August 23, 2019

Planning due diligence

Taking on a new premise, or land, is often a risk. In this article I just want to highlight the steps that, working together, the Holmes & Hills Commercial Property and Planning teams undertake to ensure that a new tenant, or prospective landowner, understands what they are looking to take up/buy and can make an appropriate assessment as to whether (or not) to proceed with the transaction.

The importance of adequate searches  

As context, carrying out adequate searches and enquiries of the property is important for a buyer (or incoming tenant) to ensure that it will:

  • not be liable for complying with unknown outstanding obligations or conditions or for remedying or paying for previous breaches of planning control; and/or
  • be able to use the property for the intended purposes

That said, if a breach of planning control has been identified a prospective tenant/buyer can ask the landowner to:

  • remedy the breach before exchange
  • take out insurance for any loss in the value of the property and legal expenses incurred in defending an attempt to enforce the breach
  • negotiate a reduction on the sale price to reflect the costs of the buyer's costs of remedying the breach

Indeed, if a tenant/buyer will not be able to use the property for the intended purposes, it may have to factor in the likely costs, time and chances of success of making a planning application to authorise its future uses/operations. Otherwise, they may decide not to proceed with the sale. These issues are also important for a landowner to understand so that they are clear on what is being sold and its value in the market.

As part of a title investigation we will check whether there any planning-related defects in the title that could adversely affect the buyer, e.g.:

  • planning obligations (e.g. an obligation to make a financial contribution to the local authority or carry out certain works on the site) which run with the land and so are enforceable against successors in title.
  • planning conditions which could restrict or inhibit the buyer's use of the land or operations on the land. If there are conditions which restrict operations in a way unacceptable to the buyer, it should consider the likely costs, time and chances of success of removing those conditions before committing to buying the property
  • which consents relating to the property have been granted, issued or refused or are the subject of pending applications (including planning permission, listed building and conservation area consent and certificates of lawfulness)
  • do any Article 4 directions apply, which remove permitted development rights from the property?

The importance of a Local Land Charges search

A Local Land Charges search should also be undertaken which will reveal if there are any:

  • financial charges, where money is owed to the local authority for work carried out on the property/land, e.g. for repair or demolition of a dangerous building
  • tree preservation orders
  • conservation areas and listed buildings
  • road agreements
  • conditional planning applications
  • enforcement notices
  • any Community Infrastructure Levy payable

Once we have been provided with copies of any relevant planning permission and other consents (to include listed building consent, consent for the display of advertisements and certificates of lawful use) we will investigate which consents:

  • have been implemented fully/partially
  • have not yet been implemented but are still capable of implementation
  • authorise existing uses and buildings

If there is an existing outline planning permission, or other planning permission, with conditions which need to be satisfied before development can proceed a check will be undertaken to see what has been done to obtain approval of reserved matters and/or satisfaction of those conditions.

In relation to the use of the building we will enquire what the existing use of the property is, when it started and how that use is authorised in planning terms.

The importance of a physical property inspection

We do recommend that a physical inspection of the property is carried out because this can reveal planning issues which may not be apparent from other searches. Examples being:

  • any additions or alterations of the property which are not authorised in planning terms; and
  • easements and rights of way, such as public footpaths, access rights and electricity cables which may affect the use or any redevelopment proposals.

Lastly, If the tenant or buyer is taking up/purchasing the property with the benefit of an unimplemented or partially implemented planning permission and/or listed building consent, care should be taken to ensure it has the necessary copyright in the plans approved as part of those consents. While planning permissions and listed building consents run with the land and benefit anyone with control over the land, this does not mean that the approved design drawings can be used by anyone. So assignment of, or a written licence to use, the copyright should be obtained before a tenant/buyer uses approved plans for its own purposes.

Hopefully the above will illustrate the need for a thorough approach to investigating “planning title” – and if there are issues then it is not uncommon for the Planning team to help to resolve them or, at the very least, provide advice as to the risk that such ‘wrinkles’ may carry.

I should add that the Commercial Property team also look into private law rights/issues (e.g. any restrictive covenants that prohibit or restrict development) as well as ensure that appropriate Building Regulations approvals/certificates have been obtained. All of which being to ensure that people understand what is being offered to them as tenant or purchaser.”

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