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Real Estate Newsletter – Spring 2021

Welcome to the Spring edition of our Real Estate Newsletter.

As we emerge from the pandemic we look at some interesting property and planning issues that have been considered even while we were in lockdown.

We would welcome feedback on the content covered below and any comments you may have on the future focus of this newsletter.

Nicholas Brent, Partner and Head of Druces’ Real Estate Team

Property – General

1. Property Investors – Make Sure Your Money is Secured From the Outset

Investing in property is very far from being risk free but usually has the advantage that monies advanced are secured against real ‘bricks and mortar’ assets. The crucial importance of ensuring that enforceable security is in place before parting with your money was underlined by a High Court ruling.

The case concerned a company’s purchase of a substantial property with a view to its conversion into a nursing home. Private investors were sought on the basis that they would be granted leases of individual rooms. More than 50 investors, who hoped that the leases would be appreciating assets and generate an income, paid deposits before the company entered administration.

The investors had never in fact been granted room leases and therefore had no legal interest in the property. The only security they possessed were purchasers’ liens in respect of deposits paid. They were secured creditors to the extent that they held equitable charges over the property.

Their security was, however, valueless in that a mortgage that the company had entered into in order to fund the property’s purchase took priority. Some investors took the step of registering unilateral notices at the Land Registry, but none did so before the mortgage was registered.

The property had been purchased for £429,000 but was currently being marketed with a guide price of just £250,000. That sum would be insufficient to discharge the mortgage. Having received an unconditional cash offer for the property, the administrators asked the Court to sanction its sale.

Ruling on the matter, the Court described it as a sad case in which investors had been left high and dry with no hope of recovering any of their money. It served as a reminder of the need for investors to ensure that they have security of commercial value and that the security is registered at the Land Registry when granted. In authorising the administrators to proceed with the sale, the Court found that the transaction would be likely to promote the purposes of the administration.

2. Property Developer Stumbles Into ‘Mines and Minerals’ Title Deeds Trap

Property title deeds often contain traps for the unwary which can even result in land being bought for a purpose to which it cannot lawfully be put. A property developer found itself in exactly that position after it purchased a site beneath which lay mines and mineral deposits which were in separate ownership.

The site was agricultural land when the developer bought it but had once been gravel pits. It was formerly owned by an aggregates company which disposed of the land by two separate transfers in the 1980s. However, it retained rights in respect of mines, minerals and mineral substances beneath the site.

When the developer commenced works on the site, the company asserted that they encroached upon the mines and minerals and amounted to acts of trespass. The developer was also alleged to have excavated and carried off minerals during the course of the works in breach of the company’s rights.

After the company took action, the High Court ruled that, on a true interpretation of the transfers, it remained the freehold owner of the mines and minerals. The decision opened the way for the company to pursue claims against the developer for, amongst other forms of relief, damages for trespass and an injunction restraining further acts of encroachment.

3. Resident-owned Management Companies Are Not Always a Panacea

The common parts of many apartment buildings and housing estates are managed by companies in which all residents have a shareholding. Such arrangements are designed to be democratic and beneficial to all concerned but, as a High Court case strikingly showed, they sadly cannot guarantee a harmonious panacea.

The case concerned a gated estate comprising eight private houses. The owner of each property was entitled to a single share in a company which owned the road running through the estate and its grass verges and bore responsibility for their upkeep. Service charges for that purpose were gathered from residents.

Following a series of disputes, a corporate entity which owned one of the properties launched proceedings under Section 994 of the Companies Act 2006 against the company and its directors. The entity, which was beneficially owned by a couple who lived in the relevant property, asserted that the company’s affairs had been managed in bad faith so that its position as a shareholder had been unfairly prejudiced.

The couple pointed to a number of alleged incidents which they said demonstrated that the company had discriminated against them, treating them differently from other residents. By its actions, the company was alleged to have subjected them to stress, anxiety and embarrassment which harmed their quality of life. The couple asserted that the company’s ultimate objective was to cause them to sell or otherwise leave their home. The company and its directors denied those allegations.

Dismissing the entity’s claim, the Court could find no evidence that the company had been run other than in good faith or that there had been a campaign to encourage the couple’s departure from the estate. There had been some errors in the way the company’s affairs had been managed but a reasonable bystander who was aware of the incidents relied upon would not regard them as having unfairly prejudiced the entity’s interests as a shareholder. There was no abuse of power on the company’s part which required judicial intervention.

4. University Successfully Resists Rooftop Telecommunications Equipment

The public interest in the installation of up-to-date telecommunications equipment on rooftops and elsewhere is so pressing that private property rights frequently have to play second fiddle. As one case showed, however, landowners can, with the right legal advice, successfully resist such developments being foisted upon them.

A telecommunications infrastructure company wished to install equipment on the roof of an urban university building. The university resisted the proposal so the company applied to the Upper Tribunal (UT) under the Communications Act 2003to impose an agreement on the university which would enable the installation. The agreement proposed by the company would last for 10 years.

The university argued that it would suffer severe prejudice if the agreement were forced upon it. The aging building was set to be demolished in the next few years as part of an urban regeneration project. The university had entered into a contractual relationship with the project’s developers that would enable it to move to another site. It would, however, suffer grave financial consequences if it failed to give vacant possession of the building by a particular date.

Ruling on the matter, the UT noted that Parliament intended that private landowners be required to participate in the provision of telecommunications sites for the public good. Compensation is payable on a non-profit basis to those who have installation agreements imposed on them and the level of prejudice suffered by landowners must be very high indeed in order to outweigh the public interest in an efficient telecommunications network. There was a clear public benefit in installing the equipment in a busy urban area where there was ever-increasing demand for electronic telecommunications.

In refusing the company’s application, however, the UT noted that the university was not required to comply at all costs with its public duty to cooperate with the company. Given the potential disruption of its contractual relationship with the developers, requiring it to submit to the agreement was too much to ask.

There was a very high risk that, in order to give vacant possession of the building to the developers by the date required, the university would have to resort to litigation to enforce the equipment’s removal. If the deadline were missed, the university would be exposed to very substantial rent liabilities and might be sued by the developers for breach of contract. The outcome of any litigation could not be predicted and money would not be enough to compensate the university for the stress, uncertainty and potential reputational damage such litigation would entail.

5. The Complexity of the Business Rates Regime

The law relating to business rates is intricate to say the least,  and without expert legal advice commercial property occupiers can fall victim to its complexity. The High Court made that point in rejecting a tenant’s determined challenge to a non-domestic rates bill.

For a period of eight months, the corporate tenant occupied premises that did not appear on the relevant local non-domestic rating list. They were not entered on the list until almost a year after the tenant moved out. The local authority purported to back-date the listing so that it covered most of the period during which the tenant was in occupation. On that basis, the tenant received a demand for more than £7,000 in non-domestic rates.

In refusing to pay the bill, the tenant argued that the council had no power under the Local Government Finance Act 1988 to retrospectively list the premises. It said that liability to pay rates did not arise because the premises did not appear on the list at any time during the relevant period of occupation. Magistrates were not persuaded by that argument and issued a liability order against the tenant.

Amongst arguments put forward by the tenant in challenging that outcome was that, if back-dating were permissible under the Act, those who enter into occupation of commercial premises that do not appear on a rating list would have no way of knowing that they might face a rates liability at some point in the future.

Rejecting the appeal, however, the Court noted that commercial occupiers must be taken to understand the law, however unrealistic such an expectation might be. The risk that the rating list might be amended with retrospective effect was thus something the tenant should have known about.

In disputing the bill, the tenant had overlooked the effect of the Non-Domestic Rating (Alterations of Lists and Appeals) (England) Regulations 2009, which permit back-dated alterations to rating lists in certain circumstances. The Court noted that, had the local authority brought the Regulations to the tenant’s attention at an early stage in the proceedings, a great deal of time and expense might have been saved.

6. Commercial Tenants – How Well Do You Understand Your Obligations?

Before signing up to a commercial lease, tenants should always take expert legal advice to ensure they truly understand the obligations they are taking on. The point was powerfully made by a case in which the insurance provisions of a lease became the focus of dispute more than 50 years after it was executed.

The case concerned premises which were held under a 99-year lease dating back to 1968. Under the lease, the tenant was required to insure the premises against various perils in both its name and that of the landlord. The obligation to reinstate the premises following an insured incident also fell upon the tenant.

The lease imposed no express corresponding obligation on the landlord to apply any insurance monies it received to reinstate the premises. The absence of such a provision gave rise to the tenant’s concern that the landlord could claim entitlement to retain such part of any insurance payout that represented its insurable interest in the premises. If that occurred, the tenant feared that it would be left with insufficient funds to meet its reinstatement obligation.

The landlord was reluctant to agree to any amendment of the lease and argued that the tenant’s concerns were divorced from any concrete facts. It accepted that, if the premises were to be rebuilt or reinstated, it would be obliged to pay over to the tenant any insurance monies it received for that purpose. It denied having any intention to obtain and keep any such monies for itself whilst at the same time requiring the tenant to fully fund reinstatement works.

Ruling on the dispute, a judge nevertheless found that the tenant had grounds for legitimate concern that the landlord might seek to retain at least part of relevant insurance monies for its own purposes. It was therefore appropriate and just to protect the tenant’s position by granting a binding declaration framed in accordance with its existing obligations under the lease.

The judge declared that, in the event of an insured peril destroying or damaging the premises, any monies paid to the landlord by insurers are required to be paid over to the tenant insofar as they are reasonably required for the purpose of reinstatement works. It would remain open to the landlord to claw back any such monies which were not in fact used to pay for such works.

7. What Does ‘Subject to Contract’ Actually Mean? Court of Appeal Guidance

The term ‘subject to contract’ is in such common usage that one might be forgiven for thinking that its meaning and effect must be clear beyond doubt. However, a Court of Appeal ruling, which will likely be pawed over by law students for many years to come, showed that any such assumption would be wrong.

The case concerned a company that owned a building on the security of which it borrowed money. After it fell into repayment arrears, the lender appointed receivers with a view to enforcing its legal charge over the building. The company argued that the loan agreement and the charge had been procured by undue influence and, on that basis, sought a court order setting both of them aside.

It also applied for an injunction preventing the receivers from taking any further steps to realise the lender’s security. A compromise was, however, reached in respect of that application. It was agreed that the building would be sold and the proceeds distributed between the company and the lender. However, £140,000 of those proceeds was ring fenced pending resolution of remaining issues between them.

The compromise agreement was recorded in a formal written document signed by both sides. However, an issue subsequently arose as to whether they had reached a further binding agreement concerning how the £140,000 was to be shared between them.

Following a hearing, a judge found that it had been conclusively agreed in a series of emails which passed between both sides that £75,000 of the £140,000 should be released to the lender. He reached that conclusion despite the fact that most of those emails, including the lender’s putative offer and the company’s putative acceptance of it, were prominently marked ‘subject to contract.’

Upholding the company’s challenge to that outcome, the Court noted that, although the phrase ‘subject to contract’ is a well-known feature of ordinary legal parlance, judicial statements as to its effect have, over the years, been legion. Frequently used as a protective catch-all, it generally connotes that a matter remains in negotiation until a formal contract is executed, thus enabling parties to withdraw at any point prior to such execution.

In finding that a binding agreement had been reached, the judge had seriously undervalued the force of the ‘subject to contract’ label on the legal effect of the negotiations. There was certainly no express agreement between the parties that the ‘subject to contract’ qualification would not be relied on. There was also no basis on which it could be said that the completion of such an agreement was necessarily implied by the course of the parties’ dealings.

8. Business Partners May Fall Out, But Duties of Good Faith are Unaffected

It cannot be guaranteed that business partners will always get on but, regardless of ill-feeling, they continue to owe each other legal duties of good faith. A judge made that point in coming to the aid of a chef whose cousin and partner acted behind his back in purchasing the freehold of the restaurant they ran together.

The two men were tenants of the restaurant, which they ran in partnership. The cousin borrowed £120,000 and bought the premises’ freehold. He then unilaterally dissolved the partnership and continued to run the restaurant as a sole trader. He took over its business name, employees, furniture, equipment and fittings and excluded the chef from the premises by changing the locks.

After the chef launched proceedings, the judge found that the cousin had purchased the freehold without his knowledge or consent. Even had he given such consent it would have been of no effect because the cousin had failed to disclose to him the availability of bank finance on advantageous terms to fund the purchase. The chef had at no point abandoned his rights as a partner or acquiesced in the purchase.

The cousin breached the duty of good faith he owed to the chef in failing to give him the opportunity to participate in the freehold’s purchase. He had also failed in his duty of full and frank disclosure. On that basis, the judge found that the cousin held the freehold on trust for himself and the chef equally. The value of the freehold had increased since its acquisition and the chef was entitled to a fair share of that and other profits arising from the cousin’s breaches of duty.

9. What Exactly Is a ‘Property Developer’? Tax Tribunal Confronts the Issue

It might be thought that the meaning of the phrase ‘property developer’ is as clear as a bell. However, in a tax case of great significance to corporate property owners, its precise definition proved challenging to say the least.

The case concerned the Annual Tax on Enveloped Dwellings (ATED), which requires payment of an annual levy by companies, certain partnerships and collective investment schemes which own residential properties in this country that are valued at more than £500,000. Property developers, property traders and property rental businesses are, however, exempted from ATED.

A British Virgin Islands-registered company that owned one such property received demands for more than £200,000 in ATED in respect of two financial years, on the basis that the property was worth between £10 million and £20 million. In denying any liability to pay ATED, however, it asserted that it was engaged in trade as a property developer.

Although the company had paid ATED without complaint in previous years, it argued that it had put on a property developer’s hat by spending about £1 million on the property’s comprehensive refurbishment with a view to selling it at a profit. It carried out those works after the property failed to sell at a price of £13.5 million. The company’s arguments, however, failed before the First-tier Tribunal.

Ruling on the company’s challenge to that outcome, the Upper Tribunal noted that the central issue was whether it was engaged in ‘trade’ as a property developer. There was no dispute that a residential property may be held as trading stock by a developer and that a one-off transaction can constitute a venture in the nature of trade. HM Revenue and Customs also accepted that the works were so substantial that the property had, in effect, been redeveloped.

There was, however, insufficient evidence that the company’s board had resolved to hold the property for a trading purpose. The mere possibility that the cost of the works might be more than recouped on the property’s sale, thus yielding a profit, did not mean that they had been performed in the course of trade. It was a fallacy to assume that the company must, as a result of its corporate status, be carrying on a business.

There was no evidence that the company was engaged in commercial operations. It had at no time sought to make money from its holding of the property, other than by its future sale. It appeared to be no more than a passive, property-owning vehicle established for the purpose of ‘enveloping’ the ownership of the property in corporate form. The appeal was dismissed.

10. Vacant Possession and Commercial Lease Break Clauses – High Court Ruling

When exercising a break clause in a commercial lease, tenants are usually required to deliver up a property with vacant possession – but what exactly does that mean? The High Court confronted that issue in a case concerning a recording studio which was handed back minus a number of the landlord’s original fixtures.

The 24-year lease of the modern commercial unit contained a break clause which entitled the tenant to terminate it on a specified date about 16 years into the term. The tenant gave notice of termination to the landlord as required by the lease but, when the keys were handed back, various fixtures which had formed part of the unit’s original base build had been stripped out.

The landlord launched proceedings, seeking a declaration that the break option had not been validly exercised and that the lease would therefore continue until the end of its term. It was submitted that the unit, as handed back, was not the premises defined by the lease and that it had therefore not been delivered up with vacant possession.

Granting the declaration sought, the Court noted that, under the terms of the lease, the premises comprised the existing building which was there when the lease was granted, including all of the landlord’s fixtures which were then in place. That broad definition made commercial common sense in that it ensured that the tenant could not exercise the break clause by handing back an empty shell which was dysfunctional and incapable of occupation. In the end, that was precisely what the tenant had done.

Although the tenant commenced works to reinstate the property and to restore the landlord’s fittings, it unilaterally suspended those works in the hope of negotiating a settlement in respect of dilapidations. Those negotiations failed and, when the clock ran down, the tenant handed back considerably less than the premises as defined in the lease. The physical condition of the property when handed back presented a substantial impediment to the landlord’s use of it, or a substantial part of it. The tenant had thus failed to give vacant possession.

11. Business Rates Mitigation Schemes are Lawful – But Not if They are Shams

It is perfectly legitimate and lawful for landlords of empty commercial premises to enter into business rates mitigation schemes. However, as a High Court case showed, judges are adept at spotting sham arrangements which have rates avoidance as their sole purpose.

A landlord of a number of empty offices entered into an arrangement with a company that specialised in rates mitigation schemes. A series of leases were granted to off-the-shelf companies with the intention of shifting the landlord’s liability in respect of non-domestic rates onto their shoulders. Some of the leases had the unusual feature of restricting tenants’ use of the premises to snail farming.

The landlord accepted that the leases were not purely commercial and were artificial in the sense that they were intended to implement a rates mitigation scheme. It also accepted that, in some of the offices, unconvincing attempts had been made to give an appearance that snail farming was in progress. However, it asserted that none of that affected the validity of the genuine leases.

The local authority agreed that it is lawful to create leases for the purpose of shifting liability for business rates. However, it argued that the landlord’s method of achieving that was unlawful in that, contrary to appearances, the leases were sham documents which were never intended to confer exclusive possession of the premises on the tenants. The council’s arguments succeeded before a district judge, who ruled the landlord liable to pay more than £100,000 in non-domestic rates.

Dismissing the landlord’s appeal against that outcome, the High Court ruled that the district judge was entitled to conclude that the leases were shams. They had not been created with the intention of providing exclusive possession to the tenants for the conduct of their businesses. Their sole purpose was to seek to avoid the landlord’s liability to pay business rates in circumstances where the tenants themselves had no intention of paying such rates.

12. ‘Simple’ Clause in Commercial Property Lease Triggers High Court Dispute

Commercial property leases can be long and complex documents, but it is often their most apparently simple clauses that give rise to dispute. That was certainly so in a High Court case concerning an airport hotel owner who was required to pay for its gas and electricity supplies ‘at no more than the prevailing commercial rates’.

The owner argued that the utility bills presented to it by its landlord – the airport’s operator – should be calculated in line with prevailing commercial rates paid for the supply of electricity and gas from an ordinary public network. Increased market competition, largely arising from privatisation of public utilities, had led to a substantial reduction in such rates since the lease was signed.

The operator, however, supplied the hotel with electricity and gas via its own private utility network. In line with Civil Aviation Authority rules, that network was designed to be safer and to have greater resilience than a public network and was significantly more costly to run. The operator argued that, under the terms of the lease, it was entitled to pass those costs on to the owner in full.

Ruling on the matter, the Court noted that, although simple on its face, the relevant clause suffered from a serious defect in that it did not identify a hypothetical market or comparator to which the phrase ‘prevailing commercial rates’ could be applied.

Employing business common sense, and taking account of the factual position when the terms of the lease were agreed in the 1990s, the Court preferred the operator’s arguments. It noted that no steps were taken at the time to connect the hotel to the public network, nor was there any attempt to negotiate a right to do so.

The owner’s argument that the public network should be treated as a comparator did not reflect the reality of the arrangements contracted for under the lease. Several other major UK airports also operated private utility networks and that provided a market by reference to which a prevailing commercial rate for the hotel’s gas and electricity supplies could be readily calculated.

13. Waiver of Contractual Rights by Conduct – Instructive High Court Ruling

Strict contractual rights, no matter how clearly defined, may be impliedly waived by conduct. That principle came under High Court analysis in a dispute concerning stalled plans for the construction of a space age engine testing centre.

Trustees of a unit trust agreed to lease a plot of land to an aerospace manufacturer who intended to use it for research into space propulsion systems. The obligation to construct a building and testing facility on the site rested on the trustees, although the cost of doing so was to be shared with the manufacturer.

The agreement set a long-stop date by which works on the site were required to reach practical completion. On that landmark being achieved, the manufacturer agreed that it would take a 10-year lease of the site at an annual rent of over £300,000. However, after the long-stop date came and went without practical completion, the manufacturer served a notice rescinding the agreement.

The manufacturer launched proceedings, seeking summary judgment on its claim that the notice had been served in valid exercise of its contractual rights. It asserted that the matter was entirely straightforward in that it was clearly entitled to cancel the agreement at any time after the long-stop date was missed.

The trustees took no issue with the manufacturer’s interpretation of the agreement. They pointed out, however, that they and the manufacturer had engaged in extensive dialogue between the expiry of the long-stop date and the service of the notice. They contended that, during the course of that dialogue, the manufacturer had exhibited a continuing commitment to taking a lease, thereby waiving its contractual right to rescind the agreement.

Rejecting those claims, however, the Court found that the trustees had no realistic prospect of establishing that the manufacturer had made a clear and unambiguous promise or representation that it would forbear from standing on its strict contractual rights. The trustees’ argument that there was a common assumption that the manufacturer would take that course was also not viable.

Despite the delay in achieving practical completion, the manufacturer had harboured hopes that the project would reach fruition and had continued to engage with the trustees on that basis. In granting the order sought, however, the Court found that it had throughout retained its right to serve notice rescinding the agreement at any time after the long-stop date passed.

Property – Planning

14. The Law Has Sharp Teeth When Tackling Breaches of Planning Control

Those who treat planning rules as a mere inconvenience in the belief that they can breach them with impunity have another think coming. The Court of Appeal made that point in upholding heavy fines imposed on a property company and its sole active director in a case of obdurate disobedience to enforcement notices.

The case concerned a Victorian commercial building, the majority of which is Grade II listed. After acquiring the property, the company removed timber shopfronts without planning permission and installed painted metal replacements. The local authority issued planning and listed building enforcement notices, requiring reinstatement of the shopfronts to their original design.

More than three years after the deadline set for compliance with the notices passed, remedial works had still not been carried out. The council prosecuted the company and the director and both pleaded guilty to planning offences. Sentencing was deferred and they belatedly complied with the notices, spending £60-70,000 on completing the restoration work to the council’s satisfaction.

Despite that, a judge took a dim view of their past conduct and ordered each of them to pay a £25,000 fine, together with £10,700 in legal costs. The judge said that they had for years considered the notices an insignificant matter and had not been prepared to commit the funds needed to comply with them.

Challenging the fines as excessive, they argued that they should have received more credit for their guilty pleas and their eventual compliance with the notices. They also submitted that the judge took too high a starting point when setting the level of the fines.

Dismissing their appeals, however, the Court found that the attempt to avoid the cost of compliance, combined with years of stubborn disobedience to the notices, amply justified the company’s fine. The director was not the occupier of the premises and did not directly receive a benefit. However, he was the controlling mind behind the company and caused it to commit the offences. His fine could not be regarded as excessive.

15. Upset By Your Neighbours’ Building Plans? You Are Far From Powerless!

If your neighbours have obtained planning permission for building works to which you object, you may think that is the end of the matter. However, as one case strikingly showed, with the right legal advice you can still win the day.

A company obtained planning permission to build a large, six-bedroom family home on a vacant plot of land. The project, however, would breach a restrictive covenant in the plot’s title deeds which forbade construction of any substantial buildings in front of a line 50 feet away from its rear boundary. With a view to overcoming that difficulty, the company applied to the First-tier Tribunal (FTT) under Section 84 of the Law of Property Act 1925 to either discharge or modify the covenant.

A couple whose home was on adjoining land objected to the application on the basis that the height and bulk of the new house would overshadow their own. The development would harm their views, together with their sense of privacy and seclusion, and would substantially reduce the value of their property. The company retorted that the new house would have little or no effect on the couple’s amenities and enjoyment of their home.

Ruling on the case, the FTT found that, although the new house could be regarded as overbearing, its construction would represent a reasonable, even desirable, use of an empty plot. In refusing the company’s application, however, it ruled that the covenant continued to yield practical benefits of substantial value or advantage to the couple and that it should therefore remain in place, unmodified.

Construction of such a large house, much of which would encroach over the line set by the covenant, would thoroughly spoil the rural outlook from the couple’s garden and change the whole character of their property. If it were built, the couple’s privacy, particularly during the winter months, would depend on the survival and proper maintenance of a hedge over which they had no control. The FTT noted the uncertain future of any such organic barrier.

16. Local Authority Resources Are Relevant to Planning Enforcement Measures

Local authorities are not required to respond to the full extent of the law to each and every breach of planning control and, in deciding what action, if any, to take, they are entitled to have regard to their limited resources both in financial and manpower terms. The High Court made that point in a guideline case.

The case concerned a fence which had been erected on the edge of a field, 300mm away from the kitchen window of an adjoining cottage. It amounted to a breach of planning control and the cottage’s owner asked the local authority to exercise its power under Section 102 of the Town and Country Planning Act 1990 to order its removal. The council, however, repeatedly refused to take that course.

The council acknowledged that the fence had an adverse impact on the owner’s amenity, principally due to loss of light and outlook from her kitchen window. The fence’s height had by that point, however, been reduced to two metres or less so that it benefited from permitted development rights. Weathering and vegetation regrowth had also reduced the fence’s intrusive appearance.

The owner offered to contribute £5,000 towards any compensation payable to the proprietor of the field. The council, however, remained concerned about the financial consequences of making a Section 102 order. It also questioned whether such a course would entail disproportionate use of planning officers’ time.

Dismissing the owner’s judicial review challenge to the council’s decision, the Court noted that, in deciding whether or not to make a Section 102 order, the council was not confined to purely planning considerations. A reduction in light to one room, although unacceptable in planning terms, was not so serious as to engage the owner’s human right to respect for her privacy and family life.

There was no requirement on the council to quantify the likely compensation payable in the event of a Section 102 order being made and such an assessment would in any event impose a disproportionate administrative burden. The council was entitled to take into account that the making of such an order would absorb officers’ time which might better be deployed in the public interest elsewhere.

17. Planning – Objectors Have to Know When to Take ‘No’ for an Answer

Objectors to planning decisions perform a valuable democratic service by taking their complaints to court, but the Court of Appeal has emphasised in a guideline case that there must come a point where the fundamental principle of finality takes effect and they have to take ‘no’ for an answer.

The case concerned a woman who had consistently opposed planning permissions granted for construction of a total of more than 400 homes on two adjoining sites close to a national nature reserve. Focusing on alleged breaches of European environmental protection rules, she pursued judicial review challenges to both planning permissions to the High Court.

After both claims were dismissed, she was refused permission to appeal against that outcome by a Court of Appeal judge who also subsequently rejected her application to reopen the matter. She remained undeterred, however, and applied afresh to a full panel of three judges for her case to be reopened, also arguing that the matter should be referred to the European Court of Justice for a definitive ruling.

Rejecting her application, however, the Court noted the high public importance of finality being achieved in litigation. That was particularly so in planning cases, where there is a need for speedy determination of issues relating to development and many people other than those directly connected to a case may be affected by the outcome. It would subvert the planning process were unsuccessful litigants able to revive the same arguments repeatedly and without limit, thereby prolonging the proceedings and delaying a certain and final outcome.

Noting that a refusal of permission to appeal normally marks the end of the legal road, the Court found that the woman had failed to show either that her case was exceptional or that she would suffer a real injustice if it were not reopened. There was no probability of her achieving a different result; there was never any tenable basis for an appeal and she had suffered no injustice.

Building works had already commenced on one of the sites, a developer having invested £2 million in the project. In those circumstances, the Court observed that reopening the woman’s case years after the permissions were granted would be likely to cause injustice to the developers.

18. Live in a Conservation Area? Do You Understand Planning Restrictions?

Most householders are entitled to make decorative and other fairly minor changes to their properties without planning permission but, if they live in a conservation area, much tougher rules apply. A High Court case showed the wisdom of seeking professional advice before getting out your paintbrush.

The case concerned a man who replaced the wooden windows on the front elevation of his property with plastic units and painted its render a shade of dark grey. The General Permitted Development Order (GPDO) ordinarily applies to such works, which therefore do not usually require planning consent.

The property was, however, in a conservation area and the local council had issued a direction that the GPDO would not apply to the protected locale. It issued a planning enforcement notice against the man requiring him to restore the wooden windows and to paint his property white. The council later prosecuted him for failing to comply with the notice and he was convicted by magistrates.

Challenging the conviction, he pointed out that the council was unable to produce before the magistrates either the original or a copy of the direction. The document had been lost, probably when the council moved from paper to electronic record-keeping. In the absence of the document, he argued that no breach of planning control could be proved against him.

Dismissing his appeal, however, the Court noted that the council and residents of the area had for years proceeded on the understanding that the GPDO did not apply in the conservation area. Planning permissions had been granted, and enforcement notices issued, on that basis and it had never previously been suggested that a valid direction was not in place. Despite the disappearance of the direction itself, the notice by which it was confirmed had been uncovered.

The Court found that the magistrates were bound to conclude on the evidence that it had been proved beyond reasonable doubt that the direction existed. By virtue of Section 285(1) of the Town and Country Planning Act 1990, the man could in any event only challenge the validity of the enforcement notice by appealing to the Secretary of State for Housing, Communities and Local Government, a step which he had not taken. The sole issue the magistrates therefore had to decide was whether he had breached the enforcement notice, which he plainly had.

19. Edge-of-Town Retail/Leisure Development Survives Court of Appeal Challenge

Commercial property developers will sit up and take notice of the Court of Appeal’s decision to uphold planning permission for a large retail and leisure development despite concerns that it will have a significant adverse impact on the vitality and viability of an existing town centre.

A local authority granted planning consent for the development on an edge-of-town site in the face of objections from a supermarket chain which operated a large store on adjoining land. It also overruled a clear recommendation from the council’s chief planning officer that permission should be refused. The chain’s judicial review challenge to the permission was nevertheless rejected by a judge.

Ruling on the chain’s appeal against that outcome, the Court noted that the case hinged on Paragraph 90 of the National Planning Policy Framework, which states that planning applications for large out-of-town retail or leisure developments ‘should be refused’ if they are likely to have a significant adverse impact on the vitality and viability of an existing town centre. The chief planning officer had advised councillors that the proposed development would have precisely that effect.

In dismissing the appeal, however, the Court emphasised that the word ‘should’, as used in Paragraph 90, does not mean ‘must’ and that councillors were not precluded from exercising their own planning judgment. In finding that objections to the development were outweighed by its economic and regenerative benefits, they had neither misinterpreted nor misapplied national or local planning policies.

20. What Does ‘Demolition’ Mean in a Planning Context? Court of Appeal Ruling

Most people might think that one only has to use one’s eyes to see whether or not a building is undergoing demolition. However, a Court of Appeal ruling on a building contract dispute underlined the difficulty of defining the word ‘demolish’ in a planning context.

A property owner engaged a contractor to knock together two houses so as to create a single residence. The project proceeded for a time but works had to be suspended for a year after the local authority took the view that they amounted to demolition and that conservation area consent (CAC) was therefore required. A dispute developed between the owner and the contractor as to where contractual responsibility for the delay and its financial consequences rested.

Following a trial, a judge found that the project involved works of demolition for the purposes of Section 74 of the Planning (Listed Buildings and Conservation Areas) Act 1990. On that basis, he ruled that CAC was required and that the owner had failed in his implied contractual obligation to use all due diligence to obtain it. The contractor was entitled to a year-long extension in which to complete the works and was not liable to pay the owner damages in respect of the delay.

Challenging that outcome, the owner pointed out that party walls with adjoining properties, together with most of the front and rear elevations of the two houses, had been retained. Asserting that the project would have no significant impact on the character and appearance of the conservation area, he argued that the judge was wrong to find that it involved works of demolition and that CAC was required.

Dismissing his appeal, the Court acknowledged that the impact of the works on the conservation area’s character and appearance was of central importance to the question of whether CAC should be granted. However, it had no relevance to the council’s purely factual decision as to whether CAC was required. The judge was entitled to find on the evidence that the removal of large parts of the houses and the clearance of the site for redevelopment amounted to works of demolition.

21. Major Mixed-Use Development Passes High Court Test

Proposals for a major mixed-use development on the site of a vacant business park received the High Court’s blessing despite a town council’s arguments that it would result in an unacceptable loss of employment land.

The 4.2-hectare park consisted of a vacant warehouse and a two-storey office block. A developer wished to demolish both buildings and replace them with 1,511 square metres of office space, 129 new homes and a 68-bed care home.

In refusing to grant planning consent for the scheme, the local authority cited local planning policies which stated that developments involving loss of employment land would be permitted only if existing uses were no longer economically viable. Would-be developers were required to establish an absence of such viability by marketing sites at a reasonable price for at least a year.

On the basis that prior approval in principle had already been granted for conversion of the office block and its car park into 45 flats, the developer carried out a marketing exercise only in respect of the warehouse. It nevertheless successfully appealed against the council’s decision to a planning inspector who granted permission for the development.

The inspector found that the proposals were contrary to local employment protection policies because, as the office block had been left out of the marketing exercise, it had not been demonstrated that employment use of the whole of the site was no longer economically viable.

He noted, however, that the extant prior approval represented a fall-back position for the developer and that there was a real possibility of the 45-flat development coming to fruition. The marketing exercise showed that continued employment use of the warehouse was unviable. Those factors, the inspector found, outweighed policy objections to the development.

Dismissing the town council’s challenge to that outcome, the Court found that the inspector had neither misunderstood nor misapplied development plan policies. His conclusions were rational and he gave intelligible and adequate reasons for a decision which represented a legitimate exercise of his planning judgment.

22. Digital Advertising Hoarding Permission Quashed on Highway Safety Grounds

Digital advertising hoardings are an effective means of grabbing public attention but they can also be a dangerous distraction to motorists if their operation is not carefully controlled. The High Court made that point in overturning consent granted for a digital billboard close to a busy food store.

A company that specialises in display advertising sought permission to upgrade a conventional paper hoarding already on the site. The local authority refused on grounds that the sign’s internal illumination would form an intrusive feature detrimental to the residential amenity of neighbouring occupiers.

The company, however, successfully appealed to a planning inspector, who granted a five-year consent. He did so on the basis that the amenity of neighbours would not be unacceptably harmed by the proposed hoarding. The consent was subject to standard conditions contained in the Town and Country Planning (Control of Advertisements) (England) Regulations 2007.

Those conditions are general in nature and are targeted at ensuring that roadside adverts do not compromise road safety. The inspector also imposed case-specific conditions which placed limits on the luminance of the proposed hoarding and banned the use of flashing or intermittent lighting.

Upholding the local authority’s challenge to the inspector’s decision, the Court ruled that those conditions did not go far enough. It noted that the company had itself proposed that the consent should be subject to industry-standard conditions commonly imposed on roadside digital hoardings.

The company recommended that only static images, rather than moving or flashing ones, should be displayed. It also suggested that switches between adverts should take place instantly, with no sequencing, merging or fading, and that images should change no more frequently than every 10 seconds.

The Court found that the inspector had failed to grapple with the council’s contention, which was effectively supported by the company, that further specific controls on the hoarding’s operation were needed in the interests of highway safety. He had also failed to give adequate or intelligible reasons for failing to impose such conditions. The permission was quashed.