Bell & Scott's Strategic Land Update, April 2010

Welcome to the latest issue of Bell & Scott’s Strategic Land Update.

Our Strategic Land Unit is the only team in Scotland to focus on legal advice on strategic land deals. For further information see our website.

This e-update is issued quarterly and will also be available to download from our website.

Strategic Land Update seeks to cover a wide range of topics of relevance to those interested in strategic land issues. In this issue, we comment on a case about an option which turned out to be a poor deal for the landowner.

In addition, we include a number of other relevant news items.

If you wish to discuss any of the items in this edition or require advice on strategic land issues please contact either Bruce Anderson: DD: 0131 718 2399 e: b.anderson@bellscott.co.uk or Neil Fraser: DD: 0131 718 2499 e: n.fraser@bellscott.co.uk

Recent Decision

A deal is a deal

The appeal of an open-ended option

Mr and Mrs Anderson owned property in London Road, Camberley. In September 2006, they signed an agreement with Chantry Estates (South East) Limited giving Chantry, in return for £1, an option to buy the property.

With the exception of a requirement to apply for planning permission for residential development, the option agreement imposed few obligations on Chantry. The price was a fixed price (with one possible variant which did not come into play). There was a six-month option period but that could be extended with no definite cut-off date. In essence, the agreement was fairly one-sided.

Chantry applied for planning permission for residential development as it was required to do under the agreement. That was refused within the six-month option period. The option agreement allowed for extensions of time to cover appeals. Chantry appealed. Then, after the expiry of the original six-month option period, Chantry applied for the appeal to be “put into abeyance” – in effect, put on hold – and followed that with an application for planning permission for a care home. In fact, Chantry made several different planning applications. Eventually, on 27 April 2008, it obtained planning permission for a 58-unit residential care home and, on 2 May 2008, exercised its option to buy the property.

The Andersons were unhappy. They went to court. They contended that, by that time, the option had expired and therefore there was no binding contract for a sale. They argued that, while there was nothing specific in the contract which actually stopped Chantry doing what it had done, terms limiting Chantry's actions had to be implied into the agreement. They said that the option agreement was intended to provide a six-month option period that could be extended only as a result of events beyond Chantry's control.

The Andersons lost their case and appealed to the Court of Appeal where they lost again. It was held that there was nothing in the option agreement that obliged Chantry to act with expedition except a clause which required Chantry, as soon as reasonably practicable, to resubmit an earlier application for planning permission (which they did, albeit not as quickly as the Andersons felt they should have). The option agreement contemplated other planning applications being made and it gave Chantry a free hand to make multiple applications. It was only natural that Chantry, as a buyer, would try to maximise profits and planning applications would be made with that object in mind.

Bruce Anderson, Partner, comments:

Obviously, I feel sorry for the Andersons – they are Andersons after all. However, the law is clear. It was a commercial contract. The law will only imply terms into such a contract if they are necessary to make it work or make commercial sense. This contract worked as it stood.

In a 2009 Court of Appeal case, it was explained that the courts are not there to improve these sorts of documents or make them fairer – simply to decide what they mean. If a document doesn’t say what is to happen when some event occurs then the normal implication is that nothing is to happen. A court might step in and say that a provision is implied if, in all the circumstances, the only reasonable reading of the document is that something is to happen – but that would be the court spelling out what the document means where there is a gap, not adding something new to it. Again, this contract worked as it stood so there was no room for the court to “interfere”.

As Lord Justice Jacob said: “This may have been a bad deal, it may have been a good deal but it was the deal the parties entered into”.

Options are so commonly used in strategic land transactions that it is always worth considering any case which centres on how an option agreement is construed. There is nothing entirely new in this one but it is a reminder that what is in a contract will usually prevail, so deals must be carefully thought through and contracts carefully drafted. What you would expect coming from a lawyer? But this case tells us that putting down in writing what you expect, and may think is obvious, is rarely a waste of ink.

Incidentally, the Andersons in question are, as far as I am aware, unrelated to me – no Andersons I know would have entered into such a one-sided bargain!

Case referred to: Chantry Estates (South East) Ltd v Anderson & Anor [2010] EWCA Civ316.

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

2009 case referred to: Belize Communications Limited v Belize Telecom Limited & Anr [2009] UKPC 11.

News

Planning Circular 1/2010: Planning Agreements

A recently published circular sets out the Scottish Government’s policy on the use of agreements made under Section 75 of the Town and Country Planning (Scotland) Act 1997. It provides guidance on the circumstances in which such agreements should be used and on how they can be efficiently negotiated to a conclusion.

The circular draws on the findings of research projects commissioned by the Scottish Government, published in 2004 and 2008, as well as a facilitated stakeholder workshop held in November 2008.

It is the Scottish Government and stakeholders’ intention that the process of negotiating and concluding planning agreements should not slow up the planning process, delaying the benefits of appropriately planned development and adding costs for developers, infrastructure providers and the wider public sector. The circular is intended to set out the circumstances in which planning agreements should be used and promote greater efficiency in their use.

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

Planning Advice Note 1/2010: Strategic Environmental Assessment of Development Plans

This Scottish Government Planning Advice Note aims to help those who are undertaking a Strategic Environmental Assessment (SEA) of a strategic or local development plan. It outlines the principles of SEA within the planning context and provides key pointers. The advice is specifically aimed at development planners who are embarking on the preparation of new development plans, and who may already have some prior knowledge of the SEA.

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

Planning etc. (Scotland) Act 2006: Implementation Timetable

On 9 March 2010, the Scottish Government published its updated timetable for the implementation of the Planning etc. (Scotland) Act 2006.

The updated timetable is available on the Scottish Government’s website accessible here

Revised guidance on Land Remediation Relief

The Land Remediation Relief (LRR) scheme was introduced in 2001 and enables companies to make a deduction against corporation tax for capital expenditure incurred in the remediation of certain contaminated sites. Companies can deduct an amount equal to 150% of the qualifying clean-up cost when calculating their taxable profits.

The revised LRR guidance has been introduced following a consultation on draft guidance to accompany the Corporation Tax (Land Remediation Relief) Order 2009 (SI 2009/2037), which extends LRR to expenditure on long-term derelict land and for the removal of Japanese knotweed.

HMRC's policy intention is that, as far as possible, companies will know whether or not they are entitled to LRR on the basis of the risk assessments carried out as good practice in re-developing land in a contaminated state.

Details are available on HMRC’s website accessible here

Statutory guidance on Environmental Protection Act 1990: Part IIA Contaminated Land

The Scottish Government has published statutory guidance on the application of The Radioactive Contaminated Land (Scotland) Regulations 2007, as amended by the Radioactive Contaminated Land (Scotland) (Amendment) Regulations 2007 and the Radioactive Contaminated Land (Scotland) Amendment Regulations 2009.

The regime for radioactive contaminated land has recently been amended to take account of experience gained during the application of the Regulations. In particular the definition of "substance" has been changed to include radon and its progeny (but not for land which has been contaminated by a nuclear occurrence). The changes being made also incorporate an amendment to further clarify that the body with responsibility for identifying radioactive contaminated land is the Scottish Environment Protection Agency (SEPA).

Other minor changes are also being incorporated to make the guidance clearer, particularly in its application to pollution of the water environment and to correct some typographical errors.

SEPA has been consulted during the drafting of this updated guidance, however, given the minor nature of the changes no other consultation was carried out.

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

Consultation on Long Leases

The Scottish Government is seeking comments on the draft Long Leases (Scotland) Bill which would implement recommendations made by a Scottish Law Commission (SLC) report in December 2006 on the conversion of ultra-long leases to ownership. Depending on the response to the consultation and the availability of parliamentary time, the Scottish Government intends to introduce a Bill in the current Parliament.

Historically, long leases tended to be granted by large estates, predominately in the years between 1770 and 1860, to encourage the industrialisation of Scotland. They were often for 999 years and tend to be concentrated in particular parts of Scotland.

In the proposed Bill, leases would be eligible to convert to ownership so long as they were granted for more than 175 years, have more than 100 years to run and the tenant does not opt out. Compensation and additional payments would be payable to landlords. Comments are to be submitted by 30 June 2010.

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

National Park proposals consultation report

The Scottish Government has issued its report on the proposals to modify the original National Park Designation Orders for the Cairngorms and Loch Lomond National Parks.

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

Consultation: Tree Preservation Orders

The Scottish Government has issued a consultation seeking views on the Town and Country Planning (Tree Preservation Order and Trees in Conservation Areas) (Scotland) Regulations 2010 and the Model Tree Preservation Order.

In Scotland, the legislation relating to Tree Preservation Orders (TPOs) has changed little since 1975. In 2002, research was commissioned to examine whether the TPO procedures in Scotland are still effective. That research found that the TPO system is basically sound and that a series of fine tunings would provide an up-to-date structure for protecting trees across Scotland.

Details of the consultation and how to respond by 9 July 2010 can be found on the Scottish Government’s website accessible here

Scottish Law Commission review of compulsory purchase

The Scottish Law Commission (SLC) has included a review of the law and practice of compulsory purchase in its recently published Eighth Programme of Law Reform for Scotland. The SLC has said that the law of compulsory purchase “is generally considered to be antiquated and obscure” and “it is in the interests of all those affected for the law to be clear, accessible, fair and up-to-date.”

Details of the SLC’s Eighth Programme of Law Reform is available on its website accessible here

Forthcoming Scottish Government publications

Look out for (1) the Scottish Government's policy statements on nationally important land use planning matters and the long term framework for sustainable land use; (2) a consultation on the Planning Obligation and Good Neighbour Agreement Regulations 2010 on the Scottish Government's website in the weeks to come.