Bell & Scott's Property Update, June 2010

Welcome to the June 2010 issue of Bell & Scott’s Property Update.

In this month's issue we comment on a case in which a developer tried to obtain a reduction in an affordable housing requirement because of the prevailing economic climate - but failed.

We also update you on a number of other relevant news items.

Recent decision

More than a hitch

Developer loses affordable housing challenge

A developer lost its High Court challenge over the viability of an affordable housing plan that is delaying a 750-home residential scheme near Lydney, Gloucestershire.

Robert Hitchins Limited submitted a planning application for a site known as Lydney B, extending to approximately 25 hectares. They had previously submitted a planning application for a site known as Lydney A, situated to the south of Lydney B. The earlier application was granted following an appeal to the Secretary of State to permit development of no more than 320 dwelllings, a neighbourhood centre, employment land, a school site, infrastructure, ancillary facilities, open space and landscaping. In that decision, the Secretary of State accepted that 20% affordable housing was the maximum provision that was reasonably achievable having regard to the site viability. There was a recognition that significant infrastructure costs were to be borne, which would benefit both Lydney A and Lydney B.

The original Lydney B application suggested 30% affordable housing. Due to the credit crunch, this was reduced to 13% (increasing to 20% if grants could be arranged). Robert Hitchins indicated that if it did not get permission for Lydney B, it would not proceed with the development of Lydney A either.

Forest of Dean District Council did not determine the application so the appeal was “recovered” by the Secretary of State on 11 August 2008. On 9 September 2008 Forest of Dean indicated that if it had been in a position to determine the application it would have refused it, one of the reasons being that it would not have secured the necessary affordable housing contribution.

The hearing was conducted in May 2009 and the report was produced on 20 July 2009. It recommended that the application be refused. The Secretary of State accepted that recommendation in his decision letter of 6 October 2009.

The emerging Regional Spatial Strategy (RSS) for the South West covers the period to 2026 and recommends a 35% affordable housing contribution. The Lydney B application was projected to cover a development period to 2024. The inspector said “In the context of such a lengthy timespan, the downturn represented by the credit crunch even though severe, can be regarded as a temporary and relatively short term element. No evidence demonstrates otherwise. RSS policy is intended to provide continuity and certainty over a lengthy period, and it is not to be expected that such policy should itself be hastily amended to reflect sudden and temporary changes in circumstances.”

Dismissing the claim, Nicol J said “I consider that the Secretary of State was entitled to decide that the application should be refused because of the possibility that development with a higher proportion of affordable housing might be viable in the future.”

Ruth Maclean, Partner in our Housing and Regeneration Team, comments:

This case feels like yet another blow for the development sector. Many development sites the length and breadth of the country are currently unviable due to the recession and lack of development finance in the market place. Coupled with lower valuations, significant Section 75 contributions compound developers’ woes. Local Authorities are also suffering, due to a huge drop in payment of planning gain contributions. Affordable Housing contributions are by no means the only contributions being delayed, although some Local Authorities are working hard in conjunction with Registered Social Landlords and developers to try to find ways to bring forward new affordable housing.

Local Authorities have shown a willingness to restructure the timing of payments and in some cases the level of contribution in further efforts to kick-start development. Developers must be prepared to exhibit their revised feasibility studies to the Local Authority to demonstrate the basis for renegotiation. Flexibility is the key, though one suspects that until there is more funding in the market place, the two sides will continue to struggle to find achievable compromises. Given that there is still a huge demand for new housing, the system will need to find ways to adapt to deliver it.

Case referred to Robert Hitchins Ltd v Secretary of State for Communities and Local Government and another: Administrative Court (Nicol J) 27 May 2010 [2010] EWHC 1157 (Admin).

A full text of the decision is available on the BAILII website accessible here

News Updates

The Environmental Impact Assessment (Scotland) Regulations 2010: Consultation Paper

The Scottish Government is seeking views on the draft Environmental Impact Assessment (Scotland) Regulations which consolidate and update the Environmental Impact Assessment (Scotland) Regulations 1999. The draft Regulations make changes in relation to: reasons for negative screening decisions; multi-stage consents; and changes or extensions to existing development. Comments by August 27, 2010.

Details are available on the Scottish Government’s website accessible here

Housing: Fresh Thinking, New Ideas

This Scottish Government publication considers the housing policies that will be needed to meet the challenges of the coming years. It examines evidence about housing need and asks where government's priorities should lie; examines some new and emerging ways of generating investment in new affordable housing; looks at existing stock, asking how the Government might make more flexible use of these assets to support greater choice and better housing outcomes for all; considers the quality of homes; and considers how the main players in the system can contribute.

Details are available on the Scottish Government’s website accessible here

Property Factors (Scotland) Bill - Call for views

A Scottish Parliament consultation on the Property Factors (Scotland) Bill invites comments on the general principles of the Bill which would make it an offence to operate as a property factor without registration. The Bill would also create a form of alternative dispute resolution between property factors and homeowners by establishing a homeowner panel and a homeowner housing committee to consider complaints from homeowners. Comments by August 12, 2010.

Details are available on the Scottish Parliament’s website accessible here

Private Sector Housing Issues for Possible Inclusion in the Housing (Scotland) Bill: Consultation Responses

Consultation responses to the Scottish Government's proposals for the possible inclusion of some private housing issues in the Housing (Scotland) Bill have been published.

Details are available on the Scottish Government’s website accessible here

Opting to tax land and buildings

The latest version of Notice 742A Opting to tax land and buildings is now available. This notice cancels and replaces the previous version issued in June 2008 and incorporates the contents of Information Sheets 06/09, 14/09, 02/10 and 08/10.

Details are available on the HM Revenue & Customs website accessible here

Spotlight 10: Stamp Duty Land Tax avoidance

HMRC state that commercial and residential property sales are being carried out in ways intended to avoid Stamp Duty Land Tax (SDLT) by reducing the purchase price below the SDLT band or threshold. In some cases an intermediate sale, often on the same day, is introduced into the arrangements with the sole intention of removing the true purchase price from tax. These arrangements seek to exploit 'sub sale relief'. HMRC warn that property sale arrangements that have been artificially structured to avoid paying the correct amount of SDLT will be actively challenged, through the courts where appropriate.

Details are available on the HM Revenue & Customs website accessible here

Legislation

New legislation on the horizon includes:

Wildlife and Natural Environment (Scotland) Bill (SP Bill 52)

A Bill to make provision in connection with wildlife and the natural environment; and for connected purposes. The Bill was introduced on 9 June 2010.

Details are available on the Scottish Parliament’s website accessible here