#13596 - Consolidation Development - Advanced Commercial Property

CONSOLIDATED NOTES

Essentially Development Can be broken down into:

1. PRE-LIM CONCERNS – Title and Development issues regarding site TITLE – RC’s, PC’s, TP rights, Charges – DEV – Right to light, roads, adverse possession, crane oversail licence, squatters – Overage

2. SPECIFIC PLANNING CONCERNS Any specific planning related concerns for site – PP (change of use partic)/ Building regs approvals/ s.106 obligations/ Other Planning Gain i.e. CIL

3. CONTRACT STAGE – Conditional contracts – Planning/ Environmental/ Option agreements/ VAT provisions applicable on sale – how this should be reflected in drafting

4. CONSTRUCTION – Background of different structures that can be used – specific methods of enforcing construction obligations – learn each one – focus on collateral warranties

5. AGREEMENT FOR LEASE – Amendments which are in interest of tenant – Registration (AN1 or UN1)/ Security of Tenure/ Guarantors – VAT TOGC

TITLE AND DEVELOPMENT CONSIDERATIONS

Title issues – advising on potential issues – further action required

• (1) Restrictive Covenants – past breaches/ future breaches

• (2) Positive Covenants – effect on client, SCPC 6.4.4 – Buyer will be bound

• (3) TP rights – reserving rights to the land – rights of way, rights of passage

• (4) Other – Leases (LTA 1954 – s.25 LTA – s.30(1)(f) redevelopment – non-fault grounds compensation – Rights of pre-emption, mortgages.

Development issues – advising on potential issues – further action required

• (1) Rights to light – Express (deed) or prescription – 20 years of continuous use – to prevent right, obstruct for one year within the 20 years – serve LON notice - register as charge and leave in place for one year – If 20+ years, serve LON notice – owner has right to object, but if he doesn’t within the year, right will be extinguished MUST be dealt with – consequences unpredictable – injunction and/or damages Regan v Paul Properties BUT Coventry v Lawrence

• (2) Reconfiguring of roads – Publicly adopted highways – does developer need need to stop up/ divert for construction traffic – apply for stopping up order, Statutory procedure s.116 HA or Part X – both complex/expensive

• (3) Airspace Issues – Landowner right to control airspace to a height necessary for reasonable use and enjoyment of land (Bernstein v Skyviews) – Crane oversail licence required for crane jib overhanging adjoining property

• (4) Adverse possession – Factual possession an possession must be adverse (inconsistent with rights of owner) – Different rules for unregistered and registered land – Unregistered land (12 years uninterrupted use) – Registered 10 years – application – 3 months to oppose – if opposition, it will not be granted

• (5) Squatters – Negotiate – emergency interim possession order (complex/timely/costly) – Possession order under CPR 55 – application and witness statement – personal service

Overage payments

• Additional payments on top of purchase price – trigger events: grant of planning permission/ practical completion/ letting of development/ sale of development

• Methods of enforcement – Pros and Cons for seller? Restrictive Covenant – BUT Cosmichome v Southampton/ Ransom Strip/ Positive Covenant/ Mortgage, Charge/ Personal obligation.

• SDLT payable on purchase price + overage – Can be deferred if overage not to be paid for at least six months after overage agreement is completed – If HMRC accepts, SDLT payable within 30 days after overage payment ascertained.

PLANNING ISSUES

APPLICATION OF TCPA/ GDPO – CHANGE OF USE/ CLEUDS – S.106 AGREEMENTS

• CLEUDS – Check enforcement periods expired for unlawful use – 4 years (dwelling-house) 10 years (commercial) – Check no deliberate concealment (unlimited enforcement) – Past 10 years of unlawful use – Buyer can apply for CLEUD

• Consider use classes – Changes within the same use class, not material change of use Art 3(1) UCO – Changes between use classes are material changes of use and require PP unless a permitted development under the GDPO.

• If PP required, are there any other planning concerns – building regulations/ will any conditions be attached to the planning permission.

PLANNING RELATED ISSUES FROM CPSE’S, CON 29R – PLANNING OBLIGATIONS

• Consider need for building regulations approval etc

• s.106 planning obligations – off-site obligations – which bind successors in title – s.106A(3)-(4) allows for discharge of s.106 after 5 years or more

ENVIRONMENTAL LIABILITY

• LA can serve a remediation notice if land is contaminated s.78A

• Remediation notice is served on the ‘appropriate person’ – Class A or Class B polluter

• Class A – knowingly caused or buyer with knowledge (commercial buyer)

• Class B – Owner/ occupier

• What options are available if buying contaminated land? Which is the best and why? Conditional Contract/ Reduction in purchase price/ Combination of warranties/indemnities from seller.

CONDITIONAL CONTRACTS

VAT

• New commercial properties (3 years or under) are standard rated supplies – Seller MUST account to HMRC for VAT on top of purchase price – DOES not mean the buyer automatically has to pay VAT on top of purchase price

• Seller should ensure (1) all sums payable are VAT exclusive (2) place an obligation on the buyer to pay VAT – Special condition A1 must be expressly incorporated into the contract by seller – this has the effect of excluding SCPC 1.4.1 and states that the sale will constitutes a VAT standard rated supply.

• Old commercial properties – VAT exempt – subject to the seller’s option to tax

• Leases – VAT exempt – subject to the landlord’s option to tax

• REMEMBER Banks, insurance companies provide exempt supplies and cannot opt to tax – cannot recover VAT from HMRC – any VAT exclusive sums payable constitute additional overheads.

CONDITIONAL CONTRACTS – ENVIRONMENTAL/ PLANNING

**Planning** - Highly likely examinable

• **Ensure drafting is not too vague/ is not in danger of being void for uncertainty**

• Ensure Satisfactory Planning Permission is defined – not subject to Onerous Conditions – i.e. that there is no obligation for a s.106 agreement and that it is not subject to any other planning gain

• Ensure contract is conditional on any Planning Challenge Period expiring

• Ensure there are trigger’s for completion – Unconditional PP (10 days of completion)

• Ensure there is a Longstop date – if conditions not met by [], Agreement can be terminated

• Parties obligations must be clearly defined

• Ability to appeal (ensure discretionary)/ Buyer should have ability to waive any conditions

Environmental

• Define Satisfactory Environmental Report

• Who has the obligation to commission a survey? When does it have to be done by? Who keeps who informed?

• Specific instructions; what the survey is looking at/ Specific environmental consultants to be used

• Report is to be addressed for the benefit of the Buyer

• Clarity/ Timetable/ Trigger for Completion/ Longstop date as before

• If not satisfactory – Who has the obligation to clean up? To what standard must remediation be carried out? When must this be done by? Long-stop date

OPTION AGREEMENTS

• Option period must be clearly defined – (certainty) – Should not be too long – restricts dealing with the land/ ties up land

• Option fee – Dependant on type of land/ length of option –privilege of tying up the land

• Discretionary – Buyer can allow to lapse or exercise the right – flexibility

• Registration – Option will be registered on seller title – agreed notice/ unilateral notice (see SGS 5) – Buyer must cancel all entries relating to option at the end of the Option period

• Purchase Price – Will it be a fixed price? OR by reference to the future market value (today or at the time the option is agreed)?

• How and when will notices be served?

PLANNING APPEALS

• Appeal from applicant – within six months of decision s.78 TCPA – Grounds of appeal and preference for decision made – Sent to Planning Inspectorate – copy also sent to LPA –

• Challenging appeal – ‘Aggrieved person’ – within 6 weeks of appeal decision – if S of S’s action not within the powers of the TCPA or any procedural requirements have not be complied with s.288(1)(a) TCPA

• Challenging permission granted – TP with ‘sufficient standing’ – by JR – within 6 weeks if LPA has acted ultra vires s.288(1)(b) TCPA

CONSTRUCTION

COLLATERAL WARRANTIES

• Should always be executed as a deed – enforceability period 12 years

• Standard reflecting the Deed of Appointment – exercise all reasonable, care, skill and diligence. Statement that the tenant relies on this – strengthens position in event of claim

• All professional fees paid to the to the Consultant– protects tenant from any claim for unpaid sums under DoA

• Copyright – belongs to the architect/ licence to the tenant

• Professional indemnity insurance – mirroring the terms of the DoA/ reputable insurer/ 12 years

• Assignment – at least twice for tenant – more saleable lease – balanced with consultant’s need to limit liability

• Net contribution clause – Consultant only liable for direct losses.

POST-COMPLETION PROBLEMS

• How many years after completion – who is responsible – consider from perspective of all parties – considering DLP/ direct contractual relationships/ collateral warranties repairing covenants.

• EXTRA NOTES

Remedies for Defective Building Works

• Defects Liability Period – Employer/ Landlord can enforce the DLP in the building contract/ deed of appointment– A tenant of a new build should negotiate the indirect benefit of the DLP in its lease.

• Contractual relationship – direct contractual relationships – Hadley v Baxendale principles.

• Collateral Warranties – To employer/ landlord/ tenant from the construction and professional team –...