Evolving schemes to reflect changing conditions

As the country continues to recover from the effects of the Covid-19 pandemic, many developers may now be considering how to change their projects to reflect an evolving real estate sector, whether as a direct result of the pandemic or due to the acceleration of existing underlying trends. Developers may be seeking to vary planning permissions due to uncertainty over the future market for office space and retail uses, or to reflect strong demand for build to rent and logistics. Whilst it will be key for developments to be able to adapt to reflect this changing environment, developers may face a number of challenges under the rules of the current planning system.

The issues faced by developers looking to amend or vary their schemes are discussed in our recent publication "Forearmed: A real estate disputes guide to likely trends in 2021 and beyond", and have also been the subject of our two recent webinars in conjunction with Landmark Chambers on varying planning permissions and overlapping planning permissions. What are the considerations that developers need to take into account, and what steps should be taken now to avoid or minimise potential problems?

Factors to consider

To respond to the rapidly changing economic climate, many development schemes need to adapt. Although a developer could apply for a new planning permission, this may not be desirable - submitting a new application has time and cost implications, and the relevant development policy and/or other material considerations may have moved on. It is often preferable therefore to vary existing planning permissions and section 106 agreements instead, but this may lead to challenges in practice.

• Varying planning permissions - There are restrictions on the use of section 96A and section 73 of the Town and Country Planning Act 1990 (the 1990 Act) to vary planning permissions - section 96A can only be used for non-material changes, and Finney v Welsh Ministers confirmed that section 73 can only be used to vary planning conditions, not the description of development. Some local planning authorities are willing to work with developers to find solutions to this, frequently combining a section 96A application with a subsequent section 73 application. However, this can be fraught with difficulty. Furthermore, where there are overlapping planning permissions for the same piece of land, which is not uncommon for major schemes, Hillside Parks Ltd v Snowdonia National Park Authority has confirmed that once one permission has been implemented, and development has been carried out which makes it impossible to complete development under another permission, that other permission is no longer valid. This can pose difficulties for developers of long term, complex, multi-phase development schemes when they look to vary their schemes. The combined effect of Finney and Hillside may mean that developers will be unable to achieve the flexibility they require using their existing planning permissions.
• Using permitted development rights - Developers wanting to avoid potential conflicts might consider taking advantage of permitted development rights to change track without the need either to vary an existing permission or apply for a new one. Unfortunately, it is not possible to rely on permitted development rights for a change of use before the existing use has been implemented. Whether the existing use has been implemented will depend on the facts in question, but a genuine use for more than a minimal period would be required. This may create practical difficulties if, for example, a developer has planning permission for a cinema as part of a larger mixed-use development, but the cinema use is no longer viable. This could result in a situation where the developer would be required either to implement a use it no longer wishes to pursue, or apply for a new planning permission for the whole development.
• New planning applications - Given the difficulties developers face attempting to vary existing planning permissions, they may have no alternative but to apply for new planning permissions. However, there may be challenges at the planning application stage because when planning authorities are considering new planning applications, many are continuing to apply policies adopted before the pandemic which do not take into account the current economic climate. There are real difficulties of anticipating with certainty what the short, medium and long term impacts of the pandemic will be, causing issues for both local planning authorities when updating policies and for developers when considering how best to adapt their projects.

Overall, developers seeking to maintain the viability of schemes, whether during development or for changes of use following completion, should seek to work with local planning authorities to adapt their projects at the earliest opportunity. However, although local planning authorities will usually work with developers to achieve this, there may be disagreements about how to make changes in practice or what changes are acceptable.

Steps to take now:

• Review existing planning permissions and section 106 agreements - what conditions or obligations might now be or could become onerous or impossible to comply with?
• Consider options available for amending planning permissions – is it possible to use section 96A, section 73 or a combination of the two?
• Discuss potential variations with the local planning authority as early as possible - what would they be prepared to agree to, and how can it best be achieved?
• Build flexibility into any variations agreed to existing planning permissions, and to new planning permissions.
• Resist detailed descriptions of development - look to put the description of development into conditions instead.

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