REAL INSIGHT – Property Update – September 2013

Planet Property

The eagerly anticipated exposé of the UK property industry by former Estates Gazette editor Peter Bill lives up to expectations. A well-honed journalistic talent, together with a ringside seat from which to observe the inhabitants of Planet Property over a key period for real estate (1997 to 2012), make for an informative and entertaining read. Click here to read Susan Freeman’s review.

The future’s green for developers

Town and village greens are seen as valuable assets for the community but registration of a green has frequently been used as a potent weapon against development proposals. However, recent legislative changes will make it harder for local residents to register land as a green in order to oppose development.

Registration will no longer be possible where development plans have been put in place. So-called “trigger events” that now prevent registration include publication of a planning application, grant of planning permission, publication of a draft local plan that earmarks the land for potential development or the adoption of such a local plan. This change took effect from 25 April 2013.

In addition, from 1 October 2013, landowners will be able to deposit a formal “landowner’s statement” with the county council or London borough to end public use of their land. Previously, landowners had to take steps to prevent the public use of their land, for example by fencing it off, to be able to stop local residents from later claiming 20 years of recreational use “as of right”.

This latest change comes as village greens fall under the spotlight in London following Lambeth Council’s decision to reject an application by skateboarders to register an undercroft at the Southbank Centre as a green in order to prevent redevelopment of the site.

Contact Daniel Farrand for more information.

Constructive criticism

Nick Lane joined Mishcon’s Property Litigation Group in September as a partner specialising in contentious construction. He gives his views on recent and future developments within the world of construction, and what the industry should be doing to prepare for an economic upturn.

Is there a common problem you come across in construction law at the moment? How do you deal with it?

Yes, bad decisions from adjudicators. Obviously, seeking to influence the choice of adjudicator is the main way of trying to alleviate the problem, but it’s sometimes impossible to avoid rogue nominations by nominating bodies if the parties aren’t prepared to agree the identity of an adjudicator and haven’t named the adjudicators in the contract. On the plus side, nominating bodies like the RICS have been taking certain steps (for example, by introducing the Diploma in Adjudication) to improve the quality of the process. I’m looking forward to seeing the fruits of the actions they are taking.

What do you think has been the most significant trend in the practice of construction law in the last three years?

The increased use of conditional fee arrangements for construction legal work. It’s regrettable that the rules were changed earlier this year to make it less attractive to use such agreements by limiting what can be recovered from the other side. The change was not in clients’ interests and doesn’t reflect their wish for lawyers to share the risks and rewards of disputes.

What do you think the “next big talking point” will be in the construction world?

It’s difficult to pick a single next big talking point. There are various issues, apart from the impact of an upturn in the economy, which may or may not become big talking points, including: environmental considerations (David Clark at Cundall has written a useful guide to measuring and reducing the carbon footprint of buildings, called “What colour is your building?”); working with Stage 2 and possibly even Stage 3 or fully integrated Building Information Modelling; the impact of the recent changes to the planning process on development (and so-called planning “call ins”); the potential impact of a mansion tax, if it becomes a reality; and the debate about whether the industry needs a statutory duty of good faith, not just to be implied into contracts but also to cover pre-contract negotiations. Another issue which looks set to continue as a talking point is the lack of affordable housing and what is to be done about it – something needs to be done but there doesn’t seem to be any clear direction at the moment.

What should clients be doing to get ready for the anticipated upturn in the economy?

Purchasers will need to keep an eye on suppliers who think that the upturn in the economy means that they can insist on more favourable contractual terms. Also, as suppliers recruit to meet increased demands, they’ll need to do so carefully and make sure that they are recruiting people with the right training and skills. There has been a reluctance to invest in proper training in the industry (and not just during the recession): this is an age-old problem which needs to be addressed.

Click here to read Nick’s full interview.

The price is not right

In its recent report into quick house sales, the Office of Fair Trading (OFT) found evidence of unfair trading practices. Three firms are currently under investigation, while the OFT has written to 120 other businesses asking them to check that their practices and contractual terms comply with their legal obligations.

Quick house sale firms offer consumers a faster sale than might be achieved on the open market, with the seller usually agreeing to receive a below market value price. The OFT report found that some firms use trading practices that may prevent customers from making informed choices when selling their home or exploit their difficult financial circumstances, and warned agents to comply with legislation or face the risk of action. Practices of concern include:

  • Reducing the price offered at the last minute after the seller is financially committed to the transaction.
  • Making misleading claims about the value of the property or the level of discount to be applied.
  • Emphasising the fastest possible times to completion (for example, seven days) rather than more realistic times (three to four weeks) on websites and marketing materials.
  • Inducing sellers to sign long-term exclusivity agreements that prevent them selling to other buyers, with severe penalties for breach of contract.

The sector managed to avoid a market investigation by the Competition Commission, which would have involved a detailed two-year probe into business practices. We would advise estate agents to respond appropriately to OFT market studies to avoid unnecessary scrutiny into their business activities.

Click here to view the OFT report or contact Andrij Jurkiw for more information.