Philip Barnes – Blog

WARD HADAWAY/HCA HOUSEBUILDER SEMINAR

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Set down below are some very rough notes from the interesting Ward Hadaway/HCA seminar for housebuilders in Newcastle. There were three presentations. Two from WH (planning matters and legal matters) plus one from the HCA. Apologies in advance if any of the details have been skewed in the drafting

WARD HADAWAY/HOMES AND COMMUNITIES AGENCY SEMINAR

PRESENTATION 1 – PLANNING MATTERS

VILLAGE GREENS
Royal Assent for new provisions – 25 April.
Positive news for developers – ends the 20 year “as of right” usage of private land for village green. The landowner can make a statement that they do not intend to allow public uses to continue before or after 20 years.
If already 20 years of public usage the village green application has to be made within 1 year of the notice to end such uses.
Also a restriction on rights to apply for village green status. If there is a “trigger event” (application or allocation) village green application cannot be made.

STOPPING UP HIGHWAYS
New provisions in Growth and Infrastructure Bill mean that stopping up applications (under S247/257 of the Act) can be made without having to wait for planning permission.

SECTION 106 AGREEMENTS
Developers can now apply to amend S106 Agreements (pre 2013) but only in relation to affordable housing provisions which make a development “economically unviable”. LA has 4 weeks to determine.
Can apply to on site and off site affordable housing provision

COMMUNITY INFRASTRUCTURE LEVY
Developers will not be charged CIL twice via a Section 73 application following payments made pursuant to the original grant of consent. (Had been a worry)
New changes will allow LPAs to set different levels of levy relating to scale of a development.
Developers need to be aware that S106 Agreements will still be needed for affordable housing and on-site facilities.
New restrictions are aimed at ensuring developers are not charged twice for the same highways works – once by CIL and once by S278 Agreement

OFFICE TO RESIDENTIAL
Now legal without permission subject to no external alteration

JUDICIAL REVIEW PERIOD
Proposed to be reduced to 6 weeks.

APPLICATIONS DIRECT TO SECRETARY OF STATE
Developers have option to apply direct to SoS in “poor performing areas” – criteria for identifying such areas yet to be defined

PRESENTATION 2 – LEGAL MATTERS

HEADS OF TERMS GUIDANCE
Heads of Terms should clearly identify the site, together with areas of 3rd party rights.
Timescales for the deal need to be defined.
Security should be defined. Generally 4 alternatives:
1 – Parent company guarantee.
2 – Bank guarantee.
3 – Phased land transfer with requirement for upfront works.
4 – Legal charge – provides comeback rights for the landowner in the event of non completion.
Legal charges need to be formally registered and once the debt has been paid the charge must be released.
Obligations on the developer should be clearly set eg with reference to commercial terms rather than simply “best endeavours” or ” reasonable endeavours”. Timescales for such obligations should be clear.

OVERAGE
Generally 3 types of overage provisions – relating to:
1. Enhanced sales revenue
2. Enhanced planning permission
3. Change of Use to more valuable use
Sometimes there are several types of overage in a single deal. Here it needs be clear there is no double counting
Crucial to specify how overage triggers are to be reported and be clear on timing.
Likely to be phased overage on bigger sites. Developers need to ensure if losses on later phases then any overage paid on early phases is clawed back.
If part exchanges are involved in the development then developers should not pay overage until all part-ex deals are completed.
Need to ensure all costs are offset against overage requirements.
A worked example calculation within the contract is crucial to provide clarity. Helps all parties later.

LAND ACQUISITION STRUCTURES
Generally 5 types of structures in play:
1. Exclusivity Agreement – provides simple lock out to enable a negotiation to take place. Often they come with a fee for the developer.
2. Conditional Agreement – generally for short term deals and usually conditional to “satisfactory” planning permission and/or “satisfactory” site survey. Deposits tend to be returnable. Generally more straightforward than an option. Key issue is where planning permission includes viability condition.
3. Option Agreement – generally for longer term land deal with a “reasonable endeavours” clause to ensure site is promoted properly by the developer. Generally most flexible for developers and best alternative for assembling multi ownership sites. Right of termination is useful for the developer.Deposits are usually non returnable.
4. Promotion Agreement – developer has right to promote site and then get a share of the sale proceeds on open market. Risky for housebuilders as they need to fund promotion but don’t then necessarily have the right to acquire the site. (Although they do get a share of the sale proceeds to another developer which should easily cover promotion costs)
5. Development Agreement – Landowner retains land but there is an agreement whereby the developer develops with a deal to split the revenue proceeds.

PRESENTATION 3 – HOMES AND COMMUNITIES AGENCY

5 KEY AREAS FOR HCA ACTIVITY
1. Affordable Housing – funding RSL schemes
2. Housing market interventions – making private sector schemes happen
3. Public land – bringing public land forward for kore housing more quickly
4. Economic assets Programme – better value from public economic development assets (ex RDA land and assets) and recycling those funds
5. Regulation of social housing – TSA etc. robust regulation to improve performance.

GOVERNMENT INITIATIVES
Budget 2013 was a clear signal of intent for housing. Publicity for H2B has overshadowed the Help to Rent scheme which itself got £800m of funding.
Both Government and LAs understand how important it is to encourage housebuilding to generate jobs and economic growth.
One key issue is the need to finalise the Comprehensive Spending Review so that more funding certainty is in place for the period beyond 2015
Affordable Homes – £4.8bn to build 170000 homes. £2.1bn for Decent Homes.
Greater focus on tackling empty homes and shops which are blighting neighbourhoods and high streets.
Build to Rent is simple gap funding of PRS new build projects. Bidding process.
HCA have a role in mediating affordable housing levels between developers and LAs
With H2B HCA take the 20% equity stake and risk. So the purchase price, for mortgage purposes, is 20% less.
Delivery role in NE – key priorities – Cherry Knowle, St George’s. Both out to procurement. Also sorting out difficult existing sites eg Middlehaven/North Shore
New “build now pay later model” is being pushed by the HCA
HCA is now sorting out its strategy re the ex RDA assets. Big involvement in EZs and bringing forward business and industrial land. Current NE priority is the new facility next to Narec in Blyth.
Building for Business – £50m deal with UK Land which will ensure more jobs created.

Author: philipbarnesblog

Group Land and Planning Director for Barratt Developments PLC. FRTPI, FRICS

One thought on “WARD HADAWAY/HCA HOUSEBUILDER SEMINAR

  1. Philip,
    Thanks for publishing these very handy notes.
    Best wishes
    David

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