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Redeveloping prefabricated property sites

We acted for a Council on the redevelopment of 15 sites across the city currently occupied by poor quality, post-war, prefabricated properties. The Council had previously attempted a programme of refurbishment but that fell abortive because of cost and value. Accordingly, the Council looked to alternative methods of replacing the 330 units of social rented housing.

The Council needed to ensure high densities due to the scarcity of land and increasing housing targets. It also needed to release value from its landholdings to fund redevelopment. It sought a private sector partner to realise its objectives and a national housebuilder was eventually chosen, its brief to provide 330 units for the Council funded by the construction of a further 750 units for sale by itself on open market.

A framework agreement was negotiated setting out the various preconditions for the development of each site in accordance with a Masterplan, programme and financial appraisal. Each site would be drawn down following the grant of planning permission and obtaining of vacant possession along with any necessary stopping up orders. The developer would then be granted a building licence to construct the housing and infrastructure and title to each plot transferred to each plot purchaser following construction.

To secure vacant possession the Council had to acquire various third party interests through negotiation, failing which it considered using its CPO powers. Advice from Leading Counsel highlighted that exercise of CPO powers by a local authority for redevelopment pursuant to a non statutory purpose was not sufficient to "cleanse" title to the land and that appropriation under the Town & Country Planning Act 1990 was required to do so.

Compliance with this process would cause delay to the build programme and serious consideration was given to proceeding in breach of easements and covenants if negotiations to acquire them broke down.

The structure of the framework agreement required careful advice from our Tax partner in relation to stamp duty land tax, to minimise the impact on the private developer (and consequently the cost of the development to both parties) and to avoid the deemed creation of any interests in favour of the Council which would attract an unexpected charge to tax.

The project required a novel approach, combining a commercial agreement and a property transaction. The Council was keen to step down risk to the developer so far as possible whilst retaining the right to share in cost savings and possible super profit by means of an overage provision. The developer was required to achieve maximum density and value, and calculate the entire cost involved by means of an exhaustive financial appraisal. Any subsequent change could then be factored in to give a running total cost on a daily basis. The Council was given the option of reducing the specification of its housing and/or providing extra funds to meet the cost of any overspend. In return the developer froze most of the costs and agreed to absorb a number of unknowns.

For further information please contact:
Alison Buckingham
Tel: 0870 194 1667
alison.buckingham@bevanbrittan.com

Working with Bevan Brittan