Tarmac Real Estate Bulletin – Winter 2021

Welcome to the Winter Edition of the Tarmac Real Estate Bulletin.

This quarter we take a look at recent case law dealing with restrictive covenants and easements and a minerals case dealing with reservations of stone. We also have an insightful article from our environmental team looking at Biodiversity Net Gain and the impact on developers. Finally, we have included some links to recent Blog Post articles that you may find useful.

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Property

Mines and minerals – reservations of stone

The Court of Appeal has considered whether mudstone came within the scope of exceptions and reservations contained within historic conveyances, enclosure agreements and statutory enclosures.

The claimants were trustees of a large rural estate in Powys. The respondent (the successor body to the Welsh Forestry Commission) owned and managed a number of freehold and long leasehold titles in the area. A dispute arose when the trustees found out that the respondent had extracted mudstone and used it in building and maintaining forest tracks and roads. The trustees claimed they retained the sub-strata under the areas owned or occupied by the respondent by virtue of exceptions and reservations in various conveyances. Whilst the trustees were prepared to come to an agreement about future extraction, they were looking for compensation for the large quantities that had already been removed.

The High Court found (and the Court of Appeal agreed) that whilst the trustees were entitled to the benefit of the various exceptions and reservations, the wording of the conveyances and enclosure awards did not include mudstone. The conveyances referred to “All mines beds and quarries of coal and ironstone and all other metals stone and minerals within and under the hereditaments and premises…conveyed” and the statutory enclosures excepted “any Mines, Ores, Coals, Metals or Minerals whatsoever”. No compensation was due to the trustees.

Practical tips:

• Practical tip – as we know, ‘mines and minerals’ is not a definite term, and must be interpreted by considering mining/commercial practices at the time of the relevant conveyance or dealing. Usually, reservations would include substances of ‘exceptional use or value’, or those substances subject to express statutory powers under the Enclosure Act 1816
• Practical tip – in this particular case, practice at the time the reservations were made was to protect rights to lead, slate and other metalliferous materials, such as zinc, hence the decision of both courts that the reservations were not deemed to include mudstone

Article provided by: Freeths Professional Support Lawyers

 

Restrictive covenants – ‘practical benefits’

A pension fund sold a golf course to a company. In the transfer, the company entered into restrictive covenants that it wouldn’t carry out residential development without the consent of the pension fund (although consent wasn’t required where the resulting dwellings would be lived in by family members of the company’s owners) and that it wouldn’t allow residential occupation other than by family members. The covenants were expressed to apply for 30 years.

The company obtained planning permission for the construction of two houses, one of which was to be occupied by the owner of the company, and the other by her granddaughter. The pension fund’s consent wasn’t required but the company applied for the covenants to be extinguished permanently, so that other people could live in the houses before the expiry of the 30 year period.

The basis of the application was that the covenants impeded a reasonable user of the land and secured no practical benefits of substantial advantage or value to the pension fund, which hadn’t retained any benefiting land when it originally sold the golf course. Its interest was purely financial. It was happy that the covenants be removed, but wanted financial compensation in the form of a share of the development value of the land.

The Upper Tribunal discharged the covenants and declined to award any compensation.

Practical tips:

• Practical tip – where land is burdened by restrictive covenants affecting its use, the owner can make an application for the covenant to be modified or discharged if certain criteria are satisfied (section 84 of the Law of Property Act 1925)
• Practical tip – the Upper Tribunal has discretion to modify or discharge where the covenant impedes the reasonable use of the land and the Tribunal will then consider whether, amongst other things, the covenant secures ‘any practical benefit of substantial value or advantage’ to the benefiting owner
• Practical tip – it is well-recognised that the right to demand a payment or a share of development value for the release of a covenant is not a ‘practical benefit’ for the purposes of section 84. The appropriate way to secure a negotiated share of the development value is by way of an overage covenant

Article provided by: Freeths Professional Support Lawyers

 

Easements – Maintaining rights of way

The claimants owned property that was accessed along a route that ran over land forming part of a country house owned by a company controlled by one of the respondents (M). In 1993, the access was relocated by agreement – the claimants released and surrendered the rights over the ‘old roadway’ and the respondent company covenanted to keep the ‘new roadway’ in good repair and condition and to ensure it was kept clear and unobstructed at all times.

The new roadway fell into disrepair to the extent that it caused alleged damage to the claimants’ car, so they attempted to go onto the country house land to carry out repairs and maintenance. M clearly didn’t want them to do this and he actually lay down in front of the digger and the police had to be called!

The claimants applied for – and successfully obtained – injunctions requiring M to remove boulders they had placed in the roadway and to remove a gate and posts that were obstructing the access. The claimants were also entitled to carry out necessary works of maintenance and repair so as to put and then keep the roadway in a satisfactory condition for their permitted use.

Practical tip:

• Practical tip – a benefitting owner is entitled to enter onto burdened land to carry out repairs or to alter the surface of the burdened land to accommodate the rights that have been granted

Article provided by: Freeths Professional Support Lawyers

 

Environmental

Biodiversity Net Gain (BNG): Opportunities for Landowners and Hurdles for Developers

The Environment Bill received Royal Assent and was passed into UK law on 9 November 2021. The provisions set out in this article remain correct, but all references to the ‘Environment Bill’ should now be read as the ‘Environment Act’.

This article discusses the biodiversity net gain (BNG) requirements within the Environment Bill (which apply only to England) and will be especially of interest to developers and landowners alike.

As many eagerly await Royal Assent of the Environment Bill (due before the end of this year), it has become clear that the new mandatory BNG requirements will become central to planning and development, and are likely to create both hurdles and entrepreneurial opportunities.

 

BNG in the Environment Bill: what does it mean?

BNG is an approach to development that results in an increase in the biodiversity value of habitat for wildlife (compared with the pre-development baseline) through habitat creation or enhancement, after mitigating as far as possible.

The Environment Bill, if enacted as currently drafted, will require developers from 2023 to deliver a minimum 10% BNG in respect of new development in England where planning permission is granted under the Town & Country Planning Act 1990 (TCPA) regime and under the Planning Act 2008 (nationally significant infrastructure project) regime.

Developers will be required to submit, and gain approval for, a “biodiversity net gain plan” from the relevant local planning authority. This must include the developer’s proposed steps to minimise the adverse effect of the development on the biodiversity of onsite and offsite habitats, the biodiversity value of the habitat pre-development and post-development, and demonstrate how at least 10% BNG will be attributable to the development.

Developers must also demonstrate how the BNG will be maintained for a minimum of 30 years. The House of Lords has recently agreed an amendment to the Environment Bill which will allow the government to review and increase the duration for which BNG sites must be secured. This is in response to recent criticisms that a 30-year timescale is insufficient.

The measure of pre-development and post-development biodiversity value will be based on a metric produced by Defra.

The BNG provisions will apply to all development in England, with the full list of exemptions to be set out in secondary legislation. These exemptions will include, but are not limited to, permitted development and marine development. Of particular significance was the government’s recent amendment to the Bill which extends BNG obligations to nationally significant infrastructure projects.

The delivery of BNG will be legally secured through either (a) a conservation covenant, entered into between landowners and responsible bodies which will bind the relevant sites as local land charges, or (b) through a planning obligation (a section 106 agreement) which runs with the land.

The Environment Bill outlines three possible ways to demonstrate that at least 10% BNG will be attributable to the development, through:

1. increasing the post-development biodiversity value of any onsite habitat (the land to which the relevant planning permission relates);
2. acquiring biodiversity units from any registered offsite biodiversity gain sites (such as buying biodiversity units from landowners or environmental organisations who have created those units by enhancing their own land); or
3. purchasing government-issued biodiversity credits (however, it should be emphasised that the government envisages this as a mechanism of last resort and it is believed that these credits will be significantly more expensive than option 2).

 

Implications and opportunities  

In practice, it will be very difficult for developers to achieve at least 10% BNG solely through their own onsite enhancement (option 1) and are thus likely to need to purchase units from landowners with registered biodiversity gain sites (option 2); ultimately impacting their available profit as a developer.

Further, as to how specifically the scheme will work in practice, much of the detail remains to be laid down in secondary legislation. The secondary legislation, with its policy content aimed to be finalised in spring 2022, is expected to address matters such as how exactly the register of offsite biodiversity gain sites will work and how the BNG requirements will apply to applications for outline planning permission and reserved matter applications.

Despite these limitations, BNG presents both an exciting “greener” and more sustainable approach to development, and an entrepreneurial opportunity for landowners to receive income from their land in exchange for units/credits. For example, farmers or businesses may commit to enhancing their land (such as closed landfill sites or unused farmland) so as to create offsite biodiversity units to sell to developers (i.e. option 2). Overall, there will be a likely significant increase in the market value of low grade agricultural land and any land capable of being enhanced.

A public register will be created containing the details of any sites where a gain has been promised to be delivered and the details of to whom (i.e. developers) the units arising from that land have been allocated. This will be crucial in preventing landowners from double-selling units. In addition, a recent amendment to the Environment Bill agreed by the House of Lords means that the government must keep under review the amount of land being entered onto the biodiversity gain site register. The government must also consider whether the period for which habitat enhancement must be maintained on the biodiversity gain site could be increased, although any changes to timescale must be done “without adversely affecting” the land supply in the biodiversity gain site register.

It is currently envisaged that there will be a two year transition period between the Act obtaining Royal Assent (expected 2021) and the BNG provisions coming into force in 2023. Significantly, the Environment Bill will not affect existing planning policies in relation to BNG, as at present, the National Planning Policy Framework encourages the provision of BNG where possible. Nevertheless, although local planning authorities often encourage BNG, some recently adopted local plans have now begun mandating BNG even though the legislation is not yet formally in existence.

Therefore, the starting point for developers will involve checking for any requirements relating to BNG in the current (or emerging) local development plan, and then to seek to align the proposed scheme with existing guidance or standards. Even where strict BNG requirements are not prescribed by the local development plan, businesses looking to develop their sites could still plan ahead for opportunities to address BNG as early as the design stage or during site selection.

Articles provided by: Penny Simpson

 

Freeths Blogs

Please also take a look at the following Real Estate Blogs:

• Real Estate Blog: On the Horizon – Some clarity on how rent arrears are to be dealt with by the Commercial Rent (Coronavirus) Bill
• Real Estate Blog: Proposed longer limitation periods and wider liability for defective work under the Building Safety Bill
• Together an Electric Dream? Electric Vehicle Charging Consultations – An Update for Developers
• Real Estate Blog: Farmers – are you prepared for the inevitable? The transition from BPS to ELM

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The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.