Urban development – helping overcome obstacles

With the continued emphasis of national planning policies on making as much use as possible of previously-developed or ‘brownfield’ land some development sites inevitably have complex issues that need resolving. Many proposed developments, especially those in dense urban environments, face the prospect of being blocked because the intended building interferes with third party rights. The most common is infringement of rights of light, which can be enforced by injunction to stop the development, but similar difficulties can occur with potential breaches of restrictive covenants or rights of way over the land. 

More and more local authorities are finding themselves being asked to assist resolving situations where third parties are threatening to block otherwise acceptable development. If the developer cannot reach agreement with the owners of these rights to allow the development to go ahead, the local authority can step in. By acquiring the land from the developer and then transferring it back it is possible to override the restrictions. As a result of section 203 of the Housing and Planning Act 2016, the restrictions are overridden and the ability to seek an injunction is converted into a right to compensation. This process is often referred to as ‘appropriation’ although that expression properly applies to the similar situation where the authority already owns the land in question for specific purpose and then designates it as land held for planning purposes. For ease, I will also refer to the acquisition process as ‘appropriation’.

In this article I will look at some of the practical issues that a local authority needs to consider when proceeding with an appropriation. The process can appear a little cumbersome, but at the end of the day it can allow a much-wanted development to go ahead that might otherwise have been prevented.

The first question is whether the local authority even wishes to become involved in helping to overcome the obstacles. The process is discretionary so the authority needs to decide that the proposed development is sufficiently important that the authority should exercise its powers to enable it to go ahead. The authority will also want to ensure that the whole process is cost neutral, so the developer must agree at the outset that they are willing to underwrite the costs of the process and will indemnify the authority in respect of all liabilities that it might incur.

Preliminary issues

Once the authority is prepared in principle to assist, a wide range of points must be covered. To start with:

• The authority must have power to acquire the land in question by compulsory purchase. The usual route for this would be through exercising its powers under the planning legislation, although this does require several tests to be satisfied. The first is relatively simple if the acquisition will enable the development, redevelopment or improvement of the land. However, the authority must also be satisfied that the development will contribute to the economic, social or environmental well-being of their area and this will normally require a full analysis of the relevant planning policies.
• Linked to the question of whether the authority would have the necessary compulsory purchase powers, you will also want to satisfy yourselves that there is a compelling case in the public interest in favour of exercising the compulsory purchase powers. This involves balancing the public benefits arising from the exercise of the powers against the individual rights that will be infringed. For there to be a compelling case, the benefits must outweigh the infringements.
• Overriding the interests will take place only if the development has planning permission. This is unlikely to be an issue, and in practice the authority would be wise to ensure that planning permission is in place before making a decision to appropriate the land.

Structuring the arrangement

When these points have been satisfied more detailed issues can then be considered.

• Timescales – often the authority will take an ‘in principle’ decision to exercise their powers, followed by a detailed decision some weeks or months later. The purpose of this two-fold approach is to encourage a negotiated settlement between the developer and the owner of the rights, by letting the latter know that the authority is prepared to exercise its powers. The initial decision will also set out any detailed matters that need to be satisfied before a final decision is taken – for example ensuring that the owner has consulted with those affected.
• The initial report (or the single report if there is just one) will deal with a number of requirements. These include confirming that the rights will be infringed if the development goes ahead; that the form of the development cannot easily be changed to avoid the infringements; and that the threat of injunction is real.
• The initial report will also likely trail the matters that will need to be satisfied before a final decision is made to appropriate. These will include evidence that the developer has made all reasonable attempts to settle the potential claims. The developer will need to provide surveyors’ reports of the offers made and the authority will want to assess these.
• Another essential step before the authority decides to appropriate the land is concluding an agreement that gives an indemnity from the developer in favour of the authority. This should cover the costs of the appropriation exercise, the funding of any judicial review that may be brought in respect of the decision and the costs of paying compensation for the infringement of the rights by the developer.
• The terms on which the land will be acquired must also be settled and the authority should consider the following:
  • What is the nature of the interest to be acquired – is it a freehold or a head lease?
  • How long will the authority hold the interest before the land is returned to the developer and what steps can be taken to minimise stamp duty liability?
  • Are there any other interests in the land? For example, is there a superior freehold interest or tenancies and charges?  How will they be dealt with?
  • Lastly, how is the land to be transferred back to the developer – how will this be secured and how will the authority meet its duty to obtain best consideration?

Appropriation is a technical exercise and may involve more procedural steps and costs than expected. However, where there is a real threat of injunction against a development because it infringes the rights of neighbours, the council stepping in and exercising its powers of appropriation could be the only solution that allows the development to go ahead. 

John Bosworth is a Partner in the Planning Team at Maples Teasdale.