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The Legal Obligations of Developers

shutterstock_194992130When you become a property developer, there are a lot of things to consider. As well as having a reliable source of finance, you will need to have a clear understanding of the development process and your obligations as a developer. These obligations include a clear understanding of the building regulations associated with property renovations as well as the legal constraints involved in obtaining planning permission. Understanding your obligations is especially important because mistakes at any stage could result in significant financial loss and costly legal disputes.


Small-Scale Development

In a small-scale residential development you might decide to replace the bathroom, install new windows or add a small extension to the rear of a property. While all of these might add value to the property, they do not require planning permission because they do not change the use of the building and do not add significantly to the footprint of the property. The most important thing to check is that the renovation work that has been done complies with local building regulations. To understand what is required, you should contact the local authority’s Building Control Service before you begin a new project.

If you are employing a building contractor, you should agree who is responsible for making sure building work complies with the regulations, as this should help to avoid disputes later on (usually the contractor is the responsible party). Once the work has started, a building control surveyor should make a number of checks to ensure that the building regulations are complied with. You will also need to check that the building work that has been done does not adversely affect another part of the property.

If you fail to ensure that new renovations comply with building regulations, the Building Control Service could take you to court. You could be fined up to £5000 and you (or the building contractor) will be liable to fix any faults or to remove the building work. If you don’t agree to undertake the work as directed by the court, the local authority has the power to undertake the work itself and recover the costs from you.

If you intend to develop the property and sell it on to new residents, it is likely that any failure to comply with building regulations will be discovered when solicitors undertake legal checks. At this point it will be clear that the renovation does not have the required paperwork. Without the correct paperwork the sale will not proceed, and you will still be left with the bill to rectify the issue.

In some cases, such as if the property is located within a conservation area, or if it is a listed building, even small renovation projects will require planning permission. You must make sure you understand the legal status of the property before you begin even small renovation projects.

Obtaining Planning Permission

In the case of developments where a property will be made significantly bigger, where engineering works are to be undertaken (such as knocking down walls), or where changes to the property will affect a shared boundary (‘party wall’), you will have to apply to the local authority for planning permission. You will need a qualified building surveyor to help you to make suitable plans for the project.

Planning permission is linked to changing the external appearance of the property, making major internal alterations or changing the use of the property. Even if the property already comes with planning permission when you buy it, you will need to check the details before you proceed with any renovation work. There are different types of planning permission, and it is very important that you understand the differences between them.

‘Outline planning permission’ means that permission has been granted for a dwelling, but the details of the build have yet to be approved. You will have to employ a surveyor and work with the local authority to agree suitable plans before full permission will be given. ‘Full planning permission’, on the other hand, means that permission has been granted to develop a property according to a particular plan. There may be conditions attached to this plan, and any changes might require re-applying for planning permission. If you buy a property with planning permission, you should check the detail of the agreed plans, especially any conditions attached, such as whether certain building materials are required for the construction. Make sure you understand the cost implications of any conditions before you buy, so that you don’t end up spending your renovation budget on new plans or expensive building materials.

Other Planning Restrictions

Buildings that are located in conservation areas, such as National Parks and Sites of Special Scientific Interest may come with significant planning restrictions. In other situations a covenant attached to the property might mean you have to get permission from a neighbour or other interested party before you build, even if planning permission isn’t required.

It is important that you know what planning restrictions there might be, and how they would affect any development projects, before you buy a development property. In the case of listed buildings, you might find that even small renovations require planning permission as well as requiring that special materials and craftsmen are used to ensure that renovations are in keeping with the original character of the property. If you have not budgeted for the extra expense, these requirements could significantly reduce your profit at the end of the development.

Another thing to consider is the environmental impact of development on the area surrounding the development property. Planning permission might not be granted where there is a tree preservation order, or where development work might damage the habitat of an endangered species of wildlife. shutterstock_157980962Doing your homework in advance will ensure that you avoid expensive red tape and make the most of your investment.

The Community Infrastructure Levy

For larger property developments (more than 5 dwellings on the same site) developers will have to take into account the cost of the Community Infrastructure Levy (CIF). This is a fee payable to the local authority for developments that create additional floor space of more than 100 square metres. The levy does not apply to new houses or flats, but can be levied on a single house or flat built by a developer (but not on a self-build project). The levy is intended to cover the additional infrastructure costs associated with new homes and can include transport links, educational contributions, park and play areas, nature conservation charges and the cost of affordable housing (if not already provided on site).

Landowners are liable to pay the CIF, but anyone involved in a development may take on the liability to pay it. Negotiations on what will be paid for, and how much the cost will be per planning dwelling is agreed as part of the planning process for the development. If the developer does not agree the terms of the CIF with the local authority, planning permission will not be granted. Successful developments will require that developers understand the process and are fully prepared, to ensure that the planning process goes smoothly.

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