Legacy Developments: the UK’s future but only with the right collaboration

This article was originally published by The Estate Gazette

As readers may know, “legacy” community development projects aim to deliver high-quality sustainable design and construction to standards that will make places fit to serve future generations. “Stewardship” is their key concept, so successful “legacy” projects often rely upon an effective working relationship between landowner as steward and developer as contractor. Whilst the landowner’s design brief will set the standard, market factors may still present challenges, which risk diluting the principles of the high-quality masterplan.

As such, collaboration between owner and developer is arguably more important on a legacy development than any other project. However, understanding and negotiating on some key areas of the contract can help to ensure collaboration is achieved between steward and contractor.

Common Objective

Ultimately, legacy development principles derive from a trusted landowner with a clear and resolute vision. However, there are some “reassurance” provisions for the developer. For example, consider a stated “common objective” setting out the vision and design construction and management standards to which both parties must adhere. A suite of documents and a “flowchart” approvals process may cover design aspects, such as exteriors, public realm, materials, sustainability and green spaces. A reference to securing maximum realisable value and commercially viable objectives may be appropriate but in the context of the common objective.

Where there is valid concern as to specified matters being at the landowner’s discretion, dispute resolution may be appropriate but by a process that acknowledges the common objective. The BBBBC is promoting “Kitemark” and “Stewardship” initiatives, which will help in this respect.

Design and Construction Period

In addition, a robust agreement will ensure that the masterplan evolves through to detailed planning in a way that is true to the vision. It is important for the landowner to retain design approval – often discretionary – via the landowner’s architect. This may be carried through to construction and works completion, with delivery secured through the landowner’s architect certifying completion of buildings and public realm.

Specific legal structures for construction should also be considered. These include:

• Development Licence: Developer constructs and sells dwellings under licence; landowner transfers buildings to buyers at developer’s direction;
• Development Agreement and Transfer: upfront transfer of site to the developer to construct and sell dwellings;
• Development Lease: lease of site to the developer to construct and sell dwellings; landowner transfers dwellings to buyers at developer’s direction

Estate Management Period

Furthermore, appropriate structures are needed to secure the promotion of the estate design and estate management.

“Design and Community Codes” and “Estate Regulations” are important. The Code imposes the achieved design and works standards and the need for consents for alterations as part of the legal title to the estate. The Regulations also cover permitted uses and protect amenity. Use restriction is increasingly important with potentially more flexible use of buildings, some of which may not fully align with the vision for an owner-occupied community. Working from home and home businesses may be permitted, but on clear “no-nuisance” terms.

Legal Structures for Management

The landowner will want a satisfactory legal structure for the Code and Regulations. Traditionally, this has been by way of restrictive covenants, but this regime is not entirely satisfactory on account of technical issues, such as whether the covenants bind or benefit land; who may enforce and be enforced against; and statutory rights to modify or discharge the covenants.

For some years, the Law Commission has been seeking a new category of land obligations, but for the present the principal options are:

• “building schemes” – a clear set of obligations that are enforceable by each owner against all other owners. However, building schemes need well-considered provisions; recent cases have challenged their operation where there is a lack of clarity.
• direct deeds with obligations entered into by each successive building owner with the landowner and management entity.
• structures based around the rather “archaic” rent charges – adverse market sentiment.

An important management consideration is the entity to control the Code and the Regulations and to grant the necessary consents. The landowner will want to ensure a degree of control until the appropriate time for handover to a responsible management trust or body. The concern is to ensure no dilution of the standards in the Code and the Regulations.

Finally, in the general management of the estate, and particularly the provision of services, a management entity will be set up to hold and manage the public realm – although, it will often contract out to a local management firm. Again, a key issue is the extent to which the landowner retains rights in this entity. The management entity, and indeed its directors or trustees, are important because of their leading role in securing the quality of services and enforcing the provisions of the Code and the Regulations. Community Land Trusts are playing an increasing role often as specifically provided in the development’s Planning Agreement.

These legal structures clearly involve a degree of balancing landowner, developer and residents interests. Although a complex process, the evident success of now-established legacy schemes endorses the fundamental importance of the original estate owner’s stewardship. With market evidence – including The Future Studios Placemaking Report commissioned by Adam Architecture and Farrer & Co – confirming that these patient capital projects deliver significantly enhanced social, health and economic returns, adherence to legacy and stewardship principles seems to be a cost worth carrying.