CYBER SECURITY – is your property adequately protected?

Authors: Ruth Benfield, Senior Associate, Real Estate and Alice Dockar, Partner, Real Estate, London

Cyber security affects all businesses and industries and is a Board level agenda item. As cyber-attacks are becoming more common (and hitting large institutions, such as Uber and the NHS) we are advising our clients to check the adequacy of their buildings and contents insurance policies and the building management, security and IT systems in their properties.

Buildings are particularly vulnerable to outside threats due to their reliance on technology for building management and security systems (for example fire alarms, sprinkler systems, automated air-conditioning, lifts, escalators, to name a few) which are often fundamental to the running of a commercial building. Such systems could be an easy target to hackers and the potential physical damage, destruction and disruption which could be caused makes the threat a real one. The risk for developers and landlords is therefore significant.

A cyber-attack which results in the destruction (or temporary failure) of such systems is likely to mean that tenants or their customers and employees are unable able to use or occupy the premises until new systems are installed, which could be a time consuming and expensive process. Imagine if a cyber-attack results in the activation of a building’s sprinkler system, causing severe water damage. Not only would a tenant be unable to use its premises until the water damage is repaired (resulting in loss of business) but also the cost of repairing the damage might not be covered by any existing insurance policy. This type of threat could affect a range of commercial properties, whether retail shopping centres, industrial units, offices or hotels.

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How is IPMS measuring up?

Authors: Nick Turner, Partner, Alice Dockar, Partner and Olivia Rolleston, Associate (Australia), Real Estate, London

Despite prevailing market practice indicating a preference by developers/landlords to continue to use the 6th edition (2007) of the RICS Code of Measuring Practice (CoMP), RICS will continue to ask its members to apply the International Property Measurement Standard (IPMS). Whilst our clients should be aware of RICS continued commitment to IPMS it remains to be seen whether this commitment results in a tangible impact on established market practice.

That said, on 1 May 2018, the second edition of RICS Property Measurement will come into effect, and one of the principal changes is the introduction of IPMS for residential buildings. The IPMS for office buildings has been mandatory for members since the first edition of the Property Measurement came into effect in 2015. However the second edition sets out 2 elements: Part 1 – the Professional Statement: property measurement – which applies to all properties and includes IPMS measurements for office buildings; and Part 2 – RICS IPMS Data Standard – which is designed to encapsulate the attributes and elements of an IPMS measurement aimed at providing consistency to software developers who provide measuring software.  Part 1 must be complied with by all RICS professionals involved with work that includes the measurement of buildings. Industrial and retail buildings can be measured under IPMS 1 which is a universal standard that applies to all building classes and measures the area of a building including external walls and compares closely to the gross internal area under the CoMP. IPMS 1 is also used for planning purposes and development appraisals.

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Court Interprets Obligation in a Standard Form Construction Contract to use all due diligence to obtain planning approvals

Authors: Nick Oury, Senior Associate, Disputes, Tokyo and Jean Hamilton-Smith, Associate, Disputes, Tokyo

A commonly encountered provision in the standard form JCT Building Contract (2005 edition) was interpreted by the Court of Appeal to include an implied obligation on a developer to use “all due diligence” to obtain planning approvals. The phrase “all due diligence” was held not to require the developer to ensure that planning approvals were in fact granted, or that they were granted within sufficient time to prevent delays. At most it required the developer to make a timely application containing sufficient information and to co-operate with the Local Authority during the planning process.

The decision demonstrates the limits of the obligations commonly entered into by developers in the UK in relation to planning approvals.

1. Facts of the case

2. Developer responsible for Planning Approvals

3. Obligation to exercise “all due diligence”

4. Delays caused by Local Authority

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TOUCHING THE VOID – Mazars Revisited

Author: Martin Dawbney, Partner, Real Estate, London

Not many outside the business rates bubble will have been following the twists and turns of the Mazars case and its aftermath.  Stripping away the jargon, the Supreme Court decided that each floor in a multi-occupied building should be subject to a separate rates bill even where immediately above or below another floor occupied by the same entity, unless linked by a private staircase or lift.  This is of relevance because especially large floors enjoy a discount, which only applies if all floors occupied by the entity in the building are taken into account.

The Government surprised the rating world by announcing in the Autumn 2017 Budget that legislation would be introduced to restore the practice of the Valuation Office (responsible for setting the rateable values of commercial properties) prior to the Supreme Court decision.

After a consultation process the draft bill has now been published.  In short, once it becomes law (intended to be before the end of the current session of Parliament) floors will be treated as one provided they are occupied (or, if vacant, were last occupied) by the same entity and are “contiguous”.  Contiguous means they either touch or are separated only by a void (e.g. a raised floor accommodating landlord’s services).

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Observations from MIPIM: The Public Dented Sector

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

Now that the annual decant to Cannes has drawn to a close, I am left wondering how to judge the mood of this year’s MIPIM – the world’s biggest property show. This was a year of contradictions: not just the capricious weather, but also the prevailing atmosphere of scrutiny that hung heavy over the enthusiastic hospitality.

Rumours of undercover reporters and elaborate sting operations were overblown, ‎with only the Guardian having written anything so far (in their article, here). But this didn’t stop it being a common theme of conversation on the roadside outside Caffé Roma and in the foyer at the Martinez regardless.

‎Comparing the London stand with five years ago, it was remarkable how far the pendulum had swung from the private to the public sector. Many exhibitors this year were local councils: alongside the venerable City of London Corporation, I spotted Barking & Dagenham, Bexley, Croydon, Ealing, Havering, Harrow, Hounslow, Newham and Kingston. Their presence at MIPIM is often criticised in the press. How can local authorities possibly justify spending council tax receipts on an annual jamboree in the south of France? Photograph a council officer holding a champagne glass or on a yacht; print it next to a millennial who can’t afford to buy a new home and you have an instant headline. This is despite the fact that developers actually chip in to cover council attendance costs through sponsorship.

There is actually a better story beneath the surface: why do local authorities attend MIPIM?

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Observations from MIPIM: logistics and prop tech

Author: Paul Chases, Partner and Head of Corporate Real Estate, London

In this post, Paul Chases, a partner in the HSF London Real Estate team comments on his experience of the Shedmasters event at the MIPIM real estate conference, and on the direction of travel of parts of the real estate industry.

  1. Continued Growth
  2. Future of the Shed
  3. Impact of Brexit

1. Continued Growth

The popularity of this year’s Shedmasters event at MIPIM (sponsored by Savills, Gazeley and Prologis, amongst others) is testament to the ongoing strength of the logistics sector, which, in 2017, saw record highs for investment in the industrial and distribution sector. The general view seems to be that this trend is likely to continue for 2018 and beyond with returns for the industrial and logistics sectors predicted to outperform those for office and retail (for example) over the next five years. Already this year, HSF has acted on a number of logistics deals. With such positive forecasts, the expectation is that new investor entrants will look to enter the market and there will be further consolidation by those already involved in the sector.

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Observations from MIPIM: Flexible workspace

Authors: Alice Dockar, Partner and Will Turnbull, Senior Associate, Real Estate London

New technology is changing the way people live and work, and flexible workspace is the subject of several events at this year’s MIPIM real estate conference. Debate at the conference has centred around whether the changes led by technology are temporary or permanent and how the industry and its participants, including landlords, tenants, agents and financiers, will adapt to this new world.

In this post, HSF partner Alice Dockar and senior associate Will Turnbull provide some observations from MIPIM on this debate.

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Closing the “viability loophole”? A return for the developer must be taken into account when setting local plans

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

The Government is recommending that viability is assessed in detail by the local authority at the stage of setting its development plan and allocating land for certain uses, and that specific assumptions should be made at that stage regarding land value and what is a reasonable return for a developer – using the ‘existing use value plus’ (EUV+) land valuation method and assuming a return of 20% of gross development value (GDV) for the developer in appropriate circumstances.  It could then be more difficult for a developer to re-open negotiations on viability at a later stage.

The Government’s new Draft Planning Practice Guidance for Viability sets out more detail on the new proposals, as we explain in this post.  This draft guidance is one of a raft of new publications which the Government have released, including new draft National Planning Policy Framework (NPPF) and a consultation on developer contributions including Community Infrastructure Levy (CIL) which are all aiming to increase the supply of housing, provide certainty for developers, capture land value more effectively and improve and speed up the planning process.

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The road to MIPIM – podcast interview with HSF partner Matthew White

 

Matthew White, partner and head of the UK planning team in the London office of Herbert Smith Freehills talks to Lucy Morton, another lawyer in the planning team, about what he’s expecting from the MIPIM real estate conference in Cannes (13th – 16th March 2018) and about his forthcoming cycle ride to the conference. Please listen to this short (5 minute) podcast. Herbert Smith Freehills will have a team attending the MIPIM conference, please contact us for more details.

If you’d like to sponsor Matthew White on his cycle ride, he’s raising money in aid of Coram, a UK charity for vulnerable children and young people, here’s the link.

Matthew White
Matthew White
Partner and Head of Planning, London
Email | Profile
+44 20 7466 2461
Lucy Morton
Lucy Morton
Professional Support Lawyer, Planning, London
Email
+44 20 7466 2626

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A five step guide to calculating the level of affordable housing the Mayor considers viable

Author: Catherine Howard, Partner, Planning, Real Estate, London

In this blog post, we explain in simple terms how a developer is now expected to set the level of affordable housing which the Mayor of London deems viable for a particular site.  This is part of our ‘back to basics’ affordable housing series.

The Mayor is fed up with developers arguing that it’s not viable for them to deliver policy compliant levels of affordable housing due to the high prices they are paying for sites. In his Supplementary Planning Guidance (SPG) on Affordable Housing and Viability issued last August, Sadiq Khan refers to the ‘circularity’ this causes: land prices are higher than they should be because buyers and sellers are not factoring in delivering much affordable housing.

The Mayor wants to stop this by ’embedding’ delivery of policy compliant levels of affordable housing into land prices. To do this, he is going to have no regard to the price developers actually paid for a site. The maximum he will let developers factor in to viability calculations is the value a site has in its existing use plus a margin of 10-30% where appropriate (what he refers to as the “benchmark land value”).

Please read on for the five step guide to calculating the level of affordable housing the Mayor considers viable.

Herbert Smith Freehills is running workshops which talk through an example calculation to show how this approach to viability assessment works in practice. In the workshop we also run through calculations showing how early and late viability reviews work  (post-planning) under the Mayor’s SPG. This will be the subject of future blog entries.  Please contact us for more information.

Step 1: Gross Development Value

Step 2: Residual Land Value

Step 3: Benchmark Land Value

Step 4: Comparing Residual Land Value and Benchmark Land Value

Step 5: How much affordable housing can the developer afford to deliver on this site, factoring in the benchmark land value?

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