The Government is asking for opinions on regulations that affect the private rented sector, social housing, construction, and the building regulations. Full details are here.

In the Government’s press release on the issue, Communities Minister Baroness Hanham said:

“For years builders, businesses, landlords and residents have had to navigate an increasingly complicated set of rules and regulations to do things by the book. Now we’re giving them the chance to tell us what they would like us to change so that building a new home or property is a smoother ride.”

Interested parties have four more weeks to put forward their views and this can be done on the Red tape challenge website. This website has full details of the challenge and you can also read the opinions of those who have already commented (and respond to those comments if you so wish.)

The note provides an overview of what Build Now, Pay Later is, the advantages it brings to housebuilders, and the terms which government departments will ask developers to bid on when they are disposing of their land.

The Build Now, Pay Later scheme is intended to make it easier for developers to manage their development cash flow, as they do not have to pay upfront for the government-owned land. Housebuilders will pay for the land after they have started work on the new homes, meaning that they can start building immediately.

The scheme has been launched in conjunction with the Government’s decision to release public sector land for housebuilding, with the aim of building 100,000 new homes by 2015. The need for new homes is urgent, as recent figures have revealed that housebuilding is now at its lowest levels since the 1920s (click here for more details.)

In its note, the Government has admitted that Build Now, Pay Later is not appropriate for all sites, and will tend to be more beneficial on larger more complicated sites which will require significant capital investment to unlock.

There are two Build Now, Pay Later models: Phased Payments and Risk Sharing.

The Phased Payments model is where the land value or base price is apportioned across a number of phases with specified dates for when payments will be made. The housebuilder bears less initial risk, as payments are linked to completed or sold phases. The timing of payments and percentage of land value paid on completion of each phase can be varied to suit the risk characteristics of the site.

The Risk Sharing model allows housebuilders to share the risk and reward from the movement in house prices and the subsequent revenue generated. However, the risk of fluctuations in development costs will be borne by the housebuilder.

Increasing housebuilding is one of the Government’s key objectives in its Growth Review, and it is also hoped that the Build Now, Pay Later will create and sustain thousands of jobs in the construction sector.

The HBF’s New Housing Pipeline Q3 2011 report also said that planning permission was granted for only 29,059 homes across England in the same period – a 50 per cent drop in the average number of home approvals in 2006 and 2007.

The report went on to state that the number of homes being built is now lower than at any time since the 1920s and called on the Government to continue with its proposed planning reforms in order to address the current housing crisis.

However, the Government’s planning reforms may be facing a serious challenge. In its review of the draft National Planning Policy Framework (NAPF) this week, the parliamentary Communities and Local Government Committee said that the Government’s proposals to reform the planning system should be re-written to give greater protection to the environment and to ensure that developers build on brownfield land and within town centres. The Committee also said that an adequate definition of “sustainable development” was missing from the proposals and put forward its own alternative definition. Full details of the Committee’s report are here.

The Committee claimed that the default answer of “yes” in the planning reforms, which gives the go-ahead to development unless the adverse effects “significantly and demonstrably” outweigh the benefits, should be removed as it could lead to poorly planned, unsustainable development.

The Government has said that it will “carefully consider” the new definition of sustainable development offered by the Committee, so we shall see what happens.

The Government is due to implement its final version of the NAPF in early 2012.

Under these Regulations, a tenant will have the right to ask their landlord to allow a competitor electricity supplier to distribute electricity to him or her via the cables and electricity system in the building.

Previously, it has been usual practice for landlords of multi-tenanted buildings to choose an electricity supplier and simply recharge the tenants the cost of the electricity supply they use (mainly through the service charge or by measuring use through electricity meters.) Tenants have had no right to demand a change of electricity supplier or to ask for their own individual supply. However, from now on, even if there are several tenants in the building, each tenant can potentially ask for a different supplier rather than agreeing to the one chosen by the landlord.

On receipt of a request by a tenant to change electricity supplier, a landlord must respond in writing within ten working days to either (1) confirm that it will provide the tenant’s choice of supplier with the necessary information, or (2) explain why the tenant cannot have a separate supply (e.g. the cabling within the building has insufficient capacity, or that to increase its capacity would have a substantial adverse financial impact on the landlord). The landlord must obtain approval from Ofgem for any charges it seeks from the electricity company for the use of the electricity distribution system in the building.

Considerations for tenants

1. The cost of physically changing the electrical cabling system (or installing additional cabling) must be met by the tenant or electricity company; and

2. Tenants may be able to obtain better electricity deals than those offered by their landlords.

Considerations for landlords

Landlords do not have to do anything until a tenant makes a request for a separate electricity supply. However, if a request is made, they must:

1. Allow electricity companies access to carry out necessary works and to read meters;

2. Install additional infrastructure, if required; and

3. Cooperate in agreeing a ‘switching’ date and a reconciliation of charges between the outgoing and incoming suppliers.

It is prudent for landlords to look at their current electricity supply arrangements, particularly if they have fixed-term contracts at a fixed price, based on previously assumed levels of electricity consumption. It may also be possible for landlords to improve the terms of the existing supply, so that tenants have less incentive to request their own supply.

On the plus side, if a tenant receives a direct electricity supply, that tenant’s electricity consumption will not count towards the landlord’s requirements under the Carbon Reduction Commitment Energy Efficiency Scheme.

Will these new Regulations result in an army of tenants demanding to exercise their new right to change electricity supplier? Probably not – tenants are likely to be deterred by the prospect of high infrastructure and installation costs, which will probably outweigh the financial benefits of switching to a cheaper electricity supplier.

Following on from the Government’s recent introduction of a new-build indemnity scheme to help purchasers of new-build properties who are struggling to obtain a mortgage, the Council of Mortgage Lenders has said that over the past few months it has received a “steady trickle” of enquiries from local councils who want to be able to offer mortgages to local residents.

But are local councils really able to offer mortgages?

Well, actually yes. Despite what most people may think, local councils are able to offer mortgages without having to register with the Financial Services Authority, which regulates mortgage lending.

And they used to be popular.

During the 1960s, 1970s and early 1980s, thousands of homeowners had mortgages with their local councils. Local councils were able to offer cheap mortgages, mainly because they could borrow money at rates that were only slightly higher than those available to the UK Government; however, by the mid-1980s these loans became less attractive when mortgage finance became more readily available from banks and building societies.

And it also appears that established lenders are prepared to work with local councils in offering mortgages.

In March this year, fifteen local authorities across the UK agreed to put money into a Lloyds TSB scheme – entitled Local Lend a Hand – to increase the deposits of first-time buyers trying to buy a home in their areas; in some cases, first-timers have been able to buy a home with a deposit of as little as 5 per cent.

Borrowers can be rest assured that if they take out a mortgage with their local council and fall into arrears, the local council must uphold the FSA’s Treating Customers Fairly requirements (as any bank or building society would have to.)

Whether the local council mortgage makes a full national comeback remains to be seen, but for homebuyers in certain parts of the country it could be a viable option.

The introduction of a new-build indemnity scheme, aimed at increasing the supply of affordable mortgage finance for new-build homes will be welcomed by cash-strapped first-time buyers with little savings. The scheme will be available to all potential buyers, subject to appropriate mortgage underwriting criteria, except buy-to-let investors and second home owners.

Under the scheme, homebuyers will be able to purchase a new-build house or flat with only a five per cent deposit. Housebuilders and the Government will contribute up to 95 per cent of the cost of the home to an indemnity fund, which will be used to pay out to a lender if a buyer defaults and where there is a shortfall if the property is repossessed.

The scheme is open to all housebuilders and all lenders operating in England. Mortgages will be available under the scheme from March 2012.

According to the Government, the following lenders have agreed in principle to participate in the scheme: Barclays, HSBC, Lloyds Banking Group, Nationwide, RBS, Santander and Yorkshire and Clydesdale Banks.

The Government has also confirmed that more than 25 homebuilders have agreed in principle to participate in the scheme: Barratt Developments, Crest Nicholson, McCarthy and Stone Retirement Lifestyles, Bellway, Fairview New Homes, The Miller Group, Bloor Homes, Galliford Try, Persimmon, Bovis Homes Group, Gladedale Group, Redrow, Taylor Wimpey, Antler Homes, Grainger, Stewart Milne, Aquinna Homes, Jones Homes, Places for People Group, Banner Homes Group, Morris Homes, Strata Homes, CALA Group, Nicholas King Homes, Urban Renaissance Villages Ltd, Croudace Homes Group, Octagon Developments, William Davis, and Heyworth Developments

Also, social housing tenants will encouraged to buy their homes after the Government offered them up to a 50 per cent discount under the Right-to-Buy scheme.

However, as expected, the Government confirmed that the stamp duty land tax relief for first time buyers will end on 24 March 2012, as planned. The loss of this relief is disappointing. Although the Government said that the relief had been “ineffective” in increasing the number of first-time buyers entering the property market, it is highly probable that there would have been fewer first-time buyers if it hadn’t been in place.

The High Court ruled that, based on Foxtons’ terms and conditions, all Foxtons had to do to receive commission was for there to be an unconditional exchange of contract with the purchaser. As that had happened, it was entitled to commission, even though completion did not take place.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: “Following this case, estate agents should check their terms and conditions to make sure that they are entitled to commission should there be exchange of contracts but no completion.”

The Act includes measures to reform the planning system, to ensure decisions about housing are taken at a local level, and to generally increase the power of local government and local communities. David Marsden, Head of Real Estate at Matthew Arnold & Baldwin, looks at the particular implications for planning here.

The Government has produced a ‘plain English’ guide to the Localism Act, which clearly summarises all of the main ideas contained in the Act and what effect they will have on local communities.

Over the coming weeks and months, the measures laid out in the Localism Act will begin to come into force. Many of the measures are expected to be in place by April 2012, although there is no definite timetable yet.

New figures show that government-owned land could be used to deliver 83,500 new homes, instead of the previously announced number of 50,000.

Earlier this year, the Government announced that it would build up to 100,000 new homes on public land by 2015 under the ‘build now, pay later’ scheme. Under this scheme, developers do not have to pay for the government-owned land they are building on until the homes are complete, thus easing pressure on cash flow. Click here for further details of this scheme.

A further announcement on brownfield site release is expected to be announced by the Government in its housing strategy, which is due to be published later this month and before the Chancellor of the Exchequer’s Growth Review on 29 November 2011.

The Bill, which was introduced to Parliament in December last year, will devolve more power from central government to local councils, so that communities have more control over housing and planning decisions in their areas.

Once Royal Assent is received (which should be a formality) and the relevant sections come into force, the Bill will, amongst other things:

1. Abolish the Regional Strategies;

2. Force local planning authorities (LPAs) to co-operate with each other on issues which cross council boundaries, particularly in relation to sustainable development and the use of land for strategic infrastructure.

3. Make changes to the Community Infrastructure Levy, so that LPAs will have greater control over the setting of their charges;

4. Introduce Neighbourhood development orders and plans (so local communities can specify where they think development should take place and how the local area should be planned);

5. Require developers to consult local communities before submitting planning applications for certain developments;

6. Introduce new enforcement measures for LPAs, including the power to reject retrospective planning applications; extend time limits on taking enforcement action against people who conceal unauthorised development; set new financial penalties; and increase powers to deal with unauthorised advertisements;

7. Abolish the Infrastructure Planning Commission, so that its functions can be transferred to a new unit in the Planning Inspectorate and decisions can be made by democratically elected (and accountable) government minsters; and

8. Reform the delivery of social housing.

Royal Assent could be given as early this week, but, if not, certainly before the end of the year; the Bill is then expected to come into force in April 2012 (although confirmation is still awaited.)

UPDATE: The Localism Bill received Royal Assent on 15 November 2011.

The first dispute concerned a joint venture between the claimant and defendant to redevelop a property for commercial gain. The claimant, Mr Edmonds, had purchased the freehold of the property, pursuant to a joint venture between the two parties. The joint venture, though, was never formalised in writing. The defendant property developer’s contribution to the purchase price of the property was obtained through a bank loan (and secured by a legal charge on the property.)

The redevelopment, however, did not take place and the property was subsequently sold. However, the two parties could not agree on how the proceeds of the sale should be divided between them. Mr Edmonds alleged that it had been agreed that he would be repaid his cash contribution of £300,000 before the defendant was repaid for the bank loan. The Court rejected this allegation, although it did accept that the defendant had agreed to bear half of the cost of maintaining the property; the Court therefore deducted that sum of money (more than £50,000) from the £300,000 that Mr Edmonds owed.

The second dispute concerned the cost of the defendant renovating Mr Edmonds family home. Again, the contract was never formalised in writing. When the renovation was completed, the two parties could not agree on how much money was payable. The Court, after carrying out a quantum meruit valuation of the works, rejected Mr Edmond’s suggestion that the defendant had agreed to manage the renovation for free and without a mark-up on “all other costs, labour and materials, etc.” Instead, the Court allowed a 15 per cent mark up, plus a percentage for the defendant’s services, although deductions were made after the Court acknowledged that the defendant had not properly advised on planning, building regulations and VAT. The court awarded the defendants £683,512 (less sums already paid.)

Although this case was decided on its facts, it highlights the dangers of proceeding with joint venture projects without a formal agreement between the parties involved.

Apart from the media and general interest created by the celebrity involved, there are lessons to be learned from this case. Many developers and landowners enter into joint venture agreements, particularly when bank finance can be hard to find. These come about in a variety of ways: setting up a formal joint venture company or limited liability partnership with responsibilities and profit shares set out in shareholders’ or members’ agreements, via collaboration or joint venture agreements, or by less formal methods such as a handshake in the local pub. Joint ventures start off with high hopes, but it should always be appreciated that things can go wrong, parties fall out, or the market can fall. Proper legal advice should be taken at the outset, the correct legal structure agreed and all likely scenarios taken into account.

There is some parliamentary opposition to parts of this Bill and an amendment to clause 26, which would have watered downed proposals to criminalise squatting in residential property, was recently defeated in Parliament. The amendment would have meant that no offence would have been committed if a building has been empty for six months or more.

Squatting is a form of trespass which involves a person or persons occupying land or property without the consent of the owner; however, at present, squatting is not a criminal offence in England and Wales (although section 7 of the Criminal Law Act 1977 does make it is an offence for a squatter to fail to leave a residential property when required to do so by, or on behalf of, either a displaced residential occupier or other occupiers whose interest in the property is protected under the legislation.)

Under the current Bill, squatters could face one year’s imprisonment and/or £5,000 fine if found guilty of squatting in a residential property.

Unfortunately, the new offence will not criminalise squatting in commercial and other non-residential buildings, as, according to the Government’s response to a recent consultation on the issue, “there does not appear to be the same level of concern about squatting that occurs in those premises.”

The Bill (and defeat of the amendment) is to be welcomed by property owners and occupiers who have borne the cost of evicting squatters and the associated property repair and clean-up costs, which can be a lengthy and expensive process. However, it is a shame that  the criminal offence of squatting will not currently be extended to commercial property, although it is very possible that this may happen in the future.

The Bill is expected to be enacted in spring 2012, with it coming into force shortly after.

E accepted that, by a literal reading of the commission agreement, commission was not payable. Instead, he argued that the purpose of the share sale was to achieve the same result as was intended by the initially envisioned but aborted property sale, and the agreement should be read as such – that the share sale was the effective sale of the property. The High Court had initially rejected his claim.

The Court of Appeal has now agreed with the High Court’s ruling on the basis that, whatever the purchaser and L intended to achieve by the share sale agreement, it was not relevant to the construction of the commission agreement. The key to understanding the commission agreement was to look at its language, and by that interpretation, the literal meaning was clear – L did not need to pay any commission to E. Neither E nor L had considered the sale of the property by means of a share sale, so they cannot have intended the commission agreement to deal with such a situation.

Simon Weinberg, a solicitor at Matthew Arnold & Baldwin LLP and assistant editor of Upload-IT, comments: “When the High Court decision came out, we helped a number of estate agents update their terms and conditions to seek to avoid the effects of the Estafnous case. The appeal court’s decision to uphold the lower court’s ruling further emphasises the need for estate agents to make sure that their terms and conditions allow them to get commission if the shares in a company owning the property are sold rather than the property itself.”

In the consultation paper, entitled Technical reforms of council tax, the Government sets out a number of practical proposals which it believes will help local councils keep overall council tax levels down for ordinary people. One of these proposals suggests giving local councils the flexibility to remove council tax relief on second homes and empty homes.

At present, council tax discounts on second homes range from 10 to 50 per cent, depending on where the property is situated. There are a range of discounts of up to 100 per cent for empty homes. However, the Government has made it clear that it has no plans to change the rules on council tax relief for homes that are left empty due to “special circumstances” (e.g. because a person has moved into a hospital or care home, has died, or has moved out to provide care to another person.)

The consultation also includes proposals to review the “double taxation” of self-contained annexes to family homes (e.g. ‘granny annexes’.) Currently, council tax inspectors treat such annexes as a separate property, meaning families get charged twice for the same single property they occupy.

The consultation closes on 29 December 2011.

We have a further example of how courts can interpret simple words like “use” and “a” in conflicting ways.

In the recent case of Parsons v Thatchers Wood Residential Company Ltd, the claimant (P) claimed a declaration as to the meaning of a restrictive covenant in the title deeds to their property, which was situated on a small residential estate. The defendant (T) was the management company for the estate; it owned and looked after the common parts of the estate and was a beneficiary of the restrictive covenant.

T’s articles of association provided that (1) each house-owner on the estate was issued a share in T, and that (2) shares could only be issued to home owners on the estate, who had to transfer their share when they sold their house. The articles were later amended to allow shares to be issued to purchasers of new houses added to the estate. The covenant was entitled “User” and provided that, unless T’s permission was given, the property was not to be used for any purpose other than “as a private dwelling-house in single family occupation”.

The issue was whether the “User” restrictive covenant prevented P from building a second house on their property without T’s permission.

In the absence of a contrary indication, the words of a heading could be taken into account. In this case, some guidance on the meaning could be gained from the heading, which indicated that the covenant was about the permitted and non-permitted “User” of the property. The subject matter was the whole of the property. There was no need for numbers to be used to limit the number of dwelling-houses, and use of the indefinite article, “a”, was not necessarily determinative. Two aspects of the covenant connoted that it was intended to limit numbers: the wording suggested that the draftsman had in mind that density was a purpose, and the covenant was applicable to the whole property.

The Court considered the 2004 ruling in Martin v David Wilson Homes Ltd. This case stated that the words “use as a private dwelling house” meant that the word “use” was definitive, not the word “a”. Therefore, more than one house could be built.

However, the High Court determined in Parsons v Thatchers Wood Residential Company that the context of the restriction on use was materially different to that in Martin v David Wilson Homes. The covenant prevented the building of a second house on the property, without T’s consent. That conclusion was supported by T’s articles of association which, in unamended form, appeared to provide that only purchasers of the houses originally built could be issued shares.

All cases are judged on their own particular facts and it is difficult to draw conclusions from this case alone. However, this case adds uncertainty to the interpretation of restrictive covenants, and developers and landowners need to consider the effect of covenants carefully before committing to a development.

What conclusions can you draw from cases such as this?  Simply do not assume that your understanding of the “law” is correct.  It might have changed.  Please check with us.

These changes could affect all commercial property owner-occupiers and investors.

HMRC intends to do the following:

1. Require all taxpayers to claim capital allowances within one or two years of when the money was spent, or no capital allowances claim will ever be allowed for any current or future owner. This will apply to all new construction expenditure (e.g. new-builds, extensions, refurbishments, etc) as well as purchases of second-hand property. Historic expenditure made before April 2012 is also likely to be subject to the new rules.

2. Require the buyer and seller of a second-hand building including fixtures to submit a formal ‘Record of Agreement’, showing how much of the purchase price is attributable to the fixtures (and notify this to HMRC within one or two years.)

If these changes do go ahead, buyers of plant and machinery fixtures will need to ensure that they notify HMRC of the expenditure within the required time limit in order to claim capital allowances. Also, the buyer and the seller will have to agree on the sale value of the fixtures within the requisite time period if the buyer is to be able to claim capital allowances in relation to the fixtures.

Draft legislation will be included in the Finance Bill 2012, with the changes expected to take effect from April 2012.

As a matter of urgency, if you have not yet claimed for fixtures, or believe that capital allowances might have been under-claimed, please contact either me at david.marsden@mablaw.com, or our property tax specialist Shimon Shaw at shimon.shaw@mablaw.com, as any additional claim should be made before the rules change in April 2012.

Well, the county of Cornwall will shortly launch a scheme of its own.

Their scheme is similar to FirstBuy, but is tailored to Cornwall only. Rather than seeking contributions from developers through section 106 agreements, Cornwall Council will offer the developer the option to sell homes at a discount of up to 40 per cent. This discount will then be passed over to the Council as an equity loan to the purchaser. (First-time buyers would have to take out a mortgage to cover the rest of the cost.) When the home is eventually sold, the Council would be repaid this percentage of the market value by the homeowner. This money will then be used to help other purchasers in the county.

The Council has said that the new scheme will also enable small and local developers to get involved (rather than just volume housebuilders, who are predominantly used in the FirstBuy scheme.)

Any scheme to help first-time buyers and housebuilders should be supported, and Cornwall Council is showing that local authorities can get involved in helping local people.

EPCs provide information on how energy-efficient a building is and make recommendations on how to reduce that building’s energy use and carbon dioxide emissions.

Subject to Parliamentary approval, the Government intends to make the following changes:

1. The duty to commission an energy performance certificate (EPC) before marketing a property will be extended to the sale and rent of residential and non-residential buildings;

2. The current 28-day period within which an EPC should be obtained using “all reasonable efforts” will be reduced to 7 days. (However, there will be an additional 21-day period during which the EPC can be obtained if it has not been secured within the initial 7-day period);

3. The requirement to include an EPC with written particulars will apply to all residential and non-residential buildings, whether offered for sale or rent. It will not be possible to only include the asset rating;

4. The powers of Trading Standards Officers (TSOs) will be increased so that they can force estate agents and letting agents (and not just landlords or building owners) to prove that an EPC has been commissioned and to produce a copy of it for inspection. This will mean, for example, that TSOs will be authorised to require estate/letting agents to produce evidence that an EPC has been commissioned in circumstances where they are marketing a building without one;

5. An air-conditioning inspection report (if required) will have to be lodged on the central EPC register. (This will no longer be voluntary); and

6. Regulation 5 of the Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 will be amended to make it clear that the provision of the EPC cannot be delayed until shortly before the parties enter into a contract for sale or rent.

These changes were supposed to have been implemented in two stages – on 1 July 2011 and 6 October 2011, so we will have to wait and see whether the Government sticks to its new April 2012 date. It certainly seems strange that the Government is pressing ahead with these changes in spite of their stated intention to reduce the burden of red tape on businesses.

The decision is important because it was Cala’s planning application that led to it launching a judicial review at the High Court against Eric Pickles’ decision to effectively abolish the Regional Strategies in 2010. Click here for full details.

Neither Cala Homes nor its lawyers have yet to make an announcement on the decision, but it could launch a challenge under section 288 of the Town and Country Planning Act 1990.

In the paper, the RICS suggests that a home’s sustainability features should be reflected in its market value. Consequently, when assessing a property, residential property valuers will need to be fully aware of both sustainability policy and each building’s “sustainability characteristics”, such as its energy efficiency rating; the materials used in its construction; its energy-efficient features; its proximity to public transport links; and its potential to be adapted to occupiers’ changing needs in the future.

The launch of the paper indicates that sustainability is likely to become an increasingly important factor in residential property valuation.

The guidance applies to high street and online estate agents, property auctioneers, buyers’ agents, and solicitors and online property sites which offer services that count as estate agency work.

The new guidance focuses on two important pieces of legislation: (1) the Consumer Protection from Unfair Trading Regulations 2008, which prohibit traders/estate agents from engaging in commercial practices that are unfair to sellers, buyers, potential sellers and potential buyers of residential property, and (2) the Business Protection from Misleading Marketing Regulations 2008, which prohibit traders/estate agents from using misleading marketing when they advertise services to potential business clients or market commercial property for sale.

The draft guidance seeks to clarify how these two Regulations apply to estate agency work. It contains examples of trading practices that could breach the Regulations, and offers practical steps that businesses can take to comply with the law when they do any of the following:

1. advertise for new business, including through flyers, websites, newspaper advertisements and verbal discussions;

2. provide advice to new clients and take new instructions;

3. market properties, including when property details are put on the Internet;

4. negotiate and make sales; and

5. deal with complaints.

Currently, if you are convicted of committing a criminal offence under the CPRs or BPRs, you could face a fine not exceeding the statutory maximum , which is £5,000 (if convicted in the Magistrates Court), or an unlimited fine and/or imprisonment for up to two years (if convicted on indictment in the Crown Court.)

Also, under the Estate Agents Act 1979, if the OFT deems a business to be unfit to engage in estate agency work, it can issue a prohibition order banning the business from doing so.

The deadline for responding to the consultation is 9 December 2011. After this date, the OFT will publish its final guidance and a summary of the responses received.

The National Housing Federation (NHF) has warned that over the next ten years, home ownership in the UK will fall to its lowest level since the mid-1980s.

The NHF’s prediction follows the publication of the Oxford Economics’ ‘Housing Marketing Analysis’ report in July 2011, which paints a pretty bleak future for the housing market.

Owner occupation rates are predicted to drop to just 63.8 per cent over the next decade – the result of high property prices, strict lending requirements by banks and building societies, and the need for large deposits from borrowers. This, combined with rising rents (forecasted to increase by 19.8 per cent by 2016), long social housing waiting lists (currently standing at 4.5m people) and fewer new homes being built, all suggests a difficult future for a whole generation of people.

So, how can we avoid this bleak future for housing?

With only 67 per cent of the UK population owning their own home, an increase in the construction of new houses is required. In 2011, only 105,000 new homes were built in England – the lowest level since the 1920s – and residential planning permissions are dropping. Thing have got so bad that last week Grant Shapps, the housing minister, said that local authorities should encourage their residents to live on boats! He even said that new moorings could be eligible for the New Homes Bonus.

With so many property organisations calling for more housebuilding, for more unused public land to be made available to housing associations, and for more residential planning permissions, it will be interesting to see whether the Government sticks to its proposed planning reforms, particularly in the face of opposition from anti-growth organisations and, according to a survey by the ConservativeHome website, even a majority of Conservative Party activists.

Under the Regulations, statutory sewerage and water undertakers take ownership of all private sewers and lateral drains that are connected to the public sewerage system. A lateral drain is the part of a drain that serves a single property and which is outside of the property boundary.

The transfer of ownership will take place on 1 October 2011 – provided there are no appeals by homeowners – and will apply to residential and commercial properties. From this date, water and sewerage undertakers will be responsible for the upkeep and maintenance of such sewers and drains. Private drains that serve individual properties and which are situated within a property’s boundary will remain the responsibility of the property owner. Property owners will continue to be responsible for connections that do not drain into the public drainage network (e.g. systems that drain into private treatment facilities or to septic tanks are excluded.)

The transfer will, in the main, benefit property owners, as it should remove the possibility of a property owner being asked to pay for the repair of pipework. However, the sewerage element of water bills will probably increase to reflect the increase in the amount of pipework that the water companies will be responsible for maintaining from 1 October. Also, there are other consequences of the transfer of ownership: water companies will have a right of access to any sewers or lateral drains situated on a private property, and homeowners may find it more difficult to build on top of sewers and lateral drains.

All property owners must consider whether the transfer of their private sewer system is detrimental to them. If an owner wants to appeal to Ofwat, he or she must do so within two months of receiving the transfer notice or of it being published (whichever is later.)

A ‘right to light’ is an easement that gives a landowner the right to receive natural light through defined apertures (e.g. windows) in buildings on their land. These rights are valuable, as they give landowners (and their purchasers) certainty that they will continue to enjoy natural light.

The review will look at whether the current law on how rights to light are acquired and enforced provides an appropriate balance between those landowners who benefit from the rights and those who want to develop in the vicinity of the land. It will also examine the inter-relationship between the planning system and rights to light, and whether the remedies available to the courts are “reasonable, sufficient and proportionate.”

The announcement of the review is good news for developers.

Developers have faced a lot of uncertainty since the September 2010 ruling in HKRUK II (CHC) Ltd v Heaney, when the High Court awarded an injunction against a developer who had infringed the right to light of a neighbouring commercial property, despite the development having been completed. The Court held that the payment of damages was not necessarily an appropriate recompense for interfering with a landowner’s right to light; consequently, the removal of a structure, or part of a structure, is now possible. The ruling highlights how important it is that developers resolve any potential rights of light issues before commencing their development. 

However, it should be noted that the ruling didn’t change the law and, therefore, the decision in each case will always be dependent on its own facts. Further details of the ruling are here.

Whilst the review is welcome, any change to the law is some way off.

The review will begin in 2012, with a consultation paper expected to be published in 2013. A final report and draft legislation could be available by late 2014 or early 2015.

Greyfort Properties (G) had submitted an application for a Certificate of Lawful Use or Development that would allow it to carry out the development of 19 flats on the site under a permission granted in 1974, without submitting a fresh planning application.

G had obtained planning permission in 1974 for the development. However, the planning permission included a condition that “before any work is commenced on the site, the ground floor levels of the building hereby permitted shall be agreed with the Local Planning Authority in writing.” The planning permission stipulated that work had to begin within five years. In 1978 – four years from the date of the permission – G carried out some access work, and argued that this work amounted to commencement of the development, meaning that the planning permission remained in force (and therefore a fresh application would not be needed.) However, the planning inspector said that the access works had been carried out in breach of the planning condition, and that the works did not amount to commencement of the development. The planning inspector’s decision was upheld by the High Court.

G appealed this ruling at the Court of Appeal.

The Court of Appeal held that, although preparatory works relating to access for the development were carried out on the site in 1978 within the five-year time limit, these works did not implement the planning permission because the ground levels’ condition had not been satisfied.

The usual rule is that development must commence within three years of the grant of planning permission. Typically, if a developer didn’t want to actively proceed with a development, but wanted to ensure that the planning permission did not expire, they would dig a few holes, maybe lay some foundations and ask the planning officer to write a letter stating that development had commenced.  They could then ‘mothball’ the site until there was a good commercial reason to proceed.

During the recession, I expect some developers have been delaying commencement of developments. This decision reminds us that it is not just a matter of physically commencing development before the end of the three-year period that is important, but that the pre-commencement conditions must also be dealt with before commencement of building works. It can take some months to have the pre-commencement conditions approved, so any developer sitting on a planning permission should not leave it until the last minute to look into this.

Stevenage Borough Council’s expansion plans, which were part of the East of England Plan, were rejected because its housing targets were dependant on housing growth by North Hertfordshire District Council. However, following the Government’s announcement that it intended to abolish the Regional Strategies, North Hertfordshire District Council suspended work on the joint project. Further details are here.

During the inquiry into Stevenage Borough Council’s housing plans, North Hertfordshire District Council informed the planning inspector that its new plans would not provide for Stevenage’s planned growth, meaning that the growth of the town would be undeliverable.

However, in the long-running Cala Homes case, the Court of Appeal ruled that local councils cannot take into account the Government’s intention to abolish the Regional Strategies when formulating planning policies (although abolition was capable of being a “material consideration” on certain occasions.) This has formed the basis for Stevenage Borough Council’s legal challenge to the planning inspector’s decision.

Organising utility connections is often cited by property developers as the main reason for delays in construction projects. A 2008 survey by National Federation of Builders showed that 87.9 per cent of development sites had experienced problems with utility companies.

Whilst more efficient working practices by utility companies are required, the BPF believes that developers and contractors can do more to help themselves, and this new guide sets out to provide more information on the framework governing utility connections and the pitfalls that need to be avoided. The guide intends to:

1. Explain the current system for obtaining new connections to gas, electricity and water services;

2. Describe the role of the major players involved in the connection process; and

3. Set out the problems most commonly experienced by developers, and the ways in which developers can seek to mitigate them.

The problems highlighted by the guidance (and the aforementioned 2008 survey) include poor communication; lack of competition in the provision of connections; lack of transparency in costs; the length of time it takes utility providers to issue quotations (an average of 12 weeks) and then to agree a supply; failure by the utility companies’ contractors to adhere to agreed programmes; and the use of outdated procedures by many connection providers.

However, the guide also recognises that developers are not faultless in the process and can help themselves by improving the lines of communication; ensuring that they complete application forms correctly; ensuring that site personnel are available when site visits are arranged with utility providers; and improving their planning, by finding out what infrastructure already exists, carrying out feasibility studies, allowing for complexity in large schemes, and not hugely overestimating loads by using data that takes no account of load coincidence and diversity.

The Government wants to remove uncertainty from the planning system for local people by ensuring that every planning application is dealt with as quickly as possible.

Under the proposals, local people will be able to see how their councils perform against the ‘guarantee’ by using information provided by the councils. Currently thousands of planning applications are held up in the planning system, leaving local householders, companies and developers “in planning limbo.” For example, between April 2010 and April 2011, approximately 3,200 planning applications took longer than 52 weeks to be decided – a statistic that the Government wants to eradicate.

The Government also intends to create more openness, by requiring councils to publish details of their planning performance on at least a quarterly basis, so that local people can see whether their council is meeting the requirements of the planning guarantee. The Department for Communities and Local Government will also publish a regular report on the performance of individual councils.

The Planning Minister, Greg Clark, has already written to local authorities signalling the Government’s intentions.

The next step

1. The Government will provide full details of how the planning guarantee will work in a consultation paper, which is likely to be published in autumn 2011.

2. The Government will publish a further consultation paper later this year on reducing the amount of information required to accompany all planning applications.

Section 15 of the Commons Act 2006 provides that anyone can apply to register land as a town or village green where “a significant number of the inhabitants of any locality, or of any neighbourhood within a locality, have indulged as of right in lawful sports and pastimes on the land for a period of at least 20 years.” In the past, those who have objected to a development on open land have been able to delay it (or even prevent it) by making an application to have the land registered as a town and village green (TVG application).

Under the proposals, the criteria for registration would remain the same, but new restrictions would be placed on land that can be the subject of a TVG application.

Defra’s proposals include the following:

1. Giving the registration authorities (RAs) the power to reject TVG applications at an early stage if insufficient evidence has been submitted, or if there is strong evidence that the application would fail to satisfy the criteria for registration;

2. Allowing landowners to make a statutory declaration, registrable with the RA and renewable every ten years, that any use of land is with their permission. This would prevent any use of land “as of right”;

3. The introduction of a ”character” test, so that only land which is unenclosed by fencing, open (i.e. not covered in dense scrub, trees and vegetation) and uncultivated would be eligible for registration;

4. Taking into account whether the land that is the subject of the TVG application is in the planning system. Land which is subject to a planning application or planning permission, or which was designated for development (or as a green space) in a local or neighbourhood plan, could not be registered as a TVG; and

5. Requiring applicants to pay an application fee. Each registration authority would be able to set its own fee, subject to a prescribed ceiling of £1,000. Fees could be refundable if the application were granted. This may deter some applications that are simply designed to delay developments.

The proposals in the consultation will not prevent the protection of any existing registered greens, and any changes to the registration system will not bring the designation of new greens to an end. However, the restrictions will be welcomed by landowners and developers, who have had to put up with costly delays when faced with TVG applications.

The consultation closes on 17 October 2011 and applies to England only.

On 1 July 2011, the High Court ruled that developer HelioSlough could build a large rail freight interchange on green belt land in Radlett, despite opposition from the Council and the Secretary of State for Communities and Local Government. Full details of the ruling and background to the dispute are here.

The Council had been set to appeal the ruling, but changed its mind after the Secretary of State announced that he would not seek leave to appeal.

However, this isn’t necessarily the end of the line for this legal dispute. The Council, which has reportedly spent nearly £1m in trying to thwart this scheme, is still opposed to it, and the matter will now be referred back to the Secretary of State who will have to re-examine his earlier findings.

If the Secretary of State’s decision goes against the Council, it may still decide to launch another legal appeal.

This is an important decision for local people affecting a proposed large scale development near Stevenage.

The claimant local authorities challenged the decision of the Secretary of State for Communities & Local Government (SoS) to grant planning permission to build 3,000 homes and the associated infrastructure  on land to the west of Stevenage.

The SoS granted permission subject to a section 106 agreement, including various obligations such as the provision of schools. The developer and the local authorities were unable to reach an agreement on the terms of the section 106 agreement and, as such, the developer submitted a section 106 undertaking which in its view met the inspector’s requirements. The undertaking included provisions concerning a temporary schools accommodation strategy (“Strategy”) which provided education to pupils occupying the first dwellings before the creation of permanent schools.  The effect of these provisions was that there would be a bar on development until the Strategy had been submitted to the local authority, and either this had not been approved within 4 months or it had been approved but subject to conditions which were unacceptable to the landowners.

There was no time limit on the bar, but equally no positive obligation on the developer to submit the Strategy. Where the Strategy was not agreed, a different bar to development came into effect until statutory proposals had been published or approved, although if no proposals were published or approved within 18 months after the grant of planning permission, the bar on development would cease. The SoS granted permission subject to conditions.

The local authorities claimed that the SoS had erred by:

1. Ignoring a policy on renewable energy (ENG1) and which has been included in the East of England Plan (EEP) requiring developments of more than 10 dwellings to obtain 10 per cent of their energy from decentralised and renewable sources; and

2. Considering the developer’s undertaking relating to the Strategy as adequate.

Decision

The local authorities had to prove that the SoS had ignored ENG1 and that the absence of reference to the policy was not sufficient evidence that it had been ignored. There was a general reference to the EEP, but it was clear from the conditions imposed that the SoS had not taken it into account. The terms of the conditions had only been tweaked so that these would not meet the targets of the ENG1 policy. On the evidence, the SoS had ignored ENG1 and this was sufficient basis to quash the planning permission.

Making the date on lifting the bar to development relate to the grant of planning permission rather than the submission of the Strategy meant that there was a gap in which the developer could avoid its obligations (i.e. by putting in a Strategy which was not agreed.) The SoS had misunderstood the effect of the proviso, the purpose of which was to protect the developer from delays  by the local authority. The permission would be quashed on this reasoning also.

Any conditions attached to a lease break clause must have been satisfied before one can successfully break a lease. As seen in various cases, such conditions will be strictly construed.

NYK Logistics (UK) Ltd v Ibrend Estates BV (2011)

The lease permitted the tenant to terminate it on giving the landlord not less than six months’ previous written notice, provided that the tenant paid all the rent up to the break date and delivered up vacant possession of the property on the break date. The break clause also provided for the landlord to waive the conditions if they had not been satisfied, though it was not obliged to do so.

The tenant served a valid break notice. The tenant wanted to do the repairs itself to control the quality and costs, and to avoid a dilapidations claim for damages in excess of its own costs in doing the repairs.

On 1 April 2009, the surveyors for the landlord and tenant attended a site meeting where it was agreed that, although the tenant had substantially completed its repairing and decorating obligations, there were some outstanding matters. The landlord’s surveyor found that the tenant had emptied the property of its fixtures, fittings, furniture and stock, save for a small quantity of items that would fit into a small van.

On 2 April 2009, the tenant’s surveyor emailed the landlord’s surveyor stating that there were a number of relatively minor defects and proposed that the tenant:

1. Pay a security guard for the property for a further week, during which time the tenant’s workmen would be able to deal with these items – the property was in an area that suffered from vandalism and theft.

2. Would not pay rent or rates, but would hand over the keys on the break date so that the landlord would have full access.

On 3 April, the tenant’s surveyor chased the landlord’s surveyor and its agent to make arrangements for the handover of the keys and with regard to its proposals, but received no response.

On 6 April, the tenant’s workmen entered the property to carry out the remaining repairs, where they remained until 9 April. The tenant had arranged security for the property until 10 April 2009.

On 7 April, the tenant emailed the landlord’s agent about the keys as it wanted to know what to do with them. The landlord’s agent subsequently spoke with one of the tenant’s representatives who informed him that there was some minor repairs and cleaning that were in the process of being completed. The landlord informed the tenant that he would send someone round to collect the keys on 8 April.

On 8 April, nobody came to collect the keys on behalf of the landlord. However, the landlord’s agent went to the property and spoke to the tenant’s security guard, but did not go in: the security guard was cautious about granting the agent access and the agent did not insist on its right of entry.

On 9 April, after having received legal advice, the landlord’s agent contacted the tenant to inform it that the conditions of the break clause had not been satisfied.

The landlord sought a declaration that the lease had continued after the break date and claimed payment of the rent due, which in fact had been paid on a without prejudice basis. The landlord argued that the tenant had failed to provide vacant possession because it had:

1. Maintained security at the property after the break date and had allegedly prevented its agent from entering the property on 8 April;

2. Retained a small quantity of its equipment in the property after the break date; and

3. Retained its workmen in the property from 6 to 9 April for its own purposes (i.e. to complete the repairs required by the schedule of dilapidations.)

The tenant counterclaimed and:

1. Denied that the lease had continued and claimed repayment of the rent.; and

2. Alternatively argued that the landlord had waived the requirement to comply with the conditions in the break clause on the grounds that the landlord’s agent’s statement on 7 April that he would send someone round to collect the keys was consistent only with the landlord acknowledging that the lease had been terminated. The landlord was only entitled to the keys on termination of the lease and, consequently, it must have accepted that vacant possession had been given.

County Court decision

The County Court judge held that the tenant had not terminated the lease and there had been no waiver. The tenant appealed.  

Court of Appeal decision

The Court of Appeal found in favour of the landlord.

To satisfy the vacant possession condition, vacant possession had to be given to the landlord by midnight on the break date. The Court stated that the concept of “vacant possession” meant that:

1. The property must be empty of people;

2. The landlord must able to assume and enjoy immediate and exclusive possession, occupation and control of the property.; and

3. The property must be empty of chattels, although this obligation would only be breached if what was left substantially prevented or interfered with the enjoyment of the right of possession of a substantial part of the property.

The tenant knew that its proposal to extend its occupation required the landlord’s agreement. The tenant should have moved everyone and everything out by the break date and then with the landlord’s permission return to the premises to complete the outstanding works.  The tenant had done nothing to demonstrate that it was giving up possession. Although it had offered to return the keys, it had not done so and as such the tenant maintained control of the premises.

The Court also held that the tenant was not entitled to award itself an extension of time for the giving of possession, even though there were concerns about vandalism, as these were rightly the landlord’s problem from the break date. In addition the court decided that the tenant wanted to complete the repairs for its own benefit to avoid a subsequent dilapidations claim rather than it being a condition of the break clause.

The Court found that the landlord had not waived the lease. The landlord’s agent only stated that he would arrange for the keys to be collected, but failed to do so following its solicitors’ advice. The Court stated that if the landlord’s agent had accepted the keys, there may have been a surrender of the lease by operation of law, but that did not happen. The landlord’s agent’s words were not sufficient to end the lease.

Comment

The landlord had no new tenant lined up for the premises and despite the fact that the landlord’s interests were not affected by the tenant’s behaviour, the Court held that the tenant remained in possession for its own purposes. The sensible action to take would have been to have left the premises, return the keys and arrange with the landlord to go back in and carry out the works.

This is a further reminder, if one was needed, that break clause conditions are strictly construed. The tenant was required to pay the rent for the remaining term, but such additional cost could have been avoided by taking early legal advice.

The respondents in this case, on behalf of Clayton Fields Action Group, successfully registered a grasslands area known as Clayton Fields as a village green under the Commons Registration Act 1965, on the basis it had been used for over 20 years for the pursuit of various games and pastimes by local residents of “Edgerton/Birkby”  within section 22(1), class C.

The land in question lay between these two areas. At the time of the application the landowner objected on the basis that the locality had to form a distinct and identifiable community. The evidence supporting the application indicated that the members of the Action Group came from a much wider area than Edgerton itself and that those in Edgerton lived in just two streets. The landowner claimed that the members of the Action Group did not form a distinct and identifiable community because they were too widely dispersed, or that they were concentrated too narrowly. The application, however, succeeded.

The High Court decided that the local authority had not been justified in registering the land on the basis that:

1. Section 22 required the land to be used by the inhabitants of a single locality. Even if Edgerton and Birkby were regarded as localities, the fact that there was an even spread of users over the two localities meant the land should not have been registered.

2. Edgerton and Birkby were not localities within section 22 since they were not administrative districts, or areas within legally significant boundaries. Clayton Fields lay between two parishes and the residents were evenly split between the two. The respondents could not pass the “predominance test” under any one parish.

The delay in bringing the challenge was a significant factor against rectifying the register but this had not prejudiced the respondents, and balancing the factors together, it was held that rectification of the register was just.

Comment

This case highlights that it is possible to successfully challenge the registration of land as a village green, although the basis of this particular challenge would not be successful post-2000. A new section 22(1A) provides that the user of the land in question could be either a significant number of the inhabitants of any locality or of any neighbourhood within a locality, and the term “neighbourhood within any locality” could mean either a neighbourhood or neighbourhoods, and the neighbourhoods concerned do not now need to be located within a single locality.

This ongoing legal battle began in August 2006, when HelioSlough submitted its original planning application to St Albans City and District Council. The Council rejected the planning application in 2007 and again in 2009, citing that the scheme was an inappropriate development on green belt land and that the developer had failed to show that the scheme could be built sustainably.

Although HelioSlough successfully appealed the decision, the Secretary of State for Communities and Local Government, Eric Pickles, overruled the appeal in July 2010 on the grounds that the rail freight terminal could be built at an alternative site at Colnbrook in Slough, which would have less impact on green belt land.

In June 2011, HelioSlough launched judicial review proceedings in the High Court to challenge this decision.

The High Court handed down its decision last week (1 July 2011), ruling in favour of HelioSlough. This means that the decision to refuse planning permission has been overturned, essentially on a “legal technicality.” HelioSlough will now re-apply for planning permission and has publicly urged Eric Pickles to support it.

However, this may not be the end of the road for this long-running legal battle. Eric Pickles and St Albans City and District Council have until 11 July 2011 to challenge the decision.

UPDATE: St Albans City and District Council has announced that it will not appeal the High Court ruling. Click here for more details.

Stevenage is designated as a major housing growth point in the East of England Plan. The Plan, which was adopted in 2008, involved Stevenage Borough Council linking with neighbouring North Hertfordshire District Council to extend Stevenage’s boundaries by building 9,600 homes to the west and north of the town. However North Hertfordshire District Council withdrew from the planned expansion in June 2010 after the incoming Coalition Government announced the abolition of the Regional Strategies through the Localism Bill.

Subsequently, North Hertfordshire District Council began work on its own housing targets, whilst Stevenage Borough Council pressed ahead with its expansion plans.

North Hertfordshire District Council and Hertfordshire County Council submitted a joint legal challenge to quash Stevenage Borough Council’s expansion plans. The councils complained that the Secretary of State had failed to impose conditions that would deliver the requirements of the Government’s carbon dioxide and energy performance policy in the East of England Plan (i.e. that developments of more than 10 dwellings must secure 10 per cent of their energy from decentralised and renewable or low-carbon sources.)

The Court quashed the decision to grant planning permission, agreeing that (1) the conditions were not compliant with the renewable energy policies in the East of England Plan, and also that (2) the permission failed to secure the provision of temporary school accommodation that the then Secretary of State had intended.

The application will now go back to Eric Pickles, the current Secretary of State, for reconsideration. He could decide to re-open the inquiry or refuse planning permission.

Through FirstBuy, the Government and housebuilders will jointly offer a 20 per cent equity loan to eligible first-time buyers to help them purchase a new-build property. The first-time buyer will then have to provide a five per cent deposit and obtain a 75 per cent mortgage on the rest of the property. The loans will need be repaid on the resale of the property.

Mr Shapps has now confirmed that over 100 housebuilders will take part in the FirstBuy scheme, by offering their new-build homes for sale to first-time buyers. A full list of these housebuilders is available here (Excel Spreadsheet.) The Government has also confirmed that the Halifax, Nationwide, Barclays, and The Melton Mowbray Building Society will be offering loans on these purchases.

This scheme is to be welcomed by both first-time buyers and housebuilders who have struggled in the recession. It will particularly benefit those buyers who can afford the monthly mortgage payments on a property, but who have been unable to purchase a house because they simply haven’t saved enough money to put down a 10-20 per cent deposit. To find out if you are eligible to take part in the scheme, please click here.

The first homes are expected to become available in September 2011.

Mr Shapps said that by Autumn 2011, every Government department with significant landbanks will publish plans to release thousands of acres of previously-developed land to housebuilders.

And to make sure that these housebuilding projections are met, the Public Expenditure Committee will carefully scrutinise each government department’s plans, to make sure every possible site is made available for housebuilding. The Government will also encourage local councils to also make their unused land available for development.

This announcement follows the launch of the Government’s ‘Build Now, Pay Later’ initiative in March this year. Under this scheme, developers will be able to build homes on Homes and Communities Agency sites without paying for the land in advance. The first six sites being developed under this new scheme are in Hemel Hempstead, Basingstoke, Tower Hamlets, Northampton, Rushcliffe and Telford. It is anticipated that these developments will create up to 3,000 new homes.

The Government’s announcement is to be welcomed by housebuilders. As the Government holds a huge amount of land, it is right that it is now freeing this land up to help alleviate the housing shortage. It is hoped that the ‘Build Now, Pay Later’ scheme will also help struggling housebuilders to get their developments up and running.

This law has not yet been passed, but it seems likely to take effect from 1 January 2012.  It will apply to non-French residents, including some French citizens who have emigrated, although those renting out their properties and professional expatriates seem to exempt.

This tax will be applied at a rate of 20% to the cadastral value of the home. This is typically lower than market value, but the current cadastral values date back to the 1970s and are due to be increased in the near future.

There is some question as to the compatibility of this new tax with EU law, but subject to a challenge on this basis, we understand that this is something of which all UK based owners of French property will need to take heed.

After this date there will be a significant reduction in the annual investment allowance for qualifying expenditure which potentially could result in lost 100% up-front tax relief.

Claiming on the balance not covered by AIA at rates applicable to the general, special or short-life asset pools spreads the claim for tax relief over much longer periods.

Here is an example I’ve seen from accountants Smith & Williamson:

Using an example of a 30 June 2012 year end, the table below shows the effect of delaying expenditure until after 1 April 2012 or 6 April 2012 on the maximum amount of AIA claimable for that year.

Businesses need to consider more than just the availability of allowances when incurring expenditure, however this change in allowances is significant enough to justify very careful consideration of when to incur qualifying expenditure.

For more information, please email me on shimon.shaw@mablaw.com.

Cala had claimed that the Government’s intention to revoke the Regional Strategies could not be a lawful material consideration for local authorities when making decisions on planning applications. The Court of Appeal has rejected this claim.

This ruling is the latest in the long-running legal dispute between Cala and the Government, which stretches back to last year. Click here for full details.

Although Cala lost the appeal, the Court of Appeal praised the clarification that the case has brought to this contentious issue. Also, whilst finding that it would be wrong to say that the intention to revoke the Regional Strategies could never be a lawful material consideration when considering planning applications, the Court of Appeal qualified this by saying that it would only be in extreme cases when the intention to revoke would constitute a material consideration.

The ruling, therefore, leaves the door open for housebuilders to launch appeals over some planning decisions.

The Zero Carbon Homes standard will apply to the building of all new homes that are started after 2016. However, the Housing minister Grant Shapps has made clear that housebuilders will only have to ensure that emissions from the homes themselves (e.g. those from heating, ventilation, hot water, fixed lighting and building services), as covered by the Building Regulations, are reduced to zero; housebuilders will not be responsible, as had been suggested in the past, for emissions from household appliances used in the house  - or, as Mr Shapps said, housebuilders “should not be responsible for the amount of television the families who buy their homes watch or the number of cups of tea they make each day.”

Mr Shapps also said that in order to “deliver a realistic and effective approach to zero carbon”, the Government would:

1. Include “tough” standards for fabric energy efficiency (e.g. insulation, glazing) in any future changes to the Building Regulations;

2. Consult on the Zero Carbon Hub’s recommendations on the levels for other on-site carbon reduction levels; and

3. Work with the housebuilding industry on options for a regime for off-site measures (e.g. community energy schemes.)

Mr Shapps concluded his announcement by saying that the Government had succeeded in “nail(ing) down a definition for zero carbon homes”, whilst not “piling unfair costs on housebuilders.” 

Although there is still more work to be done on the definition of “zero carbon homes”, it is thankfully becoming clearer. Housebuilders will welcome the Government’s decision to exclude emissions from domestic appliances.

The 12-month Planning Guarantee, which is designed to speed up development and cut bureaucracy, will cover the “entire planning process”, including appeals made to the Planning Inspectorate.

According to the Home Builders Federation, it took on average 15½ months for housebuilders to be granted planning permission in 2008, so the Government is keen to reduce this timescale.

Mr Shapps also announced yesterday that the final details on the definition for ‘zero-carbon home’ will be made available shortly, and that the Government will not be creating a local standards framework, which would have allowed local authorities to choose their own local planning policies. This decision follows fears that devolving control to local authorities may actually increase regulation – something the Government is actively trying to cut across all sectors.

EPCS are only required for a building or part of a building which has walls, a roof and energy conditioned interior. The requirement for an EPC would therefore not apply to mobile homes or caravans. It would also not apply to individual rooms that are let out, for instance in a bed and breakfast.

Cala Homes is challenging the Government’s claim that its intention to abolish the Regional Strategies should be considered by local planning authorities when ruling on planning applications.

Cala Homes, which successfully won a judicial review back in November 2010, was defeated in the High Court in February 2011 (click here for full details), but given permission to appeal the ruling.

The appeal began on 5 May and was expected to conclude today (6 May), with the decision reserved until a later date. I will post full details of the ruling in due course.

Four years (from the date of substantial completion) in respect of unauthorised building, engineering, mining or other operations in, on, over or under land (section 171B(1), Town and Country Planning Act 1990 (TCPA 1990));

Four years (from the date of the breach) in respect of the unauthorised change of use of any building to use as a single dwelling house (section 171B(2), TCPA 1990); and

Ten years (from the date of the breach) for any other breach of planning control (section 171B(3), TCPA 1990). This includes:

1. A material change of use (other than a change of use to a single dwelling house); and

2. A breach of a planning condition (except a condition relating to use as a single dwelling house

In this case, a landowner (L) obtained planning permission to erect a barn on green belt land subject to a condition that the barn be used only for the storage of hay, straw or other agricultural products. The building was constructed between January and July 2002 and looked like a barn externally, although internally was fitted out as a house. L moved into the building on 9 August 2002 and applied for a Certificate of Lawfulness of Existing Use or Development (CLUED). A CLUED would be conclusive as to the existing use and any works that have been carried out on the land being lawful. The council refused on the basis that the building was not a house and L had not lived there for 4 years.

L confirmed to the planning inspector that he had deliberately deceived the council when applying for planning permission and he had always intended to use the building as a house. The planning inspector granted the CLUED.

The council appealed and the High Court overturned the planning inspector’s decision.

L appealed to the Court of Appeal who allowed L’s appeal.

The council appealed to the Supreme Court.

Decision

The Supreme Court allowed the council’s appeal on the basis of the following:

1. There had been no change of use because the building was not constructed as a barn but as a house. The court doubted whether there could be a change of use under section 171B(2) where there was a departure from the permitted use without there being any actual prior use.

The court also rejected the idea that there was a change of use from ‘no use’ to ‘residential use’. The building had been built to live in and L was about to move in. The court had to consider how a building was used long term in order to establish if  a building was in use;

2. L could not rely on section 171B(2) because of his dishonest conduct. The court looked at the principle that statutes are construed to the effect that no one should be allowed to profit from his own wrongdoing, unless there is a contrary intention in the statute. The court considered that it would frustrate the policy of section 171B(2) if the time limits for enforcement were to apply, where the owner has made a deliberate misleading statement. Parliament would not have intended such outcome; and

3. L’s deception did not at the time constitute a criminal offence; however, it would now be an offence under the Fraud Act 2006. L’s deception undermined the planning process and the council could seek to enforce not only on the basis of section 171B(2), but also 171B(1) by invoking the public policy argument.

Comment

The court found that there was no relevant change of use; however, the case also highlights the principle that statutes should be construed to the effect that no one should be allowed to profit from his own wrongdoing. The Localism Bill proposes a new section 171B to deal with issues of concealment such as in this case.

1. Provide a summary of observations received from leaseholders in response to the landlord’s notice explaining why the proposed works are necessary;

2. Make all estimates for the works obtained available for inspection in accordance with the landlord’s notice; and

3. Allow the tenants 30 days to inspect the estimates and make observations on the same. Indeed the landlord had indicated that it had already awarded the building contract.

The landlord applied for dispensation from compliance. Although the LVT is permitted to dispense with the consultation requirements “if it is satisfied that it is reasonable to dispense with the requirements”, the LVT held that the landlord’s failure to consult had caused substantial prejudice to the tenants. The LVT also found that the disproportionate financial consequences for the landlord could not be taken into account and, as such, the liability of the tenants would be limited to £250 each.

The landlord appealed to the Lands Tribunal which dismissed the application. Appeal was made to the Court of Appeal.

Decision

The appeal was dismissed. The court decided:

1. The financial effect of the grant or refusal of dispensation was irrelevant to the exercise of the court’s discretion, because it would impose a burden on the LVTs if they had to undertake inquiries of the financial circumstances of landlord and tenants.

It would not make sense if the higher the service charge the more readily dispensation were given.

The focus of the legislation was on the consultation requirements and not the consequences of non-compliance.

The grant of dispensation might be appropriate where the importance of the consultation was not undermined (for example where the landlord needs to undertake emergency works; only a single specialist contractor is available; or a minor breach of procedure causes no prejudice to the tenants);

2.  A less rigorous approach might be justified for tenant owned/controlled landlords; and

3. Significant prejudice to the tenants was an important issue when exercising the discretion. The landlord’s non-compliance with the consultation requirements constituted a serious failing and caused the tenants serious prejudice. The landlords incorrect statement that it had already awarded the building contract was not just a technical, minor or excusable oversight.

Comment

The landlords should ensure that they comply with the service charge consultation requirements. The consequences of failing to comply can be costly. In this instance the tenants paid £1,250 towards the total cost to the landlord of the works amounting to £270,000. The court made it quite clear that the circumstances in which dispensation would be granted in favour of the landlord would be very limited.

The covenant stated that:

“….for the benefit of the adjoining land of the vendor on the west and south sides of the land conveyed, that no building shall be erected on the [land]….”

In October 2006, the Local Authority granted detailed planning permission for residential development in the area. Wimpey commenced works on the land and in May 2007. Wimpey received a letter from the solicitor acting for various people claiming the benefit of the covenant, asking them to stop works on the land on the basis of the covenant.

Proceedings were commenced in 2008 on various grounds, including loss of value and privacy  to properties, risk of flooding, the proposed use was not reasonable even though planning permission had been granted, and it would set a precedent for further modification of the covenant. Wimpey claimed that the practical benefits of the covenant were not of substantial value and that money would be an adequate compensation for the loss and any disadvantage suffered by those with the benefit of the covenants. In addition, Wimpey claimed that the character of the area would not change as a result of the development.

Decision:

The Lands Tribunal decided that it had no power to modify the covenant as Wimpey had failed to make out the grounds in section 84(1)(aa) LPA 1925 (i.e. the covenant impedes some reasonable use of the land and either does not secure any practical benefit of substantial value or advantage, or is contrary to public interest, and money would not be adequate compensation to anyone suffering loss or disadvantage from the discharge or modification of the restriction.)

The Lands Tribunal said:

1. The proposed development was reasonable since the proposed density of the development was only slightly more than the local authority planning inspector’s report;

2. The practical benefits to the objectors were of substantial value and advantage, as their properties were currently overlooked only in a limited way and now enjoy outstanding views over open land to hills in the distance. If the development proceeded  the properties would become suburban in character with the attendant loss of views and privacy;

3. Wimpey had failed to show that increased flooding was not due to their other developments in the area; and

4. the objectors were justified in objecting on the basis that the proposed modification would prove to be a precedent for further modification of the covenant and would allow further development

As such, the covenant was of practical benefit to the objectors by allaying their reasonable fears about increased flooding and high density development. Such benefits were of substantial value.

Comment:

Developers should note this decision, since even though the Land Tribunal’s power to modify a covenant is discretionary, the developer in this instance failed to show that the covenant impeded a reasonable use of the property. Indeed the Lands Tribunal made it clear that they would not have exercised their discretion even if the developer had successfully claimed under section 84(1)(aa) LPA 1925. The developer had ignored the covenant and the objections of the locals in the hope that by altering the character of the land, the Lands Tribunal would allow the development, and it would have been unreasonable for the developer to benefit from ignoring their legal obligations.

In his Budget, the Chancellor announced that, subject to informal consultation, ”the Government will legislate in Finance Bill 2012 to support good business practices and remove barriers to entry, and investment in, the REITs regime, including removing the REITs 2 per cent conversion charge.”

The informal consultation was launched on 5 April and puts forward a number of issues and questions for discussion, including:

1. Introducing a diverse ownership rule for institutional investors. How should “diversity of ownership” and “institutional investor” be defined?

2. Introducing a fixed grace period for new REITs to meet the non-close company requirement. How long should the grace period last, and what should be the minimum number of shareholders at the beginning of (and during) the grace period?

3. Relaxing the listing requirement for REITs. What are the comparative commercial advantages and disadvantages of alternatives to a full listing, including a listing on AIM or other multilateral trading facilities?

4. Abolishing the conversion charge: To what extent will this incentivise new investment (rather than acquisition of existing property investment companies)?

5. Allowing cash to be a ‘good’ asset for the purpose or the REIT balance of business asset test. Should there be an absolute limit on how much cash can be held under the balance of business test, and what should the time limit be for holding cash?

6. Creating a time limit for complying with distribution requirement. What is the current administrative burden of making a dividend payment outside the regular payment cycle? and

7. Redefining “financing costs” for the REIT interest cover test. Which items should be included as a ”financing cost”?

The Chancellor’s Budget announcement on REITs was warmly welcomed by the property sector, which had encouraged the Government to open up the REITs market to new ventures. This subsequent consultation shows that the Government is now willing to relax the qualification criteria and the cost of entry in order to attract new entrants and investment.

Responses to the consultation are required by 10 June 2011. Draft legislation will then be published in autumn 2011 for inclusion in the Finance Bill 2012.

The consultation paper, Relaxation of planning rules for change of use from commercial to residential, includes proposals to amend the Town and Country Planning (General Permitted Development) Order 1995, so that it will be permissible to allow a change of use from Class B (business and industrial uses) to Class C3 (dwelling houses) without having to obtain planning consent.

Under these proposals, more land would become available for housing, by permitting empty commercial buildings to be converted into new homes. This move follows the Chancellor’s announcement in his recent Budget that the Government would consult on proposals to increase the categories of changes of use that can be made without the need to apply for planning permission.

The consultation paper seeks views on a number of areas, including:

1. Whether a change from use class B1 (offices, research and development, and light industry) to C3 (dwelling house) should be allowed without express planning permission (subject to effective measures being put in place to mitigate the risk of homes being built in unsuitable locations);

2. Whether a change of use from classes B2 (general industrial use not within class B1) and B8 (storage and distribution) to C3 should be classed as permitted development (subject to effective measures being put in place to mitigate the risk of homes being built in unsuitable locations); and

3. Whether current permitted development rights that allow a change from class A1 (shops) and A2 (financial and professional services) to a mixed use (including one residential flat) should be widened to allow for more than one dwelling.

The consultation paper also asks for comment on whether the Government has identified all the possible problems/issues that could arise from widening permitted development rights, and what measures might be needed to mitigate against those problems.

The closing date for responses is 30 June 2011.

Buyers of new build properties will be particularly interested to know that following the 2004 Barker Review and the 2008 OFT Homebuilding Study in the UK the Consumer Code for Home Builders was put together.  The purpose of the code is to ensure that home buyers are treated fairly, can rely on the information they are given and have access to quick low cost dispute resolution when things go wrong.

Whilst this does not have a statutory basis for purchasers, and is therefore not enforceable through the courts, the industry’s top structural guarantee providers, most notably NHBC, Premier Guarantee and LABC,  have subscribed to the Code and require that any Home Builder offering their guarantee comply with the provisions of the Code.

Some notable points for Buyers and Home Builders :- 

●  The builder must display a Copy of the Code and provide copies, without charge, to any purchaser who asks for a copy, and all buyers who actually reserve one of their new build properties.

● When a buyer wishes to purchase a property from a Home Builder, they must now be given a reservation agreement setting out the terms on which they have agreed to buy the property.  This reservation agreement allows the hopeful buyer a period in which the Home Builder agrees not to sell the property to any other interested party.  This is not new to the larger home builders, who have adopted this procedure for a number of years, but will have an effect on smaller or start up Home Builders.    At this point a reservation deposit is normally paid over to the Home Builder, by the buyer (typically between £500 and £2500 depending on the value of the property).

●  Previously if the hopeful buyer did not proceed to exchange contracts, being the point at which the purchaser is contractually committed to purchasing the property from the Home Builder, then the Home Builder would often retain the reservation deposit paid.  Under the Consumer Code for Home Builders the builder is obliged to return the reservation deposit to the buyer (although they may first deduct such money as is necessary to cover their reasonable costs).  This will mean that buyers  will not proceed to buy a property they are not entirely happy with for fear of losing their reservation deposit.

●  All sales and marketing material must be clear and truthful, to include a brochure or plan showing the layout, appearance and position of the property within the development as a whole.  Home Builders are currently bound by the provisions of the Property Misdescriptions Act 1991 which could lead to a Trading Standards complaint, investigation and possibly a prosecution for those concerned.  However, this provision within the Consumer Code is likely to mean more to an aggrieved purchaser, as it is an easier course for redress.

●  The Contract for Sale must, under the Consumer Code, detail realistic and reliable information about timing of construction, completion and handover. This is perhaps the most exciting change for a buyer.  Previously most Home Builders contracts provided that completion would take place once construction had been completed, which could take several months or in some cases even years.  One national home builder had a clause within their contract providing that handover could be up to 5 years from the date on which contracts were exchanged.  Home Builders would usually provide buyers with an estimate of a handover date but there would be no penalties if they missed this date.  Home builders must now include a date in the contract setting out the date on which they realistically anticipate  the property will be completed and also termination date, which will allow a buyer to withdraw from the purchase and recover their deposit, if the property is not completed by the termination date.  The termination date must be no more than 12 months for an apartment and 6 months for a house from the anticipated date, where the property is not watertight or 4 months and two months from the anticipated date respectively where the property is watertight at the point of exchange of contracts 

●  A buyer must also now be given an accessible after-sales service  and explain what this includes, who to contact and what guarantees apply to the Home, including what health and safety precautions should be taken when living on a development where work continues. In addition the Home Builder must have a system for receiving handling and resolving the home buyers calls and complaints and must also co-operate with suitably qualified professional advisers appointed by the home buyer to resolve disputes.  This will be of comfort for buyers to know as if the Home Builder fails to deal with any issues, such as areas which need rectifying or perfecting following completion, they can refer the matter for an adjudication under the Code. 

●  This after-sales part is important also because the Code does not just benefit the first purchaser of the property, but any subsequent purchaser for up to two years from the date of completion of the build. 

●  An adjudicator can make an award of up to £15,000.00 and accordingly it is vital that Home Builders also obtain good professional advice from a New Homes specialist before marketing their properties for sale.

Solicitors acting on behalf of Home Buyers of newly constructed properties also need to be aware of the code so that they can competently advise their clients what to expect and what protections are in place. 

Unfortunately adjudications under the code have not been reported in the industry or legal press, but the annual report is due to be published shortly, which should evaluate the effectiveness of the code.   Keep an eye on our website for further information once the report has been published.