BUILT ENVIRONMENT APRIL 2019 ISSUE 5
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BUILT ENVIRONMENT
APRIL 2019 ISSUE 5
Welcome
We are delighted to introduce our fifth issue of Built Environment Insights, our
biannual publication in which we cover key topical issues for the Built Environment
industry. In this edition we explore the major shifts in UK tax policy and rules and
what this means for new and existing structures for overseas investors, in Australia
we explore the increased demand of short-stay letting and how statutory regulation is
catching up and how the UK’s Built Environment industry is responding to the impact
of climate change in 2019.
We hope you find this edition useful and informative. If you would like to discuss
any of the topics and issues raised in this edition, please contact your usual Ashurst
contact or the authors of the articles.
David Jones Diane Skapinker Grant Rowlands
Partner, Real Estate Partner, Real Estate Partner, Real Estate
Industry Lead EMEA Industry Co-Lead APAC Industry Co-Lead APAC
T +44 20 7859 1983 T +61 2 9258 6279 T +61 3 9679 3473
david.jones@ashurst.com diane.skapinker@ashurst.com grant.rowlands@ashurst.com
OVERVIEW
4 Resilient buildings
Adapting to the changing climate
uk
There is an increasing recognition of the importance of the
impact of the environment on our buildings and infrastructure
and the need for mitigation and adaptation. Recently this has
been acknowledged in the 2018 Budget, the Royal Institute of
Chartered Surveyors guidance note “Environmental risks and
global real estate” and numerous reports prepared for the
Government. Investors and developers should consider the
potential environmental risks of investing in real estate assets
that may be susceptible to environmental risks, and the potential
benefits of investing in sustainable and resilient buildings.
10 Restricting short-stay letting
in residential developments
Australia
Not as easy as you might think
This article looks more closely at the problems of short-stay
letting and proposes solutions which strike a balance between
a person’s right to deal with their property, but also protects the
interests of neighbours to avoid the problems associated with
short-stay letting.
2 • Built Environment Insights • Issue 5 • April 2019
14 Detoxifying the Planning Process
REVOKING HAZARDOUS SUBSTANCES CONSENTS
UK
This article sets out the background of the hazardous
substances regime and its interface with the land-use planning
regime. This article explains the procedural requirements for
revoking hazardous substances consents and provides practical
pointers for those involved on projects where a revocation order
is required.
20 Purpose-Built Student Accommodation
The Outlook
UK
This article looks at the UK purpose-built student
accommodation sector. Embraced by students, universities and
investors alike, PBSA has been a success story so far. We consider
the current market and some of the factors that will determine
how it evolves in the future.
26 Recent UK Real Estate Tax Changes
Thoughts on Impacts on inbound Investment Structures
GLOBAL
We have seen very material amounts of investment over the
last few years into the UK real estate market from overseas,
particularly Asian, investors. Some major shifts in UK tax policy
and rules mean that both new and existing structures need to
be considered afresh.
Built Environment Insights • Issue 5 • April 2019 • 3
UK
Resilient buildings
Adapting to the changing climate
By Jacqui O’Keeffe and Joanna Fox
Resilient buildings Adapting to change
As the Built Environment and climate change Amid the political turmoil of 2018,
sector is particularly In this article we look at how the several reports were published
likely impact of climate change and warning of the impact of our
vulnerable to climate change related policy changes may impact changing climate, one of the
risk, it is likely to feature in the the Built Environment sector. It is greatest challenges we face. At the
adaptation and mitigation anticipated that such impacts will United Nation’s Climate Change
measures adopted globally increase both in frequency and Conference in December, Sir David
intensity as a result of changes Attenborough warned “If we don’t
by the parties to the Paris such as temperature and flooding. take action the collapse of our
Agreement, as well as the Climate change risk is already civilisations and the extinction of
financial instruments that will attracting considerable interest from much of the natural world is on the
underpin the unprecedented mortgage and insurance markets. horizon”. Guidelines were agreed at
It is also likely that this issue will the Conference to implement the
action required. We take a increasingly impact investment historic 2015 Paris Agreement, which
look at how the UK’s response decisions and the value of real estate pledged to keep the global average
is shaping up to the potential portfolios. temperature rise below 2 degrees
impacts.
Celsius compared to pre-industrial
levels, and to drive efforts to limit
the increase to 1.5 degrees Celsius.
The message is clear: immediate
action is required, and the window
in which action to avoid the
predicted devastating consequences
of the global average rise in
temperature is closing rapidly. As
the Built Environment sector is
particularly vulnerable to climate
change risk, it is likely to feature
prominently in both the adaptation
and mitigation measures adopted
globally by the parties to the
Paris Agreement and the financial
instruments that will underpin the
unprecedented action required. In
this article we take a look at how the
UK’s response is shaping up.
Global change
It is estimated that 571 European
cities will be affected by droughts,
heat-waves and floods more severely
than previously thought. The Built
Environment contributes to this
accounting for an estimated 40%
of global energy use, an estimated
30% of energy-related greenhouse
gas emissions and a large share of
waste generation and use of natural
resources. The report published
by the Intergovernmental Panel on
Climate Change in October 2018
considered the impact of global
warming of 1.5 degrees Celsius
and the mitigation and adaption
measures that will need to be
taken to limit warming to this level.
Electrification, energy efficiency and
renewable energy are examples
of the adaptation and mitigation
measures required to reduce energy
usage and decarbonise energy
supply in the Built Environment
sector to meet the goals set out in
the Paris Agreement. The report
also recommends additional
changes needed in urban areas,
including the “demotorisation”
and “decarbonisation” of transport
through the expansion of electric
Built Environment Insights • Issue 5 • April 2019 • 5
vehicles and greater use of energy- and actions aligned with these risks. RICs guidance
efficient appliances. In respect of flooding, objectives In October, the Royal Institute
include making sure that decisions of Chartered Surveyors (RICS)
UK adaptation plans on land use, including development, published a new guidance note
The UK’s second National Adaptation reflect the level of current and on environmental risks and global
Programme (the UK NAP) published future flood risk, and boosting the real estate, which considers the
in July sets out how the Government long-term resilience of homes, implications for how real estate
intends to deal with the most businesses and infrastructure. In is bought, sold, used and valued.
urgent risks from climate change respect of increased temperatures, The guidance acknowledges that
over the next five years, which the UK NAP sets out actions that part of the reason for the extensive
may include increased instances will be taken to deliver more, better growth in environmental law is
of flooding; public health risks quality and well-maintained local an increasing awareness of how
from increased temperatures; green infrastructure, to adapt climate change is impacting the
damage to natural ecosystems and health systems, and work with economy, including the Built
biodiversity; disruption to domestic infrastructure operators to outline Environment sector: “Global market
food production and trade; impacts risks posed to their productivity. The participants and their lending
on water and energy supplies; and Government has stated that these partners now demand to know more
new and emerging pests, diseases steps, and more, will be taken over about the factors that could affect
and invasions by non-native species. the next five years to strengthen the value, particularly environmental
Resilient buildings represent one UK’s resilience to climate change. considerations”. The guidance sets
aspect of the programme; air quality We may start to see these out good practice for RICS members
and transportation issues and international and national and firms that are regulated by RICS.
energy policy also feature. The UK commitments filtering through into RICS guidance can be persuasive
NAP sets out a number of objectives real estate transactions. in legal proceedings, and case
6 • Built Environment Insights • Issue 5 • April 2019
law has established that it can
be determinative of constructive
knowledge about identified risks and
recommended mitigation measures.
Committee on
Climate Change
The UK’s Committee on Climate
Change (CCC) is an independent,
statutory body established under
the Climate Change Act 2008 which
reports to Parliament on the UK’s
progress with reducing greenhouse
gas emissions and preparing
for climate change. The CCC is
committed to publishing progress
reports, and the most recent report,
published in June, identifies that,
although the UK is making progress
in some areas, emissions from
buildings actually increased in 2017
on a temperature-adjusted basis.
However, the CCC considers that
there is considerable scope to reduce
emissions by improving resource
efficiency during the construction of
buildings and infrastructure. New
and existing buildings are estimated
to account for around one-third of
the UK’s greenhouse gas emissions
and the Prime Minister pledged in
May 2018 to halve energy usage of
new buildings by 2030. To meet
these targets, the UK Government
is looking at cost-efficient ways to
make all sectors of the economy
more climate-friendly and less
energy-consuming. The CCC is
also calling for tougher long-
term standards for construction
emissions, while driving consumer
demand, innovation and cost
reduction. These standards may
require retrofitting measures.
New reporting
requirements
The Government considers that
measuring and reporting energy
use and emissions can help to
drive improvements in energy
efficiency and financial savings
Built Environment Insights • Issue 5 • April 2019 • 7
for organisations. A statutory consultation on how prepared the to businesses and households each
instrument will come into force on 1 construction industry is to adapt to year. The effects can include direct
April 2019 introducing new reporting a new approach to building, and the and indirect physical damage to
requirements for large unquoted Government is currently tendering building structure, resulting in
companies and limited liability a £1.4 million three-year research business interruption and disruption
partnerships to annually report on project to address the drivers, to supplies and services.
emissions, energy consumption and barriers and challenges of new low- In the 2018 Budget, the
energy efficiency action. carbon homes. Chancellor announced a £13 million
fund to tackle risks from floods and
Sustainable Flood and temperature climate change. An increased risk of
construction materials risk: planning, policy and flooding, sink holes and subsidence
There is also increasing recognition insurance will impact on the ability to obtain
of the importance of materials and One of the objectives of the mortgages, and insurance premiums
construction methods in real estate National Planning Policy Framework may increase in response to climate
assets to meet decarbonisation (NPPF) includes the protection change pressures.
goals and develop sustainable, and enhancement of the built Although investors and developers
resilient buildings. environment through adapting to generally rely on insurance to
The Government considers that climate change. The NPPF aims protect against flood risk, given the
new methods in construction to achieve this by improving the increased susceptibility of buildings
may help with the construction of resilience of buildings, for example to flooding and foreseeability of the
new energy efficient homes more by taking account of flood risk and risk, the ability to insure real estate
quickly and cheaply. HM Treasury the risk of overheating. Loss and interests against such risks is not
and the Infrastructure and Projects damage caused by flooding results in guaranteed. Insurability concerns
Authority have recently launched a billions of pounds worth of damage may also adversely impact on the
8 • Built Environment Insights • Issue 5 • April 2019
ability to secure financing. do not change, there is a risk costly challenges such as climate change”
Increasing the resilience of remedial works will be required will be published in spring 2020
buildings to rising temperatures as heatwave risk intensifies. The by the National Infrastructure
is also a significant challenge. The Government has stated that new Commission. This report will look
Environment Audit Committee homes will be built in a way that at how resilience can be assessed
(EAC) considers that, at current minimises overheating, but does not and improved, including through
temperatures, one in five homes consider overheating in the wider better design and the application of
in the UK overheat. As a result, built environment. new technologies. In the meantime,
buildings often rely on air This is likely to be a key policy investors and developers should
conditioning units, which add to issue and we may see building consider the risk of investing in
both air pollution and greenhouse regulations which require potential real estate assets that may require
gas emissions and increase energy overheating to be mitigated. The urgent adaptation at a considerable
consumption. The Government has effects of overheating can be cost, as well as the potential benefits
recently acknowledged that since mitigated by construction materials, of investing in sustainable and
2015 it has been aware that all new considering ventilation and shading, resilient buildings.
builds are prone to overheating. and investing in new technologies
The NPPF considers that the risk of to reduce interior temperatures
overheating should be examined, and the consequential need for air
but there are currently no building conditioning.
regulations in place to prevent
overheating. Improving the resilience Jacqui O’Keeffe
Consultant, London
Members of Parliament are of the Built Environment
T +44 (0) 7859 3925
particularly concerned about the sector jacqui.okeeffe@ashurst.com
effects of overheating on real estate In the 2018 Budget, the Chancellor
assets such as hospitals and care announced that a new study Joanna Fox
Solicitor, London
homes, and the CCC and the EAC are on improving the resilience of
T +44 (0)20 7859 3725
pushing for policy changes. The EAC UK infrastructure “in light of joanna.fox@ashurst.com
argues that, if building regulations technological advances and future
Built Environment Insights • Issue 5 • April 2019 • 9
AUSTRALIA
Australia
Restricting short-stay letting
in residential developments
Not as easy as you might think
by Jason Cornwall-Jones
Online platforms such as AirBnB hotels, as hotel businesses tend to
The global popularity of and Stayz dominate the short- pay more by way of taxes, OH&S
stay market. The accessibility compliance, insurance and other
private short-stay letting as
of short-stay letting may be a overheads. Owner-occupiers and
an alternative to booking welcome development in many long-term tenants of apartments
hotel rooms has increased circumstances. For example, short- and residential units also often
stay probably has a role in smaller object to having an ever-changing
significantly in recent
holiday locations with insufficient array of temporary neighbours.
times. hotel accommodation, or heritage Statutory regulation of short-stay
areas which are not suitable for letting is in its infancy in many cities,
hotel development. However, short- and hasn’t really caught up with
stay in CBD residential apartment short-stay. Principles relating to
blocks can be more problematic. the inviolability of private property
Private apartments being used as a continue to run strong – if someone
surrogate for “regular” hotel rooms wants to let their house for the
creates an unfair playing field for weekend, why shouldn’t they?Perhaps because the principle of a apartments/homes and 8,116 private communal areas caused by short-
“person’s home being their castle” rooms were listed as available for stay tenants became significant
developed in an age before 50 story short-stay in 2018. enough to warrant the installation
apartment blocks, all-night parties Apartment owner-occupiers of fingerprint locks in communal
and heavy duty sub-woofers. and long-term tenants have voiced areas. Newspapers in Melbourne
In the absence of adequate concerns in respect of short-stay have reported residents complaining
statutory regulation of short-stay letting in their buildings. These of mess, theft, loud parties, damage
letting in Melbourne, Australia, concerns include fears for safety and to common property and other
Ashurst was recently instructed by security, as well as apprehensions disruption. Such incidences are not
developer Capital Alliance Investment of damage to common property restricted to Australia. An English
Group to devise a creative solution (pools and gyms) and interference newspaper labelled short-stay
using existing legal principles to with amenity. Mohan Du, Founder apartments in one Central London
cover the shortcomings in the and Chief Executive of Ashurst apartment block as “pop-up brothels”
existing statutory regime – more on client Capital Alliance Investment – with apartments being rented on a
this later. Group, commented that “having daily basis by local sex-workers. There
unsanctioned ‘quasi-hotels’ operating were also reports of drug-use and
The problem of short- out of residential developments is loitering. The extent to which these
stay letting in apartment unsafe and undesirable because the problems are attributable solely
buildings buildings are not designed for it and it to short-stay letting is hard to say.
An increasing number of residences exposes long-term residents to unruly Nevertheless, it is clear that short-
are available for short-stay letting in behaviour one would not expect in stay letting in these circumstances is
many cities. In Melbourne, Australia, and around their homes”. not helpful.
according to independent data In one central Melbourne
tool Inside AirBnB, 14,379 entire apartment building, the damage to
Built Environment Insights • Issue 5 • April 2019 • 11Traditional solutions On the other hand, in Byrne v essentially involved using a
to short-stay letting in Owners of Ceresa River Apartments traditional legal concept (a
apartment buildings Strata Plan 55597 5, the Western restrictive covenant) in a novel way.
The “traditional” solution for Australia Supreme Court held that In particular, we included in the
restricting short-stay letting in the Owners Corporation could plan of subdivision a restrictive
apartment buildings has been to reasonably restrict use by way of covenant preventing short-stay
include restrictions in the owners by-laws because that was consistent letting in favour of the owners
corporation rules prohibiting with the relevant statute.6 The United corporation on the title to each
short-stay letting. However, recent Kingdom Privy Council adopted the unit in development. The restrictive
Australian case law has called into same approach in O’Connor (Senior) covenant runs with the land, is
question the enforceability of such and others v The Proprietors, Strata apparent from a search of the title,
rules. Plan No. 51.7 The case was concerned and is relatively easy to put in place
In Owners Corp PS 501391P v with by-laws in the Turks and Caicos – it is a simple addition to the plan
Balcombe1, the Supreme Court Islands. The Privy Council held that of subdivision. For good measure, we
of Victoria held that the Owners the relevant legislation did not also included a contractual restriction
Corporation could not prohibit prevent reasonable restrictions on in the contract for sale, and we
short-stay letting. The rule passed use being made. Interestingly, the included a prohibition in the owners
by the Owners Corporation by legislation under consideration in corporation rules (despite current
special resolution, was held to be O’Connor was modelled on the NSW questions about the enforceability
outside the scope of the relevant strata legislation. of prohibitions in the owners
legislation.2 Similarly, the NSW Civil corporation rules, the law is moving
and Administrative Tribunal (NCAT) Less traditional swiftly in this space). Any concerns
in Estens v Owners Corp SP 11825 held approaches that such measure might impact the
that a by-law passed by the Owners Taking into account the problems
Corporation, designed to exclude with enforcing short-stay restrictions 1. [2016] VSC 384.
2. Subdivision Act 1988 (Vic); Owners
short-stay letting, was invalid.3 NCAT in owners corporations rules, Capital Corporation Act 2006 (Vic).
held that short-stay letting via AirBnB Alliance recently asked Ashurst to 3. [2017] NSWCATCD 63 (6 July 2017).
4. Strata Schemes Management Act 2015
is a devolution of a lot by way of a consider a more effective restriction (NSW) s 139(2).
lease. As a result, the rule was invalid for their Docklands and Southbank 5. (2017) 51 WAR 304.
6. That is, the Strata Titles Act 1985 (WA).
for being inconsistent with the Developments in Melbourne. 7. [2017] UKPC 45 (21 December 2017).
applicable law. 4 The solution that we designed 8. Owners Corporations Amendment (Short-
stay Accommodation) Act 2018 (Vic).
12 • Built Environment Insights • Issue 5 • April 2019marketability of the apartments have a civil penalty. The applicant has the unless the governing Council
been unfounded – in fact, quite the burden of providing evidence of the restricted it (to no less than 180 days
opposite. Mohan Du notes that these conduct and the harm it caused. per year).
restrictions have received positive The Victorian framework does The proposed NSW planning
responses from buyers: “what we had not enable owners corporations to law amendment aligns with the
not expected was the level of support prohibit or restrict short-stay letting. approach taken in England. Short-
and commendation from owner- Rather, action must be taken in term renting in London is permitted
occupiers who noted that short-stay VCAT each time specified conduct for up to 90 nights in a calendar
accommodation next door to their occurs. This may not be practical year. However, we understand
principal place of residence was one of – particularly where there are these restrictions have been
their number one concerns”. large volumes of short-stay letting difficult to enforce. Many owner-
arrangements in a building. occupiers have complained of illegal
Now the law The NSW Government has also arrangements in contravention of
needs to catch-up recently passed to two key pieces the planning laws. It seems that
The device described above is of legislation, which have not such restrictions are ineffective at
appropriate for new developments, yet commenced. The legislation managing arrangements in inner city
but would not be suitable for authorises the declaration of a Code apartments.
existing buildings. This means the of Conduct. The Code of Conduct Developing a regime which strikes
law need to catch-up and fill the gap. will establish a complaints system, a balance between respecting a
Australian legislatures now appear appoint independent adjudicators person’s right to deal with their
to be alive to the issue and are better and create an exclusion register. property, but also protects the
regulating short-stay letting. In the The Code will entail a “2 strikes legitimate interests of neighbours to
last year, the Victorian Government and you’re out” policy. Additionally, avoid the problems associated with
passed laws regulating short-stay the legislation empowers owners short-stay letting, is clearly not easy.
letting.8 Upon the occurrence corporations to pass by-laws to We suggest the recent changes in
of certain conduct, in buildings prohibit short-term letting upon a 75 Victoria and NSW should be closely
managed by owners corporations, per cent majority vote – but only in monitored to see what works, and
applications may be made to the lots that are not the principal place of what does not work.
Victorian Civil and Administrative residence of the host.
Tribunal (VCAT). The relevant conduct Changes to the NSW planning
includes that which causes excessive laws have also been proposed. The
noise, hazards, interference with amendment would restrict short-
the use of common property, or stay letting in Greater Sydney to 180 Jason Cornwall-Jones
damage to common property or a lot. days per year, where the host is not Partner
VCAT may make a prohibition order, present. Short-stay letting in all other T +61 3 9679 3422
jason.cornwall-jones@ashurst.com
compensation order, or an order for areas of NSW would not be restricted,
Built Environment Insights • Issue 5 • April 2019 • 13UK
Detoxifying the
planning process
Revoking hazardous substances consents
by Charlie Reid
Background to reconcile different standards of
When redeveloping former The hazardous substances regime control over industrial activities
hazardous installations the need ensures that necessary measures within the EU, led the European
to remediate the land itself are taken to prevent major accidents Commission to propose a Directive
and limit their consequences to on the control of major industrial
is apparent but what is often
people and the environment. The accident hazards. The original
overlooked is the need to clean- regime originates from a number Seveso Directive was adopted in
up the consenting position. Sites of major incidents in Europe in the 1982; it has been amended over time
that once housed hazardous 1970s, the most significant of which and the current iteration, Seveso III,
substances will have needed took place in Seveso, Italy, in 1976, was adopted in 2012.
hazardous substances consents where the accidental production and The objectives of the Directive are
release of a dioxin as an unwanted achieved through two main areas: (1)
(“HSCs”) and these can remain
by-product from a runaway land use planning requirements and
a barrier to development even if chemical reaction led to widespread (2) health and safety measures. In
they are in effect redundant. This contamination. Such incidents, and England, the former is implemented
article considers the practicalities an acknowledgement of the need through the Planning (Hazardous
of revoking HSCs within the
context of the planning system’s
drive to increase housing supply.Substances) Act 1990 and the the activities being carried out or on any planning permission.
Planning (Hazardous Substances) from the substances present on the
Regulations 2015 and the latter site. A CD is divided into three zones Why is it an issue?
is delivered principally through (inner, middle and outer) which Although the restrictions on
the Control of Major Hazards define the levels of likely risk or harm developing around hazardous
Regulations 2015 (“COMAH”). This to individuals (including businesses) installations are understandable and
article focuses only on the land use within each zone with risks and necessary, the potential for conflict
planning aspects in England. consequences decreasing from inner between the existence of an HSC
The process established by the to outer zones. and a local authority’s planning
Planning (Hazardous Substances) When a HSC is granted, the CD priorities is clear. The housing crisis
Act 1990 (the “Act”) regulates the associated with it is also fixed. This currently facing the UK exacerbates
storage and use of hazardous then interfaces with the land-use this problem. In the drive to increase
substances by making a HSC a planning regime both at plan- land supply for new homes, the
prerequisite to storing hazardous making and decision-taking levels. spotlight is increasingly falling on
substances on sites in controlled Local Planning Authorities should brownfield and former industrial
quantities. HSCs therefore provide know the location of hazardous land in our cities; even sites that
control over the presence of installations as they will have been once housed hazardous installations
hazardous substances whether notified of any relevant CDs by the now provide opportunities for
or not an associated planning COMAH competent authority. When residential, employment and
permission is required for the taking public safety into account in community uses to be developed.
development of a hazardous planning decisions and formulating Indeed, the Government’s Housing
installation. The authority local plans, the Local Planning White Paper (February 2017) and
responsible for granting HSCs, the Authority will need to take account subsequent NPPF (Feb 2019),
Hazardous Substances Authority, of the total number of people that alongside the Mayor of London’s
is usually the relevant local council will be present in the CDs as a result Housing Strategy (May 2018) and
and often this is the same entity of development coming forward. emerging draft London Plan, all seek
as the Local Planning Authority. So, for example, if a planning to encourage the productive re-use
Where this is the case, it needs to application is submitted which falls of brownfield land; so much so that
be remembered that the authority’s within a CD (for the redevelopment the NPPF now requires planning
planning and hazardous substances of the major hazard site itself or policies and decisions to “give
functions are related but separate. within its vicinity) the Local Planning substantial weight to the value of
Authority must consult with the using suitable brownfield land within
Why is this relevant? HSE and take its advice into account settlements for homes and other
When a HSC application is when determining the application. identified needs” 2.
considered, an assessment is made The HSE will present its advice in While the policy paper trail is clear
as to risks and likely effects of one of two ways; it will either “advise to see, it won’t by itself override
major accidents occurring at the against” or “not advise against” the paper trail left over from a
installation. The decision as to the grant of planning permission, site’s industrial past. The problem
whether the level of risk is tolerable taking into account the nature, size is particularly acute where a HSC
for the surrounding community and characteristics of the proposed legally subsists but is redundant in
and environment is made by the development and its location practice (disused urban gas holder
Hazardous Substances Authority. within the CD and proximity to the sites where natural gas is no longer
However, the HSE1, as the COMAH hazardous installation. Although stored in controlled quantities are
competent authority and statutory the HSE’s role is advisory only, a good example). This is because
consultee on HSC applications, will it is unusual for Local Planning until an HSC is formally revoked, the
advise the Hazardous Substances Authorities to go against HSE advice; CDs remain in place and are likely
Authority as to the nature and where they do, the HSE has the
1. The COMAH competent authority for most
severity of risk. The HSE sets a power to request that the Secretary cases is the Health and Safety Executive
consultation distance (“CD”) around of State (“SoS”) calls in the planning and Environment Agency, acting jointly
and for nuclear sites the Office of Nuclear
major hazard sites following the risk application. The HSE will also advise Regulation and the Environment Agency,
assessment, being the area which the Local Planning Authority on acting jointly.
2. NPPF 2018 paragraph 118(c)
the HSE considers at risk from either conditions which may be imposed
Built Environment Insights • Issue 5 • April 2019 • 15to still apply. This can lead to an out This issue could also become reintroduced to the site. The of date “paper trail” that acts as a increasingly tactical given the solution is usually the imposition barrier to development, a political direction that planning policy is of a planning condition restricting lever and commercial bargaining taking. Policy H5 of Sadiq Khan’s occupation of the whole or chip even when the absence of draft London Plan makes plain part of the development unless hazardous substances and benefits that the Mayor expects residential and until the HSC concerned is of redevelopment are plain to see. proposals on industrial land formally revoked. This can be a The following problems can arise: to deliver at least 50 per cent pragmatic approach to securing 1. An unrevoked HSC may contribute affordable housing where the the grant of planning permission, to a site not being released scheme would result in a net loss especially in circumstances where from an industrial planning of industrial capacity. A situation the developer has a contractual policy designation and/or not where a local authority supports relationship with the HSC holder. allocated for housing and other redevelopment in principal but However, it can store up problems development. This can result tactically seeks to retain an where the HSC holder is a third in substantial cost and delay for industrial allocation in order to party or adjoining landowner. In developers who may have to wait secure greater upfront affordable either case, it still requires the for a local plan review to lobby for housing and/or more stringent revocation of the HSC for the a change in policy or, alternatively, reviews of financial viability is not development to be de-risked prepare and consult on a planning unforeseeable. and resource and effort on the brief, masterplan or similar to win 2. The HSE “advises against” the developer’s part to achieve this. support from the Local Planning grant of planning permission 3. The more extreme outcome is a Authority. It can also results even where the Local Planning request by the HSE for the SoS in planning applications for Authority is supportive. This is a to call-in a planning application redevelopment being advertised fairly regular occurrence on the following the Local Planning as departures from the local plan basis that unless the relevant Authority’s resolution to grant which increases call-in risk and HSC is revoked, hazardous planning permission. Although is another hook for objectors. substances could in theory be not a frequent occurrence, 16 • Built Environment Insights • Issue 5 • April 2019
the situation is not unheard granted planning permission irrelevant. This can result in sites
of. This precise situation arose at a local level but was subject not being properly assessed
at the former Ram Brewery in to a condition preventing in Environmental Impact
Wandsworth Town Centre in occupation of various blocks Assessments, the HSE not being
2010, where the density of part until the relevant HSC had been properly engaged at the pre-
of the proposed development fully revoked. The condition was application stage and restrictive
(two residential towers) within imposed notwithstanding written conditions subsequently coming
the inner and middle zones assurances from the HSC holder as a surprise and development
of the CD of a neighbouring that it intended to decommission programmes overlooking the
gasholder resulted in the the gasholder and relinquish the time and steps required to revoke
calling-in and subsequent refusal HSC in the near future. an HSC. In a worst case, it can
of the application by the SoS 4. As the Ram Brewery example also result in missed contractual
notwithstanding a resolution demonstrates, out of date HSC’s opportunities.
to grant planning permission can restrict development both
being made by the local planning on site and more widely. This What can be done?
authority. One of the reasons for can lead to a concentration of The Government’s guidance
refusal was the possibility of a power in hands of HSC holder acknowledges the risk that
major explosion at the gasholder; who can frustrate the ambitions redundant HSCs pose to
although the risk of a major of neighbouring landowners development:
explosion was considered low it and developers as well as Local “Hazardous substances authorities
was not insignificant. A revised Planning Authorities. should be proactive about revoking
scheme with recalibrated bulk 5. Often the HSC is simply consents that are no longer required.
and massing was subsequently forgotten or assumed to be Operators are required to inform
the COMAH competent authority in
advance of permanently closing or
decommissioning a COMAH site. The
competent authority will then notify
the hazardous substances authority
to allow for the revocation of the
hazardous substances consent.”
However, in reality, there is little
evidence of this proactivity, even
where a site is de-notified under
COMAH. Although revocation
powers sit with the Hazardous
Substances Authority it will often
not invoke them without first
receiving a request to do so from the
HSC holder.
This can be addressed where a
developer is proposing to develop
the hazardous installation itself
by dealing with it contractually
to oblige the holder of the HSC to
revoke it.
The issue is less straightforward
where the HSC benefits third party
land. Where a deal cannot be struck
with the HSC holder it may be
necessary to see if the Hazardous
Substances Authority can apply
Built Environment Insights • Issue 5 • April 2019 • 17leverage. Where this is not possible Secretary of State. The confirmation and simultaneously serves notice
a design scheme design may need process is handled by National on landowners (and people in
to be explored which minimises the Planning Casework Unit (“NPCU”) control of the land) and affected
impact of any potential occupation in Birmingham on behalf of the parties (this is a very limited
restrictions that could be imposed. Secretary of State. list and does not comprise the
The Act provides very little detail general public and neighbours
How do you revoke a HSC? as to the procedural requirements or other consultees). The notice
In simple terms the Hazardous for making and confirming a should advise recipients to direct
Substances Authority makes a revocation order. In truth, the objections to the NPCU. The NCPU
revocation order and the Secretary process is not complicated and the recommends avoiding any wider
of State confirms it, following key steps can be summarised as consultation as it is not strictly
procedures similar to those used to follows: required and can cause confusion
stop up highways. 1. The Hazardous Substances and delay as an authority will need
The powers for Hazardous Authority “makes” the revocation to respond to any representations
Substances Authorities to “make” order, which means that they seal it receives.
revocation orders are contained in and date the relevant document. 3. The people on whom notice is
sections 14(1) and 14(2) of the Act: 2. The authority sends the made served then have 28 days to serve
1. section 14(1) contains a order to the SoS for confirmation objections on the SoS at the NPCU.
general power and permits a
revocation order to be made
if the Hazardous Substances
Authority considers it expedient
to do so having regard to
material considerations; and
2. section 14(2), enables a
Hazardous Substances
Authority to make a revocation
order if it appears to them that
a prescribed scenario has arisen,
namely:
• there has been a material
change of use of land to which
the HSC relates;
• planning permission has been
granted for development which
would involve a material change
of use of the land affected by
the HSC and the development
to which the permission or
development consent related
has been commenced; or
• the hazardous substance (or
substances) consented has not
been present on, over or under
the land to which the HSC
relates for at least five years.
Section 14(4) requires that a
revocation order must specify the
grounds on which it is made.
Section 15 of the Act then provides
that a revocation order shall not take
effect unless it is confirmed by the
18 • Built Environment Insights • Issue 5 • April 20194. If there are objections, a local process of getting a revocation order Substances Authority’s delegated
inquiry would need to be held but confirmed by the Secretary of State powers;
in practice, there would probably is relatively straightforward there 5. engage early with NPCU to
be some time to try and negotiate is typically some uncertainty as to establish what they require to be
away the objections. the steps the Hazardous Substances submitted to them and relay this
5. After expiry of the 28 day period, Authority will take at the beginning information to the Hazardous
if no objections are made, the of the process to actually make Substances Authority;
SoS can confirm the order with or the order. Different authorities 6. establish a good working
without modifications. take different routes to make the relationship with legal officers
6. Confirmation of the order involves revocation order depending on at the Hazardous Substances
a physical endorsement by the SoS their internal processes. Given the Authority if they will be assisting
on the order (i.e. a stamp is applied general unfamiliarity of authorities with the order making process
verifying that the order has been with their powers/functions under and be on hand to assist them as
confirmed and the date plus any the Act, this can lead to delay and necessary.
modifications required). confusion. Errors by a Hazardous
7. The order and any modifications Substances Authority at the front- Conclusion
take effect on the date of end can cause unnecessary delays The pressure to increase housing
confirmation. at the confirmation stage with land supply in our cities means that
8. The authority then serves a second the Secretary of State. Much also we are increasingly going to see
notice enclosing a copy of the depends on the HSC holder who may HSCs needing to be revoked in order
confirmed order on the same need to provide written assurances for development to be de-risked and
parties originally served. to the authority to help the process brought into beneficial use.
along. Policy may keep moving forwards
What do you need Having assisted on a number of but it will be necessary to address
to be aware of in the revocation orders, our suggested redundant HSCs if the housing and
revocation process? practical points for anyone involved economic growth our politicians
Revocation orders made under in obtaining a revocation order are: want to see is to be achieved.
section 14(1) attract a right to 1. seek to agree an action plan Hazardous Substances Authorities
compensation by anyone suffering with the Hazardous Substances will need to become more confident
damage in consequence of the order Authority early on to clearly in their powers and more proactive in
by way of (a) depreciation in value of establish what powers it will be revoking old consents.
a land interest or (b) disturbance of using, what steps it will be taking Meanwhile, the more familiar
his enjoyment of land. Authorities to make the order and what developers are with the revocation
can therefore require assurances information it requires from the process the better able they will be
that no claims for compensation HSC Holder; include appropriate conditionality
will be made or that they are 2. encourage the HSC Holder to into land contracts, navigate the
suitably indemnified against such provide sufficient information planning process and to assist
claims before using their powers. that enables the authority to use Hazardous Substances Authorities
No such rights arise in relation to s14(2) powers if possible. Where in driving forwards revocation orders
the use of section 14(2) powers, s14(1) powers are to be used the when needed.
however, the authority may require HSC Holder will need to confirm
evidence which demonstrates that that it does not intend to pursue a
a prescribed scenario has arisen and compensation claim;
this can be hard to collate without 3. there is no need for public
input from the HSC holder. consultation (the Act only requires
Although making and confirming notice to be served on a very
a revocation order is not a complex limited group, namely landowners
process, the reality is that many and those affected by the
authorities are more used to wearing revocation); Charlie Reid
their Local Planning Authority hats 4. it may be prudent to avoid Senior Associate, London
T +44 207 859 2254
than their Hazardous Substances determination by committee charlie.reid@ashurst.com
Authority ones. So while the and to stick within a Hazardous
Built Environment Insights • Issue 5 • April 2019 • 19UK
Purpose-Built Student
Accommodation
The Outlook
by Sadia McEvoy
Ashurst has gained significant UK, Australia and Ireland, benefit
The UK PBSA sector has experience in recent years advising from an education industry centred
clients in relation to purpose-built around the English language, which
seen vibrant growth
student accommodation (PBSA), and has enduring international appeal.
in recent years and, as it is easy to see why. This burgeoning In the words of British newspaper
an asset class, PBSA sector has a number of attractions the Financial Times, “student
for investors. accommodation is not merely
has rapidly become
Tenancy rates are high and cash a small-scale and idiosyncratic
institutionally acceptable. flow is relatively secure, whether development; it is an early example
In this article we look at due to initial government funding of a vast move to gain exposure to
or to the “bank of mum and dad” rental property, instead of financial
the current market and
when students find themselves securities”. The driver behind this
some of the issues to short and the rent is due. In times of shift is low returns in bond markets.
consider. recession, student accommodation According to investment manager
is relatively cushioned. Furthermore, M&G, student accommodation
anglophone countries, such as the can provide a premium over publicbonds. Thus, PBSA has become an Frank in conjunction with UCAS (the number of students living in halls
institutionally acceptable asset class. Universities and Colleges Admissions or in accommodation provided by
For British universities a decline Service, whose main role is to the university remains roughly the
in government funding, increased operate the application process for same. The research also found that a
competition for students, and British universities) – the Student higher percentage of students were
ambitions for expansion have Accommodation Survey 2018/19 – happy with their choice of PBSA than
led to an ideological shift in the found that accommodation was the those who had chosen the private
Higher Education sector where most important factor influencing rented sector.
students are now akin to customers student wellbeing across the UK, Evidence indicates that students
and universities are increasingly outranking factors such as a good want PBSA and the market has
aligned with the private sector. This campus atmosphere and pastoral continued to provide it. In 2018/19,
marketisation of higher education care. the number of PBSA bed spaces in
has facilitated a new approach to The findings of the Student the UK reached 627,115 according to
student accommodation. Accommodation Survey 2018/19 US-based commercial real estate
Universities recognise that a factor indicate that around 30 per cent company Cushman & Wakefield, and
in attracting students, and thereby of full-time first-year students the development pipeline is strong.
meeting the financial challenges now live in PBSA, up from 22 per International interest in the UK PBSA
they currently face, is the quality and cent five years ago. The corollary sector also appears buoyant despite
cost of the accommodation offering. is that the number of students in Brexit, as illustrated, for example, by
Indeed, research undertaken by the private rented sector or living Singapore Press Holdings’ purchase
international estate agent Knight at home has declined, while the of a portfolio of properties owned
Built Environment Insights • Issue 5 • April 2019 • 21Arguably, the risks attached to
losing EU students are less than
those in relation to non-EU students
because there are fewer of them. For
example, UK PBSA operator Watkin
Jones does not really feature Brexit
in its demand forecasts because
less than 7 per cent of students
come from the EU. Watkin Jones’
figures indicate a robust secured
development pipeline comprising
17 sites, representing 7,534 beds, and
reflect the widely held assumption
that the strength of the domestic
market, combined with ongoing
interest from non-EU countries,
indicates a healthy outcome for
PBSA in 2019/20. Nevertheless, the
significance of Brexit to the sector’s
investors may well depend on the
geographic location of assets. A
disproportionate number of EU
students are based in London- for
example, 18 per cent of the London
School of Economics’ students are
by the leading PBSA provider, Unite UCAS figures from 2017/18 from the EU – arguably making
Students, for £180.5 million in indicate that, while applications London-based investment a riskier
September 2018. But what factors from UK students fell, applications proposition post-Brexit.
should investors be considering as from both EU and non-EU students More broadly, the risks posed by
the UK PBSA market continues to increased. The growth in non-EU Brexit in terms of potential loss
develop? student numbers is particularly of EU funding for research at UK
strong, and rose by 6 per cent in universities (which amounted to
International Students 17/18, driven perhaps in part by the almost £1 billion at the time of the
The Student Accommodation Survey relatively weak value of sterling. referendum), and the “brain drain”
2018/19 confirmed various patterns China sent more students to the UK of European talent, could reduce
regarding international students, than any other overseas country and the attractiveness of UK universities
who constitute around 22 per cent current fears regarding stagnation to overseas students. Therefore,
of the UK student population. in the Chinese economy have raised although the direct detrimental
International students are the group concerns that if Chinese students impact of Brexit on student numbers
most likely to rent and are more choose to stay at home or look may not be significant, the indirect
likely than UK-based students to elsewhere for higher education consequences flowing from a
stay in the same accommodation for opportunities this could have a reduction in the quality of UK higher
more than a year. Non-EU students major impact on the UK PBSA sector. education could be of more enduring
are less likely to have an issue with While Brexit is unlikely to have a significance.
the affordability of their PBSA than significant impact on numbers of
EU students. Non-EU students are non-EU students, for EU students Other Challenges
also the group most likely to have there are a number of uncertainties. Over the last ten years, despite the
their rent paid by someone else, for The two key questions - which introduction of tuition fees, there
example, parents or wider family. For remain unresolved at the time of has been a steady increase in the
investors, these findings confirm the writing - will be arrangements for number of UK-domiciled 18- and
importance of international, non-EU fees (currently EU students pay 19-year-olds going to university.
students to the success of the PBSA the same fees as UK students) and However, domestic demographics
sector. access to student visas. indicate a decline in the birth rate
22 • Built Environment Insights • Issue 5 • April 2019that has led to fears of declining
numbers in higher education.
Added to this threat is the
Government’s drive to encourage
more school leavers to participate
in apprenticeships or undertake
T Levels (technical exams in lieu
of A-levels) rather than pursue a
degree. However, statistics indicate
that the demographic decline will
be reversed from 2021 and there is
also an argument that in times of
uncertainty, such as now, people
look to upskill to mitigate the risk
of unemployment and therefore we
may see more students, rather than
fewer, in the next few years.
Another uncertainty facing the
PBSA sector is the future of higher
education itself. Academics opine
that the role of universities has
changed throughout history. From
the home of medieval spirituality, to
centres of technological innovation
in the 21st century, universities have
become quasi-businesses motivated
by self-interest in a competitive
market landscape. If this remains
the case, universities will have to
continue to customise education
to meet their students’ demands.
This will mean providing a flexible
learning experience, available 24/7,
enabling students to work and
learn online or on campus. Degrees
may not be the only qualification
on offer, as the rapidly changing
needs of the labour market demand
frequent reinvention and hence new
skills. As the costs associated with
a university education continue to
rise, the motivation to learn remotely
while working, or to live at home,
may begin to outweigh the benefits
of living and socialising within the
physical environs of a university.
Nature of Future
Developments
While predicting the future shape
of education and the long-term
impact of Brexit is, to say the
least, challenging, in the shorter
Built Environment Insights • Issue 5 • April 2019 • 23term the future of the PBSA sector We may also see an increased yields are more secure, the closer seems assured. Nevertheless, the focus on top-ranking universities accommodation is to campus. product will continue to evolve at the expense of lower-ranking Securing development opportunities and be refined. In the Student institutions. For example, within this range is challenging Accommodation Survey 2018/19, world-renowned Russell Group in many UK cities, particularly affordability was, unsurprisingly, universities are more likely to attract London, where availability and cost critical to students’ overall attitude international students and hence increasingly preclude development towards PBSA, and scaling up the interest from the PBSA market. A in zones 1 and 2. size of developments, together vicious circle could ensue where In terms of new builds, there is with flexibility on the types of struggling universities cannot scope for PBSA to benefit from smart rooms available, is seen as a way of attract students because their construction methods, in particular, achieving this. Increasingly, future accommodation is poor, but PBSA off-site manufacturing. Off-site developments may also look to operators are not interested because manufacturing – where components ensure that accommodation can be they do not have enough students. or entire units are assembled or used in holiday periods on a hotel/ This could see a widening of the gap fabricated before reaching the hostel basis in order to maximise between “elite” UK higher education construction site - has proven revenue. The London market, for institutions and the rest. However, financial benefits and is being example, is problematic in terms interest in PBSA even at top-ranking promoted by the UK Government as of affordability, but has greater universities is subject to location a means of mitigating the current potential to benefit from alternative factors. Research indicates that housing crisis. Because modules use outside of term time. students are happier, and rental and components are produced 24 • Built Environment Insights • Issue 5 • April 2019
to standardised systems a more a means of nurturing wellbeing, material for the University of York’s
consistent product can be achieved, and this emphasis has not been new PBSA, which states that the
enhancing the quality of a project lost on the PBSA market. Contented new residences will include “flexible
as well as reducing the chances of students means more students, and and welcoming communal space”,
delay and disruption. Whereas off- therefore monetising wellbeing “a safe, secure and comfortable
site manufacturing has historically by creating student communities environment”, “views of the lake and
been linked to aesthetically instead of building merely for parkland” and “a sense of belonging”.
uninspiring buildings, modern digital functionality has huge potential If the future of PBSA is affordable
manufacturing methods mean upsides for everyone involved. high-quality accommodation with
that architectural ambition can be Cushman & Wakefield, for example, attractive communal spaces that
fostered and not compromised by in its 2018 Student Accommodation foster wellbeing and community,
off-site methods. Irish construction Report, observed that future then it is a win-win for students
company Graham Group is a developments must look not just to and universities. For investors, for
proponent of off-site manufacturing room quality but to amenity spaces the time being, the figures speak
and is set to use it on the University “to support the student experience, for themselves: student numbers
of York’s current 1,400 bed student interaction, collaboration and are growing, they want PBSA and
accommodation project. As well good mental health”. Its research the appetite from domestic and
as delivering the accommodation, indicates that providers taking this international markets remains
Graham Group is an investor as part approach were able to secure a 3 strong.
of a consortium with fund manager, per cent increase in rent in contrast
Equitix. to those with poorer quality spaces Sadia McEvoy
Senior Expertise Lawyer
Across the real estate sector more which managed only 2.5 per cent.
T +44 (0)20 7859 2017
broadly, we are seeing much greater This more holistic approach can be sadia.mcevoy@ashurst.com
focus on creative placemaking as seen in action in the promotional
Built Environment Insights • Issue 5 • April 2019 • 25You can also read
