Real Estate Focus: December 2023

Developers take note: mandatory Biodiversity Net Gain from January 2024 - update

In the August 2023 edition of Real Estate Focus we reported on the government’s introduction of mandatory Biodiversity Net Gain (BNG) under the Town and Country Planning Act 1990 (TCPA 1990).

BNG sets a target for the positive environmental impact of a development. Developers must submit a biodiversity gain plan after the grant of planning permission to discharge the mandatory BNG planning condition (the Plan). The BNG target depends on the size of a development but requires at least a 10% increase in biodiversity and obligates developers and local planning authorities (LPAs) to make environmental improvements. These can be achieved by mitigating damage where possible, compensating where required, and creating new habitats. The LPA must approve the Plan before development can commence and must publish the Plan and outcome on a public register.

Following the delay in the introduction of mandatory BNG from November 2023 to January 2024, the government has published material to support entities in complying with the upcoming requirements.

The Department for Environment, Food and Rural Affairs (Defra) has published a draft Plan template for major developments, which sets out a framework for a developer to populate with information on how their environmental plans will satisfy their BNG obligations. This includes: setting out the steps that will be taken on-site to avoid or minimise impacts to habitats, providing details of both on-site and off-site environmental enhancement, and calculating any biodiversity units (the unit of measurement used by the biodiversity metric set out in the TCPA 1990) required.

Additionally, Defra has published associated draft guidance. This provides advice for the developer on populating the Plan and is also targeted at helping the LPA determine whether the developer has met the statutory requirements.

Defra will also in due course produce an equivalent draft Plan template for use on small sites and phased developments. It will then publicise any changes being made to either the draft Plan templates or the accompanying guidance in its blog, before producing final Plan templates ahead of the introduction of mandatory BNG in January 2024.

For further advice and details of the BNG regime, please contact Counsel, Lucy Bruce Jones or associate, Alysha Patel

Leasehold and Freehold Reform Bill: what does it say (and not say)?

The Leasehold and Freehold Reform Bill promised in the King’s Speech was introduced in the House of Commons on 27 November 2023.

The Bill is described as the second part of a legislative package to reform English and Welsh home ownership law. It follows the Leasehold Reform (Ground Rent) Act 2022, which put an end to ground rents for new qualifying long residential leasehold properties in England and Wales (and as reported in the November 2023 edition of Real Estate Focus, the government is consulting on capping ground rents in existing long residential leases, proposals that have already proved to be highly controversial).

As anticipated, the proposals in the Bill are wide-ranging and fall into two broad categories.

The first category is aimed at empowering leaseholders. It includes proposals to:

• Make it cheaper and easier for existing leaseholders in houses and flats to extend their lease or buy their freehold;
• Increase the standard lease extension term from 90 years to 990 years for both houses and flats, with ground rent reduced to a peppercorn;
• Remove the requirement for a new leaseholder to have owned their house for two years before they can extend their lease or buy their freehold and, for flats, before they can extend their lease; and
• Increase the 25 per cent ‘non-residential’ limit preventing leaseholders in mixed-use buildings from buying their freehold or taking over management of their buildings, allowing leaseholders in buildings with up to 50 per cent non-residential floorspace to do so.

The second category of proposals aim to improve leaseholder consumer rights, by:

• Requiring greater transparency regarding leaseholders' service charges, so that all leaseholders receive minimum key financial and non-financial information on a regular basis and are therefore in a better position to challenge costs they consider to be unreasonable;
• Replacing buildings insurance commissions for managing agents, landlords and freeholders with transparent administration fees;
• Scrapping the presumption that leaseholders must pay their landlords’ legal costs when challenging poor practice; and
• Granting freehold homeowners on private and mixed tenure estates similar rights of redress as leaseholders, by extending rights to transparency over their estate charges and rights to challenge charges paid.

Surprisingly, given what was said in the advance publicity, the Bill does not include a ban on the sale of new leasehold houses. However, the government has indicated that this is likely to be added to the Bill at a later stage as it progresses through parliament.

Property guardianship schemes in the spotlight (again)

Property guardianship schemes have had their fair share of court time.

While there is no statutory or official definition of a “property guardian” they are generally seen as someone who has entered into an agreement to live in a building - such as an old factory or office - that would otherwise be empty, for the primary purpose of securing and safeguarding the property. Property guardian companies licence individual property guardians, for a fee, to live in the property. The government has estimated that about 5,000 to 7,000 people live as property guardians in empty buildings.

In London Borough of Southwark v Ludgate House Limited and Mr Andrew Ricketts (Valuation Officer) [2020] EWCA Civ 1637 the Court of Appeal considered the impact of a property guardianship scheme on the owner’s liability for business rates (see our December 2020 edition of Real Estate Focus). Generally, properties are exempt from business rates and liable to council tax instead if they are used “wholly for the purposes of living accommodation”. The owner argued that the areas occupied by the guardians within the building were used wholly for residential purposes and therefore subject to council tax. The Court of Appeal disagreed, holding that the building should be assessed as a single non-domestic unit in the occupation of its owner and subject to business rates.

Property guardianship arrangements have again been scrutinised by the Court of Appeal in Global 100 Ltd v. Carlos Jimenez and Others [2023] EWCA Civ 1243. In this instance, the issue was whether the use made by property guardians of their living accommodation in a property constituted “the only use of that accommodation”. If it did, the property was a “house in multiple occupation” (HMO) for the purposes of section 254 of the Housing Act 2004 and subject to regulation and licensing by the local authority.

The First Tier and Upper Tribunals held that the building was an HMO and should have been licensed as such. A failure to do so amounted to an offence and rent repayment orders requiring repayment of £6,251 were ordered.

On appeal, it was argued on behalf of Global 100 Ltd as property manager that the property guardians used the accommodation both to live there and also to protect the property and, as there were two uses of the accommodation, it was not an HMO.

The appeal was dismissed. It was apparent that the property guardians were using the living accommodation as their main residence – they had no responsibilities as property guardians save to live in the accommodation.

The property was therefore an HMO and “…When..[a redundant office building with no cooking facilities except those provided by and shared between the occupiers, and no bathroom facilities other than those appropriate to an office and again shared by the occupiers] .. is used for residential purposes such a building is, it seems to me, very obviously the sort of premises which would benefit from the statutory control provided by… the 2004 Act”.

Supreme Court approves a new “newcomer” injunction

The key issue before the Supreme Court in Wolverhampton City Council and others v London Gypsies and Travellers and others [2023] UKSC 47 was whether the court has power to grant an injunction which binds persons who are unknown at the time when the injunction is granted (“newcomers”) and who have not at that point performed the acts prohibited by the injunction. In this case the injunctions in question had been obtained by local authorities to prevent unauthorised encampments by gypsies and travellers.

The Supreme Court unanimously concluded that the court does have power in principle to grant newcomer injunctions. It is not limited to pre-existing, established categories of injunction; they may be granted in new circumstances as and when required by the principles of justice and equity which underpin them. This was demonstrated by the courts’ development of several new kinds of injunction over the last 50 years, such as freezing injunctions and search orders.

However, the court should only exercise that power in circumstances where there is a compelling need to protect civil rights or to enforce public law that is not adequately met by other available remedies. In addition, newcomer injunctions should only be made subject to procedural safeguards designed to protect newcomers’ rights, given that they are made without notifying the affected newcomers. In this instance, for example, the application for an injunction should be advertised widely so that those likely to be affected by it are given a fair opportunity to make representations before the injunction is made.

The Supreme Court highlighted the importance of the case. While it arose in the context of unlawful encampments, the issue raised has a much wider significance. The availability - or otherwise - of injunctions against newcomers has become increasingly important in numerous contexts, including environmental and other protest: “the issue is liable to arise whenever there is a potential conflict between the maintenance of private or public rights and the future behaviour of individuals who cannot be identified in advance”.