Bell & Scott's Strategic Land Update, October 2009

Welcome to the October 2009 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 another case where a landowner refused to sign up to a planning agreement with an option holder.

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 Caroline Docherty: DD: 0131 718 2383 e: c.docherty@bellscott.co.uk

Recent Decisions

Forcing the Seller's hand

Planning agreement creates another splash

In 2005, British Agricultural Services Limited and Hanson Building Products Limited (“Hanson”) granted NIRAH Holdings Limited (“NIRAH”) an option to buy around 180 acres in Bedfordshire known as Quest Pit. NIRAH stands for National Institute for Research into Aquatic Habitats. NIRAH planned to build a major visitor attraction including a large freshwater aquarium, a spa, hotels, exhibition and conference facilities, retail units and a science research park at a cost of over £375m.

The price under the option agreement was only £1 but Hanson would be relieved of the responsibility for remediation of the site which was part of a clay pit. Hanson retained substantial land holdings nearby. The option agreement set out aims: to maximise the value and amenity of NIRAH's development and to enhance the value, promote and then undertake the development of Hanson's remaining land.

In accordance with the agreement, NIRAH submitted an application for outline planning permission with Hanson's consent. One of the important issues to be dealt with in the planning process was access to the proposed visitor centre. The local planning authority resolved that it was “minded to approve” NIRAH's application for outline planning permission, subject to a planning agreement being entered into under Section 106 of the Town and Country Planning Act 1990 covering, amongst other things, provision for a shuttle bus service for visitors from a park and ride facility.

Satisfactory planning permission was a pre-condition of the exercise of the option and, without the Section 106 agreement, planning permission would not be granted. The time limit for NIRAH exercising the option was approaching – they were at risk of losing the site.

NIRAH argued that Hanson was obliged to approve and enter into the Section 106 agreement under the option agreement which provided for Hanson to enter into any ancillary agreements in a form approved by Hanson (such approval not to be unreasonably withheld or delayed) if requested by NIRAH, provided that to do so would not, directly or indirectly, adversely impact upon or adversely interfere with, or in any way prevent Hanson's business activities or the other stated aims in respect of its land. Hanson maintained that it had insufficient information, in particular about the route of the proposed shuttle bus link, to make an assessment as to whether the Section 106 agreement would be detrimental to its own development aims.

The court decided that the contrast between the aims of “enhancing value” in respect of Hanson's land and “maximising value” in respect of NIRAH's project meant that the option agreement required Hanson to accommodate and make allowances for NIRAH's project in any future plans for its own land. Construing the agreement so as to enable Hanson to block any aspect of NIRAH's project that would prevent Hanson from maximising the value of the future development of its land would have been inconsistent with the aims set out in the option agreement.

The judge took the view that Hanson had been provided with sufficient information about the proposed shuttle bus link road to enable it to form a view as to whether it should approve and sign the Section 106 agreement. The fact that the routes under consideration included routes that, if outline planning permission were granted, would require an application to amend the planning permission, did not entitle Hanson to withhold approval of the draft agreement. Hanson had not provided evidence that the shuttle bus routes under consideration adversely impacted, interfered with, or in any other way prevented its stated aims in the option agreement. The reasons which Hanson gave for not agreeing to the Section 106 agreement were unreasonable. NIRAH was entitled to an order requiring Hanson to approve the Section 106 agreement.

Bruce Anderson, Partner, comments:

You wait for ages and then they all come along together - how apt that this case involves buses!

In the last edition of Strategic Land Update, I said that it was unusual for a dispute about the signing of a planning agreement to reach the courts. Well…here we go again.

As many of you will know, Section 106 agreements are the equivalents in England of Section 75 agreements in Scotland: both are planning agreements. Having set out the mechanics of entering into planning agreements in the last edition of SLU, I don’t intend to go into that again here. The main interest in this case is the way in which the court interpreted the provisions of the option agreement.

The judgement is lengthy and sets out in great detail the actings of the parties and their advisors. A theme running through the judgement is that at some point between signing the option agreement and being asked to sign the Section 106 agreement, Hanson regretted having entered into the option agreement – that was tied up with Hanson’s emerging plans for the development of its remaining extensive landholdings in the area. Accordingly, it would have suited Hanson if the option agreement had expired and so it was in Hanson’s interest to spin things out. As the judge puts it “Hanson’s behaviour…involved procrastination and taking a wide view of what they were entitled to under the option agreement.”

However, the essence of the judgement lies in the recognition by the court that the option agreement had been negotiated carefully and struck a balance between the aims of the two parties. The aims were set out explicitly in the agreement and that was a crucial factor. Maximising value in respect of NIRAH’s project was an aim; maximising the value of Hanson’s land was not.

Aims or objectives are often not mentioned in option agreements or missives. It is not always appropriate and careful thought should be given to whether it suits the circumstances of any particular deal. However, where it is appropriate, it can be useful if agreed aims or objectives are set out. They can assist in clarifying the context in which an agreement was reached. That, in turn, can help to ensure a fair outcome in a future dispute. They do, of course, have to be carefully drafted!

Case referred to Nirah Holdings Ltd v (1) British Agricultural Services Ltd (2) Hanson Building Products Ltd [2009] EWHC 2282 (Comm)

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

News

The timetable can be accessed here

Planning: Guidance on Transitional Arrangements
Since the last issue of Strategic Land Update, the Scottish Government has produced helpful guidance to answer some of the common questions about the changeover to the new planning regime.

In essence, cases which were determined under the old system prior to 3 August 2009 are unaffected by the changes.

Planning applications which were in the midst of processing on 3 August 2009 may have been affected in three main ways:

• certain of the new requirements associated with the latter stages of processing will apply (e.g. requirements for decision notices and reports of handling);

• those in the category of local developments may have been delegated under new schemes of delegation from 3 August 2009 which, for example, will affect the right of appeal; and

• any grant of permission on or after 3 August 2009 has been subject to the new provisions on duration of planning permission and in the case of applications for outline planning permission, has resulted, or will result, in a grant of planning permission in principle.

Where an appeal was underway but not completed before 3 August 2009, it continues to be processed under the procedures in place at the time when the appeal was made.

Details on the transitional measures and the definitive position on all legislative changes made to date are available on the Scottish Government’s website accessible here

Proposed SPP and NPPG changes consultation
The SPP and NPPG series is being consolidated into a single, shorter document as part of the commitment to practical and proportionate planning policies outlined in the Scottish Government’s “Delivering Planning Reform”. A consultation on the presentation of the existing policy and the removal of the duplication, advice and background information took place in 2008 and some adjustments to existing policy were proposed in the draft consolidated SPP which was published on 1 April 2009.

The Planning etc. (Scotland) Act 2006 requires planning authorities to exercise their development planning functions with the objective of contributing to sustainable development and, since the publication of the draft consolidated SPP in April 2009, two significant pieces of legislation have been passed by the Scottish Parliament which have implications for national planning policy. These are the Flood Risk Management (Scotland) Act 2009 and the Climate Change (Scotland) Act 2009. The government now needs to make changes to national planning policy to reflect the new legislation in the final SPP. Additional policy changes proposed are:

• The replacement of Circular 12/1986 Planning Control over Onshore Oil and Gas Operations with a section in the consolidated SPP;

• Alterations to the policy on national high amenity single use business sites;

• A revised coastal planning policy;

• National maximum parking standards applied to specific types and scales of development not being included in the SPP but the overall policy on using maximum parking standards being retained;

• The policy on new junctions on trunk roads and motorways being amended to reflect the current policy position of Transport Scotland;

• The policy on the protection of prime quality agricultural land being strengthened to clarify the circumstances in which development may be acceptable; and

• The inclusion of a new section on the Scottish Government's expectations for community engagement in the planning system.

Details of the consultation which closes on 12 November 2009 are available on the Scottish Government’s website accessible here

Barriers to delivering mixed use development
The Scottish Government’s Directorate for the Built Environment has carried out research into mixed use development as part of its current overhaul of the planning system in Scotland.

Past research has shown that the vast majority of local plan allocations and planning applications are for single use despite professional opinion that mixing uses, both at the scale of neighbourhood and individual building, can be valuable. The Government believes that mixing use can help produce more vibrant, adaptable and pleasant environments and can assist in achieving sustainable places to live and work which minimise travel and support local demand for goods and services within a walkable distance.

The research carried out explored whether the single use perception is correct and aimed to identify why and where mixed use development has and has not occurred and to highlight barriers and enabling factors.

The results of the research are available on the Scottish Government’s website accessible here

Consultation responses on planning agreements
A recent report by the Scottish Government summarises responses to its December 2008 consultation on how best to make the system of planning agreements set out in the Town and Country Planning (Scotland) Act 1997 s.75 and implemented through Circular 12/1996 operate more effectively. Responses to the circular were largely favourable, particularly from planning authorities and businesses and trade organisations.

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

NPF 2: Strategic Appropriate Assessment Report
The National Planning Framework, NPF2, has been subjected to a strategic level Appropriate Assessment to ensure that it does not result in adverse effects on the integrity of Natura 2000 sites: Special Areas for Conservation and Special Protection Areas.

The NPF sits above the Scottish development plan hierarchy, setting out national spatial planning priorities for the period to 2030. As part of its overall spatial strategy, the NPF identifies 14 national developments. In accordance with the Planning etc. (Scotland) Act 2006, the designation of national developments within the final NPF will mean that the principle of these developments has been established and cannot be subject to further debate as they progress through the planning process. However, national developments are not excluded from the process of securing planning permission or other equivalent consents. Detailed aspects, including assessment of their environmental effects and any requirements for mitigation, will be considered further at the appropriate stage of the process. An action programme to guide the delivery of the NPF has been prepared which provides a means of building any requirements for mitigation identified in this Assessment into project development and implementation to avoid negative effects on the environment, including Natura sites.

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

Changes to National Park authorities’ consultation
The Scottish Ministers are proposing to modify the Designation, Transitional and Consequential Provisions Orders for The Cairngorms and The Loch Lomond and the Trossachs National Park Authorities to reduce the size of their memberships and allow for the delegation of some of their planning functions to local authorities.

For the Cairngorms, its Designation Order is to be amended additionally to provide for the extension of the southern boundary of the National Park to include part of Perth and Kinross.

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