With the well-publicised headwinds in the housebuilding sector, developers may be re-considering spreading development risk. One option is splitting sites into smaller parcels for development by other housebuilders, but it is not without complication.
The Parcels
In the rare case of a flat site surrounded by adopted roads and services, it may just be a case of split up, sell off and forget but unfortunately, that's not a typical development site.
The shape, physical features and attributes of a large site may delineate natural parcels. Clearly it doesn't make sense for one developer to have five units marooned on the other side of a stream or some other physical feature. But there will be commercial drivers as well; some parts of the site may be more favourable to certain market sectors or there may be a desire to share liability for less desirable features.
Roads
In most cases, planning or physical constraints will restrict the accesses into the larger site and these may not necessarily coincide conveniently with parcel boundaries. Whilst there's nothing to stop one parcel of land having general access rights over another, in practice developers need certainty on the access locations and have a guaranteed access route to the public road network to meet lenders' requirements, if nothing else. A common solution is the provision of a spine road by the landowner linking the various parcels.
While preferable for developers acquiring a parcel to have the spine road completed to at least base layer prior to acquisition, this may be unrealistic. So missives for the parcel acquisitions would be expected to provide for clear build out obligations including: adoption-standard road specification, a timeline for construction and step in rights in the event of default by the landowner. There would also need to be accompanying legal rights of access to the respective parcels.
Utilities
Whilst selling with utility connections is a commercial point, the requirements of SUDS infrastructure often mean that it makes sense to deal with this on a whole site basis. It can be easier to install other utilities from a logistical and legal perspective before development has commenced but this carries with it timeline implications and the risk of inflexible or insufficient utilities subsequently constraining or sterilising parts of the site. Safeguarding utility corridors for future servicing requirements is usually a wise decision.
Planning
The majority of sites will benefit from a planning permission in principle (PPiP) with each block/phase of the development then the subject of an approval of matters specified in condition (AMSC). A landowner will need to consider whether they obtain the ASMCs for the individual development blocks/phases to control the housing numbers across the development as well as, for example, affordable housing and open space provision.
If an individual developer seeks to obtain its own planning permission (i.e. not an AMSC under the PPiP) for their block (e.g. for a housing remix) there is a risk that this may invalidate the PPiP for the remainder of the larger site, following the Supreme Court judgment in the Hillside case. This risk may need to be managed in the missives with individual developers.
Section 75 agreement
Section 75 contributions are often payable at trigger dates based on the completion of a certain number of houses (e.g. the 150th house). Or construction on mainstream units may be restricted until a certain number of affordable units are provided. It can be difficult where houses are built by various developers with different build out rates to monitor the house numbers from each developer to ensure the contributions are paid on time. Who will know which developer built the 150th house (and when) that triggered payment? And who is making sure the affordable units are being provided?
Where possible, section 75 contributions should be negotiated on a roof tax basis, paid based on the number of completed units within a certain period and paid by the developer of the relevant parcel.
A section 75 agreement is binding on each landowner on the development site jointly and severally unless otherwise provided so there needs to be careful drafting to avoid one developer being on the hook for another developer's failure to pay.
Managing the development
Prior to the disposal of a parcel, it will be necessary to formalise the legal rights for interaction between the respective parcels and in respect of the management of any common facilities for the larger site. Some obligations may be included in the missives, but for the long term, a Global Deed of Conditions is the usual solution and as it provides certainty of mutual rights and obligations between developers. This is important to get right at the outset as it can be exceptionally difficult to change further down the line.
As a minimum, the Deed of Conditions would cover the access rights to, and maintenance of, the spine road, SUDS infrastructure and the management of boundaries between the parcels. It would also cover the external boundaries of the larger site, however it could also govern the use of respective parcels to protect prestige, features of the larger site or allocate common property. Mutual rights of access between respective parcels are also common but careful drafting is necessary to avoid inadvertently sterilising part of the parcels.
Risks to manage,
Even though deeds of condition can provide for rights for access and servitudes, it's important to know which party is going to retain or acquire ownership of the areas in question as this can raise logistical issues down the line. Utility providers, for example, may require servitudes to be signed by the landowner and this can be impracticable where there are multiple owners, particularly where plot purchasers end up owning a share of common parts.
As highlighted, there may only be one shot to get the deed of conditions right so early engagement with the various stakeholders is essential to ensure a workable and robust framework for the development.
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