Davon Property Finance

Guest Article: The Devil is in the Detail

In an active and rising land market and under competition, it is all too easy (and common) for the land buyer to be tempted to “gloss over the finer details” to short circuit the due-diligence process or to accept facts at “face value” in order to get that all important deal over the line. The cautionary phrase ‘’act in haste and repent in leisure’’ springs to mind and the Residential Development land team acting as  land agents and/or bank valuers regularly encounters scenarios in which remedial action is  recommended and ultimately required to ensure the marketability of  both the end product and the lender’s loan security.

 

It may also be the case that whilst a very competent and “development savvy” solicitor will be appointed to act, that same professional may not have visited the site and is therefore only dealing in a truly one dimensional context in terms of the existing legal documentation which is sometimes incomplete or not up to date. Whilst more legal practitioners are tending to conduct site visits (particularly if they are more complex or higher value) there are occasions due to issues of fee/time constraints or geography where this is either not practical or financially feasible.

 

With this mind, as the instructed Land Agent or Valuer, we often have to act as that second pair of eyes (and ears) on that first all- important site visit which coupled with many years of experience and local knowledge might  highlight issues that  otherwise would be missed.

 

Whilst often cited as a positive marketing feature, shared private drives and access roads also raise questions as to the ongoing cost of (and the purchaser’s ability) to maintain them in the future. Such scenarios often occur where the estate roads are vested in the ownership of a management company or alternatively where there is no clear indication of clear legal title. An existing access for a single domestic dwelling does not always mean that this will be sufficient for a multi-unit development.

 

Whilst not the final arbiter, a thorough site inspection can also reveal other hidden issues- at the very least it can assist the conveyancing process by highlighting areas of uncertainty for further clarification. Does that gate in the boundary fence suggest a right of way –formal, informal or otherwise? Is there any evidence that the boundary has been changed from its original position? Is there a substation on site – if so on what basis and can it be relocated within the site or offsite in order to implement the planning consent. Is there Knotweed on site, has it spread next door? You notice that they are cars from neighbouring properties that are being parked on the site and are told that they are doing so on an illegal basis, can be moved  but then establish later on (post completion) that they have been doing this for many years unchallenged.

 

One aspect of land buying that we are increasingly encountering is the potential impact of Restrictive Covenants and which for our team have on more than a few occasions inhibited a sale and/ or the implementation of   a planning permission. By their very nature they can be recent or very historic and vary in the ability to frustrate the principle of or the quantum and nature of redevelopment.  This is a complex and specialist area of the law and our advice would be always to seek specialist legal advice at the outset, initially from a solicitor and possibly also from Counsel. The main challenges are to identify the beneficiaries of that covenant, their benefitting land or whether it was part of a building scheme and the extent to which they might be enforceable or capable of being challenged in the Lands Tribunal or whether the risk could be covered by Defective Title Insurance or if it could be negotiated between the parties.  On no account should ( in the first instance ) a unilateral approach/enquiry be made of the identified or possible beneficiaries of the Restrictive Covenant as that action might  preclude the ability to obtain cover or nullify any existing policy.

 

It is very often the case, that a property might be acquired with the benefit of an insurance policy which would need to be audited by the purchaser’s own solicitors. Quite apart from the level of cover which need to be sufficient, it is important to ascertain that it is not scheme specific, it is fully assignable and ideally it is capable of being split off as individual units. It is also worth establishing as to what information was disclosed to the underwriters at the time the policy was taken out and whether the site had been through the planning process and if so whether there had been any reference to the restrictive covenants in the public consultations. Finally, be aware that certain underwriters place restrictions on how an opportunity might be sold with the benefit of that policy and care is needed that any marketing  action does not inadvertently invalidate the policy. In some cases, it has been necessary to pre-clear the marketing strategy with the insurer.

 

Another point of detail which we would routinely question is the position on copyright and reliance in respect of the planning drawings and associated specialist reports and it continues to surprise us how many developers and landowners overlook this when ‘’packaging land ‘’for onward sale given the potential marketing and cost implications of having to obtain retrospective copyright or reliance from professionals.

 

We have highlighted a few of the more common issues that can arise and which if not pre-empted can trip up that next acquisition or result in a costly mistake. Whilst, caution is not normally an adjective associated with developers, it is the case that whilst time consuming (and not without cost) additional due diligence can be worthwhile. The two truisms about development is that you should expect the unexpected and not always believe at face value everything that you are being told!

Hugo Stuttaford

Director – Residential Development

Jackson Stops & Staff

Hugo Stuttaford - Jackson Stops & Staff - Davon

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