Residential leasehold – time for change?

Author: Martin Dawbney, Partner, Real Estate, London

At the end of July, hard on the heels of the Housing White Paper published in February, DCLG issued a Consultation Paper on “Tackling unfair practices in the leasehold market”. If you wish to make your voice heard prompt action is needed – the period for responses expires on 19 September.

The main points which are proposed to be covered in future legislation are:

  • Cutting back on the future sale of freestanding houses on a leasehold basis (unfair fees have been charged for extensions etc), save where there is good reason to protect local character or amenities.
  • Limiting the charging and increase of ground rents on new flat leases over 21 years in duration (recent publicity has focused on ten-year doubling of rents which, if not capped, can reduce the price or even make the flat unsaleable).
  • How can we make the (little-used) commonhold regime fit for purpose? Briefly, this combines ownership of a freehold unit with membership of a corporate body which manages the common parts. A commonhold community statement is an essential feature, much of which is standard.
  • What else should be done to tackle “abuse of leasehold” (to adopt DCLG’s wording)? This may include reform of existing leasehold terms and a review of the cost of acquiring the freehold (known as “enfranchisement”).

This Consultation is very much about protecting the interests of the consumer who was either not made fully aware of the true cost of buying a leasehold interest (on top of paying the original price) or who was sold the property on a “take it or leave it” basis, with no ability to negotiate the terms of sale. First-time buyers would have been particularly vulnerable to the latter practice and may not have been properly advised. Continue reading

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What impact do overseas investors have on housing supply?

Planning Resource has published an on-line article by Matthew White, Head of Planning, London, discussing the conclusions of the May 2017 report by the London School of Economics concerning the impact of overseas buyers on housing supply. For the Planning Resource article, please see here or contact us.

The LSE report finds that London attracts a significant amount of institutional investment from lenders and business globally, bringing forward development on major development sites faster and with more homes than would otherwise have been the case. Despite a perception that new homes bought by overseas investors are kept empty, the LSE found that in fact this is generally not the case. The LSE report says:

Developers estimated occupancy rates for individual schemes were generally up to 95%. There was almost no evidence of units being left entirely empty – certainly less than 1%. Units bought to be let out appear to have very high occupancy rates and indeed some are ‘over-occupied’ eg by students. However for those units bought as second homes, occupancy could be as little as a few weeks a year. Many such second home sales are to UK residents, not overseas buyers.

This will be of interest to developers who rely on overseas buyers to de-risk their projects. The issue is likely to remain contentious in some areas of London, but this research will be useful evidence in response to such concerns.

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Revised Electronic Communications Code – Code Red for Landowners

Author: Deborah Caldwell, Professional Support Lawyer, Real Estate, London

A revised new Electronic Communications Code has been introduced as one element of the recent Digital Economy Act 2017 (see our TMT ebulletin of 22 May 2017). The existing Code has long been declared unfit for purpose, hopelessly out of date and badly drafted. Introduced in 1984 to deal with the privatisation of British Telecom, it was tweaked slightly by the Communications Act 2003 but failed to keep pace with advances in digital communications technology and the public's relentless appetite for electronic services.

The government has comprehensively overhauled the Code and aims to help operators expand their networks and upgrade infrastructure by lowering the cost and simplifying the roll out of such infrastructure. This is driven in particular by operators seeking to improve the data rich services sought by both consumers (such as video, social media and gaming services) and businesses (such as cloud-based services and those in respect of connected devices) as a result of rapidly emerging digital technologies and handset capabilities. These applications consume increasingly higher bandwidths and will require faster broadband speeds if operators are to meet future capacity, quality and reliability expectations. Operators were given enhanced permitted development rights at the end of last year, to the same end.

The new Code has not been welcomed by landowners, but the government has stated that it is simply putting communications on the same footing as other essential utilities such as water and energy.

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The new EIA Regulations: what has actually changed?

 Author: James Gibson, Associate (Scotland), Planning, London

The Town and Country Planning (Environmental Impact Assessment) Regulations 2017 came into force on 16 May 2017, implementing the 2014 EU Directive. Similar regulations have also come into force under the infrastructure planning regime. Largely, the new regulations are a fairly extensive and, in places, trivial set of amendments. The question is, will they have a tangible impact on established EIA practice?

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Intellectual property issues for purchasers of development sites

Authors: Rachel Montagnon, Professional Support Consultant, Laura Deacon, Of Counsel, and Joanna Silver, Senior Associate, Intellectual Property, London

A recent case reminded us that a range of IP issues can sometimes be overlooked when purchasing development sites. Some relevant questions that purchasers may not immediately consider include:

  • Does the development have a distinctive name or logo?
  • Is there a website associated with the development?
  • Are there social media accounts that specifically relate to the development?
  • Do you have permission to use the architect’s drawings to promote the development?

If any of the above apply, intellectual property issues could cause problems if not identified early on.

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Leasehold pitfalls – termination risks of leasehold development site structures

Author: Simon Elliott, Senior Associate, Real Estate, London

A number of recent transactions where we have acted for banks and lenders have emphasised that care needs to be taken by developers at the outset of a project when buying into or putting in place a leasehold structure of the site. We have seen how important it is to be aware of the effect that the provisions of a headlease can have on the liquidity and bankability of underleases (for example, of sub-plots within the site). In particular, thought is needed around provisions that could bring any underlease to an end for reasons beyond the control or influence of the undertenant and thereby threaten the existence of a charge over the underlease interest. I explain below how forfeiture rights and contractual termination rights in favour of a head landlord in particular should be approached with caution, as both provisions can be of concern to a lender taking security over such an underlease.

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On Election Day

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

I'm sure I am not alone in finding it difficult to be enthusiastic about today's general election. From a development perspective, there is little in the main parties' manifestos that stands out as new or innovative. The pledges that our would-be prime ministers have made are heavy on promise but light on detail, and deafeningly silent on deliverability. It is easy to commit to building a million new homes when there is no depth or substance as to exactly how this will be achieved. And with both parties ruling out any review of the green belt, I am left wondering what politicians think they will be doing in the next Parliament that hasn't already been definitively proven not to work in the last one.

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The impact of purdah on planning and a recent decision on judicial review

Author: Fiona Sawyer, Professional Support Lawyer, Planning, London

This week, we have links to two pieces of interest to developers:

  • "Getting away with purdah" – an article in EG by Matthew White, Head of Planning, and Annika Holden, Associate (Australia), Planning, London discussing the impact of the convention of purdah, brought into play by the unexpected announcement of the snap general election. Purdah has the potential to severely disrupt and delay the planning process; recent experience has shown that it is often inconsistently applied, can cause confusion and can be invoked as an excuse to avoid controversial decisions. The article comments on the history, status and potential exploitation of purdah, highlighting relevant caselaw. For the full article, see here.
  • "Failure to comply with statutory conditions will lead to quashing unless it is 'highly likely' the error would have made no difference" – an ebulletin by our London Administrative and Public Law team, discussing the impact of a recent planning judicial review case concerning a council's decision to adopt a document setting out an interim approach to negotiating affordable housing contributions. Key points include that the High Court must generally refuse relief on an application for judicial review if it appears "highly likely that the outcome for the applicant would not have been substantially different if the conduct complained of had not occurred". For the full ebulletin, see here.

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Grants of planning permission against officer recommendation – managing the legal risk

Author: Annika Holden, Associate (Australia), Planning, London

The Court of Appeal has recently upheld challenges in two cases where planning permission was granted by planning committee against officer recommendation (see Oakley v South Cambridgeshire District Council & Anor [2017] EWCA Civ 71 and Campaign To Protect Rural England, Kent (CPRE), R (On the Application Of) v Dover District Council [2016] EWCA Civ 936). From a legal perspective, Oakley is particularly interesting as a rare look by the Court of Appeal at the question of whether planning authorities have a general common law duty to give reasons on the grant of planning permission – see the excellent e-bulletin from my public law colleagues here for more on that. On a practical level, the cases represent a good reminder of how carefully all parties need to tread whenever planning permission is granted against officer recommendation.

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Supreme Court rules on the correct interpretation of the phrase “relevant policies for the supply of housing”

Author: Charlotte Dyer, Senior Associate, Planning, London

On 10 May 2017, the Supreme Court handed down its eagerly anticipated judgment in respect of two housing appeals against decisions made by Suffolk Coastal District Council and Cheshire East Borough Council.  The case centered on the appropriate interpretation of paragraphs 14 and 49 of the National Planning Policy Framework (NPPF).  Both appeals had been brought on the ground that the decision-maker in each case had misunderstood the key NPPF phrase "relevant policies for the supply of housing". 

This is not the first time that this had been the subject of judicial consideration.  On seven separate occasions between October 2013 and April 2015, the Administrative Court ruled on this, with little consistency between the judgments.  One expects that the Supreme Court judges were rather pleased that they would finally get to have their say on this when these appeals finally landed on their desks.  Indeed Lord Carnwath explained at the very beginning of his judgment that this was an issue of "controversy" in respect of which the court had been urged "to bring much needed clarity to the meaning of the policy".  Below I will explain the judgment and consider its wide ranging implications.

1. What does the NPPF say?

2. How had this been interpreted previously?

3. How did the Supreme Court interpret this?

4. What else did the Supreme Court say?

5. Conclusions

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