Author: Michael Chivers, Senior Associate, Real Estate, London

Are you a landlord or developer of property which includes residential flats?  Are you going to dispose of your interest in that property?  If so, you may be obliged to offer your residential tenants a right of first refusal before selling to anyone else. If you don’t, you could face serious consequences including criminal sanctions.

In this blog we go back to basics to explain when the statutory right of first refusal applies, what the consequences are when it does and how it is relevant in the context of mixed-use developments.

The Landlord and Tenant Act 1987 gives tenants this statutory right, however, the legislation was rushed through parliament in the run-up to the 1987 general election by a Conservative government who were under pressure to redress the balance of power between landlords and tenants in the residential sector. The result was a complex and defective piece of legislation which has been heavily criticised by the courts over the years.

1. When does the right of first refusal apply?

2. What are the consequences when the right of first refusal applies?

3. How is the right relevant to mixed-use developments?


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Reasons to be cheerful

Authors: Matthew White, Partner and Head of Planning; Lucy Morton, Professional Support Lawyer, Planning, London

It is good practice for a local planning authority to give reasons for the grant of planning permission. Failure to give adequate reasons may be serious enough to justify quashing the permission.

There is a statutory duty to give reasons for the grant of permission for EIA development.  However, even if it is not EIA development, reasons will need to be given where the grant of permission does not follow the planning officer’s recommendation; where the development would not comply with planning policy; and where there is significant public interest in the proposals. The law on the duty to give reasons was summarised and confirmed recently in a Supreme Court case, Dover District Council v CPRE Kent (2017) UKSC 79.

1. Background

2. Supreme Court

3. Comment


1. Background

The Dover case related to a planning application for a large residential development in an area of outstanding natural beauty (AONB). Before the local authority granted permission, the planning officer’s report had made several recommendations, including reducing the number of residential units, to reduce the harm caused to the AONB. The report stated that this would preserve scheme viability and retain the economic benefits of the development, which helped to provide the finely balanced exceptional justification needed for causing harm to the AONB. The officer’s report also recommended implementation as a ‘single comprehensive scheme’ to secure those economic benefits (including a hotel and conference centre) and conditions or planning obligations to achieve this.

Planning permission was granted by the local authority without following these recommendations. No reasons were given by the local authority for this departure from the officer’s report.

2. Supreme Court

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Supreme Court ruling on negligent property valuations: Tiuta International v De Villiers Surveyors [2017] UKSC 77

Authors: David Reston, Partner, Insurance Dispute Resolution, Sarah Irons, Professional Support Lawyer, Dispute Resolution, Matthew Bonye, Partner and Head of Real Estate Dispute Resolution

The Supreme Court judgement in the case of Tiuta International v De Villiers Surveyors was handed down at the end of last month. The case involves surveyors valuing a property development, and a lender granting a loan facility to a developer while relying on the valuation.

The Supreme Court held that where a lender, Tiuta, advanced money on the basis of an initial valuation of property by surveyors De Villiers, then Tiuta refinanced the facility on the basis of a second negligent valuation by De Villiers, the liability of De Villiers was limited to the ‘top up’ element of any additional lending.

This ruling has come at a time when valuation negligence is a hot topic in the courts. There is an increased frequency of claims, often being tied to the financial instability of the late 2000s and its effect on commercial real estate values.  In recent months, other important issues such as the width of the margin for error in valuation, have come under scrutiny.

For more information on this case please click on the link to the HSF insurance blog post, below:

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Filed under Development, Dispute resolution (property litigation)

What developers and planners need to know about autonomous vehicles

Author: Matthew White, Partner and Head of Planning, London

Developers and planners need to start preparing now for the future impacts of autonomous vehicles, Matthew White suggests in his article for Planning Magazine, published on Friday 15 December 2017.  The article takes the form of a Q&A with Matthew answering the following questions:

What support are the government and the private sector providing for driverless car technology?

Is there any evidence that driverless cars will become widespread on UK roads?

What key planning and development issues does the spread of driverless cars raise?

How could the rise of driverless cars impact on local authority planners?

What particular implications does it present to developers?

Should planners prepare for the impact of driverless cars now?

Please click on the link below to read the article from Planning Magazine:

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Affordable Housing: Back to Basics

Author: Charlotte Dyer, Senior Associate, Planning, Real Estate, London

“Affordable housing” – two words that those working in the property and planning world can hardly move without seeing flashed about everywhere. There is a wealth of information available on the subject. However, much of it is technical, highly detailed and assumes an existing level of knowledge that can make it hard for those who are new to the industry or who haven’t previously come across affordable housing to really get to grips with the subject.  This blog is the first in a series of blogs that we will be publishing over the coming weeks that will go back to basics to explain what is affordable housing in England, what are the different types, who is eligible for it, how is it implemented and what it means for private developers.

1. Where is affordable housing defined?

2. What are the different types of affordable housing?

3. The London Plan


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Commercial Service Charges – the RICS consults on proposed mandatory requirements

Authors: Matthew Bonye, Partner and Head of Real Estate Dispute Resolution and Judith Smyth, Associate, Real Estate Dispute Resolution, London

Commercial property practitioners and stakeholders have just under a week left to have their say on the draft text of the 4th edition of the RICS Code of Practice: Service Charges in Commercial Property (the “Code”), which is due to come into effect on 1 April 2018.  This professional statement will replace the 3rd edition of the Code, which is the RICS’s current best practice guidance.

In this blog post we look at what the proposed changes are and how landlords will be affected.

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Budget: Tax implications for real estate

Authors: Neil Warriner, Partner and Will Arrenberg, Partner, Real Estate Tax, London

Apart from a couple of pieces of good news, the Autumn Budget materials published earlier today contain a number of definite and potential changes to UK tax on real estate which could impact on pricing going forward.

The good news in the residential sector is undoubtedly the headline-grabbing reduction in SDLT for first-time buyers. The net effect of the proposal is that any first-time buyer will either have no SDLT to pay on purchases up to £300k, and less SDLT to pay on purchases up to £500k. This is worth up to £5k.

In the commercial sector, the good news is that the so-called ‘staircase tax’ is effectively being overridden by allowing businesses to ask the Valuation Office Agency to recalculate valuations by reinstating its previous practice in multi-occupancy buildings that applied for business rates purposes before the decision in Woolway (VO) v. Mazars (2015) UKSC 53. Also, no increases in SDLT rates were announced.

However, in the direct tax world, a number of changes are proposed (including changes that are the subject of a consultation announced today) that could have a significant impact, particularly as regards commercial property:

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Filed under Autumn Statement, Development, Planning, Real estate tax

Affordable housing viability calculations: Herbert Smith Freehills workshops on Mayor’s new guidance

Authors: Matthew White, Partner and Head of Planning and Catherine Howard, Partner, Planning, London

Herbert Smith Freehills are running workshops for property developers on housing and viability, with a focus on London and interpreting the Mayor’s recently adopted guidance on viability and affordable housing.  In our workshops we run through a case study with actual calculations showing how viability reviews work under the Mayor’s new formulae. Please contact us for more information on the workshops.

Background: proposals on a national and London-wide scale to address the housing crisis

Following the Government’s Housing White Paper (in February 2017), several recent publications by the Government and the Mayor of London set out proposed changes to planning legislation and policy, designed to address the housing crisis:

– The Mayor of London adopted his Affordable Housing and Viability Supplementary Planning Guidance (SPG) in August 2017. This SPG aims to improve transparency and trust in the planning process, with a focus on viability information, and aims to increase the expectation of actual delivery of affordable housing to at least 35% (and 50% on public land) for each new development scheme which proposes 10 or more new homes, with an overall long-term strategic aim of at least half of all new homes in London being affordable.  The method and explanations in the Mayor’s SPG are more detailed and rigorous than those in the Government’s national consultation (see below), and there have been industry calls for the Mayor’s methodology to be used nation-wide. Continue reading

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Filed under Autumn Statement, Development, Housing, Planning

The Potential Pitfalls of Overage

Author: Kate Wilson, Professional Support Lawyer, Real Estate, London

Overage provisions can be complicated, and the recent case of Sparks v Biden [2017] EWHC 1994 (Ch), offers some useful reminders of the potential pitfalls that can arise when drafting overage agreements and the scope of the Court’s ability to imply terms into a contract.  In this article we examine the issues that can arise and suggest some practical points for consideration when negotiating an overage agreement.

In this case, the drafting did not expressly oblige the buyer to market newly built houses for sale once the development was completed, nor was there any mechanism for the payment of overage if the houses failed to sell within an appropriate time. The parties’ intentions were assumed – including that the buyer would want to sell the houses as soon as they were completed in order to realise his investment as quickly as possible.  However, this did not happen, and the agreement did not provide for such a turn of events, leaving the seller at a disadvantage.

  1. Facts of the case
  2. Decision of the court
  3. Points for practice

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CRC Reform – Energy usage to be reported in financial statements

Authors: Julie Vaughan, Senior Associate, Environment and Carol Shutkever, Partner, Corporate, London

News of what is to become of the CRC (formerly Carbon Reduction Commitment) Scheme post-2019 has finally arrived, in the form of a new Government consultation from the Department of Business, Energy and Industrial Strategy (BEIS) issued on 12th October 2017*:

  • the obligation to buy allowances to cover energy usage will cease and be replaced by an increase in the rate of the Climate Change Levy (CCL) – a longstanding tax on high energy usage;
  • instead of reporting to the Environment Agency, disclosure of energy usage is proposed to form part of a company’s financial statements.

Disclosure in the accounts is designed to bring to the attention of the Board (and other stakeholders such as potential investors) the potential for cost savings through implementation of energy efficiency measures and thereby to contribute to Government policy in the area of climate change and energy security.

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Filed under Development, Environmental law