Regeneration schemes don’t usually get held up by one dramatic problem. More often, it’s an accumulation of smaller issues that could have been picked up much earlier: a title restriction here or an awkward S106 provision there, or a transaction structure that doesn’t properly deal with the risks. By the time these things come to light, money has been spent and the terms/programme built around assumptions that turn out to be wrong.
In practice, many of these issues are not deal-breakers. Restrictive covenants can sometimes be insured against, rights can be released and S106 agreements can often be varied. The difficulty is that each solution takes time, and time is usually something a regeneration programme doesn’t have. So, for registered providers (RPs), some of the most expensive legal problems are the ones that could have been identified earlier.
Start with the land
Before committing to a scheme, it’s worth starting with the basics. It’s important to establish whether the RP has the title and rights needed for the proposed development.
Regeneration sites can involve multiple titles, historic rights and restrictions which may have little impact on the existing use of the site but become significant when redevelopment is proposed.
Access, easements, restrictive covenants, rights for services, leasehold interests and third-party rights should all be considered against the proposed scheme specifically, rather than a simple title-checking exercise.
If something needs to be acquired, released or varied, it is far better to know before the scheme is committed and too much budget spent.
Make sure the transaction matches the scheme
There are a number of ways an RP might structure a regeneration project, from a straightforward land acquisition to a development agreement, forward funding or forward purchase arrangement. The legal structure needs to reflect where the commercial risks sit.
Who bears the cost of delays? What happens if construction costs increase? Who controls changes to the scheme? What protection does the RP have if the developer becomes insolvent? Etc. etc. These are commercial decisions, but the legal documents need to deal with them properly. Otherwise, when something goes wrong, the parties may find they have very different ideas about who carries the risk.
Don’t leave the S106 until the end
The S106 agreement can have a direct impact on the RP’s ability to acquire, fund and manage the affordable housing.
The proposed tenure mix, nomination arrangements, transfer restrictions and mortgagee protections should be checked early, particularly where the RP is acquiring homes from a developer. For example, an RP might agree HOTs only to discover that the S106 restrictions don’t fit its intended tenure or funding arrangements.
It is much easier to resolve a problem with the S106 when the planning and transaction teams are still able to influence the structure than after the scheme has already been agreed and the developer considers the HOTs binding.
Existing residents can affect the programme
Estate regeneration brings another layer of complexity where existing residents, leaseholders or other occupiers are involved.
The RP needs to understand what interests have to be acquired, whether vacant possession can realistically be achieved and whether any rights or occupational arrangements could affect the proposed phasing. Could relocating tenants be a feasible option?
These issues should be considered alongside the regeneration strategy, not as a separate legal exercise because there is little point in having an ambitious phasing plan if the existing residents cannot realistically be rehoused or the necessary interests acquired in time.
Early advice can prevent late problems
A property lawyer shouldn’t just arrive once the deal has been done to sort the paperwork. The most useful time to involve the legals is when there is still room to change the structure, renegotiate terms or deal with a title or planning issue without incurring significant delays and putting the programme at risk.
A few early questions can make a significant difference:
Can the RP acquire and develop the land it needs?
Does the planning and S106 position work with the proposed scheme?
Can existing interests be dealt with within the required programme?
Are the commercial risks properly reflected in the transaction documents?
What happens if the scheme changes or the developer does not perform?
Getting these points bottomed out at the outset won’t remove every risk from a project but can certainly help to ensure legal issues don’t become the reason a viable scheme is delayed.