Small Developments Affordable Housing News

Welcome news for developers of small sites.

Following the government’s successful appeal last week against the decision in the West Berkshire Council and Reading Borough Council case nearly a year ago (click here to go to our previous posting), the National Planning Practice Guidance will be amended again. It is expected to reintroduce the relevant provision exempting developments of 10 homes or fewer from affordable housing or Section 106 contributions.

Housing minister Brandon Lewis’ triumphant statement called the case “a total waste of taxpayers’ money” and said the judgment will restore common sense to the system and ensures that builders developing smaller sites don’t face costs that could render development unviable and stop them building any homes at all.

Whether the exemption will be reintroduced in its same form immediately, or with any changes, or whether the government will wait until West Berkshire and Reading have considered whether to appeal further remains to be seen. We will update you as soon as we have more news. It is certainly going to be hard for local authorities whose affordable housing supply was anticipated to come from small housing developments


Building Around a Tenant

How much redevelopment and refurbishment work can a landlord do when it has a tenant in occupation? The recent case of Timothy Taylor Limited v Mayfair House Corporation provides a useful reminder of the obligations owed by landlords to tenants where they want to carry out redevelopment works to a building around a tenant of part who remains in occupation.

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(US) Pennsylvania Property Tax Reassessment Update

Several counties in Pennsylvania are conducting countywide property reassessments. This update provides status changes for Washington, Blair and Lancaster Counties, along with a set of important deadlines and basic assessment appeal information.

Washington County Washington County rolled out informal notices setting forth the tentative reassessment values for tax year 2017 for commercial properties last week, and the reassessment values are now available on the Washington County reassessment website. If you are unhappy with your tentative value, you may request an informal review with Tyler Technologies. The deadline to request an informal review is property-specific. All reviews must be heard by June 1, 2016, so you must contact Tyler Technologies by the date listed on your notice to schedule a review.

Following the informal review process, on July 1, 2016, the county will issue a Change of Assessment Notice to all property owners. Property owners will then have 40 days to file a formal appeal that will be due by August 10, 2016.

Blair County Blair County reassessment notices effective for tax year 2017 will be mailed to all property owners on or before July 1, 2016. Property owners will then have 40 days to file a formal appeal with the Blair County Board of Assessments. The deadline to file the formal appeal is August 10, 2016.

In addition, informal administrative reviews will be conducted from July through September 2016. Formal appeal hearings will be held after the informal reviews are complete. Because of the timing of the informal review, you must file the formal appeal by August 10, 2016, to preserve your appeal right.

Lancaster County Lancaster County postponed its ongoing reassessment and it will now be effective for the 2018 tax year. Preliminary reassessment notices are scheduled to be mailed out in March 2017.

We will continue to update you on additional information.

Important Reassessment Dates:

May 2016 Deadline to schedule informal review (Washington County – check notice for deadline)

July 1, 2016 Formal reassessment notices to be mailed (Washington County and Blair County)

July 2016 Informal review hearings (Blair County)

August 10, 2016 Formal appeal deadline (Washington County and Blair County)

March 2017 Informal notices to be mailed (Lancaster County)

Should I file an appeal? A property owner receiving a reassessment notice should evaluate the following:

  • Is the property data correct (i.e., land area, building size)?
  • Is the market value fair, based on your location (i.e., compared with recent sales in your area)?
  • If the property is rented, is the market value based on the income generated by the property?

Reed Smith is prepared to assist you in evaluating your property for an informal review or formal appeal. View our Real Estate Group, or contact Dusty Elias Kirk to request an evaluation of your property.

Landlords! Keep Your Contact Details Up To Date!

We have blogged on a number of occasions about the pitfalls befalling tenants when it comes to the exercise of break options. The case of Levett-Dunn v NHS Property Services Ltd is an example of case that was decided in the tenant’s favour and serves as a salutary lesson to landlords that they cannot rely on their own failings to thwart a tenant’s attempt to break their lease.

In the case of Levett-Dunn, the tenant served break notices on each of its four landlords at the address stated for the landlords in the lease. However, only one of four landlords continued to use that address and the landlords applied for a declaration from the Court that the tenant’s break notices were invalid as they had not been served at the landlords’ current address. The Court held that it was in the landlords’ “own power” to inform the tenant that their address had changed and if they failed to notify the tenant, they took the risk that notices and other correspondence would not reach them. The Court dismissed the landlords’ claim and the lease was held to be validly determined.

This case serves as a reminder to all landlords (and particularly overseas landlords with addresses for service in the UK stated in their leases) to inform tenants of any changes of address or contact details. Landlords will not be able to benefit from their own shortcomings and they may miss out on vital information that affects the value of their investment.

Select Your Expert Witness With Care

The recent case of Flanders Community Centre Limited v Newham London Borough Council has provided us all with a dramatic reminder of how important the role of the expert witness is at trial. Whilst most lease renewal cases don’t go to trial, those that do need careful preparation and early instruction of experts to ensure the evidence given stands up to scrutiny.

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Don’t Let Deposits Spoil the Deal

A recent case acted as a reminder of the risk inherent in taking a contractual deposit which is greater than the market norm. That case involved penalties for overstaying permitted parking times and re-confirmed the contract law principle that a deposit must represent a genuine affirmation of a party’s earnest intention to proceed and must not exceed the percentage set by long established practice – which in property contracts is 10%. Where deposits are more than 10% of the price there is a much higher chance of the deposit being repayable – the precise opposite of what the seller would be trying to achieve. Exceptions will be made only where there are special circumstances justifying a larger payment. So, tread very carefully before asking for or agreeing to accept a larger than usual deposit.

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(US) For Virginia Land Use, Local Governments Have To Follow The Rules

Starting July 1, 2016 Virginia local governments must, in reviewing a residential rezoning or concept plan amendment, determine whether a requested land use exaction addresses an impact that is “specifically attributable” to the proposed new residential development. Virginia’s unique proffer system allows a rezoning applicant to voluntarily offer to provide reasonable conditions governing the proposed use of property as part of classifying land into areas and districts by legislative action.  Virginia builders and developers, like their counterparts throughout the United States, are familiar with the reality of the land use entitlement process that allows the government to condition adjudicative approval of a use on the dedication of property, payment of fees or performance of obligations to the public, so long as the government quantifies an “essential nexus” and “rough proportionality” between the exaction the government demands and the social costs of the applicant’s proposal.

The revised proffer legislation codified in Code of Virginia Section 15.2-2303.4 places the burden on local government to demonstrate a proffer is not unreasonable because it addresses an impact that is “specifically attributable” to a proposed new residential development.  After July 1, 2016 Virginia local governmental entities must establish that the proffer addresses a need or an identifiable portion of a need for one or more public facility improvements in excess of existing public facility capacity at the time of the rezoning and each such new residential development applied for receives a direct and material benefit from the proffer.

Not surprisingly, Virginia units of local government strongly opposed the new proffer legislation arguing that the legislation will put an end to a constructive and collaborative development process and eliminate the ability of developers to offer proffers for public facilities or improvements.

The tension between units of local government and developers can be resolved by a cooperative effort to prepare a sound nexus study of the impact of a proposed project.  Some jurisdictions analyze environmental impacts of projects under state versions of the National Environmental Policy Act (“NEPA”).  The environmental impact statements required under NEPA and a variety of state legislation similar to NEPA could provide a model for determining the essential nexus and rough proportionality of Nollan and Dolan in the context of the “specifically attributable” impact analysis required by Code of Virginia Section 15.2-2303.4.

By using the same sort of analysis conducted for environmental review in some jurisdictions, Virginia units of local government and land use applicants could engage in a cooperative fact-based application impact analysis that would address the requirements of Code of Virginia Section 15.2-2303.4, without engaging in rezoning moratoria or unnecessary acrimonious debates that may follow the July 1, 2016 implementation of the new proffer legislation.  Use of an impact statement combined with supportive findings could allow units of local government and developers to comply with the new statute while achieving common goals.  Such a process would allow compliance with U.S. Supreme Court dictates while addressing the Virginia General Assembly’s revised proffer requirements.

The sky’s the limit…

What would you do if;

  1. your property development business had obtained planning permission to construct a 62 storey tower comprising 200,714 sq.m;
  2. you had secured funding in principle to commence the development; BUT
  3. the proposed development infringed the rights to light of 61 properties – of which 53 were maintaining their fundamental right to an injunction to prevent loss of light from the development as their primary remedy;
  4. you could see a failure to meet demand for space if pre-contract orders for materials are not placed in April 2016; and
  5. your investors had threatened to exit if the threat of injunctive remedies was not removed?

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A new broom: sweeper clauses in residential leases

Properly employed, sweeper clauses are designed to catch service charge costs that may be unforeseeable at the time of drafting. This is an essential fall back when drafting a long residential lease whose term will be somewhere between 99 and 999 years and subject to a statutory right of extension on the same lease terms.

However, sweeper clauses are not the all-encompassing saviour they may appear to be. The recent decision in Geyfords v O’Sullivan & others is a reminder that wide drafting is often narrowly construed by the courts: In that case the court held that a sweeper referring to “management” costs did not extend to the landlord’s legal costs in managing the development.

It is also worth remembering that sweeper clauses in residential leases will also be subject to the tests of reasonableness contained in s.18 and 19 of the Landlord and Tenant Act 1985. Those provisions require costs under residential service charges to be both reasonably incurred and for the works or services to have been carried out or provided to a reasonable standard commensurate with the cost incurred.

The First Tier Tribunal has jurisdiction to decide in advance whether proposed expenditure is within the scope of a particular residential service charge regime. The best approach for the cautious landlord may, therefore, be to seek a ruling from the First Tier Tribunal before expending large amounts of money on services or works that are not expressly covered by the wording of the lease in question.

Lease Assignments to Guarantors No Longer Valid

It is now clear that leases cannot be assigned to the tenant’s guarantor but serious issues arise out of the recent High Court case of EMI Group Limited v O&H Q1 Limited which specified that any lease assignment by a tenant to its guarantor is void. This means that the assignment is not effective, the lease is still held by the previous tenant and the intended assignee remains the guarantor of that previous tenant (and does not become the new tenant of the lease). In addition, be aware that the court’s decision applies retrospectively. This post summarises action landlords and tenants may want to take now and assesses the issues arising.
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