Viability – Speed of Delivery Matters

Last year, the High Court in R (McCarthy and Stone Retirement Lifestyles Ltd) v Greater London Authority [2018] EWHC 1202 (Admin) found the Mayor of London’s 2017 Affordable Housing and Viability SPG unlawful in one respect: the SPG sought to require all planning applications that do not provide at least 35% affordable housing to be subject to early and late stage viability reviews (the ‘Viability Tested Route’). 

This, the Court found, is inconsistent with current London Plan Policy 3.12 which only requires further reviews on developments that are ‘likely to take many years to implement‘.  It was therefore not something that the SPG could, as guidance, properly cover.

So what?

Policy H6 of the Draft New London Plan now seeks to convert the SPG’s approach to viability into policy.  The Mayor has therefore been unruffled by the judgment. Although the Draft London Plan is not yet adopted, he has given full weight to the emerging policy. 

The McCarthy and Stone judgment was more circumspect about weight (paragraph 57), noting that only once representations had been considered and the DNLP amended would it have equal weight to guidance.  It would, it was held, be normal at that point for it to have “some” weight. 

London Plan Weightlessness

The Millharbour appeal decision in December bears out the limited weight that the draft policies deserve. The Inspector found that a late stage review was not necessary to make a proposal, offering 16% affordable housing, acceptable in planning terms.

This was a single-phase, mixed-use scheme including two tall buildings and 319 residential units in Tower Hamlets.

The Council agreed with the developer that only 16% affordable housing could be provided, but nonetheless sought to justify a late stage review on two grounds:

  • first, the appellant’s earlier viability assessments suggested 35% and 40% affordable housing could be provided;
  • second, the Draft London Plan applies the Viability Tested Route where the relevant affordable housing threshold is not met.

Rejecting that, the Inspector had ‘no reason to quibble with the [agreed] 16% level‘ and found that:

  • the previous affordable housing offers carried no weight in justifying a late stage review. The Draft London Plan carried only ‘limited weight’;
  •  a late stage review would only be needed (citing McCarthy and Stone) where a scheme ‘took ‘many years’ to implement or build out‘. It was ‘very unlikely this scheme would be left unfinished for any length of time or that it would take many years to complete’. Hence, no late stage review was required.

This appeal decision shows that decision-takers may, at least in the short term, find it harder to rely on policy alone to justify further viability reviews for schemes offering sub-threshold levels of affordable housing. Where policy is being relied on, it is likely to focus minds on the ‘likely to take years to implement’ criterion, imprecise and evidentially problematic though it is.

The decision also suggests that a) speedy delivery (i.e. of smaller, more straightforward schemes) as a matter of policy has the potential to compromise affordable housing, and b) conversely, slower and longer/phased schemes may be subject to higher affordable housing requirements. The Mayor will be concerned that this does not create perverse incentives. In any event, all sides will be keenly watching the examination of Draft Policy H6.

A legitimate expectation to what, exactly?

The Court of Appeal has considered whether the Secretary of State is required to give reasons for deciding not to ‘call in’ a planning application. In R (on the application of Save Britain’s Heritage) v Secretary of State for Communities and Local Government [2018], Save Britain’s Heritage (Save) challenged the lawfulness of the Secretary of State’s (SoS’s) decision under s77 of the Town and Country Planning Act 1990 not to call in an application relating to the ‘Paddington Cube’ development. We consider the court’s findings and its implications.

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This article was first published in Property Law Journal (December 2018/January 2019) and is also available at www.lawjournals.co.uk.

Legislation not the ‘agent of change’

Supporters of the Planning (Agent of Change) Bill 2018-19 had been looking forward to its second reading in the House of Commons on 26 October 2018. On 10 September, however, the Bill was withdrawn.

Parliamentary bale out

Music/ cultural venues and pubs in particular will be disappointed. There will be no legal planning protection for existing such uses, which are often threatened by nearby noise-sensitive (i.e. residential) development.

It is not clear why the Bill was withdrawn. The Bill itself was not published (or, if it was, it was withdrawn shortly afterwards), so we do not know what we are missing.

Planning policies fill the gap?

The agent of change principle is, however, included in Paragraph 182 of the new NPPF, which provides:

Where the operation of an existing business or community facility could have a significant adverse effect on new development (including changes of use) in its vicinity, the applicant (or ‘agent of change’) should be required to provide suitable mitigation before the development has been completed.

The Paragraph 182 provision that the new use ‘should be required’ to mitigate is in itself strong, but it is subject to there being a ‘significant adverse effect’ – a high threshold. It does not necessarily preclude complaints to councils or, worse, nuisance claims.

The NPPF is highly material but will need to be applied flexibly. In practice, the effectiveness of the principle is likely to depend on development plan policies, planning officers and council members upholding it. This in turn depends in some cases on communities demonstrating the importance of music venues and pubs in their area. It also requires decision-takers to recognise the wider nuisance-sensitive uses that should benefit from protection against parachuting in, for example retail operations. The Draft London Plan Policy D12 helpfully unpacks some of these elements but is also artificially narrow, protecting ‘venues’ rather than the wider range of uses that make up diverse and, increasingly, intensified, city spaces.

However, regardless of any planning policy mitigation measures, there will always be a risk of a statutory nuisance claim. Legislation will be needed to deal with that problem, ideally providing a partial immunity to both existing and new cultural and entertainment facilities.

A reasoned approach

We look at a local planning authority’s duty to give reasons, in light of recent case.  In September 2016, the Court of Appeal ruled that Dover District Council had failed to give legally adequate reasons for its decision, against the advice of its planning officers, to grant planning permission for a controversial development partly in an area of outstanding natural beauty (AONB) (R (on the application of Campaign to Protect Rural England) v Dover District Council [2016]). This was one of several recent cases which have dealt with, and have generated some uncertainty about, the duty to give reasons.

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This article was first published in Property Law Journal (March 2018) and is also available at http://www.lawjournals.co.uk/

Regulation change to allow LPAs to sell land with benefit of planning permission granted to themselves

From 23 February 2018, an LPA will be able to grant itself planning permission and sell the relevant land with the benefit of that planning permission. This small statutory change has the potential to significantly bolster LPAs’ role in facilitating development and ensuring that it is comprehensively planned.

The Town and Country Planning General (Amendment) (England) 2018 (the Amending Regulations) will remove Regulation 9  from Town and Country Planning General Regulations 1992 (the 1992 Regulations), with the effect that planning permissions granted by LPAs to themselves  will now run with the land.

Currently, Regulation 9 provides that a planning permission (where applied for by an LPA on its own land) will be personal to the LPA and where applied for jointly, only for the benefit of LPA and the named applicant. This has severely impeded the ability of an LPA, having secured planning permission to then sell the land on with the benefit of that planning permission. This has had cost implications requiring more complex land structures to be put in place before applications for development proposals could be made.

Oddly, the Regulations do not apply to any planning permissions granted before 23 February 2018. Given that future consents will run with the land it is strange that past consents have not been similarly “liberated”.

The removal of Regulation 9 was proposed in last year’s Housing White Paper on the basis that it will save time that developers would otherwise spend securing planning permission in relation to land which they purchase from LPAs.

It should achieve this. Now the Government needs to make sure that the best consideration requirements are changed so that land can be sold on for the best use for the area rather than just for the best price.

Deliverability vs Delivery – Court of Appeal confirms NPPF approach

The Court of Appeal has clarified the meaning of ‘deliverable sites’ in the key housing land supply provisions of Paragraph 47 NPPF (5YHLS).  As well as emphasising the need for pragmatism when applying the NPPF, the judgment confirms the need to get timing right if challenges are to be made to the assumed rate of housing delivery.

Supply test in question

In St Modwen v SoS CLG, the developer challenged the housing trajectory put forward by the authority to satisfy the NPPF 47 requirement to show specific deliverable sites sufficient to provide five years worth of housing against objectively assessed need. NPPF Footnote 11 confirms that ‘deliverable’ means available now, offer[ing] a suitable location for development now, and […] achievable with a realistic prospect that housing will be delivered on the site within five years and […] viable.

The Inspector disagreed that sites without permission should be excluded.  She accepted that the rate of consents was likely to increase in light of the draft plan.  She acknowledged a distinction between deliverability and likelihood of delivery: ‘…it may well turn out that not all allocations currently identified as deliverable will in fact be delivered’. The submitted HLS figures were robust, because ‘the assessment of supply is distinct from that for delivery’.

The Secretary of State accepted the Inspector’s finding that there was a 5 year HLS and dismissed the two linked appeals.

Courts insist on common sense

The High Court and the Court of Appeal dismissed the argument raised in seeking judicial review of the decision that the SoS had misunderstood and misapplied the concept of ‘deliverability’.  He should, it was claimed, have considered what would ‘probably be delivered’.

The Court of Appeal disagreed that Ouseley J’s judgment in the High Court suggested that assessment of ‘what probably would be delivered’ is part of, not separate from, the assessment of deliverability.

Ouseley’s judgment – that the assessment of “deliverability” … is an assessment of the likelihood that housing will be delivered. [It] does not require certainty that the housing sites will actually be delivered’ (emphasis added) – simply reflected the distinction between the HLS figure required under the first part of NPPF47 and the ‘expected rate of delivery’ required for the trajectory under the second part.

The Court of Appeal once again went out of its way to criticise ‘unreal’ arguments on the meaning of NPPF policy, holding that:

  • there is a consistent and intentional distinction in the NPPF between ‘deliverability’ and the ‘expected rate of delivery’;
  • deliverability in footnote 11 concern sites’ capability of being delivered – not the certainty/ probability of delivery;
  • the appeal decision was being taken in light of NPPF49, engaging the question of demonstrable 5YHLS, not a question about the ‘the expected rate of housing delivery’.

So what?

The judgment serves to emphasise that:

  • there need only be a ‘realistic prospect’ of delivery for sites to be relied in within the 5YHLS;
  • challenges to the assumptions around the expected rate of delivery generally need to be taken up at the Local Plan examination stage;
  • Local planning authorities do not control the housing market. The NPPF recognises that.’

The last point underlines the fact that LPAs play a critical role, but are only one part of the housing delivery jigsaw. It is also illustrates how important the Housing Delivery Test will be, as a sense check on assumptions and progress, if it is introduced as promised in the Housing White Paper.

Update: When does a condition restricting use remove PD rights?

Last month we blogged on the High Court’s judgment in Dunnett, which refused to quash the Secretary of State decision not to grant a Certificate of Lawfulness in respect of the use of office to residential Permitted Development rights where a condition on the office consent was effective in excluding GPDO rights. The condition stated that “The use of this building shall be for purposes falling within Class B1 (Business) as defined in the Town and Country Planning (Use Classes) Order 1987, and for no other purpose whatsoever, without express planning consent from the Local Planning Authority first being obtained.”

The Court of Appeal has now upheld the High Court’s judgment.

The result? Uncertainty prevails.

Trump reigns

The Court of Appeal noted that there is no bar to (cautiously) implying terms into planning conditions: doing so is an objective, fact-dependent exercise in which the Court asks ‘what a reasonable reader would understand the words to mean when reading the condition in the context of the other conditions and of the consent as a whole’ (applying Trump International ([2015] UKSC 74).

Deconstructing the condition

Against that backdrop, the Court of Appeal held:

  1. The words ‘and for no other purpose whatsoever’ were, in this case, enough not only to control the B use of the property, but also to exclude future reliance on PD rights. The wording that followed – ‘without express planning consent from the Local Planning Authority first being obtained’ (the “Tail”) – just made the exclusion ‘the more abundantly clear’.
  2. The Tail cannot sensibly include a planning permission granted through the GPDO. The appellant argued that it was necessary to read into the Tail ‘or the Secretary of State’ because of the unavoidable possibility of the Secretary of State granting planning permission on appeal against a refusal by the LPA. Once that is read in, the Appellant submitted, it must include Secretary of State decisions through the GPDO as well as Secretary of State decisions on appeal as there is no basis for including one but not the other. The Court rejected this: it is not necessary to imply ‘or the Secretary of State’ at all because appeal rights do not depend on conditions; they are conferred automatically by statute.
  3. Further, if the Court were to accept the appellant’s argument, the Tail would include all means of granting permission and would therefore have no limiting effect at all. The LPA could not have intended to include useless wording.
  4. The reason for the condition and the site’s planning history reinforced the findings above by reflecting the council’s intention to maintain close control over the site.

Comment – it depends

Unhelpfully, given Trump, implied meaning will always depend on context. That said, as a result of this judgment:

  • It will be very hard to show that stating that uses are ‘limited to’ a particular use will, alone, be enough to exclude PD rights.
  • Words such as ‘for no other purpose whatsoever’ will likely do the job, but ‘for no other purpose’ alone may hang in the balance.

The difficulty will be for wording that is more emphatic than ‘limited to’ but less emphatic than ‘for no other purposes whatsoever’.

It is not a great outcome for investors, who will have to puzzle over the endless and often pointless variations and contortions in condition wording pumped out by decision makers to understand what price planning freedom. A set of standard conditions embedded in the Planning Practice Guidance which make clear how PD rights should be dealt with and provide a level playing field would be welcome.

When does a condition restricting use remove PD rights?

Article 3(4) of the GPDO 2015 provides that permitted development (PD) rights will not apply if they are ‘contrary to any condition imposed by any planning permission granted or deemed to be granted under Part 3 of the [TCPA 1990] otherwise than by this Order.’  Must such conditions refer explicitly to the GPDO? If not, what is enough?

Backstory

The Courts have held in some cases that conditions that do not expressly exclude PD rights do not implicitly restrict them (Carpet Décor (Guildford) Limited v Secretary of State for the Environment and Another (1981) 261 EG 56 and Dunoon Developments v Secretary of State and Poole Borough Council (1993) 65 P. & C.R. 101). The cases fall short of establishing that conditions cannot, legally, implicitly exclude PD rights:

  • In Carpet Décor, the High Court held that a condition excluding PD rights had to be ‘in unequivocal terms’. This suggests a strict approach, though arguably it does not definitively rule out the possibility of implicit restrictions.
  • In Dunoon, the Court of Appeal made several statements – some strict, some looser.  Indicating the strict approach, Farquharson LJ said: ‘The purpose of the General Development Order is to give a general planning consent unless such a consent is specifically excluded by the words of the condition.’ Indicating the looser approach, Farquharson LJ specifically addressed whether a preclusion of the GDO was ‘…to be implied from the words themselves, in the context in which they are used…’. He went on to consider whether the non-explicit wording of the condition was sufficiently ‘emphatic’, ‘conclusive’ or ‘wide’ to preclude the GDO. Sir Donald Nicholls VC, agreeing with Farquharson LJ , concluded that in this case there was ‘no explicit or implicit intention to negative development pursuant to any existing or future [GDO].’ These passages only make sense if implicit exclusion of PD rights is actually possible.

Who Dunnett?

In the first opportunity to revisit this in 2 decades, the High Court decision in Dunnett Investments Limited v SSCLG [2016] EWHC 534 (Admin) suggests that implicit exclusion of PD rights can work.

  • The claimant relied on PD rights to change from Class B1(a) offices to Class C3 dwelling houses. Its existing permission included a restrictive condition:

“1. This use of this building shall be for purposes falling within Class B1 (Business) as defined in the Town and Country Planning (Use Classes) Order 1987, and for no other purpose whatsoever, without express planning consent from the Local Planning Authority first being obtained.

REASON: “In order that the Council may be satisfied about the details of proposal due to the particular character and location of this proposal.”

  • The LPA failed to determine the claimant’s PD prior approval application and the claimant applied for a Certificate of Lawfulness (which the LPA refused, based on the condition).
  • The claimant challenged the decision, relying on Carpet Décor and Dunoon as requiring the strict approach (i.e. that the language must be explicit and unequivocal to exclude PD rights).

The Court rejected this, on the basis that:

  1. The second part of the condition serves no other purpose than to prevent the operation of the GPDO. “Without that meaning the second part is irrelevant to the condition”.
  2. The words ‘for no other purpose’ prohibit any other purpose including any other purpose otherwise permitted by the GPDO.
  3. The word ‘whatsoever’ is “emphatic and, in context, refers to any other use, howsoever arising or under any power. Read together, and considering the plain and ordinary meaning of the words used, in my judgment, it is clear that the GPDO is excluded”.
  4. The words “without express planning consent from the local planning authority first being obtained” have no sensible meaning unless they remove GPDO rights.
  5. The reason for the condition confirmed that, due to the particular character and location of the site, any other use would need to be the subject of an express application.

The judgment treats the loose approach as ‘entirely consistent with the cases of Dunoon and Carpet Décor’.

Clear as mud

For the time being, the outcome reflects the prevailing uncertainty for landowners, developers and LPAs, because:

  • it is unclear which elements of the reasons at 1-5 above were decisive,
  • the outcome was said to be fact sensitive.

Dunnett has been appealed to the Court of Appeal and will be heard this month (March 2017). The Court of Appeal could reject the loose approach altogether. If, however, the Court confirms the principle of implicit exclusion of rights, it would be helpful if it clarifies:

  • the forms of wording which will do the job (and those that will not); or
  • whether the effect of the condition entirely depends on the wording read in the context of the reason and the condition as a whole.

In a period where PD rights are increasingly valuable, the outcome will be important.