Law of Property

The legal process involved in acquiring the site

Land for sale is generally classified as Brownfield (developed land) or Greenfield (undeveloped land such as parks or fields). The development of Brownfield land is actively supported by government’s policy while Greenfield development is discouraged.

And acquisition is essential procedure involving purchase of the land suitable for required business purpose. The legal procedure for buying land should always be conducted by a qualified solicitor or licensed conveyancer. A solicitor will apply to the Land Registry to examine the official register of the title. The register will show weather there are any tenancies, licences, restrictions or any other deeds. After an examination of the official register of the title solicitor should follow ‘private treaty’ acquisition plan. In order to begin process of site acquisition solicitor will have to send vendor a letter of intent even though neither side is bound by any agreement yet. In cases such as: Turriff Construction Ltd v Regalia Knitting Mills Ltd[1] or more recent Alldridge (Builders) Ltd v Grandactual[2] it was assumed that acceptance of letter of intent does not carry contractual effects. According to Law of Property (Miscellaneous Provisions) Act 1989[3] contract must be made in writing in order to obtain rights to the site. Nevertheless, acquisitions in auctions, implied trusts (Yaxley v Gotts[4]) and grants of lease up to three years do not require contract to be made in writing.

Before signing the contract both parties should sign a deed which according to Alldridge (Builders) Ltd v Grandactual[5] transfers all interests to the land to the new owner. Once contract containing all the main heads is signed by both parties and transfer of interest been witnessed and signed contractual agreement is completed. The freehold title transfers from the vendor to the developer once contracts have been completed, and from that point onwards the developer owns the entire risk (Wilkinson, Reed, & Cadman, 2008). If the land title is registered at the Land Register then the new owner will be liable to the risks after gaining the title to the land.

Third party rights

Realistic land valuation and future business potential cannot be evaluated if rights of third parties are dismissed. New owners after sale agreement can find themselves trapped with interests of other parties. Those parties not included into contractual agreement are called third parties. Of the many types of interest over land belonging to or in the possession of other persons, the most important so far as building developer is concerned are easements and restrictive covenants (Uff, 2005, p. 488). Nevertheless, impact of licences and leases, proprietary estoppels, adverse possession rights or any other deeds which may bind new owners should be seriously considered before proposition to acquire the site.

A purpose of the 1925 Law of property Act was to make land more alienable but at the same time protecting third parties interests in the land. The Land Registration Act 2002 concentrates on the registered title which reflects all attachments to the land. The Land Charges Act 1925 (now Land Charges Act 1972) made equitable third parties interests registrable which means purchaser will be bound to them irrespective of notice (Midland Bank Trust Co. v Green[6]).

Easement is an interest in land which gives the right to the owner of one piece of land to restrict the use of land which belongs to another owner. The main purpose of all easements is to benefit on dominant land over the servient land which should prevent persons from acquiring any personal benefits. Easements usually are rights of: way, storage, support or light. As well as being created by express or implied grant or reservation, easements may also be acquired by prescription (Galbraith & Stockdale, 2005). If any neighbouring land has been used for more than 20 years with knowledge of land owner as a benefit for dominant land for example trespass, it becomes subject to legal easement. Hence, a right to a view or control over the land cannot be treated as an easement. If any easements are to be found attached to the land, there are legal ways to invalidate them such as: owner of the land can cancel restriction, he also can abandon the easement which would be treated as implied release and if the servient land is being purchased by owner of dominant land.

Licenses to use land with legal permission can be created on land where there is no dominant land therefore easements cannot be registered. It is treated as a legal interest in land and will be bind to new owners in the future.

In English law it is common to impose contractual obligation via contractual agreement contained within a deed of sale. Such private control over the building plot could affect future usage of that property. Restrictive covenants are treated as deed restrictions and could be applied to land that is part of specific development or subdivision. During the construction phase or after the completion of the project, use of land can impact residential area, local community specific needs, motorway development plans, or visiting parties interest therefore third parties rights should be seriously taken into account before tendering procedures as they can place duties onto developers as well as can affect value and purpose of the land. Originally covenants were established for benefit of the land and aims to maintain existing property values. The Lands Tribunal has power in certain circumstances, under the Law of Property Act 1925[7], to modify or discharge restrictive covenants where the original purpose of the covenant has over time become inappropriate (Conveyancing Warehouse, 2008). Even though, some restrictive covenants because of incorrect intentions have been found void and for that reason are enforceable to new owners. Nevertheless, restrictive covenants also might prevent construction in many ways such as: design, size, colours, fencing etc. Business opportunities could also suffer from various bans on transporting activities, noise or pollution volumes, limits on tree cutting and many more. Information on any existing restrictions including deeds can be found at county courthouse as they are published in public records. Contingency clause might be included into tendering offer before assuming all possible restrictions as it gives possibility to pull out of the contract in case covenants or deeds are identified later than contractual agreement avoiding costly penalties. Evidence of third parties rights are also found in the Access to Neighbouring Land Act 1992 which enables a third party to access neighbouring land in order to carry out works in other land. For example: cleaning drains, repairing buildings etc.

Adverse possession or a succession of squatters living on the land for more than 12 years fells under the Limitation Act 1980 and the legal owner of his estate can lose his land.

Interests of estoppels are not registrable however estoppel interest and equities are capable of binding in title of registered land (Ives Investment Ltd v High[8]).

The planning process in the UK

The latest principles of English planning law are synchronised in the Town and Country Planning Act 1990[9] and requires a planning application for development of parts depot. Under the Town and Country Planning (Use Classes) Order 1987 parts depot classifies as B1 or B2 general industrial development. Because previous development was not used for industrial purpose and it is not covered by the Town and Country Planning (General Permitted Development) Order 1995 rights planning application becomes necessary. In order to make an application to Birmingham council application should include: certificate of ownership, detailed layout plans, location plan, design and access statements and application fee. The Planning and Compulsory Act 2004 aims to deliver efficient and practical use of land with integrated benefit for local communities. The economic importance of planning law to the individual is demonstrated by the direct effect which planning consent has upon the value of land and building (Uff, 2005, p. 491). Other relevant legislations to planning system in the UK are: Planning (Listed Buildings and Conservation Areas) Act 1990, Environment Act 1995 and Highways Act 1980. In order to maintain planning system legitimacy and efficiency local governments (councils), The Courts and executive agencies such as Environment Agency are responsible for right interpretation and support to parliament’s law. Following the 2004 Act, the County Councils are responsible for minerals and waste planning (including Minerals and Waste Local Development Frameworks) and their own development, for example education and highways, although they can get involved with and comment on planning matters at both regional and local levels (Planning Aid, 2006). The overall structure for administering the rules on planning is headed by the First Secretary of State (the Deputy Prime Minister) who has power over local planning authorities – county councils, district councils, metropolitan authorities and other bodies vested with planning responsibilities, such as National Park Authorities (Galbraith & Stockdale, 2005, p. 362).

Lack of constitutional constraint allows for a wide degree of discretion in the UK planning system. In determining applications for planning permission, a local authority is guided by the development plan, but is not bound by it: other ‘material considerations’ are taken into account (Cullingworth & Nadin, 2003). Preparation of a local plan is carried out by the same local authority that implements it and is traditional British planning. Even though right to appeal in the courts is limited, most appeals can be heard by the government representatives.

Local Development Framework created by Birmingham City Council can be found at: www.birmingham.gov.uk. It is clear that Council main priorities are: maintenance of sustainable community (reduced CO₂ emissions, sustainable materials), proactive industrial land development plan, expansion of economic strategy (taking into account that depot will generate economical prospectus is a huge advantage), waste distribution strategy etc. (Birmingham City Council , 2009)

Development plan plays the key role in determination of planning applications. According to the 1990 Act local planning authorities must have regard to the provisions of the development plan when determining planning application. Under s.54A of the Act 1990 their determination must be made in accordance with the plan unless there are other material considerations which indicate otherwise (Galbraith & Stockdale, 2005).

Direct issues relevant to the site

Before proceeding to purchase land, it is vital to establish with the local authority that they will ultimately allow you permission to bring your plans to fruition (Primelocation, 2009). Planning advisor for West Midlands is Sandra Newton and she should be contacted (the UK land line 0121 236 8876) before the actual purchase of the land. The best way to garner support from your planning office is to involve them in the process from the outset, holding early site meetings to discuss your intentions on an informal basis and without cost to yourself (Primelocation, 2009). Close and professional engagement with planning officers in early land acquisition stages will assist and suggest on any planning matters or issues relevant to the site. However, common law cases show that developer cannot take planning officers decisions for granted. Downderry Construction Ltd v Secretary of State of Transport, Local Government and the Regions and Caradon DC[10] are fine example that experienced developers, should not totally rely upon a planning officer’s decisions because mistakes are made by the same officers. In such circumstances developers can be found breaching contract, when public law principles are crossing private law expectations Henry Boot Homes Ltd v Bassetlaw DC[11]. It was also revealed that councils have no general duty of care Tidman v Reading[12] therefore hire of a professional lawyer to deal with planning procedures and keeping all agreements signed and dated with planning municipalities is highly recommended. The same rule applies to beginning of building process when official letter should be received signed and dated by planning officer allowing construction procedure on site as councils are keen on changing their planning decisions. The most recent planning case Orange Personal Communications Services Ltd v Birmingham City Council[13] is a perfect example of Birmingham City Council granting a planning permission for a vehicle depot while at the same time evaluation of environmental report has been overlooked. Because of wrong evaluation, permission for the vehicle depot was quashed by the court.

Redevelopment of Brownfield land, particular close to highway, might involve potential risk of contamination which can be very expensive to deal with in order to get planning permission. Identified site is relying on efficient infrastructure as it might create new traffic or even new roads. As infrastructure is so critical to the viability of a particular development scheme it directly influences land value (Wilkinson, Reed, & Cadman, 2008, p. 52). If the necessary infrastructure does not exist to support a development or its use is restricted, then a developer will take account of the cost of its provision in the evaluation of the land value. Due to current economic climate councils have significantly decreased public infrastructure funding as a result of Labour party ‘cutting costs’ policy. For that reason under the Town and Country Planning Act 1990 sections: 106, 106A, 106B planning obligations might be enforced by the planning authorities to the developer in order to grant planning permission. Obligations should benefit local community in various ways for example provision for a new roundabout or new car park.

Local highway authority will be consulted on all planning application to establish whether a development can be supported by the existing road scheme.

Because the site is located in residential area, many restrictions might be placed on the developer regarding size of depot, business generated pollution and noise, negative impact on community volumes. Risks involved due to big vehicles coming in and out of the depot.

Reserved matters according to article 3 of the Town and Country Planning (General Development Procedure) Order 1995 empowers local authority to check site’s layout, scale, appearance, access and landscaping features before granting planning permission.

1999 European Community Directive circular 15/88 – environmental assessment needs to be carried out as parts of depot will produce huge amounts of CO₂ emissions, harmful materials might be in use, disposal of waste structure should be evaluated. Developer should follow environmental planning guide assessed by professionals in Diagram No. 2. Reducing CO₂ emissions and achieving sustainability in new construction projects is highlighted in Birmingham’s Planning Framework 2010 (Birmingham City Council, 2010). It means that developers will be responsible for usually higher costs investments using sustainable materials in order to liaise with local municipalities.

Permission for construction might be given for limited period of time due to materials to be used or nature of business.

Preservation and enhancement of amenity such as: planting or preservation of trees, building fence or hedgerows in order to restrict public access to parts depot.

The Planning (Listed Buildings and Conservation Areas) Act 1990 as in such areas getting planning permission might be very complicated and due to that fact, value of the land and or business may fell dramatically (Amalgamated Investment Co. Ltd v. John Walker and Sons Ltd[14]).

The Planning and Compulsory Purchase Act 2004 – the future of motorway expansion should be considered because local authorities have power to acquire land compulsorily for regional planning purposes which might increase or decrease the property’s value. A very good example of compulsory land acquisition set by Birmingham city council can be Birmingham City University’s (BCU) plans to establish city centre campus in Eastside. The BCU has invested over £30 million into the project: bought the land, outlined proposal and received granted planning application for a new development. The Government’s plans include the creation of a new rail station at Eastside, on the same plot earmarked for the University’s proposed city centre campus for which outline planning permission has already been granted (Tidmarsh, 2010). Particular situation ilustrates how big investement might colapse under the Government’s planning intentions.

Contractual issues

Current English/Welsh Contractual Law reflects statutory legislations such as Sale of Goods Act 1979, Consumer Protection (Distance Selling) Regulations 2000, Supply Goods and Services Act 1982 with common law principles implied over the years. Construction contract forms may be adopted from: JCT, ICE, FIDIC, NEC or GC/WORKS. But the nature of construction business is very complex (, involving numerous highly skilled professionals (sometimes not which is the cause of real issues), vast volume of documentation with high possibility of design, evaluation, operation errors (Multiplex Constructions (UK) Limited v Cleveland Bridge UK Limited[15]). Time, cost, quality and performance values are always among the highest priorities with big risks and high value tasks. For these reasons formation of contractual obligations should be very precisely and responsibly undertaken task by contractual professionals because contractual issues are very frequent.

A common problem in design and build contracts is doubt over the scope of works intended by the employer’s requirements embodied within the contract (Brewer, 2003). In Skanska Construction UK Limited v Egger (Barony) Limited[16] such conflict arose after Skanska overspent £12 million what it argued was not related to contract. The claim was rejected.

Formation of contract starts when one party makes an offer and the other one accepts it. Oral contractual agreements do not help in solving contractual issues as it is harder to provide evidence. Traditional form of acceptance known as ‘’subject to contract” is not binding. Issues can arise when negotiations takes so long that parties comes into contractual obligations without having a contract. In Mitsui Babcock Energy v John Brown Engineering[17] negotiations led to contractual agreement.

Retrospective acceptance may become an issue if some terms are agreed some not. But if party does not disagree and continues to work it is deemed that party has accepted terms.

Letters of intent are another contractual risk. Although it would clearly be better for everyone if all of the terms and conditions of the contract were finalised and a formal contract entered into before works were commenced, this is unfortunately rarely possible (Hoar, 2008). Contractual valuation appeared to be a conflict between ERDC Group Ltd v Brunel University[18]). After five letters of intent contractor did not want to agree with final contract conditions. It was assumed that letters of intent are fine example of contractual agreement and if party does not disagree with letter of intent it is clear that party accepts conditions.

A lot of issues may occur in order to identify what is actually subject to contract and what is not. Failure to set all warranties and conditions in the contract can cause dramatic problems. Unfair Contract Terms Act 1977[19] deals with breach of contractual obligations and breach of common law duties. If contract lacks good faith or is imbalanced the Unfair Terms in Contracts Regulations 1999 comes in to force. Mistakes and misrepresentation can also become an issue. These two are falling under the Misrepresentation Act 1967 with Smith v Land and House Property Corporation[20] as an example.

In order to achieve dispute prevention equitable risk sharing or innovative project award and delivery systems should be within the contract.

Contracts (Rights of Third Parties) Act 1999 applied to contracts signed after 11 May 2000 had made significant impact on English contractual law. Parties not mentioned in contractual agreements (known as third parties) gained rights, in certain cases, to enforce terms in contracts made in their favour (St Martin’s Property Corporation Limited v Sir Robert McAlpine Limited)[21]. The spectrum of ‘’obligations” includes the possibility of one party to a contract being under a duty to perform or to pay damages for non-performance to a third party who is not an original party to that contract (Uff, 2005, p. 155). English common law has also developed changes regarding third parties rights to the parties mentioned in contracts. In Linden Gardens v Lenesta Sludge[22] the employer did not suffer the loss nevertheless the party was entitled to enforce rights against the contractor on behalf of those who would suffer damages.

Energy efficiency demand is another potential risk as more claims occur during efficiency failure. Moreover, claims for breach of implied warranty may arise based on representations made in marketing materials regarding services provided in connection with green construction, the quality of those services, and what the purchaser could expect to receive from those services (Brinson & Dolan, 2008).

Contractor can make late, not right payments to sub contractor. Contractor can fall behind schedule (North Eastern Properties Ltd v Coleman & Quinn Conveyancing[23], quality can be catastrophic as in latest Liverpool hotel cladding fault (Hankinson, 2010). Nevertheless, the client is protected by Civil Liability (Contribution) Act 1978[24] and is eligible for recovering damages Birse Construction Ltd v Haiste[25]. But the client needs to demand reasonable timing schedule British Steel Corporation v Cleveland Bridge & Engineering Co Ltd[26] , pay reasonably for services otherwise contractor can be eligible to Quantum Meruit valuation.

Health and safety issues that may arise during the construction phase

Construction developers in the UK are liable to the Health and Safety Work etc Act 1974 and also to the Construction (Design and Management) Regulations 2007[27] breach of duty imposed by the preceding provisions of these Regulations. CDM 2007 is also supported by an Approved Code of Practise. If building process will last longer than 30 days or involve more than 500 person days than Health and Safety Executive should be notified with form F10.

The client’s role in process of construction phase is influenced by control and decision methods. According to CDM client must appoint competitive resources, provide information to designers, co-ordinate all process, evaluate H&S risks, suitable management on site, ensure welfare, workplace (Health, Safety & Welfare) Regulations 1992.

At design stage most of H&S issues may be avoided by choosing right methods of how to complete work safety. Client leadership is recognised as a crucial driver for improving H&S performance throughout the supply chain (Office of Government Commerce, 2007). Providing suitable and adequate construction H&S plan to the main contractor before building is another hefty task.

Unrealistic deadlines and a failure to allocate sufficient funds are two of the largest contributors to poor control of risk on site (Health and Safety Executive, 2007). There is a potential H&S risk on site if contractors are rushing the work in order to complete project on time or funds have not been enough to ensure reasonably practical site’s operation cause by: unefective site segregation, scaffolding, poor security, management etc.

A client should arrange adecuate site’s management plan and recources are in place based on critical evidence. If any issues will appear

Insurance

How construction professionals can limit or avoid legal disputes

To avoid unexpected third parties interests, flood risks, overhead power lines, public or private services and boundaries one of qualified The Royal Institute for Chartered Surveyors (RICS) surveyor should be appointed for a proper land survey. Land surveyors also perform a vital function in carrying out feasibility studies, or environmental impact assessments on potential sites to assess whether plans are workable (Primelocation, 2009). Land Registry website (www.landregistry.gov.uk/) for a small fee can provide information about the land such as: planning permission, rights of way, detailed history and current ownership of property.

The developer reduces the risk inherent in the transaction through negotiation of the contract terms – for example, the contract can be conditioned and payments can be phased or delayed (Wilkinson, Reed, & Cadman, 2008). Such conditions helps developer to avoid early payment obligations, keeps contractor more focused, responsible and motivated on site which is very important. A retention fee commonly used in contracts is a good way of keeping a small portion of funds aside if quality issues will appear. The contract could be subject to ‘satisfactory planning consent’ if there is no planning consent in existence.

Two contractual parties must settle their expectations in reasonable manner with fair terms and conditions, responsibilities and liabilities. Hence the new Construction Act 2008 suggests contract being not written it might be that it would be complicated for layers and professionals to identify contractual obligations under terms of contract. Further cost and time may be expended in sorting out that front end issue (Anderson Strathern, 2008)as Well written contract is essential for both parties as it provides clear function of agreed fees which will be paid for only good quality services. Design should be finalised before the total sum of works has been agreed with realistic time schedule, settled way of communication and exchange of information, etc. Best practise avoiding contractual issues is not to start any building activity if contract has not been signed. Appropriate construction contract should be chosen in order to avoid risks through construction process that is where suitable procurement method should be considered too. Contract needs to be with scheme of how disputes will be dealt with. Adjudication should be included as it provides quick, objective way of dispute resolution.

As mentioned before, contractual procedures should be undertaken only by highly experienced professionals.

It is essentially important to set up a clause in the contract containing liability, cost of possible damages in order to prevent similar claims as in George Mitchell v Finney Lock Seeds Ltd[28].

Clearly defining roles and performance expectations will help to avoid confusion and minimize risks. In addition, marketing materials should avoid vague representations regarding performance, and should limit such statements to those that can be quantified (Brinson & Dolan, 2008).

Performance bonds should be used in order to protect the client needs during the building maintenance and liability process. Building insurance and warranties differ from bonds and guarantees in that they protect the building owner after the issue of the final certificate (Burns, 1996). Collateral warranties became important when the Court began to adopt a restrictive approach to recovery in tort (Friedman, 2008). They provided contractual causes of action which were normally assignable. Professionals should always prohibit the assignment of their reports especially after the House of Lords held that such prohibition is valid.

Use of indemnity insurance for construction professionals is highly recommended as it prevents persons and companies against losses arising from claims of breach of duty, negligence or mistakes. Legal costs are normally covered by Professional Indemnity policies, subject to the insurers’ prior consent (Professional Indemnity Insurance, 2009). In Johnson Brothers v BW Developments [2003] issue with sub-contractors negligence on site was valued at £200k of damages. Hence, policyholders are bound by insurers legal enforcements of: legality, capacity to enter into a contract, unqualified offer, unqualified acceptance, valuable consideration, intention to form an agreement and absence of fraud (The chartered institute of loss adjusters, 2004). Important point is that both parties are falling under the positive duty of disclosing information even if not asked because insurer will know only what policyholder has told him.

A lot can be learned from Wembley stadium dramatic £253 million litigation process. The main contractor Multiplex in order to claim huge losses took to court sub-contractors, consultants. In Multiplex Constructions (UK) Limited v Cleveland Bridge UK Limited[29] plaintiff claimed that defendant walked away from contractual obligations. If things go wrong the contract terms and conditions should include all dispute resolution methods and ‘walking away’ is the first thing to be under the terms. The problem was according to the judge that both parties have allowed the case to reach court (McAteer, 2008). If contractual terms would include adjudication as a way of dispute resolution court procedures would be avoided. The client in this scenario should also take liability on board as this coordinator failed to make sure disputes are resolved in ‘quick & quite’ manner, failed to provide contractual obligations/conditions for professionals packed with reasonable performance duties (or failed to appoint adequate professionals?) and gained poor development image.

Adjudication

Adjudication is a dispute resolution method applicable to almost all parties within construction industry and is implemented by The Housing Grants, Construction and Regeneration Act 1996 (the Act) and current JCT 05 contracts. Adjudication was first introduced into a UK standard form of construction contract in 1976 when it was incorporated into a form of domestic sub – contract intended for use with the JCT 63 (Ndekugri & Rycroft, 2009). The construction industry was offered an option of fast and cheap way to settle disputes with independent body – an adjudicator. Because of quick determination (28 days)[30] cash flow has been secured. The courts have generally been very supportive of adjudication recognizing that it was the will of Parliament that the process should produce a temporary decision enforceable by the courts (Cottam, 2002). Reasons for that are simple: in the six years since HGC&R Act came into force from 15000 adjudications only 300 of these have been the subject of an action to enforce the decision (Dancaster, 2005). Decision should be implemented even if law or facts were misinterpreted by adjudicator[31]. Adjudication process as stated by the Court of Appeal (Cottam, 2002, p. 170) is being described as a speedy process in which mistakes can occur therefore the Court should ensure mistaken decisions are resolved. In Project Consultancy Group v Trustees of The Gray Trust [32] it was held that adjudicator’s decision is challengeable. This is due to adjudicators jurisdiction being challenged very often by defeated parties as ‘’a last resort of hope”. That is why The Notice of Adjudication is very important as it sets out the jurisdiction of the adjudicator with fine example of Carillion Construction Ltd v Devonport Royal Dockland Ltd[33]. In Makers UK Ltd v The Mayor and Burgesses of the London Borough of Camden[34] judge revealed that it is better for all parties to limit their contact with adjudicators as it will prevent challenges to be made against adjudicator jurisdiction.

It is a very good practice that critical reviews and reports such as:

(Latham, 2004), (Dancaster, 2005) are keen to identify adjudication’s major concerns and problems and pr