Section 123…Go!

Rightly, no-one ever believed section 1(1) of the Localism Act 2011: “A local authority has power to do anything that individuals generally may do”. Section 2 (“boundaries of the general power”) put paid to that. 
There are many good things which authorities might do, if they were allowed. In some circumstances, this would be to dispose of their interests in land at an undervalue, where this would unlock viable development, or would for example secure more affordable housing.  
In an excellent recent Property Law Journal article  Stephen Ashworth sets out the pitfalls of section 123 of the Local Government Act 1972, which prevents local authorities from disposing of land “for a consideration less than the best that can reasonably be obtained”. “Consideration” means financial consideration rather than any wider benefits that may be secured. There is an exemption from consent in cases where the undervalue is £2m or less and the purpose of the disposal would contribute to the promotion or improvement of economic, social or environmental well-being. Stephen rightly questions this:
Critically the £2m limit is risible in the present market. It is the value of less than five London starter homes. It is often less than the difference between competing bids for land. At the very least it needs updating. In a devolutionary world, maybe, if a limit is necessary, it should be set locally, perhaps by mayors or local enterprise partnerships.”

It is certainly disappointing that the £2m cap hasn’t been increased, or that the Secretary of State has not set out any guidelines that encourage deals at an undervalue above the threshold which promote well-being, particularly in the form of increased delivery of housing, especially affordable housing. 

By coincidence, since the article was written, on 26 August 2016 Holgate J delivered judgment in R (Faraday Development Ltd.) v. West Berkshire Council & Anor  where he rejected a claim by a competing developer that West Berkshire’s development agreement with St Modwen in relation to the comprehensive regeneration of the London Road Industrial Estate in Newbury was in breach of section 123. Landmark Chambers’ summary  sets out the judge’s distillation of the principles to be applied in determining when a court should intervene in relation to the application of section 123. After a detailed examination of the deal that had been negotiated he rejected the section 123 challenge. It was common ground between the parties that if that ground of challenge failed, so too would the allegation fail that the deal amounted to unlawful state aid (ie a distortion of competition by favouring any party by virtue of the support provided by the Council to that party). 

The case is also interesting and useful for its detailed examination as to whether the arrangement between St Modwen and the Council was caught by public procurement requirements as a public works contract, in which case the Council would have breached its obligation to follow the formal public notification and competitive procedures laid down in the Public Contracts Regulations. After an analysis of the European case-law, the judge rejected this ground too:
“In my judgment the DA is a contract to facilitate regeneration by the carrying out of works of redevelopment and to maximise WBDC’s financial receipts, particularly rent, from the LRIE. The provision of services under clauses 4 to 7 and land assembly do not represent a main purpose in themselves, but simply facilitate the Council’s regeneration and financial objectives, the “twin objectives” with which WBDC’s process began (see paragraph 29 above). WBDC lawfully decided that the DA itself should not impose upon the developer an enforceable obligation to carry out the redevelopment. It is therefore not a “public works contract.

 The case should give comfort to developers and authorities alike that the pitfalls of section 123 along with equivalent risks arising from EU state aid and public procurement legislation can be safely navigated. However, challenges on these grounds remain an ever-present threat, whether for instance the state aid complaint  that has been brought in relation to the London Borough of Hammersmith and Fulham’s arrangement with CapCo in relation to the Earls Court development and the successful challenge (Stephen Ashworth acting for the claimant…) of Winchester City Council’s revised development agreement with Thornfield for the now possibly defunct Silver Hill project in R (on the application of Gottlieb) v Winchester City Council (Lang J, 11 February 2015). 

The need for some common-sense over section 123 is illustrated by the interesting wrinkle in London in relation to section 123: it doesn’t apply to Transport for London, because it is not a “principal council” for the purposes of the section, even though Schedule 11 paragraph 29 of the Greater London Authority Act 1999 does require that when it engages in development, either directly or through a subsidiary, it must do so “as if it were a company engaged in a commercial enterprise”. So it can dispose of land at an undervalue (subject to avoiding state aid problems) but can’t take an equivalently enlightened position when developing in its own right or through a subsidiary! These complications will no doubt constrain how the London Mayor delivers on his promise of increased levels of affordable housing on Transport for London land, the subject of a 26 August 2016 EGi piece

It would of course be equally useful to see a lighter touch state aid and public procurement regime, but that relies on rather larger political cogs. 
A final note arising from Faraday:
Interesting to see that the case featured Landmark’s Batman and Robin, David Elvin QC and Charlie Banner, this time on opposing sides, with Robin being given a very hard time by Holgate J, if the judgment is anything to go by…


Batman and Robin in happier times. 

Simon Ricketts, 2.9.16
Personal views, et cetera

Time To Review The “C” Use Classes?

Isn’t it time to update the Use Classes Order, in particular its categorisation of residential and quasi-residential uses?

Until replaced in 1987 following a 1985 review, the 1972 Order reflected another age. Those lists of specific special industrial uses (blood boiling, bone burning, maggot breeding…) have been jettisoned. Since 1987 use class A1 has no longer explicitly excluded cats-meat shops or the sale of tripe. Since 1987 office, R&D and light industrial uses have been amalgamated into B1 (notwithstanding the government’s and LPAs’ continuing attempts to this day to maintain distinctions between the respective sub-classes).

Subsequently the 1987 Order has been tinkered with endlessly (13 separate revisions) but never again subjected to a root and branch review. Outside of legal subscriber-only websites, the Planning Jungle’s website probably has the best summary of its current, increasingly convoluted, status.

Three decades on, don’t we need to take a step back and reassess the ways in which we use property and how uses should be categorised so as to reduce uncertainty when it comes to determining whether changes should engage the planning system and as to how policies are to be applied?

The “C” classes in particular continue to pose problems. There are in reality many permutations and gradations of residential use.

The current “C” classes

We need to consider whether 2016 reality slots easily into the following pigeon holes:

Use class C1 is defined as “hotels, boarding and guest houses where no significant element of care is provided”, specifically excluding hostels, which are “sui generis” (not in any use class).

Use class C2 is defined as use as “residential care homes, hospitals, nursing homes, boarding schools, residential colleges and training centres”. Secure residential institutions are in a separate class, C2A.

Use class C3 is defined as use “as a dwellinghouse (whether or not as a sole or main residence) by—

(a) a single person or by people to be regarded as forming a single household

(b) not more than six residents living together as a single household where care is provided for residents; or

(c) not more than six residents living together as a single household where no care is provided to residents (other than a use within class C4)

Use class C4 is defined as small shared houses “occupied by between three and six unrelated individuals, as their only or main residence, who share basic amenities such as a kitchen or bathroom”, otherwise known as homes in multiple occupation (HMOs) although use as an HMO occupied by more than six individuals is sui generis.

The reality

However the spectrum in the real world includes:
– dwellings occupied on a longterm basis by a single household up to six residents where no care is provided (slam dunk C3 whether or not owner-occupied, PRS or in any affordable housing tenure, or indeed whether left empty for much of the year)

– serviced apartments (section 25 of the Greater London Council (General Powers) Act 1973 provides that in Greater London, the use as temporary sleeping accommodation, for 90 days or less, of any residential premises involves a material change of use – so C1 not C3 if the occupation is relatively short-term, otherwise possibly sui generis, but then again, increasingly, high end apartments come with significant concierge, cleaning and other services, so where is the boundary between serviced apartment use and C3?)

– aparthotels – just a clunky word denoting a block of serviced apartments, or is there a distinction?

– longterm occupation of hotel rooms (how longterm would the occupation have to be for the use to fall outside C1? The 1975 case Mayflower Cambridge Limited v Secretary of State for the Environment and Cambridge City Council 73 L.G.R. 517 talks of hotels serving a “transient population” with no indication of what that translates to in terms of weeks or months. A season could be said to be transient. What about a year?)

-purpose-built student housing (probably sui generis but differing approaches are taken by LPAs, illustrated by a recent NLP blog post)

– co-living in purpose-built blocks with a high degree of communal facilities, more akin in many ways to a student hall of residence than traditional C3 (again sui generis?)

– hostels/HMOs with more than six individuals staying (sui generis but often difficult to draw a boundary line with C1 applying criteria set out in Panayi v Secretary of State for the Environment [1985] J.P.L. 783 and R. (on the application of Westminster City Council) v Secretary of State for Communities and Local Government [2015] EWCA Civ 482)

– extra-care accommodation (either C2 or C3 depending on the level of care and self-containment)

– airbnb type short term lets (not now jeopardising C3 use of the dwelling if the short-term lets are for no more than 90 days of the year, following section 25A of the Greater London Council (General Powers) Act 1973, introduced by section 44 of the Deregulation Act 2015, otherwise probably sui generis?)

Good for the lawyers, as they say. Not good at all for ensuring that schemes can come forward to meet modern housing (and funders’) needs or to reflect what modern policy priorities may be.

Simon Ricketts 1.7.16

Personal views, et cetera

Valuing Starter Homes

The sound-bites from chapter 1 of the Housing and Planning Act 2016 make it sound so simple. Starter homes will have be sold at a discount of at least 20% to market value, with a price cap of £450,000 in London and £250,000 elsewhere.
That much is baked into the Act (subject to change via a subsequent statutory instrument). But most of the necessary detail is to follow in the Regulations that we expect to see this Autumn following the Government’s technical consultation in March. A busy summer ahead within DCLG.

I was speaking on a Westminster Briefing conference panel this morning alongside Jennifer Bourne from the Council of Mortgage Lenders and Chris Buckle from Savills. The mix of private sector and public sector delegates had a series of interesting and thought-provoking questions for us but more particularly (if they had been in the room) for those busy ministers and civil servants. I came away with a series of thoughts swirling around as to the particular difficulties in arriving at a valuation process that will work without introducing unnecessary extra complexity, delay or uncertainty into development (an already hazardous adventure):

– What will be the precise mechanism for having starter home valuations signed off? We expect some standardised section 106 agreement clauses – presumably they will require the developer (and home owner on any prospective re-sale within the restricted period) to submit a valuation for the LPA’s sign off but how can we ensure that processes won’t be elongated if there is disagreement? Who will pay for the LPA’s valuation sign-off or will this be centrally managed via the HCA or any other body? Who is to oversee the process to avoid any lack of rigour as between developer and LPA?

– How to deal with the uncertainties inherent in valuing any new home, with the premium that newness initially attracts, such uncertainties being particularly accentuated in the case of larger developments where local comparables may be less relevant?

– Is the valuation to exclude the “starter home” nature of the property, given that purchasers may well be prepared to pay more than 80% of that valuation (or, where relevant, more than the price cap) thereby increasing the valuation of the property? This premium will increase on potential re-sales during the restricted period (even allowing for any tapering).

– How to ensure that there are no side deals between developer and purchaser, particularly where there are more potential purchasers than potential starter homes or where the starter home seems a particularly good deal, for example where the price cap works so as to lead to a reduction of much more than 20% (as it will in parts of central London and the home counties)? Indeed how is the developer in practice to choose between different buyers, faced with that price cap?

– How to take into account any reduction in value of the balance of the private market housing within a scheme if it turns out that starter homes are cannibalising private market sales?

– where off-site contributions are negotiated in lieu of on site provision, how is the level of those contributions to be set?

This is the Council for Mortgage Lenders’ detailed and measured response to the Government’s technical consultation on the proposed Regulations.

Lastly, Savills have an interesting slide showing the likely viable mix of starter homes and other affordable housing – figure 1 in their April 2016 briefing note . However starter homes are valued, they come at a price.
Simon Ricketts 21.6.16
Personal views, et cetera

How Does Your Garden Village Grow?

It is encouraging to see the practical encouragement that the Government is giving for local authorities and promoters jointly to bring forward high quality proposals for new communities.

Expressions of interest are sought by 31 July 2016 for “garden village” projects defined by the Government as developments of between 1,500 and 10,000 homes that meet specified criteria. Up to 12 proposals are to be supported. The list of information required has now been published.

This follows DCLG’s March 2016 prospectus that covered both garden villages and garden towns/cities (10,000 homes plus).

Key criteria include:
– backing from the relevant local authorities

– engagement with the local community

– embedding of “garden city principles” (how strictly, one wonders, given the lack of many developments to adhere to all of those principles articulated by the TCPA.

The prize for selected applicants is a package of government support that could include:

– delivery enabling funding (ie funding for the local authority for staff or consultancy work)

– support from ATLAS

– “brokerage across government” to unblock cross-departmental issues

– access to government housing funding streams (eg the starter homes fund and affordable housing funding)

– “financial flexibilities” to improve viability and cashflow (TIF-type mechanisms perhaps?)

– planning freedoms (presumably eg the potential to be a “planning freedom zone” under section 154 of the Housing and Planning Act 2016)

– dedicated delivery vehicles (eg public-private sector JVs or even development corporations, made easier to create by sections 166 and 167 of the Housing and Planning Act 2016).

The Government has learned from the failings of the previous eco-towns initiative, where schemes that were selected achieved an unfair policy advantage, short-circuiting the then regional planning process, and failed to live up to promises made to promoters and the public alike as to consultation and assessment processes. Whilst the legal challenge to the lawfulness of that process failed (the Bard Campaign v Secretary of State for Communities and Local Government [2009] EWHC 308 (Admin), public unpopularity ran the process into touch in the lead up to the 2010 General Election.

Instead, this time round there is no explicit shortcut through the planning process – expressions of interest must set out how the proposed garden village fits with the “strategic growth plans for the area”.

Alongside the prospectus, the Government has been refining its policy stance on new settlements, in DCLG’s December 2015 consultation paper on proposed changes to national planning policy.

The NPPF currently says this:
“52. The supply of new homes can sometimes be best achieved through planning for larger scale development, such as new settlements or extensions to existing villages and towns that follow the principles of Garden Cities. Working with the support of their communities, local planning authorities should consider whether such opportunities provide the best way of achieving sustainable development. In doing so, they should consider whether it is appropriate to establish Green Belt around or adjoining any such new development”
The consultation paper proposes the following:
“20. We propose to strengthen national planning policy to provide a more supportive approach for new settlements, within locally led plans. We consider that local planning authorities should take a proactive approach to planning for new settlements where they can meet the sustainable development objectives of national policy, including taking account of the need to provide an adequate supply of new homes. In doing so local planning authorities should work proactively with developers coming forward with proposals for new settlements in their area.”

If you have a scheme that meets the criteria in the prospectus, there is little time to be lost.

Simon Ricketts 17.6.16

Personal views et cetera

Permitted Development: What Next?

This Government loves permitted development rights. Two of their most ambitious ones so far have yet to be reflected in legislation. I’m not holding my breath as to when they will emerge or how workable and/or significant they will turn out to be.

Office demolition and residential rebuild



Brandon Lewis announced way back on 13 October 2015 that there would be a new development right to “allow the demolition of office buildings and new building for residential use”.
I assume that the delay has been caused by the need for an amendment to section 60 of the Town and Country Planning Act 1990, now achieved by section 152 of the Housing and Planning Act 2016, because section 60 limited (in relation to permitted development rights for the erection, extension or alteration of any building) the matters that may be dealt with by way of prior approval, to “the design or external appearance of the building”. Section 152 extends this, with immediate effect, to “any matters that relate to those operations…and are specified in the order”.
That additional flexibility will be necessary because surely all manner of issues will need to be controlled, not least the issues dealt with by way of prior approval in relation to office to residential use permitted development use changes: highways and transportation, flood risk, contamination and issues in relation to noise from nearby commercial premises.

However there are bigger unanswered questions:
– what scale of redevelopment will be possible?

– will the height, floorspace quantum or development envelope be pegged to that of the existing building?

– what of mixed uses (for example commercial uses at the ground floor)?

– presumably no starter homes or affordable housing requirements?

In London, the Government is also going to come up against London Mayor Sadiq Khan’s well publicised concern as to the loss of office space by way of permitted development rights. This is his 3 June 2016 press statement.
Upward extensions in London



The February 2016 DCLG/Mayor of London consultation paper sought views on proposals “to increase housing supply in the capital by allowing a limited number of additional storeys to be built up to the roofline of an adjoining building through permitted development rights, local development orders or development plan policies”.
The key components of a new permitted development right would be
– requirement that the additional space be used to provide self-contained additional housing units

– upwards constraint of one or two additional storeys, “up to the level of an adjoining roofline”. The right could not be used incrementally on premises adjacent to those where the right has been exercised. Confusingly, it is said that the right “would apply to premises within a single terrace, where the premises at either end of the terrace have a higher roofline than the rest of the terrace”. This is pretty specific!

– neighbour consultation scheme equivalent to that introduced in May 2013 for larger single storey rear extensions to homes and only where neighbours raise objections would the LPA have to consider the impact of the proposed development on their amenity

– prior approval requirement to allow for consideration of other issues, including space standards and method and hours of construction

– some locations to be excluded eg within the curtilage of listed buildings. The paper indicates that the right would not necessarily be excluded from conservation areas or from protected view corridors but “an additional prior approval could require the local planning authority to consider the impacts of the proposed development on a conservation area or a protected view. London boroughs would determine whether further storeys are appropriate in specific conservation areas or protected views and apply local design codes…”

Sadiq Khan has expressed no view yet on the upward extension initiative. Assuming it goes forward to legislation, do we really think that there are many sites that meet the criteria and which would either not have proceeded smoothly anyway via a traditional planning application or which would not have been stymied in any event due to landlord and tenant, rights of light or viability concerns?

Simon Ricketts 15.6.16

Personal views etc

7 Questions About Permission In Principle

Despite its 217 sections and 20 schedules, the Housing and Planning Act 2016 is in places the merest of sketches – nowhere more so than the illusive idea of “permission in principle” in sections 150 and 151. Here are just some of the things we don’t know:

1. What does “housing-led development” mean?

2. What types of land will be able to be included in the new register envisaged, promised by the Act’s explanatory notes to be a register of brownfield land suitable for housing, but without any such constraint in the Act itself?

3. What procedures will govern the process for selecting land for the register, allowing both proponents and opponents a fair hearing? The Act simply refers to “consultation and other procedures”. In which ways will the procedure be any speedier than any development plan process whilst complying with the European Convention on Human Rights and SEA Directive?

4. Categories of land on the register, or designated in other plans, will have automatic permission in principle for development by way of a general development order but what will be the categories and in relation to what categories of land will specific applications for permission in principle be needed? The explanatory notes suggesting that applications will be limited to minor development (ie fewer than ten dwellings) but presumably the general development order will allow for much larger development to have automatic permission in principle (with EIA, where necessary, being carried out at some undetermined stage in the process?)?

5. How detailed will be the development parameters set out in the permission in principle, given that LPAs will only be to take into account limited criteria in determining subsequent applications for technical details consent? The explanatory notes suggest that “the parameters that can be granted permission in principle are limited to location, the uses (which must be housing-led) and the amount of development”. Will that be enough to give developers something bankable in terms of predictable value/cost? The explanatory notes suggest that permission in principle cannot be subject to conditions, so how will the parameters be documented in a way which sufficiently precise?

6. In practice, will LPAs require land owners and developers to make all the running as at present, justifying that development would be acceptable with necessary supporting information and technical work, or will land owners be able to sit back, let the LPA take the local flak and wait for permission in principle to pop out of the sausage machine in place of getting a developer on board to secure planning permission? Will land owners accordingly retain more land value gain?

7. Are matters that go directly to value and viability, such as social and physical infrastructure requirements and affordable housing numbers and tenure, to be determined at permission in principle stage or technical details approval stage? The explanatory notes simply suggest that “the Secretary of State may also specify in the regulations, certain types of information for inclusion into the register alongside the entries …. For example, the site reference, address, size, an estimate of the maximum number of dwellings that the site would be likely to support, and its planning status.”

More generally, is there an Act with such blatant Henry VIII clauses, ie Parliament passing an Act with its fingers crossed behind its back so that it can amend the provisions in the statute without primary legislation? Section 2(10) takes the biscuit (“Regulations under this section may amend this chapter”), giving future Governments carte blanche to mutate the Act’s starter homes provisions in whichever way they choose. (Read “Why Henry VIII clauses should be consigned to the dustbin of history” by Richard Gordon).

Simon Ricketts 11.6.16

Personal views et cetera

Brownfield Thinking

“Brownfield land” is right up there with “hard-working families” in terms of the political buttons that it presses. But what is it and what are the implications of land being “brownfield”?
There is no planning law definition other than the definition of “previously developed land” in the glossary to the NPPF:

“Land which is or was occupied by a permanent structure, including the curtilage of the developed land (although it should not be assumed that the whole of the curtilage should be developed) and any associated fixed surface infrastructure. This excludes: land that is or has been occupied by agricultural or forestry buildings; land that has been developed for minerals extraction or waste disposal by landfill purposes where provision for restoration has been made through development control procedures; land in built-up areas such as private residential gardens, parks, recreation grounds and allotments; and land that was previously-developed but where the remains of the permanent structure or fixed surface structure have blended into the landscape in the process of time”.

It may be a surprise to some that there is nothing in the definition that connotes “under-used”, “vacant” or “derelict” – the definition does not exclude land which is currently in occupation (save occupation by agricultural or forestry buildings).

It may also be a surprise to some that (just as large parts of the green belt are anything but green) brownfield land is often anything but brown. The definition only excludes “private residential gardens, parks, recreation grounds and allotments” to the extent that they comprise “land in built-up areas”. The High Court recently confirmed (although it’s obvious on the wording of the definition) that land used as private residential gardens, parks, recreation grounds and allotments in the countryside as opposed to “in built-up areas” comprises brownfield land (Dartford v Secretary of State, 21 January 2016).

The Government has set as a policy objective that 90% of brownfield land “suitable for housing” should have planning permission by 2020. It is seeking to achieve this by a number of policy initiatives, which include:

Housing and Planning Act: permission in principle

The Act provides for the establishment of a register (which the explanatory notes to the Act, rather than the Act itself, explains is intended by the Secretary of State to be a register of brownfield land which is suitable for housing development). Local authorities will be able to place land on the register if it meets criteria which the Secretary of State will set down. The Explanatory Notes accompanying the Act state that “the criteria prescribed by the Secretary of State could for example include that the land must be available already or in the near future for housing development, that it must not be affected by physical or environmental constraints that cannot be mitigated and that it must be capable of supporting 5 dwellings or more“.

The effect of being on the brownfield land register is that, by a general development order, the Government will give automatic permission in principle for certain specified types of site suitable for housing which are on the register, or which have been allocated for that purpose in other local plan documents. The details of what the criteria will be are left for the general development order. The detailed procedure that authorities have to follow in deciding what land goes on the register is also left for later regulations.

Strengthened NPPF policies

The Government has consulted on changes to the NPPF, which would:

– provide that “substantial weight should be given to the benefits of using brownfield land for housing (in effect, a form of ‘presumption’ in favour of brownfield land). We propose to make it clear that development proposals for housing on brownfield sites should be supported, unless overriding conflicts with the Local Plan or the National Planning Policy Framework can be demonstrated and cannot be mitigated” (paragraph 22)

– include an even stronger presumption for starter homes on unviable or underused brownfield land – “Alongside these proposals, we propose to widen the scope of the current exception site policy for starter homes to incorporate other forms of unviable or underused brownfield land, such as land which was previously in use for retail, leisure and non-residential institutional uses (such as former health and educational sites). This will provide clarity about the scope of the exception site policy for applicants and local planning authorities, and release more land for starter homes.” (Paragraph 40)

strengthen the starter homes exception sites policy – “To ensure there is greater certainty that planning permission will be granted for suitable proposals for starter homes on exception sites, we propose to be clearer about the grounds on which development might be refused, and to ensure that this is fully embedded in national planning policy. Specifically, we propose to amend the exception site policy to make it clearer that planning applications can only be rejected if there are overriding design, infrastructure and local environmental (such as flood risk) considerations that cannot be mitigated.” (Paragraph 42)

– support development of brownfield land in the green belt if it “contributes to the delivery of starter homes” (weaselly word, “contributes”!) as long as there is no substantial harm to the openness of the green belt. (Paragraph 53)

The consultation period has closed and we await what emerges…

PS ask a tax lawyer about brownfield land and you will get a very different answer based on its use as shorthand for reliefs available for remediation of contaminated land.
Simon Ricketts 8.6.16

Personal views et cetera