Legacy development by schools

Insight

31.01.2019

Where schools are promoting land near the school site for residential development, they are often keen to specify high-quality design and construction and to ensure that their standards are preserved for the future. 'Stewardship' is the watchword. A successful 'legacy development' depends upon a working partnership between the school and the developer. The school'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 or down-the-line community facilities. Schools 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 the school as landowner 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 landowner to retain design approval, indeed discretionary approval, often through a specific role for the landowner's architect. This role may be carried through to construction and works completion, at which stage (ideally) it should be the landowner's architect who certifies completion of the buildings and the public realm.
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 school'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.

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' and 'estate stipulations' (covenants) 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 estate 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 can arise with more intensive uses such as holiday lettings, taxi services and child care operations.

Which legal structure?

The school as landowner 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 school 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. 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 to issue and vary the code and the estate stipulations from time to time and to grant the consents under the code and estate stipulations.

The school will want to ensure that this role (and thus control) is retained by the school 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 estate stipulations.

The future 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 school as landowner 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 estate stipulations.

Legal structures for design control and estate covenants may involve a necessary balance of landowner and developer interests, but the evident success of now-established legacy schemes (and the failings of inappropriately regulated developments) endorses the fundamental importance of estate owner stewardship.

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