Tarmac Real Estate Update – Winter 2018
Welcome to the Winter edition of the Tarmac Real Estate Bulletin.
This quarter we look at changes to the permitting regulations, what has been happening in the planning world, a summary of the High Court’s decision to overturn the Secretary of State’s coal refusal, implications of changing the use of property from Agriculture to residential or commercial and what landlord’s should know if an AHA tenant pays its rent late.
Changes to the Environmental Permitting (England and Wales) Regulations 2016
On 26 November 2018, the Government published its response to a recent consultation on proposals to tackle crime and poor performance in the waste sector. The proposal was part of the government’s “25 Year Environment Plan”, in which it committed to (among other things) eliminate waste crime and illegal waste sites and strengthen the Environmental Permitting Regime.
Key changes to be implemented by the Government resulting from the response
The Government aims to improve operator competence at waste sites through introducing the following amendments to the Environmental Permitting (England and Wales) Regulations 2016 (EPR):
Written management system at waste operation sites
- The amended EPR will require all regulated waste sites to operate in accordance with a written management system;
- The written management system should identify and seek to minimise any potential risks of pollution arising from the site’s waste operations, e.g. maintenance, non-conformance, risks arising from complaints by the local community and closure;
- Failure to produce, hold or operate in accordance a written management system will constitute a breach of the EPR.
Providing details of technical competence at sites
- The EPR will be amended to require operators to submit the details of the technical competence arrangements at site via their waste returns;
- The Government acknowledges that operators may need some time to obtain the relevant technical competence qualifications as required under the amended EPR. However, once the amended regulations come into force, regulators will have the power to enforce against poor technical competence at operator’s sites. Initially, enforcement action will not have immediate criminal consequences. However, the Government intends to introduce criminal sanctions in due course;
- Waste operators and technically competent managers (TCMs), will be held responsible for breaches on sites.
- Alongside the changes to the EPR, the Government will:
- introduce a de-registration system for technical competence and
- clarify the legal requirements for technical competence.
The amendments to the EPR are expected to be published in early 2019 and to come into force in April 2019.
The new rules highlight the importance of ensuring that all sites and operatives are familiar with, and follow, Tarmac’s written management systems and that technical competencies are kept up to date.
Should you have any queries in relation to the above and require further advice, our specialist environmental team will be pleased to help.
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In September, the HM Treasury using Twitter to announce the Autumn Budget and there was a challenge in the High Court of the revised NPPF from the Friends of the Earth, together with significant and important changes to the PPG that supports the new NPPF, July 2018. The changes to the housing needs assessment in the PPG have a caused a recent stir, with its new standard methodology based in part on the ONS population growth figures that have subsequently been reduced in many areas by around 25%. Our September update is here:
In October, the Government introducing a new Shale Environmental Regulator Group to help resolve regulatory issues on fracking sites, with Caudrilla Bowland Ltd commencing fracking on its Lancashire site. In addition, they introduced further planning reform to make the planning system more efficient to provide more homes and improve building safety. Our October update is here:
In November, the Government has plenty of planning reform proposals in the pipeline which sees increasing housing supply, and types of housing being proposed by developers as well as better use of land allocation and CPO powers. A very important Court of Appeal decision in the Faraday case has also been issued on procurement law for development agreements that will dramatically change the way development agreements will be produced or procurement procedures will apply.
The Government also published various draft legislation to ensure that UK legislation is amended and will continue to function correctly post-Brexit by removing references to comply with EU legislation or obligations and reflects that the UK will no longer be a member state. Whether the legislation will be needed remains to be seen. Read our latest planning update here:
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High Court overturns coal refusal
The High Court has overturned the Secretary of State’s refusal of a planning application for coal mining. We outline the main reasons for the decision.
High Court’s overturns coal refusal
The High Court has overturned the Secretary of State’s refusal of mining firm HJ Banks and Company’s planning application for an opencast coal mine to extract up to 3 million tonnes of coal from 325 hectares of farmland near the village of Widdrington, Northumberland.
The Secretary of State accepted that the benefits of coal extraction and local employment deserved “great weight”, but against that, he decided that the project would have “a considerable adverse impact on the landscape character” of the area. He also concluded that “overall, the scheme would have an adverse effect on greenhouse gas emissions and climate change of very considerable significance”.
The High Court noted that the “principal issue” was the effect that the mine would have on greenhouse gas emissions from the power generation industry. The Court also noted that the Secretary of State had accepted that there “was a need” for the coal to meet Britain’s energy needs and no one had suggested that his intention was to “leave the country’s energy needs unmet”.
The Court held that the Secretary of State had been entitled to take a “different approach” to the impact of indigenous coal mining on greenhouse gas emissions from previous Secretary of State decisions. The reasons for the change in approach were “explained clearly enough” in the Secretary of State’s decision letter.
However, the High Court held that what the Secretary of State failed to explain was “how a proposal needed for the country’s energy could be refused” unless there was sufficient evidence that the energy gap would be filled by renewable or low-carbon sources. The Court concluded that the Secretary of State had “failed to provide adequate reasoning” for his refusal to follow the inspector’s recommendations.
The Secretary of State’s decision was quashed and the planning application will have to be re‑determined by the new Secretary of State.
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Changing the use of property from Agriculture to residential or commercial
Landowners seeking to develop their agricultural land into residential or commercial property will need to consider the implications of doing so on their neighbours. They also need to consider whether easements and other rights benefiting the land, will continue to exist post development.
The drainage of surface water away from the development is a main concern. The drainage system often runs across neighbouring properties, making the situation trickier. While the landowner is developing their property, the neighbouring land is likely to remain agricultural in nature for many years to come. An increased level of liability is therefore on the landowner, who is seeking to develop their land.
If the drainage is through open ditches, then a landowner would need to ensure that nothing impacts nitric levels within the water or pollutes the ground water going through land that is downstream. In practical terms, this could affect the servient landowners by contaminating their land and water, thus putting them in difficulty when applying for farming subsidies and Environmental Schemes. This opens the landowner who is developing their property to possible civil proceedings.
In this case, it is also worth noting that even if the development is downstream from neighbouring agricultural land, as commercial developments are covered predominantly with hard surfacing, it is likely that rainwater and particularly storm water will run off the land more quickly into the drains and ditches; this is in comparison to agricultural land which would soak up rain water more readily. This will intensify the amount of water that the drains need to carry significantly. Where existing ditches and drains cannot cope with the increased speed of flow, there is an increased chance of flooding.
In general terms, an easement must not grant any additional rights to a person than was originally intended. One cannot therefore expect the same easement, which benefitted bare land, to apply to, a large residential estate or a business park.
The test is a complicated one, with contradictory precedents muddying the water further. Essentially, the two main tests are the following:
- Does the development of the property qualify as a “Radical Change” to the character of the land in questions (as opposed to intensification of the use alone) and
- Does the new redeveloped land burden the servient land significantly more than before?
Once both points above are satisfied, the landowner’s right to the easement will automatically be extinguished and they will need further express easements or other remedies, e.g. construction of a new drainage system, to be in place. Alternatively, the landowner may be able to negotiate and obtain guarantees and indemnity from servient owners that rights currently enjoyed by the land will continue in the future.
With regard to test 1 above, it would be reasonable to expect that the development of agricultural land would satisfy the test; the fundamental characteristic of the farm will have changed and the land will be used for residential or commercial purposes. As regards the second test, the increase in burden will depend entirely on the facts. Once the first test is satisfied however, the chances of the same applying for the second is high.
Whether you are a landowner wishing to develop or you are a farmer/landowner neighbouring property you believe is about to be developed, it is always a good idea to run issues of easements, particularly the exhaustion of them as well as the liability you would have to your neighbours, passed your lawyers. Freeths are lucky enough to have an experienced team of agricultural lawyers who will be able to advice you on this specialist area. Please do get in touch with a member of the Agricultural Property team if you do require assistance.
The risks of late rent for an AHA tenant
We regularly come across issues relating to non-payment of rent or late payment. For commercial and residential properties the consequences are not always draconian. However, when an Agricultural Holdings Act (“AHA”) tenant fails to pay rent on time this could have very serious, and costly, outcomes for them. There are special rules and procedures that relate to AHA tenancies, of which every landlord and tenant should be aware.
An AHA tenancy is one that relates to land, which is to be used for the purposes of agriculture. The tenancy agreement will usually provide that it is for two years or more, and the land shall be let year to year until it is determined. Since 1 September 1995 it has been impossible to create a new AHA tenancy. However, AHA tenancies that were created before this date still continue to exist.
AHA tenancies can be extremely valuable to tenants and less attractive for landlords. That is because if an AHA tenancy is in place, it will mean the tenant has security of tenure, and the landlord can only regain possession in certain limited circumstances. AHA tenancies created before 12 July 1984 will normally carry succession rights, so that when the tenant dies or retires, a close relative can apply to succeed the tenancy. There can be two successions after the original tenant. AHA tenancies created on or after 12 July 1984 generally do not carry succession rights, but there is still security of tenure for the tenant’s lifetime.
Failure to pay rent on time
One of the circumstances in which a landlord may be able to regain possession from an AHA tenant is if the tenant fails to pay rent on time. There is a two stage process for the landlord wishing to regain possession:
- The landlord must serve a notice to pay (which requires the tenant to pay within two months of service of the notice). If the tenant complies with this notice then the landlord will not be able to take any further steps.
- If, however, the tenant fails to adhere to the notice to pay within two months of service, the landlord can then serve a notice to quit known as a Case D Notice.
There is still then the option for the tenant to challenge the Case D Notice, either by referral to arbitration, or by challenging the validity of the Case D Notice itself (e.g. if the Case D Notice is unclear or not valid at common law). If however, the landlord does not fall down on any technicalities, and the rent is unpaid, it is difficult for a tenant to successfully challenge a Case D Notice relying on non-payment of rent, meaning ultimately the landlord could terminate the AHA tenancy.
There are a number of technicalities / potential pitfalls for the unwary landlord or tenant when dealing with failure to pay rent on time, which could mean that either (a) the landlord is unsuccessful in its attempt to regain possession, or (b) the tenant who tried to pay rent is still faced with a valid Case D Notice. Some potential issues to bear in mind (though this is by no means a non-exhaustive list) are:
- Has the landlord given notice to the tenant providing details of its address for service? Rent will not be payable until this is done.
- Is the notice to pay in the statutorily prescribed form? If it is not, then the landlord will not be able to rely on it.
- Is the amount of rent claimed by the landlord correct / has the landlord incorrectly included a claim for other monies as well?
- Have the notices been served correctly by the landlord?
- Are the notices clear?
- If the tenant wants to challenge a Case D Notice served by the landlord, has the tenant referred the matter to arbitration in time?
- Has the tenant complied with the notice to pay in time?
Disputes can arise where the tenant makes payment on or shortly before the expiry of the notice to pay, which means that the landlord does not receive payment until after the deadline. The general position is that the tenant must make payment in cash to the landlord within the notice to pay period. Arguments can arise however, where the tenant argues that the landlord has accepted an alternative course of dealings (e.g. where the landlord accepts rent by cheque put in the post on the due date).
As a landlord, you should ensure that you comply with all of the requirements for the notice to pay and Case D Notice. It is all too easy to fall down on what may be perceived to be a minor element, but which invalidates one of the notices served. This is particularly important given a landlord’s limited ability to ever terminate AHA tenancies.
From the tenant’s point of view and useful for landlord’s to know, a tenant should not leave payment to the last minute, as this is likely to create risky arguments about whether it has paid on time. In addition, whilst there may be some arguments about the validity of the notices, or whether rent is due, in general, the safest position for the tenant is simply to comply with the notice to pay. The alternative for the tenant may be running the risk of losing its tenancy altogether.
All of us here at Freeths wish you a very merry Christmas and best wishes for the New Year. We hope you enjoy the festivities and the break. We look forward to updating you again in 2019!
The content of this page is a summary of the law in force at the present time and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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