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Powers and partnership for regeneration

The case of Peters v London Borough of Haringey (Haringey) provides welcome clarity over the extent of the local authorities powers to form limited liability partnerships (LLPs) for the delivery of regeneration projects carried out in partnership with the private sector.

Partnership approach

LLPs offer benefits:

  • tax transparency (particularly for the private sector participant) in relation to corporation tax and VAT;
  • governance (often a key concern for the public sector): the fact that LLP members don’t generally owe a fiduciary duty to the LLP can alleviate concerns over conflicts and other issues.

Haringey Development Vehicle

The case concerned the high profile procurement, by Haringey, of a joint venture partner to participate in the Haringey Development Vehicle (HDV).  The HDV was to have responsibility for the delivery of specific projects as well as the general management and exploitation of Haringey estate.   The various reports identified some key benefits from participating in the project including: (a) an estimated 6,400 new homes; (b) development returns of £275m, plus S106 and CIL payments; (c) £8m HDV investment into a social and economic programme and £20m Lendlease investment in a Social Impact Vehicle.  The HDV was formed as a LLP, with 50/50 control between Haringey and Lendlease.

Opposition

However, the HDV project faced fierce political opposition, one manifestation of which was the challenge by a former senior local government official in Haringey in relation to the lawfulness of the project on a number of grounds, including (the exclusive focus of this blog) the use of an LLP as the legal entity to deliver the project.

Haringey had relied upon Section 1 of the Localism Act 2011, which provides a general power of competence to “do anything that individuals generally may do“.  Section 1 of the Act is however qualified by Section 4(2), which states that “where, in exercise of the general power, a local authority does things for a commercial purpose, the authority must do them through a company“, with “company” being defined specifically as a company under the Companies Act 2006 (and not a partnership).

The Claimant was therefore arguing that, by using a LLP as opposed to a limited company, Haringey was acting unlawfully – but this was dependent on whether Haringey was undertaking the HDV project “for a commercial purpose”.

Commercial purposes?

In determining whether there was a commercial purpose the judge, Ouseley J, held that Section 4(2) of the Act is not intended to narrow the scope of pre-existing powers.  He also made clear that Lendlease’s purposes (which were clearly profit driven) were not relevant to the analysis; neither were those of the LLP itself – what was important was Haringey’s purposes.

And on that question Ouseley J was clear that the purposes were not commercial, and the challenge therefore failed.  The objective of the HDV project was for the achievement of “housing, employment and growth or regeneration objectives”.  He said “achieving a return is neither purpose or the activity of itself”.  The fact that profit may be a consequence of achieving best consideration on land disposals and of acting prudently did not mean that the Council was acting for a commercial purpose.  To the extent it was doing so, it could be said to be doing so in order to further its primary non-commercial purposes.

Relevance

For local authorities and developers alike the case provides helpful clarity on the lawfulness of using LLPs to deliver regeneration projects.  Although each case will need to be considered on its facts (including some analysis of the intentions of the authority), the case provides a very helpful sign-post toward what local government powers allow for.

Post script…

While the challenge failed at law, but the future for the HDV project itself is uncertain.

Following the judgment, the Labour leader who had originally promoted the HDV scheme was replaced and the Labour party (under new leadership) fought the May 2018 elections on a platform which included scrapping the HDV – illustrating that very often at local government level political support for a project can be as important as being legally “correct”.

The case illustrates that a claim can “succeed” in the broader sense of creating a pause in which political opposition may overcome a unpopular (but lawful) decision.  That should influence the circumstances in which delivery vehicles are deemed to be the appropriate mechanism for regeneration – sometimes a lower risk strategy will be to opt for an easier to understand and less legally contentious approach will be the right option.

As of July 2018, the precise status of the HDV is unclear, but the “Stop HDV” group continues to campaign against any kind of reanimation of the scheme.

Neighbourhood plans v housing

As the need for housing gains increasing traction, to what extent are neighbourhood plans having to take a back seat? Six years after they were introduced by the Localism Act 2011, neighbourhood plans have surprised many commentators with both their level of take-up by communities, and the importance afforded to them by the government. We look at some recent decisions.

Read the full article

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

Assets of Community Value: chickens and eggs

Some recent cases have considered Assets of Community Value (ACVs) where the owner is both appealing a refusal of planning permission, and is also appealing the decision to list the property as an asset of community value.  These cases helpfully demonstrate how the interrelated appeals are considered from both a planning application and listing challenge perspective.

The Alexandra Public House in Haringey closed in 2012, and was listed as an ACV in 2015. The owner bought the pub in a semi-derelict state, and made a planning application to change the building into two dwellings, as well as appealing the listing of the pub as an ACV.

The local authority refused planning permission, but the Secretary of State granted permission on appeal.  The Inspector noted “the primary purpose of ACV listing is to afford the community an opportunity to purchase the property, not to prevent otherwise acceptable development“, and while some weight was afforded to ACV listing, the Inspector found it not to be determinative.  Weight was given to the additional dwelling which would be provided, the improvement in the quality of the existing flat above the pub, the reduction in noise and anti-social behaviour for the neighbours due to the change of use, and the provision of a viable use for a run down the building.

In considering the listing appeal after planning permission had been granted, the Judge referred to the decision in the Tumbledown Dick appeal, which stated that the grant of planning permission for an alternative use should not be ignored in the context of a listing appeal.

The Tumbledown Dick case considered a historic pub, which McDonald’s agreed to purchase before the Localism Act came into force.  Shortly before the First Tier Tribunal considered the listing appeal, McDonald’s obtained planning permission for a change of use to restaurant/takeaway.  The Judge considered that the grant of planning permission, along with the sale of the freehold, substantial expenditure being required to bring the building back into use and that it had been vacant for five years made a future community use unrealistic.

The Judge noted that where permission is refused, it might make it more likely that the building would be sold at a price which could support a community use, or allow the continuation of the current community use. In this case, as planning permission for residential use had been obtained, it was much less likely that the Alexandra would be sold at a price low enough to allow a pub use.  On this basis, the Judge allowed the appeal to remove the property from the list of ACVs.

The Ship in South Norwood closed as a pub in 2014, and was listed as an ACV in 2016. The Ship was converted to residential.  The Local Authority issued an enforcement notice for the conversion of the public house into seven flats and office space, along with physical works, which the owner appealed.

In considering the enforcement appeal, the Inspector noted that the ACV listing was being challenged on the basis the decision was made outside the specified time limit, and that if the ACV status was not confirmed, the building could be used as shops, financial and professional services or restaurants or cafes under permitted development rights. While a material consideration, ACV listing did not outweigh the benefits of providing additional housing and a viable use for the building, and the appeal was allowed and permission granted for the change of use.  The Ship remains on Croydon’s list of ACVs.

These cases are helpful in showing the Secretary of State’s approach to ACV status. While it is a material consideration, in neither case did it result in planning permission being refused for a change of use which will effectively end the community use.  This is a clear departure from the view expressed by the Upper Tribunal in Banner Homes, that any permission for a change of use was likely to be refused while the asset was ACV listed, as we discussed in a previous blog.  While owners of ACVs may be reassured that planning permission has been granted as part of an assessment of fairly ordinary planning considerations, nominating groups may be dismayed that ACV status did not afford these community assets greater protection against a change of use.

A layer of complexity, a review of the ramifications of the Localism Act five years on

The Localism Act 2011 obtained royal assent in November 2011, gradually bringing into effect a raft of legislation supporting the government’s communities-based agenda. Following the Conservative Party’s 2010 manifesto, subtitled ‘Invitation to join the government of Britain’, localism remained a focus of the coalition government, and remains a focus of the current government.

Read the full article

This article was first published in Property Law Journal (October 2016) and is also available at www.lawjournals.co.uk

 

Lions and tigers and … Assets of Community Value

The first Asset of Community Value (ACV) case to reach the Upper Tribunal has upheld the listing of a field used by the local community without the permission of the landowner.  The decision will be of considerable interest to the owners of similar properties, considering the uses of land which can benefit the community for ACV purposes, and the bar to show a continuing community use.  The process for listing an ACV is explained here. The case has serious implications for owners allowing inoffensive use of land with development potential, including ‘meanwhile’ uses of buildings.

Backdoor village green?

fieldBedmond Lane field, located in the Green Belt and crossed by two footpaths, had been used informally by the local community for 40 years until 2014. A local residents’ association nominated it as an ACV in 2013, and it was listed by St Albans City and District Council without notice to the owner (Banner Homes) in March 2014.  Banner requested a review of the decision to list the field (and fenced the footpath/ erected notices stating “private land no unauthorised access”).  The Council decided to maintain the listing in September 2014.  Banner appealed to the First Tier Tribunal, which upheld the listing decision in April 2015.

Banner were then granted permission to appeal to the Upper Tribunal on two grounds:

  • whether the community use in Section 88(2)(a) of the Localism Act 2011 could include an unlawful use (Ground 1); and
  • whether there was a reasonable prospect of a community use in the next five years (Ground 2).

Unlawful community uses

Banner argued that use of land without permission could not meet the test for listing as an ACV.  Rejecting that, the Upper Tribunal pointed to:

  • the lack of specific exclusions in the ACV legislation for unlawful use (and allowance for criminal use in dealing with acquisition of rights by prescription);
  • the fact that the requirement for the use to further the social wellbeing or social interests of the local community provides some “inbuilt protection” from a public policy perspective; and
  • the fact that ACV registration does not create any private rights, unlike the Town and Village Green regime.

More than fanciful

On Ground 2, the Upper Tribunal rejected the argument that the ‘realistic reuse’ test under Section 88 of the Localism Act ACV regime requires anything more than a possibility (as opposed to a likelihood) of a main community use of the land in the future.  Noting Banner Homes’ insistence that it was not and never had been its intention to grant rights of access or use to the public, Levenson J concluded that the future use test was one for the local authority or the Tribunal, and “is not a matter for veto by the landowner”.

The First Tier Tribunal’s decision – that it was “not fanciful” that a community use could re-start if Banner had a change of heart – was upheld. Banner’s difficulties in securing planning permission to graze horses on the Green Belt land (and the limited chance of planning permission being obtained for other uses in the immediate future) was treated as relevant.

Planning prospects

Government guidance recognises that LPAs may treat ACV status as a material consideration.  The Upper Tribunal judgment suggests that “as a matter of planning policy any necessary permission is likely to be refused while land is listed”.  That is wrong but reflects the way that ACV listing is emerging as a trip hazard for developers.

The combination of a low bar to meet the future use test and the limited weight given to the representations of owners will be a matter of concern for the owners of potential ACV sites.  While it is sensible that the decision maker considers the property and its potential in the round, to avoid all owners promising they would never allow a community use and therefore defeating the listing of any asset, a sensible balance needs to be struck.

This case will be of concern to owners of similar development sites.  While the use of fences and notices may interrupt the creation of other rights, they may not prevent the prospect of ACV listing, and owners may wish to take concrete steps to show that it would be fanciful for the main use of the property to be a community use in the future – possibly by obtaining planning permission for a non-community use if possible.

Neighbourhood watch

signNeighbourhood Planning remains a political priority and is one of the areas for which Planning Policy Guidance has recently been updated.  Following the Woodcock Holdings decision, relating to the Husterpoint and Sayers Common 2031 Neighbourhood Plan, the recommended approach to Neighbourhood Plans emerging before up to date Local Plans are in place has been clarified.

Already clear?

In Sayers Common, the Secretary of State dismissed an appeal despite his Inspector’s recommendation to allow it.  He concluded that the proposal would conflict with the Neighbourhood Plan, formally made after the Inspector’s report.  Permission was refused as the proposal would conflict with a requirement to enhance the existing settlement pattern, and was considerably in excess of the 30-40 dwellings the Neighbourhood Plan considered could be accommodated during the plan period.

However, this was quashed when Woodcock Holdings Limited successfully challenged the decision, on the basis that the Secretary of State had failed to identify the nature and extent of the conflict with the Neighbourhood Plan, had not applied the presumption in favour of sustainable development, the PPG guidance (that permission would seldom be refused for a pre-examination draft plan had not been complied with), and that the NPPF policy regarding weight to be afforded to an emerging plan had not been followed. The judgment did conclude that a neighbourhood plan could come forward ahead of a Local Plan, but the legal challenge was allowed on all grounds (see our blog on the detail).

Back to the future

The planning application has been re-determined by the Secretary of State, who again refused permission on the basis that it was not in accordance with the Local Plan or the now-made Neighbourhood Plan, to which he gave “careful consideration”.  He also gave the emerging Local Plan “very limited weight”, and reached the same conclusions regarding conflict with the policies as before.

As discussed previously in relation to the DLA Delivery Limited case, which challenged a Neighbourhood Plan prepared in accordance with an emerging local plan (rather than the existing expired core strategy), there has been debate on the treatment of Neighbourhood Plans which come forward in the absence of an up to date Local Plan.  Recent updates to the Planning Policy Guidance clarifies the Government’s position where a Neighbourhood Plan comes forward in advance of a new Local Plan. The Guidance states that:

  • Neighbourhood Plan policies “may become out of date, for example if they conflict with policies in a Local Plan that is adopted after the making of the neighbourhood plan. In such cases, the more recent plan policy takes precedence“.
  • communities may decide to update all or part of their Neighbourhood Plans where they have become out of date, which will require a fresh examination and referendum, putting a considerable burden on Neighbourhood Plan steering groups.

The best way to avoid this is to ensure that Neighbourhood Plan policies either do not interfere with meeting Objectively Assessed Needs or, more difficult where there is no proper assessment of needs on the table, that any restraint policies are consistent with maintaining a 5 year housing land supply. The PPG update does not suggest that a Neighbourhood Plan that is immediately out of date at adoption – because its policies thwart a 5 year Housing Land Supply – should be given more weight than the policy imperative to maintain housing land supply and meet OAN.

In Woodcock Holdings the relevant parts of the Neighbourhood Plan were held to be inconsistent with the NPPF in this sense and so unlikely to survive either examination or allow a finding of prematurity.  The latest Sayers Common decision does not explain how an out of date set of NP settlement policies could be given overriding importance relative to national policy requirements in that sense.

Putting the Neighbourhood Plan cart before the Local Plan horse

newickThe Court of Appeal has granted permission for the first Neighbourhood Plan case to be heard by it on appeal. The appeal is brought by DLA Delivery Limited, who applied for planning permission for 63 houses on the edge of the village of Newick, East Sussex.  DLA promoted its site as part of both the Local Plan, and the Neighbourhood Plan process, which have been running concurrently.  Although DLA’s land was identified as a suitable reserve housing site in the emerging Local Plan, the Neighbourhood Plan did not allocate it.

Accordance with what?

While the Local Plan is still emerging, the Neighbourhood Plan has been progressed. DLA sought permission to judicially review the local planning authority’s decision to hold a referendum on the draft Neighbourhood Plan (which has subsequently been formally made, becoming part of the local development plan).  In addition to environmental grounds, DLA claimed that the Neighbourhood Plan was not in conformity with the appropriate strategic policies.  The Neighbourhood Plan had been prepared in accordance with the policies of the emerging Local Plan.  However, as the Local Plan had not yet been adopted,  the plan currently in force covered the period to 2011.  DLA argued that the Neighbourhood Plan could not be in accordance with the strategic policies, and therefore meet the basic conditions to be made, as the plan it related to was not yet in force.

Court of Appeal prepared to look again

The claim was dismissed in the High Court by Foskett J, but granted permission to appeal on one of eight grounds – the need for the Neighbourhood Plan to be in ‘general’ conformity with strategic policies.  Permission to appeal on the other grounds has subsequently been granted by Lord Justice Lindblom in the Court of Appeal.

The case raises interesting points at a time where neighbourhood planning is a political priority, with measures to speed the process included in the Housing and Planning Bill.  Meanwhile, Local Plans with their need for a vast evidence base, may lag behind.  It remains to be seen how the following issues, addressed in the High Court in Woodcock Holdings, will be dealt with by the Court of Appeal.

  • Where Local and Neighbourhood Plans come forward at the same time, should the Neighbourhood Plan look back to the existing plan, or forward to the emerging plan?
  • How can a Neighbourhood Plan, in general conformity with an out of date Local Plan, meet the needs of the community going forward?
  • Should a Local Plan be able to override a Neighbourhood Plan once it has measured its objectively assessed need, if more homes are needed?

Independence day?

A further point of interest raised by the appeal is the appointment of Neighbourhood Plan Examiners. While Local Plans are examined by inspectors appointed by the Planning Inspectorate, Neighbourhood Plan examiners are appointed by the relevant Neighbourhood Plan steering group.  Whilst the claimant emphasised that they made no criticism of the examiner personally, they did suggest that the appointment of the examiner by the parish council gave rise to an appearance of bias.  It will be interesting to see what the Court of Appeal make of this “apparent bias” in the appointment of examiners – should it be another job for the Planning Inspectorate?

Will LPA shaming and intervention work to incentivise plan making?

In this blog, part of our series on the Government’s technical consultation on implementation of the planning changes (the Consultation), we discuss how the Government is proposing to deliver on its commitment to get local plans in place by 2017.

As outlined in our earlier blog, clauses 129 – 133 of the Housing and Planning Bill are intended to incentivise and control the plan-making process, with the ultimate sanction being the intervention of the Secretary of State – the Secretary of State will be able to reject, write or correct local plans.

Good plan making picChapter 6 of the Consultation sets out the Government’s proposed criteria for deciding when to intervene in the plan making process. It suggests that the priority or target authorities for intervention are those where:

  1. the least progress in plan-making has been made;
  2. policies in plans have not been kept up-to-date;
  3. there is a higher housing pressure;
  4. intervention will have the greatest impact in accelerating local plan production.

There is nothing surprising or controversial about this criteria, but how the Government will determine where “intervention will have the greatest impact in accelerating local plan production” is not explained.

One study suggests that 21 local planning authorities are most ‘at risk’ of intervention (as of April this year) in light of the Consultation criteria above.

The Consultation also states that the Government plans to publish a range of monitoring information on local plan progress, every 6 months, for all local authorities in England:

  1. the date that their local plan was adopted or last reviewed (for areas without an adopted local plan it would be the date of their last plan prior to the 2004 Act);
  2. for the publication and submission stages of the plan-making process, the date these stages have been achieved;
  3. for each stage in the plan-making process (publication, submission, adoption) that has not yet been achieved:
    1. the local authority’s forecast date for achieving that stage (likely to be April 2016);
    2. for subsequent publications of the information in (a), the most recent forecast dates. Even if the forecast date remains the same as the original forecast (original baseline date) this date will be published. The intent of this is to show that the local authority is meeting their timetable;
    3. any slippage or acceleration between the original baseline date and the most recent forecast dates.

The intent of this publication is clearly to name and shame local authorities into action. Will it work?  Is the threat of intervention going to be enough to stimulate the plan-making progress, particularly for those authorities that are already severely under resourced?

What about financial incentives for local authorities, be they positive or negative?  Surely this is the critical gap in the Government’s thinking.  The Local Plans Expert Group (LPEG) seems to agree and has recommended in their March report that the Government ought to review the role of financial incentives to stimulate efficient and effective plan making and that authorities should be warned that they will be given less priority when bidding for infrastructure related funding (even if through a LEP) if they do not have in place an up to date local plan which identifies the need for that infrastructure.

While most would prefer to see positive, rather than negative incentives for local authorities, if the Government is serious about incentivising the plan-making process the surest way of achieving this, without intervention, would be for local authorities to have some “skin in the game”.

Note: the Consultation closed on 15 April.

A return to local authority housebuilding?

Between the late 1940s and the early 1980s, over a 100,000 social housing units were built each year in England, with the vast majority being built by local authorities. In recent years, English local authorities have built around 1,500-2,000 dwellings per year.

Although this is not a like-for-like comparison (social housing vs all dwellings), the figures paint a clear picture of local authorities’ withdrawal from the business of house building.

A number of initiatives suggest that this might be about to change, and one model for local authority housing delivery may be particularly attractive to local authorities looking to get back into house building without the rigmarole of OJEU procurement.

man building a brick wallCouncils as housing developers

The Government’s One Public Estate programme (delivered in partnership with the Local Government Association) has the ambition of delivering collaborative property focussed projects involving local and central government.  The ambitions go beyond simply enabling house building, and extend to rationalising Council’s land holdings and improving local government efficiency and promoting jobs.  However it is one of the house building projects which will be of particular interest to local government (and perhaps of concern to the local house builders).

Croydon Council, as part of the One Public Estate programme, has created a wholly-owned development company, called Brick-by-Brick.  It will benefit from a pipeline of potential sites currently owned by either the NHS or the Council, and has the objective of delivering 1,200 homes by 2018.

Legal issues: OJEU Exit?

It has some innovative legal features too.

It has been reported that the Council considers that the local housing company will not be subject to the EU procurement rules – and thus will be able to engage suppliers without having to comply with the Public Contracts Regulations 2015 – a major advantage.

From a procurement law standpoint, this is completely correct, provided that the company has a commercial character, and is not predominantly a vehicle to deliver public policy objectives. To maintain this position it will also need to operate as an independent commercial undertaking (albeit one that is owned and control by the Council). However certain features, such as a Council guarantee for the liabilities of the company would fatally undermine this independence, and call into question its status as an entity outside of the reach of the public procurement rules.

Certainly the information that is currently available about Brick-by-Brick suggests that it will be a commercial entity – it is aiming to provide a return on the Council’s investment in order to fund wider council services (amongst other things).

Councils looking to establish similar companies will also have had to take advice on issues such as local government trading powers and the General Power of Competence under the Localism Act.

A further consideration is the price that such companies obtain land from the public sector. EU State aid rules mean that, if the entity is to be genuinely financially independent, it would need to pay a market price for the land it receives from the public sector.  Noting the premiums paid for residential sites in London, this could require considerable upfront capital within the company.

Conclusion

Despite the challenges (none of which are insurmountable) the Brick-by-Brick model will be of great interest to many Councils who are keen to deliver new housing (and to be seen to be doing all they can to achieve this objective) within their areas.

Local house builders may have concerns about perceived advantages enjoyed by development companies established, particularly around valuations for the purchase of public sector land – time will tell whether they are well founded.

Neighbourhood planning: full steam ahead?

The Housing and Planning Bill seeks to further the Government’s localism agenda, by speeding up the neighbourhood planning process.  The Bill includes provisions to automatically designate neighbourhood areas where Local Planning Authorities (LPAs) do not make a decision in time, and will impose a timetable on the consideration of neighbourhood plans.

The Government is now undertaking a consultation on the contents of regulations to be made under the Bill once it becomes law.  The consultations suggests a range of measures which will further increase the pressure on LPAs to progress neighbourhood plan applications.

Neighbourhood-planNoting that 90% of applications are from Parish Councils, and 90% of those applications are for the whole parish, the consultation suggests removing the ability of local planning authorities to amend the area applied for in these circumstances, unless part of the area was designated for another plan. Rather than having eight weeks to consider this type of application, the LPA would have to approve it as soon as possible.

The consultation suggests a limit of 13 weeks for LPAs to consider applications for neighbourhood forums, where applications are to a single LPA, or 20 weeks where two must be involved, and an exception where part of the area has already been designated.

The consultation also asks whether an LPA should be given five weeks from receiving an examiner’s report to decide whether to call a referendum, unless they disagree with the examiner, or agree more time is needed with the neighbourhood group. The consultation suggests a procedure to notify interested parties where they disagree with the examiner.

The consultation suggests that referenda should be held within ten weeks of the decision to call a referendum, or 14 weeks in a designated business area. It also suggests that following a referendum, the LPA should be required to bring the plan into force within eight weeks.

The process by which the Secretary of State may intervene when requested by the neighbourhood planning group is also suggested.

The consultation also proposes that designated neighbourhood forums be added to the list of bodies consulted by LPAs when they are preparing local plans. Alongside the provision in the Bill which allows neighbourhood forums to request that they be notified when planning applications are made, this increases the sway neighbourhood forums will have as part of the wider planning process.

These measures all emphasise the importance to the Government of neighbourhood plans, and increase the pressure on LPAs to progress applications. While there is clear political intent to involve people in planning decisions at a local level, this comes at a time when LPAs may be struggling with the volume of planning applications and have limited capacity available for the work associated with neighbourhood planning.

It remains to be seen whether these measures will boost the number of neighbourhood plans being made, or whether they will increase pressure on (already) stretched LPAs without significant results.