Legal News

The Planning and Compulsory Purchase Act 2004

The Planning and Compulsory Purchase Act 2004 (‘the PCPA’) received Royal Assent on 13 May 2004 and will be coming into force in accordance with a timetable to be published by the Office of the Deputy Prime Minister.

The aim of the PCPA is to reform a planning system that many people believe had become too inflexible and bureaucratic. The key features of the PCPA include:

• Replacing planning obligations with a new system of planning contributions, thereby allowing developers to make contributions towards services and facilities relating to their development without the need to negotiate with the local planning authority.
• Reducing the duration of planning permissions from five years to three years in order to speed up the operation of the system though longer permissions may be granted in certain circumstances, for example regeneration projects.
• Removing the right to extend the life of planning permissions by altering a condition under section 73 of the Planning Act 1990.
• Enabling local authorities to use Compulsory Purchase Orders if they think that the development is likely to improve the economic, social or environmental well being of their area. This is designed to help speed up the process of assembling land for regeneration and major infrastructure schemes.
• Ensuring that bodies with plan making functions exercise their functions with a view to contributing to the achievement of sustainable development.
• Giving powers to local authorities to decline to determine planning applications in certain circumstances.
• Replacing Regional Planning Guidance with Regional Spatial Strategies, which will incorporate broader ‘spatial’ policies covering social, economic and environmental matters.
• Changing the outline planning permission regime to enable more community involvement and greater information to be obtained.
• Replacing local plans, unitary development plans and structure plans with Local Development Documents, which will form part of the new Local Development Schemes to be prepared and maintained by every local planning authority.
• Removing the Crown’s immunity from planning control.
• Allowing local authorities to introduce Business Planning Zones where a need is identified in the Regional Spatial Strategy.
• Giving local authorities the power to decline to determine subsequent applications and overlapping applications.
• Allowing the Secretary of State to bring certain mezzanines within the meaning of development so that they will require planning permission. This is likely to include retail floor space over a certain size.
• Allowing the Secretary of State to speed up the inquiry process for applications considered to be of national or regional importance.
• Allowing local authorities to issue Temporary Stop Notices for up to 28 days for breaches of planning control. Breach of the notice can lead to summary conviction and a fine of up to £20,000.

The PCPA places increased importance on community consultation. It is therefore important to make contact with the local authority at an early stage in the development programme to find out which groups need to be consulted and how this should be done. This is designed to speed up the application process (as consultation has to be carried out before the application is submitted) but it carries new time and cost implications for applicants. Although the PCPA has Royal Assent, it is too early to assess the full extent of the impact it will have on planning applications and development schemes. This is likely to depend on the outcome of further consultation papers and guidance provided as each part of the PCPA comes into force.

For further advice contact:
Ronald Hooberman
Telephone +44 (0)20 7440 7023
ronald.hooberman@mishcon.co.uk

Land Registry Reforms

The Land Registration Act 2002 (the “LRA”) and Land Registration Rules 2003 came in to force on 13 October 2003 replacing all prior Land Registration legislation and paving the way for e-conveyancing.

The LRA and the Rules are undoubtedly the most significant legislation to affect property practitioners since the Land Registration Act 1925!

The changes have been driven by public policy which aims to promote freedom of information and a transparent property market. This has been achieved in a number of ways including the following:

• Extension of compulsory registration of title to include new leases for a term of over seven years and assignments of existing leases with over seven years unexpired.
• All new documents lodged with HM Land Registry post 13 October 2003 are open to public inspection. It is possible to apply to blank out from public view certain sensitive information which needs to be kept confidential i.e. creating an ‘exempt information document’.
• Abolition of Land and Charge certificates.
• HM Land Registry has powers to serve notices on landowners and others who have interests affecting land. Failure to respond promptly to notices could have serious consequences.
• There is now a duty to disclose any pre-existing‘overriding interests’ e.g. easements, leasehold interests and other third party rights.
• New rules have been introduced in relation to registration of interests of squatters.

For further advice contact:
Yvonne Baker
Telephone +44 (0)20 7440 7164
yvonne.baker@mishcon.co.uk

REIT on!

Only three years ago, Mishcon together with Helical Bar sponsored independent research for the Investment Property Forum, which called for a UK REIT based structure.

The Treasury’s lack of interest was reflected in the pages of Property Week with the UK REIT being referred to as a‘dead horse’ that had been‘flogged to death’. Now, ably assisted by some effective industry lobbying, we have a very different response.

Whilst the more optimistic are already planning for the advent of a UK REIT (or PIF), the timing, regulation and potential benefits are still uncertain. The Treasury is now taking the lead with a consultation exploring the scope for reform with the objective of aligning the after tax returns from holding property indirectly more closely with returns from direct property ownership. The Treasury has made it absolutely clear however that its intention is not to reduce the overall tax contribution and that a conversion charge will protect the Treasury against loss of revenue.

The Government is drawing on the experiences of other countries especially the longest standing markets of the USA and Australia. In the USA, whilst some developers remain as tax paying companies, most property companies are structured as REITs and there are now over 175 funds with a market cap exceeding $200 billion. In Australia the LPT Market began in the 1970’s but took off in the 1990’s and the current market cap is circa AUS $45 billion. But in both countries, investors were slow to accept these vehicles as a means of investing in property.

It is therefore likely that should similar legislation be introduced in the UK, a similar lead in period can be anticipated. With the current strength of the UK commercial property market, opportunities for a new type of investment vehicle could be limited for new entrants who will be competing against the performance of the quoted property sector as well as the other existing indirect investment opportunities.

For further advice contact:
Susan Freeman
Telephone +44 (0)20 7440 7017
susan.freeman@mishcon.co.uk

Code for Commercial Leases

Mishcon de Reya property partner Philip Freedman chaired the Government sponsored working party that prepared the Code of Practice for Commercial Leases in England and Wales.

The Code encourages flexibility in the market by promoting shorter leases, alternatives to upward only rent reviews, limits on service charges and tenant repairs, and more reasonable restrictions on assignment, alterations, etc.

In December, the Government received an interim report on the effect of the Code on the market and a final report is expected by the end of this year. If the Code is found to have had little effect in increasing flexibility and choice for tenants, the Government will seriously consider legislation, particularly to ban upward only rent reviews but with other possible targets including certain restrictions on assignment.

New Rules for Business Lease Renewals

Amendments to the Landlord and Tenant Act 1954 took effect on 1 June 2004. The many changes include simpler procedures for excluding new leases from protection.

Landlords not opposing renewal must specify in their termination notices detailed proposals for the new lease, as a basis for negotiation. Tenants no longer need give counter-notices. Their deadline for applying to the court for a renewal is deferred and can be extended with the landlord’s agreement, but the landlord can also make the court application, to avoid delays. The court can order a new term of up to fifteen years. Interim rent can be invoked by tenants as well as landlords, and in certain cases the new rent will also be the interim rent.

Tenants may still vacate by the end of their leases without giving notice, but once they are holding over they must give three months’ notice, to end on any day.

Individual tenants who trade through limited companies (but not LLPs) will no longer risk losing protection and the rules for group companies will also apply, for both landlords and tenants, to separate companies controlled by the same individuals.

The information notice procedure is extended and a party giving information must give an update if the information changes, or is found to be wrong, during the following six months. He can be sued for giving incorrect or inadequate information.

New rules apply in those rare cases where parts of the premises have different landlords, mainly to ensure that the tenant is fully protected.

Where only part of property is occupied by the tenant for a full 14 years, double compensation on an opposed renewal will apply only to that part. The tenant may also claim compensation if, as a result of the landlord’s misrepresentations (e.g. as to intended redevelopment) the court refuses a renewal or the tenant refrains from applying for one.

For further advice contact:
Philip Freedman
Telephone +44 (0)20 7440 7018
philip.freedman@mishcon.co.uk