Mike Finnett Looks at Residential Property Development for 2017

Tuesday 31st January 2017

The challenge for any housebuilder as they search for new development sites is not just in sourcing land, but ensuring it is brought through to development as smoothly as possible, and this will be as pertinent as ever in 2017.

Minimising the cost and time to secure planning and build out the development has always been key to maximising the financial return, but evident land shortages and increased competition for viable sites means housebuilders and developers need to be ever-vigilant of potential problems.

A key topic at the moment is mine and minerals. If a third party owns mines and minerals under the surface of land, it is important to establish exactly who owns such rights through thorough investigation and avoid any unnecessary delays in the purchase or development of land.

This can avoid homebuilders becoming liable to a claim of trespass on the mines and minerals from a third party. Risk can be further mitigated by obtaining an indemnity insurance policy offering financial protection against any potential challenges, continuing protection for the eventual plot purchasers once the site has been developed.

It is also imperative to ensure there are no restrictive covenants affecting land that could interfere with or prevent its development. Although these restrictions should be easily identifiable from a review of the title deeds to the land in question, they can have serious implications, if still enforceable.

Indemnity insurance can mitigate the risk of enforcement against the housebuilder, or the release of the covenant, if this can agreed with the benefitting party. The final alternative is an application to the Lands Tribunal to either modify or discharge the restrictive covenant, on specific grounds.

Another matter of immediacy is the occupation of any land by a third party, and their entitlement, including the existence of one of two types of agricultural tenancy. The 1986 Act tenancy provides a strong security of tenure and the right to pass on the tenancy to future generations, but makes it difficult for landowners to regain possession quickly. A Farm Business Tenancy is more flexible and can be terminated by a landowner on no less than 12 months’ notice, but must end on the anniversary of the commencement date, if a periodic tenancy, or on the last day of the term if fixed term.

In all cases, it is imperative that advice is sought as early as possible to avoid any unnecessary delays, and action taken at the earliest possible stage. In an ever-evolving market with ever-increasing competition, preparation and proactivity will be key for all housebuilders in 2017 and beyond.

For advice on residential property matters and to discuss this article in further detail, please contact Michael at michael.finnett@gordonsllp.com or call 01132270255.