Bell & Scott

In this month's issue we comment on (1) a case where the question of what the word “tree” means was crucial for the purposes of a development and (2) a case where a tenant’s attempt to curtail its liability to pay for promotional costs in a Centre cut no ice.

An ‘elephant test’ lets you see the wood and the trees

When is a tree a tree, a sapling a sapling and a bush a bush?

The dispute between Palm Developments Ltd (Palm) and The Secretary of State for Communities and Local Government and Medway Council (Medway) has its roots in a series of five applications by Palm to carry out surveys on a disused wharf site by the River Medway in Kent. To facilitate the carrying out of the surveys, "scrub, shrubs, saplings, vegetation and all trees" needed to be cleared from a part of the site. In 2005 (after a failed planning application by Palm to develop a commercial wharf) Medway made a Tree Preservation Order over the site. Unsurprisingly, therefore, the five applications were refused by Medway. Palm then appealed unsuccessfully to the Secretary of State. Palm finally resorted to Judicial Review proceedings in the High Court.

In the High Court, Palm argued that its first and second applications had only been for work on a "one-off" basis - only small trees and shrubs would be removed, leaving more mature trees to re-seed the area once the surveys had been carried out and the planning inspector had not taken this into account. Also, the definition of what constituted a tree for the purposes of a TPO was crucial and the planning inspector had got this wrong. Palm also believed that the planning inspector's report had departed from planning guidance in the UK Government’s "Blue Book" which allowed incidental damage to smaller trees and scrub when carrying out work on trees in an area of woodland where there was a TPO in place.

Palm’s appeal failed. The court decided that, for a TPO aimed at protecting woodland, a tree means not only a fully grown tree but a sapling as well.

This decision is clearly of interest to developers on both sides of the border and applies to both green and brownfield sites - it is certainly not safe to assume that brownfield regeneration will trump any TPO which might have come into force, even if the only work proposed is what some might assume to be relatively minor clearance of insignificant flora. Although Scotland is covered by different legislation, it is in much the same terms and decisions like this are likely to be influential.

You might well wonder why a judge needed to produce pages of analysis on what constitutes a tree. Surely, we know a tree when we see one! We probably do, but the legislation that allows for TPOs, both north and south of the border, does not specifically say what a tree is and the existence or not of trees on the site was central to Palm’s ability to develop.

Most developers throughout the UK could have been forgiven for thinking that a very small sapling could not, for the purposes of a TPO, amount to a tree. Indeed, there were previous cases which said that a sapling was not a tree. However, the judge in this case took a much broader view – there is no real cut-off point based on size or width in so far as a TPO protecting a piece of woodland is concerned. The test is simply that we should know a tree when we see one – an elephant test. Where a TPO is made to protect a woodland, you have to assume that the purpose of the TPO is to ensure survival of the area as woodland over time. Potentially, almost all growth in the woodland should be viewed as a possible barrier to development. Close working with the planning authority and a considered approach by arboriculture specialists is, therefore, vital to mitigate any hindrance that might otherwise be caused by this clarification in the law.

Case referred to Palm Developments Limited and The Secretary of State for Communities and Local Government and Medway Council [2009] EWHC 220 (Admin).

A full text of the decision is available on the British and Irish Legal Institute website accessible here

Boots is the tenant of a unit at the Trafford Centre in Manchester. Trafford Centre Limited is the owner of the Centre and Boots’ landlord. The Boots’ lease contains a service charge provision. As well as the usual items covered by any normal service charge, such as maintaining and repairing the common parts of the shopping centre, the levy at the Trafford Centre can also cover expenditure incurred by the landlord in “providing promotion” of the Centre. Under its lease, Boots’ liability to contribute towards the costs incurred by the landlord in promoting the Centre is limited. The landlord has to bear 50% of the costs of promoting the Centre and the total cost of promotion to Boots cannot exceed 10% of the total net service charge it has to pay.

The landlord and Boots disputed the service charge treatment of four items provided by the landlord at the Centre:-

There was no dispute about the landlord’s entitlement to include a charge for these matters in the service charge account. However, Boots claimed that the items were promotional and, therefore, the 50/50 split and 10% cap should apply. The landlord disagreed.

The case centred on the meaning of the word “promotion” in the lease - “Promotion” means “advertising and other forms of promotion of the Centre intended to bring additional custom to the Centre”.

Boots argued that any activity or thing designed to bring additional customers to the Centre should be regarded as “promotion”. The landlord claimed that “promotion” only covered activities which took place outside the Centre and which occurred irregularly or were one-off or out of the ordinary.

The judge disagreed with both approaches. He believed that there could be no set rule for deciding between what is and what is not “promotion”. He drew a distinction between something which could be called “a promotion of the Centre”, on the one hand, and something which was a “service or facility or amenity in the Centre”, on the other hand. Using this test, the judge decided that most of the disputed items were facilities, amenities or attractions as opposed to a form of promotion of the Centre. Therefore, the 50/50 split and the 10% cap did not apply and Boots was required to pay its full share. However, the Court did say that since the Sky Wall was used at times for information purposes, an element of that cost should be subject to the split and cap.

Fiona Bell, Solicitor in our Development and Investment Team, comments:

A useful decision for retail landlords, tenants and their advisers, not least since the activities organised by the landlord in this case are by no means unique to the Trafford Centre.

The case draws attention to the thorny issue of how much tenants of shopping centres are willing to pay for promotional activities - an issue which is likely to become even more sharply focussed if economic conditions deteriorate. Landlords will surely look to make more commercial use of mall areas to increase both footfall and customer dwell time.

Boots had clearly taken a strong line in its lease negotiations and managed to get itself a potentially valuable restriction on the amount it was going to have to pay for something that benefits the landlord as well. However, it is probably right that the main purpose of items like Christmas decorations and a Santa’s Grotto, is to enhance your enjoyment of a centre when you are there – they are features of a centre. If Boots had in its mind’s eye that the 50/50 split and 10% cap were to cover the Christmas decorations and Santa’s Grotto, then it should have ensured that these items were specifically covered by the word “promotion” in the lease.

Of course, the RICS’ Code of Practice, “Service Charges in Commercial Property” (Scottish edition) recognises that promotional costs should be shared equally between landlords and tenants but that Code is voluntary only. It requires service charge budgets to show what the gross expenditure on marketing is and how much is contributed by the landlord, thus establishing the net marketing cost to be shared between the tenants. It also states that marketing plans (including promotions) should be prepared and presented to occupiers in advance of the period to which they relate. Those plans should be agreed, monitored and reviewed with occupiers to analyse their effectiveness.

It may be some time before the Code becomes the norm in every lease of a shopping centre. Even then, any dispute on service charge will always focus on the words used in the lease. Parties need to think carefully about what they do and do not want to pay for, even in the season of goodwill and festive cheer!

Case referred to Boots UK Limited and Trafford Centre Limited [2008] EWHC (Ch) 3372.

A full text of the decision is available on the British and Irish legal Institute website accessible here

The Scottish Government is seeking views on the draft of Designing Streets which is to be a new planning policy. It incorporates the principles of PAN 76 (New Residential Streets) as well as more comprehensive information and guidance and, therefore, will supersede PAN 76. The government’s view is that previous guidance contained in PAN 76 made it clear that uncoordinated decision-making can result in disconnected, bland places that fail to make a contribution to the creation of thriving communities. The principle is further reinforced in Designing Streets, which recommends that those involved in design and approval are encouraged to work together strategically, from an early stage, to negotiate issues in the round and retain a focus on the creation of locally distinct, high-quality places.

The draft consultation is available on the Scottish Government’s website accessible here

On February 25, 2009, the Scottish Parliament published its report on the Proposed National Planning Framework 2 following review by the Local Government and Communities Committee.

The report is available on the Scottish Parliament’s website accessible here

The Scottish Government has issued this circular to accompany the three main development planning regulations issued just before Christmas 2008:

The Planning etc. (Scotland) Act 2006 includes detailed provisions on many of the procedures to be followed in preparing development plans. It also contains specific powers to prepare regulations which provide further detail on the development planning system. This circular explains how these two sets of requirements fit together and aims to provide a single straightforward description of the legal requirements, and also to explain Scottish Ministers' expectations for the key parts of the process.

The regulations provide a minimum set of requirements to ensure that Scottish Ministers' priorities for the operation of the development planning system are achieved. They are intended to allow authorities to respond appropriately to the very different circumstances in which plans will be prepared over time and across Scotland.

SPP: Planning Circular 1 2009 is available on the Scottish Government’s website accessible here

RICS objects to HMRC's guidance on goodwill on sale of trade related properties

RICS has declined to lend support to the Valuation Office Agency and HMRC’s approach to the valuation of goodwill on the sale of trade related properties. RICS has made it clear to the VOA that it does not support the guidance and it will continue to seek changes.

This follows HMRC’s publication of a practice note on how to apportion the price paid for a business as a going concern between goodwill and other assets involved in the sale, including land.

SPF welcomes the Scottish Government’s move to reduce carbon emissions’ target for 2010

SPF has welcomed the decision by the Scottish Government to reduce the previously proposed 2010 target for reducing carbon emissions from new commercial buildings.

The Sullivan Report saw the need to deliver a reduction of carbon dioxide emissions from new commercial property development of 50%. However, the new target will be 30%, in recognition of current economic conditions. The requirement will be implemented from October 2010 following public consultation during summer 2009.

The OFT has published a report setting out the results of its study of the Scottish property management market. The report concludes that competition in the market is not working well for consumers. The level of switching between providers is very low. Also, consumers often do not understand their rights and obligations and do not have a clear understanding of the standards they can expect from a property manager. Furthermore, when things go wrong, there is no effective redress mechanism. Similar issues arise in relation to land maintenance, in particular, due to very high barriers to switching providers. The OFT recommends early implementation of a Scottish Government promoted self-regulatory scheme, with an independent complaints redress mechanism.

The Association of British Insurers (ABI) has published “Climate Adaptation: Guidance on Insurance Issues for New Developments”. The guidance is designed to help developers ensure that their properties are as flood-proof as possible and insurable. New properties built after 1 January 2009 are not covered by the Revised Statement of Principles (accessible here) which is a voluntary commitment given by members of the ABI relating to the provision of flood insurance. For those properties, it is, therefore, important that flood risk is managed to acceptable levels so that affordable insurance is available.

The Guidance is available on the Association of British Insurers’ website accessible here