Four important developments for the housebuilding industry
12th October, 2016
Four important developments for the housebuilding industry have occurred over the past week.
Here we take a look at the Government’s new housing fund, changes to the registration of new housing sites at the Land Registry, the international measuring code and what a recent case involving short-term residential letting website “Airbnb” could mean for you.
Chancellor launches new home building funds
What is it?
Chancellor Philip Hammond and Communities Secretary Sajid Javid have unveiled plans aimed at getting 40,000 extra new homes built by 2020.
The Government will borrow £2 billion to support an “accelerated construction” scheme, which aims to get houses built on publicly-owned brownfield land available for swift development. This is aimed at encouraging new developers to build up to 15,000 homes in this parliament.
There will also be a £3 billion home building fund to provide loans to stimulate projects. This fund will release £1 billion of short term loans for small builders, custom builders and innovative developers to deliver 25,000 homes by 2020, while a further £2 billion of long term funding for infrastructure will be aimed at delivering up to 200,000 homes.
The Government is also set to publish a housing white paper later this year with further “significant” measures to help it achieve its target of a million new homes by 2020.
What does this mean for me?
In theory, this is good news for housebuilders of all sizes with the Government looking to help accelerate the pace of development.
However, the additional funding has been accompanied by threatening noises by the Government about making developers “release their stranglehold” over land and not to build up so-called land banks.
Housebuilders also face having to negotiate the current planning system – whilst decrying ‘nimbyism’ amongst the public, the Communities Secretary did not announce plans for any major changes in planning procedures.
Reforms to the Land Registry registration of new housing sites
What is it?
Everyone in the industry will be aware of the delays (often over 6 months) in registering new housing sites at the Land Registry.
Following representations from the Home Builders Federation, which argued that the current system causes unnecessary delays with knock-on effects to business, the Land Registry is to bring in a revised system which will improve the process for registering new housing sites.
From now on, housebuilders will be able to ‘red flag’ specific applications to register a new housing site. This will be recognised by all LR offices and will alert officials that a housing site is being registered and therefore the registration needs to be processed quickly.
At present, the HBF says housing sites are not identified at an early enough stage and so can suffer serious internal processing delays at the Land Registry.
As well as this new ‘red flag’ system, which is being introduced immediately, the Land Registry is also looking at several internal processing options and will have further new processes in place by the end of 2016/17.
What does this mean for me?
Many housebuilders have experienced delays with registering sites with the Land Registry, an experience which can then cause delays with plot sales and hence slow down the overall production of new homes.
Hopefully the new system will start to iron out some of these issues and streamline what is an important stage in the development of housing.
The Land Registry have asked developers to play their part by ensuring that any changes to plot numbers and layout are communicated to the Registry, saying that currently confusion over identifying what plots have been transferred, and whether they are within those for which Estate Plan Approval has been obtained – because only those can be registered – can result in weeks of delay and tie up a lot of Land Registry resource.
New International Property Measurement Standards for residential buildings
What is it?
Currently there is no uniform approach internationally to measure residential property.This can cause problems; the most obvious being that an owner or investor is misinformed about the amount of floor space that they are purchasing which can lead to disputes and ultimately costly litigation. Calculations regarding service charges and rent calculations can also be problematic.
To address this, new standards have been created by 18 experts from 11 different countries – the International Property Measurement Standards for residential buildings.
The most relevant points about the Standards are as follows:
- They cover the majority of conceivable sections of a residential property, definitions ranging from a ‘balcony’ to a ‘veranda’;
- It recommends that IPMS measurements should be supported by computer based drawings but if laser or tape measurements are used a reliance on scaling should not stand alone;
- The measurements and calculations should be in the unit adopted by the relevant country and a conversion factor will then be applied;
- When measuring is taking place, a degree of ‘tolerance’ should be used when taking into account the measuring equipment so as to give the most accurate results;
- Examples of coloured drawings can be cross referenced for ease of reference;
- Limited use areas need to be identified, for example if there are any limitations regarding height, light and area difference from internal dominant face.
What does this mean for me?
As the new standards are currently voluntary, there is no requirement for housebuilders to conform to them as yet.
However, the advantage of adopting the new standards is that they will initially operate as a conversion tool to provide greater market transparency and to aid cross market benchmarking. Also, it is anticipated that the new standards will be made mandatory in the future.
Airbnb and residential use covenants
What has happened?
The use of “Airbnb” and other similar websites are an increasingly popular way for residents to make money by letting a room in their house or flat for a short term as an alternative to hotel accommodation.
A recent Upper Tribunal decision (Iveta Nemcova v Fairfield Rents Limited) has, however, highlighted that such use could be in breach of a residential use clause in the lease.
In the case, a tenant had a 99 year lease of a flat with a covenant not to use it for any purpose other than as a private residence.
She let the flat out for about 90 days a year mainly to business visitors to London and advertised her flat on her own website and through a reservation system website.
The Upper Tribunal’s conclusion was that, based on the facts in this case, the property was not being used as a private residence and granting very short term lettings was in breach of the clause in the tenant’s lease.
What does this mean for me?
Leases of houses and flats to plot purchasers will typically include covenants restricting the use of the property.
It is possible that as a result of this recent judgment, housebuilders will be asked by potential buyers whether or not standard leases can be amended to allow “Airbnb”-type lettings of a property.
Therefore housebuilders should consider what their policy will be in this respect if such enquiries are made.
How can Ward Hadaway help?
For advice and information on any of the issues raised in this update, please get in touch.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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