Rising to vertical challenges

The draft London Plan clears the way for easier development on small sites in the capital by creating a presumption in favour of a range of infill development, with the target of increasing density and delivering more homes in London. One of the types of development that ought to become easier from a planning perspective is the construction of additional dwellings on the roofs of existing buildings. Research has already shown that up to 40,000 new homes could be built in zones 1 and 2 alone, simply by building up (Skyward, Knight Frank, 2017).  Despite the proposed presumption in favour of granting planning permission for appropriate rooftop developments and the capacity potential identified by Knight Frank, there are a range of obstacles in the way of a developer from a property law perspective.  Many of the issues discussed in these articles were argued in Francia Properties Ltd v Aristou & Ors [2017] L&TR [2016] PLCS 229. Although permission to appeal was granted to the Court of Appeal under the leapfrog provisions of the CPR, the appeal was withdrawn by the RTM company and lessees.  Feasibility Development on top of an existing building may not always be possible or viable. There are many technical issues to consider, such as whether the building has sufficient structural strength; sufficient servicing capacities; and a means of escape to comply with building regulations. There are also planning, finance and tax issues. These are some of the questions a developer will need to ask itself before embarking on a project. Who owns the roof and airspace? This may be an obvious question, but the answer is not always so obvious. The starting place is usually the lease of the flats occupying the current top floor of the building. In a block of flats, one would expect the roof to be retained by the landlord. It is a general rule that a freehold owner of land is presumed also to own the air space above its property. Absent an express or implied prohibition, the owner is entitled to use its retained property as he pleases, even where that will be detrimental to the interest of his lessee (see Hannon v 169 Queen’s Gate Ltd [2000] 1 EGLR 40). The developer ought to check whether there are any easements over the roof void that would be interfered with if the development were to take place. For instance, in some buildings the hot water tanks, television aerials or satellite equipment may be stored there. Granting a lease of the airspace of a roof, which is a common part, may make it liable to be acquired by qualifying tenants on a collective enfranchisement, thereby destroying the value to a prospective purchaser. Will the development be a breach of the covenant to repair the roof? Where the roof is retained by the landlord, it is likely that he will have covenanted to maintain and repair the same. In Devonshire Reid Properties v Trenaman [1997] 1 EGLR 45, it was held that the construction of a fifth flat on the roof of the building would place the lessor in breach of its obligation to repair the roof because “a covenant to repair, uphold and maintain or keep in good repair raises a duty not to destroy the demised premises and the pulling them down, wholly or partly, is a breach of such covenant”. That decision was not followed in Hannon, where the judge said: “It strikes me that the logic behind such a principle [not to destroy] is suspect and the principle is faintly absurd nowadays.” In any event, on the basis of first principle, whether the implied duty not to destroy is absolute must depend on the construction of the lease. Not every alteration of the premises amounts to a breach of the covenant to repair. Do the terms of the existing leases limit development? In Hannon there was no other provision in the lease that pointed towards limiting development and in fact there was an express term from which development seemed to be permitted. Devonshire Reid was distinguished on a number of grounds but the important point to take from these cases is that whether development is permitted by the terms of the lease will depend on the construction of the lease as a whole and may differ from case to case. Existing tenants may also argue that there is a letting scheme in place that prevents the construction of further flats on the building or estate. In H Waites Ltd v Hambledon Court Ltd [2014] EWHC 651 (Ch); [2014] 1 EGCR 119 the existing tenants of the estate unsuccessfully argued that the existence of a scheme implied a covenant against further development. Morgan J concluded that the existence of a scheme of covenants did not justify the court implying a restriction on the number of flats that may be constructed. Many leases include a clause permitting development. For example, a lease may except and reserve to the landlord “a right to build upon and to maintain repair, replace and renew any other part or parts of the Building and upon any adjoining land or buildings of the landlord in such manner as the landlord may think fit provided in the case of the Building that reasonable means of access to the [demised premises] is available at all times.” Are there freehold covenants preventing development? In suburban areas it is common for restrictive covenants to restrict building to a number of storeys. It will be necessary to consider whether a proposed development would breach any such freehold covenants; whether the covenant is enforceable and, if so, whether there are grounds for an application to discharge or modify the covenant under section 84(1) of the Law of Property Act 1925. This article is adapted from a seminar delivered to the Property Litigation Association with Jonathan Upton. Part two reviews potential roadblocks to development, such as the right of first refusal under the Landlord and Tenant Act 1987, extracting development value in the event of a collective enfranchisement and whether RTM companies can stop a development.