Vol 9 No 2 Autumn 2003

Published by The College of Estate Management

and issued to all its students and members of the Charter Society

Cemicircular
The College of Estate Management compiles this bulletin
for current and former students as an aid to your studies and
future careers.
CEMicircular covers all courses and includes
information about important developments and topical
issues in the world of surveying and property. You should
not, however, rely on the extracts in CEMicircular as your
only source of information. They will seldom offer more
than a brief summary of a new topic or recent issue and
some points are bound to be omitted, perhaps giving undue
emphasis to the material included. You are therefore urged
to read as widely as possible, including making use of the
internet, and it is vitally important that current students
study the course material. This could make the difference
between superficial knowledge and real understanding.
To help you keep up to date, look out for the following
captions against items:

CEMicircular Webwatch gives details of related

websites where additional information can be sourced.
Latest Research indicates material that has been
generated by recent research, including projects carried
out by CEM and other institutions.

Editors note
The editor of this circular is Gaye Pottinger, Research Officer
at CEM. She would be pleased to hear your views and
comments on its structure, content and presentation.
Contributions or suggestions of material for inclusion are
also welcome. Please write to Gaye Pottinger at the College
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Contents

Page

Building

Energy performance

Building for sustainability

Texlon for super roofs

Protecting historic environments

Party walls and archaeology

Construction

Design-and-build contracts

Watertight basements

Partnering

Construction team working

Development

Retail regeneration

Rights of way
Finance

Lease accounting

Distressed loans

22
23

Law

Litigation and mediation

Early case assessment

25
26

Management

Model lease clauses

Energy management

Keep open clauses

Hong Kong retail sector

28
30
32
33

Planning

Town centres and retail development

Planning for rural economic development

Renewable energy developments

Resurrecting planning permission

Obtaining development consent

37
38
41
43
44

Property

Stamp duty land tax

New tax, new avoidance

Overage payments

Saudi property market

45
47
48
49

Residential

Commonhold and Leasehold Reform Act

Home equity release

Energy efficient homes

52
54
55

Rural

Rural offices letting market

The Countryside and Rights of Way Act

Vehicle access across commons

Farm survey report

57
58
60
61

Valuation

Valuation standards

Valuation accuracy

63
65

Notices

Book review

New researcher

CPD Study Pack update

Recent research at CEM

CEM Graduation day

67
67
67
68
69

2
4
6
7
8
10
11
12
15
18
20

BUILDING

Building
will have an effect on the supermarkets when their energy
ratings are compared in public.
When designing with energy in mind, traditional
architectural CAD software is little help. It focuses on
EU member states must introduce a directive on the Energy
describing the dimensional, physical form of the building.
Performance of Buildings by the end of 2005 and the UK
Three-dimensional modelling software begins to go deeper,
government is committed to a major revision of the Building
but its calculations of light, reflection and radiance are
Regulations Part L. In future, buildings will be required to
output at a purely visual level. They can show, with a bit of
have energy ratings. Stephen Pacey describes powerful new
artistic licence, how a space might look, but they cant
software able to simulate the thermal performance of
reveal quantitative detail. Just how bright is the lighting
buildings that will enable architects to predict energy
level on the reception desk on a given day? What effect
performance with unprecedented accuracy and No more
would rotating the building by 5 have on the artificial
guessing games (RIBA Journal, May 2003).
lighting requirements? As for thermal performance,
overheating, underheating,
21 Sep 12 00
21 Sep 12 00
21 Sep 12 00
comfort levels and the cost of
running a building over 25
years, these are usually left until
after the basic design has been
formulated and then handed to
the M&E engineer to work out.
By this time, major design
changes
that solve
Base Case: 50% Glazing
Case 2: 80% Glazing
Case 1: 20% Glazing
environmental problems using
passive methods are usually out of the question.
This lack of an integrated approach to energy troubled
Buildings will soon be energy-rated like fridges and
Andy Roberts, an architectural director in the Newcastle
washing machines, and architects will be under increasing
office of architects Ryder. We are very committed to
pressure to design with long-term energy consumption in
promoting sustainable design, but we felt there was a big
mind. But help is at hand. <Virtual Environment>, a
problem bringing in services advice once a design was
powerful building simulation software, is now available as a
established, he says. We wanted to tackle fundamental
desktop integrated modelling package that will not only
building services aspects at the front end of the process.
visualise lighting and thermal performance, but analyse
Ryder started using <Virtual Environment> (<VE>) in
everything from alternative building forms and user comfort
September 2002 in an attempt to achieve this.
to life cycle costs, carbon rating and the behaviour of people
<VE> is a suite of analysis and simulation software
escaping a fire.
packages tightly integrated into a single, common model of
The EU Directive on the Energy Performance of
a building. It emerged from the University of Strathclyde
Buildings, which must be introduced by member states by
Department of Architectures ABACUS (Architecture and
the end of 2005, calls for all buildings to be given a
Building Aids Computer Unit, Strathclyde) programme
certificate based on how they match minimum standards of
which started looking at computer-based solutions for
energy consumption. The UK governments recent White
architectural problems in the late 1960s. This software
Paper, Our energy future creating a low carbon economy
brings intellectual rigour to areas that have for most
(www.dti.gov.uk/energy/whitepaper), commits it to a major
architects been a series of rules of thumb, and, at worst, pure
revision of the Building Regulations by 2005. Professor
guesswork sticking a finger in the air.
David Strong, managing director of the Building Research
For too long, basic software has just been giving people
Establishments Energy Division and chair of a working
a feel (for the energy performance of buildings), says
group helping the government implement the directive, is
Don McLean, the academic who now heads IES, the
conscious of the size of the task ahead.
company that has developed <VE>. But the original drive
The last revision to Part L of the Building Regulations
behind ABACUS was to use the power of computers to get
took seven years to come to fruition, and we are already
the kind of information that people really require in order to
10% into the three years we have to transpose the new
make informed decisions about design.
directive into law, he says. But he welcomes the
<VE>s modules include tools for solar, lighting and
opportunity to place a greater emphasis on the energy that
thermal analysis and simulations; mechanical and electrical
buildings use. With increasing levels of corporate social
elements for duct, pipe and cabling design, value
responsibility, energy will play an important role in the
engineering, capital and life cycle cost modules and an
commercial environment. Buildings used extensively by the
award winning building evacuation module. While only
public, like supermarkets, will have to display their
some may be of interest to architects, the concept is that all
certification in a prominent way. I dont suggest this will
disciplines can perform their own analyses using the
have a direct effect on shoppers purchasing decisions, but it

Energy performance

BUILDING

appropriate set of modules. The key to making this work is

the final module, the ModelBuilder.
ModelBuilder is a single building model software along
the lines of Architectural Desktop, Revit and Archicad.
While by no means as sophisticated an architectural design
tool as these, ModelBuilder makes it relatively
straightforward to create a conceptual or detailed design in
an integrated 3D model. The building is constructed in the
model from intelligent elements such as walls, windows
and doors. These not only have dimensions and a finish, as
they might in a visualisation model, but also a full range of
other properties, such as thermal, porosity and air infiltration
characteristics.
At concept stage, where different options are being
investigated, notional properties can be applied. An external
wall can be, say, 50% glazing, with brises-soleil on the south
and west elevations. Different design options can be
simultaneously analysed for their performance over a
number of key criteria. The base concept of 50% glazing can
be compared with different levels and types of external
materials, and even different building shapes and
orientations. The softwares value engineering module
summarises each option according to a range of criteria
including capital and running costs, annual heating and
cooling requirements, peak loads and total carbon emissions.
It will also let you know immediately whether an option is
going to have problems meeting the requirements of Part L.
The ability to instantly identify how well each design
performs can help an architect to rapidly refine and optimise
a concept. While it would be foolish to take forward a
design based solely on the figures that emerge from a
computer, the software does assign some real comparative
values to important areas that are often left unprobed. Even
at this early stage, it can be valuable to see the effect of
minor changes to a buildings orientation, or the effect of a
naturally ventilated atrium.
As the model of the building is developed, more detailed
analysis can be carried out. The thermal module will
simulate temperatures, solar gain and heating and cooling
loads, over time. Being able to plot these together, for
example looking at peak and distributed cooling loads over a
week in high summer, can have a big impact on plant size
that can lead to a reduction in the size of equipment rooms,
simultaneously lowering carbon dioxide emissions,

improving its certification under the new EU Directive and

reducing life-cycle costs.
Ryder has six staff using the SunCast solar analysis
module on a number of projects. Using SunCast we were
able to clearly demonstrate to planners that a city centre
scheme had a minimal shading impact on public spaces that
were adjacent to the site, says Andy Roberts. In a value
engineering exercise on the facade of another project, we
were able to determine that brises-soleil were only required
in certain areas. Roberts M&E consultants were initially
surprised to find an architect performing solar evaluations,
but have now started using modules themselves, working
directly from Ryders single building model.
With more than 20 different modules, we can only begin
to hint at <Virtual Environment>s sophistication. The
BuildingModeller can import CAD data in DWG, DXF and
ADT formats, and can export back to ADT. But a direct link
into the Revit modelling software ought to be an ultimate
goal and would bring the nirvana of one totally integrated
design, simulation and analysis system a step closer. Links
with Autodesk are already established. Autodesk asked IES
to model its new UK headquarters building in Farnborough
several months after it was built. The software identified that
conditions in the south-east-facing triple-height glass
reception area would be uncomfortable for 225 working
hours each year. Having visited the building several times
recently, I can confirm this is the case.
<Virtual Environment> can not only help architects to
improve carbon ratings, but in doing so, gives a quantitative
rationale for improving energy performance, increasing
comfort and therefore the productivity of end users while
potentially reducing the total cost of the building over its
life. And it beats sticking a finger in the air.
Cemicircular WebWatch
Prompted by the directive on Energy Performance of
Buildings, an EU website called Manage Energy
(www.managenergy.net) has been set up to promote
energy saving and renewable energy. DEFRA have a part
of their site dedicated to sustainable energy, which
includes coverage of the Directive (www.defra.gov.uk/
environment/energy). The UK Energy White Paper is on
the DTI website (www.dti.gov.uk/energy/whitepaper).

BUILDING

Building for sustainability

EU directives and the Part L Building Regulations are
pressing for the creation of greener buildings that are more
energy-efficient and produce less waste. But is it possible to
go green and still make developments pay? The pioneers
believe it is possible. Stacey Meadwell looks at the response
by construction and development companies to the green
agenda (Estates Gazette, Office Trends, 24 May 2003).

The construction industry generates around 70m tonnes of

waste a year. Add to this the fact that buildings account for
4050% of the UKs total energy consumption, and it is
little wonder that the government is keen to see property
become greener.
The updated Part L Building Regulations, which include
far tougher energy efficiency targets, go some way in
pushing the industry on to the path of sustainable
development. An EU directive wants to firm up energy
efficiency obligations and the UK government will have to
introduce legislation to implement this by 2006.
But occupiers are also exerting pressure, because they
have obligations as part of their corporate social
responsibility to ensure their businesses have the minimum
impact on their surroundings. As a result, some developers
are beginning to address the issue but can they afford to?
When the Part L regulations came into force last
summer, it was estimated that building costs would rise by
10%. Part L brought in the measurement of air leakage in
buildings and this affects the build quality you cant build
shoddily, says Lynne Sullivan, who is both director of
sustainability at architects Broadway Malyan and a member
of the governments building regulations advisory
committee.
And, clearly, high-quality construction costs.
Joanne Embling, a partner in the development team at
Cushman & Wakefield Healey & Baker, warns that current
market rents could result in developers bottom lines being
squeezed. There are relatively few office markets in the
UK where the rental levels give you much latitude in terms
of specification.
She believes that in order to have any room to
manoeuvre with build costs, a rent of 20 per sq-ft-plus is
required.
While some developers will admit there can be a cost
increase for example, Taylor Woodrows manager of
environment and sustainability, Katherine Hyde suggests a
hike of 5% for greenness research into the issue is at
an early stage. The RICS Foundation is currently
undertaking research into the business case for sustainable
development.
The government does offer grants for the research and
use of new technologies that improve building
sustainability. But this may not be enough to make green
building an attractive proposition.
Akeler received financial assistance from the EU in
order to develop the Solar building at Doxford Park in

Sunderland five years ago, which has Europes largest solar

electric facade. Marcus Boret, director at Akeler, says it was
not economical to do and the development was partly
experimental.
It is encouraging that there are those in the industry who
are prepared to experiment. And the few pioneers generally
play down the negative impact of any cost increases.
Developer LandSec Trillium was ranked first in Europe,
and second globally in its sector, in last years Dow Jones
sustainability index and is the highest ranked property
company in the FTSE4Good index, which reflects the
performance of socially responsible companies. Dave
Farebrother, LandSec Trilliums assistant director,
environmental services, says: Possibly, if you have built a
better building you let it faster and this could offset the
extra costs.
He believes that some elements of sustainability are
relatively easy to implement and prove immediately cost
efficient, such as the incorporation of controls for lighting
and heating that switch the supplies on only when they are
needed.
REID Architecture adopted a green approach to the
refurbishment of the 1950s West End House in Londons
Soho, using natural ventilation, external blinds and chilled
beams to keep down energy costs. Figures produced by
construction consultants and project managers Davis
Langdon & Everest show that this design has actually cost
less at 80 per sq ft than the 95200 per sq ft for a
major refurbishment. Both sets of figures factored in
extending the buildings life by 15 to 20 years.
Davis Langdon & Everests figures also showed that the
naturally ventilated building cost 63p per sq ft pa to run,
compared to 1.18 pa for an air-conditioned building.
Derwent Valleys investment director Nigel George
believes its 32,000 sq ft office block in Southampton Street,
WC2, which has a number of sustainable features, cost no
more than other buildings. He says that while some elements
may cost more, others cost less.
It is a point backed up by Stanhopes Ron German:
Displacement air-conditioning is cheaper than fan coil but
then it is more expensive to put louvers on the outside of the
windows.
Excluding the Solar building, Boret believes that
Akelers buildings, which all carry a very good or excellent
BREEAM rating (a widely used standard for assessing the
environmental performance of buildings), do not cost any
more than anyone elses.
It is something that CWHBs Embling has also noticed:
Greener construction is not more expensive in every case.
As systems become more highly developed like the
computer then one hopes that the cost of the product will
come down.
Sustainable development is not going to fade away like
last years catwalk collection, RICSs executive director
David Fitzpatrick concludes: Cost will become less of an
issue because it will become a level playing field because
everyone will have to address it. Those that do it efficiently
will make the money.

BUILDING

Developers respond to the demand for sustainability

A guide to best practice starts with the premise that sustainability is planned in from inception
With so many aspects to sustainable development for the industry to think about, it may seem like a huge mountain to climb to
become truly sustainable. Most pioneers say it is all in the planning: that sustainability cannot be an after-thought but must lead
the development from the start. Some in the industry are already making great strides. Here are some of todays best practices.
Location
Close examination of the topography of a site and orientation of a building can both result in energy savings within the finished
building, and also limit the environmental impact of its construction.
Akeler director Marcus Boret explains that designing the building so that the floorplates fit the natural landscape as much as
possible minimises the amount of excavated soil that must be transported off the site. This not only saves money on haulage
costs but also cuts the pollution that would be caused by lorries undertaking such journeys.
Likewise positioning the building so that it receives the maximum amount of natural light saves on lighting costs.
Construction
Off-site construction is proving attractive to some, says Taylor Woodrows manager of environment & sustainability Katherine
Hyde. Assembling parts of a building away from the site reduces waste, she says. Off-cuts from M&E systems can be reused in
a factory, whereas on-site theyd get thrown away. You also see higher quality in factory-built objects.
Conserving energy in the finished building
Natural ventilation is becoming more common, with solar shading, air-displacement systems, chilled beams and thermal
curtains being just some of the methods used.
The idea is to use natural energy not only to heat and cool buildings as much as possible but also to create a far more pleasant
working environment for occupants. Windows that can be opened are also making a comeback.
The greener methods of temperature control can also have the added benefit of allowing greater floor-to-ceiling heights
(providing more room for air to circulate) and fewer, and more accessible, handling units to maintain and repair, thus reducing
day-to-day maintenance costs and disruption.
Simple metering and movement sensors are also being used to keep heat and light usage to the areas where they are needed.
Longevity
An inflexible building will inevitably cause headaches in the long term as different occupiers bring different demands and new
fit-out requirements.
Designing a building, therefore, when it is not known who the occupier will be can make sustainable development a little tricky.
Developers have to build enough flexibility into the design and fabric so that an occupier can manipulate the building to their
own needs.
This has an impact on such things as how a building is ventilated if the ventilation system is relying on a through-draft from
one side of the building to the other, putting a partition in the middle could disrupt the system.
One approach to flexibility is to place stairwells towards the outside of the building along with other soft areas which can be
more easily manipulated.
What is sustainable development?
A building can have deleterious effects on the environment far from its actual site
Sustainable development was described at the Earth Summit in Rio de Janeiro in 1992 as meeting the needs of the present
without compromising the ability of future generations to meet their own needs.
It is not just about the amount of carbon dioxide that a building emits and how much energy is used to run it. Green building is
also about the materials that are used does the paint on the walls give off VOCs, and are the materials used in the
construction from sustainable sources?
The environmental damage caused by any construction must also be considered according to the distances that materials had
to be transported to the site, and how much material was wasted in the process, and what happened to that waste.
Then there is the social impact and the long-term implications of the building. What is it doing for the people who live nearby,
are the workers travelling to the building in a way that creates extra pollution, and what will happen to the building in the years
to come?

Cemicircular WebWatch
The RICS Foundation has funded and conducted research
on sustainability with the property and construction
sectors (www.rics-foundation.org). For more on the
FTSE4Good index go to www.ftse.com/ftse4good. Details
about the BREEAM rating system is available on the BRE
website (products.bre.co.uk/breeam).

BUILDING

Texlon for super roofs

Could it really be possible to put a whole city under one
roof a kind of giant plastic umbrella? It sounds like
something from science-fiction, but, as Peter Kernan
reports, it could be on the way (Construction Manager,
June 2003).

Architect Ben Morris has extraordinary ambitions for

Texlon, a material with roots in spaceship insulation. We
could roof a city with it, he proclaims in the sort of voice
that brings the words mad and scientist to mind.
Enclosing urban blocks and quarters with massive cushion
roofs will liberate buildings from the ravages of water.
In other words, buildings wont need waterproof roofs of
their own any more because soaring above them and
stretching for miles will be a giant umbrella that shields all a
citys structures. Flat roofs really could be flat. Something
like this is already happening at Kingsdale School, London.
Because Texlon (a close cousin of Teflon It came from
outer space, below) is a plastic, it doesnt need the support
other roofing materials do. One square metre weighs 200g,
including the plastic piping that inflates the cushions. The
same area of glazing weighs several kilos.
As a result, you can even dispense with trusses and
suspend the roof from cables a concept that cushion roof
specialist Vector calls the Xanadome. The company is
currently building a small Xanadome (20m by 30m) at
Wallsgrave Hospital in Coventry and is discussing bigger
versions with clients. Morris, the 46-year-old co-founder of
Vector, claims that a Xanadome can free-span a kilometre.
But Texlon is more than just a high-tech cladding for
futuristic one-offs like the Eden Centres biomes. After
serving the long apprenticeship that all innovations in
construction have to undergo, Texlon has won cautious
acceptance. Its cheap, too Morris reckons its half to twothirds the cost of glazing a roof. And schools and hospitals
have started to adopt it.
Airbag insulation
Cushion roofs consist of layers of Texlon welded together at
the edges and inflated to make airbags. The air stops the
plastic sheets flapping around and insulates the building
below. The more airbags, the better the insulation. The
6

typical U-value ranges from 2.94 for the single airbag

created by a two-sheet roof to 1.18 for the four-airbag
system of a five-layer roof.
At Kingsdale School in Gypsy Hill, London, Galliford
Try project director Bob Collyer is covering a three-storeyhigh quadrangle the size of a football pitch with a threelayer cushion roof that automatically regulates its solar
shading. Roofing the space let Collyer build a dining hall
that seats 500 pupils, a walkway and a large auditorium with
tiered seating, as well as a two-storey roofed structure with a
library on the ground floor and a mini-auditorium on the
first.
Sensors control solar shading by varying the degree of
clash between the pixellating graphics on two of the Texlon
sheets (see Sun screen). The patterns graphically interfere
with each other and make the roof look like a sparkly dress,
says Morris. Collyer puts it more prosaically: Its like an
enormous great rooflight that controls the admission of
natural light.
First, Collyer had to strengthen the 1960s-built schools
existing steelwork to take the extra weight of the Texlon
roof. He then spanned the 36m width of the quad with a
series of curved steel trusses Kingsdale is not a Xanadome
and covered the 6m-wide space between each with a
single piece of Texlon. Its thick, rigid stuff, like the canvas
sides on lorries. Pulling it across was very heavy work, he
says.
Miracle material?
Collyer reckons that Texlon is heavy-duty enough to walk
on. Morris goes a bit further. He says you can bounce on it
as you would a trampoline, although if you take him at his
word youll leave two little dents behind each time you land.
It wont tear even if you walk across it in stiletto heels, he
says. Five years back, kids heaved a paving stone on to one
of our cushion roofs at a swimming pool reception in
Scotland. It went through the top layer but the middle sheet
held and the air in the lower compartment pushed it up to
seal the hole in the top sheet. Its self-healing. Self-healing?
Well, it stops the air escaping through tears. For a permanent
repair, theres a roll of special tape.
According to Morris, Texlon is self-cleaning too and has
got the graffiti artists licked. Its got the second-best friction
co-efficient known to man, he declares. Grit and dust dont
stick to it. A bit of rain will wash aerosol paint away. The
supreme super-slippy champion? Teflon, of course.
Built-in safety
Collyer isnt quite so wide-eyed. Hes used Texlon before,
on a tented roof for a Butlins camp at Bognor Regis (of
which hes very proud), and he says they needed abseilers to
clear off the bird droppings.
For his final trick, Morris points out the miracle
materials ability to disappear in a puff of smoke. Texlon
doesnt catch fire: its self-extinguishing. At 200 degrees C,
Texlon just shrivels away from the heat source. Morris has
exploited this by creating a cushion roof that self-destructs.
Hot wires run around three sides of the cushions on a failon-demand roof; the hot wires, when activated, sever the
cushion from the trusses it is attached to. The Texlon drops
down, leaving the building without a roof.

BUILDING

In a shopping mall, for example, a lot of the

construction budget goes into dealing with fire, says Morris.
But this disappearing roof takes up to 20% off build costs
by turning an enclosed mall into an open street. In other
words, because the roof will remove itself, the construction
team doesnt have to conform to the stricter fire regulations
demanded of internal spaces.
These things never make money, but I love what you
can do with it, says Morris. Beautiful buildings are his
passion. We choreograph the whole operation, he says.
It came from outer space
Texlon emerged from Americas determination to win the
space race.
Back when Nasas goal was to put a man on the moon,
chemical company Dupont invented fluoro-polymers, of
which Teflon is the best-known example, as an electrical
insulant impervious to cosmic radiation. In the 1980s,
Vector added ethylene to create ethylene-tetra-fluoroethylene (ETFE), the chemical description for which Texlon
is the brand name.
Like its Teflon ancestor, ETFE will last forever. And not only
is it eternal, the latest version from Vectors R&D lab is
virtually invisible. Hold it up and you dont know its there
you cant see the edges, says Morris.
Although not so clear as glass, Texlon allows more light to
pass through.
Installations include the Eden Project, the Treasury, the
National Gallery and Sainsburys head office. And with
Wimbledon looking for a transparent roof to prevent days
being rained off, Texlon may serve another ace.

Sun screen
Both the upper and middle sheets of the Kingsdale roof
are laid out in a chessboard pattern, with half the squares
on each screening out UV light.
With no air between the two sheets, the screening squares
are offset, giving maximum solar shading. But as the
upper airbag inflates, the screening squares overlap,
decreasing the shading.
Sensors automatically pump air from the lower to the
upper airbag to raise the temperature.
Future vision
How Kingsdale Schools potato-shaped auditorium and
library will look in the newly roofed quadrangle.

Cemicircular WebWatch
For more details about Texlon go to www.texlon.ch.

Protecting historic environments

In July the UK Department for Culture, Media and Sport
issued a consultation paper, Protecting our historic
environment: making the system work better, proposing an
overhaul of the system for protecting historic buildings and
sites in England. This summary of the main proposals for
change is from LawNow, the online newsletter of law firm
CMS Cameron McKenna (23 July 2003).

17 July saw the launch of what the Government has called

A Consultation Paper with radical ideas to simplify and
improve the executive and administrative system for the
protection of the built heritage in England. The Paper is the
long-awaited final stage of a process that began way back in
December 2001. It amounts to a top-to-bottom review of
what some in the property industry refer to as one of the
dark arts historic building control.
Think for a moment about the different structures that
come within this area of development and heritage control:

listed buildings (over half a million of them in England

alone)
conservation areas (over 9,000)
scheduled monuments (over 18,000)
historic parks and gardens (more than 1500)
historic battlefields (43 in number)
world heritage sites (15 in England and another 11 on
the Tentative List).

They represent a huge variety of structures across the

English countryside and cityscape.
For some time the Government has been aware of the
need to change the way in which owners are informed why
their property is protected; what is considered important
about the property and how they can best look after it; the
need for local authorities to have clearer guidance about
how to enable change and apply controls; and the need for
developers to enjoy greater certainty when promoting
development that affects built heritage.
Government regards this consultation as a way of
providing benefits, via a simple system and proposes new
responsibilities, for everyone.
Why are these changes so important, and what do they
mean for the property industry?
1 The list of protected buildings and sites continues to
grow each year. In 1970 there were approximately
90,000 listed buildings: there are now half a million. It
is, as Government recognises, a rich inheritance, but it
requires a large-scale operation to manage such a huge
stock of buildings. The Government wants to improve
the system, in the way that it operates and in its
efficiency.
2

The list of protected buildings and sites, as it grows,

adds constraints to the development of land in England,
both in the countryside and in cities.

BUILDING

The Government continues to seek to push developers

via central, regional and local planning policies into
the cities with a view to using brownfield land. If this is
to be the long-term future of development in England,
then it is increasingly likely that, when developing
Englands urban areas, those involved in the process will
come up against and have to manage development
solutions that take into account the built heritage.
With all of this in mind, the Consultation Paper looks to
recognise the need to work more effectively within the
system, whilst protecting the built heritage.
The key areas for change proposed in the Consultation
Paper are:

a single unified list to cover all of the important

historical, architectural and archaeological structures
in England;

the management and maintenance of the List to be

transferred from the Department of Culture, Media
and Sport to English Heritage (with some
management constraints based in Statute);

wider consultation on the procedure of listing a

building for its special architectural or historical
importance;

a statutory right of appeal against the listing of a

property;

the introduction of Statements of Significance for

listed properties that would show the reasons for
listing; what is significant about an item on the
Statement, and an indication of what works to the
listed items would require consents from local
planning authorities.

Comments on the consultation proposals are required by

Government to be submitted by 31 October 2003.
CONTACT:
For further information please contact Alistair Watson in
the Planning Group on +44 (0)20 7367 3890 or email
alistair.watson@cmck.com

Cemicircular WebWatch
The governments consultation paper Protecting our
historic environment: making the system work better can
be downloaded from the DCMS website
(www.culture.gov.uk/global/consultations).

Party walls and archaeology

It is not that unusual these days for a major development to
be preceded by an archaeological excavation. Knowing how
deep a dig might go is important in the UK, because
archaeology can be caught by the party wall legislation like
any other excavation, as explained by Stephen Boniface
(Building Conservation Journal, Spring 2003).

Many readers will be aware of the party wall legislation and

procedures, particularly in the light of publicity surrounding
the recently published fifth edition of the RICS Guidance
Note. When thinking about the application of the Party Wall
Act, we will usually consider development in terms of
extension or alteration to physical structures. However, to
quote the RICS Guidance Note, the Act does not only
regulate works to boundary structures. It also provides
protection for buildings where their stability may potentially
be threatened by excavations on adjacent land.
The term excavation is not defined further and can
mean the digging of any hole close to a structure on
neighbouring land. The hole could be an excavation for a
foundation (the most common interpretation) or perhaps for
a soakaway system for drainage. For the purpose of this
brief article, however, it should be remembered that an
excavation for archaeology might also fall under the Act for
consideration.
What the Act requires is that before the excavations are
undertaken the owner of the land on which the excavations
take place must serve a notice on the relevant adjoining
owners, in certain specified situations. Certain procedures
follow that will often result in the preparation of a Party
Wall Award, which in principle protects the rights of all
involved to enable the excavation to take place.
What the Party Wall Act requires is that where an
excavation is within three metres of a building or structure
and the excavation is to a lower level than the bottom of the
foundations of that building or structure, then the Party Wall
Act applies and notice has to be given. Alternatively, if the
excavations are within six metres of a building or structure
and will cut through a line drawn downwards at 45o from the
bottom of the foundations of that neighbouring building or
structure, then, again, the Act applies.
The problem with archaeology is that the depth of the
excavation will often be unknown when the work
commences. Further, the depth of the neighbouring
foundations may not be known and if the building is historic
the chances are that the footing or foundation will be quite
shallow.
If the archaeologists seriously believe that they are
unlikely to go below the foundation or excavate into a zone
covered by the Party Wall Act, then they can proceed with
the work without issuing notices.
However, as soon as they get to a depth where the Party
Wall Act might apply they will have to issue notices and
work will have to stop until the Party Wall Act procedures
have been followed. The alternative is to issue notices in any
event, on the basis that they might excavate into a zone
where the Party Wall Act will apply.

BUILDING

Party Wall Act apply? NO

Party Wall Act apply? NO

Party Wall Act apply? YES

45O

45O

6m

6m

3m

Party Wall Act apply? YES

3m

Many of you may be thinking, What will happen if the

notices are not served? The simple answer is that the
adjoining owner could get an injunction to stop the work and
force the owner of the land on which the excavation is
taking place to serve the notices. The cost implications to
that owner and possibly to the archaeologist could be
significant.
It is generally now accepted that most professionals
understand that the Party Wall Act might apply to works
near a party wall structure. If an architect or a surveyor fails
to notify an owner and the owner is then put to the
inconvenience and cost of party wall procedures without
being forewarned, it is possible that the professional adviser
could be held responsible for those costs.
Similarly, as archaeology often involves excavation, it
could be argued that an archaeologist should be fully aware
of the implications of the Party Wall Act and when it might
apply. An archaeologist that does not advise an owner of the
possibility that the Party Wall Act and its implications might

apply could be held liable for costs that flow from an

injunction, party wall notice, etc.
Although it could be argued that ignorance is no defence
in law and it is for building owners to acquaint themselves
with any legislation relevant to work they wish to undertake,
they will, of course, argue that they rely upon the
professionals to advise them on all relevant matters. While
these are legal matters upon which advice from solicitors
and other should be sought, it is surely more appropriate and
less inconvenient if all professionals are properly aware of
such matters and advise their clients in advance.
Cemicircular WebWatch
For links to a variety of websites about party walls, go to
the CEM Gateway for Learning through the External Links
section within the Blackboard Virtual Learning
Environment for your course. Also of use is the RICS
website (www.rics.org/public/party_walls).

CONSTRUCTION

Construction
Design-and-build contracts
The widespread amendment of design-and-build contracts
transfers undefined risks to contractors and breeds disputes.
But soon all cards will have to be on the table, says Ann
Minogue, partner at solicitors Linklaters (Building,
27 June 2003).

Design-and-build contracts are the flavour of the month. The

RICS contracts-in-use survey for 2001 confirmed that
design-and-build had captured 43% of the market. Most
design-and-build contracts are now let on JCT With
Contractors Design 1998 but amended heavily by the
employers advisers. The dispute in Mowlem plc v Newton
Street Ltd involved just such a contract. Judge David Wilcox
was looking at a point of law arising out of an appeal against
an award made in an arbitration on the interpretation of such
amendments.
The works in that case involved the conversion of a large
reinforced concrete structure in Manchester, used as a post
office sorting house, into a block of flats. The amendments
concerned were mainly to the articles of agreement and
provided in particular that the parties agreed that the
contract sum shall be the guaranteed maximum price
and is acknowledged to include the full cost to the
contractor of all risks and responsibilities assumed.
Mowlem accepted additional risk and responsibility for
divergences and discrepancies within the contract
documents and relating to the statutory requirements. The
contractor agreed that it was not relieved from any
responsibility on the basis of any misunderstanding,
insufficient information, the unforeseeability of any risk or
the inadequacy of any drawings. And that a change meant
only a material alteration or modification to the contract
documents instructed by the employer.
The contractor was advised by structural engineers prior
to the contract to undertake a further investigation into the
concrete frame. It did not do this, and no provision was
made for such investigation in the contractors proposals
submitted by Mowlem and included in the contract. The risk
of concrete repairs was not referred to in the contract and no
description of the repair work was included in any contract
documents. Mowlems argument was that such repair work

10

could not form part of the works. Mowlem accepted that

the amendments in the articles imposed additional
responsibility on it, but not for things outside the definition
of the works. Accordingly, it did not accept the risk of
concrete repairs. The judge rejected this proposition: the
articles imposed additional risk on the contractor, including
the risk of unforeseen or unknown risks arising out of the
condition of the existing building.
Another dispute arose in relation to discrepancies in the
contract documents. At the date the contract was signed,
planning permission had just been granted to increase the
number of flats and the contract drawings included
unamended elevation drawings. Again, the articles
transferred responsibility for discrepancies to Mowlem,
which it had to resolve at its own cost. The judge decided
that the discrepancies did not involve material alterations
to the contract documents.
Mowlem finally tried to argue that the employer had
misrepresented the condition of the building and its
suitability for the works, and argued that the amendments to
the articles were so widely drafted that they could not satisfy
the reasonableness test in respect of exclusion of liability for
misrepresentation imposed by the Misrepresentation Act
1967. Again, the judge upheld the arbitrators finding that
the amendments were reasonable.
So despite the cavalier approach of many contractors to
these sort of amendments, suggestions that they will never
be enforced because they are not fair or reasonable are
optimistic. The courts will look at what the words say and
interpret them as best they can. The fact that the wording of
all these various amendments is different means that each
case needs to be looked at individually.
The JCT, recognising the widespread attempts to amend
JCT WCD, is about to publish JCT Major Projects Form
2003. This anticipates the risk transfer under many
employer-led amendments. It will hopefully add a degree of
standardisation that will give employers the confidence to
use the form without extensive amendment and give
contractors some certainty about the risks they have
assumed, so that they can price them appropriately.
Cemicircular WebWatch
For details about JCT contracts go to the Joint Contracts
Tribunal website (www.jctltd.co.uk).

CONSTRUCTION

Watertight basements
Creating a watertight basement can involve a lot of working
room, until now. Corus boffins have found a way of sealing
sheet piles to make an instantly watertight basement
involving far less disruption and lower costs. The system
can also be used for creating barriers around contaminated
sites. Kristina Smith finds that simple solutions are often the
best (Construction Manager, July-August 2003).

How do you build a watertight basement when theres no

room for manoeuvre? One contractor did it with sheet piles,
thanks to a deceptively simple innovation from Corus.
It was a site bounded on four sides by roads. The
underground car park extends right to the edges of the plot
beneath a three-storey office building. The rock head,
mudstone, is 3m below the surface.
The solution is a novel one. Excavate a 5m trench round
the perimeter, lower in sheet piles, pour in 1.5m of concrete
to hold them in place. Excavate out and paint up the sheet
piles to form the walls of the car park. Well, its not quite
that simple. There was some clever sealant stuff going on in
the pile interlocks.
For design and build contractor Houseman and Falshaw,
this meant savings of 80,000 or more on a 5m contract
and a much quicker build-time. Not to mention a quiet life
for the neighbours. You cant put a price on the degree of
disruption we saved the other people on the estate, says
contracts director Clive Mitchell.
The contractor is building the three-storey office, dubbed
The Lens due to its curved glass facade, for Hornbeam
Park Developments which owns much of the former ICI
works site. Developer and contractor negotiated this
contract, having worked well together on previous jobs on
the park.
Since the developer owns the three minor roads
surrounding the site, Houseman and Falshaw could have
opted for a conventional reinforced concrete solution.
The problem is cost and time, says Mitchell. Because
you are taking up all of this site, you need such a big
working space to be able to construct the concrete wall.
This would have involved excavating a 3.5m deep trench
around the edges of the 65m by 35m site. The trench would
extend outside the site boundary to accommodate the toe of
a concrete wall. Battering back at 45 degrees would eat into
the surrounding roads.
A temporary cofferdam was a no-no since silent piling
or vibropiling would not have penetrated the mudstone.
And driven piling is far too noisy for a site with near
neighbours, the developers existing tenants.
Houseman and Falshaws structural engineer Hill
Cannon came across Hydrobarrier from Corus. Basically its
sheet piles. What makes them special is the work Corus did
on sealant systems for the interlock. It makes them
waterproof instantly [see below].
John Theos, Hydrobarriers business manager, says the
seal alone would provide a basement suitable for some car
parks. This would be equivalent to BS 8102 grade 1 which
allows for some leakage. There are four grades in all,

grade 3 being habitable. For the Harrogate site, Coruss

contractors will make it grade 3 by returning to shot blast
the piles, weld the interlocks and paint.
This job only required a low-grade sealant since the
regular water level is at just 0.5m from the bottom of the
piles. So why not use bog-standard piles? Because with
standard piles, some water would be bound to leak through,
which would effect the quality of the welding: You will get
holes in the weld, says Theos. Its a crappy weld basically.
You have to keep going over it. It doesnt look good and its
not an efficient way of working.
Before excavating the 5m trench for the piles, Houseman
and Falshaw dug a number of trial trenches and left them to
stand. It had to make sure the clay walls would not collapse
at such a depth.
Meanwhile Corus was welding the piles together in
fours, reducing installation and welding-on-site time and
ensuring three out of four joins happened in factory
conditions. This caused some fun at first on site, as Corus
contractor had to experiment with the way it was slinging
the pile panels so that they hung vertically. The contractor
installed girders over the trenches to control the line of the
wall.
Once we had ironed out the practicalities, things went
well, says Mitchell.
No reservations
Despite Corus assurances that the piles wont leak, Hill
Cannon specified concrete as the backfill rather than
granular material. The engineers were concerned that if you
get a build-up of water, that could cause problems. So for a
few thousand pounds, it was worth concreting, says
Mitchell.
The contractor used granular material to temporarily fill
the gap at the front of the piles. Ground anchors will hold
the piles in place while the contractor excavates and
constructs the basement. And once the ringbeam and
crossbeams are linked, the anchors become redundant.
Mitchell reckons using Hydrobarrier saved in the region
of 50,000 on temporary works and 30,000 on the
difference in cost between piles and reinforced concrete.
Would he use it again? Mitchell points out that the
success of this particular solution is dependant on the stiff
ground conditions. But he says: If we came across this
problem, Id have no hesitation. I think the system is right
for the job.
The secret of the seal
When is a sheet pile wall not a sheet pile wall? When its a
Hydrobarrier.
Hydrobarrier came out of Scunthorpe about three years
ago, when Corus was looking at ways to capitalise on its
technical expertise. There is a lot of sheet pile know-how up
North.
The key to Hydrobarrier is sealants.
Corus boffins have been testing different brands and
combinations of sealants to find systems that remain intact
while piles are driven in a variety of ways and in a variety of
ground conditions. They have also developed a variety of
sealants that work for different types of contaminated
ground.
11

CONSTRUCTION

There are mastics, epoxy resins, mechanical systems.

One might be applied over another for protection until the
piles are driven in.
Business is blooming
Corus has patented one combination or sealant system and
hopes to do more. Thats the way you can really
differentiate yourselves, explains Hydrobarrier business
manager John Theos.
Corus uses contractors with which it has worked before,
and sends one of its own people to site to supervise the
work. It is a relatively young business so at the moment
there are just two supervisors on the books.
Hydrobarrier has a number of completed jobs under its
belt. The most prestigious is a car park basement for the
BBC White City project. Developer Urban Splash will use it
on a 250-apartment building in Altrincham designed by
Fosters.
Two housing projects, at Cambridge and Newbury, have
been enclosed by Hydrobarrier, their cleaned-up site
protected from the surrounding contaminated ground by the
sheet piles and special sealant combo.
Cemicircular WebWatch
Details of the work and innovations developed by Corus
can be found at www.hydrobarrier.com.

12

Partnering
Making changes in the way things are done is never that
easy, especially if you are bombarded with a lot of changes
all at once. Perhaps it is therefore not surprising that
partnering as an approach to managing building and
construction projects has taken rather longer to be
embraced in UK local government than in the private sector.
In two items from Construction Manager (June 2003)
Kristina Smith traces the transformation of Middlesbrough
into a Beancon council.

Outstanding in the sticks

Its easy to get swept away on the tide of Carillions, Kiers
and Willmott Dixons, to think that partnering is the norm,
not a novelty. Then you meet a small regional player who is
enthusing about the fact that they are working on partnering
contracts. Where have they been for the past decade?
The charge often levelled against the Rethinking
Construction brigade is that behind the gloss of the bigvalue demonstration projects, the message is not filtering
down to other parts of the industry, the clients and
contractors working on the small-scale jobs which
collectively employ a huge proportion of constructions
workforce.
Its true. A designer on one of the very first
demonstration projects, which aimed to show that partnering
was effective for small jobs, has not worked on a partnering
contract since. Most of our projects are fairly modest and
the clients just arent motivated to try it, he told us.
Doing things differently is hard work. Just ask the people
at Middlesbrough Council who are trying to be a good client
in the Egan mould (below). Its tough to change the way you
think and function after years of compulsory competitive
tender and hard-fought claims battles.
It may be surprising for those who dont work in that
sector to find out that Middlesbrough and its contractors
have been partnering for less than three years. And they are
at the forefront, one of only six councils earmarked by the
government as exemplars for Rethinking Construction.
Those of you working in enlightened firms for
enlightened clients will read about what theyre doing up in
Teesside and think how far behind they are. Those of you
who work for local government may be impressed by just
how much progress Middlesbrough has made.
Whatever you think, this is what construction is like for
the people building the schools, libraries and hospitals that
never make the headlines.

CONSTRUCTION

Finally, a win for Boro

These days, its a model local authority. Kristina Smith
meets the men who made Middlesbrough, transforming a
bureaucratic department into a fee-earning consultancy.

What is the best way to change a group of weary civil

servants? Make them earn their keep.
In five years, local government long-timers Stephen
Stokoe, Doug Grimston and Dave Hodgson have turned a
staid council department into a fee-earning business.
Hundreds of local government people will be coming here to
find out how, because the government has designated
Middlesbroughs design services department as a model for
every local authority in the country (see box).
Sir John Egan said in his report that the government
should be a better client. And so we find Stokoe, head of
design services, and his two managers Grimston and
Hodgson taking that advice seriously. They look after
projects worth 10m or less schools extensions, libraries,
major repair work for clients like local education authorities
or NHS Trusts the sort of projects which many partnering
practitioners would say were just too small to make pay. But
they do it.
Seeing for myself
Grimston, group leader, building, meets me downstairs at
Vancouver House where design services is based. A security
guard has replaced the receptionist and contractors are
converting the old reception area into more rooms, a moneysaving exercise. This is evidence of Middlesbrough
Councils corporate commitment to overhauling
procurement: a PPP with Hyder Business Services is now
running some of the councils services including reception,
housing benefit and telephone enquiries.
Grimston, he tells me in his soft Teesside accent, almost
apologetically, has always worked in local government in
the area. A total convert to partnering, he has been eager to
try something different for years; his architects were the first
in the council to start using Rethinking Construction KPIs.
Behind his cuddly exterior and his gentle voice there is a
tougher side: I used to enjoy the adversarial nature of being
a QS. It was something to get my teeth into. Now its a
great relief to use his years of experience to problem-solve
with contractors round the table.
Tough but fair
Grimston is a straight-talker, which is perhaps why I feel
surprised when he tells me about his first partnering job: It
was a marvellously rewarding experience. It sounds like
hyperbole. But for someone like Grimston, who was
involved with a regional Latham working group looking at
changing the industry back in 1992, it must have been
frustrating to be always working with compulsory
competitive tender.
Of interviews for partnering jobs, he says: You see the
whites of the eyes of the lads that are going to do it. You can
look them in the eye and know if you can work together.
Middlesbrough awards contracts with quality accounting
for at least 50%. It even sets a minimum margin to stop

over-eager contractors putting in unrealistic prices in order

to get a partnering job on their CV.
Contractors that I contacted say that Middlesbroughs
selection system is rigorous but fair. They like the fact that
Grimston and his team will sit down with them afterwards if
they havent won a contract and explain in detail the reasons
why.
It has long been accepted that partnering is a more
rewarding way of working, but how does this translate to
best value for a client, I wonder? To find out I go with
Grimston, Stokoe and Hodgson to visit Middlesbroughs
Dorman Museum and speak to senior curator Ken Sedman.
The Dorman Museum redevelopment, which started at
the end of 1999, was Middlesbroughs first partnering job.
Grimstons masterstoke was to employ Barnsley chief QS
and the godfather of local authority partnering, Keith Hilton.
Why reinvent the wheel, asks Grimston when we can buy
the expertise off the shelf from Keith? This was an unusual
and clever step. Like Wates seconding a Wilmott Dixon man
as project manager if he happened to be the ideal choice.
The Dorman job came along at the right time. Stokoe et
al had something to prove. In 1998 a new chief executive
axed one third of the people from the architects and
engineering sections, merged the others into design services
and told them that they must earn their keep, like fee-earners
in a private consultancy.
Pleased punters
Sedman is very pleased with his new extension, which
replaced a 1960s monstrosity that was demolished as part of
the job. The punters like it too. Visitor numbers have
skyrocketed. In seven weeks he has met his visitor target for
a year, which at 70,000 is twice what he was getting before
the redevelopment.
I dont think we have had a single bad comment
about it, Sedman says, which is unusual, especially since
the original museum was built in 1904 in a very different
style.
The striking curved faades at each side of the extension
conceal a good illustration of a partnering success. The
original design had called for curved glass. During
discussions, the client asked how much it would cost to
replace a broken pane. The answer was too much and so the
design was adapted to use faceted glass, which, as well as
saving on future maintenance costs, delivered a 30,000
capital saving, split between client and contractor Miller
Construction.
We got a lot of building for the money, Sedman says.
Its not marble halls, but then again its only a 3m project.
A marble hall would have been half the size.
Radical approach
Next door to the Dorman Museum, in Albert Park, we sit
down for a cup of coffee with Stuart Johnston. Johnston
manages the park and the visitor centre that houses the little
caf where we are sitting, next to a shrieking toddler with a
plate of chips. The new visitor centre and rejuvenated lake
were part of a 4.5m renovation of the run-down Victorian
park.
Johnston is sparing in his praise. He thinks this one is
no better and no worse than other brand new buildings for
13

CONSTRUCTION

defects. But when he talks about the project he says there

are things we got right and things we got wrong.
But what would be different now, had the job been
traditional? We probably would not have got on. I doubt that
I would have made the building available to Steve for his
meetings, he replies, half-joking but making a serious point.
Albert Park was a job with plenty of difficulties and too
many contributors. Having a happy client at the end of the
job is no mean feat. Hodgson, who was the project manager
on this job, had to work hard to get here.
Hodgson, who is group leader, civils and structures,
liked the idea of Egan because he hates confrontation, but he
says it was difficult to get his head round the ideas at first.
The Rethinking Construction approach was not something
that somebody could give you on sheets of paper, like at a
seminar on new technical advice. He admits that it seemed
like a little bit of a fantasy world to begin with. Would
contractors really change? After all, contractors are the
enemy. His staff were afraid they would be shafted.
Too many cooks
So there was Hodgson, on the Albert Park job, with his staff
scared of partnering plus an unwieldy project group: main
contractor, subcontractors, the client, the Environment
Agency interested in the lake, and park users.
He had one of the biggest challenges of his career,
getting everybody involved to understand each other.
He came through, though. Look at the boat house. The
architect designed it too small, and only found out when the
project was well under way. The extra cost was 40,000. On
a conventional project this would have doubtless led to
claims, acrimony, delay. But here they were able to sit down
with main contractor Land Engineering and the buildings
subcontractor Dorin Construction and sort out where the
money could be found.
Stokoes Strategy
After a sandwich back in Stokoes office, he and I sit down
to talk about the Middlesbrough Driver. This thing was the
main reason that Middlesbrough won its award. Stokoe
wants to develop and sell it to other authorities.
Stokoe, an ex-architect and long-time local government
man, was brought into Middlesbrough Council in 1996 with
a brief to turn the department into a business. One of the
first things he did was to persuade the council to pay for his
MBA. Look, I was never trained as a business manager, he
told them. He did the MBA, by distance learning and in his
spare time. Since then he has persuaded Dave Hodgson to
start one too.
Implementing the Middlesbrough Driver is Stokoes
defining achievement. A business tool for measuring and
improving performance that was developed for
Middlesbrough Council to use at a corporate level, Stokoe
has applied it to his department to profound effect.
Take a group of disheartened local government
employees, conditioned by the very nature of their jobs to
stick to the rules. Axe a third of their friends, tell them
they have to operate like a private-sector consultancy, on
their public sector salaries. Then introduce partnering:
twice as much work per project as you hand-hold
contractors and clients whove never done it before.
14

How do you do get people on board with all that? The

Middlesbrough Driver (see below).
Public goes private
He takes me upstairs to the design services office. Its like
finding a Conran caf in the middle of the Co-op. Gone are
the grey cabinets and piles of paper. Instead a bright, openplan floor with plants and an informal seating area. It feels
like a consultancy.
The staff asked for the refurbishment as part of the
yearly review process, which is central to the Driver. If they
had to be professional, they wanted to look professional.
Hodgson had told me earlier that this refurbishment was his
greatest achievement, which at the time I thought strange.
Why not choose Albert Park or winning the award? Now I
understand.
It is an amazing transformation.
The way they have taken to the Rethinking Construction
regime is first class, says Grimston. These are dyed-in-thewool local government employees. They are absolutely the
last people in the world you would expect to be able to
change.
Model authorities: The UKs Beacon Councils
The government set up the Beacon Council scheme four
years ago to flag up and disseminate best practice among
the 480 authorities in England. Each year a different list of
themes is chosen.
This year Rethinking Construction was, for the first time,
one of nine themes which included tackling homelessness,
supporting the rural economy and street and highway
works. More councils entered the Rethinking Construction
category than any other. The 28 applicants were cut down
to a shortlist of seven, with six awarded beacon status.
The other authorities are:

Barnsley Metropolitan Borough Council

Mid Devon District Council
Norfolk County Council
Stockton-on-Tees Borough Council
St Helens Metropolitan Borough Council.

The scheme is administered by the Improvement and

Development Agency (I&DeA) for the Office of the Deputy
Prime Minister. www.idea.gov.uk/beacons

CONSTRUCTION

The big idea: What is the Middlesbrough Driver?

The Middlesbrough Driver has cousins in high places: the
Treasury for one. It is one of 40 similar business tools
created for central government departments, and local
government.
These started appearing in the public sector after the
current government came to power and introduced the
idea of performance management. They have been
around in the private sector since the early 90s.
The Middlesbrough Driver and its like are simplified
versions of the European Foundation for Quality
Management Excellence Model (EFQM). Their job is to
help organisations measure where they are and work out
how to improve.
The idea is that every year the people in a business sit
down and rank themselves under nine headings; five
enablers like leadership and strategy and six results
which include customers and key performance indicators.
Stephen Stokoe volunteered his department to pilot the
Driver when consultant BQC Performance Management
was developing it. It was a way of bringing together the
plethora of initiatives pelted at local government in the late
90s: the Modernising Government White Paper, best
value, performance management, Rethinking
Construction. It is the most effective way of encouraging
the staff in developing the business, says Stokoe.
Now Stokoe and BQC director Geoff Norris have put a bid
in for funding to develop another version of the EFQM
model. Its working title is Rethinking Construction Driver;
it would be a tool to help other authorities change the way
they worked. Middlesbrough would sell the Driver.
www.efqm.org

Cemicircular WebWatch
For details of the Beacon Council scheme, go to the ODPM
website for local government (www.localregional.odpm.gov.uk) and the Improvement and
Development Agencys website (www.idea.gov.uk/
beacons). Details about the European Foundation of
Quality Management are on their website
(www.efqm.org).

Construction team working

Integrated working is supposed to be the way ahead and
should mean better business, but it doesnt happen often.
Developer Stanhope has been taking a team-based approach
for some time, and some of those involved share their
experiences, as reported by Karen Fletcher (Building
Services Journal, August 2003).

In his Accelerating Change report, Sir John Egan

expressed his vision of the future of UK construction. He
wanted to see a time when ... the construction industry is
able to offer clients projects that are predictable on cost,
time and quality; where the industry understands its
customers needs and can deliver products which are
predictable in every way....
Egan also said that clients should improve their
understanding of construction, and they should help lead
the process of creating integrated teams.
Stanhope is making great strides in this direction,
developing an integrated, non-adversarial approach to
construction. In a recent round table discussion with Martin
Long, Stanhopes project director, and several of their
suppliers, BSj learned that it is possible to achieve Egans
vision.
The latest project completed by Stanhope is 95 Queen
Victoria Street. This is one of a series of buildings in
London which has been put together by Stanhope teams.
Paul Davey of Bovis Lend Lease, construction manager on
the Queen Victoria Street building, explains: This building
is part of Legal & Generals portfolio of property
investments. What Stanhope has done with us is to build a
team from preferred suppliers, contractors and consultants.
All of these relationships are based on negotiation. There is
no competitive bidding. The trade contractors are treated the
same way.
These relationships last longer than a few projects. In
some cases, the suppliers have worked with Stanhope for
over a decade. Martin Long says: The companies we work
with have effectively selected themselves. They suit our way
of working. We tend not to work with companies which are
divisions of large corporates. But all the people we work
with on the contracting side tend to be small, privatelyowned companies where we have a historical level with the
owner, or managing director.
The usual question that is raised when clients hear of this
kind of working is, Am I really going to get the best price
for the job?. Long has personal experience of dealing with
this question: A lot of the financial institutions do have a
problem with the way we work. They put a maximum price
on a job because they are concerned that they cant get the
job for the price we say we can. We have to discuss the
process with our clients. We work with particular funders to
get them to buy into this whole idea of negotiation, single
source trade contractors and so on.
Stop fighting, start talking
But Longs argument for less adversarial work is
compelling: There is a paranoia in the industry that if I go
15

CONSTRUCTION

to a single source supplier or trade contractor, I wont get

the best price. Our answer is, no, you wont get the lowest
price on day one, but we feel we get the best value at the end
of the job. How many people go low cost at the start of a
project, and then end up at the end in court and taking two
years to sort it all out?
Davey says establishing costs at the start is important:
We give trade contractors the cost-plan values, or a
percentage of cost plan value. They know what budget we
are working to, which is the budget developed by Mott
Green Wall in this case. We can then have cost discussions
up front, so we have greater cost certainty.
We now appoint trade contractors very early, so that we
are not presenting them with a fait accompli of a particular
layout or manufacturers equipment, says Long. We get the
benefit of a contribution from the M&E consultant in terms
of a design, and then have our contractors give it a realitycheck, and a cost check.
From the point of view of manufacturers and smaller
contractors who would usually expect to be much further
down the pecking order this kind of working has proved
revolutionary. Ian Windridge of Eton Associates says: The
construction industry is so confrontational. From day one
you start to make a claim because youve been screwed
down on your price, and you have to make a profit
somehow. But the Stanhope approach is were going to do
things differently. They recognise that the way to deliver
good jobs and good quality is to work with the people who
have to do the jobs at the end of the day. Our voice is heard
and listened to. We are involved from day one, and these
jobs are finished on time, to budget and to very high
standards.
Kevin Burrows, contracts director of Gardner & Co,
adds: This is totally different from how everyone else is
doing business in the construction industry. Right from the
start were made aware of what the cost model is, and we
are invited to make comments on that. Thats where jobs can
go wrong if theres an unrealistic cost plan, and everyone
is trying to squeeze the job. Tempers get frayed and corners
are cut. The consultant puts his spec together in isolation,
produces it, then it becomes a battleground.
Mark Kowal, of architectural practice Sheppard Robson,
agrees: This way of working makes the more common
method look archaic by comparison barriers in place, and
designers on one side of the table, and contractors on the
other with everyone defending their position.
Stanhope has also prohibited use of retentions; there are
no bonds and no 12-month defect clauses. These factors go a
long way to helping suppliers run their businesses better.
Windridge says: Ive yet to find the true worth of a bond. I
do know that it affects your business cash flow and
overdraft. The bank will give you a bond, but it impinges on
your overdraft facility.
The IT factor
One of the key reasons for the success of this type of
working is negotiation and discussion. Half the issues that
arise on the job, especially with services, can be resolved in
the open office, says Windridge. Burrows adds: We sit on
the same level as the professional team, and out of that come
good value engineering solutions.
16

Martin Long says: Part of the reason that negotiations

are straightforward is that people know there will be more
work coming their way. Theres no point arguing over a few
thousand pounds now, because you could be throwing away
five years work.
Discussion after the project has also proved useful.
Kowal says: We found the feedback process very useful.
Simple buildability things came to light. Tricky things that
we might have designed, we dont do in future because we
know how the team works. We feed this back into our
technical department and set up standard details. These
include sets of notes on things to watch out for, and things
we should aim to do.
The team used IT to aid co-operation and better design.
Long says: We used a collaborative tool right from the
beginning so that every trade contractor and designer on the
job had to have an A-site address. We used this for all
drawings and 70% to 80% of all paperwork on the job was
sent this way. We tried to outlaw the fax! People would scan
drawings and send them by electronic transfer on A-site
instead.
The group emphasises that teamwork fuelled the use of
IT, not the other way around. Trust and co-operation were
vital. For example, 3D modelling of 95 Queen Victoria
Street was overseen by Mark Terndrup, associate director of
Waterman Gore. Using 3D interactive design is a first. We
did the whole thing in 3D, working closely with the team.
We needed their input. We were using novated trades and
suppliers, that means that as designer I can pick the
equipment that we want to use from the Stanhope supply
list. That means that when its handed over, we know that it
will all fit together. This saves us having to design for
several options all the time because we dont know what the
contractor is going to use.
While 3D modelling is very useful, it does require
careful management of design. If you have a fluid design,
you cant use the 3D model so effectively. But design on this
job was constant, says Terndrup. He adds that his vision for
the model is that eventually it will become the basis for the
O&M manual on future Waterman Gore/Stanhope projects.
There are challenges to overcome for any team when
using IT. We had to get a foreman, with 20 years in the
business, to log on and check his e-mails every morning,
says Long. They can be reluctant at the start, but we have
found that people become very enthusiastic once they are
familiar with it. Thats the level youre starting at.
Architects also have issues with 3D modelling. To get
the benefits out of 3D you have to go down to the minutiae,
comments Kowal. To model all of that would take an age to
do. It would have to be done by an architect who
understands the building process, and there are very few
architects out there who want to sit at a computer and model
all day. We do use modelling to help us understand how the
roof would work on this project, and to negotiate with
planners. But on this type of project the schedule is very
aggressive so we dont have time to go into great detail.
But everyone felt that use of this kind of technology has
enormous potential. Martin Long points out that because of
electronic communications there is a living record of the
job, which wont get lost or misplaced. Everyone involved
could, in theory, have a copy of this. All of the O&Ms have

CONSTRUCTION

now been completed for this job and you can interrogate all
our records, says Long.
Long is aware that while the Stanhope way of working
has huge advantages, there are some areas where more work
could be done. This way of working makes it easier to
discuss new ideas. But we havent got to the point where
new ideas on, say, sustainability are coming through any
quicker. Its easy to say you could come up with an idea and
get it reviewed. We are not very good at finding new
products and new ideas to respond to a different agenda
such as energy, sustainability or waste management. It is
still quite an uphill struggle to change, even though weve
got the team working together. You have to convince
everyone that a new product might be better, and I dont feel
we do enough of that.
The elusive trust factor
The team holds lessons learned sessions and there is a
short report produced. Stanhope also holds quarterly
meetings to talk about whats happening in the marketplace.
Innovation, however, remains a sticking point for the whole
of construction: As an industry, there are a lot of suppliers
that say they have great ideas. How we apply them on our
jobs seems to fall short, comments Long.
But if this way of working is so successful, why isnt it
more common? Long says that the simple answer is that

trust is difficult to engender. Chris Trew of Mott Green Wall

says that lessons learned from working with Stanhope can
be transferred, but that each client has their own preferred
way of working.
In fact, one of the tough things about working in a nonadversarial climate is going back to the old ways. It is
difficult to take a team of people who like working the
Stanhope way, and put them back on a job with a client who
wants to bang the table and trip you up at every turn. You
find that your man may not react the right way. He needs to
go back to being a contractual animal. Its difficult to switch
that on and off, says Burrows.
It is both encouraging and frustrating to hear about the
Stanhope teamworking methods. Encouraging because it is
obviously possible to achieve non-adversarial working
relationships within construction. But frustrating because
too few people are even attempting it.
In the Accelerating Change report, Egan writes:
Integrated teams deliver greater process efficiency and by
working together over time can drive out the old style
adversarial culture.... I want to see expert teams coming
together to deliver world class products based on
understanding client needs. If Egan is takes a look at 95
Queen Victoria Street, he will see exactly that. Its just a
shame that he, and the rest of us, cant find it more often.

17

H
C
M
R
EDEVELOPMENT
C A
E
S
E

Development

Retail regeneration
Shopping centres can play a vital role in regeneration, but
they must be integrated with other uses and existing retail to
be successful and to avoid squeezing district centres. Tim
Dixon, Director of Research at The College of Estate
Management, reports on findings from research published in
January 2003 on the role of UK retailing in urban
regeneration (Estates Gazette, 22 March 2003).

Where are the jobs coming from?

Retail is a major factor in UK employment trends
Retail (GB)

130

Total (UK)

Wholesale (GB)

120

The stock of property in which these workers are housed

is also a valuable asset. But the retail landscape of 2000 in
the UK is very different from that of 20 years ago.
Changes in lifestyle, cycles in economic growth, a
tightening of the planning regime (through PPG6 and
PPG13) and the recent store closures of leading retailers
have all combined to create a changed landscape.
Consolidation in the retail sector has reduced the number
of stores but increased store size. This also reflects the
decline in neighbourhood stores relative to out-of-town
superstores.
Regeneration policies in Britain are founded on the aim
of enhancing economic development and social cohesion
through effective regional action and integrated local
regeneration programmes. Mixed-use developments are seen
as driving the new programme of regeneration within a
framework predicated on sustainability.

More shops or fewer?

110

The Shops Index (1990=100) indicates growth in UK out-of-town shops

Neighbourhood

200

100

90
79

81

83

85

87

89

91

93

95

97

99

00

High Street

Total

Out-of-town

150

Source: National Statistics

Retail, as a major contributor towards the national economy

in terms of output and employment, offers a strong engine to
drive urban regeneration policies.
Examples of retail regeneration have been well
publicised by Tesco in such areas as Seacroft in Leeds, and
the recent work of Business in the Community, an
association of businesses committed to having a positive
impact on society, highlights the real benefits that retail
employment can bring to inner-city areas, in terms of growth
and multiplier effects in the local economy.
The retail industry is a major employer and makes a
substantial contribution to national GDP and employment,
and retailing remains one of the UKs top service sectors.
On the basis of gross value added (output minus input),
data from National Statistics shows that it is in the top five
of the UKs industries, representing more than 5% of
national GVA.
An employer of substance
In 2000, the British retail industry employed 2.7m people
10.8% of the British workforce working full- and parttime. Moreover, from 1979 to 2000 retail employment grew
by 27%, compared with 4% in wholesale, and 4% for all UK
jobs.
However, this growth is based on a large increase in
part-time and female worker growth. For example, the
proportion of retail employees working part-time increased
from 40.4% in 1981 to 58% in 2000, and the proportion of
women workers increased from 34% to 45%. Regionally,
location quotient analysis also shows a strong retail presence
in the South West and the East.
18

100

50
90

91

92

93

94

95

96

97

98

99

00

Source: National Statistics/Verdict

Retail, as part of this mix, can play a key role, especially

when the multiplier effects of spending are taken into
account. Research by the New Economics Foundation, for
example, shows the benefits of keeping spending in the local
economy and making sure that regeneration benefits are
focused on local people and local employment.
In disadvantaged areas, money does not circulate in the
local economy enough to contribute towards regeneration,
tending rather to flow quickly towards other areas. In turn,
poor local shopping services prompt locals to use services in
other neighbourhoods. But appropriate retail provision can
help plug the gaps, preventing leakages from the local
economy.
The College of Estate Managements recent research for
the Office of Science & Technology (through DTI
Foresight) and Harold Samuel Trust shows the important
role that retail can play in the local economy.
Local communities
Using national accounts data, it is possible to calculate
employment multipliers for retail. For example, nationally
we estimate that for every 100 retail jobs created, a further
50 direct, indirect and induced jobs are created in other
sectors.

DEVELOPMENT

Using a range of case studies from the early 1990s and

NOMIS employment data, the research also shows that
shopping centres in Aberdeen, Bristol, Norwich, Bromley,
Leicester and Worcester have benefited employment in local
economies.
Our case studies reveal two main findings:

During a period of recession and overall job losses,

shopping centre developments in the six centres
appeared to create jobs.
In some towns, rental growth was bolstered as a result of
the new development, but in others the size of the
development and adverse economic conditions appeared
not to provide the momentum to power sufficient
property performance growth.
NORWICH A BEST PRACTICE
How the East Anglian city revitalised the retail centre and
countered competition from out-of-town
Background
The retail centre of Norwich is based on the medieval
street pattern of the city. The only covered shopping
centre, Castle Mall, was built in 1993. Castle Mall is an 85unit centre with a total trading area of 360,000 sq ft. Built
on four levels, it has five major retailers together with a
multiplex cinema.
Impact
The development of Castle Mall was part of an overall
strategy for the centre of Norwich that the council had
been developing since the late 1980s. The strategy to
develop a series of major retail developments with infill
regeneration and renewal was implemented to respond to
competition from other centres, such as Peterborough, a
need to revitalise the centre and a need to improve the
retail offer to compete against out-of-town.
Research evidence suggests that Castle Mall increased
confidence within Norwich as a whole. Footfall increases
were recorded in adjoining areas. The scheme did not
harm the status of traditional retail areas and added muchneeded retail space.
Because of the recession, however, the scheme did take
time to let (in 1996 it was 82% let). Rents were boosted in
the areas adjacent to Castle Mall, although further out
rental growth was slacker.
During the 1980s and the early part of the 1990s, Norwich
continued to outperform the UK standard shop rental
value growth average.
In employment terms, NOMIS data suggests that Castle
Mall was a valuable contributor to jobs, although much of
the additional employment appears to be part-time. This
came at a time when job losses, outside the retail area,
were severe.
The future
In 2002 Norwich was ranked ninth in the Experian retail
rankings. It continues to flourish as a historic centre and
retail destination. Nonetheless, the new Chapelfield
development is set to change the retail landscape once
more.
It will also be important to monitor the impact of ecommerce, because Norwich has above-average at risk
categories.

Although it is difficult to cast forward the multiplier

effects at a national level into the local economy, there were
certainly signs that, in the centres in question, retail jobs had
been created. It is also likely that construction jobs will be
created as a secondary effect in the local economy.
However, two provisos need highlighting:

Many of the jobs created were part-time jobs and head

counts, which do not account for full-time equivalents
and can inflate the impact of retail developments.
There is evidence to suggest that retail and non-retail
employment in inner-city areas may well have been
squeezed in the case study centres.

Certainly at this time, during the 1990s, out-of-town

developments in Leicester (such as Fosse Park) and other
towns and cities were occurring.
We did not examine data outside the local authority
boundaries, however, so it is not possible to highlight the
importance of out-of-town retail employment beyond the
local authority boundary.
At the same time, we found evidence of increasing
numbers of retail outlets in our case study centres over the
period of analysis. In some centres this was accompanied by
the decline in the number of non-retail outlets.
The Castle Mall development in Norwich is a prime
example of retail playing an important role in regeneration
(see box). Norwich suggests that shopping centre
development can succeed even during a downturn, if the
development improves the retail offer and is well integrated
with the rest of the towns shopping centre facilities.
This example shows that retail jobs were a major
contributor to regeneration and that, in property terms, rental
growth held up well and was boosted in adjacent areas.
Bromley, on the other hand, experienced some
deterioration in rents in marginal areas. Worcester also
appeared to continue to under-perform compared with other
centres in terms of rental growth, despite the rebuilding of
the centre.
The retail landscape of today is very different from that
of the early 1990s. Urban regeneration schemes must also
recognise the importance of sustainable development, which
requires consideration of environment, transport and social
inclusion issues.
Key determinants
Factors to be considered include resource consumption;
environmental capital; urban design; equity/social inclusion;
participation; commercial viability; and integration of
environment and quality of life. Inevitably, internet
shopping will also need to be considered and the linkages
between employment and the local economy properly
tracked.
Intermediate labour markets (ILMs) are also a growing
labour market phenomenon in the UK. ILMs are based on
the concept that there is a market for paid labour
intermediate between unemployment and full employment.
The Seacroft Partnership in Leeds is an example of an
ILM involving inputs from Leeds city council, East Leeds
Family Learning Centre, the employment service and a
group of employers led by Tesco.
19

DEVELOPMENT

Tescos development of a flagship store creating 450

jobs has been an important component of this model. But,
ultimately, any new retail development must be sensitive to
existing retail to avoid the ghost town tag attributed to
some areas of adversely affected district-level shopping.
The role of UK retailing in urban regeneration is available
at http://www.cem.ac.uk./Further research by the College of
Estate Management on the multiplier effect in mixed-use
development will be published by the BPF.

Cemicircular WebWatch

20

Rights of way
When purchasing sites for development, attention should be
given to the question of who owns the access rights. This is
even more important following two recent Court of Appeal
cases. Alice Woodhouse, a property support lawyer at
Richards Butler, advises Keep track of your rights (Estates
Gazette, 5 April 2003).

This is a conversation between a property developer and his

solicitor. The developer has found a fantastic new site, but it
has a slightly dodgy access. He does not think that this
should be a too much of a problem
Ive found a great new development site. The only
problem is that access isnt direct to the public highway.
From the road, you need to go down an unmade track for
almost 200 yards. But Im sure this is something I can take a
view on: the track has obviously been the main access for
years, and the seller tells me that there have never been any
problems with using it. The seller says that he can provide
me with a statutory declaration stating that he has used the
track for over 20 years. So thats OK isnt it?
Actually, no.
But Ive bought properties in the past with similar
statutory declarations on access.
Im sure you have. For many years, such declarations
were regarded as an acceptable way of dealing with
properties that dont have formal access rights. But two
recent Court of Appeal decisions have established that they
are of little value, since you can no longer acquire a right of
way by long use over a track like yours.
Why not?
Because you cant acquire a right of way by long use (or
easement by prescription, to use lawyers terminology) via
criminal activity. In January this year, the Court of Appeal
heard the case of Bakewell Management Ltd v Brandwood
[2003] EWCACiv 23; [2003] 09 EG 198. It was a bit
different from your situation because it concerned people
driving over a common to get to their houses. They had been
using the same track across the common for more than 20
years, and it formed the sole access to their homes. Even so,
they had no legal right of way, because driving a car over
common land constitutes a criminal offence.
The property I want to buy is nowhere near a common.
Surely it isnt a criminal offence to drive up a track to your
own front door?
Unfortunately, in many cases, it is. The Road Traffic Act
1988 makes it a criminal offence to drive a motor vehicle
without lawful authority over any land that is not a road.
Massey v Boulden [2002] EWCACiv 1634; [2003] 11 EG
154 concerned people driving over a village green. You
might think a green is a bit like common land, but the law in
question was the Road Traffic Act, which applies equally to
all types of land, except roads.
But isnt a track a type of road?
No. The Road Traffic Act defines a road as any
highway and any other road to which the public have
access2. Even if the track is a road, in that it is a route
over which you can drive cars, if the owners are the

DEVELOPMENT

only people with access, it wont come within this

definition.
But that means that anybody who accesses their houses
via a neighbours private driveway is committing a criminal
offence.
Thats what the dissenting judge said in Massey. Its fine
if your neighbour has granted you a deed of easement,
because that will give you the lawful authority under the
statute. But if no deed of easement has been granted
maybe because neither of you thought it necessary you
will be committing a criminal offence and, for that reason,
will not be able to establish a right of way by long use.
So is there any solution to this mess?
Yes, but it isnt cheap and it wont work in every
situation. The government legislated to cover the position a
few years ago. Section 68 of the Countryside and Rights of
Way Act 2000, together with regulations made under it in
2002, gives a landowner the right to apply to the owner of
the track to buy a legal right of way. He has to pay
compensation of 2% of the value of the property, which
means the open market value of the property with the
benefit of the right of way. If your property was worth
500,000, you would have to pay 10,000, a lot of money
for something you would have regarded as being yours in
the first place.
Can I do a deal with the owner of the track?
Yes. You are not obliged to follow the legislation and
you may save costs if you are able to strike a deal. Of
course, the owner will know that he could get 2% of your
propertys value under the legislation, but if he has adjoining
property, you may have rights that could be granted to him
in exchange.
Why wont this work in all situations?
Because you have to apply not to the court or to a
tribunal but to the owner of the track. You may not know
who this is. We could try a public index map search to see if
it leads to a Land Registry title number, but small tracks like

these are often left out of registrations, and it may be

impossible to trace the owner: legislation doesnt provide for
absentee landowners. Of course, absentee landowners can
prove advantageous: you wont receive any ransom
demands. But there would almost certainly be problems
when you came to sell.
Is there any other way out?
Although driving over such tracks is a criminal offence,
most insurers will still cover the risk. But since they look at
each case individually, you cant assume that cover will be
automatic. And this type of insurance is expensive.
Ill have to reconsider the price Im paying for the site.
And what about my existing properties with no formal
access rights?
I feel a section 68 application coming on

Cemicircular WebWatch
For those interested in the implications of the Bakewell
Management case, lawyers Osborne Clarke have a good
commentary (www.osborneclarke.com/publications/text/
pm1g.htm). Of wider interest is an online supplement to
the book Neighbours and the Law by John Pugh-Smith,
Graham Sinclair and William Upton (www.ealaw.co.uk/
supplement). It includes sections on boundaries,
covenants, planning and building control and rights and
restrictions.
Finally, here are links to the cases and statute mentioned
in the article for those interested:

Bakewell Management Ltd v Brandwood

(www.courtservice.gov.uk/View.do?id=1520)
Massey v Boulden (use Lawtel: www.lawtel.co.uk)
Countryside and Rights of Way Act 2000
(www.legislation.hmso.gov.uk/acts/acts2000/
20000037.htm)
Road Traffic Act 1988 (www.legislation.hmso.gov.uk/
acts/acts1988/Ukpga_19880052_en_1.htm)

21

FINANCE

Finance
substantially all the risks and rewards of ownership and such
lessees should be denied the ability to account for their
ownership interest as an investment.
International Financial Reporting Standards will come into
IAS 40 had unfortunate consequences for the financial
force in the UK in 2005 and replace current UK standards
statements of Hongkong Land Holdings. As its Hong Kong
that have been in operation for the past 20 years. Philip
investment property portfolio was leasehold (all Hong Kong
Tew, real estate partner at PricewaterhouseCoopers,
property is leasehold), it was denied investment property
explains how the new standards have implications for
treatment. The group has had to prepare two sets of figures
property investors and corporate occupiers, but the status of
one to comply with IAS 40, and one for the investment
leasehold investments has still to be agreed (Estates
community.
Gazette, 3 May 2003).
Perhaps as a consequence of Hongkong Lands plight,
the IASB has now accepted that leasehold property can be
investment property. Under proposed
Potential impact
revisions to IAS 40, leasehold
investments can be accounted at fair
How IFRS may affect the investment property business
value if the entity uses the fair value

Increased gearing, banking covenants breached

model and the head lease is accounted for

Changes to net asset value

as a finance lease under IAS 17 Leases.

Management incentive and bonus schemes out of line

Earnings volatility
At first sight, the proposed changes to

New rules that will see a gross valuation of proportional leases

IAS 40 sound eminently sensible, but

Asset class financial instrument hedges may be ineffective for accounting

problems emerge on closer examination.
purposes
Finance lease accounting involves

Transaction economics may be altered

creating a borrowing for the minimum
contractual lease payments at lease
In 2005 and beyond, EU-listed groups will be applying
inception, then subsequently categorising rental payments
EU-approved international financial reporting standards in
partly as a notional finance cost and partly as a repayment of
their annual consolidated financial statements. The IFRS
the borrowing. The initial liability would ignore contingent
rules on property lease accounting are in a state of flux and
rents and is not restated once contingent rents become fixed
it is not entirely clear at the moment how property lease
(eg following a rent review). However, the valuation of the
accounting will work under the IFRS regime. There are
investment property asset on the other side of the balance
issues both for the investment property owner and for the
sheet does take account of contingent rents in the
corporate occupier.
determination of ERVs and yields. The result therefore
seems rather like comparing apples with pears.
Changing leasehold investment property standards
Under the current UK standard, SSAP 19, leasehold
Conclusions
property which otherwise meets the definition of investment
The final revisions to IAS 17 and IAS 40 are expected this
property is held in the balance sheet at open market value
year and it is likely that these rules will frame property lease
without depreciation. This standard was issued more than 20
accounting in the UK from 2005 onwards, until the big
years ago and, despite some minor subsequent amendments,
change when the distinction between operating and finance
it has served the test of time. It remains one of the shortest
leases is abolished. It is far from clear whether or not the
and simplest of the UK accounting standards.
current changes will be changes for the better. Further
When the International Accounting Standards Board
details of the changes are set out in the
issued its own investment property standard in 2000,
PricewaterhouseCoopers publications, Waking up to IFRS:
IAS 40, which is in many ways similar to SSAP 19, it
Implications for the investment property sector, and
decided that leasehold property could not be investment
International Financial Reporting Standards: Implications
property. This was based on the premise that, as land has an
for the investment property sector.
indefinite life, any lease interest cannot provide to the lessee

Lease accounting

22

FINANCE

Changes for occupiers

Occupational leases likely to be split-accounted
Despite the proposed change to IAS 40, the IASB does
not seem to have abandoned the principle that leases of
land can only be for a proportion of the useful economic
life, given that land has an indefinite life, and this principle
remains in IAS17.
At the same time, the IASB now appears to have decided,
under proposed revisions to IAS 17, that a building does
not have the same characteristic as land and therefore
occupational leases should all be split-accounted, partly as
leases of land (operating leases) and partly as leases of
buildings (operating or finance leases, depending on the
terms). The way rent is proposed to be allocated between
the lease of land and the lease of the building for the
purpose of the above split-accounting is based on the
relative fair values of the land and the buildings at the
inception of the lease.
We now have the prospect of an occupier signing a lease,
part of which (the land) will be off balance sheet as an
operating lease and part of which (the building) may be on
balance sheet as a finance lease. Given how many
occupational leases are signed each year, this is perhaps
good work for the valuers, as they will have to provide
valuation numbers to support the calculations, but it is
difficult to see how these proposals will add to the clarity
of financial reporting.

Cemicircular WebWatch
Details of accounting standards in force in the UK can be
found on the Accounting Standards Board website
(www.asb.org.uk). For international standards go to the
International Accounting Standards Board website
(www.iasb.org.uk). The PricewaterhouseCoopers report
Waking up to IFRS: Implications for the investment
property sector is available at www.pwcglobal.com/
images/gx/eng/fs/insu/031903ifrs.pdf.
For property valuation purposes also be aware of the
International Valuation Standards. These can now be
viewed, free of charge, online from the IVSC
(www.ivsc.org).

Distressed loans
Around the world, lending that would normally perform
badly is currently being supported by low interest rates.
Winners and losers emerge as banks look to clean up their
balance sheets, explains Juliana Ratner (Financial Times,
1 August 2003).

Low interest rates are keeping afloat some property loans

that would otherwise be distressed as property values fall,
tenants struggle to make rental payments and some
landlords find themselves over-extended.
While these potentially risky loans would be pushed into
non-performing territory if interest rates rose, investors say
banks could end up with non-performing loan portfolios if
rates stay low.
Low interest rates usually mean borrowers with financial
difficulties can cover their costs for longer than with higher
rates. In a low interest rate environment, property borrowers
that default usually do so because a tenant has financial
difficulties.
Yet low interest rates are not a panacea and can even be
bad medicine. If rates remain low for an extended period
with the threat of deflation, already low rents could fall
further, which means a landlords rental income might not
cover his borrowing costs.
Borrowers that will be hardest hit are those who took out
loans three or four years ago and are locked in at rates they
thought were attractive, says Stephen Dingle, co-head of
Ernst & Youngs real estate finance group. Those borrowers
will suffer if a tenant goes out of business and they cannot
fill the space with another tenant willing to pay the same
amount of rent.
If that happens on a large scale, banks will be eager to
get rid of the loans so they can redeploy the capital in better
performing loans.
Investors who buy non-performing loans are keeping
an eye on Italy, Germany, China and Japan, with the
expectation that there will be assets to buy once banks
are ready to clean up balance sheets. Japanese banks have
been selling off bad loans slowly since their economic
bubble of the 1980s burst, but some bankers estimate that
they have the same amount of bad loans on their books
as six years ago, in spite of the sales, and expect the pace
to pick up.
China, too, has turned to western investors to help work
out some of its bad loans. There have also been some
portfolio sales in Italy this year.
But investors are salivating at the prospect of German
banks which are suspected of having more bad loans than
they have admitted selling off their distressed loans.
In the early 1990s, German banks received tax incentives
to lend money to developers building in the former East
Germany. Many of the developments either went bust or
were never built and the loans languish on the banks books.
HVB, which is spinning off its property arm in its plan to
dispose of assets to strengthen its balance sheet, is
understood to be considering selling a E500m ($567m)
portfolio of distressed property loans, as are other German
23

FINANCE

lenders. But the level of bad loan sales is not as high as

investors thought.
While bad loans are bad news for banks and their
borrowers, investors who buy and work out distressed loan
portfolios make money by buying them for fractions of face
value and trying to get more than they paid back from the
borrowers. The buyers tend to be opportunity funds and
investment banks, such as Deutsche Bank, GE Capital,
Lehman Brothers, Morgan Stanley, Lone Star and Whitehall,
whose biggest investor is Goldman Sachs.
Estimates of the value of non-performing property loans
are difficult to come by because banks are reluctant to detail
where their loan portfolios have gone wrong. But bankers
and investors who look at NPLs say there may be hundreds
of billions of dollars of distressed loans on banks balance
sheets, which would include non-performing corporate loans
and property loans.
Even in individual markets it can be difficult to
distinguish between corporate and property loans. In Japan,
for example, many distressed loans possibly up to 50
percent, according to one banker were made to non-real
estate companies that diversified into property.

24

Daiei, the Japanese retailer, is struggling with huge debts

in spite of a Y520bn ($4.3bn) bail-out last year. During the
countrys economic boom it borrowed to finance its
acquisitions of a baseball team, the Fukuoka baseball
stadium and other real estate, including a hotel adjacent to
the stadium. The ill-fated diversification is now being
auctioned. Bankers estimate it could fetch about 3035 cents
to the dollar.
Working out NPLs is a labour intensive business, but for
the yield-seeking investors with the expertise, it is lucrative
and less volatile than other investments made by the
opportunity funds.
David Brush, global head of Deutsche Banks real estate
private equity firm, says Deutsches lowest returns from a
non-performing loan portfolio was 6 per cent. The best was
35 percent.
Even if governments do not encourage banks to dispose
of distressed debt, investors who buy the NPLs can benefit
whether rates are low or high.

LAW

Law
Litigation and mediation
Litigation and mediation cannot be compared. Why?
Because they do different things. Tony Bingham, barrister
and arbitrator specialising in construction, explains that we
have mediation because we cant afford to find out what the
truth is (Building, 9 May 2003).

Its that time of the year again. The folk who will soon be
top dogs in the construction and civil engineering business,
in charge of sorting out its contractual demands and its
disputes, are asking for help with their university
dissertations. These are the youngsters who are up and
coming. They write to me for help with a thesis. Will I fill in
a questionnaire or three? But I tell you what is plain: these
bright young things have already been got at. They hardly
ever come with an open mind; they have a kit full of
preconceived ideas. Here is one such. It is a favourite
dissertation topic: the idea is to compare mediation with
litigation.
Dear Mr Bingham, how much cheaper is it to resolve a
dispute by mediation? Dear Mr Bingham, how much faster
is it to resolve a dispute by mediation than litigation? Dear
Mr Bingham, what proportion of disputes are resolved by
mediation compared with litigation? The questions are
loaded. The students have read up on litigation and its costs,
and mediation and its wizardry. The authors of many a good
textbook on mediation techniques have told us how bad
litigation is and how good mediation is. The students
questions almost always give the game away. Invariably the
question starts with a premise: mediation resolves disputes
faster, cheaper, sooner. So, tell me by how much is it better
at resolving disputes? Thats when I baulk. Who says
mediation resolves disputes? It damn well doesnt. It works
ever so well at getting rid of disputes, but dont you go
telling me it resolves them.
The student asks: Give an indication of the cost of
mediation in resolving construction disputes in comparison
with arbitration and litigation. I cant. Honest, I cant. Look,
let me give the game away. When I am the mediator I use
the cost of litigation as a part of my mediators weaponry.
Remember, I am here to coax the disputing parties to find a
different way of ending the dispute. I focus their minds on

the money, time and hassle of litigation. I depress them. I

get them to tell each other how much the legal costs will be
if this dispute goes all the way to trial and judgment. We
fathom figures. Thats what will be spent for a resolution.
So, if you want to know your rights under the contract,
theres the money at risk. To get a resolution is to get an
impartial, imposed and binding decision about the facts,
allegations, evidence and law by a judge or arbitrator. Now
comes the selling point. The mediator says that if, instead of
a resolution, you are attracted to getting rid of the dispute,
then give up the idea of seeking a decision about your rights
under the contract. The punchline is rather like a good joke,
taking the brain by surprise: abandon your legal rights
embrace commercial convenience instead.
Some dont get the punchline at all. So we rehearse the
idea, all day and sometimes all night. We dont decide
rights. We dont resolve entitlements. We just get fed up
with the prospect of fighting all the way to a resolution. Do
you see why I say how much less it costs to resolve a
dispute in mediation? I can certainly say how much is saved
by giving up the right to have a decision on who is right and
who is wrong about a loss and expense claim under a JCT
wiggly woggly contract. Its the cost of getting rid of a
dispute, compared with the cost of resolving it. You can ask
me to calculate the cost of a BMW to the office compared to
a BMX to the beach. So, bloomin what? I can tell you the
cash cost of mediating. I can tell you the cash cost of
litigating. Dont tell me one can be compared with the other,
or that one is better than the other. You are buying into a
different adventure. Mediation is known as alternative
dispute resolution that title is misleading. It is an
alternative to litigation, arbitration or adjudication because
those decide whether someone has broken their contractual
promises and they calculate the damages. You can have the
alternative to all those by negotiating a deal that ignores the
broken promises, ignores how disappointed you are, ignores
how angry you have become and tells you that you still cant
afford the English legal system.

CONTACT
You can write to Tony Bingham at 3 Paper Buildings,
Temple, London EC4 7EY, or email him on
info@tonybingham.co.uk.

25

LAW

Early case assessment

Resolving property disputes can compound the original
problem, but early case assessment may solve this
conundrum. Alison Oldfield, associate in the real estate
litigation group at Eversheds, discusses the key steps and
the important role of surveyors achieving the best possible
outcome (Estates Gazette, 5 July 2003).

A tale is told among legal circles about the ownership of a

consignment of oranges that resulted in years of elaborate
litigation, mountains of documents and considerable legal
costs. At the court door, the parties discussed the possibility
of settlement. It became clear that the claimant wanted the
oranges for their juice, and the defendant wanted the peel to
make marmalade. By then, the oranges were rotten.
Morality tale
The moral of the story applies equally to those involved in
property disputes. Imagine this scene. A landlord is keen to
develop a retail investment that would involve considerable
disruption to the 15 tenants, who dispute the plans. Should
the landlord:

ECAs in property disputes

ECA is particularly useful in property disputes. Besides the
rights and wrongs of a particular debate, a long-standing
relationship has to be preserved between, for example, a
landlord and tenant or between neighbouring landowners.
The outcome of a property dispute can also affect
successive owners of land who may have had no part in the
original debate and who purchase an interest long after the
dispute is over.
Public relations issues may also need to be taken into
account. For instance, a public dispute about derogation
from grant could have damaging consequences for an
institutional landlord. And a nationwide retailer may prefer
to avoid the embarrassment of a breach of covenant claim
arising from its business operations.
Concept in practice
How does the ECA model work in practice? Take
dilapidations disputes. Here, the ECA concept fits particularly
well with the principles behind the RICS protocol.

Step 1: Identify the legal and factual issues

These will include:
(i) the lease terms;
(ii) any other physical features of the premises that are
relevant to the extent of the tenants liability;
(iii) the evidence of actual disrepair;
(iv) the cost of the works needed to repair the building;
(v) whether the disrepair has affected the value of the
landlords reversionary interest.

Step 2: Assess the prospects for success

This is a preliminary view, but it should nevertheless be
a helpful indicator. Where the prospects of success
depend upon proof of a particular issue, further evidence
may be required, as follows:
(i) the construction of the lease terms may need further
consideration in order to determine whether a
particular part of the building falls within the
tenants responsibility;
(ii) expert opinion may be required in the event of a
dispute over the method of repair for remedying a
specific problem;
(iii) the advice of a surveyor will also be needed on any
schedule of dilapidations and costings provided by
the opposing side;
(iv) further investigations may be necessary to ascertain
the landlords future plans. Any plans to redevelop
will have a significant effect upon the claim: the
sooner that line of defence is known about, the
better.

Step 3: Consider the commercial context

For how much longer does the lease run? If the
contractual term is due to expire, is the tenant looking to
renew? If so, is it looking for favours from the landlord
as to the terms of renewal? Does the tenant occupy other
properties belonging to the landlord? If it does, will the
dispute have a knock-on effect either for the landlord or
the tenant? What goes around comes around, especially
for institutional landlords or retail occupiers.

(a) plough on with his plans regardless of the tenants

concerns; or
(b) consider mediation and come up with a solution that fits
all?
Although (b) is recommended, (a) is all too often
adopted.
Whatever the cause, disputes are a fact of life. But badly
managed ones can be costly and affect profitability. They are
also management intensive and serve to divert resources
away from the core business, often damaging key
commercial relationships and leading to consequences
beyond the immediate litigation. In terms of property
disputes, the premises in question will no doubt be crucial to
the running of a companys activities. It is therefore ironic
that property is rarely considered a core issue in most
businesses.
In well-managed disputes, the company will evaluate the
risks at an early stage and maximise the value of property
investments. A companys property interests are often
outsourced to a surveyor, in which case the legal skills of
dispute management and the surveyors skills in portfolio
management make natural allies. This alliance should ensure
that the right decision makers learn about the issues that will
affect the bottom line before they reach the point of no
return.
Early case assessment model
The avoidance of potential pitfalls can be achieved by using
early case assessment (ECA), a legal model that was
developed by DuPont and is widely used in the US (see
box). It is becoming increasingly evident in the UK. The
idea is simple: obtain access to the correct information and
advice early on and focus on the best possible outcome.

26

LAW

Step 4: Identify the best possible outcome and how to

get there
Identifying the best possible outcome is a balancing
exercise. It involves weighing up the legal and factual
issues, the prospects for success and the wider
commercial context and finding the solution that best
serves the interests of the business. Not necessarily the
very best, but the realistic, achievable goal.
The landlord will have a number of options. During the
term, it can keep the tenant on the hook and pursue a
monetary claim for damages or right to forfeit, or serve a
notice to repair and force the works to be carried out. At
the end of the term, it could pursue a damages claim or
redevelop the site in the hope of achieving a better
income stream, despite the ramifications that this will
have for the dilapidation claims.
Having decided the best outcome, the routes to success
can be identified.

Step 5: Estimate costs

No dispute resolution should be embarked upon without
a proper consideration of the cost. The benefit of ECA is
that the estimation of costs occurs after a detailed
analysis of the issues, by which stage the routes to
resolution will also have been identified: estimating costs
therefore becomes more accurate. This is particularly
important in dilapidations claims. It is pointless to spend
three times the amount on legal proceedings as the claim
itself is worth. But the process of analysing lease terms
and debating the minutiae of schedules of dilapidations
can lead to that result. Under ECA, a proper cost/benefit
analysis of the dispute is possible. The true bottom-line
cost can then be assessed.

Step 6: Finalise the strategy plan

The final stage involves drawing all the issues together
and determining which route should be adopted to
achieve the best possible outcome in the light of the
costs estimates. Once the strategy has been agreed, an
action plan can be drawn up identifying the timescales
and costs for each step.

Key to success
It is vital that the strategy and its component parts are
regularly reviewed. The commercial context can change.
Facts can come to light that significantly alter the prospects
of success, following which the best possible outcome may
have to be reassessed. Regular reviews of the ECA are
therefore essential.
But provided these are undertaken, the model will
provide a snapshot of all the relevant considerations that
drive the conduct of a dispute at any given moment.

Conclusion
ECA is relevant to any dispute, no matter how large or
small. For instance, in a service charge dispute involving
tricky legal issues disproportionate to the value of the claim,
the ECA model enables a client to identify which of the
disputed items really matter and which can be conceded. It
also places the dispute firmly within the context of the
landlord and tenant relationship.
The model has also been used to handle volume disputes
such as a series of actions to obtain possession of a shopping
centre and to recover arrears from the outgoing tenants. The
systematic approach towards individual cases achieves
consistency. It also gives a client an overview, enabling it to
understand the key issues and to prioritise cases.
The process promotes a clearer idea of the commercial
and legal sense of a dispute, providing proactive dispute
resolution rather than blind litigation, and addressing the
cost/benefit analysis of a claim at the start of the dispute
rather than at the court door. It enhances communication
between clients and their professional advisers because it
draws together all the key considerations in a single step-bystep analysis.
The result is a properly considered strategy that is in
touch with commercial considerations. Effective dispute
resolution constitutes a positive tool for a companys
business strategy, not a waste of management time and legal
costs.
The ECA model involves a six-stage process
A comprehensive means of resolving disputes
identifying the legal and factual issues in dispute: what
has happened and what is at stake;

assessing the prospects of success in the light of the

legal and factual issues: this may be a preliminary view,
but lawyers need to get off the fence when asked to do
so;

reviewing the business and commercial context in which

the dispute has taken place: what wider implications
need to be taken into account?

identifying the best possible outcome and the routes to

achieve this: including arbitration, mediation or litigation;
and possibly involving settlement negotiations or, in
some cases, the parties agreeing to cut their losses and
walk away;

estimating the costs of the various routes to the best

possible outcome: an essential part of the process, which
recognises the cash flow demands of any business;

drawing all these issues together to establish a strategic

plan for the dispute, and then identifying the steps that
need to be taken to achieve the planned objective.

27

MANAGEMENT

Management
Model lease clauses
The British Property Federation (BPF), together with the
British Council for Offices (BCO), has recently relaunched
its model clauses for commercial leases. Alan Riley,
property law consultant at Halliwell Landau, discusses the
key features of the clauses and explains that, while its all
very well having model lease clauses, their efficacy will
depend upon practitioners using them as a package (Estates
Gazette, 17 May 2003).

Key points
The BPF/BCO model lease clauses are intended to be
fair to both parties and to reduce protracted negotiations

To be effective, however, they must be adopted as a

complete package

Adopting standard terms of dealing can produce more

efficient and cost-effective transactions by reducing the
scope for time-consuming disputes and negotiations.
In lease transactions, the proliferation of in-house
precedents (inevitably produced with a landlord bias) invites
protracted negotiations. In a welcome move towards a
degree of standardisation, the British Property Federation
(BPF), in a joint venture with the British Council for
Offices, (BCO), has relaunched its model lease clauses.
The model lease clauses have been drafted with an FRI
office lease of whole in mind, but they can be adapted for
use in multi-let buildings, or with other types of property.
They are neither radical nor startling, and are broadly
if not universally acceptable. Although intended to be fair
and reasonable for both parties, in some cases the clauses do
not fully comply with the recommendations set out in the
Code of practice for commercial leases in England and
Wales (see box). Given that the BPF is a co-producer of the
code, this is surprising, but it illustrates the difficulties when
it comes to satisfying landlords of the appropriateness of all
the codes recommendations.
The following features of the model lease clauses in
particular should be noted.
Rent
As would be expected, rent is payable quarterly in advance
on the usual quarter days without any deduction or set-off.
You might query why, if the clauses are intended to be fair
and reasonable, set-off is fully excluded. This is, of course,
normal practice, but you would struggle to convince the
non-lawyer that it is either fair or reasonable for a tenant to
continue to pay rent if the landlord does not fix the roof.
Interest is payable on late payments, including
circumstances in which the landlord refuses to accept
payment because of a perceived material breach of
covenant.
Where appropriate, VAT is payable on tenants payments,
the landlord providing a VAT invoice within 10 working
28

days of receipt of payment. Other sums due from the tenant,

insurance rent for example, have not been expressly
reserved as rent. However, because no reddendum clause
has been included, this does not constitute a statement of
policy. It is for the draftsperson to decide whether this is
appropriate.
Repair
A full repair covenant is included, under which the tenant is
obliged to keep [the premises] in good and substantial
repair and condition. This will need to be adjusted by the
tenant if the premises are in disrepair at the date of the lease,
since an obligation to keep in repair will include an
obligation first to put into repair. The landlords ability to
enter to carry out repairs in default could be described as
less rigid than normal, but it is still reasonably effective.
The obligation to yield up at the end of the term is stated
to be in line with the tenants obligations under the lease.
Lawyers are often wary of simple, modern language, but
there is no difference between an obligation to yield up in
line with and one to yield up in accordance with the
tenants covenants.
Alterations
Structural alterations, and those affecting external
appearance, are prohibited, but other alterations are allowed,
with prior consent. Minor internal alterations such as
demountable partitions are freely permitted.
In contrast to the recommendations of the code, an
absolute reinstatement requirement is imposed upon the
tenant, save to the extent reasonably required by the
landlord.
Assignment
No circumstances are laid down for the withholding of
landlords consent. Instead, the landlord will rely upon the
reasonableness of his refusal and the ability to impose
conditions.
The conditions set out in the model clauses allow for the
following:

(where reasonable) a rent deposit, a bank guarantee and/

or a further guarantee;
an AGA: note that the AGA requirement is absolute. In
this regard, the clause is not code compliant. The code
suggests that AGAs are to be employed only where the
assignee is of a lower financial standing than the
assignor. The commentary accompanying the model
clauses mounts a defence by suggesting that landlords
are to be urged to apply the code at the point of licence
to assign. But this is a weak defence. It ignores the fact
that recommendation 9 (dealing with the AGA point)
appears in the first part of the code, Negotiating a
business lease, and not in the second part, Conduct
during a lease;
a guarantee of the AGA by the outgoing tenant. The fact
that the BPF/BCO encourage the use of such a double-

MANAGEMENT

decker guarantee does not mean that it will work. In

fact, the validity of this clause is doubtful. In terms of
best practice, a landlord client should always be advised
as to the uncertainties of relying upon this clause;

a condition that all outstanding sums are paid; and

such other conditions as the landlord reasonably
requires.

Subletting
Subletting the whole is achievable with the landlords prior
consent, as is the subletting of an occupiable unit (a
defined term) if this is contracted out of the Landlord and
Tenant Act 1954.
With regard to contracting-out, it might have been
advisable simply to require a lawful contracting-out
agreement, rather than an agreement authorised beforehand
by the court. Basically, once the 1954 Act reforms arrive,
contracting-out will probably be achieved by the service of a
notice, rather than by an order of the court.
No Homebase-type problems should arise in relation to
any subletting, since the rent to be paid under the sublease
needs only to be an open market rent.
Charging
Usefully, the code contains an express provision relating to
charging. This means that the tenant may create a fixed
charge with the landlords prior consent, and has general
freedom to create a floating charge created in the normal
course of the tenants business. The latter will start to
become redundant during the course of this year because the
Enterprise Act 2002 prevents the creation of new floating
charges.
Insurance
The BPF/BCO admit that much of the thinking in respect of
insurance took place before 11 September 2001. Thus, no
position is adopted on uninsured losses (except that the
insurance obligations of the landlord are subject to usual
excesses and limitations).
Oddly, there is an obligation upon the landlord to insure
against loss of Rents (a term whose definition directs you
to include service charge payments in multi-let cases). But

the tenant enjoys a rent suspension only on the Principal

Rent, and agrees to pay the Insurance Rent, the definition
of which includes insurance against loss of principal rent,
but not rents generally. The commentary suggests that most
landlords will insure the service charge and suspend it if
there is insured damage, but tenants need to be alert in order
to pick up that point.
The reinstatement obligation may not be ideal for the
landlord. Reinstatement does not involve precise
replication, but the provision of a reasonable modern
equivalent. However, under the model lease clauses, the
landlord must reinstate substantially as was, although
not in identical form if it would not be reasonably
practical to do so. The idea that an as was obligation
might be construed as one requiring identical
reinstatement might unnerve landlords.
Understandably, given the drafting complexities, no
detailed reference is made to the manner of reinstatement or
to the provision of collateral warranties. But the justification
for this is that it is considered statistically unlikely that an
insured risk will materialise and destroy property. One
would welcome this as a valid defence to a negligence
claim, but, sadly, it is not.
The insurance provisions are not code compliant since
the tenant cannot influence the choice of insurer. This is
not surprising because few landlords would concede such
control. In addition, as stated above, the clauses do not
protect the tenant against uninsured losses. Further noncompliance is evidenced in the requirement for insurance
terms to be usual, not competitive as suggested by the
code. No clear line has been taken over entitlement to
insurance commissions, leading to likely disputes.
Rent review
This clause is a typically modern review clause, and
operates in an upwards-only direction, reassessing the rent
in line with market rents at five-year intervals.
Reviews are informal: that is, negotiation, with reference
to a third-party expert or arbitrator in the case of a deadlock,
with time expressed not to be of the essence. The clause
contains uncontroversial assumptions and disregards, and
has objectively fair provisions for the payment of back rent
where the rent review agreement is overdue.

Are the model lease clauses Code of practice compliant?

Non-compliance illustrates the difficulty in satisfying landlords of the codes appropriateness
Code recommendations

Model lease clauses

Recommendation 6
Alternatives to upwards-only rent reviews

Upwards only

Recommendation 8
Policy terms should be competitive

Insurance on usual terms

Recommendation 8
Opportunity to influence the choice of insurer

Tenant given no influence

Recommendation 9
AGAs only where the assignee is of a lower financial standing

Automatic AGA requirement

Recommendation 10
No removal of alterations unless this is reasonably required
(save to the extent reasonably required)

Absolute reinstatement obligation

29

MANAGEMENT

Uphold the standard

The use of the clauses is free, in whole or in part, provided
that the user acknowledges that they were used with the
consent of the BPF/BCO. It is not clear where this
acknowledgement is to be made: does it have to be included
in the lease? If some of the clauses have been tweaked, and
others included in full, is it necessary to acknowledge which
parts of the lease are used with this consent? Be that as it
may, unrestrained freedom of use might encourage greater
standardisation.
The BPF/BCO rightly state that:
There is a growing acceptance that the documents used
in the commercial property and construction sectors should
be standardised.
Standardisation cuts costs, eliminates disputes, and
speeds up transactions. But it can come about only if
standard terms are used as a complete package; a difficult
concept in landlord and tenant negotiations. The
commentary accepts that conflicting positions may be taken
by clients in different circumstances, thereby undermining
one of the aims of the initiative.
If practitioners do use the clauses, they should resist the
temptation to do what many firms do to the standard
commercial property conditions to incorporate a whole
raft of standard alterations.
Cemicircular WebWatch
The BPF/BCO model lease clauses is available to
download from the British Property Federation website
(www.bpf.org.uk/publications/documents/37). Readers will
also be interested in consulting the Code of Practice for
Commercial Leases in England and Wales. This can be
downloaded from www.commercialleasecodeew.co.uk.

30

Energy management
EU standards for energy consumption in buildings that
must be implemented in the UK no later than January
2006 will affect not only new buildings but also existing
buildings. Stringent requirements and the introduction of
mandatory certificates on energy performance mean that
the property industry will need to demonstrate a major
improvement in its energy management if it is to comply.
Tom Bainbridge, senior solicitor in the environment law
group at CMS Cameron McKenna, discusses the main
features of the new standards (Estates Gazette, 12 April
2003). See also article on Energy Performance in the
Building section of this issue.

Reducing energy consumption is probably a low priority for

many in the property industry. But the energy used by
buildings has been estimated to account for between 40%
and 50% of the total energy consumption in the UK.
Since energy consumption generally relies on the
burning of fossil fuels and results in emissions of the
number one greenhouse gas carbon dioxide it should be
little surprise that legislators and policy makers see the
objective of reducing energy consumption in buildings as
significant in the fight against global climate change.
Developments in law and policy are likely to cause many
property developers, owners, occupiers and investors to
view energy management in a new light.
Higher performance standards
Energy performance standards are set to rise and new
obligations will be introduced, affecting not just new and
renovated buildings but extending to all existing buildings.
An EU Directive will introduce energy performance
obligations rapidly, affecting virtually all existing buildings
as well as introducing further obligations affecting new
buildings and renovations. The UK government will have to
introduce new (or amend existing) laws to implement the
Directive by January 2006.
There are three key elements of the directive:
minimum energy performance standards, an obligation to
consider alternative energy sources and the need for
virtually all buildings to have an energy performance
certificate (see box).
As a result of mandatory energy performance
disclosure, the market will become much better informed
and prospective purchasers, tenants and investors will be
more likely to seek high standards of energy performance
or to use poor energy performance as a tool for
negotiating purchase prices or rents downwards. The
impact will be particularly significant for those holding
portfolios of properties with poor energy performance
where renovation work could trigger performance
upgrading requirements or where there is oversupply of
that type of property in the market. For those with an
interest in developing and retaining new properties, overdesign on energy performance may well be preferable in
order to retain value in investments, vindicating the
existing practice of some institutional investors who

MANAGEMENT

invest only in properties with a BREEAM Good or

Excellent rating (which exceed legal compliance on a
range of environment indicators).
Focus on performance
The focus so far has been on the capacity of the building to
perform well. But minimising energy use also requires
proper operation and maintenance of the energy consuming
or preserving components of a building and managing
energy demand. This has the potential to deliver cost savings
and other financial benefits too.
There are numerous steps that can be taken to improve
the energy efficiency of systems and reduce energy
consumption including the obvious, such as heating or
cooling parts of a building only when occupied that can
reduce running costs.
Capital grants may be available to encourage investment
in energy-efficient or renewable energy technologies or to
support research and development. Enhanced capital
allowances (ECAs) are available to building owners and
occupiers purchasing certain energy-efficient equipment
(such as boilers, heat pumps, motors and so on) registered
on a list maintained by the Carbon Trust.

For qualifying purchases, the purchaser will be able to

set off 100% of the purchase and installation costs against
its taxable income in the year of acquisition (rather than
writing off only a proportion of the capital cost over a
much longer period).
Unfortunately, often the person making the purchase
decision (for example, an M&E contractor) has no financial
interest in selecting ECA-eligible equipment unless he has
been contractually bound to select equipment on the basis of
ECA compatibility or to achieve challenging energy
performance standards.
Reduced energy consumption has another potential
benefit. If the reduction in energy use can be monitored
accurately, it may be possible to estimate the resulting
reductions in carbon dioxide emissions and convert these
into what are known as emissions credits. These are
financial instruments based upon tonnes of CO2 that can be
sold into the UK Emissions Trading Scheme. There remain
many uncertainties about the rules of the UK scheme and
their compatibility with a proposed EU-wide emissions
trading due to start in 2005.

Three ways that the EU aims to encourage greener buildings

Minimum energy performance standards for new buildings, an obligation to consider alternative energy
sources, and mandatory certificates of energy performance

Like Part L, the Directive will require minimum energy performance standards to be set for virtually all new buildings. The
standards must also be achieved, as far as technically, functionally and economically feasible, by virtually all existing buildings
with a useful floor area greater than 1,000m2 and which undergo a major renovation. A major renovation involves work on
25% or more of the building skin or involves a cost equivalent to 25% or more of the value of the whole building (excluding the
cost of the land). This is higher than the material alteration threshold under Part L, although governments are free to apply the
lower threshold. National legislation may also require the energy performance of the whole building to be upgraded or simply
the renovated part or system (provided performance of the whole building is being upgraded in connection with a wider
renovation being carried out within a limited time frame). For owners and occupiers, therefore, there is a risk that renovations
planned in three or more years time may trigger an obligation to undertake upgrading works that are wider than the planned
renovation itself.

Unlike Part L, the Directive imposes an obligation to consider alternative energy sources in the design of new buildings that
have a useful floor area greater than 1,000m2. The technical, environmental and economic feasibility of incorporating alternative
energy sources must be considered before construction of such buildings starts. This will mean having to consider how
measures such as renewable energy technologies (for example, solar electric roof tiles or wall cladding), combined heat and
power plant (boilers that generate both heat and electricity), district heating schemes and heat pumps (for example, pumps
extracting heat from the ground) can be incorporated into the design of a building. Some of the measures are matters of detail
that could be implemented in the UK through the building regulations, others will almost certainly require consideration to be
given during the planning process. In either case, the developers case on alternative energy sources will be subjected to
review by relevant stakeholders. Therefore, the alternative energy obligation could mean having to justify, at the detailed
planning stage, a failure to include such measures in a buildings design. This could mean that a grant of full planning permission
would be open to challenge by judicial review if the feasibility of such measures is not taken into account. Either way, this will
have an impact on many development projects not planned to be built out for another three years.

While Part L requires new buildings to be issued with a certificate of energy performance (demonstrated during commissioning
only), the Directive extends this concept to the regular certification of virtually all new and existing buildings. Each certificate
will include an assessment of the energy performance of the building to which it relates, and a comparison with the performance
of an equivalent new building or one with similar benchmarks. The certificate will also include recommendations for costeffective measures to improve the energy performance of the building. Although, under the Directive, these recommendations
are not intended to be binding, in practice they could be forced on a building owner in at least two scenarios: (i) where a
prospective buyer or tenant has a strong negotiating position, either of them may insist upon energy performance improvements
to bring an existing building closer into line with then current legal standards or industry benchmarks; or, (ii) where a major
renovation is undertaken of a building with a useful floor area greater than 1,000m2, the obligation to upgrade the energy
performance of the building would be triggered.
To be valid, the certificate can be up to 10 years old but, in practice, the more alert prospective purchaser or tenant will want
to see a certificate that is recent, and evidence that recommended improvement works have been carried out.

31

MANAGEMENT

Eligibility rules just published

However, rules determining the eligibility under the UK
scheme of credits from emissions reductions projects are
due to be published this year and the government is to invite
proposals for pilot projects from May.
Eligible projects will then not only have the potential to
lower costs but also to produce a tradable commodity. The
price of each tonne of carbon dioxide equivalent traded has
been reported as being between 4 and 11.
Admittedly, poor management of energy by an occupant
could outweigh even the most inspired energy performance
potential designed into a building. But, for those who want
it, there may be a mutual benefit in each sharing the
financial risk in the cost of over design, the effort in
maintaining good energy management and the financial
rewards resulting from lower energy use.
Of course, there may also be fertile ground for disputes
over the ownership of the potential green benefits and
responsibility for performance successes and failures.
Taking a pro-active approach to energy performance and
energy management in buildings may, as we have seen, do
more than just ensure legal compliance or cut overheads. It
may also be a means of protecting the value of investments,
gaining competitive advantage or generating new revenue
streams. In sum, concern about climate change has the
potential to turn carbon dioxide into either an asset or a
liability. Any business failing to manage the issue is likely to
realise only the liability.
Energy law now
The current mandatory building energy requirements are
set out in a recent amendment to Part L of the Building
Regulations 2000. As a result of a rolling programme of
increasing standards, the energy performance of new
buildings is generally better than that of older buildings.
But the industry feels that the regulations make
compliance too complicated. And environmentalists think
the latest standards are not as strict as those of our
northern European neighbours.
The regulations affect only the design and construction of
new buildings and the material alteration of existing
buildings. Therefore, to the extent that the regulations do
apply to existing buildings responsible for a large part of
building-related CO2 emissions their impact will be felt
only slowly as renovations are planned for other reasons.

Cemicircular WebWatch
Further useful information is available from The Carbon
Trust (www.thecarbontrust.co.uk) and BRE
(www.bre.co.uk). Building Regulations, including Part L,
can be found on the ODPM website
(www.safety.odpm.gov.uk/bregs).

32

Keep open clauses

Clauses that require tenants of shops to keep them open
during normal trading hours are fairly common in UK retail
leases, but how are such clauses enforced if a tenant is
making a loss and finds it impossible to stay open? The
courts have tightened up on the application of keep-open
clauses in a recent decision of interest in both England and
Scotland. Craig Connal QC, head of commercial litigation
at McGrigor Donald, explains how the northsouth gap has
widened on this issue (Estates Gazette, 12 July 2003).

Keep-open clauses, under which tenants agree to keep their

premises open and actively trade from them for the duration
of a lease, have given rise to one of the more fruitful areas
of litigation in the retail property world. Initially prompted,
in many instances, by the significance of cessation of active
trade by anchor tenants, such as supermarkets, the ripples
have spread outwards to impact upon all kinds of retail
operations. For many landlords and tenants operating on
both sides of Hadrians Wall1 , differences in judicial
approach to these clauses form an important part of the bank
of knowledge that such companies and their advisers need to
have. A recent decision from one of Scotlands leading
judges has tended to widen, rather than close, the gap
between the two systems.
NorthSouth divide
South of the border, the decision of the House of Lords in
Co-operative Insurance Society Ltd v Argyll Stores
(Holdings) Ltd [1997] 23 EG 141 had explored the issues
surrounding specific performance of an obligation to keep
open and trade and had upheld the view that, in general,
these orders would not be granted for what were felt to be
good practical reasons. But in Scotland, the Inner House of
the Court of Session (equivalent to the Court of Appeal) in
Highland & Universal Properties Ltd v Safeway Properties
Ltd [2000] 3 EGLR 10 had had all of the Co-operative
Insurance arguments deployed before them, yet had taken
the view that, in the context of Scots law, the position was
broadly the reverse: specific performance was a normal
remedy, rather than exceptional, and was generally to be
granted. That applied to an obligation to keep open and trade
the various practical issues made no odds. To date, the
House of Lords has not had the opportunity in a Scottish
appeal of revisiting that decision.
What then of the current position in Scotland? One
argument advanced from time to time is that there is a
residual discretion vested in the court to decline to grant an
order of specific performance on equitable grounds. The
difficulty for a tenant trying to advance such an argument is
the shortage of precedent for the exercise of that power, as
opposed to cases where unsuccessful attempts have been
made to persuade the court to exercise it. On the other hand,
as Scotlands then senior judge, Lord President Rodger, said
in another case where the shortage of precedent was argued:
For my own part, I do not attach any significance to the
fact that the discretion to refuse the remedy to which the
Pursuer was entitled in strict law has been exercised only

MANAGEMENT

very rarely. A Court will be called upon to exercise that

discretion wherever the circumstances make it appropriate to
do so, irrespective of whether such circumstances occur
frequently or infrequently.
In a number of instances, tenants have advanced varied
arguments for the exercise of the equitable discretion in their
favour, but have not been able to argue that they would
sustain a loss if compelled to trade. In Oak Mall Greenock
Ltd v McDonalds Restaurants Ltd 2003 GWD 17-540 that
was precisely the argument that Lord Drummond Young had
to consider.
Immaterial loss
The judge accepted that the power could be exercised where
there were cogent reasons for so doing and where it would
be inconvenient and unjust to grant specific performance.
The tenant argued that throughout almost four years of
trading it had incurred losses in all but two months. It
anticipated that if it were compelled to recommence trading,
losses would continue and the lease had some years still to
run. Far from regarding this as a weighty argument, or even
a novel one, requiring the hearing of evidence at trial before
a final decision was made, Lord Drummond Young was
dismissive of the point. He said:
The mere fact that the defenders are trading at a loss,
even if it appears that that loss is likely to continue for the
remainder of the lease, is in my opinion quite insufficient to
satisfy the test. In many commercial contracts, perhaps even
the majority of them, one or both parties run the risk of
making a loss; that is of the very nature of commercial
activity. If a loss results, that cannot be an excuse for nonperformance.
Indeed, he went on to express the view that it was
immaterial that the loss might be severe, since it was not
being suggested that the company could not survive the loss.
He took the view that it would have been necessary to
establish that there was a serious disproportion between
any benefit to the landlord in enforcing the obligations and
the detriment to the tenant in having them enforced against
it: constant losses, of whatever size, would not themselves
suffice for that purpose. To the judges mind, what was
being suggested could not be regarded as in any way
exceptional.
Future debate
At some point, the appeal level of the Scottish judicial
system will have the opportunity to consider Lord
Drummond Youngs comments. For the moment, rightly or
wrongly, they go further than has hitherto been practice,
even in Scotland. In the meantime, the enforcement of keepopen clauses in such circumstances is a factor that both
landlords and tenants operating in the Scottish market will
need to bear in mind. Is it right to compel a tenant to trade
when it may make a very large loss, over a prolonged period
of time (even though it is paying the rent and meeting all the
other obligations of the lease)? Or should commercial
parties be held firmly to the bargains they have entered?
Views may legitimately differ, but the debate will certainly
continue.

The Hong Kong retail sector

The SARS outbreak in Hong Kong earlier this year had
significant repercussions for tourism and for the retail
sector. This assessment of the impact on retail rentals is by
Yu Kam Hung, Executive Director, and Alex PW Leung, of
the Valuation and Advisory Services at CB Richard Ellis
(Surveyors Times, newsletter of the Hong Kong Institute of
Surveyors, June 2003).

Introduction
The outbreak of severe acute respiratory syndrome (SARS)
has not only reduced the number of tourists visiting Hong
Kong, but also weakened local consumer sentiment. Shop
tenants are requesting landlords to reduce their property
rentals.
The effects of SARS on the retail sector vary between
different trades and locations. Rental tenants find SARS is
creating a very uncertain future and are generally not willing
to lease new shops. The landlords, on the other hand, are
adopting a wait-and-see attitude and do not want to cut their
asking rentals substantially. New shop leasing activity is
therefore quiet at present.
For assessment of a shop rental as at todays value,
updated market comparisons may not be available, or the
transactions found may show contradicting figures. A study
of the retailers operating results by using the income
approach is an alternative to the traditional direct
comparison method.
Retail business before SARS
Before the SARS crisis, the Hong Kong economy was
already facing the problem of a high unemployment rate.
The retail market in some prime locations, however, was
previously well-supported by an increasing number of
visitors to Hong Kong. According to the Hong Kong
Tourism Board (HKTB), a total of 16.57 million people
visited Hong Kong in 2002, representing an increase of
20.7% over the level recorded in 2001. Arrivals from
mainland China increased remarkably by 53.4% year-onyear to 6.8 million, representing over 40% of all visitors to
the territory.
Nevertheless, the World Health Organisation has
classified Hong Kong as one of the SARS infected areas
and recommends people planning to travel to Hong Kong
to consider postponing all but essential travel. The Airport
Authority recorded a 68.9% drop in the number of
passengers using Chek Lap Kok International Airport in
April. Following the numerous infection cases in
Mainland China, Mainland tourist arrivals have also
fallen, to 75%80% below the peak of last year. The
impact of SARS on those traders specialising in retailing
to visitors is much greater than those shops targeting
mainly local citizens.
To illustrate the impact of SARS on retail market rentals,
a model has been established to reflect the situation of a
hypothetical shopping mall. It is assumed the mall
concerned is a regional shopping centre serving mainly local
Hong Kong customers.
33

MANAGEMENT

TABLE 1: Operation of various trades before SARS

Trade

Jewellery/watch/accessories
Brand fashion
Gift shop
High street fashion
Childrens toys
Beauty shop
Furniture/home fittings
Electrical appliances
Music/books
Restaurant Speciality
Restaurant Fast food
Restaurant Chinese
Supermarket/chemist chain
Fitness centres
Karaoke parlour

Profit margin
(per turnover)

Monthly rental
(per lettable
area $/sf)
$200
$150
$100
$100
$60
$40
$40
$40
$40
$40
$30
$25
$28
$20
$20

20%
10%
15%
15%
10%
20%
10%
10%
10%
20%
10%
10%
8%
10%
10%

Rental as percentage
of turnover
20%
1015%
15%
1015%
15%
10%
10%
7%
7%
1015%
1015%
1015%
56%
15%
15%

Notes:
The profit margins and percentage of turnover for retail payment vary from company to company and are determined by the
companies polices and the operating results of individual firms.
The monthly rental rate represents the pattern of different traders in a typical regional shopping mall. The actual rents depend
on floor level, location, frontage, sizes, layout, etc. of the shop units concerned.
All the figures above are approximate, for illustration only. They reflect the relationship between rental values and sale turnover
of some trades in a typical regional shopping mall.
Source: CB Richard Ellis
TABLE 2: Current situation, with no rental concessions
Trades

Karaoke parlour
Restaurant Speciality
Restaurant Chinese
High street fashion
Brand fashion
Jewellery/watch/accessories
Restaurant Fast food
Fitness centres
Furniture/home fittings
Electrical appliances
Gift shop
Beauty shop
Childrens toys
Supermarket/chemist chain
Music/books

Estimated
change in
turnover

Change in
cost other
than rent

Revised profit/
(loss) margin

60% to 70%
50% to 60%
50%
30% to 50%
30% to 50%
30% to 50%
30% to 40%
20%
15% to 20%
10% to 20%
10% to 20%
5% to 10%
0% to +5%
+5%
+5% to 10%

20%
20%
20%
15%
25%
20%
15%
10%
8%
8%
5%
5%
+1%
+3%
+5%

(106%)
(42%)
(44%)
(20%)
(13%)
(7%)
(18%)
(1%)
0%
3%
5%
18%
11%
10%
12%

Required %
rental reduction
to break even
>(100%)
>(100%)
>(100%)
(98%)
(38%)
(20%)
(92%)
(7%)
(3%)

Note: Revised profit (loss) margins above are based on the new turnover after the spread of SARS on condition that the
passing rentals remain unchanged.

It is also assumed that the shopping mall is held under a

single ownership and the leasing manager has carefully
considered a balanced trade mix which generates the best
return to the property owners under normal market
situations.
The trades which are commonly found in a large-scale
shopping mall have been selected for the illustration. The
operating conditions of the selected trades, before the
outbreak of SARS, are shown in Table 1.
In our model, the monthly rentals of the shops range
from $20 to $200. The variance in the rental values is due to
a combination of the following reasons:
34

Location of shop units: some trades are eager to have

prime locations with good exposure. These trades can
afford higher rental payments by virtue of their bigger
profit margins and/or higher sales turnover.
2 Size of shop unit: commercial users such as restaurants,
fitness centres and karaoke parlours can take up sizable
space but can only pay low rents. The factor of bulk
discount on the unit size in this retail sector is more
sensitive than other types of properties.
3 Protection from direct competition: the landlord would
prefer to create monopolies on certain trades, such as
supermarkets and speciality restaurants, within the

MANAGEMENT

shopping mall. Higher rental incomes are obtainable

from these kinds of trades when there are no direct
competitors within the same shopping mall.

Tenants are restricted to use the shops for the trades

specified by the landlord;

The pre-SARS trade mix balance remains the optimal

one in view of the short recovery period, which is
generally expected by the market to be six months;

Revenues of all trades must cover all their variable

running costs including but not limited to management
fees, air conditioning charges and rates;

Lease terms are all assumed to be 3 years subject to

fixed rents, with options to renew for a further 3 years;

No discounted cash-flow analysis is employed to assess

the equivalent fixed rent owing to the prevailing low
interest rate and short lease terms;

The fall (/improvement in certain trades) in turnover will

be recovered gradually in phases within the recovery
period; and

The impact of SARS is totally discharged by the end of

the recovery period. Turnover and required profit
margins will all return to the pre-SARS levels.
We then employed an income approach to assess the
residual amounts affordable for property rentals month-bymonth. The market rent of each trade is calculated as the
average of the residual amounts over a 36-month term.
During the early stages of the recovery period, the
turnover of some trades cannot support their business costs.
No residual amount is therefore available for the rental
payment. The residual amounts of the selected trades for the
1st month are tabulated in Table 3.
In view of the uncertainty created by SARS, new retail
tenants face a higher risk on their investments. We have
factored in the additional risk by increasing the profit
margin, up to 15%; depending on the effect on turnover due
to SARS, the ratio of variable and fixed costs of the
business, the amount of investment involved, etc, of
different trades. Most trades will gain no profit in the
coming month and no residual amount will be contributed to
the rental. Similar calculations were made for the remaining
months of the recovery period in Table 4. The rentals will
return to the pre-SARS levels afterwards.

Retail business during SARS

Based on our observations and discussions with some
retailers, we have estimated the immediate effects of SARS
on the same traders, as shown in Table 2.
The entertainment sector was the hardest hit in the SARS
crises, as people believed that the risk of infection was
higher if people were crowded in confined areas such as a
karaoke room. For the same reason, fewer people visited
restaurants and shops. Instead, people chose to stay at home
or went to the countryside.
Only a few trades had no drop in sales under the attack
of SARS. Some of them even showed an improvement.
Supermarkets, chemist chain stores and medicine shops
were benefiting in the crisis, as people were eating out less
but buying more food, surgical face masks and anti-bacterial
agents from these shops. Moreover, sales of some in-home
entertainment items such as CD/VCD/DVD and childrens
toys also increased marginally.
With the fall-off in sales, some operating expenses
could be lowered: first, by a direct reduction in the cost of
goods sold, and second, by the implementation of strict
cost saving plans. Owing to the presence of historical setup costs as well as fixed overheads, the total fall in
expenses was always smaller than the drop in revenues.
Reduced turnover resulted in narrower profit margins or
greater business losses. The reduced sales revenue of
restaurants sometimes could not even cover their daily
operating expenditure. This explained why a number of
restaurants temporarily closed their businesses.
Assessment of new market rents
Because of the lack of updated market transactions during
the SARS crisis, time adjustments need to be made by using
an income approach. In our analysis, we have made the
following assumptions:

TABLE 3: Assessment of market rental for the coming months by the income approach
Trades

Karaoke Parlour
Restaurant Specialty
Restaurant Chinese
High street fashion
Brand fashion
Jewellery/watch/accessories
Restaurant Fast food
Fitness centre
Furniture/home fittings
Electrical appliances
Gift shop
Beauty shop
Childrens toys
Supermarket/chemist chain
Music/books

Turnover
change

New profit
margin
required

Revised
turnover

Non-rental
cost

Required
margin

Residue
for
rents

Difference
from preSARS rent

65%
55%
50%
40%
40%
40%
35%
20%
18%
15%
15%
8%
+3%
+5%
+8%

25%
35%
25%
25%
20%
30%
20%
15%
15%
15%
20%
20%
10%
8%
10%

$ 47
$144
$112
$480
$450
$600
$156
$107
$330
$486
$567
$370
$410
$477
$614

$ 80
$173
$139
$493
$394
$480
$158
$ 90
$294
$436
$443
$266
$303
$405
$498

$ 12
$ 50
$ 28
$120
$ 90
$180
$ 31
$ 16
$ 50
$ 73
$113
$ 74
$ 41
$ 38
$ 61

Nil
Nil
Nil
Nil
Nil
Nil
Nil
$ 1
Nil
Nil
$10
$30
$66
$34
$55

100%
100%
100%
100%
100%
100%
100%
97%
100%
100%
90%
25%
+10%
+36%
+37%

Note: Figures in dollars represent amounts per sq. ft. in lettable area

35

MANAGEMENT

TABLE 4: Effect on market rentals when the expected recovery period is 6 months
Trades

Karaoke Parlour
Restaurant Specialty
Restaurant Chinese
High street fashion
Brand fashion
Jewellery/watch/accessories
Restaurant Fast food
Fitness centre
Furniture/home fittings
Electrical appliances
Gift shop
Beauty shop
Childrens toys
Supermarket/chemist chain
Music/books

1st
Month

2nd
Month

3rd
Month

4th
Month

5th
Month

6th
Month

Rent
upon
recovery

Average
of 36
months

Change
from preSARS rent

$0
$0
$0
$0
$0
$0
$0
$0
$0
$1
$10
$30
$66
$34
$55

$0
$0
$0
$0
$0
$0
$0
$0
$0
$3
$19
$32
$65
$33
$52

$0
$0
$0
$0
$0
$30
$30
$0
$0
$5
$29
$33
$64
$31
$50

$0
$0
$0
$0
$0
$60
$51
$20
$21
$7
$69
$35
$63
$30
$47

$0
$0
$4
$0
$4
$90
$71
$27
$28
$15
$79
$37
$62
$28
$45

$4
$24
$69
$17
$22
$167
$127
$33
$34
$18
$90
$38
$61
$27
$42

$20
$40
$100
$25
$30
$200
$150
$40
$40
$20
$200
$40
$60
$28
$40

$17
$34
$85
$21
$26
$176
$133
$36
$36
$18
$92
$39
$61
$28
$41

16.1%
15.0%
14.6%
14.8%
14.3%
11.9%
11.5%
11.1%
10.9%
10.0%
8.4%
2.4%
+1.0%
+1.4%
+3.6%

Note: Figures in dollars represent amounts per sq. ft. in lettable area

This shows the rentals of spacious retail units dropping

some 15% from the pre-SARS levels in general. The
reduction in other small to medium sized units depends on
the type of trade. A landlord may reduce the drop in rental
by adjusting the trade mix and leasing to those businesses
with less impact from SARS. As boutiques and accessories
are dominant in a typical shopping mall, the overall rental
drop should be close to that of these trades and in the region
of 10%.

Shop Sizes

Large sized shops

(such as Chinese restaurants)
Small to medium sized shops

36

Conclusion
Since 4 May 2003, the number of daily new infections has
been reduced to single digits. The spread of SARS seems to
be under control but its development is still uncertain due to
the easy transmission of the virus and the infection cases in
our neighbouring provinces/countries. The expected
recovery period is ever-changing. We have conducted a
sensitivity analysis on retail market rentals (of general
shops not located within tourist areas) against the expected
market recovery period. The conclusions are as follows:
Expected Recovery Period/
Change in Market Rent

Optimistic scenarios
(3 months)

Base scenarios
(6 months)

Pessimistic scenarios
(9 months)

8%

15%

24%

6%

10%

18%

PLANNING

Planning
Town centres and retail
development
In anticipation of the issue of a new government
consultation paper on town centres and retail developments
in the UK, Cliff Guy, Professor in the Department of City
and Regional Planning at Cardiff University, discusses the
pros and cons of retail malls and mixed use shopping streets
(Town and Country Planning, July 2003).

By the time you read this, a new consultation version of

PPG6 (Town Centres and Retail Developments) may at last
have been released by the ODPM. Several issues which
were widely recognised as being unclear in the 1996 version
such as the definition of need for new retailing, the
flexibility which superstore developers are supposed to
show regarding size of store and location, and the extent to
which the sequential approach should apply to non-retail
uses will all (we hope) be presented more clearly.
One issue which was hardly discussed in the 1996
version of PPG6 was the relationship between large-scale
retail development in town and city centres, and the centre
as a whole. There are two aspects to this question. First,
nothing was said about the possible trading impacts of retail
or leisure schemes within the same town centre: this
contrasts with the lengthy advice concerning the impact of
off-centre development.
This always seemed surprising, because there is
evidence, from the early studies of the impacts of the Eldon
Square centre in Newcastle1 onwards, that large-scale retail
and leisure schemes can alter patterns of pedestrian and
traffic circulation and lead to loss of trade in other parts of
the city centre. In Newcastle, the Graingertown area never
fully recovered from the impact of Eldon Square, and has
recently been rescued commercially only through the
injection of 41 million of public funding.2
A second issue is the extent to which large-scale
developments can fit into the normally fine-grained town
centre environment. From the 1960s onwards, developers
attempted to recreate the North American shopping mall
within town centres, largely because planning policies made
it very difficult to gain consent for schemes in the suburban
locations favoured in North America. These malls enhanced
the retail offer, providing better undercover conditions for
the shopper and allowing new department stores to enter
town centres. At the same time, these typically inwardfacing schemes, with high, featureless outside walls, clashed
horribly with the smaller-scale, more detailed facades of
Victorian and Georgian shop frontages across the street.
Eldon Square again comes to mind.
Local authority planners who should have been aware of
these issues gave way to developers often under pressure
from councillors who believed that a modern scheme would
give the town added importance and prestige. Government

advice was in favour of pedestrian-vehicle separation in

town centres3 and gave less significance to the built heritage.
These large schemes were usually almost entirely retail
the non-retail element being confined to cafes or, later on,
the food court, with its variety of fast-food offerings.
Leisure uses such as cinemas were difficult to integrate into
shopping malls because they could not deliver the high rents
needed to provide a positive return on investment.
Residential uses were not even considered.
Eventually, a combination of grass-roots opposition to some
particularly insensitive schemes and the recessions of the early
1980s and 1990s put paid to such schemes. Developers either
managed to gain consent for out-of-town malls or were willing
to put forward smaller infill schemes within town centres, as
in the much admired Lanes development in Carlisle.4
Since the mid-1990s, however, a new wave of city centre
malls has come into being. Large malls have been completed
in Reading, Southampton, Norwich, and elsewhere. In
Birmingham, Nottingham, and Manchester, older schemes
are being wholly or partly replaced. Bristol and Cardiff are
both likely to go ahead with 70,000 square metre-plus
extensions to their city centres, competing to some extent
for the same regional market.
The built form of these malls has varied much more than
was the case in the 1970s. West Quay (Southampton) and the
Oracle (Reading) are irregular in shape, making the most of
difficult sites, but still typify the inward-facing, wholly retail
pattern of earlier times. On the other hand, Birminghams
Bull Ring will (it is claimed by the developers) combine
stunning architecture with a series of covered streets and
squares providing a truly unique retail experience,5 while the
planned schemes in Bristol and Cardiff will include street
frontages and some residential development.
These issues have been debated recently in a meeting of
the Urban Design Group.6 The UDG criticises inwardlooking malls that restrict pedestrians and damage
communities, and seeks real streets and the introduction
of mixed uses to promote real communities and ensure
natural surveillance.7 This is in keeping with Government
advice that the design of proposals for retail development
should have proper regard to their relationship with their
surroundings and ... should avoid presenting blank frontages
to town centres or ... [be] inward-looking.8 And recent town
centre schemes in North America have increasingly
followed these lines, although most of them are much
smaller than the British schemes mentioned above.9
The argument can be split into two propositions: first,
that pedestrian streets lined with shops are better than
enclosed malls; and, secondly, that mixed uses should
replace retail-only developments. These ideas appear very
worthy, but they do raise some difficult issues.
From the consumers point of view, enclosed malls offer
attractive and comfortable shopping warm in winter, cool
in summer. The main destinations are close together, and
access by car or public transport is usually convenient.
Retailers like the high level of security, and (in the better
centres) they benefit from marketing and publicity for the
37

H
C
R
PLANNING
A
E
centre as a whole. Designers of the new shopping streets
need to find some way of retaining these features. Are the
streets to be left open to the elements, or covered, as in the
case of the Victoria Quarter in Leeds?
Secondly, mixed uses can be difficult to integrate into a
large-scale central scheme. In most cases leisure and
residential uses occupy adjacent sites, as at Southampton,
where phase III of West Quay, incorporating a 7,000-seat
arena and three 20-storey residential towers, is yet to be
built. Only the highest rent-paying cafes and bars can easily
be incorporated into a largely retail scheme. In some cities,
the local property market can support expensive singles
apartments, but no other type of residential use is likely to
be feasible commercially. It is no accident that those areas
which have pioneered mixed-use developments have been
on the fringes of the city centre, where land values are lower
and investors are more willing to countenance a degree of
innovation and experiment.10
The Bull Ring, when it opens later this year, will be
watched with great interest. Will it exemplify the new
orthodoxy of shopping streets and mixed uses, or will it just
seem a badly co-ordinated shopping mall? My feeling is that
institutional investors, retailers, and shoppers remain to be
convinced, and it is mainly in city centre fringes or smaller
infill developments that we are likely to see a return to
traditional shopping streets.
Notes:
1 See David Bennison and Ross Davies: The Impact of
town centre shopping schemes In Britain. Progress In
Planning, 1980, 14, pp.1-104.
2 Ben Walker: All the smiling fascias. Regeneration &
Renewal, 4 Apr. 2001, pp.22-23; Chris Oldershaw: From
rundown to boomtown. Planning, 4 Apr. 2001, p.14.
3 Town Centres: Approach to Renewal. Ministry of
Housing and Local Government. HMSO, London 1962.
4 Keith Scott: Shopping Centre Design. Van Nostrand
Reinhold, London, 1989.
5 http://www.bullring.co.uk/thevisions
6 Marino Donati: Expert advocates shopping streets.
Planning, 28 Mar. 2001, p.3; Anon: Traditional town
centre streets to succeed shopping mall era. New Urban
Futures, Issue 12 p.1.
7 Letter from Roger Evans in Planning, 2003, p.10.
8 PPG6: Town Centres and Retail Developments.
Department of the Environment. The Stationery Office,
London, 1996, para. 2.34.
9 Charles Bohl: Developing Town Centers, Main Streets
and Urban Villages. Urban Land Institute, Washington,
2002.
10 Simon Guy, John Henneberry and Steven Rowley:
Development cultures and urban regeneration. Urban
Studies, 2002, 39, pp.1181-1196.
Cemicircular WebWatch
At the time of writing this issue of Cemicircular, the
consultation on PPG6 had not been released. When it does
come out it will appear on the ODPM website at
www.planning.odpm.gov.uk. The existing version of PPG6
is on the same site (www.odpm.gov.uk/stellent/groups/
odpm_planning/documents/page/odpm_plan_606915.pdf).

38

Planning for rural economic

development
Findings from the Countryside Agencys recent research on
planning for sustainable economic development in the
English countryside are reviewed by James Shorten, Senior
Rural Planner with Land Use Consultants in Bristol. He
argues that the dominant policy assertion that rural
economies need further diversification looks increasingly
questionable and it is time for a new approach to planning
for rural economic development (Town & Country
Planning, July 2003).

There is a considerable body of recent governmentsupported research into rural and farm diversification and
the planning system,1 and last year the Countryside Agency
asked Land Use Consultants to draw on this work to
produce a position statement on planning for sustainable
rural economic development to inform future national and
local planning policy.
Rather than develop a set of model policies, the resulting
position statement, Planning for Sustainable Rural
Economic Development, instead lays out a clear approach
for the development of local policies which reflects the need
to understand the differences between different rural areas
and tailor policies to meet their particular needs. One size
fits all policy for rural diversification is not appropriate for
the contemporary countryside, and for significant areas of
England the notion of rural diversification itself may be an
unhelpful and misleading policy objective.
Post-modern rural economies?
It is a widespread policy assertion that rural economies
require diversification. The Rural White Paper is typical:
We want a diverse rural economy that attracts new
businesses which fit with their surroundings, and provide
new opportunities far all.2
Such policy is based on the view that rural economies
are too narrow, being overly dependent on agriculture,
forestry, and tourism. Yet in all but the remotest areas of
England rural economies have already diversified to such an
extent that, in terms of employees and firms,3 their
composition is now very similar to that of neighbouring
urban areas. Indeed, the economic differences between the
rural areas of Englands eight regions are more significant
than those shown by urban to rural comparisons. For
example, the rural areas of the South East are more similar
to the urban economies of England as a whole than they are
to Englands other rural areas.4
The Countryside Agency has recently published a
separate analysis of Englands rural economies5 which
identified five key characteristics:

four key groups of employment distribution, hotels and

restaurants; public administration; manufacturing; and
banking, finance and insurance;
the role of in-migrants;
the importance of the household as an economic unit;

PLANNING

self-employment;
the land base.

This adds further grain to an understanding of Englands

rural economies and underlines their complexity and
diversity.
Numerous rural economies now lack many of the
features that in the past might have been expected to
characterise rural businesses and markets. To a considerable
extent this reflects the strong influence of neighbouring
urban areas on many areas of countryside. Increasingly
businesses that have no direct link to a rural location are
being attracted to rural areas.
There are still economies in rural areas, but the
framework for policy for them needs to be renewed. In
particular, the dominant policy assertion that rural
economies need further diversification looks increasingly
questionable.
Planning for rural diversification
Planning policy reflects broader policy for rural
diversification, giving quite general support for economic
development in the countryside. Thus PPG7: The
Countryside Environmental Quality and Economic and
Social Development (produced in 1997 and under review
at the time of writing) suggests that the range of
industries that can be successfully located in rural areas is
expanding, and that such firms can bring welcome new
life and activity to rural communities (para.3.8). Local
planning authorities are encouraged to assess the
economic and social needs of their areas and devise
positive policies for economic activity which respects the
countryside (para.2.9).
PPG7s guidance for the location of economic
development also reflects its broader settlement strategy,
directing most development to market towns and larger
villages (para.2.10). A clear exception is made for farm
diversification, though, which will usually occur in more
isolated locations (paras 3.4A and 3.48).
It is important to note that all recent research1 found
that systematic assessment of social and economic needs
to allow policy for rural economic development to be
tailored to local circumstances had hardly ever occurred,
despite being suggested in guidance since 1995. It is also
apparent that planning policy and implementation are
frequently not well co-ordinated with economic
development activity. Together, these factors have
significantly restricted the ability of planning to take a
more proactive role in rural economic development.
Sustainable rural economic development
National policy for sustainability raises considerable
challenges for rural areas. The four headline policy
objectives are:6

social progress which recognises the needs of everyone;

effective protection of the environment;
prudent use of natural resources; and
maintenance of high and stable levels of economic
growth and employment.

Importantly it is stressed that all four objectives should

be met together. The Rural White Paper does not offer a
definition of rural sustainability, but PPG 7 sets four
objectives, which can be paraphrased as:

meeting economic and social needs through encouraging

economic buoyancy and diversity;
maintaining or enhancing the character of the
countryside;
improving village and town viability through focusing
new development on larger settlements; and
recognising the interdependence of urban and rural
policies.

Rather than offering a vision or design for rural

sustainability, this policy approach is more akin to pushing a
collection of relevant, yet often contradictory, issues into a
large pile and hoping that they will shape themselves into a
coherent policy spine for the future of the countryside. This
has not happened, and nor will it. Choices have to be made
about the emphasis of policy, as achieving rural
sustainability is not a cake and eat it proposition.
Rural diversification provides a neat illustration of this
paradox when the destination of prevailing policy is
considered. Policy gives broad support to greater and greater
diversification of rural economies. Yet rural economies are
generally already substantially diverse. What benefits do
such diversified rural economies provide? The vast majority
of economic activity in rural areas is already decoupled from
agriculture and forestry. Most is also unrelated to recreation
and tourism. Across England many settlements are largely
commuter dormitories. Is the prevailing trend of rural
diversification providing social, environmental, and
economic benefits together? Probably not often.
A new approach for planning for sustainable rural
economic development
It is perhaps time to draw back from the phrase rural
diversification as a descriptor of rural economic
development, despite its widespread use.
Planning for sustainable rural economic development
should mean identifying those developments, from the
diverse range of possible economic activities that can now be
located in rural areas, which will meet the social, economic,
and environmental needs of a particular area together. This is
a question of being able to say what sort of diversification an
area needs, rather than diversification per se.
Some areas may not need further diversification.
Providing more support for the land-based economy may
mean excluding some types of development which would
otherwise replace it.
The work undertaken by Land Use Consultants for the
Countryside Agency identified five key issues which
sustainable rural economic development must address:

a crucial focus on local economies;

how to provide social, economic, and environmental
benefits together;
supporting agriculture and the land-based economy more
generally, especially where these contribute to
environmental enhancement;
39

PLANNING

enabling rural communities to be more self-sustaining;

and
understanding the current nature of rural economic
development better, and thus the scope and capacity for
future economic development better.

In combination these present a stiff challenge to most

prevailing planning policy. They also emphasise that what
constitutes sustainable rural economic development will be
different from place to place, as needs and potential benefits
vary.
Planning policy needs to set objectives and detailed
criteria for sustainable rural economic development with
sufficient sensitivity to pick up how needs and potential
benefits vary spatially, and this is only possible through a
more sophisticated approach of evidence-based policy
development. The detail of this new approach to planning
for sustainable rural economic development is laid out in the
position statement, and is summarised below.
Planning for sustainable rural economic development the
process
The new approach sets out a process which does not mean
the local planner starting again from scratch, but builds on
work undertaken to date, focusing on understanding local
circumstances and planning for an areas future in an
integrated way to ensure that economic development can
contribute to rural sustainability.
There are a number of steps in this process:

understanding the state of the local countryside;

drawing up a synopsis of the state of the local
countryside;
setting a vision;
identifying objectives; and
developing planning policy.

Understanding the state of the local countryside focuses

on gathering sufficient information about the area to allow a
detailed understanding of how the local rural economy
works. This must include investigation of linkages
between issues (such as employment, housing, and
transport) and assessment of the impacts of policy to date.
This understanding leads to a synopsis of the state of the
local countryside, which essentially defines the current
position of the local countryside, including important
spatial variation.
On this foundation a vision for the future of the local
economy can be established. Visions are now a popular
policy tool, but many visions lack sufficient focus to be
useful, being both anodyne and hyperbolic and so
essentially meaningless. The vision can be ambitious, but it
should also be realistic. In this respect the vision should be
more of a future synopsis than a wish-list.
The evidence base and vision provide the means to set
clear objectives for local economic development, which then
lead into detailed criteria-based and area-specific planning
policies for sustainable rural economic development.
Derived in this way, policies do not simply identify
acceptable types of development, but can set requirements
for rural economic development for particular rural areas by
40

identifying the economic, social, and environmental

objectives to which rural economic development should
contribute. Evaluation of development proposals would
therefore be on the basis of ability to meet the objectives,
and two different proposals for similar types of development
could result in different decisions when judged by all their
characteristics.
A clear implication of this approach is that farm
diversification should be seen as one element of the range of
rural economic development, and not as a free-standing
activity. The need to support farm businesses would remain
a clear objective for policy for sustainable rural economic
development, though, and would be read alongside other
local objectives.
The position paper goes into considerably more detail of
the approach. It is intended to allow local planning
authorities to plan for rural economic development more
effectively and proactively. It also recognises that land use
planning has the potential to be far more instrumental in the
local authority. In addition, once established, the evidence
base and policy set should be relatively durable and more
easily maintained.
Last, the consequences of not undertaking such a stepchange should be considered. Business as usual risks a raft
of economic development in the English countryside which
offers too little to local communities, the local environment,
or local economies. In many areas warning signs are already
present. The planning system can be a champion of rural
sustainability, but needs to work more purposefully to
achieve this. The revision of PPG 7 offers a timely
opportunity to usher in such a step-change for rural
planning.
Notes:
1 Elson M, Macdonald R (1995) Planning controls over
agricultural and forestry development and rural building
conversions, Land Use Consultants for the DOE.
Steenberg C, Broom G (1995) Planning for rural
diversification, Oxford Brookes University for the DOE.
Rural Development Commission (1998) Rural
development and land use planning policies. CPRE
(2000) Farm diversification planning for success.
Shorten J, Daniels I (2000) Rural diversification in farm
buildings an investigation into the relationship between
the re-use of farm buildings and the planning system,
University of the West of England for the Planning
Officers Society. Land Use Consultants, University of
the West of England, and Royal Agricultural College for
the DTLR (2001) The implementation of national
planning policy guidance (PPG7) in relation to the
diversification of farm businesses. University of the West
of England, Land Use Consultants, and Kernon
Countryside Consultants for the Countryside Agency
(2002) An investigation into the treatment of traffic and
transport issues in the determination of planning
applications for farm diversification proposals; and, in
Wales, National Assembly for Wales (2001) Farm
diversification and the planning system, and National
Assembly for Wales (2002) The rural economy and the
planning system.

PLANNING

2 Department of the Environment, Transport and the

Regions/Ministry of Agriculture, Fisheries and Food
(2000) Our countryside: the future. A fair deal for rural
England, Cm 4909, The Stationery Office, London, p.7.
3 As derived from the Annual Business Inquiry (Office for
National Statistics).
4 Land Use Consultants for the South East England
Regional Assembly (2003) Planning for sustainable
rural economic development a proposed strategy for
planning for sustainable rural economic development in
the South East.
5 Countryside Agency (2003) Rural economies: stepping
stones to healthier futures, CA 137, Cheltenham.
6 DETR (1999) A better quality of life: a strategy for
sustainable development for the UK. Cm 4345. The
Stationery Office, London, para.1.2.
Further information
Copies of the report and guidance are available from the
Countryside Agencys Positive Planning team in
Cheltenham.

Cemicircular WebWatch
The Countryside Agency report Planning for Sustainable
Rural Economic Development can be downloaded from
the South East Regional Assembly website
(www.southeast-ra.gov.uk/regional_policies/planning/
advisory_groups/rural_issues.html).

Renewable energy developments

If the Energy White Paper, published in February 2003, is to
be believed, then the UK government has woken up to the
concept of local policies to promote positive planning for
renewable energy sources, says Sebastian Berry, Head of
External Affairs at Solarcentury (Town & Country
Planning, May 2003).

For many years, the UK planning and renewable energy

debate has focused on the needs of large-scale wind and
biomass developments in rural and urban fringe areas. Here,
the key issue remains how best to deal with those negative
planning barriers such as NIMBYism (Not in my back yard
attitudes) that continue to frustrate new developments and
threaten to derail the Governments 2010 target for
generating 10 percent of the UKs electricity from
renewable sources.
But it would be a mistake to assume that removing
negative barriers to large-scale renewable energy
developments is the only planning issue facing the
renewable energy industry.
More recently, a whole new positive planning for micro
(or urban) renewables agenda has emerged, led largely by
pioneering local councils such as Merton and championed
by NGOs such as the UK Business Council for Sustainable
Energy, the TCPA, Greenpeace, and Friends of the Earth.
Typically, positive planning for micro renewables policies
adopted at local level are designed to ensure that all large
new developments source 10 percent of their total energy
requirements from on-site renewable sources such as solar
thermal, solar photovoltaics, and micro wind.
This is an important element in the micro renewable
policy agenda, seeking as it does to promote island
generation at the point of use an energy policy model that
requires completely different policy drivers from those of
large-scale energy generation and distribution. In part, at
least, this agenda is being driven politically by a growing
realisation that it is not enough for a largely urban political
elite to assume that rural Britain will deliver all of the
Governments renewable energy target to 2010 and the 20
percent aspiration by 2020. As the Mayor of Londons
Draft Energy Strategy observes, London in particular has a
leading role to play in demonstrating how urban areas can
generate an increasing proportion of their own electricity.
Already, islands of good practice are emerging. Mertons
new unitary development plan, for example, as amended by
the planning inspector, recommends that all new industrial,
warehousing, office and live/work units outside conservation
areas and above a threshold of 1000 square metres will be
expected to incorporate renewable energy production
equipment to provide at least 10 percent of predicted energy
requirements. The inspectors report adds that there is
unambiguous national and regional support for the approach
adopted in policy E.13 and suggests that under this policy it
would be up to developers to demonstrate how the
requirement would render a particular development unviable.
If the Governments Energy White Paper, published in
February 2003, is to be believed, this agenda is now being
41

PLANNING

taken seriously in Whitehall. Specifically, the White Paper

committed the Government to examine how to bring
consideration of the use of renewables and energy efficiency
in developments more within the scope of the planning
system ... and in a way that does not impose undue burdens
on developers (para.4.31).
During the House of Commons debate on the Energy
White Paper on 24 February, Patricia Hewitt, the Secretary
of State for Trade and Industry, also emphasised that the
Government would use the early review of building
regulations to ensure that, in setting much higher energy
efficiency standards for new build and such things as the
refurbishment of roofs, we can massively increase
investment in solar energy and similarly energy-efficient
systems.
One immediate way forward lies in central government
working with local planning authorities, developers, and the
industry to extend the scope of planning gain or planning
obligations to include on-site renewable energy production
in new developments. The UK Business Council for
Sustainable Energy, for example, has argued that guidance
for the development of housing and other buildings should
require that, wherever possible, new developments include
some form of sustainable energy generation within their
design. But how would this positive planning obligation for
renewables work in practice and avoid, in the White Papers
words, undue burdens on developers?
In London, the Mayors Draft Energy Strategy proposes
(in proposal 20) that the Mayor will expect applications
referable to him to generate at least ten percent of the sites
energy needs (power and heat) from renewable energy.
Boroughs should expect the same of new commercial and
industrial developments over 1000 square metres and new
residential developments of ten dwellings or more.
The Draft Energy Strategy refers explicitly to Merton
Borough Councils experience and addresses the undue
burdens on developers test set by the White Paper.
Specifically, the Mayor argues (in para.5.70) that energy
costs are often insignificant compared to other costs to
business, and particularly to other developmental costs. This
is especially true in London, where the cost of land is very
high. This means that the additional costs associated with
sustainability features, such as incorporating renewable

42

energy plant, can more easily be absorbed. This is

particularly so at the development stage as it would
represent a small fraction of total costs.
He then notes (in para.5.73) that Merton also addressed
the undue burdens issue: In their justification for the
proposed policy, Merton calculated that renewable energy
investment to satisfy the requirement would represent less
than 3.6 percent of total development costs. Their appraisal
indicated that the policy is not likely to lead to nonviability.
Of course, developers, the renewable energy industry,
NGOs, and local communities will follow the development
and implementation of these policies with keen interest. In
particular, the undue burdens test is likely to provide the
focus for considerable debate. It also provides the solar
photovoltaic industry in particular with a golden opportunity
to challenge the mistaken assumption that PV-integrated
building is always more expensive than traditional cladding
materials. The Energy Saving Trust points out that in
commercial buildings, PV panels are already cost-effective
when compared with prestige cladding materials. In this
sense there is already potential for 250 megawatts of PV by
2010.
It is likely that far-sighted developers will want to work
actively with the renewable energy industry and local
stakeholders to deliver developments that exceed local
planning obligations. Far from seeing them as an undue
burden, the best developers will welcome local positive
planning for renewables policies as an opportunity to
promote good practice and to deliver exemplar
developments.
CONTACT:
e-mail: seb.berry@solarcentury.co.uk

Cemicircular WebWatch
The UK Energy White Paper is on the DTI website
(www.dti.gov.uk/energy/whitepaper). Details about the
London Mayors Energy Strategy is available at
www.london.gov.uk/mayor/strategies/energy.

PLANNING

Resurrecting planning
permission
In the UK if a planning permission lapsed because it was
not implemented or renewed on time then it was dead but
not any more, it seems. The Appeal Court appears to have
approved a piece of legal jiggery-pokery. Martin Edwards,
specialist planning barrister in 39 Essex Street Chambers,
and John Martin, solicitor and director of property law
research at Pinsents, assess the fallout for the planning
system (Estates Gazette, 2 August 2003).
Key points

The Appeal Courts decision to resurrect a planning

permission opens a Pandoras box.

It conflicts with government aims to prevent section 73

applications from being used to extend the life of
permissions
So Bishopsgate Goods Yard can now be demolished and
the East London Line extension may (or may not) be built.
That much is certain following the Court of Appeal judgment
in R (on the application of Prokopp) v London Underground
Ltd [2003] EWCA Civ 96; [2003] PLSCS 166. But this
decision has far-reaching consequences for the planning
system that the court does not appear to have considered.
The facts are simple. LU applied for an order for the
extension under the Transport and Works Act 1992. This
was accompanied by an environmental statement. Deemed
planning permission was granted in 1997 subject to
conditions, including a time limit and a condition
precedent. For some reason, LU failed to comply with the
latter. In R (on the application of Hammerton) v London
Underground Ltd [2002] EWHC 2307 (Admin); [2002] 47
EG 148 (CS), Ouseley J had held that works already
undertaken before the time limit expired were in breach
of that condition. All parties in Prokopp accepted that the
permission had lapsed.
Jiggery-pokery
This could have been avoided. As Schiemann LJ pointed
out, the usual way of dealing with lapsed permissions in
such circumstances is for the developer to apply, under
section 73, to vary the time limit before the permission runs
out. But that would trigger the entire consultation process
and require a new environmental statement. In any event,
the permission had lapsed and section 73 was therefore not
available. So LU and Hackney and Tower Hamlets London
Borough Councils entered into a section 106 planning
obligation by unilateral undertaking: LU undertook to
observe virtually all the conditions attached to the lapsed
permission and the councils agreed not to take injunctive or
enforcement proceedings to stop the development.
Prokopp concentrated on the narrow issue of the effect
of the environmental impact assessment (EIA) regime on the
arrangement. The court held that the EIA Directive had been
substantially complied with because an environmental
statement had been submitted with the original application.
However, this distracts from the real importance of Prokopp
that the Court of Appeal has given its seal of approval to a
piece of legal jiggery-pokery.

After all, this was not a case of renewing a planning

permission. It involved a lapsed permission, which had
ceased to be. It was an ex-planning permission. The
permission was not being kept alive, it was being
resurrected. Unfortunately, far from raising Lazarus, the
Court of Appeal has unleashed Frankensteins monster.
Unmanageable problems
Prokopp opens Pandoras box. Let us consider a large
greenfield housing development granted outline planning
permission in February 2000, just before the new PPG 3,
with its brownfield land presumption, was issued. It
incorporated an element of planning gain considered highly
desirable by the planning authority. The permission has not
yet been implemented. The developer and the authority want
it to go ahead; renewal is required. However, if a section 73
application were submitted it could be called in by the
Secretary of State.
PPG 3 strongly suggests that such developments should
not proceed. But the planning authority want the planning
gain. Not to worry: Prokopp rides to the rescue! Allow the
permission to lapse and revive it with a planning
obligation. With no supervisory jurisdiction over planning
obligations, the Secretary of State would have nothing to
call in. Why stop there? What about the out-of-town retail
scheme that could deliver the much-needed leisure centre?
And how dead is dead? Why not revive a permission that
lapsed years ago? Some may think that planning authorities
would never enter into such Faustian pacts. Well, take a look
at R v Merton London Borough Council, ex parte Barker
[1998] JPL 440, Tesco Stores v Secretary of State for the
Environment [1995] 1 WLR 759, or R v Plymouth City
Council [1993] 2 PLR 75.
It may be argued that the Secretary of States power to
serve enforcement and stop notices under sections 182 and
185 provides a safeguard. But how often does he do so? And
such notices can be served only after consultation with the
local planning authority. What happens if they disagree,
apart from a lucrative case for the lawyers?
And what happens further down the line? The extension
runs through other boroughs. Since the permission has
lapsed, what if the developer fails to comply with a
condition relating solely to matters within, say, Lewisham?
And because of the lapse, a breach of condition notice
cannot be served. So Prokopp hinders another planning
authority, not party to the jiggery-pokery, from taking
summary action for breach.
Curiouser and curiouser
This case contains another curious feature. The Court of
Appeal has in effect sanctioned the bypassing of the normal
section 73 procedure for renewing permissions. This at a
time when the government has included a provision in the
Planning and Compulsory Purchase Bill to prevent section
73 applications from being used to extend the life of
permissions. The judges appear to be at odds with the
politicians.
The East London Line is back on track. What a pity that
the Appeal Court has derailed the planning system in the
process.
Anyway. Must go now: theres a queue of developers at
the door

43

PLANNING

Changes to Procedure for Obtaining Development Consent

At the beginning of September the Government issued the Town and Country Planning (General
Development Procedure) (England) (Amendment) Order 2003. The changes apply to England only.
The key changes are:

IM
P
N OR
O
T TA
IC N
E T

1. The time limit for appeals against refusals of planning permission or non-determination must now be made
within three and not six months of the relevant decision date or expiry date. This applies to all applications made
after 5 September 2003.

2. Similar changes to the listed building regime are made by Regulations applicable to the procedure for considering applications
for listed buildings consent.
3. From 5 December 2003 local planning authorities must:

When granting planning permission give reasons and a summary of the relevant development plan policies.
When imposing conditions give full reasons for those conditions and give full details of all relevant development plan
policies.
Reasons for refusal must still be given but must now be accompanied by a statement of the relevant development plan
policies.

For applications made before 5 December 2003, this requirement will not apply if the application is determined within three
months of 5 December 2003.
The changes to the requirements for Local Planning Authorities (LPAs) to give reasons for approval are potentially significant
and may possibly open up new grounds for procedural challenge. The requirement applies to any decision to grant planning
permission or reserved matters approval. Any such decision must include a summary of the reasons for grant and the relevant
development plan policies. This is a significant extra burden for LPAs, especially for smaller reserved matters applications or
minor planning applications.
Reasons for imposing conditions are already required under the existing regime. The added requirement now is for LPAs to
identify all policies and proposals in the development plan which are relevant to the decision. The drafting of the Order
suggests that the decision is the decision to impose conditions rather than the decision to grant the permission itself.
The extra burden placed on LPAs may cause delay in the process. The change seems contrary to the Governments stated aim
of speeding up the planning process and stripping away unnecessary administrative stages.
The duty to give reasons for a refusal of planning permission already exists but has now been augmented by the requirement
to specify all policies and proposals relevant to the decision.
Other changes
The Order makes several changes to the consultation requirements under the General Development Procedure Order. These are:

Regional Development Agencies (RDAs) are made a statutory consultee in relation to infrastructure projects and policies of
strategic regional investment or employment policy within the RDAs strategy, provided in both cases the RDA has notified the
Council of the relevant project or policy.
A new exception for LPAs to consult on a statutory basis is also included in the Order. If a statutory consultee has given
standing advice, there is no need to consult on an individual application. This will not apply to EIA applications, nor will it apply
if standing advice is over two years old.

Conclusions
The reduction by half of the period for appeals makes the need for a tactical approach to planning applications even more
apparent. If the proposals for the abolition of twin tracking remain in the Planning and Compulsory Purchase Bill then this will
have a significant impact for the development industry.
LPAs now face an increased burden in relation to the issue of decision notices. Whilst there is some theoretical benefit to the
increased requirement, the effect could be that decision notices will be delayed and also become subject to even greater
scrutiny by disaffected third parties.

CONTACTS:
This information is provided courtesy of Law-Now, CMS
Cameron McKennas free online information service. LawNow provides updates on all areas of the law from
arbitration to water and acquisition finance to telecoms.
Using e-mail and our web site, Law-Now provides a
personalised information service on key legal
developments you choose what information you wish to
receive from a list of topic areas. See www.law-now.com
to find out more about Law-Now and to register.
For further information please contact Chris Williams in
our planning team on 020 7367 3571 or email on
chris.williams@cmck.com.

44

PROPERTY

Property
Stamp duty land tax
From 1 December 2003, the new stamp duty land tax (SDLT)
replaces stamp duty on UK property transactions. The main
features of the new tax are covered in this item from Law
Now (newsletter published by law firm Cameron McKenna,
26 June 2003). Avoidance techniques with particular
reference to partnerships and rent reviews are discussed in
the article that follows by Stephen Goldstraw, taxation
partner at Manches Solicitors (Property Week, 4 July 2003).

SDLT is a new tax which is designed to replace stamp duty

on property transactions. It will apply to transactions that are
completed on or after 1 December 2003 subject to the
application of transitional rules. Stamp duty in relation to
property transactions will cease to apply to documents
executed on or after 1 December 2003.
This note is the first in a series of planned notes on
SDLT. Future notes will cover both the overall structure of
the tax as well as its application to specific areas such as
leases, developments and complex transactions eg PFI and
securitisations. The new compliance regime and the
administration of the tax will also be covered.
The purpose of this note is to highlight the transitional
rules that apply to transactions that are completed on or after
1 December 2003 but pursuant to contracts entered into
prior to the introduction of the SDLT regime.
Leases
Broadly, SDLT will apply to leases as follows:

It will be charged on the Net Present Value (NPV) of

rents payable throughout the term of the lease.

SDLT will be charged at 1% of NPV unless this falls

within the exempt threshold (150,000 for commercial
leases and 60,000 for residential leases).

The NPV is calculated by applying a formula (this

discounts rents by 3.5% per annum).

Rent reviews more than 2 years after the lease are

ignored when calculating NPV.

In relation to turnover rents a reasonable estimate will

need to be made on lease completion and recalculated
periodically.

The disadvantaged areas exemption will provide some

benefit.
Example
Stamp Duty
Initial rent per annum
Term of lease
Rate of duty
Stamp duty
SDLT
NPV of rents
SDLT at 1%
% Increase (comparison of stamp duty and SDLT)

Transitional Rules

A lease completed before 1 December 2003 is outside

SDLT.

A lease completed on or after 1 December 2003 where

the agreement for lease was executed on or before the
Finance Bill receives Royal Assent (currently expected
in the week commencing 13 July) will be outside SDLT
unless the agreement for lease is varied or assigned after
Royal Assent. As the Finance Bill currently stands, it is
also arguably outside the scope of stamp duty, although
the position could change before 1 December.

A lease completed on or after 1 December 2003 where

the agreement for lease was executed after Royal Assent
will be subject to SDLT.
What to do next
Exchange as many agreements for lease as possible prior
to Royal Assent, but note the fourth point below.

Complete as many leases as possible prior to 1

December if SDLT will otherwise apply, but bear in
mind that if an agreement executed on or before Royal
Assent is completed on or after 1 December, as things
stand both SDLT and stamp duty could be avoided,
although it is quite likely that this position will be
reversed before 1 December.

Consider taking a lease of an uncompleted new build or

refurbished unit before completion and before 1
December 2003. This is legally possible although
suitable protection for both landlord and tenants needs to
be built in.

Avoid having to vary or assign an agreement for lease

executed on or before Royal Assent.

Sales
Broadly SDLT will apply to sales as follows:

SDLT will be chargeable at the same rates as the current

rates for stamp duty, except that the current 60,000
exemption is increased to 150,000 for commercial sales.

The disadvantaged areas exemption will provide some

benefit.

Transitional rules
A contract completed before 1 December 2003 is outside
SDLT.

A transaction completed on or after 1 December

2003 pursuant to an agreement executed after
Royal Assent will be subject to SDLT. If any stamp
duty has been paid on the contract (eg under s.115
Finance Act 2002 where the price exceeds 10m
and completion is not effected within 90 days of
500,000
20 years
the contract), this will be set against the SDLT
2%
liability.
10,000

A transaction completed on or after 1 December

2003 pursuant to an agreement executed on or
7,106,202
before Royal Assent will be outside SDLT unless
71,062
the agreement has been varied or assigned after
711%
Royal Assent.

45

PROPERTY

Under the Finance Bill as currently drafted, where a

contract to purchase land is entered into on or before
Royal Assent and a contract to sub-sell the land is
entered into after Royal Assent, not only will the second
contract be within SDLT but so too will the first contract.
Sub-sale relief is not currently available for SDLT and
therefore SDLT would be payable on both sales.
Although the Finance Bill is not clearly worded on this
point, it seems that where a contract entered into on or
before Royal Assent has been substantially performed
(but not completed) and the purchaser sub-sells after
Royal Assent, the second contract will be within SDLT
but the first contract will not. A substantially performed
contract is essentially a contract under which the
purchaser has gone into possession and/or paid the whole
or substantially the whole of the purchase price (eg
under the so-called split title schemes).

What to do next

Exchange before Royal Assent if possible but consider

whether there is a real advantage. If completion will take
effect before 1 December 2003 it will be outside SDLT
in any event. If there is no likelihood that the contract
might be sub-sold or assigned, the same amount of tax
may be payable under the SDLT regime as would be
payable under the stamp duty regime, although the SDLT
compliance regime will apply.

Exercise extreme care before varying, novating or

assigning a contract entered into on or before Royal
Assent, since a variation, novation or assignment after
Royal Assent will automatically bring the transaction
within the SDLT regime and, as things currently stand,
without any materiality requirement.

Exercise caution before contracting to sub-sell land after

Royal Assent. In the case of contracts that have been
substantially performed before Royal Assent, these
should be protected. Although the Finance Bill is not
itself clear on this, the Chief Secretary to the Treasury
has made a clear statement to Parliament that it is the
Governments intention that these contracts should not
be brought within the charge to SDLT. This is
particularly welcome to those taxpayers that have
acquired land by resting on contract under the split title
nominee scheme.

For contracts that have not been substantially performed

by Royal Assent, these will be brought within the charge
to SDLT if a sub-sale contract is entered into after Royal
Assent and completed on or after 1 December 2003.
However, the Chief Secretary to the Treasury has made
statements in Parliament indicating that the Government
is considering giving sub-sale relief where contracts

46

have not been substantially performed. This is the

subject of consultation, and in the meantime caution
should be exercised and advice taken on the current
position before carrying out a sub-sale.
Consideration may be given to delaying the completion
of contracts entered into on or before Royal Assent until
on or after 1 December 2003. In the normal case, the
transaction will not fall within the SDLT rules but, as the
Finance Bill currently stands, neither will stamp duty
apply. However, it seems quite likely that this will
change before 1 December 2003, so that if a transaction
does not fall within the SDLT regime it will nevertheless
be subject to stamp duty. In the meanwhile, do consider
delaying completion if that is possible, always having in
mind the 90-day rule where the agreement is subject to
s.115 Finance Act 2002

Options
Earlier statements made by the Government indicated that
contracts arising from the exercise of existing options would
fall outside the SDLT regime. The Finance Bill as it
currently stands does not do this, and therefore transactions
completed on or after 1 December following the exercise of
an option after Royal Assent will be within the SDLT regime
unless the Government has a further change of heart.
SDLT rules are subject to change
In relation to SDLT it is particularly important to take advice
before acting, not only because the rules are complex but
also because the rules as currently set out in the Finance Bill
may change before it is enacted. It should also be noted that
the Treasury will be given very wide powers to amend the
legislation before it becomes operative, and therefore
significant changes are possible before 1 December.

CONTACT
This information is provided courtesy of Law-Now, CMS
Cameron McKennas free online information service. LawNow provides updates on all areas of the law from
arbitration to water and acquisition finance to telecoms.
Using e-mail and our web site, Law-Now provides a
personalised information service on key legal
developments you choose what information you wish to
receive from a list of topic areas. See www.law-now.com
to find out more about Law-Now and to register.
If you would like further information, please contact Mark
Nichols (020 7367 2051, mbn@cmck.com), Richard Croker
(020 7367 2149, radc@cmck.com) or Mike Boutell
(020 7367 2218, mqb@cmck.com).

PROPERTY

New tax, new avoidance

Stephen Goldstraw reports on emerging techniques for
avoiding the new Stamp Duty Land Tax (Propery Week,
4 July 2003).

The Government is just months away from abolishing Stamp

Duty on most land transactions and introducing the new
Stamp Duty Land Tax (SDLT).
The new tax will come into effect in December.
However, it must be taken into account earlier than that
because it will apply to contracts made after Parliament has
passed the Finance Act (which is scheduled for later in July)
if these complete after the start of SDLT.
SDLT will be charged on premiums at the same rates that
currently apply for Stamp Duty. However, on rentals, it will
be up to eight times higher than the old Stamp Duty rates.
This increase has become the subject of fierce lobbying. At
the time of writing it is not clear whether this lobbying will
succeed in reducing the new charge.
SDLT will be far more difficult to avoid than Stamp
Duty. As Stamp Duty was a tax on documents, it could be
avoided if a document was not used in the transaction. If a
transfer could be registered at the Land Registry without
production of a stampable document, or if registration was
unnecessary, the tax could be avoided.
SDLT is different. It is a tax on transactions, whether
these require documents or not. The purchaser or lessee is
liable to pay it whether the transfer requires registration or
not.
Having said that, where there is a will, there is generally
a way. So how might the new tax be avoided?
One way is to complete current transactions quickly. If
leases are agreed or contracts exchanged before the Finance
Act is passed, SDLT will not apply whenever completion
occurs though it should be borne in mind that there should
be no sub-sale or variation of the contract or agreement for
lease in order to escape SDLT. Where it is not possible to
exchange prior to the passing of the Finance Act, the
transaction will still avoid SDLT if it completes before the
December start date.
Potential in partnerships
Draft legislation already exists for SDLT, so it is possible to
speculate about avoidance techniques that might be used
after the start date. This is subject of course to the fact that
the legislation may be changed.
The government appears not to know what to do with
land held by partnership and it has, for the time being,
excluded many partnership transactions from SDLT. So the
transfer of land into and out of partnerships, and the sale of
interests in partnerships that hold land, will continue to be
dealt with by the existing Stamp Duty regime pending
further consultation.
On the face of it, this would enable the vendor and
purchaser of land to enter into a partnership, the vendor
contributing the property and the purchaser contributing

cash. Provided the partnership agreement is carefully drafted

it should not amount to a sale for Stamp Duty purposes. For
instance, it is important that the cash goes into the
partnership and not to the selling partner.
After an appropriate interval the partnership could be
dissolved with the purchaser agreeing to take the property
and the vendor the cash. Correctly drafted, the dissolution
agreement should either escape duty or, at worst, be subject
to duty on only half of the cash payment. This is on the basis
that the dissolution agreement does not amount to a sale for
Stamp Duty purposes.
The scheme will be more robust where there is a genuine
partnership created between vendor and purchase for
example, where the property is let and the rent shared
between the two for the duration of the partnership or where
the property is to be developed.
As mentioned above, the high rate of SDLT on lease
rentals is a cause for concern for many businesses. The
government believes that the grant of a lease at a rack rent is
broadly equivalent to the sale of the freehold and that it
should therefore be similarly taxed.
Rent review rules
The proposed charge is 1% of the net present value of the
rental payments due over the term of the lease, the discount
rate being 3.5%. A mathematical formula is included in the
legislation to explain how the figure is calculated. But the
formula does not explain how to deal with rents that are not
paid annually. Perhaps the calculator of the charge that the
Revenue promises to place on its website will be more
hopeful.
One way of reducing the SDLT on a lease may be to take
advantage of the rules on rent review clauses. The rent on
which the SDLT is charged ignores any rent review clause
that is more than two years away. Therefore, if a lease is
entered into at a low rent (or possibly no rent) for two years,
with a review the next day, no SDLT is payable.
Even in todays difficult market, it is perhaps unlikely
that many landlords will agree to a two-year rent-free
period. However, the basic idea could still work if, for
example, the landlord takes a small premium for granting
the lease instead of charging rent for the first two years of
the lease. SDLT would be due on the premium but this is
likely to be much lower than the charge would be if there
was a market value rental paid from the outset.
Most landlords would baulk at the idea of not fixing the
rent on the lease at the outset, but even this may not present
an insuperable problem. The legislation seems to imply that
a rent review clause more than two years away can be
ignored even if it fixes a minimum rent to be paid on review.
If this is the case, it should be enough to persuade most
landlords to go along with the scheme.

Cemicircular WebWatch
Details about stamp duty and the new SDLT can be found
on the Inland Revenue website
(www.inlandrevenue.gov.uk/so).

47

PROPERTY

Overage payments

after the original sale), the uncertainty surrounding a simple

guarantee arrangement can be considerable.

Negotiating overage payments is one way for sellers to try

to ensure they obtain the maximum benefit from a disposal
of land, but how can security be assured for a payment
months or years later? This controversial strategy is
discussed in relation to UK property law and a case study by
Adrian Watson, partner, and Mark Shelton, principal
support lawyer, at DLA (Estates Gazette, 21 June 2003).

Rights of re-entry
In other words, if the buyer does not pay the overage, the
property reverts to the seller. That sounds like an effective
remedy for the seller. However, the inherent equitable
jurisdiction of the courts to grant relief against forfeiture
should not be forgotten: the seller might find that he has not
got quite the security he bargained for. And few buyers (let
alone their lenders) will agree to such a draconian remedy in
the first place.

More than ever, pressure is on surveyors to obtain maximum

benefit on land disposals. This means an increased use of
devices to extract any betterment value from such land,
perhaps years after the original sale.
An overage payment might be triggered by a grant of
planning permission (or a more valuable planning
permission) for development of the land sold, by completion
of a development, or by a subsequent sale. Whichever
trigger applies, it is one thing to negotiate an entitlement to a
further payment, and quite another to ensure that the
payment is made months or years later.
Security for the payment is crucial, and surveyors need
to be aware of the pros and cons of the various mechanisms.
This is as important for the buyers surveyor as it is for the
sellers, since the mechanism adopted may affect the buyers
finance arrangements, or the use to which the land can be
put.
Restrictive covenant
It is common for a seller to require that the buyer gives a
covenant restricting what can be done with the land sold:
typically, a covenant preventing development. This will be
released only if the buyer pays overage.
For this legally to work, the seller has to retain a piece of
land that benefits from the covenant. But this may not be
attractive: maintenance may be required to avoid occupiers
liability or nuisance claims from neighbouring owners;
travellers may have to be evicted; and eventual disposal may
be problematic. More important, the covenant may be
challenged under section 84 of the Law of Property Act
1925, as happened in the Lands Tribunal case of Re
Withinlee (unreported 3 April 2003) (see box).
Sellers lien
If the arrangement is such that the seller transfers the
property without receiving the full price, the seller will
retain a lien on the property for the balance. However, the
buyers lender will invariably insist that the seller waives its
lien, so this scenario is rare.
A guarantee or bond
An effective security, this, too, may affect the buyers
finance arrangements. If it takes the form of a simple
guarantee, its effect will be limited to the covenant strength
of the guarantor. Recent events should teach us that no
company is financially impregnable, and that the speed with
which prospects are transformed can be breathtaking.
Because overage arrangements can run for years before
payment becomes due (Withinlee came to court 35 years
48

Mortgage or charge
This is an effective form of security. But the problem, as
with the sellers lien, is that the buyers lender is unlikely to
accept anything less than a first charge over the property.
Should there be no lender, this represents probably the best
mechanism for each party.
It can be reasonably argued that a first mortgagee should
not fear a second charge to secure overage. After all, if the
overage becomes payable, that will be because the value of
the property has increased. An equitable charge that is
drafted so as to give the chargee sufficient remedies can be a
good compromise, and, since the liability to pay the overage
is contingent, an equitable charge is arguably more
appropriate.
Whatever the type of charge, a deed of priorities
regulating the amount that can be secured by the prior
charge will be required in order to preserve the benefit of the
second. If this is not done, the prior chargee could take all
the net sale proceeds. However, it can be difficult to agree
such documents with a prior chargees solicitor because they
limit the flexibility to amend the terms and security of the
prior charge.
Lease with an option to buy the reversion
Instead of receiving the freehold, a buyer can be granted a
lease. If betterment is achieved, the buyer becomes entitled
to call for the transfer of the freehold upon payment of the
overage sum. Again, the buyers lender may effectively
dictate what happens. For a leasehold property to be an
effective security for a lender, the lease term will need to be
substantial. The longer the lease, the less incentive there is
for the buyer to exercise the option and pay the overage,
unless, perhaps, the lease contains a user clause restricting
the lessees right to use the property for the purposes
permitted by the planning permission that created the
betterment.
Restriction
This (along with an equitable or legal charge) is probably
the most effective security, and one that remains acceptable
to the buyers lender. When the buyer registers the purchase,
a restriction is placed on the register of title, preventing the
resale of the property. Once betterment is achieved, and
overage paid, the seller has to co-operate in lifting the
restriction. But such a restriction does not of itself provide
any security for payment by an impecunious buyer, or
impose any duty upon a buyer who is content to retain the
property and resell it.

PROPERTY

There is considerable scope for controversy over security

mechanisms in respect of overage payments. Much time will
be saved in documenting the deal if the security aspect is
negotiated at the outset, and, in particular, if a form of
security acceptable to the buyers lender can be identified at
that stage.
Case study: Re Withinlee
Practical or financial benefit?
This case concerned two plots of open land: the paddock
and the brown land, the latter being a strip adjacent to
the paddock. In 1967, the seller of the paddock retained
the brown land and took a covenant from the buyers that
prevented development on the paddock. By 1999, the
owners of the paddock (the 1967 buyers) had obtained
planning permission to build five houses on that land.
Being unable to negotiate a purchase of the brown land,
they challenged the covenant.
Section 84 of the Law of Property Act 1925 gives the
Lands Tribunal power to cancel or to modify restrictive
covenants on stated grounds.
Ground (a)
Broadly, under ground (a) the covenant had become
obsolete. The buyers argued that this fell to be assessed
by reference to the purpose of the covenant, which had to
confer a practical benefit on the brown land, not a purely
financial one. In this instance, all sides agreed that the
purpose of the covenant was not to prevent development
(practical benefit), but to give the owner of the brown land
a bargaining position (financial benefit). The tribunal held
that this purpose could nevertheless be taken into
account, else the covenant would be obsolete as soon as
it was granted.
Ground (aa)
Under ground (aa), though, the crucial issue was whether
the covenant gave the owner of the brown land any
practical benefits of substantial value or advantage. This
excluded any financial benefit conferred by the covenant.
Expert evidence stated that the brown land had little
economic use other than that of development, and
difficulties stood in the way of that; not least the planning
process and the sites configuration. Thus, the tribunal
held that development on the paddock would not
detrimentally affect the brown land: the challenge
succeeded on this ground.
Unattractive mechanism
The case illustrates the vulnerability of a restrictive
covenant used in this way. To make it stick, the seller has
to be sure that the terms of the covenant are such as to
bestow an actual benefit on the retained land. This in turn
means ensuring that the retained land is capable of
economic, independent use. Such uncertainties make this
an unattractive mechanism.

Saudi property market

Strengthening Saudi Arabias economy involves lessening its
dependence on oil, and this is now top of the agenda for the
countrys rulers. Part of the answer lies in liberalising the
countrys real estate ownership laws to attract foreign
companies. At the moment, retail leads the way, as reported
by Nadia Elghamry (Estates Gazette, 26 July 2003).

Dallas meets the cradle of Islam. That is how most people

picture Saudi Arabia. Arabs and oil money and buckets of
it. It is, however, an outdated image and one the kingdom is
keen to move away from.
True, Saudi is floating on about a quarter of the worlds
oil reserves the largest in the world. True, also, that
petroleum accounts for roughly three-quarters of budget
revenues, 90% of export earnings and nearly half of the
kingdoms Riyal 936bn (153bn) GDP. Yet therein lies the
problem.
Its reliance on oil makes Saudi Arabias accounts
vulnerable to fluctuating commodity prices. It has fragile
fiscal accounts and an over-reliance on foreign workers,
while its universities continue to churn out thousands of
home-grown graduates each year.
In addition, its oil industry is threatened by cheap, nonOPEC-controlled Russian oil imports, and uncertainty over
the US role in Iraqi oil fields.
Analysts estimate that Saudi Arabia is also in debt to the
tune of around Riyal 655bn (107bn), it has a swelling
population and rocketing unemployment. In addition,
Riyadh is expected to have a budget deficit this year.
In 2002 economic output was a mere 0.7%, and although
figures are hard to extract, external analysts believe output
will continue to spiral downward.
To address these problems, Saudi is turning its attention
to private-sector growth to lessen its dependence on oil and
provide jobs for its 23.5m population.
But attracting foreign companies is easier said than done.
The kingdom of Saudi has taken steps to open up the
country, including rejecting a 10% tax on expatriates and
lowering the tax bracket on foreign corporates from 45% to
25%. Nevertheless, its complicated investment and
ownership laws and strict Islamic culture are still a barrier.
But the kingdom is trying. Don Bradley, who heads
Cluttons Middle East practice, explains that Saudi Arabia
allows up to 70% foreign ownership of companies, and
eventually non-nationals will be allowed to own land as the
country moves towards fulfiling its WTO obligations.
But, he admits, further work needs to be done to
liberalise the countrys social structure. Bradley visualises a
time when the country realises it is losing out to other Gulf
states, which have been much quicker to liberalise their
laws, and is forced to change.
I think it has to come but I just dont know the politics
on high, he says. But there is definitely a realisation that
the old model needs to change.
Retail is where international operators have made the
greatest inroads. The likes of Debenhams and Starbucks are
49

PROPERTY

well known names in Saudi shopping malls. But most of

these are linked with a Saudi sponsor either through a
franchise or a joint venture.
It is easy to understand why. According to Retail Trade
International a retail database the size of the population,
the high proportion of young people and high levels of
disposable income have made Saudi Arabia the fastestgrowing consumer products market in the Middle East.
It has also made some of the Saudi elite even richer.
Prince Alwaleed bin Talal Abdulaziz al Saud is one of them.
He is reportedly the fifth richest man in the world and
described in the property industry as a legendary investor in
the region.
He owns most of Citibank and Disneyland, as well as the
Four Seasons hotel chain. But it is his latest venture that has
got Saudi tongues wagging.
The Kingdom Centre, a Riyal 1.9bn (310m) mixed-use
scheme in Riyadh, won him the Skyscraper 2002 award for
the best new skyscraper in design and functionality.
At 302m, it is the same height as the Eiffel Tower, and its
41 floors boast a five-star hotel, shopping mall, sports club,
wedding and conference centre, and apartment complex, all
topped off with a 56m skybridge complete with observation
deck for the brave.
A 99-year lease on a four-bed apartment in the tower
would set an investor back nearly Riyal 5m (817,000).
But the Kingdom Centre did not have the best of starts.
Nigel Gimbert, leasing manager for the scheme, admits to
being more than a little nervous when he opened the doors
of Saudis tallest skyscraper on 15 September 2001, just four
days after the New York tragedy.
Nobody expected us to open, but we did, Gimbert says.
He need not have worried. Shopping is a sport in Saudi, as
there is little else in the way of entertainment. So save for a
small blip in May following the terrorist bombings in
Riyadh, the centre welcomes around 20,000 visitors a day
spending Riyal 100 (16.30) a time.
It took just four months to let 80% of the 315,000m2
retail centre. Today it has a mere 5% vacancy rate. Rents
vary by floor, but prime space in the only all-female mall
costs Riyal 1,800 per m2 (294).
High fashion names have flocked to the centre, which is
anchored by SAKS Fifth Avenue, Debenhams and Marks &
Spencer. But the pride and joy, says Gimbert, is Louis
Vuitton which has just signed a lease.
There is a little remorse in Gimberts voice when he
recounts how the centres main competitor, Al Faisalia
shopping centre, boasts a Harvey Nichols.
Despite this, Gimbert is not overly worried by the
competition provided by the 267m tower designed by Foster
& Partners. Our target market is different. We are top end in
terms of target market, he explains.
Introducing new western brands into the Saudi market is
vital, says Robin Williamson, general manager at DTZ, in
Saudi Arabia.
What they need is new occupiers, not another
Debenhams or Starbucks. There is nothing new, he says.
Saudi Arabias rulers will also have to go a long way to
rebuilding confidence in the government. Multinational oil
companies got their fingers badly burnt in June when twoyear negotiations with the government to open up the
50

countrys Riyal 97.9bn (16bn) gas reserves fell through

over arguments about returns.
The government moved swiftly to repackage the deal
and two major oil companies have since signed agreements.
This is good news, says Williamson. It is very good for
the occupier market as they will have a large requirement
for offices, and the sheer volume of spend will help the
economy, he adds.
This will not just benefit the petrochemical industry but
will be a boost for everyone. It would bring fashion,
holidays, cars, residential, everything, says Williamson.
Tourism: spiritual holidays
Spiritual holidays are a growth market in Saudi. Each year,
more than six million people visit Islams holiest cities,
Mecca and Medina, in the west of the country.
Prince Sultan bin Salman bin Abdulaziz, the head of the
newly-created supreme commission for tourism and the first
Arab in space, is hoping to increase this number to more
than 15m.
Last month the prince outlined a comprehensive
masterplan aimed at creating a viable tourism infrastructure,
creating 2.3m jobs and 14bn in revenues over the next 20
years.
The visitors will need somewhere to sleep, and the
countrys infamous bin Ladin family is busy constructing a
pilgrims hotel next to the holy mosque.
The hotel will cover 1m m2 over 17 floors. It will have
100 elevators and five towers, four of which will hold
serviced apartments.
Don Bradley, head of Cluttons Middle East operations,
has been heavily involved in the project.
Every Muslim has to do Haaj once in their lifetime, so
with two billion Muslims in the world, the figures add up,
he says.
Arabian days and nights: Life as an expatriot
It is 7.30am, the start of the Saudi day, and already the
temperature is nearing 40oC.
Despite this, it is a comfortable life, says Don Bradley at
Cluttons, which has a small office in Jeddah. Expats are
housed in compounds containing everything for daily life,
including sports clubs and restaurants, and transport to take
children to school.
Life nears normality, but as a dry country a quick pint
after work is out of the question. Working in the property
market, the main problem is the lack of statistics, says
Bradley, which can cause problems with valuations. In the
main, leases are short, and property companies have to offer
the full range of services right through to managing a
property.
Because of the immaturity of the property market, the
worth of valuations is not appreciated, explains Bradley.
All valuations are to the RICS Red Book, but we have
had to be fastidious and weve had to break new ground
establishing it, he says.
Privatisation programmes have helped educate the Saudi
market in due diligence and international standards, but this
is still in its infancy.
While the projects can be as large as any in the world,
the concept of market-driven development is non-existent,

PROPERTY

says Robin Williamson, general manager at DTZ Middle

East.
You cant compare the UK and Saudi markets, he says,
Supply is basically what is up there, and if you own land
you build on it, he adds.
Williamson is involved with a 25m sale-and-leaseback
for a multinational company. But these are rare. Most
people hear what we are doing and think there must be a
problem.
Despite this, a job in the Middle East will not do an
agents career any harm, says Joanne Davies, a recruitment
consultant at McDonald & Company.
While surveyors are not classed as a profession in Saudi
Arabia, the RICS is working hard to get that changed.
People are worried they are sacrificing their career, but
the scale of developments you work on in terms of size, and
the experience and skills gained, mean you actually jump
ahead of your London colleagues.
But do not underestimate cultural differences, says
Russell Bowyer at McDonald & Company. People do not
realise how different it is in Saudi, especially at Ramadan
when smoking, eating and drinking in public is forbidden.

It is difficult to live a normal lifestyle, and anyone who

manages more than a year in Saudi is doing well.
Bowyers advice is not to be picky about your
destination. A lot of people have to compromise, go
anywhere to start with and work your way through the
Middle East to get to where you want to eventually.
Expats have definitely thinned out since the terrorist
bombing in May. The foreign office still advises against all
non-essential travel to the country, warning that there is a
continued threat of large or small-scale attacks against
Westerners.
Security has been stepped up, says Nigel Gimbert at the
Kingdom Centre. And the positives definitely tip the
balance.
It is an incredibly interesting job, says Gimbert. If you
are married and living in a compound, it is close to
normality. The money is good, the schooling is excellent
and, with four children, there is no way I could have
afforded private education in the UK.

51

RESIDENTIAL

Residential
Commonhold and Leasehold
Reform Act
Since the introduction in the UK of the Commonhold and
Leasehold Reform Act 2002, which enabled residential
lessees to extend their lease or collectively acquire the
freehold of their block of flats, only some of provisions of the
Act have come into force. Roland Cullum and Julian
Briant, both partners at Clutton Partners, look at the effect
of the Act so far and its expected impact later this year
(Estates Gazette, 26 April 2003).

Collective enfranchisement of blocks of flats

The Commonhold and Leasehold Reform Act 2002
amended the qualification for mixed-use buildings on
collective enfranchisement, allowing long lessees of blocks
of flats to purchase collectively the freehold of their
building.
In the past, where the non-residential parts exceeded
10% of the total floor area of the building, the long lessees
of the flats could not collectively purchase.
Under the new Act, the amount of commercial space has
been raised to 25%. In addition, the low-rent test will be
abolished.
There have been other technical changes that affect
buildings having a resident landlord, and there have been
changes in the residency condition, which has now been
abolished.
However, the new Act for collective claims has not yet
come into force because the Office of the Deputy Prime
Minister is drafting the necessary orders. For collective
claims, the valuation date is to be amended to the date on
which the initial notice is served.
This, too, has not yet come into effect and, at present, the
old rules apply. The valuation date is the date when it is
agreed what freehold interest is to be acquired.
In a rising market it has suited landlords to dispute the
extent of the freehold claim, although in the present market
it might well be the lessee who wishes to dispute in the hope
of obtaining a lower price because of falling capital values.
The Act rules that there will be no marriage value
payable by lessees where there was an unexpired term in
excess of 80 years.
Impact to date none.
90-year lease extensions
The 2002 Act amended the Leasehold Reform, Housing and
Urban Development Act 1993 and this section has come into
effect.
First, the low-rent test has been abolished. Secondly, the
residency test has been changed. Previously the lessee must
have occupied the flat for his only or principal home for a
continuous period of three years, or for periods totalling
three years during the past 10 years. The new qualifying
52

condition is that the lessee must have owned the flat for at
least two years before the notice is served.
It might well have been expected that many lessees
would have taken advantage of the new ownership test,
particularly because it enabled investors to obtain lease
extensions. However, although the new rules came into
force in July 2002, as far as London is concerned the sales
market has stagnated since the autumn of 2002. Although
some of the London estates would have been expected to
experience a surge in applications, this has not in fact
proved to be the case.
Exceptions to this are flats where the unexpired term is
below 15 years. In these cases the automatic growth in the
freehold reversion coupled with the diminishing term are
prompting investors, companies and non-resident lessees
who did not previously qualify to take advantage of the new
rights.
Otherwise the lack of a surge of new applications might
be because lessees themselves do not have sufficient capital
liquidity to fund lease extensions, and it may not suit buyto-let investors to extend leases at present with faltering
rental values. Although these investors would hold a more
valuable capital asset, the yield from rentals would fall.
The single most important factor is the stagnant central
London residential market. There is a perception that the
market is falling, so potential claimants are holding back in
anticipation of a cheaper deal, particularly those with
medium and long-term leases which are not dramatically
affected by the diminishing term.
The new rules have changed the valuation date to the
date of claim so that claimants might wish to delay to feel
that they have taken advantage of a falling market.
In London, FPDSavills index of residential value
movement, which is published quarterly, has become an
important tool. There is anecdotal evidence of significant
numbers of potential claimants holding back until the
next index is published to see if this does reinforce the
falling market view. If it does, we may expect claims to
follow.
The new rules also gave personal representatives of a
deceased qualifying tenant the right to make a claim,
although in practice this is likely not to produce a large
volume of fresh activity.
In addition, there is no marriage value payable where the
lease has in excess of 80 years unexpired. That should in
itself produce a number of claims, as lessees appreciate the
savings that they will make if they serve the notice while
there are still more than 80 years to run.
Impact patchy, but generally more limited than had
been anticipated.
Houses
The changes that came into force are very similar to those
affecting individual flats, particularly the abolition of the
residency test and a new two-year ownership test. This is the
one area which has had some effect. A number of companies
have taken advantage of the change in the rules because they

RESIDENTIAL

were not eligible, except in certain special conditions, to

enfranchise prior to July 2002.
The new Act gave the tenant marriage value where the
lease had more than 80 years to run at the date of notice.
This too should encourage lessees to think carefully about
serving a notice while there are more than 80 years to run
and, again, this has had some effect.
The new Act also had an impact on lease extensions
under the 1967 Leasehold Reform Act. Under the old rules,
where the lessee had applied for a 50-year lease extension
and that lease extension was now running, it was not
possible for the lessee to submit a further claim for the
freehold. The new rules now make this possible.
Impact this is the area where the impact has been
greatest.
Conclusion
The 2002 Commonhold and Leasehold Reform Act was
designed to assist lessees further in their rights to
enfranchise and, at the time, a substantial rise in the number
of claims was expected.

However, this has failed to materialise, partly because a

number of the provisions have not yet been enacted in
relation to collective claims and, secondly, because of the
current state of the residential property market.
Another factor which has served to diminish the number
of claims is the willingness of some landlords to negotiate the
sale of freeholds and new long leases on a voluntary basis (for
example without a lessee having made a formal claim).
There can be disadvantages for the freeholder following
this course because he will be entitled to roll over Capital
Gains Tax relief in relation to statutory deals, but not on
voluntary ones.
For non-tax-paying landlords (such as charities) this is
irrelevant and for others a desire to redistribute their assets
may outweigh the need for rollover relief. Certainly, there is
a general acceptance by freeholders that control has been
lost and there is a need to find an alternative home for funds.
The Leasehold Valuation Tribunal has confirmed no
increase in the volume of claims being referred to them.
That said, the authors have both recently received fresh
claims. Perhaps lessees are contemplating taking the plunge.

A growing valuation problem

Under-enfranchisement claims could lead to loss of common sense
The Act and its predecessors sets out the interests which have to be valued and compensated. This includes a requirement (in
shorthand) to ignore any effect the Act may have on the market value of the existing lease. Valuers are required to put
themselves into an increasingly hypothetical and unreal non-Act world. In the real world, the Act exists and purchasers of
leases are anxious to take advantage of its provisions; any agent worth his or her salt will not be slow to point those
advantages out.
The result is an inflated market for leases and various convoluted efforts to establish a means of translating inflated market
figures into non-Act world figures. As we all saw with the Rent Act and fair rent assessment, the longer the calculation of
hypothetical values goes on, always using previous hypothetical precedents, the further we all get from a realistic assessment
of the required value.
Under the Rent Act it took the Court of Appeal to break the cycle and reintroduce common sense. The authors perceive a
similar problem with enfranchisement valuations, and before long a breath of reality will need to return to the valuation of
leasehold interests particularly those with short unexpired terms.
Impact of right to manage
Another part of the Act which is yet to be introduced is the major section dealing with right to manage. It is not clear what
effect this will have on collective enfranchisement.
It is said that many collectives are driven mainly by a desire to escape from a landlord or managing agent. If that is so, then
right to manage is a no-cost alternative to collective enfranchisement, and we may therefore see a decline in collective
enfranchisement in the short term.
In the longer term, lessees who have learned to work together through a right-to-manage company may be less concerned
about management consequences of enfranchisement, and become more willing to take the plunge.
Under the existing legislation, collective enfranchisement takes place through a nominee purchaser, and the legislation is fairly
relaxed about the identity and/or structure of the purchasing vehicle.
The 2002 Act requires there to be a right to enfranchise company with a very specific structure. This is undoubtedly more
complicated and the authors are aware of advice being given to lessees to the effect of do it now under the more relaxed
rules.

Cemicircular WebWatch
The full-text of the Act can be found at
www.legislation.hmso.gov.uk/acts/acts2002/
20020015.htm. Further information about the Act is also
available from the Office of the Deputy Prime Minister
(www.odpm.gov.uk/stellent/groups/odpm_control/
documents/contentservertemplate/
odpm_index.hcst?n=1366&l=4).

53

RESIDENTIAL

Home equity release

The home reversion market in the UK is estimated to be
worth 250m and rising. Releasing equity from a home is
increasingly used by older people to supplement pensions,
and lack of regulation means there may be a scandal waiting
to happen, says Edmund Tirbutt (The Independent, 28
June 2003).

Critics have said equity release is a scandal waiting to

happen, as more and more older people tap into the value of
their home to supplement modest pensions. Last year, more
than 3bn was raised by nearly 87,000 people borrowing
against their homes, or selling a proportion of them, an
increase of nearly 40 percent, and this trend will likely
continue.
The first and cheapest way of releasing equity is to sell
your home and buy somewhere cheaper. But for many, this
can be too much of a wrench, so they turn to the financial
engineers. There are three main choices.

Home reversion. You sell a percentage of your home for

a tax-free cash sum. There is no interest to pay, but when
you die the company cashes in its share. And the money
you receive will be after deducting a notional rate of
interest, so the lender may pay only 25,000 for a 50
percent share in a house worth 100,000.
Roll-up mortgage. You take out a mortgage secured on
your property. Again, no interest to pay in your lifetime.
It rolls up and is repayable on the sale of your home,
with the capital borrowed. But the interest can soon
swallow the value of your home.
Home income plan. Like a reversion, except the money
raised is invested in an annuity to provide an income. As
with orthodox annuities, how much you get will depend
on your age, whether you are male or female and your
health.

The Financial Services Authority (FSA) will take

responsibility for mortgage selling in October next year, but
much of equity release will remain unregulated. Mortgage
roll-up schemes will come under the FSA, but not reversion
ones. So victims of reversion mis-selling would not be able
to complain to the Financial Ombudsman Service.

54

Anyone seeking an equity release plan should ensure

they are dealing with a suitably vetted organisation, such as
members of the trade association Safe Home Income Plans
(Ship). Among the important guarantees offered by all
Ships 14 members are that you can move home penalty-free
after taking out your plan and you can never owe more than
the value of your property.
But Ship does not impose rules on redemption penalties,
and some can be significant. As with mortgages, you should
take independent advice. Independent financial advisers
(IFAs) specialising in equity release include Key Retirement
Solutions and Hinton & Wild Home Plans.
These firms can deal in the main categories of equity
release, home-reversion and roll-up, and can also discuss
using either to generate an income. Although many
mortgage brokers may advise on home reversion schemes
and roll-up mortgages, only firms registered as IFAs can
discuss income options involving annuities. Dean Mirfin,
business development director at Key Retirement
Solutions, says: Before seeing an adviser about equity
release you should be asking yourself what you are trying
to achieve. If you dont know why you need the money
and how much you wish to raise, then it will be very
difficult to talk to an adviser and the chances are that you
dont need it anyway.
The Treasury is clearly alarmed by the outcry at its
decision not to police reversion schemes, so it is having a
hurried rethink. The home reversion market is estimated to
be worth more than 250m a year, and is growing rapidly,
Paul Boateng, chief secretary to the Treasury, says. The
target market tends to be elderly, and sometimes vulnerable,
people who have paid off their mortgage.
This may mean regulation is extended to the whole
equity release market, which will be welcomed by
borrowers and responsible lenders.
But you must tread carefully and think through the
implications of surrendering part of the value of your house,
not least because of inheritance tax effects.
Information
Equity release: Ship tel: 0870 241 6060.
Specialist IFAs include: Key Retirement Solutions
tel: 0800 064 7075;
Hinton & Wild Home Plans tel: 0800 328 8432.

RESIDENTIAL

Energy efficient homes

More householders are taking an interest in making their
homes more energy-efficient and lenders are now offering
loans and mortgages for energy-saving improvements,
reports Melanie Bien (Independent, 3 August 2003).
Surveyors therefore need to be in tune with greater occupier
awareness and the potential for business in helping clients
go green.

The impact of global warming, thought to be the main cause

of increased flooding in the south of England and elsewhere
in the world, is making home owners more conscious about
measures they can take to help the environment.
And they can help themselves too. The Energy Saving
Trust estimates that home owners could save up to 200 a
year on their energy bills by adopting some basic measures
(see efficiency tips below) that reduce harmful emissions.
But while switching off the lights powered by
energy-efficient bulbs, of course when leaving a room,
turning down the heating and recycling your newspapers
all contribute, for some people this just doesnt go far
enough.
Colin and Margaret Williams decided to start from
scratch and build an environmentally responsible home in
Mattishall, Norfolk. So impressive is their property that last
year the couple won Norwich & Peterborough (N&P)
Building Societys Eco Build competition.
Their home has low CO2 emissions due to their high
levels of insulation, while they have also managed to halve
water consumption by using a rainwater recovery system.
Sustainable materials have gone into the construction of the
property, with the couple using lime mortar rather than
cement, Warmcell (newspaper) insulation and European
softwood.
Low-energy lights and oil-fired cooking have reduced
electricity consumption, and even the paints, stains and
varnishes are all natural entirely plant-based and using no
petrochemicals.
It wasnt all plain sailing, though, especially with the
rainwater recovery. These systems are still in their

infancy in the UK, and the system purchased was slightly

Heath Robinson [unnecessarily complicated] in some of
its components, recalls Mr Williams. Some of these
components failed to survive more than a few weeks
without problems. However, better-quality components
were supplied and the system now works extremely well.
That said, the couple experienced further problems with
the passive stack ventilation system, which airs the whole
house automatically without consuming electricity. I had
not appreciated how difficult it would be to persuade heating
engineers to install a non-standard system, says Mr
Williams. Some even refused to submit a price. Many told
me that the proposed system would not work.
I took advice from a consulting services engineer who
had specialised in environmental designs. He suggested
some minor changes and I was able to engage a local firm of
heating engineers, who installed the system to a very high
standard and it works.
The cost of the project meant the couple were forced to
do much of the labour themselves. It was a commitment of
over five years without holidays or weekends off, and few
free evenings, he says. We have roughly calculated our
work at 80,000 10 per hour for a tradesman, 5 an hour
for a labourer.
But while this is a huge commitment, smaller steps can
be taken to help the environment, such as applying for a
green mortgage. Both N&P and the Co-operative Bank offer
home loans linked to reforestation schemes.
The Co-op makes an annual donation to Climate Care
through its eco-mortgage, which aims to offset around 20
percent of an average homes carbon dioxide production for
every mortgage agreed. As a result, new woodlands are
being created in Uganda. N&Ps new-build green mortgage
aims to make new homes carbon neutral; for each
mortgage it sells, it plants 40 trees over five years with
Future Forests in East Anglia and Lincolnshire.
N&P also offers green mortgages to those who are either
buying an existing property or remortgaging and looking to
improve their energy efficiency. Customers get a free energy
survey and 500 cashback towards recommended home
improvements.
N&P also offers a green further advance to any existing
mortgage customer who wants to carry out energy-saving

Keep the heat in

Close your curtains at dusk to help stop heat escaping through the windows.

Turn off the light when you leave a room.

Avoid leaving appliances on standby.

Dont fill up the kettle to the top; only boil the water you really need.

Make sure your thermostat is never set at more than 60C (140F).

When buying new appliances, look for the orange and blue Energy Efficiency Recommended logo.

Ensure your home is properly insulated. Install double-glazing, eliminate draughts and fully insulate your roof and cavity walls.

Buy energy-efficient light bulbs. They last up to 12 times longer than regular bulbs and cut energy waste by over 75 percent.

If your boiler is 15 years old or more, think about replacing it; this could reduce fuel bills by more than a fifth.

Install solar panels. Government initiatives pay for up to 50 percent of the cost of installation. For more details, go to
www.est.org.uk.
Source: Energy Saving Trust

55

RESIDENTIAL

improvements to his or her home. The Ecology Building

Society provides mortgages for energy-efficient housing and
derelict and dilapidated properties.
Borrowers neednt worry about paying over the odds for
being green, either. You will pay a modest premium
because you wont have the whole mortgage market to
choose from, says Ray Boulger, senior technical manager at
mortgage broker Charcol. But the rates from these lenders
are all respectable.
Readers who have built an environmentally responsible
property from scratch and want to enter this years Eco
Build competition can pick up a form at any N&P branch or
call 0845 300 2522. The prize is 5,000 and entries must be
received by 31 December.

Cemicircular WebWatch
Details about making homes more energy efficient is
available on the Energy Savings Trust website
(www.est.org.uk). Details on the Norwich and
Peterborough Green Mortgage is available at
www.npbs.co.uk/mortgages. Other sites: www.cooperativebank.co.uk; www.ecology.co.uk;

56

RURAL

Rural
Rural offices lettings market
The current state of the letting market for rural offices in the
English countryside is discussed by Julian Sayers, RICS
Rural Faculty chairman, and director of Adkin Rural &
Commercial, where he has responsibility for the
management of over 23,000m2 of rural commercial property
and is involved in the appraisal, planning, development,
marketing and letting for the conversion of a wide variety of
farm and estate buildings (Rural Professional, June/July
2003).

The past few years have seen a tremendous growth in the

conversion of farm and estate buildings to provide
commercial property to let, including high quality office
accommodation. Although many of these developments
have taken place in southern England, there have been an
increasing number of successful projects in the north of the
country, but, as with all such ventures, location is one of the
main keys to success.
The expansion has been supported by a wider variety of
businesses willing to consider moving to rural locations, as
they appreciate the benefits of working in the countryside.
These include access without traffic congestion, the
availability of car parking, the pleasant working
environment and the response received from clients visiting
the premises. Those factors need to be balanced with the
ability to gain access to adequate telecommunication links,
the main road and motorway network and, ideally, rail links,
together with facilities where staff can shop, bank and find
sustenance during the working day.
Subject to meeting these criteria, demand was rising
steadily until the middle of last year, when enquiries started
to dry up as the overall commercial letting market went into
decline. Some people thought this was due to an over-supply
of rural offices, but the lack of demand simply reflects that
which has been seen across the whole spectrum and not just
the rural sector.
Businesses are not prepared to commit themselves to the
expense of moving and taking on new premises at a time of
uncertainty within the UK economy and the world at large.
This highlights that those who pursue this form of
diversification must recognise the risks as well as the
potential benefits and take a long-term view of such projects
as part of their overall business strategy.
Until last summer, Adkin Rural & Commercial had let all
the office developments with which the company had been
associated, usually prior to completion. However, there are
now four schemes where conversions started last year and
units remain unlet. Fortunately, existing tenants seem to be
staying put as they batten down the hatches and wait to see
how the demand for their products or services will pan out
over the forthcoming months. Having said that, premises
have been let since the downturn in the market. The
companies concerned have been willing to sign up and pay

the rents being asked, as they wish to benefit from the

advantages detailed above despite the adverse trading
conditions which, as always, do not affect all businesses to
the same degree.
As to rental values, these have increased as demand has
grown for rural office space and because of the rise in
commercial rents overall. Rents now range from 130 to
340 per m2 for the premises with which Adkin Rural &
Commercial has been involved throughout the central area
of southern England, depending upon the location and the
quality of the accommodation. The sums achieved often
exceed those of the local market town or business park, as
companies are willing to pay a premium for the benefits of a
farm or estate location. The rural office is not a cheap
office providing conversions are carried out to a high
standard and incorporate the features of the traditional
buildings concerned.
The keys to success include:

Location remembering that a set of buildings can be

just a few miles too far away from the requirements for a
successful, high-quality development which will attract
the requisite rents.
A carefully designed scheme to ensure the office space
will meet the needs of a wide variety of tenants. This
means retaining flexibility for open plan or subdivided
accommodation and the ability to join or separate
individual units at the start of the scheme or at a later
date.
Ensuring that quality materials are used to create the
right atmosphere within the offices, together with the
imaginative use of lighting and one-off design features
sympathetic to the buildings concerned.
Incorporating in the conversion scheme suitable trunking
for tenants to install all their computer and
telecommunications equipment, which, together with
power supplies, require at least three separate channels.
If the buildings are wide floor, ducting and sockets may
also be needed but, above all, the links between internal
offices and individual units must be flexible.
Providing adequate access to the telecommunication
network which is vital to modern-day businesses. This
can present more problems than obtaining planning
permission in certain locations. It means at the very least
providing ample standard phone lines and the option for
ISDN. The provision of ADSL and Broadband may be
more difficult, but ways are being found to overcome
some of the initial hurdles which are often encountered
and, if successful, the development will be significantly
enhanced.

The returns achieved from the capital invested in new

developments have come under pressure due to the dramatic
rise in building costs over the last two years. High-quality
conversions, depending upon the state of the original
buildings and the infrastructure required, including access,
car parking, landscaping and services together with
57

RURAL

professional fees, were costing 750 to 1,000 per m2 but

recent tenders have resulted in figures ranging from 1,000
to 1,500 per m2. Since the start of the new year there have,
however, been signs of contractors willing to negotiate
following the receipt of tenders, which probably reflects the
state of their order books. In addition, the farmer or estate
can make savings by undertaking ground works and other
parts of the scheme where the appropriate skills are
available within the workforce. Having said that, steps must
be taken to avoid conflict between the parties, particularly
if there is a chance that the builders and in-house staff will
be on site at the same time.
The rise in costs means that returns are falling from a
peak of 15% or even higher to 10% or less for some
projects, at which point the viability of a scheme may come
into question, particularly if external finance is required.
Fortunately, interest rates continue to fall and if money can
be borrowed at 55.5%, even with a 1012% return there is
scope to repay the capital within a reasonable time frame,
although the potential for void periods must be taken into
account.
There is a future for the rural office, and demand may
well develop as we see the problems associated with
increased traffic and the potential spread of congestion
charges impact upon the demand for central urban
locations. The market will, however, be affected by the state
of the economy, and farmers and estate owners must
therefore be aware of the risks, as with any form of
development, and to this end sound professional advice
should be sought before embarking on a new scheme.
Just remember: location, quality, flexibility,
telecommunications and marketing are the principal keys to
success.
[This article also appeared in RICS Farmland Market.]

Cemicircular WebWatch
FPDSavills have a good selection of market reports and
commentary on their website, all available to download.
Go to the research section at www.fpdsavills.co.uk/rural.

58

The Countryside and Rights of

Way Act
Rights of access on foot across rural areas have been
extended in England and Wales by the Countryside and
Rights of Way (CRoW) Act, which received Royal Assent on
30 November 2000. Part 1 of the Act should provide
opportunities for surveyors in relation to the access
provisions, as discussed by Angela Sydenham, former chief
legal adviser to the Country Landowners Association (CLA.)
and a consultant specialising in agricultural law and access
with the Suffolk-based legal firm of Birketts. She has written
several books on agricultural legislation (Rural
Professional, June/July 2003).

The Act introduces a new right of access on foot for open air
recreation to mapped open country, namely mountain, moor,
heath, down and registered common land. Improved and
semi-improved grassland is excluded from the definition.
There is provision for the definition to be extended to
include coastal land and for landowners to dedicate any land
for public access.
Access land does not include excepted land, nor land
over which there is an existing right of public access (eg
commons within section 193 of the Law of Property Act
1925 or land subject to access agreements or orders under
the National Parks and Access to the Countryside Act 1949).
However, the existing right of access will continue.
Challenging the mapping
The Countryside Agency and Countryside Council for Wales
are under a duty to prepare maps showing all registered
common land and open country. They have power to
exclude small areas on the map where they consider it
would serve no useful purpose. The countryside bodies also
have a discretion to take a physical feature as the boundary
of open country, even if the result is that some other land is
included or some open land is excluded.
There is a procedure for publishing draft and provisional
maps. Representations against the inclusion or exclusion of
land on draft maps may be made by anyone within
prescribed periods. There is a right of appeal by those with
an interest in the land against the inclusion of land in
provisional maps on limited grounds only. These are that the
land is not registered common land or open country, or that
the discretion to map to a boundary feature has been
wrongly exercised. Once the time has elapsed for bringing
appeals and either there were no appeals or all the appeals
have been withdrawn or determined, the appropriate
countryside body must issue the map in conclusive form.
Access maps are to be reviewed at least every 10 years.
There is an opportunity for surveyors on behalf of their
clients to make representations on draft maps and appeals on
provisional maps. The relevant regulations in England are
Access to the Countryside (Maps in Draft Form) (England)
Regulations 2000 SI 2001/3301; Access to the Countryside
(Provisional and Conclusive Maps) (England) Regulations
2002 SI 2002/1710; and, in Wales, Countryside (Draft

RURAL

Maps) (Wales) Regulations 2001, SI 2001/4001;

Countryside Access (Provisional and Conclusive Maps)
(Wales) Regulations 2002/1796 (W171) Countryside Access
(Appeals Procedures) (Wales) Regulations 2002, SI 2002/
1794.
England has been divided into eight for mapping
purposes. Provisional maps have been issued for the south
east and lower north west and the time for making appeals
has expired. The timetable for the rest of England should be
checked on the Countryside Agencys website:
www.countryside.gov.uk/access. The Agencys booklet on
mapping methodology, also available on the website, is
essential reading for anyone challenging a provisional map.
The Countryside Council in Wales website is
www.ccw.gov.uk/mapping.
The Planning Inspectorate provides a Guidance Note on
Appeals and an appeals form which are available from the
Planning Inspectorate website: www.planninginspectorate.gov.uk/access/appeals
Advising on Excepted Land (Schedule 1)
Certain land, although it comes within the statutory
definition of open land and is therefore shown on the maps,
will not be available for public access. The excepted land
includes cultivated land, which is defined as land on which
the soil is being, or has at any time within the previous 12
months been, disturbed by ploughing or drilling undertaken
for the purposes of planting or sowing crops or trees.
Ploughing and drilling include respectively agricultural or
forestry operations similar to ploughing and agricultural or
forestry operations similar to drilling.
Land covered by buildings is also excluded. Buildings
are defined to include any structure or erection and any part
of a building as so defined, but do not include any fence or
wall, or anything which is a means of access as defined by
section 32; and for this purpose structure includes any tent,
caravan or other temporary or moveable structure. Land
within 20m of a dwelling or livestock building is also
excluded.
Other excepted land includes land used as a park or
garden, for the getting of minerals by surface working, for
the purpose of a railway or tramway or golf course,
racecourse or aerodrome, or land covered by works used for
the purposes of a statutory undertaking or
telecommunications system. In order to qualify as excepted
land any necessary planning consents must have been
obtained. Land over which there are in force byelaws made
by the Secretary of State for Defence will also count as
excepted land. A further category of excepted land is land
covered by pens in use for the temporary reception or
detention of livestock.
Surveyors should be advising landowners on what land
is excluded from public access and the methods of bringing
this information to the attention of the public.

Applications for exclusions and restrictions on access

Landowners will be able to exclude or restrict access for any
reason for up to 28 days a year. However, no more than four
of the excluded days in any calendar year may be either a
Saturday or Sunday. No Saturday in the period beginning 1
June and ending 11 August in any year may be excluded. No
Sunday in the period beginning 1 June and ending 30
September in any year may be excluded. The purpose of
these rules is to ensure that access is not precluded during
the periods when the public are most likely to want to
exercise the statutory right.
Further exclusions or restrictions may be approved by
the Countryside Agency for management reasons, on
grounds of nature and heritage conservation, fire prevention,
defence or national security and to avoid danger to the
public.
Regulations on the operation of exclusions and
restrictions were expected in December last year but are still
not published. It will be extremely important for those
advising a landowner who wants to exclude the public from
access land to study any regulations when they are published
in detail.
Negotiations and appeals against work notices
If access land has no legal right of access, the Countryside
Agency may make an application to the Secretary of State
(or the Countryside Council for Wales) for a creation order
under section 26 of the Highways Act 1980.
There may also be a need for physical works to be
carried out, such as the construction of gates or openings
made in walls and hedges. Powers are given to access
authorities (Highway Authorities or National Parks) to enter
into agreements with landowners and occupiers to do the
necessary works or, where agreement cannot be reached, to
do the work themselves after giving the stipulated notice.
There is work for surveyors in negotiating such
agreements and making appeals where notice to do work has
been served. Appeals may be made on the grounds that the
works are not necessary to remedy a breach of the
agreement, or that the works have already been carried out,
or the time specified for doing the works is too short.
Conclusion
Part 1 of the Act should therefore provide interesting and
varied work for surveyors (and lawyers of course). Part II of
the Act, which deals with public rights of way, road traffic
offences and private vehicular rights of way which arise
through long use, also creates opportunities for professional
advisers. But that merits an article to itself.

Cemicircular WebWatch
Details of the mapping exercise are available at
www.countryside.gov.uk/access and www.ccw.gov.uk/
mapping

59

RURAL

Vehicle access across commons

In the UK recent case law has changed presumptions
about the enforceability of vehicle rights of way gained by
long user over commons and other land, such as private
tracks (see also item on Rights of way in the
Development section). Access users can now apply for a
statutory easement under the Countryside and Rights of
Way Act, but subject to important deadlines. An article in
Country Landowner magazine in March 2003 resulted
in such a large response to the CLA legal department that
an update was provided in June 2003. Both articles are
reproduced here.

Some important deadlines

(March 2003)
For those with premises that rely on a prescriptive right of
way (long user) for vehicular access, important changes
have occurred over the past months. Although many
properties on commons rely on such a right of access, it
has been recognised since 1993 that no such right can exist.
The Court of Appeal decision in Hanning v Top Deck Travel
Group [1993] NPC 73 CA held that, as driving over a
common off the public road has been illegal for many years
(under s.193 of the Law of Property Act 1925), no right of
access for vehicles could be acquired by prescription.
As a result of the Hanning decision there have been
several high profile cases reported in the media where some
owners of commons (including councils) have demanded
substantial sums for the purchase of a legal easement (a
formal right of way) to enable house owners to take cars to
and from their properties despite having done this freely for
50 years or more.
The Government decided to rectify the problem by
putting a cap on the amount that the owner of the common
could charge for such an easement. Section 68 of the
Countryside and Rights of Way Act 2000 was passed, along
with associated Regulations (Vehicular Access Across
Common and Other Land (England) Regulations 2002).
Broadly, these provisions allow owners of premises that
would have enjoyed a prescriptive vehicular right of access,
save for the technical illegality of driving over a neighbours
land, to apply for a statutory easement on payment of
compensation (ranging from 0.25 to 2 percent of the
property value). (Information on the necessary user; details
of the levels of compensation and procedure to be followed,
can be obtained from the CIA legal department.)
The Regulations themselves can be found at
www.hmso.gov.uk
The Regulations came into force on 4 July 2002. They
apply to England only. One of the most important points to
note is the date for making an application, and unfortunately
there is some ambiguity over this. Regulation 6(2) states:
The application must be served within 12 months of the
date on which these Regulations come into force or, if later,
the date on which the relevant use of the way has ceased.
It seems clear from this that if, for any reason, the way
had ceased to be used with vehicles by 4 July 2002, it is
60

critical to make an application by 3 July 2003, to preserve

vehicular use in the future.
However, where use of the way continues after 4 July
2002, the drafting of the Regulations is not entirely clear.
Several commentators have questioned whether the right to
apply for an easement will be lost after 3 July 2003. As
such, even where use of a way has not been challenged, the
safe advice must be to apply for the statutory easement by 3
July 2003.
A further very important development in this area of the
law took place at the end of last year with the ruling in
Massey & Drew v Boulden & Boulden [2002]. The Court of
Appeal found that, as it has been illegal under the Road
Traffic Acts since 1930 to drive over any land further than
15 yards from the public road, no vehicular rights of way
can be obtained by long user.
It follows from this case that owners of any land may
now demand that the users of private tracks who assumed a
right of access with vehicles by long user, acquire a
statutory easement under the s.68 procedure. The only
exception to this is where the prescriptive right had been
acquired prior to the use of vehicles becoming illegal.
The same deadline discussed above is appropriate in this
situation as well.

Look before you leap

(June 2003)
1. First and foremost, any landowner who needs to cross
land in the ownership of a third party in order to reach a
public highway should in the first instance make a
careful examination of their title deeds to see whether
there is any specific reference to a right of way. It is
important to read carefully the wording of such an
easement to ascertain whether there are any words of
limitation on the user ie as to the extent of the user or
the activities that are permitted.
It is also important to interpret from the wording
whether the grant is a full legal grant of an easement
made by the owner of the land capable of making the
same or some lesser easement, such as the
confirmation of a right which has been acquired by
long use (a prescriptive right.) The latter can usually
be identified in the case of a registered title by
wording such as Notice entered in pursuance of rule
254 of the Land Registration Rules 1925 on (date) that
the registered proprietor claims that the land has the
benefit of a right.... In the case of the former, no
further action should be required, although if there is
any doubt in the matter it would be prudent to consult
a solicitor for clarification.
2. In the case of the latter (or in the absence of any form of
wording), it is necessary to consider whether it can be
established that the property enjoyed a prescriptive right
before it first became illegal to drive over the
neighbouring land.
Depending on where the land is situated, it will be
necessary to show that there has been a minimum of 20
years use before either 1 January 1926 or 1 December
1930.

RURAL

It is not possible in this article to consider the aspects

that constitute a prescriptive right, and each case needs
to be considered individually. However, it is essential
that use has not been with the permission of the
landowner. It can be appreciated that it may not be
straight-forward finding evidence of regular use from
nearly a century ago, but it should be noted that use need
not be by motor cars alone it has been held that use by
horses and carts or carriages is sufficient to establish
vehicular use.
Furthermore, the use is not dependent on it being used
by the same person. Periods of use by one owner of the
property can be added to a period of use by a subsequent
owner to reach a cumulative total sufficient to achieve a
minimum of 20 years use.
3. Where the access is across a thin strip of verge,
consideration should be given as to whether this is
manorial waste in private ownership or whether it forms
highway verge. Enquiries should be made to the highway
authority for clarification. If it is the former (and
paragraphs 1 and 2 above do not provide a solution),
then a private easement will be required from the
landowner even if the crossing is only a matter of feet.
4. Thought should be given to whether there is a public
vehicular right of way along the track in question. It is
illegal to drive motor vehicles across public footpaths
and bridleways without the consent of the legal owner of
the land. However, it is possible that the track is
classified as a byway open to all traffic, in which case
the general public has a right of way for vehicular
purposes.
Finally, where relevant use of the way has already ceased
for any reason, remember that in the case of land situated in
England it is crucial to lodge the application for the statutory
easement on or before 4 July 2003 in order to avoid the risk
of losing the right to apply for the same.
CONTACT
Members of the Country Landowners Association should
contact the legal department on 0207 235 7952 for further
advice in this complicated area of the law.

Farm survey report

In June 2003, the Research Centre of the Institute of
Chartered Accountants in England and Wales (ICAEW)
published findings from its 6th Farm Profits survey. An
edited version of the Executive Summary from the report by
Helen Wootton, Research Analyst with ICAEW, is
reproduced here. Details about how to obtain the full report
and subscribing to the Farm and Rural Business Group are
given below.

Survey objectives and method

The survey is undertaken among the practising members of
the Farming and Rural Business Group and other ICAEW
members involved with farm clients, and reports on the
accounts of their farming clients.
The previous survey for 2001/02 contained information
about members views on the effects on the rural economy
following the outbreak of foot and mouth disease in 2001.
This year the research has re-focused on the financial
circumstances of the farms.
The main objective of the research was to ascertain the
chartered accountants views of their farming clients
regarding:

The financial situation (profit, loss, drawings) of the

farm
Whether the financial situation is changing
The nature of the farm (owned or tenanted; region; type
of farm; size of farm)
Whether succession is established for the farm
Whether there is diversification of activity
Average age of those family members involved in the
farm.

The 2003 6th annual Farm Profits survey involved a

short self-completion questionnaire sent to 436 members of
the ICAEWs Farming & Rural group and gained 255
responses (members were allowed complete questionnaires
for up to ten of their farming clients). It covered a wide
range of farms in terms of location, size and type, and while
every effort was made to survey a representative sample of
farms, there may be some variation from the real world
situation. For some of the analyses by farm type, size and
location the base numbers can be relatively small, and care
must be taken in drawing conclusions from the data.
The accounting year-end for respondent farms fell
between May 2002 and April 2003, with 90% falling after
August 2002, therefore the information is relatively recent.
Survey findings
Respondents were asked about the change in the farms net
worth from last year to this. On average there was a 2%
decrease, with farms in the north of the country having the
largest average decrease, and farms in the south-east the
largest average increase.
Farm accountants were asked about annual net profit,
and of those that responded the average was 23,484, a 26%
decrease on last year. This varied by location, size and type
61

RURAL

of farm with farms in the north having the lowest average

annual net profit and also the largest decrease since last year,
and farms in the south-east having the highest average
annual net profit.
The average profit per hectare was 236 across all farm
types. Average profit varied by type of farm and was highest
for poultry farms at 4,512 per hectare and lowest for beef/
sheep LFA (Less Favoured Area) at 106 per hectare.
The average profit per family member who derives
income from the farm was 10,812, a decrease of 14% on
the previous year. Although profits had fallen, average
drawings from farms had increased. In both the current and
previous survey average drawings were greater than average
profits. In addition a third of farms had invested in land this
year, 87% in plant and machinery, and over a quarter on
other non-farming assets.
These findings might lead one to expect that borrowings
had increased, but they had remained stable since the last
survey. The additional capital seems to be coming from nonfarming sources, with over half of respondent farms
introducing capital from external sources whereas only 17%
introduced capital from farming sources. Amongst those
who had introduced capital from non-farming sources, the
average amount introduced showed no significant change;
however, amongst those who injected from farming sources,
the average amount has doubled since the previous year.
Diversification is another source of additional income,
but less than one in five respondent farms had diversified.
The most popular diversification was letting property or
land.
On average, the respondent farms had 2 full-time adult
family members deriving income from the farm, and 1.4
part-time. The age range of the full-time family workers was

62

from 20 to 89, with the average youngest member being 43

and the average oldest being 60. These findings indicate an
ageing profile amongst farmers, with fewer younger family
members involving themselves in farming, although over
half of the respondent farms had established a family
succession.
Less than one in five of the farms were working in cooperation with other farmers, either for sales or purchases.
Co-operative working was more common in the south east,
and for larger farms.
Only 4% of respondent farms were subject to whole
farm contracting agreements, and again these were more
common in the south-east or on larger farms.
The Chartered Accountants completing the forms were
asked for their view of the farms future profitability: 38%
thought it would get a lot or a little better, and 25% felt it
would get a lot or a little worse although it is worth
commenting that very few respondents took an extreme
view (a lot better or a lot worse) and by far the majority
predicted only slight change or no change.
Further information
Copies of the full report Farm Profits Research can be
obtained by email from Charmaine DSouza at ICAEW
(charmaine.dsouza@icaew.co.uk), together with details
about how to subscribe to the Farming and Rural Business
Group for their newsletter, conference details and support
initiatives.
Queries about the Farm Survey research report should be
addressed to Helen Wootton, Research Analyst
(helen.wootton@icaew.co.uk, 020 7920 8587).

VALUATION

Valuation
Valuation standards
Since 1 May 2003, RICS valuers worldwide must comply
with new valuation standards contained in the updated Red
Book, which ends use of the term open market value and
replaces it with market value and market rent. Duncan
Preston, chairman of the RICS Valuation Faculty and a
national director of Jones Lang LaSalle, outlines the main
features of the new regulations (Property Week, 9 May
2003). This is followed by observations from Robert Peto,
chairman of DTZ, about the need to harmonise valuation
standards across Europe and strike a balance between
business ethics and efficiency (Property Week, 13 June
2003).

The end of open market value

Standards evolve and evolving standards need to be
codified. Every professional body has a responsibility to
review its regulations, standards, rules of conduct and
disciplinary processes.
The users and providers of our services would expect
such a process to exist.
The RICS Appraisal and Valuation Standards is the fifth
edition of what is known as the Red Book.
It is referred to as standards and not manual because it
no longer has any methodology in it. Instead, it is a set of
mandatory standards.
Valuation information papers are being produced
separately and compliance with them is not mandatory. The
first of these papers, valuation of owner-occupied property
of financial statements, has been published.
Higher standards
The RICS is a professional body that is privileged to operate
on a self-regulatory basis, and the latest book is the result of
a project to create standards that are capable of global
application, follow the development of international
valuation standards, improve the structure of practice
statements with supporting commentary and address the
issues raised by Sir Bryan Carsberg in his report on
challenges to best practice.
The new Red Book, effective from 1 May, is remarkably
different in structure from its predecessor, which was a large,
unwieldy, repetitive and at times inconsistent document
formed on the effective subsumption of the valuation
guidance notes into the third edition of the Red Book.
The frame of the new Red Book is the global standards
that apply to chartered surveyors worldwide.
On top of that are the standards to cover matters that
arise from local statutory or regulatory requirements.
The RICS has a policy of supporting and adopting
international valuation standards (IVS). The Red Book,
reflecting the international status of the RICS, should create
standards that are complementary to, rather than in conflict

with, the international movement and, where applicable,

adopt and promote regional standards, such as those which
apply to Europe.
The Red Book has been accused of having too many
bases of valuations. The RICS has consigned many of these
to history, including open market value. It has been replaced
by market value, a shorter term which means the same thing,
and introduced market rent.
Global market
Not only does this support the movement towards a global
market, but, similar to the development of international
accounting standards, it provides a standard which is
transportable, accepted and understood in an increasing
number of countries in the world.
Valuers are being asked to consider their positions with
clients and to be able to justify their actions.
We have also seen the demise of estimated realisation
price and estimated restricted realisation price, and
confirmation that the term forced sale value must not be
used.
If a valuation is prepared with any restriction on
marketing or timing that would affect the opinion of market
value, it is to be stated as a special assumption. On the
subject of definitions, the notion of preparing valuations for
third party use has been more accurately defined in the
phrase regulated purpose valuations. The intention is to
give greater clarity to what I have previously, and arguably
more loosely, referred to as valuation for third party
consumption.
Another old chestnut has been whether the valuer is an
independent valuer or an external one. This generic
distinction has been scrapped.
The issue developed from the RICS definition of
independent, which was probably at variance with most
clients interpretation of independence.
The new Red Book now has a big change of emphasis.
As well as being required to be knowledgeable,
experienced and having the right skills, the valuer must now
have independence of mind, integrity and objectivity.
The use of the term independent valuer is now not an
RICS definition as such, but a requirement to clarify the
criteria of such a role in the terms of engagement for the job
on the basis that the criteria differs between statutes and
regulations in different counties.
The important aspect is the mandatory requirement for
any valuer to act with independence and integrity.
Linked to this, Sir Bryan Carsberg expressed concerns
on threats to objectivity and in response the Red Book now
contains the RICSs nine core values and guidance on the
process of handling actual and potential conflicts of interest,
and issues on confidentiality.
Valuers are being asked to consider their position with
clients and to be able to justify their actions. Their processes
will be monitored by the RICS.
The RICS has produced a practice statement on the
rotation of valuers. In regulated purpose valuations,
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VALUATION

members have to make a statement on the firms policy on

rotation of valuers, to minimise any threat posed by
familiarity. The RICS suggests valuers be rotated at least
every seven years.
Those who prepare regulated purpose valuations have
also to include matters of disclosure in their report which
provide an indication of the financial importance of the
client to the business and the period of time that the valuer
has provided the report and his firm has known the client.
Full disclosure
These are in response to the Carsberg recommendations,
which might be described as a check on familiarity and
reliance.
With regard to fees, the valuer must now state whether
the total fee income from that client, not just the valuation
fee, but the firms total fee, exceeds 5% of the firms annual
turnover. If it does the report should state the level within a
5% bracket.
There is no requirement to provide the actual income and
turnover figures. The report must also contain a statement as
to how long the valuer has been the signatory to the
valuation.
With the changing structure of the institutional and
investment markets, the disclosure must also provide a very
brief comment on the period of time that the firm has known
the client, and what other work it performs for that client,
being for example the fund management house, as distinct
from the particular portfolio that has been valued.
Highlights of the new Red Book

Totally new structure

Rules followed by commentary

Two parts, one which applies globally and one which

meets local requirements

Reduced number of valuation bases, including loss of

open market value

Introduction of recommendations from the Carsberg

Report

Focus on independence, integrity and objectivity

Guidance on conflicts of interest and confidentiality

Third party valuations defined

Valuers will be monitored on their processes by the RICS.

Rewriting the valuation rule book

By Robert Peto, Property Week 13 June 2003
A balance must be struck between ethical standards and
business efficiency
Valuation continues to come under scrutiny with the
publication of new research into its accuracy and the launch
of a new Red Book by the RICS on 1 May, 30 years or so
after the first edition (The end of open market value, legal
+ professional, 9 May, p.35).
The new book reflects the need for consistency in
international valuation standards with the added emphasis
on standards of behaviour and transparency in relationships
with clients, all of which are highly topical.
To reflect this internationalisation, the latest Red Book
applies to all chartered surveyors wherever they practise in
64

the world, and it incorporates the relevant standards and

definitions produced by the International Valuation
Standards Committee. This is important because the
adoption of the International Accounting Standards for listed
companies in 2005 is fast approaching.
There are two issues worthy of comment. The first is the
potential confusion in the minds of clients and their advisers
over the proliferation of valuation standards. This is of
particular relevance in Europe as there are now three sets of
standards: the IVSC International Valuations Standards (the
White Book), the European Group of Valuers Associations
(TEGoVA) European Valuation Standards (the Blue Book)
and the RICS standards (the Red Book).
The need to develop an understanding of different
national valuation methodologies and standards and
encourage harmonisation of these across Europe offers a
valid role for TEGoVA. In this respect, the Blue Book could
perhaps be more aptly considered as a textbook on European
valuations. This would reduce the scope for confusion.
The second issue is whether the new Red Book strikes
the right balance in relation to matters of corporate
governance on the conduct of published valuations, which
are now known as regulated-purpose valuations. In certain
areas, such as revealing and dealing with conflicts of
interest, the Red Book is very prescriptive as there is a
recognition of the need for total transparency. It does not
preclude acting where there is a real or perceived conflict,
but only if the parties involved are aware and agree.
In other areas, there is a requirement to develop policies
for the rotation of valuers. However, the frequency of
rotation is not prescribed, although the RICS does
recommend that it should be at least every seven years.
The RICS Appraisal and Valuation Standards Board has
taken a pragmatic approach, as the RICS can only go so far.
It is up to other regulatory bodies to consider whether they
wish to be tougher or go further with their regulated
members.
In the undertaking of valuations for secured lending,
banking regulators might consider requiring lenders to seek
a valuation from a valuer who has no recent or current
relationship with the borrower in respect of the property in
question. Some of the banking community were
disappointed that the RICS did not seek to regulate this, but
there are times when an industry must decide whether it
should impose its own controls rather than expect others to
do this for them.
They might, however, conclude that the need for speed,
cost-saving and efficiency in a competitive market far
outweighs the risk of an inappropriate valuation.

Cemicircular WebWatch
More details on the recent changes to valuation standards
in on the RICS website (www.rics.org/val). The new Red
Book can be accessed online (www.hostref.com/rb) (you
need to purchase a login from RICS Books). The
International Valuation Standards can also be viewed
online from the IVSC (www.ivsc.org), but these are free of
charge.

VALUATION

Valuation accuracy
In the UK property market, standards of accuracy in
valuations are now higher than in the 1980s, but more than
a third of valuations still vary from the eventual selling price
by more than 10%. The debate about the permissible margin
of error and whether valuations lag the market therefore
continues, as reported by Mark Jansen (Property Week, 13
June 2003).

The results of the Variance in Valuation report by Drivers

Jonas might ring alarm bells for those outside the
profession. Why do more than a third of valuations miss the
target by at least 10%?
The report, based on 1,070 valuations made during 2001,
also notes that more than 80% of the valuations fell within
20% of the eventual sale price. It adds that the overall
success rate has been largely unchanged since 1997 (see
box).
However, standards of accuracy are considerably higher
than in the 1980s, when on average just 40% of valuations
fell within 10% of the eventual sale price. By contrast, the
courts tend to see 10% or 15% as the outer limit of
acceptable accuracy in negligence cases.
This is the last time that Drivers Jonas will publish the
survey. As recommended by the Carsberg Report, which was
commissioned by the RICS to examine ways of maintaining
confidence in valuation practice, the RICS is taking over
responsibility for publishing surveys on the correlation
between valuations and achieved prices.
Duncan Preston, chairman of the RICS valuation faculty
and head of valuation at Jones Lang LaSalle, says the
institution hopes to publish its first report within six months.
He adds that the IPD is considering ways to enhance the
scope of the survey.
Red Book rules
The Drivers Jonas report follows publication earlier last
month of a revised RICS Red Book for valuers that
emphasises the importance of independence, in line with
Carsbergs recommendations.
Coincidentally, the UKs two biggest property companies
both published their year-end results last month. Both
showed increases in net asset value per share, yet the
yawning gap between the companies NAVs and share prices
continues, suggesting that many investors remain deeply
sceptical about valuations.
When British Land reported NAV up 7.7% to 860p on 28
May, its shares rose 2.1% to 483p, before settling back to
473p, a discount to NAV of 45%. ATIS Real Weatheralls
revalued BLs investment portfolio at 9.65bn, up 0.7%; the
rest of the NAV increase came from 130m worth of share
buybacks and early redemption of convertible bonds.
Five days earlier, Land Securities reported NAV up 5%
to 1215p but shares virtually unchanged at 790p, leaving
them on a 35% discount to NAV. Retained earnings of
62.5m and the return of 511m of capital to shareholders
offset a 0.6% fall in Knight Franks valuation of the
investment portfolio at 7.84bn.

Alastair Ross Goobey, president of the Investment

Property Forum and an adviser to Morgan Stanley, says
valuations tend to lag behind market sentiment and mask the
volatility of property prices.
This is because valuations are made on the basis of
comparable evidence, that is, previous transactions. When
the market is falling, property owners tend not to sell
because they are reluctant to achieve anything less than their
last valuation. As a result, valuers have no transactional
evidence that values are falling, says Ross Goobey.
He adds: Valuations are done professionally, but I dont
think they give the underlying truth of where the market, or
real value, is. [But] Im not criticising the profession, they
do what the rule books say and I think many investors
understand this.
Rupert de Barr, valuation partner at Drivers Jonas, says
the main reason for the gap between valuations and sale
price revealed in Variance In Valuations is that each of the
valuations in the study was carried out at least four months
before the property was sold.
This was done to exclude any possibility of the valuer
being aware of bid levels for the properties, which would
artificially improve accuracy. The average time lag was
eight months, which gave plenty of time for market
movements to influence the sale price subsequent to the
valuation.
Martin Farr, valuation partner at GVA Grimley, agrees: I
would say that to have 65% of valuations within 10% of the
sale price when the valuations were done four or eight
months before the sale is pretty good. A lot can happen in
that time.
Farr doubts whether the reports to be published in future
by the RICS will show much improvement in accuracy: If
you have that sort of time lag, and given the volatility of
markets and the room for difference of opinion that you
have in valuation, I doubt there will be much change.
Graham Thomas, president of the Association of
Property Bankers, says the gap between valuations and sale
price revealed in Drivers Jonass report is of initial concern,
particularly when viewed against the more aggressive loanto-value positions that banks have taken.
Although they have become more cautious in the past six
months, Thomas says: Two years ago and even a year ago,
banks were pretty aggressive on loan-to-value ratios,
especially in middle market transactions and to some extent
on larger transactions.
But Thomas points out that the survey is based on 2001
valuations, a period when the market was rising fairly
quickly. Like de Barr and Farr, he says price changes are
inevitable if there is a long time lag between valuation and
sale.
Unlike Farr, he believes that accuracy levels have
improved since the survey was done because of better input
from both valuers and the banks: I sense that now, the
variance is probably not so great. The market has stabilised
[since 2001] and I think the approach of valuers has become
more professional, in terms of their analysis and in their
recognition of conflicts of interest.
Theyre definitely becoming more independent and
more conservative. And I think the improved analysis by
valuers probably reflects the better instructions that banks
65

VALUATION

are now giving, theyre much more detailed and specific

than they were a couple of years ago.
Thomas believes there is still room for improvement. He
wants to see the RICS report that says 80% of valuations
were within 10% of the sale price, rather than 65%.
Duncan Preston adds: Im not at all discouraged by [the
Drivers Jonas report]. Nothing seems to be broken, but if we
can make ourselves better, everybody will benefit.

Valuation accuracy

A total of 65% per cent of valuations during 2001 fell

within plus or minus 10% of the eventual sale price.

A total of 80% fell within plus or minus 20% of eventual

sale price.

This accuracy rate has remained broadly static for the

past six years.

Accuracy has improved greatly since the 1980s, when

on average just 45% of valuations were within 10% of
the eventual sale price.
Source: Drivers Jonas

Staying inside the margin of error

By Jonathan Ross, property litigation partner with Forsters.
New research which found that 35% of property valuations were more than 10% outside the eventual sale prices (see above)
raises issues about the permissible margin of error in negligence and the importance of price when determining the value of a
property.
Valuation is an art and not a science and, as a result, every valuer has a subjective opinion. The courts have developed the
margin-of-error principle to determine whether a valuer has used reasonable care and skill.
If the valuation falls outside the permissible margin, or the bracket, the valuation is nearly always deemed to be negligent,
even if it cannot be shown that any particular step in the valuers methodology was faulty.
Independent experts will assist the court in determining the bracket and the correct valuation.
The size of the bracket depends on how unusual and difficult the property is to value. In the case of Singer & Friedlander v John
D Wood & Co (1977), the judge held that it was 10% either side of the right figure but it could be 15% in exceptional cases.
Although there have since been some cases in which a bracket higher than 15% has been applied, the margin of 10% is
generally used and it can even be lower for residential properties as they are easier to value.
Any contemporaneous sale price is often the best guide to value. A valuer should establish the market history of the property. If
it has been properly marketed and he values it at materially more than the price, he will almost certainly be found to be
negligent.
He should be particularly wary of accepting information from interested parties at face value.
The sale price and information in relation to tenancies, rents and service charges should be obtained from the solicitor and any
report on title prepared by the solicitor should be considered.
Since the avalanche of cases against valuers following the last property crash, there have been relatively few successful cases
in recent years.
In March 2003, a claim by Lloyds TSB against Edward Symmons failed and the guidance notes and practice statements issued
by the RICS have clearly helped valuers to follow the correct methodology when undertaking valuations.
However, those valuers whose valuations were found to be more than 10% above the subsequent sale prices must be shifting
slightly nervously.

Cemicircular WebWatch
The Variance in Valuation report from Drivers Jonas can
be downloaded from their website
(www.driversjonas.co.uk/showpage.aspx?doc=6112).

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NOTICES

Notices
Book review
Construction and Engineering Law: A Guide for Project
Managers

Pauline Makepeace, tutor in Law at the College of Estate

Management, and Sally Marsden, a solicitor and former
student of the College, have produced the first book in this
country to give guidance to project managers on
construction and engineering law
In 2001 College researchers conducted an independent
survey for the RICS of their Project Management Faculty
members, to help the Faculty Board plan how best to
support its members. The research found that legal issues
were top of the list of topics most respondents wanted to
know more about. This book fills that gap.
The responsibilities of project managers have inevitably
attracted the attention of the judges and arbitrators, with
project managers being sued for negligence. The book
covers the key legal areas that project managers are
expected to understand in their daily work. The book is split
into ten chapters, written by a team of experienced authors
from the College of Estate Management, international law
firm Dechert, Keating Chambers, a leading construction set,
Barrie Tankel Partnership, and EC Harris. The book is
written in an accessible style and is intended for dipping.
Each chapter is almost self-contained. The ten chapters
cover:

Introduction to the discipline of project management

Liability of the project manager
Limiting and extending liability
Project managers appointments
How the role of the project manager fits in to the
standard forms of building and engineering contracts
Review of key legislation
Health and safety issues
Professional indemnity insurance
Areas of dispute
Dispute resolution

The foreword is by Robert Akenhead QC, one of the

countrys leading construction lawyers, who has acted in a
number of professional negligence cases including a high
profile case involving aspects of project management. He
says:
This is the first book published in this country which
gives guidance to people who practise and wish to practise
as project managers in relation to construction and
engineering law. It is intended to, and does, provide a
thorough, comprehensive but practical guide to actual or
would-be project managers in the principal legal areas in
which they are likely to find themselves in the very real
world of managing projects.

I have absolutely no hesitation in recommending this

book not only to actual and would-be project managers but
also to legal and other construction professionals.
The book is available through the RICS bookshop priced
45 with a 10% discount for RICS members, or from
Butterworths website: www.butterworths.co.uk

New researcher
Judith Shephard joined the College Research Department in
August 2003. Following graduation from Reading
University in 1995 with a BSc(Hons) in Land Management,
Judith worked as a researcher at the University on projects
investigating mixed use development and the quality of
urban design. She has subsequently held positions at
FPDSavills, researching residential property markets, and
Property Market Analysis where she specialised in
undertaking bespoke consultancy projects for property
developers and investors. At CEM, Judith will be working
on the SUBR:IM project (Sustainable Urban Brownfields:
Integrated Management), part of a major new research
consortium funded by EPSRC (the Engineering and Physical
Sciences Research Council) investigating the role of the UK
development industry in brownfield regeneration.
More information about the SUBR:IM project can be
found at www.subrim.org.uk

CPD Study Pack update

Three new titles were published in June:

Changing the Home Buying Process

Health and Safety Risk Assessment

Party Walls The Law and the Surveyors Role

Twelve titles have been updated:
Asbestos the Issues

Asset Valuations Red Book Update 2003

CDM Regulations

Creating Accessible Environments

Dilapidations: An Introduction

IT and the Chartered Surveyor

Lease Renewals

Planning Permission How to get it

Project Management 2004

Rent Reviews

Valuation of Commercial Property for Secured Lending

VAT on Land and Buildings

67

NOTICES

Two other reports pending are:

Recent research at CEM

During the past 12 months CEM has had its most productive
period for research in terms of income and output. A number
of reports are in course of publication. Students of the
College can find copies of the full reports at the
Blackboard website and details will also be posted at
www.cem.ac.uk under Research, so its worth checking
these sites for the availability of new material.
The main reports to look out for over the next few
months include three reports for the RICS Project
Management Faculty:

68

Project Management and the Private Finance

Initiative explores the extent to which RICS project
managers are involved in PFI. The report is aimed at
raising awareness of PFI in the surveying profession, as
well as developing and expanding project management
skills and competencies.
Learning from other industries examines the scope for
project managers involved in construction and
development to learn from the knowledge and
experience of their counterparts in other industries.
Legal issues in project management examines the
areas in which project managers require legal
knowledge, provides guidance as to which areas are
important, and points to sources of relevant information.
This research informed production of the new book
Construction and Engineering Law: A Guide for Project
Managers, also reviewed in these Notices.

Lessons from UK PFI and Real Estate Partnerships:

drivers, barriers and critical success factors.
Commissioned by the Faculty for the Built Environment,
the research shows that the successes and difficulties
associated with PFI and real estate partnerships provide
valuable opportunities to learn from experience and
translate best practice into future projects.
Valuing for Right to Buy: a review of the valuation
process in sales of local authority housing to sitting
tenants, for the Office of the Deputy Prime Minister.
Represents the most comprehensive review of the RTB
valuation process ever undertaken, based on surveys of
all the main stakeholders, that is, local authorities,
council valuers, district valuers, council tenants and
purchasers. Data for over 20,000 RTB valuation cases
was also analysed.
Already published:

Mixed-use urban regeneration at Brindleyplace,

Birmingham and Gunwharf Quays, Portsmouth: an
assessment of the impact on local and national
economies (May 2003). The report, commissioned by the
British Property Federation, examines the local and
national economic impact of two major mixed-use
schemes in terms of tax revenue, household income,
business rates/council tax and jobs creation. A
regeneration balance sheet for each scheme is presented
in the context of government policy and other related
research.

NOTICES

CEM Graduation day

On 12 July 2003, 377 students graduated, including 20
prize-winners, from the following CEM courses:

Diploma in Construction
Diploma in Surveying
Postgraduate Diploma in Arbitration
Postgraduate Diploma in Facilities Management
RICS Postgraduate Diploma in Building Conservation
RICS Postgraduate Diploma in Project Investment
RICS Postgraduate Diploma in Project Management

Although many students are based overseas (particularly

in the Far East) and were unable to receive their awards in
person, a total of 103 students attended the ceremony in
Reading, including those from Bangkok, Czech Republic,
Cyprus, Germany, Guernsey, Hong Kong, Isle of Man,
Jersey, Mauritius and Qatar. Others travelled long distances
within the UK. Altogether around 350 people were there,
including students and their guests, and College staff and
their guests. The photograph shows a group of College
tutors suitably attired for the occasion. From left to right:
Pauline Makepeace, Sandra Lee, Harold Crowter, Graham
Hough, Gordon Fogg (adjusting his mortar board), Bill
McNeill and Tim Mealing.

69