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  This draft guidance is one of a raft of new publications which the Government have released, including new draft National Planning Policy Framework (NPPF) and a consultation on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
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+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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Silence is Consent: Developers must pay attention to draft pre-commencement conditions

Author: Charlotte Dyer, Senior Associate, Planning, London

Developers beware – if you don’t agree with a pre-commencement condition in draft, you could have to express your disagreement in writing within 10 working days, or risk the authority imposing it in a planning permission anyway.

The government is currently consulting on changing the procedure for imposing pre-commencement conditions in planning permissions, with regulations expected to be in force in April 2018.  After this date, developers must be proactive in deciding whether or not they agree with the terms of any proposed pre-commencement conditions. If they do not agree, they must respond within 10 working days of receipt of a notice from the authority indicating their disagreement or providing comments. In the absence of a response, the authority can proceed to grant permission with the pre-commencement condition.

This is intended to prevent unnecessary delays to decision-making. However, it will create an extra burden on developers, particularly those with multiple applications being considered in parallel or where the authority is seeking to impose a large number of pre-commencement conditions. Given the continued extensive use of pre-commencement conditions, this is likely to have far reaching impacts on developers across England. The consultation is open for responses until 27 February 2018.

Set out below is a quick recap of the current position and a brief explanation of the latest proposals.

1.Restriction on pre-commencement conditions

2. Exemption from the need to obtain written agreement

3. Commentary

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“Women Leading Real Estate” – change is afoot

Author: Alice Dockar, Partner, Real Estate, London

Herbert Smith Freehills was out in force at a fantastic, thought provoking breakfast event yesterday at the Hilton, Park Lane organised by Bisnow and entitled “Women Leading Real Estate”.

There was a keynote interview with Alison Nimmo, CEO of The Crown Estate, and a panel session on “Driving Change & Building the Pipeline for Aspiring Young Leaders” with panellists:

  • Colette O’Shea, Managing Director at LandSec;
  • Sherin Aminossehe, Head of Offices at Lendlease;
  • Brian Bickell, CEO of Shaftsbury;
  • Lynda Shillaw, CEO of Magairports; and
  • Sue Clayton, Executive Director, Capital Markets at CBRE

Closing remarks were given by Vivenne King, Chair of Real Estate Balance and Andrea Carpenter, Director of Women Talk Real Estate.

The turnout was impressive – over 500 people attended this event, and the audience was predominantly female.  We are proud to be positively engaged with and part of the change taking place in the Real Estate industry.

For us, the key take home messages, for women and men in the world of real estate, were:

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Will land values fall if future planning permission is ignored?

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

What if land values fell because the value attached to future potential planning permission was disregarded? This is what the Labour party is proposing, through reform of the compulsory purchase process. A Government committee is also asking questions on whether the Community Infrastructure Levy (CIL) is working and what other methods could be used to capture the value of land (here is the link to the inquiry).  We’ve seen some dramatic headlines recently but land value capture is not a new idea and has been around for decades. What are the implications for developers?

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New Trusts Registration Service and the UK Real Estate Sector

Authors: Paul Chases, Partner and Head of Corporate Real Estate; Alex Wright, Associate, Real Estate, London

For any real estate developers with trusts in their holding structures, there are new regulations in force that make it a requirement for trustees to obtain and hold up-to-date details of the beneficial owners of their trusts on record and to register these annually with HMRC where the trust is liable to pay tax in the UK.

The HMRC penalties for failure to comply could potentially be severe and as such, trustees should ensure they are familiar with these reporting requirements, particularly as the deadlines for registration are fast approaching.

To learn more, please click on the link below to read our e-bulletin on the new registration requirements. Please note that since publication of the e-bulletin, HMRC has extended the deadline for compliance for trusts already registered for self-assessment from 31 January 2018 to 5 March 2018.

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LANDOWNERS AND DEVELOPERS – BEWARE THE RIGHT OF FIRST REFUSAL

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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