Author: Julia Tobbell, Senior Associate, Real Estate Dispute Resolution, London
Whilst a developer is in the early stages of planning and finance, it may be happy to leave the current tenants in situ to generate a little extra income before the development starts (provided it can remove the tenants when the time comes!). If that is the case, the parties will follow the usual end of lease procedure in the months running up to the termination date. In practical terms, this means ensuring that the tenant is making arrangements to vacate and setting out the landlord's claim for dilapidations. This blog entry addresses the approach developers can take to these claims for dilapidations.
The usual position, upon lease termination, is that the tenant owes the landlord damages in respect of any breaches of its repairing covenants (which can include reinstatement, redecoration, removal of fixtures and so on). There are a complex series of rules which govern the quantum of damages payable, but in many cases the damages will equate to the actual cost that the landlord will incur in carrying out the works necessary to bring the premises back up to the required standard.
However, a developer who is planning on demolishing the premises patently has no intention of carrying out any such works. It would therefore be unfair to expect a tenant to pay in full for the cost of the works when they will never be carried out and, indeed, the premises may shortly cease to exist. Parliament has long since recognised this potential injustice and addressed it in section 18(1) Landlord and Tenant Act 1927. The provision contains two 'limbs':
Since 1 October 2013 Conservation Area Consent has not been necessary for demolition of an unlisted building or enclosure in a conservation area, but the requirement now is to obtain approval for the demolition by planning permission (a change introduced by the Growth and Infrastructure Act 2013). Failure to receive approval before such demolition is a criminal offence.
It is important to note that the permitted development right for demolition of buildings is not available in relation to unlisted buildings in a conservation area. This means that if you want to demolish an unlisted building in a conservation area you must obtain express planning permission from the relevant planning authority.
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On the same day as announcing the Housing and Planning Bill (13 October 2015), the Department for Communities and Local Government confirmed that the temporary permitted development rights which allow conversions from office to residential use will be made permanent.
In May 2013 permitted development rights were altered to allow a change of use from offices (use class B1(a)) to residential (use class C3) without the need to make a full planning application. The rights were due to expire on 30 May 2016 but the Government has now confirmed that the rights will be made permanent. This means that there is no rush to get prior approvals for converting offices into homes, or to complete the change of use, before 30 May. Those who already have prior approvals or permission will have three years in which to complete the change of use.
To further support the delivery of new homes, the rights will in future allow the demolition of office buildings and encourage new building for residential use. The current exemptions on economic grounds for some local authorities will be removed and those authorities will have until May 2019 to make an Article 4 Direction if they wish to opt out of the permitted development rights.
However we have not yet seen the amending legislation and the rights are proving controversial, with no requirements for affordable housing and no requirements relating to the quality of the homes.
Amending legislation is expected before 30 May 2016.
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