South: Going vertical to deliver more homes

Amid the early stages of the coronavirus epidemic, housing secretary Robert Jenrick published the Government’s housing strategy document which announced the intention to introduce wide ranging reforms to the planning system and delivery of much needed housing to the communities with the greatest need. The strategy document entitled Planning for the Future can be found here. William Nassau-Lake at law firm Boyes Turner explains.

The package of measures included an intention to introduce in the summer of 2020 permanent permitted development rights for rooftop developments of up to two additional storeys above existing buildings. This proposal follows the policy statement issued by former housing secretary Sajid Javid in 2018 and justifies upward development by increasing density in line with local character and making the most of existing local infrastructure.

The timetable for adoption of these measures is bound to slip as the Government focuses resources to the health emergency. Nevertheless, the proposals are to be welcomed as development of this nature could bring much needed additional homes without eroding greenbelt or removing employment space.

Critics of the proposals are concerned that, like other recent permitted development initiatives such as the recent “office to residential” boom, the exercise of the proposed permitted development rights will lead to poorly designed and low quality housing stock which has not undergone the rigour of the planning system.

Legal Issues to consider

Upward urban development is not a new phenomenon and many developers have already embraced the vertical development potential. That said, upwards development will often not be appropriate for a range of reasons including planning & practical considerations, cost and physical restraints such as the integrity of the existing structure.

There are also a number of legal factors which should be taken into account when considering upward only development including the following:

Terms of Existing Leases – the terms of existing leases of the building may conflict with the proposed redevelopment. The Landlord’s quiet enjoyment clauses which are likely to be included within any existing leases of the building may be breached by the Landlord’s proposed development if the construction works materially interfere with the tenant’s possession and enjoyment of their property. Rights may also already exist for the existing tenants to use the roof space or roof voids or items situated on or within them such as roof gardens, plant and equipment etc.

Well drafted leases should reserve sufficient rights for the Landlord to undertake further development on parts of the property not already demised but this is unlikely to be sufficient to overcome claims for breaches of quiet enjoyment for existing residential tenants, particularly on the upper floors, where the interference caused by the construction is significant.

Telecommunications Apparatus – the existence of telecommunications masts on the roof will need to be addressed and their removal or relocation negotiated. Telecommunication tenants may well have the benefit of security of tenure pursuant to the Landlord & Tenant Act 1954 which may cause complications or result in compensation being due to the tenant if a renewal is contested on development grounds. Telecoms operators will also have rights under Telecommunications legislation.

Rights of Light – upward urban development is more likely to infringe the rights of light enjoyed by adjoining properties. A developer will need to assess the potential impact of rights of light and could face a lengthy and costly legal battle or have to incur the cost of settling potential claims.

Indemnity insurance may be available to cover the risk of rights of light claims depending on the circumstances.

A thorough assessment of all relevant rights of light should be undertaken.

Health & Safety requirements – the developer will need to ensure that the upward development is undertaken in accordance with health and safety requirements so as not to risk the health & safety of existing occupiers. The necessary arrangements could have significant practical implications for the way in which the proposed development is undertaken.

Residential Tenants’ right of first refusal – where a building comprises existing residential units which have been sold on long leases, the long leaseholders are likely to have the benefit of a statutory right of first refusal (pursuant to provisions of Landlord and Tenant Act 1987) if the freeholder/landlord intends to dispose of the roof and air space above to a developer.

This process will cause delays and expense to the freeholder/landlord and, if the tenants are successful in exercising their right of first refusal, will prevent the developer from acquiring the rooftop and airspace. It is worth noting however that the success tenants will need to step into the shoes of the proposed developer and acquire the rooftop/airspace themselves which may present the developer with an opportunity of being engaged to undertake the development on behalf of the tenants.

The 1987 Act contains criminal sanctions if the procedure giving the tenants right of first refusal is not complied with and/or allows the Court to unwind any transaction entered into in breach of the Act.

Collective enfranchisement – the Leasehold Reform, Housing and Urban Development Act 1993 gives long leasehold tenants the right of collective enfranchisement. If the qualifying criteria set out in the Act are met the tenants may have a right to acquire the building, along with the roof which will hinder or prevent further development by the current owner.

Case law is rapidly evolving in this area as can be seen from in the recent case of LM Homes Limited & Others v Queen Court Freehold Company Limited (2020). A note of that case can be found here.

Party Walls – The provisions and procedures of the Party Wall Act 1996 should be considered. The Act applies to both horizontal as well as vertical party structures (such as floors or ceilings) between adjoining flats or between flats and the roof/roof void.

Summary

The Government’s appetite for vertical urban development may present new urban development opportunities but further detail is needed about the proposed permitted development rights before the industry can assess how much of an impact the proposals will have.

Even where planning considerations are overcome, rooftop development presents a range of complex legal issues which each need to be carefully considered, addressed and overcome before assessing the viability and deliverability of the rooftop development.

For more information contact William Nassau-Lake by email at wnassau-lake@boyesturner.com.