Placemaking: getting large-scale developments started

Delivering 1.5 million new homes over the next five years is the ambitious target set by the Government, but when coupled with its additional objective to adhere to the principles of sustainability and enhancing the environment, it can create a tension for developers. This is where the principles of placemaking can offer answers. Placemaking is about delivering sustainable, high quality, mixed-use developments (residential and commercial) which are community-led and which have safeguards in place post-development to ensure the developments thrive in the long term.

Principles of placemaking

In placemaking, there is a strong emphasis on delivering a mix of open-market and affordable residential properties across the site to create an inclusive community. Commercial buildings are also included because they provide employment opportunities and reduce the need for transport.

The use of community facilities encourages a vibrant social life for residents and should be designed to support healthy living (both physical and mental) by providing a stimulating and varied natural environment. From a sustainability perspective, green infrastructure networks and communal areas can also help enhance the natural environment, provide a biodiversity net gain and help reduce carbon emissions.

Fundamental to all placemaking is the implementation of an effective design control regime. The design and construction principles are often set out in a series of estate documents, typically including a building manual, design guidance and an estate masterplan. The design code will also set out the types of materials that can be used and the design detail to be incorporated into the development.

How to deliver a placemaking project

There are a number of ways to approach a large-scale placemaking development, and the most suitable approach will depend on the landowner’s financial position, available capital, expertise, risk appetite, and goals – both financial and otherwise. Ultimately, the landowner needs a clear vision from the outset of what they are trying to achieve; that vision should inform how they proceed. It is equally important to choose the right development partner – one who shares the estate’s visions and values.

Pre-development

The first question for landowners is what level of involvement they want: selling the site outright to a developer is a low-risk option that delivers a quick financial return, but doing so means the landowner may be foregoing a higher financial return by losing the ability to realise profits over a longer timeframe. Further, the landowner will lose any say in the delivery of the scheme, which could present reputational issues if the developer takes it in a direction which is inconsistent with the landowner’s views.

Where the landowner wants to sell, there are different ways of structuring the disposal which will suit different situations.

1. A build licence structure: here, the land is not transferred to the developer, but the developer is granted a licence to build. The landowner will then be directed to transfer built units to end-users by the developer. Typically, a landowner will receive a licence fee for the grant of the licence and a percentage of each sale. Although this option allows the landowner strong controls over the delivery of the development, which may be attractive, the developer’s key concern will be whether they have a sufficient interest in the land to obtain finance from a lender.
2. A freehold transfer: this can either be conditional (ie the developer only buys if reserved matters approval is granted by the local authority) or on an unconditional basis. Either way, the landowner should register a restriction against the developer’s title to the land to ensure the landowner’s design code and vison is adhered to. Typically, the landowner will receive a premium (potentially in staged payments) but no share of sale proceeds. This structure is often the developer’s funder’s preference.
3. A development lease: where the landowner grants the developer a lease, permitting them to develop the site, subject to the conditions of the lease. This is a halfway house between a freehold transfer and a build licence. Price is also flexible: usually a premium is paid on the grant of the lease, and the landowner and the developer then share the proceeds of the sales to end users in agreed proportions. Funders are comfortable with this arrangement, because the developer has a proprietary interest in the development site. The landowner can also exert a reasonable amount of control via their role as landlord.

Where, on the other hand, the landowner does not want to sell (perhaps because it is seeking greater control or a higher return) and would rather deliver the scheme together with a developer, there are a different set of options.

1. The parties could enter into a joint-venture arrangement, either using contractual arrangements (such as a collaboration or framework agreements) or incorporate a corporate body (typically a limited liability partnership) to document the relationship. Either way, it will be important to ensure that the parties are aligned in how they want to develop the site and have a shared ethos concerning finance and long-term management arrangements.
2. The landowner could also look to deliver the scheme in conjunction with a master developer, who would oversee the design, planning, funding, infrastructure provision and construction in accordance with the landowner’s vision. The master developer could also assist in determining the principles for the development and creating the building manual and design code.
3. Alternatively, the landowner could deliver the scheme in-house. Here, the landowner has no problem retaining control and the financial rewards could be much greater, but there are risks with deploying significant capital, especially where borrowing is involved. Demands on the landowner’s time and resource must also be factored in (and landowners need to be honest with themselves about whether they have sufficient expertise in-house).

Which option is right for a particular situation will be determined by a combination of drivers, including levels of control required, the phasing of the development, appetite for risk, the bargaining powers of the parties, and, crucially, the market.

Post-development

A core principle of placemaking is the long-term stewardship of the development. This falls into two main categories, both of which should be considered from the outset.

1. How the design is protected and promoted: this is supported through the use of a design and community code. This code will be based on the building manual and will provide a set of rules for residents making alterations to and maintaining their homes. The code may also include estate stipulations, which can be made to bind homeowners by direct covenants with the landowner. A management company or trust may also be set up to manage the development and it is usual for residents to be closely involved with this, to promote a sense of ownership and stewardship.
2. How the development is managed: in particular how services and works are provided, to preserve and enhance the communal areas. Thought must also be given to how consents and other matters under the design and community code are dealt with.

The need for houses is ever present, but the Government’s ambitious housebuilding targets (alongside their environmental and sustainability goals) present a real opportunity for large-scale development which puts placemaking and community at its heart.

This article is part of the Rural Estates Newsletter 2025, click here to read.

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

© Farrer & Co LLP, February 2025

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