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2013 Development Appraisal - Site Assembly & Possession Strategy
1. Site Assembly & Possession Strategy
Speaker: Simon Wainwright BSc FRICS
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2. 2013 Lecture Series
Lecture Date
An introduction to development 7th February 2013
appraisal & residual valuations:
Cash flow techniques and 13th February 2013
sensitivity analysis:
Site Assembly & Possession 25th February 2013
strategy :
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5. Authorised Occupiers
• Tenants – With / Without Security of Tenure
• Sub-tenants
• Assignees
• Licencees
• Trespassers
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6. Landlord & Tenant Act 1954 Part II
• When a tenancy reaches its contractual
expiry date, the tenancy continues by
“operation of law” until determined in
accordance with the Act.
• Statutory right to lease renewal
• Lease terms to be agreed between the
parties or referred to the Court
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7. Landlord & Tenant Act 1954 Part II
• There must be a tenancy
• The tenancy must relate to the premises
• The tenant must carry out a business at
the premises
• The tenant must occupy the premises for
the purpose of a business
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8. Grounds for opposition
A. Breach of repairing covenants
B. Persistent delay in paying the rent
C. Breaches of other obligations
D. Availability of alternative accommodation
E. Sub-tenant – possession required for
letting or disposing of the whole property
F. Landlord intends to demolish or
reconstruct
G. Landlord intends to occupy the premises
himself
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9. Consequences & Compensation
Where tenant has been in possession > 14
years = 2 x Rateable Value
Where tenant has been in possession < 14
years = 1 x Rateable Value
Compensation for tenant’s improvements
dealt with under the Landlord & Tenant Act
1927
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14. Site Assembly & Possession Strategy
Speaker: Simon Wainwright BSc FRICS
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Hinweis der Redaktion
ContentsTerminologyLand speculation vs Property DevelopmentRisk management and the necessity for profit.Purposes for which such studies are undertakenGood practice - What guidance is available?Where to obtain your data?Volatility and interpretation of results
Takes timeDevelopment Value > Existing Use Value Site holding costs defrayed by income – rent, advertising revenueQuestion – when does the development account start / stop?Question – when do you transfer from asset manager to development manager?Planning process quite protracted – may take a number of attemptsSet a target date and work to ensure VP by that date
Vacant PossessionFull access – vehicle & pedestrianRights of LightParty Wall MattersExtinguishment of Rights, Easements & Covenants – pylons, mineralsCrane Over-Sailing RightsServices – inc temporary provisionServices to include drainage and flood provisionSoil SurveysLevel SurveysArchitectural surveys - Listed buildings – immunity from listingRoad closing orders – stopping upAll necessary consents – planning, listed building, conservation area consent
The criteria under which a tenancy qualifies for protection under the Act are set out in Section 23 and can be summarised as follows:There must be a tenancy: This can include underleases, agreements for lease or underlease and periodic tenancies. Licences and ‘tenancies at will’ do not qualify.The tenancy must relate to the premises: ‘premises’ can include both land and buildings but to qualify, the premises must be capable of occupation.The tenant must carry out a business at the premises: a business includes a trade, profession or employment and does not necessarily have to be for profit.The tenant must occupy the premises for the purpose of a business: there are several aspects to this requirement: The important points are thus- the tenant must have a physical presence and control of the premises, although an intention to occupy may satisfy this criterion;- if the property is being used for mixed purposes then that will be sufficient to satisfy this criterion, provided that one of those uses is for business purposes;- an underletting of the whole of the premises will mean that the head tenant loses the protection of the LTA 1954 as it will no longer be in occupation. If the tenant underlets part the same principle applies and it will no longer be in occupation of the whole;- if the tenant vacates for the purpose of carrying out fit out works it is unlikely that it will be deemed to have given up occupation as it will have an intention to occupy.ExclusionsMining leases Agricultural holdings Service tenancies (i.e. granted as part of a tenant’s employment) Tenancies for a term of 6 months or less
The ‘Section 25’ notice must be served not more than 12 months and not less than 6 months before the termination date specified in the notice.Ground F “On the termination of the current tenancy the Landlord intends to demolish or reconstruct the premises comprised in the holding or a substantial part of those premises or to carry out substantial work of construction on the holding or part thereof and that he could not reasonably do so without obtaining possession of the holding”.Ground F is Mandatory groundIn order to succeed and rely upon Section 30 Ground F to obtain possession, the Landlordwill need to show both the intention and the ability to carry out the redevelopment works. In particular, the Landlord will need to satisfy all of the following to be successful: 1. Proof of intention;2. Nature of the intended works; and3. The need for legal and physical possession of the property. In relation to the nature of the intended work, the Landlord will need to show that the Landlord proposes to demolish or reconstruct the whole or a substantial part of the Premises. Whether works amount to demolition or reconstruction is a question of fact and degree. The Landlord must also be able to demonstrate the need for legal and physical possession. For example, can the work be undertaken without obtaining physical possession? The Landlord will also need to be able to demonstrate the ability to carry out the work. In satisfying this test it is common to produce any one or more of the following: Planning permission or correspondence with the planning authority;Building regulation/approval;Drawings/bills of quantities/specification/tender documents/building contract/letter of intent/programme of works;Board resolutions/minutes regarding intention to carry out works/oral evidence from a Director;Bank letters/confirmation of finance;Other consents to building works (for example, from neighbours);Oral evidence about the way in which the project has evolved; and(Possibly) expert evidence about the nature, extent and length of the proposed works and any difficulties in carrying out those works with the Tenant in possession. These questions will be determined as at the date of trial, and so it is at that stage that the Landlord will need to show that: Subjectively the Landlord has a firm intention to redevelop (although the exact scheme of development need not be settled); andObjectively the Landlord has a reasonable prospect of being able to carry out the development (for which the areas of evidence listed above will need to be in place by the date of trial)
The amount of compensation for an improvement must not exceed either the net addition to the value of the holding as a whole which directly results from the improvement or the reasonable cost of carrying out the improvement at the termination of the tenancy (less the cost of putting the works into reasonable repair except so far as the tenant is contractually bound to effect the repair). It should be noted that it is the “net addition to the value” of the holding which is considered:
Sub-TenantsLicenseesTrespassersAdvertising hoardingsTelephone BoxesTenancies without breaks or which expire beyond the target possession date – relocation or business extinguishment (buying the business)Negotiating development break clauses in existing leases
Fire EscapesHighways / Footpaths and rights of accessDrainage EasementsRights of AccessCovenants – title indemnity insuranceServicesTelcomsCar Parking
Council resolution to use CPO powersCouncil issues CPOObjections & InquirySecretary of State approval or rejectionNotice to Treat < 3 yearsNotice of Entry – within 3 yearsCompensation – Upper Tribunal (Lands Chamber)Private Treaty negotiations – relocation or business extinguishmentBasis of valuation – market value ignoring the acquiring scheme, but not the background planning policies – can include hope value and development value.Ransom strip – Stokes v Cambridge 1961 – allocated one third of the increase in value to the owner of the ransom strip