One of the more interesting suggestions by the Government to address the housing crisis is that if a developer is not commencing development, or is not building consented homes as quickly as deemed acceptable, the Council may instigate CPO powers to acquire the site and transfer it to another developer.
This would, however, give rise to some very complex legal and practical issues which are worth examining.
There is little question that a Council would only succeed with such a CPO if it had a substitute developer on board waiting in the wings and signed up to a binding development agreement which committed it to building out the homes at a materially faster rate than the current developer. This may prove difficult for market reasons and given the prospect that the incumbent developer will have an obvious head start.
Such a CPO process could take 18-24 months or longer, and may in turn put a stop to delivery on site until the process has run its course, thereby slowing down or stopping delivery and having the opposite effect to that intended.
A CPO would also be costly, and a substitute developer may balk at the idea of entering into a binding and open-ended CPO indemnity agreement with a Council and being responsible for spending hundreds of thousands of pounds on a CPO and then having to fund the compensation payment to the former owner/developer. There is also never a guarantee that a CPO will succeed and all this has to be funded before the substitute developer even gets on site. inevitably, this would also add even more risk to the development of the site concerned.
As to Labour’s initiative, the CPO compensation code operates so that the development value/potential development profit attached to land can be claimed by a dispossessed landowner/developer - so unless CPO compensation law is changed a developer who had obtained planning permission and who was now being CPO'd could be entitled to compensation representing the land value/profit it would have achieved had it not been the subject of a CPO - without having to take the development risk!
This would leave the substitute developer in a very difficult and risky position. Whilst this suggests a change to CPO compensation rules might be appropriate, such a step (to reduce the value of land held by a developer or landowner being CPO'd in these circumstances) would open up very challenging and overwhelming human rights arguments. There is also the small issue of the limited availability of Parliamentary time to make such fundamental changes to legislation which have been enshrined in UK law since the 19th century.
Whilst it may not provide the required drama, the better response is to look to practical solutions which are simple, easily delivered and adaptable.
There is no reason whatsoever why a developer should not under current law and policy be required to agree a trajectory for housing delivery with an Council which identifies a shared programme and responsibility to discharge conditions, deliver infrastructure and to practically address statutory undertakers and other potentially obstructive bodies. This approach could quite legitimately allow for the identification (and evidencing) of exceptions relating to changes in market conditions or other unforeseen events.
There is also no existing legal constraint to these arrangements being scheduled to a section 106 Agreement and with some modest policy revisions it would be entirely appropriate for a Council to impose a trigger on identified and agreed terms, to instigate an alternative delivery mechanism. That mechanism would be fairly easily drafted and could require the staged release of future phases of the failing development that are then offered and then transferred on the open market (at consented value and allowing for promotional costs etc.) to allow others to meet the agreed delivery targets.
The clear intention of this approach would be to provide enough flexibility to reflect the constraints to delivery; for the Council to share the responsibility in delivery; and to give the Government a meaningful mechanism for the controlled delivery of housing.
This suggestion also requires nothing more than a change in policy, avoids the need for new and potentially ineffective legislation and leaves discretion and control where it should be with the local community and their Council.
Eversheds Sutherland (International) LLP
6 February 2018
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