Bell & Scott
Property Update, February 2007
Welcome to the February 2007 issue of Bell & Scott Property Update.
Property Update provides a round up of relevant case law and other items which
we consider may be of interest to those in the property industry.
In this month's issue we comment on a recent case which looked at the timing of Environmental Impact Assessments and also a case concerning a tenant potentially being held liable for the replacement of certain electrical and mechanical items, despite the items being in working order.
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Recent Decisions |
Timing is Everything
When is the correct time for carrying out an Environmental Impact Assessment?
The recent House of Lords case of R v London Borough of Bromley ex parte Barker dealt with the proposed redevelopment of Crystal Palace. Outline planning permission was granted for an 18 screen multiplex and 950 space car park. When approval of reserved matters was sought the Council was advised by its legal advisors that it was unable to require Environmental Impact Assessment (“EIA”) at that stage because EIA could only be required when considering the application for outline consent itself. A local resident was concerned about the destruction of her local park and the impact of the works on, amongst other things, her and her child’s health, which she believed had not been properly assessed, and challenged the Council’s decision not to require EIA.
The question for the House of Lords was whether the UK Regulations had applied the European Directive dealing with Environmental Impact Assessment properly.
The UK Regulations stated that where outline consent was sought (as opposed to detailed planning permission), EIA could only be required at the stage where the application for the outline consent was being considered. There was no provision for a local authority to call for EIA at a later stage (e.g. where it was considering the application for approval of reserved matters).
The European Directive, on the other hand, states that projects will be assessed for their impact on the environment before the decision which entitles the developer to proceed with a project is made. There is an obvious discrepancy between the Directive and the Regulations: outline consent in itself, where approval of reserved matters is outstanding, does not entitle a developer to proceed with the project. The Directive therefore does not restrict the time to consider EIA to the outline stage.
Following referral to the European Court of Justice, who held that the UK had not implemented the European Directive dealing with Environmental Impact Assessment properly, the House of Lords found in favour of the objector. The House of Lords held that outline consent and a decision approving reserved matters together constituted development consent, albeit a multi-stage consent. The UK Regulations had overlooked this possibility.
Stephanie Mackenzie, an Associate in our Strategic Land Acquisition & Development Team comments:
This decision does not mean that EIA will always be required at reserved matters stage, but it does mean that it might be. When applying for outline consent, developers should still lodge sufficient information to enable an authority to ascertain whether the development is likely to have significant effects on the environment. The need for EIA at the reserved matters stage will depend on the extent to which the environmental effects have been identified at the earlier stage.
Government guidance is now awaited on the practicalities of how EIA will fit into the two-stage outline permission process and new regulations will be required. The intention is that the effects of a development on the environment will be identified and assessed as early in the process as possible and it is likely that the EIA emphasis will still be on the outline consent part of the planning application. With the best will in the world however, EIA might be required at the reserved matters stage because the possibility cannot be eliminated that it will not become apparent until a later stage in a multi-stage consent process that the project is likely to have significant effects on the environment.
Developers should be cautious of the impact of this decision. Getting an outline consent in vague terms and then introducing the detail at reserved matter stage could well leave a developer open to EIA far later in the planning process than developers have become used to. This is something that developers should bear in mind both at the outline stage and at the reserved matters stage, both from a timing and a budgetary perspective.
Case referred to: R v. London Borough of Bromley ex parte Barker (FC)
The full text of the decision is available from the UK Parliament Website here.
Who’s Liable?
Who should be liable for replacement and renewal when a lease expires?
The Royal Bank of Scotland plc (“RBS”) were the tenants of 26 St Andrew Square under a twenty five year lease running from 1979 until 2004. Westbury Estates Limited (“Westbury”) had served a Schedule requiring certain repair works to be carried out, including the replacement of certain electrical or mechanical items.
The obligation on RBS was to accept the premises in their present condition and throughout the period of the lease to uphold, maintain, repair and renew the premises, internally and externally, so as to keep the premises in good and substantial repair and condition. It was expressly declared that this included all necessary work, including structural work, and that it included maintenance, repair, renewal and if necessary replacement of all services, including lifts, heating installations, ventilation or air conditioning, drainage systems and gas, electricity and water supplies.
The dispute concerned the liability to pay for replacement of some electrical or mechanical items, including lifts, the fire alarm, the wiring, the boiler and convector heaters. Westbury claimed over £500,000 in replacement costs which they had incurred, along with around £70,000 of lost rental income whilst the replacement work was carried out.
The argument centred on whether RBS were obliged to replace mechanical and electrical equipment which, it was accepted, could still be operated. Westbury argued that the obligation to keep in good and substantial repair and condition meant that replacement of equipment which, according to CIBSE guidelines, had reached, or was reaching, the end of its economic life, was within RBS’ obligations. Westbury made no claim about unreliability of the equipment, simply that replacement was necessary given the age of the equipment.
Lord Reed found that RBS were under no such obligation, simply because of the age of the equipment. He commented that the fact that an item was at or near the end of its economic life did not mean a tenant was necessarily obliged to replace it under the repair obligation in the lease. The equipment might still be in good and substantial repair and condition. Whether an incoming tenant might expect a particular item to be replaced because of its age was not a test of whether the repair obligation had been breached.
Furthermore, it was noted that the CIBSE guidelines were not in general use (and may not even have existed) when the lease was entered into in 1979. Lord Reed commented that the practice of landlords and tenants in 2004 was not the test, if different from the practice in 1979. Breach of the guidelines did not, of itself, demonstrate that RBS had failed in their obligations under the lease.
Sheila Webster, Head of our Property Dispute Resolution Team comments:
This seems to me to be a victory for common sense. When considering repair obligations, use of the CIBSE guidelines may be a sensible approach as a starting point for whether mechanical or electrical equipment may need replacement. However, it seems a huge leap to assume that equipment is not in good and substantial repair and condition just because it is old. Indeed, it might even be said to be ageist!
The important point here in assessing liability to replace is, and in my view, should be, the physical condition of the equipment. In relation to such equipment, replacement might be necessary if there was an inherent defect, or if it was unreliable and prone to breakdowns. Merely being less efficient than a modern equivalent however does not mean equipment needs replacement at the cost of the tenant under the lease.
Case referred to: Westbury Estates Limited v. The Royal Bank of Scotland plc.
The full text of the decision is available from the Scottish Courts Website
here.
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News |
Building a Greener Future: Towards Zero Carbon Development
The Department for Communities and Local Government is consulting on a package of measures aimed at ensuring that by 2016 all new homes are zero carbon homes. The consultation affects England and Wales, but the proposed measures will have to take effect across the whole of the UK if Britain is to meet its target of zero carbon new homes within the next decade.
The Consultation document is available here.
Recommendation to Turn Ultra-Long Leases into Ownership
The Scottish Law Commission has recommended to Scottish Ministers that ultra-long leases be converted to ownership. To qualify as ‘ultra-long’ the lease must have been granted for more than 175 years and have more than 100 years to run. The recommendations would, if enacted, be an appropriate follow-up to the Abolition of Feudal Tenure etc. (Scotland) Act 2000.
Full text of the Scottish Law Commission’s recommendation is available here.
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