The Property Speculator

The Property Speculator’s First Podcast!

After a steep learning curve of ‘XML Files’, audio editing software and getting over the hatred of my own voice, I’m proud to announce the first of hopefully many podcasts.

In this edition, I interview Ryan Fuller of The Fuller Long Partnership. They are an established firm of Town Planning Consultants headed by 2 former colleagues of mine (James Long and Ryan). Ryan has been a Professional Town Planner for many years and has worked in a variety of settings.

Ryan speaks about how the novice developer should approach the process of planning applications, explains the truth about some widely-held myths and suggests a slightly different way of making development plans than the usual one.

Ryan can be contacted through the Fuller Long website which is at www.Fullerlong.com.

Please note this podcast will be placed on iTunes very soon!

Access the Fuller Long Podcast Here

Jan 29th, 2012

An Introduction to Property Use Classes

Within the very large field of property, there are several categories and sub-categories of building. The reason for this is that council planning departments use these classes when planning residential, commercial and retail developments in an urban or rural environment. It is far easier to refer to the use classes as they are, rather than a description such as ‘Industrial’ or ‘retail’ as ambiguity and ‘grey areas’ are common.

© Copyright Mike Kirby and licensed for reuse under this Creative Commons Licence

The classes are issued by The Secretary of State as he/she is ultimately responsible for all UK planning matters (a method of appeal against planning decisions is to address the Secretary of State). In most cases, converting a property so that it moves from one use class to another, needs the grant of planning permission before work is allowed to go ahead. There are some exceptions however, such as a flat can be added to a retail property provided it is used in association with the retail property.

The table of Use Classes is as follows:

Use Class	Use Description	Is Change Permitted?
A1 Shops	Sale of goods and cold food, retail warehouses, hairdressers, travel and ticket agencies, post offices, domestic hire shops, funeral directors, dry cleaners, internet cafes	No change of use without permission, except to A1 plus single flat
A2 Financial and professional services	Professional (excluding health and medical services) and financial services (banks and building societies); other services appropriate in a shopping area where the services are provided principally to visiting members of the public	Change to A1 permitted only if there is a ground floor display window
A3 Restaurants and cafes	Sale of food and drink for consumption on premises, e.g. in restaurants, cafes	Change to A1 or A2 permitted
A4 Drinking establishments	Public house, wine bar or other drinking establishment	Change to A1 or A2 or A3 permitted

Hot food takeaways

Sale of hot food for consumption off the premises

Change to A1 or A2 or A3 permitted

Sui Generis

Launderettes, taxi businesses, car hire businesses, filling stations, scrapyards, shops selling or displaying motor vehicles for sale, retail warehouse clubs

No change of use permitted

Business

a Offices other than financial and professional services providing for the visiting members of the public

b Research and development

c Other industrial processes appropriate in a residential area

Change to B8 (only up to 235 m2 of floor space) permitted

General industrial

General industry, not within B1

Change to B1 or B8 (only up to 235 m2 of floor space)

Storage or distribution

Storage or distribution centres

Change to B1 (only up to 235 m2 of floor space) permitted

Sui Generis

Work registerable under Alkali etc, Works Regulation Act

No change of use permitted

Hotels

Hotels, boarding and guest houses, provided that care is not provided

No change of use permitted

Residential institutions

Residential accommodation for provision of care (e.g. old age homes); residential schools and colleges and training centres; hospitals and nursing homes

No change of use permitted

C2A

Secure residential accommodation

Prison; young offenders institutions; detention centres; secure training centres; custody centres; short-term holding centres; secure hospitals; secure local authority accommodation; military barracks

No change of use permitted

Dwellinghouses

Dwellinghouses for individuals, families and up to six individuals living as a single household

Subdivision of dwellinghouses into two or more dwellinghouses not permitted

Houses in multiple occupation

Use of a dwellinghouse by not more than six residents as a house in multiple occupation

Change to C3 permitted

Sui Generis

Hostels

No change of use permitted

Non-residential institutions

Clinics, health centres, crèches, day nurseries, day centres, consulting rooms (not attached to doctor’s house); museums, libraries, art galleries, public and exhibition halls; non-residential schools, colleges and other educational centres; public worship or religious instruction; law courts

No change of use permitted

Assembly and leisure

Cinemas, dance and concert halls; swimming pools, skating rinks, gymnasiums; other indoor and outdoor sports and leisure uses, bingo halls

No change of use permitted

Sui Generis

Theatres, amusement arcades and centres, fun fairs, nightclubs, casinos (as from 6 April 2006)

No change of use permitted

Sep 5th, 2011

A Quick Guide to Planning Conditions

Receiving the appropriate planning permission to carry out the work you want to, is one of the most important aspects of property development. However the grant of full or outline planning consent will be subject to some conditions that may or may not represent a problem to you.

Whenever full Planning permission is applied for and the developer (i.e. you) is notified of the positive decision, certain rules must be complied with in order to stay within the law. This ensures (from the Local Planning Authority perspective) that the developer does not apply his/her own ‘angle’ on the decision. These conditions will be stated on the decision notice itself or attached on a separate schedule.

To use an example of a ‘sticky’ planning condition that I came up against personally, a group of small-medium sized industrial units were offered to be let. These units were high quality as they were newly built, and a sub-division of a very large worldwide company (our client) was very keen to take on a lease to one of the units. The company required occasional access during unsociable hours in order to supply European factory production line components in the event of a breakdown at short notice. As I was progressing in negotiating favourable terms, it came to my attention that one of the planning conditions was a restriction on the hours that my client’s employees would be able to access the unit. Because of its very close proximity to some houses, the Local Planning Authority had applied a condition that ensured that occupants of the industrial units could not subject nearby residents to excessive noise during the weekend or outside normal working hours. There was not really any way round this, and as a result I had to find alternative premises for my client. The point of this is that although you might be celebrating the grant of planning permission on a plot or a property, the conditions that accompany it are equally important.

Planning Conditions can be related to almost anything affecting the property or land. If a newbuild property is planned, then it’s likely that some conditions will be connected to required materials, dimensions, access to the property and landscaping. Clearly you must be familiar with these before you start to build. If you intend to renovate and/or convert an existing property that has listed status, expect much more in the way of conditions. Sometimes the conditions involve something to be agreed to with the local council, in this case a fee is payable to have the conditions ‘discharged’.

Materials are an important aspect of how the finished property will look and how it blends with neighbouring properties and landscape. It’s likely that bricks and roofing tiles will have to be agreed to, prior to construction commencing on a new-build property. The local authority is also certain to take an interest in how the surface and foul water drainage system is planned. Landscaping is also important to the local planning authority; imposed conditions often request that schemes are provided and implemented within a certain period of time.

Both full and outline planning permission are subject to a maximum limit of 3 years. This means that from the date of consent, if works have not begun on the planned development, the permission is considered to have lapsed and will be void. For works to begin, planning permission must again be applied for and obtained before the works can actually begin. So if you already have planning permission for proposed works that is slowly running out, you should definitely get started to avoid a lot of inconvenience later. You should note that land or property that has existing planning consent that is approaching the end of its effective life is worth less than if the consent is fairly ‘fresh’. This is because of the increased risk of not being able to start work immediately before planning permission expires.

Access to the property is also a large consideration for the planners. If the development is substantial, questions will be asked in relation to increased traffic levels. Even if the development is a single dwelling, access to the carriageway will still be important as (for example) it might be on a blind bend in the road. Parking is also considered at some length.

In urban or built-up areas, the local planners might well impose conditions attached to the permitted hours of build. This is usually normal working hours, and there will be a restriction on working weekends and bank holidays. Sometimes if you are extending an existing property as part of the development, the local planning authority might remove some permitted development rights. This is because permitted development allows a certain degree of extension to a property. If the property is extended as part of your development, this in effect ‘uses up’ the degree of extension that is allowed. It doesn’t mean that the property can never be extended at any point in the future; it does mean however that consent must be applied for and granted.

It is common on listed properties to have at least some sign of the presence of bats. A dead bat, signs of droppings or visual signs of their presence is enough to warrant a bat survey. Building work cannot begin if there are grounds to believe that bats inhabit some area of a property. To ignore this is a criminal offence because of the protected nature of bats. A condition might well be attached to consent stipulating that a bat survey must be carried out and work cannot begin until the bats have ceased to occupy.

A very common condition attached to planning consent on rural properties (especially farms) is an Agricultural Restriction (or ‘tie’). This places a control over occupancy that only allows for residents to be involved in farming and must use the property and associated land to produce their main source of income (or words to that effect). This is very strictly enforced by councils, so be very wary of it because a property with an agricultural tie is offered at a hefty discount to one that does not have one in place. There is not really any way round this condition, so keep an eye out for it unless the property will ultimately be getting marketed as an agricultural one.

© Copyright Nigel Davies and licensed for reuse under this Creative Commons Licence

As I’ve already mentioned, having an understanding of the importance of planning conditions is very important to a property developer. However what is just as relevant is the understanding that conditions can be appealed against. Obviously there is no guarantee whatsoever that taking this route will provide you with the perfect scenario of having the planning permission that you planned in place, with minimal conditions attached. Professional developers often carry out what is known as ‘twin tracking’. This means that planning permission is applied for and while they await the ruling, identical permission is re-applied for. This is so that if one application is granted but is not what they wish for (i.e. the conditions are not considered viable) when the second permission is granted, the first can be appealed against. Unfortunately if planning consent is re-considered by the local authority, they have the power to decline the consent, meaning that permission to build anything is lost. If the developer holds a second separate certificate, then they have not lost everything and can still build, albeit with less than ideal planning conditions.

Jun 19th, 2011

Developing an Arts & Crafts Property

‘Arts and Crafts’ refers to a particular style of design that was principally founded by Artist & Writer William Morris. It was at the height of its influence between 1860 and 1910. Although the ‘movement’ (as it is known) is most often associated with architectural design, it also referred to a wider range of items such as furniture and decor.

William Morris was a Socialist, he felt that industrialisation was slowly killing off all creativity in design and believed that the usual style of Victorian design was void of any ‘soul’. He thought that design should be functional rather than overly decorative and favoured the work of Artisans and Craftsmen rather than mass produced items. The Arts and Crafts properties that exist today are very clearly more carefully and skilfully built than the vast majority of Victorian properties. The architectural features were produced to a very high standard and in the case of large houses, were sometimes completely unique. Unfortunately for a Socialist, he didn’t foresee that individually produced items proved to be very expensive. For all but the wealthy, the Arts and Crafts movement was a step backwards in terms of economy.

Arts and Crafts properties are characterised by a certain look that can show slight influences of Medieval and other styles such as Georgian and even maybe a bit of American Colonial. Arts and Crafts didn’t so much evolve from a particular style; it was a rebellion against industrialisation. The style we know today as Arts and Crafts has simply come from a movement that was not contrived in any way. It was a result, rather than a plan.

© Copyright Mike Searle and licensed for reuse under this Creative Commons Licence

External

Features that immediately identify an arts and crafts property are low roofline, small paned windows and exposed structural components such as beams with wooden pegs. Externally, windows and doorways very often had stone mullions.

Internal

William Morris was famously quoted to say “Have nothing in your house that you do not know to be useful, or believe to be beautiful”. This was a significant departure from the Victorian and Georgian ideas of filling the house with all manner of dust-gathering knick-knacks. It also represents a genuine ‘look’ that is more in line with the present day idea of trying to keep domestic clutter to a minimum.

The colours of the inside of the houses were lighter colours than the majority of Victorian properties; I would speculate that it was because Arts and Craft houses tend to be in rural areas rather than urban and the residents didn’t have to be as concerned with air pollution. Cornicing was still there, and painted white to give a pleasant contrast with the wall colours. This relationship between walls and cornicing was simple and not as ornate as Georgian design.

One of the most obvious and dominating features in an Arts & Crafts property is the fireplace. Of course because architectural items such as this were hand-made, they were often intricately carved and also very large. Floors were dark wood (sometimes parquet downstairs), as oak was used in abundance.

Arts and Crafts style furniture is based around a classical look rather than any particular common features. Brown leather (preferably aged) is an easy way to add instant authenticity for chairs and sofas. Again, oak is used for furniture throughout the house. Oak doesn’t shrink and distort anywhere near as much as soft-woods (like pine) when it’s drying out. It should definitely look handmade, rather than mass-produced. If you don’t want to spend all that money on handmade oak furniture, staining or dark-tinged wax is available for lighter woods (such as pine or beech) and works better than you might think.

For curtains, plain but elegant is good. No Victorian or Regency-style frills or netting. Curtain poles are also plain and should be simple wood or solid brass.

Lighting was (in common with the rest of the property) kept simple but was handmade. There is no shortage of Arts & Crafts style wall light sconces available online to compliment the look; in fact to really get into the spirit of Arts & Crafts movement you could handmade some yourself.

Rugs and carpets during this era were still quite ‘fussy’ and covered with swirls and loops. This design contrasted with the dark wooden floor though so it did not seem too intrusive. Wallpaper was popular at this time, although not quite as popular as in the main period of the Victorian era. It was a similar design to the rugs and carpets.

Jun 6th, 2011

Developing a Listed Property

It’s so easy to fall in love with a listed building. In fact, that’s really the reason they are listed in the first place, they are beautiful and need protecting. That sums up most peoples infatuation.

© Copyright Oast House Archive and licensed for reuse under this Creative Commons Licence

Renovating a listed property however, is definitely not something to be entered into lightly. They are extremely strictly controlled, and specific Listed Building consent is required to carry out the most (seemingly) insignificant work. However, because Listed Building consent is needed, ordinary Planning Permission is not.

Buildings in England and Wales are listed in 1 of 3 categories:

Grade I Listed. These are buildings (also structures and monuments) “of exceptional interest, sometimes considered to be internationally important“. An example of these is The Albert Dock in Liverpool, or manor houses such as Hinwick House in Bedfordshire.
Grade II* Listed. These are “particularly important buildings of more than special interest“. An example of this is Douai Abbey in Berkshire.
Grade II Listed. These are buildings that are “nationally important and of special interest“. Currently, 92% of Listed Buildings are Grade II status. Examples of these are Ditsworthy Warren House in Devon and Horwood House in Buckinghamshire.

Definitions quoted from English Heritage

There is a system in Scotland that is similar:

Category A. These are “buildings of national or international importance, either architectural or historic, or fine little-altered examples of some particular period, style or building type”. An example of this is Abbotsford House near Melrose.
Category B. These are “buildings of regional or more than local importance, or major examples of some particular period, style or building type which may have been altered”. An example is Craignish Castle in Argyllshire.
Category C (S). These are “buildings of local importance, lesser examples of any period, style, or building type, as originally constructed or moderately altered; and simple traditional buildings which group well with others in categories A and B”. An example of this is Black Clauchrie House in South Ayreshire.

Definitions quoted from Historic Scotland

In Northern Ireland:

Grade A. These are defined as “buildings of greatest importance to Northern Ireland including both outstanding architectural set-pieces and the least altered examples of each representative style, period and type”. An example of this is Springhill House in County Londonderry.
Grade B+. These are “buildings which might have merited grade A status but for detracting features such as an incomplete design, lower quality additions or alterations. Also included are buildings that because of exceptional features, interiors or environmental qualities are clearly above the general standard set by grade B buildings. A building may merit listing as grade B+ where its historic importance is greater than a similar building listed as grade B”. An example is Lissan House near Cookstown.
Grade B1. Defined as “buildings of local importance and good examples of a particular period or style. A degree of alteration or imperfection of design may be acceptable”. An example of this is Tandragee Castle in County Armargh.

Definitions quoted from Northern Ireland Planning Service

Clearly, the authorities take listed building protection extremely seriously. To carry out work on a listed building without obtaining consent is a criminal offence, and it can lead to prosecution. In practice, Local Authorities often encourage a retrospective listed building application and consider it on its particular merits.

Planning Law, when applied to Listed Building consent uses the concept of Curtilage. This is the immediate area that surrounds a listed building. When a particular building is granted ‘Listed’ status, the building as a whole is listed and this can include the Curtilage. Unfortunately, in practice this is sometimes difficult to define. Subsequently it can introduce problems and contention. Because of the all-encompassing nature of listed building status, all work, regardless of involving only the interior or exterior, requires the grant of listed building consent. Even if you were to purchase the property, wishing to change something that was obviously installed in the last 10 years or so, permission is still required. This might seem obstructive, but it follows the principle of close scrutiny of proposed work.

To apply for Listed Building consent, the first place to visit online is the relevant Local Authority website. Application forms are available to download, and guidance is offered too. The local authority normally aims to return a decision on applications within 8 weeks (unless it’s for a large development, demolition of a listed building, or anything that involves a Grade I or II* property or regional equivalent).

As every listed building is different, it is difficult to summarise what can and can’t be done. However, English Heritage is keen for listed property owners to contact their local authority conservation officers to discuss plans before submitting applications. This can make life a lot easier.

If listed building consent is refused, the applicant can either:

Apply to the Secretary of State for Communities and Local Government, or
The plan can be changed to comply with the advice offered. A re-application is needed for this.

In some circumstances (usually involving Grade I or II* buildings) a grant might be available from English Heritage to contribute towards listed building repairs. However, this should not form part of the financial appraisal of your project unless you have written notice that this will definitely be granted.

Apr 14th, 2011

Understanding Section 106 Agreements

A ‘Section 106 Agreement’ relates to a small but very significant part of the Town and Country Planning Act 1990. It is an extremely important part of planning law and if a developer wishes to establish planning consent on a property, it is likely that he/she will become very familiar with it.

A definition of a s.106 agreement could be:

An obligation to contribute something for the good of the local area, in connection with the grant of planning consent.

A section 106 agreement is also often known as a ‘Planning Obligation’. Land or property that has the benefit of planning permission to construct/convert a property representing shrewd use of the land, is worth between 3 and 10 times the value of similar property that doesn’t. The Local Planning Authorities (LPA) therefore feel that as the developer is benefiting to such a degree, he should contribute something as a ‘price’ to pay. Incidentally, section 106 agreements can be applied to both Residential and Commercial developments.

A great deal of case law exists on the subject of this. For many years, developers were refused planning permission if they did not accept exactly what the Local Authority wanted them to contribute. There were even 1 or 2 cases of local authorities requiring work to be carried out as a condition of planning consent that had doubtful connection with the actual development, raising concerns of blackmail. However generally, developers were happy with the situation that obliged them to provide something for the community in return for their planning consent.

The moral problem with making planning obligations inextricably linked to planning consent is that authorities should not be introducing a financial aspect to planning matters. If the development benefits the area, then it should be permitted; if it does not, then permission should be refused. Money should not provide the decision. For this reason, in more recent years planning obligations have been negotiable, and therefore more flexible.

In Circular 1/97, guidance for LPAs was offered to provide certain criteria for planning obligations:

The obligation should be relevant to planning.
It should be directly related to the proposed development.
It should be ‘fairly & reasonably related’ in scale and kind to the intended development.
Reasonable in all other respects.

Examples of planning obligations are:

To carry out a land clean-up on an area of contaminated land.
To provide ‘affordable housing’ as part of a substantial residential development.
To contribute to the widening/improvement of a road that provides access to the development.
Providing flood defences for the development where appropriate.
The provision of housing for people over 60.

A developer is not legally obliged to accept the undertaking of a s.106 agreement. However this will result in the refusal of planning consent. The developer is entitled to apply to the Secretary of State (SoS) for the grant of planning permission. If the SoS subsequently grants permission to the developer, the LPA does not have input to any planning obligation agreement.

Section 106 obligations are a condition of the planning consent. This means that they must be carried out as part of the agreement. If planning permission is acted upon and the planning obligations are not adhered to, the Local Authority has the right to enter the land/property and carry out whatever work forms the planning obligations. The associated costs will then be recouped from the developer.

The novice developer is also quite unlikely to be expected to contribute a great deal in the way of planning obligation. It is also possible to negotiate with the LPA and agree to a mutually beneficial way approach. This obligation should not deter you from seeking planning consent. However, do be aware that any development finance lender will be interested not only in the details of your planning permission, but if there is any s.106 agreements to be considered.

Apr 11th, 2011

Update on the UK Planning System

In the UK budget on the 26^th March 2011; The Chancellor, George Osborne announced plans to alter the UK planning system in order to encourage growth in the property sector, and subsequently the economy as a whole.

Apparently, in its current form:

“The planning system has held back investment and created distortions in the way that businesses compete, deterring development and growth”.

This overhaul (in my opinion) is good news. It doesn’t just relate to the commercial sector, but to the residential too. The intended actions are:

Introduce a new presumption in favour of sustainable development, so that the default answer to development is ‘yes’;

Plans on how this will be incorporated into the planning process are due to be announced in May 2011.

Localise choice about the use of previously developed land, removing nationally imposed targets while retaining existing controls on greenbelt land;

This will allow Local Authorities to use their discretion in applying planning laws.

Pilot a land auction model, starting with public sector land;

The details of this have not yet been released, but it is likely to have 2 parts:

Local Authorities will be able to buy land from owners and grant planning permission in relation to it.
Sell the land onwards to developers, keeping any uplift in land value.

Introduce a number of measures to streamline the planning applications and related consents regimes removing bureaucracy from the system and speeding it up. This will include a 12 month guarantee for the processing of all planning applications, including any appeals;

This is likely to take a few months to take shape. The Government is planning to allow certain types of minor commercial developments to fall under Permitted Development.

The plans to streamline the planning process will be unveiled in autumn 2011.

Ensure a fast-track planning process for major infrastructure applications through the Major Infrastructure Planning system;

Clearly this is unlikely to impact the private developer, unless they’re planning to grow in project size rather quickly.

Consult on proposals to make it easier to convert commercial premises to residential

This is probably the most eagerly anticipated change to the existing planning laws. The Government is intending to allow certain changes of property use from ‘Business’ use, ‘General Industrial’ use and ‘Storage/Distribution’ use to Residential use. This will effectively allow developers to convert some commercial premises into houses and flats.

I imagine though, that strict conditions will be imposed such as (for example) proof that the property has been empty for a certain period of time.

I believe that these proposals represent the largest changes to planning and property laws for many years. If the government makes the plans work, it will provide a much-needed boost to the property sector. No doubt many developers will be in a comfortable position to immediately exploit these new additions, but hopefully it will benefit the smaller-scale speculators too.

Mar 28th, 2011

Finding a Property Development Opportunity (Part 1)

[wp_campaign_3]

If you intend to construct a development property as a newbuild, one of the very first considerations you are likely to come up against is where to find suitable land upon which to begin your project. Unfortunately, it’s not simply a case of purchasing a handy field or plot and building a property on it. It’s no secret that there are planning laws that dictate where and what you can build. In fact, planning permission is probably THE most important aspect after location and budget.

Therefore, it is vital that the right opportunity for your needs is found, although a hefty amount of flexibility will be required. It is likely that the plans for a completed property will not be finalised until the actual ‘raw material’ is secured.

So, where should you be looking for opportunities? In order of popularity:

1. Estate Agents.

It’s not just newly-built and pristine properties that are advertised in estate agents windows and subsequently find their way onto Zoopla and Rightmove. Estate Agents also advertise rundown, derelict or just scruffy houses and flats too. Sometimes they also have plots of land for sale, although this will be heavily dependent upon the particular area you are looking in. As many self-builders will confirm, there are significantly less Greenfield plots for sale in the South-East of the UK.

It’s very important to build a relationship with the estate agent. It’s so easy to look for plots of land online that you might be surprised at the number of people who do it. Subsequently, if you meet estate agents face-to-face it will set you apart from all the dreamers who email and call the agents with little idea of what they are looking for and even less conviction to actually buy anything.

2. Property Auctions.

Auctions are still an excellent way of finding potential development projects. A quick look at any of the auctioneer’s websites will advise you of future property auctions and what will be on offer. This guide to buying property at auction is available, including a full list of auctioneers with individual links to their websites. Be aware that on auction day itself, it will be too late to browse the catalogue picking the properties that interest you. That MUST be done far in advance of the auction so that you can inspect the property (many auctioneers have viewing days to enable potential bidders to assess it and take a builder or building surveyor along too) and sort out finance (you will be required to place a 10% deposit down with a cheque or bankers draft if you are the successful bidder on a lot).

3. Observation.

This is a much underrated way of identifying plots that for some reason are not up for sale or being auctioned. If an obvious plot between 2 existing properties is found, it might be that the existing owner simply hasn’t thought of putting it on the market. If an old ‘for sale’ sign is around, it is worth trying the agent’s phone number to get some further information or contact details of the owner. If there is no obvious sign of the land or property have ever been up for sale, then the detective work begins.

The Land Registry is an excellent place to begin. It is fairly straightforward to pinpoint the property on their interactive map. You can then download a pdf copy of the Title Deeds for no more than around £4-£5. Unfortunately, not every single piece of land or property is registered with the Land Registry. The practice of collecting property ownership details is only done when the property changes hands. If this hasn’t been done in the last 30 years or so, then it’s unlikely to be listed.
The next option is to ask around in the local area. This could be the nearest house, shop or pub. This is likely to be more straight-forward in a rural or suburban area because areas of land are not divided up into such small parcels as that in urban areas. In these urban areas, boundaries are often moved and there is also a chance (believe it or not) that the actual property owner has lost track of what they actually own.

Mar 6th, 2011

Developing Property on Contaminated Land

There is a (reasonably) well known quote by Mark Twain that goes:

“Buy land! They’re not making it anymore”

I personally quite like this, as it is a very succinct way of reminding people of the relative scarcity and finite nature of land.

What this means to the novice property developer and investor is that theoretically, at some point all land could be bought and developed upon. Of course, this is never likely to happen but what is foreseeable is a point where all available land has become so sought after that the asking price has been driven up to a level where it renders a project financially unviable.

In this situation, brownfield sites (sites that have developed previously and are currently available for a new use; possibly subject to a grant of planning permission) might have to be considered. Sometimes, these plots will have been used for activities that would render them contaminated (for example, a filling station). When novice developers think about a contaminated site, they might visualise being ankle-deep in oil or waste fuel while the building work is carried out. The reality is that this could never be the case.

The control of contaminated areas of land is governed by either the planning process as a whole, or Part IIA of The Environmental Protection Act 1990 (EPA 1990). Under Planning Policy Statement 23, a property developer is responsible for making sure the development is safe for its intended use. So if the site is suspected or there is proof of it being contaminated, the planning authority will require assessments to be carried out before any planning consent is granted.

Under EPA 1990 Pt IIA, if the site is not dealt with through the planning process, then a local authority has an obligation to investigate any potentially contaminated land within its boundaries. If any contamination is found, then the developer must carry out a clean-up if the contamination is considered a risk to people, property or the environment. Clean up of an area will include some or all of the following:

‘Desktop study’, site visit and initial risk assessment. This will entail an appreciation of the site history; original, current and future/proposed use; information on expected contaminants and their sources; information on potential ‘receptors’ such as people and flora/fauna. When Phase 1 has been completed, a report containing a preliminary risk assessment and recommendations for further investigative work will be submitted to the local authority and the Environmental Agency prior to moving on to Phase 2.
Site investigation and risk assessment. This phase involves the investigation into the scale of the contamination. This could be heavy metals, oil and fuels or gas. A ‘Sampling Strategy’ will be drawn up to specify the depth, scope, pattern and frequency of sampling. An assessment of risk to human health, waterways and other receptors will also be carried out at this stage. Upon completion, a report will have to be submitted to the local authority and The Environmental Agency detailing the recommendation as to whether remedial action is required to make the ground fit for use.
Remediation approach and works. The approach to be adopted for remediation will include the intended standard to be achieved. The works is when the physical work is actually carried out to make the site fit for development. It might include the removal of contaminated soil from the site and/or the introduction of a layer of impermeable material to prevent contamination seeping through. Any potential source of contamination will also be remedied to prevent further contamination.
Validation of remedial works. This is when the ground will be re-sampled to establish how effective the works have been. A Remedial Works and Supporting Validation Report must be submitted to the local authority and the Environment Agency. If it has been successful, then a written decision will be issued and the usual application for planning consent can be submitted.

Clearly, this is not a particularly speedy process. And it is also unlikely to be particularly cheap. However, there are specialist companies who will look after the process for you. Assessing the cost involved is a difficult thing to do because it depends entirely upon the scope and nature of the contamination, the size and location of the site and the intended eventual use of the site.

A very approximate indication of prices however is:

Removal of contaminated material – £50-£170 per cubic metre.

On-site encapsulation – £40-£100 per cubic metre.

Soil washing £60-£120 per tonne.

Items that might have to be included in the above are:

Haulage costs

Landfill tax

Accommodation of personnel (if required)

Traffic management

The best recommendation I can provide if you are considering developing on a site you suspect to be contaminated, is to speak to one of the specialist companies (links provided below). They are fairly unlikely to be able to give you a very accurate quote for clean-up, but should be able to give you some idea of approximate costs. An appraisal could then be carried out to see if the project is financially viable.

Building on a contaminated site might financially benefit you, as many other developers might be unwilling to use the land, even post clear-up. Subsequently, if you considered this a worthwhile idea, the land cost might prove to be substantially cheaper than the alternatives even after inclusion of the cost of clean-up.

Links:

Environmental Agency page on Contaminated Land

http://www.environment-agency.gov.uk/research/planning/33710.aspx

Land Remediation Specialists

http://www.trm-ltd.com/

http://www.ecologia-environmental.com/

http://www.thelkgroup.com/

Jan 24th, 2011

Using a Property Purchase Option

Quite often, a property developer feels that it is a better idea to build a property from the ground up rather than renovating an existing one. There are advantages to this approach, as there are definitely economies of scale involved when buying a suitable building plot. It usually works out far cheaper (per individual unit) to build several properties on a slightly larger plot, than one on a small plot.

With this in mind, one of the most important (if not THE most important factor at this point) is the establishment of planning permission for the build you intend to carry out. Once you have this, the capital value of the site can increase many, many times over.

This causes a problem if you intend to be particularly prudent with your finances. Do you:

Buy the land without planning permission and run the risk of not getting consent, and owning a useless plot that cannot be built upon? Or
Purchase a plot that already has planning permission in place at up to 10 times the price it was prior to the grant of planning consent?

Most novice developers follow option 2 and purchase the plot with either outline or full planning permission already in place. This offers the least amount of risk but is also the most expensive choice by quite some margin.

Professional property developers are not in the habit of spending money unnecessarily, they will seek the establishment of a Purchase Option on the land prior to buying it. This is a contract between the two parties (Vendor & Purchaser) that is ‘open-ended’. This means that one party can choose to exercise their right to buy something (at a price agreed prior to contract finalisation) or they can allow it to expire and take no further action.

The way a Purchase Option works is thus:

1. A property developer believes a particular plot of land is suitable for development, but presently has no planning permission in place. The plot is not currently for sale, so he traces the owner of the land through the HM Land Registry.

2. He consults the local Planning Authority as to the viability of obtaining planning consent on the plot. This is done informally and may only amount to a phone call, although a planning officer might visit the site to discuss the developer’s plans with him. If the planning officer believes that there are no obvious problems at this point, the developer is likely to be invited to submit a planning application.

3. The owner of the land is then approached by the developer and asked if he would sell the land to the developer subject to the satisfactory grant of appropriate planning consent. If the landowner agrees to this, a purchase price is agreed to (this is normally considerably below the full value of the site with consent in place, as the developer is still taking some degree of risk).

4. The developer usually pays the landowner a fee for the facility of agreeing to this contract, this is known as the Option Fee. It could be around a thousand pounds or so, depending on the size and scale of the project. This fee is the landowner’s, regardless of the outcome of any planning decision.

5. The Purchase Option contract is drawn up by a property Solicitor. It states:

a. The names of the two parties

b. An indication of the area of land (maybe accompanied by a plan)

c. The Option fee

d. The agreed purchase price of the plot

e. The term of the contract (this could be for 6 months, for example)

f. The precise conditions of the planning consent required by the Developer

6. The full version of the option contract is then signed by both parties. Now, at any time for the remaining term of the option contract, the purchaser (developer) can buy the plot from the vendor at the agreed price, provided the planning consent is satisfactory and any associated conditions are acceptable to the purchaser. The developer then has the plot he wanted, with suitable planning permission in place, at a price that was significantly less than it could have been.

7. If the planning permission is not granted on the terms the developer hoped for and it is unlikely that it will be granted, the developer can simply allow the term of the option contract to expire. This becomes worthless upon expiry and the developer is not financially committed to the land at all. The prospective vendor however, gets to keep the option fee regardless.

Option contracts are now fairly common, a lease option and a double lease-option are available but work in different ways to the purchase option. It is simply a contract that one party can choose to exercise or not, but the other party is legally bound to adhere to.

Purchase options can be fairly complicated, reflecting the nature of English & Welsh property law. Because of this, it is not really possible to download a contract template that will serve all situations. I highly recommend a Property Solicitor is consulted and asked to draw up the draft and final copies of the contract.

Jan 18th, 2011

1 2 Next »