent development and whether these could be overcome

• LPAs will be looking why the site subject to the planning

application is the preferred option

Sequential Test (3)

Exception Test (1)

• If the sequential test shows that it isn’t possible to use

an alternative site, the exception test will need to be

completed.

• For the Exception Test to be passed:– it must be demonstrated that the development provides wider sustainability

benefits to the community that outweigh flood risk, informed by a Strategic

Flood Risk Assessment where one has been prepared; and

– a site-specific flood risk assessment must demonstrate that the development

will be safe for its lifetime taking account of the vulnerability of its users,

without increasing flood risk elsewhere, and, where possible, will reduce flood

risk overall.

• Both elements of the test will have to be passed for

development to be allocated or permitted.

Exception test (2)

• This test shows how developers will manage the

flood risk on the proposed site

• It needs to show that the development will be

safe for its lifetime taking into account the

vulnerability of use (see table 3 of the PPG

guidance on flooding)

• The proposal will need to provide sustainability

benefits site for the community

Planning applications (1)

• LPA’s have to ensure that flood risk isn’t increased

elsewhere by the approval of the permission (NPPF para

103)

• Following the application of the relevant tests, it must

be demonstrated that:

– the most vulnerable development is located in areas with

the lowest flood risk; and

– the development is flood resilient and resistant including

safe access and escape routes


• Developers must provide evidence to show that the

proposed development would be safe and that any

flood risk can be mitigated

• Developers may have to produce a site specific flood

risk assessment covering the following areas:

– the design of any flood defences

– access and egress inc evacuation procedures if necessary

– the design of the development to manager and reduce flood

risk

– operation and maintenance of the development


• LPAs will consult the Environment Agency prior to

refusing/consenting to the planning permission if

the development is:

– within 20m of a main river;

– in an area with critical drainage problems;

– in an area which is deemed to be vulnerable as per

the Flood Risk Vulnerability Classifications;


• Likely that LPAs will require some kind of

conditional element to the planning permission if

the site is at risk of flooding such as:

– Materials used in the development;

– An element of landscaping to mitigate flood risk;

– Ongoing monitoring of the potential flood risk;

– Drainage solutions; or

– Flood defences

Mitigation of flood risk (1)

• Flood risk on developments can be mitigated in

various ways:

– layout of the site

– green infrastructure in appropriate places and other

suitable drainage systems

– safeguarding areas of land for flood risk

management/potentially off site

– designing buildings to avoid flooding e.g. raised floors

• Be aware of other sources of potential flooding,

not just the rivers and the sea


• Developers should also consider the safety issues of

developing sites that are at risk of flood:

– what a possible flood event could look like e.g.

sources, depth, speed of onset

– structural safety of the development

– how would a flood impact on the services of the

development?

– access/evacuation routes for residents especially

those that are vulnerable


• Flood resilience

– designing and constructing buildings that reduce the impact of

flood water to prevent permanent damage

– guidance for developers and designers on flood resilient

developments produced by Department for Communities and

Local Government in 2007 – “Improving the Flood Performance

of New Buildings”

• Flood resistance

– construction that can prevent entry of water where water

depths are below 0.6 metres

– using appropriate building materials

Other issues (1)• Contamination

– Is the land likely to be contaminated or is there

potential contamination in the area?

– Without a pathway, this does not pose any risk

however if the area floods, there is the risk that the

contamination could find a pathway on to the land

– Developers could find themselves in line to pay for

remediation works and the subject of potential

enforcement action as the owner of the site

– Should factor this in when completing risk

assessments

Other issues (2)

• Insurance

– If development is in an flood zone, this could make it

more difficult for buyers to obtain insurance and

potentially a mortgage lender if they cannot insure

– If they can insure, likely to be much more costly

– Potential effect on sales or the value of the properties

– Might not be a commercially viable site if the developer

is not able to recover enough value from the plots

Other issues (3)

– Developers should provide buyers with the relevant

information and evidence to provide to insurers (i.e.

to show that the risk has been mitigated)

– ABI suggests that the same level of information

provided to LPAs could/should also be provided to

buyers to assist them when approaching insurers

Other issues (4)

• Utility providers

– If the development is in a flood zone, will utility

providers be willing to lay and provide services?

– Potentially more expensive depending on the

infrastructure required

– If the development floods, what are the drainage

solutions to cope with any potential sewage leaks?

Government response (1)

• Following the 2015 – 2016 flooding the Government

have announced:

– £40 million towards damaged infrastructure in Cumbria

and Lancashire

– £2.3 billion to be spent on flood defences over the next 6

years

– £10 million so that the Environment Agency can repair

flood defences

– Grants for farmers through the Farming Recovery Fund


– Considering paying

farmers to allow their

land to be flooded

Farmers would be

allowed to drain

ditches and streams

without needing

permission – has been

criticised by ecologists


• Separately, the Government have indicated that they

want to build 200,000 new homes year across the UK

• Research by Greenpeace shows that many of these new

homes will be built in areas that are at serious risk of

flooding

• Likely to be even more emphasis on risk assessments

carried out by developers in the future

Tips for developers

• Factor in the issue of flooding at an early stage

• Pre-application correspondence with LPA to seek

advice on flood risk

• Ensure that, if necessary, the potential flood risk

influences the design of the development

• Be prepared to identify other potential sites

Questions?

Real Estate

Planning and development club 2016, Nottingham