1. PROPERTY DEVELOPMENT ISSUES
GLOSSARY of PLAYERS (not examinable)
Developers – buy property with a view to constructing a new building on the land or refurbish existing
buildings. Aim to either sell on at a profit or let to a tenant who will bring in income to repay development
loans and make profit.
Investors – buy property already let to commercial tenants or is designed for this purpose. Looking for
profit by way of rental income and an increase in value of the reversionary interest.
Real Estate Investment Trusts (REITs) – property investment vehicles aimed at enabling tax efficient
investment in a professionally managed portfolio of property.
Occupiers – most businesses occupy property on a leasehold basis for flexibility. Supermarkets often buy
both leasehold and freehold property speculatively in the hope planning permission is granted in future.
Land banking – supermarkets buy property and land to leave vacant. This prevents rivals opening store
locations in the vicinity.
Banks – often occupy mixed use property developments e.g. Spinningfields, Manchester.
Public Sector – owns a large amount of land and has the power of Compulsory Purchase Orders (CPO).
Often work in partnership with developers on regeneration projects e.g. Stratford, London 2012 Olympics
Private Finance Initiatives (PFI)b – method of funding major capital investment e.g. schools, hospitals,
transport infrastructure without immediate recourse to public funds. Private consortium usually created
involving large construction firms contracted to design, build and manage projects.
Estates Gazette – a weekly magazine/online publication for the property industry. Vital research tool for
commercial property lawyers to keep abreast of market news.
Parties involved include:
- developer client purchasing the property; - seller;
- bank providing the funding; - future tenants;
- construction team (Building Contractor, Architect etc.); - local authority;
- solicitors acting for all the above parties; and - buying and selling agents
GLOSSARY of FUNDING
Debt finance – most common = loan that the developer repays plus interest to the lender (usually bank).
Documented in a loan agreement and accompanying security documents e.g. debenture, fixed/float charge.
Equity finance – gives investors the right to share in the profits of the development. Commonly, investors
and developers enter into joint venture company used to buy and develop property.
Mezzanine finance – used if development is risky and developer cannot raise finance through a traditional
loan. Higher interest rates to reflect how mezzanine finance ranks behind a bank loan.
, DEVELOPMENT ISSUES
May be a number of consents / rights that need to be sought before development can
commence – see PLP module.
Careful consideration of title and search results / enquiries important to ensure there are no
restrictions or encumbrances that would prevent development
Check the extent of the ownership of the land – essential that buyer gets the entirety of the
property
‘Ransom strips’ – physical gaps in the title which may inhibit or prevent development
without payment of ‘ransom’ to the owner
Occupiers existing on the site need to be dealt with to ensure vacant possession. Consider
how you will remove squatters and the cost
TITLE ISSUES
COVENANTS
Property may be subject to covenants that prohibit or restrict development – identify early
o requires consent from owner of land with benefit – takes time and money to resolve
o Insurance may not be available at a commercially acceptable cost
o Upper Tribunal (Lands Chamber) (UTLC) takes time, money, no guaranteed success
MINES & MINERALS EXCEPTED
Common law presumption that landowner owns everything below surface to earth’s centre
Presumption rebutted by showing severance of mines and minerals
o Can be evidenced by a statement on Property Register
o Having absolute title = no guarantee that mines/minerals are included
May occur where a previous seller retained/reserved right to extract minerals
o Some cases, rights may be registered in separate title = 2 titles for the land/below
o Attempts should be made to identify owner
Report reserved rights to buyer in case it affects their proposed use of the land
o Damaging mines/minerals by e.g. digging foundations could amount to trespass and
liability for damages or injunction to stop the works.
o Purchasing the rights could be time consuming + expensive
PLANNING PERMISSION + S.106 AGREEMENTS
PP needed from Local planning Authority (LPA) for development
s.106 Agreements = entered into with LPA which specify certain works that MUST be
carried out before works commence on-site
AIRSPACE ISSUES
May need consent to interfere with airspace belonging to others – e.g. sail the jib of a crane
over adjoining land – licence + consent needs to be negotiated prior to work commencing
Common law doctrine that ownership of airspace extends up to sky
Bernstein v Skyviews (1978) – landowner retains control of airspace to a height
‘necessary for ordinary use and enjoyment of the land’
Ownership asserted by action in trespass or nuisance (no need to prove loss) – injunctions
ACCESS ISSUES
GLOSSARY of PLAYERS (not examinable)
Developers – buy property with a view to constructing a new building on the land or refurbish existing
buildings. Aim to either sell on at a profit or let to a tenant who will bring in income to repay development
loans and make profit.
Investors – buy property already let to commercial tenants or is designed for this purpose. Looking for
profit by way of rental income and an increase in value of the reversionary interest.
Real Estate Investment Trusts (REITs) – property investment vehicles aimed at enabling tax efficient
investment in a professionally managed portfolio of property.
Occupiers – most businesses occupy property on a leasehold basis for flexibility. Supermarkets often buy
both leasehold and freehold property speculatively in the hope planning permission is granted in future.
Land banking – supermarkets buy property and land to leave vacant. This prevents rivals opening store
locations in the vicinity.
Banks – often occupy mixed use property developments e.g. Spinningfields, Manchester.
Public Sector – owns a large amount of land and has the power of Compulsory Purchase Orders (CPO).
Often work in partnership with developers on regeneration projects e.g. Stratford, London 2012 Olympics
Private Finance Initiatives (PFI)b – method of funding major capital investment e.g. schools, hospitals,
transport infrastructure without immediate recourse to public funds. Private consortium usually created
involving large construction firms contracted to design, build and manage projects.
Estates Gazette – a weekly magazine/online publication for the property industry. Vital research tool for
commercial property lawyers to keep abreast of market news.
Parties involved include:
- developer client purchasing the property; - seller;
- bank providing the funding; - future tenants;
- construction team (Building Contractor, Architect etc.); - local authority;
- solicitors acting for all the above parties; and - buying and selling agents
GLOSSARY of FUNDING
Debt finance – most common = loan that the developer repays plus interest to the lender (usually bank).
Documented in a loan agreement and accompanying security documents e.g. debenture, fixed/float charge.
Equity finance – gives investors the right to share in the profits of the development. Commonly, investors
and developers enter into joint venture company used to buy and develop property.
Mezzanine finance – used if development is risky and developer cannot raise finance through a traditional
loan. Higher interest rates to reflect how mezzanine finance ranks behind a bank loan.
, DEVELOPMENT ISSUES
May be a number of consents / rights that need to be sought before development can
commence – see PLP module.
Careful consideration of title and search results / enquiries important to ensure there are no
restrictions or encumbrances that would prevent development
Check the extent of the ownership of the land – essential that buyer gets the entirety of the
property
‘Ransom strips’ – physical gaps in the title which may inhibit or prevent development
without payment of ‘ransom’ to the owner
Occupiers existing on the site need to be dealt with to ensure vacant possession. Consider
how you will remove squatters and the cost
TITLE ISSUES
COVENANTS
Property may be subject to covenants that prohibit or restrict development – identify early
o requires consent from owner of land with benefit – takes time and money to resolve
o Insurance may not be available at a commercially acceptable cost
o Upper Tribunal (Lands Chamber) (UTLC) takes time, money, no guaranteed success
MINES & MINERALS EXCEPTED
Common law presumption that landowner owns everything below surface to earth’s centre
Presumption rebutted by showing severance of mines and minerals
o Can be evidenced by a statement on Property Register
o Having absolute title = no guarantee that mines/minerals are included
May occur where a previous seller retained/reserved right to extract minerals
o Some cases, rights may be registered in separate title = 2 titles for the land/below
o Attempts should be made to identify owner
Report reserved rights to buyer in case it affects their proposed use of the land
o Damaging mines/minerals by e.g. digging foundations could amount to trespass and
liability for damages or injunction to stop the works.
o Purchasing the rights could be time consuming + expensive
PLANNING PERMISSION + S.106 AGREEMENTS
PP needed from Local planning Authority (LPA) for development
s.106 Agreements = entered into with LPA which specify certain works that MUST be
carried out before works commence on-site
AIRSPACE ISSUES
May need consent to interfere with airspace belonging to others – e.g. sail the jib of a crane
over adjoining land – licence + consent needs to be negotiated prior to work commencing
Common law doctrine that ownership of airspace extends up to sky
Bernstein v Skyviews (1978) – landowner retains control of airspace to a height
‘necessary for ordinary use and enjoyment of the land’
Ownership asserted by action in trespass or nuisance (no need to prove loss) – injunctions
ACCESS ISSUES
