High streets or housing? Time to decide

On 3 December 2020, MHCLG published a consultation proposing “measures to support housing delivery, economic recovery, and public service infrastructure”. The proposals have potentially very significant impacts. The government has demonstrated that it is prepared to move quickly following such consultations, frequently adopting measures consulted upon with little further consultation or notice. It is therefore not impossible that, whether or not some of the proposals put forward in this consultation have been raised and discarded before, or are likely to receive heavy opposition, they could be progressed nonetheless. The consultation closes on 28 January 2021. All who have an interest in property and maintaining the vitality of town centres and local communities should consider responding.

What is being proposed?

The consultation covers:

  • a proposed new permitted development (PD) right for change of use from the new Use Class E (commercial, business and service use) to residential;
  • expanded PD rights and a new planning application process for hospitals, schools and prisons; and
  • proposals to simplify and consolidate existing PD rights. These include a proposal seeking views on changing the breadth of the new Use Class E.

These changes are intended to take effect pending fundamental reform of the planning system pursuant to the Planning for the Future White Paper consultation proposals. The proposals relate to England only.

The new residential PD right

The government proposes to introduce a new PD right for change of use from the new wide Use Class E (which was introduced last summer) to residential use. This would mean that express planning permission will not be required for this change of use, putting into effect the government’s wish that a wider range of commercial buildings should be allowed to change to residential use without the need for a planning application. The intention is that the new right will come into effect from 1 August 2021. It would replace current PD rights for change of use from office to residential (Part 3, Class O of Schedule 2 to the GPDO), and from retail etc to residential (Part 3, Class M of the GPDO), which will remain in force until 31 July 2021.

The new right will be available to a large percentage of properties in commercial, business and service use whether in town centres or otherwise, so long as they were in Class E use as at 1 September 2020, even properties in conservation areas. There will be no size limit on either the size of building that can be converted, nor the percentage of Class E properties in an area that can be lost. Prior approval will be required from the LPA, but on limited grounds.

Proposed changes to Use Class E

The consultation asks whether uses that are currently able to change use within the new Class E should be able to change to any use within that class, or whether this right should be restricted. The consultation also asks whether the scope of some rights should be broadened, for example to allow for change of use to or from Use Class E rather than to/from individual uses within it as currently.

It is interesting that the government is seeking views on whether the new Class E should be limited because, when it originally consulted on changes to retail uses in October 2018, the proposal then was simply to amend Class A rather than the wider changes that were ultimately introduced last summer.

Potential impact

The proposed new residential PD right would clearly have a major impact at any time – the effect of losing potentially large quantities of commercial, business and service properties to residential use in a town centre environment would always be significant.

However, to propose such a new right now seems premature, with so many retailers struggling and landlords wondering when they will see their rents paid, and when there has been so little time to see whether the flexibility offered by the new Use Class E will indeed have a positive impact on town centres. Any negative impact will be exacerbated if the government decides to go ahead with widening Use Class E – if the new residential PD right proposed by this consultation is progressed, widening Use Class E would in turn widen further the potential for more premises to be converted from commercial to residential use, often irreversibly due to the length of residential tenures, with limited oversight by LPAs.

This could be further exacerbated if the Treasury proceeds (as reported by the Times on 26 November 2020) with a ban on local authorities buying investment property. The Treasury is proposing this because reduced rental income has impacted the value of commercial portfolios acquired by local authorities with low-cost government loans, which has made many authorities vulnerable during the Covid-19 pandemic (with authorities like Croydon pushed to insolvency). Such local authorities may be keen to take advantage of an easy way to reconfigure their failing commercial town centre portfolios and recoup their losses by implementing the new residential PD right.

Finally, solving problem town centre vacancies by converting them to residential use conflicts with the findings of the Open Doors pilot, which in 2018 linked community groups needing space with landlords struggling to fill town centre retail units. MHCLG’s recently published Evaluation Report of the pilot demonstrates how valuable town centre space is for community use, with the scheme deemed a success by landlords and community groups alike, and outlines government support for establishing new Open Doors networks across town centres. Recommendations for the future development of town centre community meanwhile uses as set out in the Evaluation Report do not sit happily alongside these proposals for a new residential PD right in favour of the same town centre premises.

What next?

The government is trying to juggle twin priorities of saving the high street and solving the housing crisis. The question is whether either purpose can be served by these proposals which, if progressed, could in fact cause damage to communities that could take decades to recover from. Introducing new cultural, community or educational uses into town centres would surely restore the fortunes of our high streets more effectively than ill-suited residential conversions. It would also be a much better response to the resurgence in local community facilities that has been one of the few positive outcomes of the Covid-19 pandemic. But the ability to change use to residential through this proposed PD right will inevitably crowd out such opportunities.

Developers, owners and investors have until 28 January to make their views on the proposals known, whether directly, by responding to the consultation through the online survey (here), or through their industry representatives. We have prepared a Client Briefing to help clients to understand the issues and impacts arising from these proposals – please contact us if you would like to receive a copy.

For further information please contact:

Fiona Sawyer

Fiona Sawyer
Professional support lawyer, planning, London
+44 20 7466 2674

Matthew White

Matthew White
Partner and head of UK planning practice, London
+44 20 7466 2461

Contractual Control – a register too far?

Following the release of the “Planning for the future” consultation in the summer, the Ministry of Housing, Communities and Local Government (MHCLG) subsequently issued a further consultation document entitled “Transparency and Competition: A call for evidence on data on land control”, the aim of which is to increase transparency around “contractual arrangements used to exercise control over the buying and selling of land” by creating a separate register of interests such as options, rights of pre-emption and estate contracts. This subsequent consultation closes at the end of this week.

This consultation is complementary to the government’s mission to make the planning system more dynamic and open. Under the proposals, beneficiaries of contractual arrangements such as options or rights of pre-emption would be obliged to disclose certain information about these arrangements to HM Land Registry so as to make this data available to the public, who would theoretically use it to better its understanding of development opportunities within the local community and to play a more active role in the development process. However, there are some concerns that the proposals as currently drafted would go further than perhaps anticipated, and could result in a position whereby the time spent in reporting this information and registering the existence of these contractual arrangements outweighs the benefit to the public in disclosing them.

As a firm, we act on a large volume of complex transactions involving the types of interest in land to which this consultation relates, acting for buyers, sellers, developers and investors. Having reviewed the MHCLG’s proposals, we responded to the consultation to raise some concerns, including the following:

Are the public sufficiently interested?

Whether there is sufficient public interest at present to justify collating and publishing the data contained in the government’s proposals (such as the effective date and longstop dates of any contractual arrangement) is questionable. The proposals in the consultation purport to assist local communities in playing “an informed role in the development of their neighbourhoods”, but we cannot see how the information made available by virtue of the proposed register would allow those communities to do so. Instead, the information available via the planning regime would seem to be far more useful in this regard.

Which rights are the right rights?

The definition of rights of pre-emption and land options that the government proposes to use is contained in section 46 of the Finance Act 2003. This definition is extremely wide and could cover all sorts of arrangements typically found in real estate transactions which, we assert, should be outside the scope of the proposed register. For example, a right of renewal contained in a lease of business premises is an arrangement which would fall within this definition. We cannot see that there is public interest in disclosing the existence of arrangements such as these, which exist for valid commercial reasons but which do not impinge any potential development opportunities which could benefit the community.

What is a qualifying Estate Contract?

We also have concerns with regards to the proposals relating to the estate contracts which the register would seek to identify, and specifically, the qualifying criteria of a completion date falling more than six months after exchange. There may be any number of reasons as to why a contract could potentially complete more than six months after exchange, which may be entirely unrelated to the development of land. This could relate to the structuring requirements of the purchaser and its group; it might be due to the fact that third party consent of some sort is required and which is unrelated to a development opportunity; or that the transaction is linked to others which need to complete simultaneously, therefore requiring a delay in completion until all are ready to proceed, to give but a few examples.

Agreed notice v Unilateral notice

The suggestion that the beneficiary of a right of pre-emption or option should be required to protect its interest at HM Land Registry by way of an agreed form notice rather than a unilateral notice will mean a significantly increased administrative burden being placed on the parties to those agreements and their advisers. The submission of an application for an agreed form notice requires the underlying document to be submitted in its entirety, and this often contains commercially sensitive information. As such, an application of this nature is often accompanied by an additional HM Land Registry application which seeks to exempt from the register any such commercially sensitive information which is not required to be published under the Land Registration Rules 2003 (an “Exempt Information Application” (EIA)). Completing an EIA can be time-consuming, and if this needs to be done on every application to register a notice, considerable amounts of public and private funds will need to be spent in jumping through the administrative hoops required by the proposed regime and in the majority of cases, this will outweigh the public benefit achieved in publishing the relevant data.

The above are merely a snapshot of the issues which we believe require further thought and refinement by the MHCLG if this idea is to be both workable and useful.

The consultation remains open for comment until Friday 6 November. If you have any questions, please contact us.

For further information please contact:

Julian Pollock
Julian Pollock
Partner, Real Estate, London
+44 20 7466 2682
Nicholas Turner
Nicholas Turner
Partner, real estate, London
+44 20 7466 2640
Kate Wilson
Kate Wilson
Professional support lawyer, real estate, London
+44 20 7466 2650

“The Future of the Planning System” v “Planning for the Future” – two important consultations closing this week

“Planning for the future”, the government’s Planning White Paper published on 6 August 2020 and on which the consultation closes this week (29 October 2020), has been widely publicised and analysed in depth by the development community. As we said in our blog earlier this month, given the impact of the White Paper’s proposals on development in the short and the long term, developers should respond to this consultation. However, another consultation on the planning system in England, which closes the following day, on 30 October 2020, hasn’t been so widely publicised. This latter consultation is a Call for Evidence by the Housing, Communities and Local Government Committee (HCLGC) for an inquiry into the government’s proposals for reforming the planning system. Although the Call for Evidence was only issued on 8 October 2020, developers should find it easy to respond to, because it asks questions that are prompted by the Planning White Paper consultation but not expressly dealt with by it.

What does the HCLGC consultation ask that the White Paper doesn’t?

The future of the planning system in England” inquiry is gathering evidence which, whether intentionally or otherwise, will test the Prime Minister’s statement in his Foreword to the White Paper that the planning system in England is “outdated and ineffective”, that it is “artificially constraining” England’s potential and, in particular, that it is the planning system’s fault that “we have nowhere near enough homes in the right places”. The inquiry also tackles the issue of the future of the green belt, on which the Planning White Paper is surprisingly silent. In my view, if the aims of the White Paper are to be achieved, particularly the urgent increase in supply of new homes, these are important questions, the answers to which should guide which proposals the government should take forward and how. From initial responses to the White Paper seen in the many discussions that have taken place on it, it seems as though others in the development industry agree. Perhaps the questions being put by the HCLGC inquiry should have been asked by the government before the White Paper was published. Ideally, MHCLG will wait to take account of the answers received before pressing on with their fundamental reforms.

Questions asked by the HCLGC Call for Evidence:

  • Is the current planning system working as it should do? What changes might need to be made? Are the Government’s proposals the right approach?
  • In seeking to build 300,000 homes a year, is the greatest obstacle the planning system or the subsequent build-out of properties with permission?
  • How can the planning system ensure that buildings are beautiful and fit for purpose?
  • What approach should be used to determine the housing need and requirement of a local authority?
  • What is the best approach to ensure public engagement in the planning system? What role should modern technology and data play in this?
  • How can the planning system ensure adequate and reasonable protection for areas and buildings of environmental, historical, and architectural importance?
  • What changes, if any, are needed to the green belt?
  • What progress has been made since the Committee’s 2018 report on capturing land value and how might the proposals improve outcomes? What further steps might also be needed?

For more information please contact:

Fiona Sawyer
Fiona Sawyer
Professional support lawyer, planning, London
+44 20 7466 2674

“Planning for the future” consultation closes shortly

Two months ago the government published “Planning for the future“, a Planning White Paper proposing the most radical changes to the English planning system since the Second World War. The proposals have been the subject of much debate across the development industry. With the consultation closing in just over three weeks, developers still have time to consider whether, and how, to respond to the consultation.

Should developers respond?

Developers often decide to leave it to industry bodies to respond to consultations on their behalf and many may choose this route for this consultation as well. However, for these proposals, developers may want to consider whether they should submit an independent response. This is not only because of the enormity of the proposals and the impact that they will have on development in the short as well as the long term, but also because, depending on how the proposals are ultimately implemented, there may be limited opportunity for further public consultation or scrutiny – this may be the one chance that developers have to voice their opinions or concerns about certain elements before they are put into effect. One only has to consider the recent example of how permitted development rights for upwards extensions and demolition of commercial properties for residential development were implemented to see how major change can be introduced through secondary legislation without prior Parliamentary scrutiny.

How should developers respond?

When deciding what to say in response to the consultation questions, many in the industry are sharing their opinions to help ensure that consultation responses are considered and instructive. We have taken our time to review the provisions in detail and have produced a briefing paper to provide an in-depth analysis of the practical implications for clients to inform any response they may have to the consultation. If you are interested in receiving a copy of this briefing, please contact us. We are also running a series of user-friendly and practical round table sessions on the White Paper for our clients.  If this would be of interest, please let us know.

For further information please contact:

Matthew White

Matthew White
Partner and head of UK planning practice, London
+44 20 7466 2461

Catherine Howard

Catherine Howard
Partner, planning, London
+44 20 7466 2858

COVID-19 – Planning FAQs

In light of the new measures put in place by the UK government in response to the COVID-19 pandemic, many projects are being assessed to determine whether they can continue or whether work should pause. Local authorities are putting in place appropriate measures for their areas to protect the health and safety of the public and their employees whilst trying to help businesses to survive. The impacts vary from council to council and national guidance is being updated regularly. Innovative technological and online solutions have been encouraged across the sector, including by the Planning Inspectorate and the courts, to find practical solutions to difficulties arising.

We have produced a FAQ fact sheet collating relevant guidance as well as our opinions on some of these issues. If you would like to receive a copy, please contact us.

Information is also available from the HSF Real Estate and Construction teams on landlord and tenant and construction issues. Please contact us if you are interested in hearing more from them.

For further information, please contact:

Matthew White

Matthew White
Partner and Head of UK planning, London
+44 20 7466 2461

Catherine Howard

Catherine Howard
Partner, planning and environment, London
+44 20 7466 2858

Julia McKeown

Julia McKeown
Associate (New Zealand), planning, London
+44 20 7466 2321

Fiona Sawyer

Fiona Sawyer
Planning support lawyer, planning, London
+44 20 7466 2764