Legacy Development

Rural estate owners are increasingly promoting mixed use developments to deliver vibrant communities with high quality buildings and public spaces. Stewardship is the watchword in both construction and estate management and there is growing evidence of its role in the success of these legacy projects – financial, social and (most simply) what is visible in terms of placemaking.

A successful legacy outcome depends upon a working partnership between promoters and developers. The promoter’s design brief will set the standard, but market factors may present challenges: build costs, materials and labour, house tenure types and significant capital costs, whether upfront  infrastructure (such as highways and services) or down-the-line community facilities (such as schools and leisure). Promoters may need to find a balance between firm stewardship and collaborative guidance to ensure that the principles of a high quality masterplan are not diluted.

Construction Period

For the construction period an estate promoter will want a robust development agreement to ensure that the outline concept in the masterplan evolves through to detailed planning in a way that is true to the project’s standards. It is important for the promoter to retain design approval, indeed discretionary approval, often through a specific role for the promoter’s architect. This role may be carried through to construction and works completion, at which
stage (importantly) it is the promoter’s architect who certifies completion of the buildings and the public realm. Approvals control will extend to matters such as modifications of the planning permission by section 73 applications and the ‘on site’ working drawings – it is this latter stage that may otherwise see inappropriate departures from the design scheme.

These principles require a firm stance in negotiations but there may be some ‘reassurance’ provisions such as:

• A statement as to a ‘Common Aspiration’ by reference to which both parties must act, for example: “the promotion of a development at the highest class and quality so as to enhance the estate owner’s reputation”. Clarity may be given by a reference to a set of Common Aspiration documents covering different design aspects, such as facades, street layouts, materials and landscaping. There may additionally be a reference to securing maximum realisable value and commercially viable objectives but with regard to the Common Aspiration.
• Reference of design disputes to determination by a responsible third party such as an architectural foundation or a trust body.
• Deemed approvals where there has been no response from the estate owner. 

However, it is fundamental to enforcement that the promoter’s architect will retain control over design, particularly on a multiphase development where appropriate delivery of the first phase is essential to set the standard and secure the returns (financially and socially) for later phases.

Estate Management Period

In the estate management period there are two particular elements:

• Protection and promotion of the estate design; and
• Management of the estate, particularly the provision of services and works.

For design protection and promotion, a ‘Design and Community Code’ (Code) and ‘Estate Stipulations’ or covenants (Stipulations) are important. The Code imposes the design and the works standards as achieved during the construction period and will be part of the legal title to the estate. The Stipulations contain a general obligation to comply with the Code, particularly in relation to alterations and necessary consents. The Stipulations also set out use and amenity regulations. Use stipulations are increasingly important with potentially more flexible use of buildings, some of which may not be fully aligned with project aspirations (particularly for an owner-occupied residential community). Principles of working from home and home businesses may be permitted, but on clear ‘no-nuisance’ terms. Issues arise with more intensive uses such as holiday lettings, taxi services and child care operations.

Which Legal Structure?

The estate promoter will want to establish a satisfactory legal structure for the Code and Stipulations. Traditionally, this has been by way of restrictive covenant provisions, but the legal community acknowledges that this regime is not entirely satisfactory and is bedevilled with technical issues such as:

• Whether the covenants bind or benefit land;
• Who may enforce and be enforced against; and
• Statutory rights to modify or discharge the covenants.

As long ago as 2008 the Law Commission indicated the “urgent need for reform” with a new category of land obligations being proposed, but there is little likelihood of change in the near term.

A promoter may wish to use a legal structure known as a ‘Building Scheme’ – a special term applied to estate developments. A properly constituted Building Scheme imposes a clear set of obligations (including the Code and Stipulations) which are enforceable by all owners against other owners. It is important for the scheme to have clarity on such details as:

• Identification of the relevant estate and the relevant obligations;
• All dwellings on the estate being within the scheme;
• All owners being entitled to enforce and being liable to be enforced against;
• The estate owner developing and disposing on the basis of the scheme; and
• Rights to vary the estate and modify the scheme.

However, Building Schemes also need well-considered provisions particularly as they are based on fairly limited principles from a 1908 legal case – a number of recent cases have challenged their operation where there is lack of clarity. 

One important consideration concerns the role of the entity entitled (a) to issue and vary the Code and the Stipulations from time to time and (b) to grant the consents under the Code and Stipulations.

Estate owners will want to ensure that this role (and thus control) is retained by the estate until such time as is appropriate for handover to a responsible trust or management body. The concern is to ensure no dilution of the standards in the Code and the Stipulations.

The management of the estate, and particularly the provision of services and works, is a related concern. Generally, a management company will be set up to hold and manage the public realm, although it will often contract out responsibilities to a local management firm. Again, a key issue is the extent to which the estate promoter retains control or involvement, for example through a ‘special A share’ which may give rights to promote or to block matters. The management company, and indeed its constituent directors, are important because of their leading role in securing the quality of commissioned services and enforcing the provisions of the Code and the Stipulations.

Legal structures for design control and estate covenants may involve a necessary balance of promoter and developer interests but the evident success of nowestablished legacy schemes (and the failings of inappropriately regulated developments) endorse the fundamental importance of estate owner stewardship.

If you require further information about anything covered in this briefing note, please contact Charles Anderson, or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, January 2019