CC Autumn 2006

Vol. 13 No.
1 Autumn 2006
CEMicircular
The College of Estate Management compiles this bulletin for
current and former students as an aid to your studies and future
careers.
CEMicircular covers all courses and includes information about
important developments and topical issues in the world of
surveying and property. You should not, however, rely on the
extracts in CEMicircular as your only source of information. They
will seldom offer more than a brief summary of a new topic or
recent issue and some points are bound to be omitted, perhaps
giving undue emphasis to the material included. You are therefore
urged to read as widely as possible, including making use of the
Internet, and it is vitally important that current students study the
course material. This could make the difference between superficial
knowledge and real understanding.
To help you keep up to date, look out for the following captions
against items:
Contents
Page
Building
Building Regulation breach
Precast concrete
Lighting design
Restoring Pugins Grange
2
3
4
6
Construction
Construction delay
Trouble at Wembley Stadium
Joint names insurance
Specifying apartment blocks
9
10
11
13
Development
Flat-pack housebuilding
15
17
20
CEMicircular WebWatch gives details of related

websites where additional information can be sourced;
Finance
Facts about UK REITs
PFI refinancing
Latest Research indicates material that has been

generated by recent research, including projects carried
out by CEM and other institutions.
Law
Contaminated land liability
Multi-letting liabilities
22
24
Residential
HMO licensing
Energy efficiency and HIPs
25
26
The editor of this circular is Gaye Pottinger, Senior Research Officer

at CEM. She would be pleased to hear your views and comments on
its structure, content and presentation. Contributions or suggestions
of material for inclusion are also welcome. Please write to Gaye
Pottinger at the College address below, or email to:
k.g.pottinger@cem.ac.uk.
Management
The out-of-town retail sector
Repairing obligations
Break clauses
Negotiating lease renewals
28
30
31
32
Subscription to CEMicircular
Planning
Design and access statements
Planning and flood risk
Nature conservation sites
35
36
38
Property
Property insurance commissions
Easements
40
41
Rural
Countryside cases
UK farming
44
46
Valuation
Valuation and REITs
Leasehold reform valuation
48
49
Notices
New staff
Organisational changes
CEM firsts in Vietnam and China
Publications
52
52
52
52
Editors note
CEMicircular is produced twice a year, in the spring and autumn. It is

sent to all students on CEM courses, staff, CPD subscribers and
members of the Property Peoples Network (PPN), which is open to
CEM alumni. To join PPN see www.ppnonline.co.uk.
Copyright
The extracts from journals in this circular are reproduced by
permission of the publishers. So as not to abuse this permission, the
College asks that anyone wishing to make copies of any of the
articles should first contact the editor of CEMicircular.
Whiteknights, Reading, Berkshire, England, RG6 6AW

UK Telephone: 0845 612 9009 (UK only, low call rate) International Telephone:
+44 118 921 4633 Academic Registry Fax: +44 (0) 118 921 4617
BUILDING
Building Regulation breach
What happens if work is carried out in breach of the UK Building Regulations? Sue Lindsey, barrister at Crown Office
Chambers in London, explains the powers available to local authorities to put things right (Architects Journal, 29.06.06, p.
38).
the cost of doing so from the building owner. If the local

authority does not want to embark on carrying out the work,
section 36 preserves the right for it to seek the civil remedy
of an injunction and force the owner to do the work. Any
owner failing to comply with an injunction would find
themselves in contempt of court.
To most architects the words 'Building Regulations'

generally bring to mind the technical requirements that have
to be met. But what teeth do the regulations have when
there is non-compliance? While most employers and
contractors continue working with building control to find a
solution, sometimes an impasse is reached. The Building
Act of 1984 and the regulations spell out the options for the
local authority. There is a mix of statutory powers that can
be exercised, and various civil and criminal proceedings can
be brought.
The other option open to the local authority is to bring a

prosecution in the criminal courts under Section 35 of the
Act. This can be for the breach of any provision in the
Regulations, and there is a maximum fine of 5,000 for each
offence. Notably, unlike the Section 36 procedure, the
Section 35 offence does not address how the offending work
is to be put right. Also unlike the Section 36 procedure, the
court has held that a Section 35 offence is only committed
when there is no intention to put the works right. These
differences probably explain the ODPM's guidance that a
Section 35 prosecution is the usual course of action to take
against contractors. It is, after all, ultimately the building
owner who has the responsibility and control to put their
house in order.
Where works have been carried out before the local

authority arrives on the scene, Regulation 15 can often be
used to order the opening up of a building in order for the
works to be inspected. Similarly, where retrospective
approval is sought for unauthorised works, the local
authority has extensive powers to order opening up.
Where works are either ongoing or have been completed,
the local authority can, up to 12 months after the completion
of works, serve a notice under Section 36 of the Act
demanding that alterations be removed or put right. The
current guidance from the ODPM is that this procedure is
generally used against the building owner, and it seems that
a notice can be served as soon as there is work in place that
contravenes the regulations. Unless they ask the court for
longer, an owner has 28 days to comply with a Section 36
notice. If they do not comply in time, the local authority can,
with immediate effect, undertake the work itself and recover
Lastly, while Section 38 of the Building Act states that a civil

claim lies for breach of Building Regulations, this has never
been brought into force. So while breach of the Regulations
can be evidence of the violation of contractual or tortious
duty, the only body that can bring direct action for that
breach
is
the
local
authority.
CEMicircular WebWatch
See the website of Crown Office Chambers,
www.crownofficechambers.com, and look under
Articles, where you will find up-to-date building and
construction related case notes by several of the
barristers.
Copies of the UK Building Regulations, related
publications and details of books on the subject can be
found at www.thebuildingregs.com.
Precast concrete
Buildings constructed from precast concrete cannot only be made attractive (forget associations with some of the uglier
developments of the 1960s), but can also be highly sustainable, particularly in terms of thermal efficiency explains Andrew
Minson, head of framed buildings with The Concrete Centre (Architects Journal, 01.06.06, pp. 5051).
Precast concrete, already widely recognised for its fast

construction and buildability benefits, is now winning the
sustainability arguments as well. As with in situ concrete,
precast concrete has a wide range of benefits that makes it
well suited to sustainable construction compared with other
materials: high thermal efficiency and fabric energy storage
(FES); fire resistance; sound insulation; minimum vibration;
long life; use of recycled raw materials, including industry
by-product streams; local sourcing and transport.
'air miles' CO2 impact of transportation. Timber and the iron

ore for steel often travel many thousands of miles.
Sustainability benefits are not restricted to frames. Precast
paving can also actively improve the environment by
reducing the level of pollution caused by nitrogen oxides
(NOx). Developed by Mitsubishi in Japan, precast paving
treated with titanium dioxide has been shown to significantly
lower pollution by absorbing NOx. Cement additives based
on titanium dioxide also provide a concrete finish that is selfcleaning. The material reacts with sunlight and rain to clean
off airborne spores and pollution. It has been successfully
used by Richard Meier for the Dives in Misericordia white
concrete church in Rome.
FABRIC ENERGY STORAGE

Of these benefits, FES is increasingly embraced by forward
thinking clients and designers. Here, concrete stores and
releases heat to stabilise the internal temperature of a
structure, thereby reducing the need for heating and air
conditioning. Increasingly, the potential of precast concrete's
FES is being realised for new construction. Developers
report capital costs reduced by 520 per cent due to the
reduction or removal of air conditioning and suspended
ceilings. Users report reduced operational costs.
MORE FROM LESS

The precast industry is making significant progress towards
placing sustainability high up the construction agenda. It has
implemented a 'more from less' programme to examine the
sustainability issues for the precast sector and how best to
tackle those issues.
There are two types of FES: passive and active. With

passive FES, exposed soffits use natural or assisted
ventilation together with night-time purging to cool the
building space. Active FES has controllable systems of air
ducted through plenums or floors. Tests show that they emit
50 per cent less CO2 than air conditioning. Furthermore, the
limited fabric energy storage of lightweight frame structures
offers just 610W/m2 of cooling compared with 1520W/m2
for passive concrete FES and 2535W/m2 and beyond for
active concrete FES.
To this end, the sector has established sustainability and

health and safety committees to provide a pan-industry
approach to sustainability; a Concrete Targets Award
scheme to improve health and safety; and Best Practice
Awards to recognise and promote excellence among the
membership of British Precast in the areas of innovation,
health and safety and the environment. The 2005 awards,
sponsored by The Concrete Centre, were given to a range
of simple and cost-effective solutions that reduced water
consumption, eliminated a hazardous waste stream
previously sent to landfill, implemented energy-saving
programmes and overall waste-reduction programmes.
Details of all the 2005 award entries and winners can be
found at www.britishprecast.org
The use of FES significantly increases a building's

sustainability. The CO2 emission level from the lifetime
operation of a building is far higher than that of the
embodied CO2 of its construction materials. Indeed, over 50
per cent of the UK's carbon emissions results from the
operational use of buildings. So reducing a building's
operational heating and air conditioning requirements
reduces its real environmental impact. Over its full life cycle,
a lightweight framed building will result in higher CO2
emissions than a heavyweight framed building. The
buildings designed using FES also appear to be free of sick
building syndrome.
In addition, British Precast is working on a four-year

research project with Loughborough University to develop a
sector-wide approach to sustainability. The Sector
Sustainability Strategy project will:
identify the economic, social and environmental

impacts, both good and bad, of the precast sector;
establish the precast industry's awareness of the

opportunities and threats related to sustainable
development; and
establish objectives, targets and indicators for

future improvement.
CONSTRUCTION IMPACTS
The other inherent benefits of fire resistance, sound
insulation, minimum vibration and long life mean that
precast concrete reduces the need for additional protective
coatings, preservative treatments and vibration-damper
systems. All of this significantly reduces the environmental
impact of precast concrete. As does the fact that precast
concrete is UK sourced. There is growing concern over the
The project is currently examining the industry's

sustainability priorities, and the action it needs to take.
Further
details
can
be
found
on
www.sustainableprecast.com
3
British Precast has been working with the British Cement

Association on a joint approach to the sustainability of
cement and concrete. The role of cement in improving the
sustainability profile of precast concrete is important.
Furthermore, precast manufacturers are reporting a
significant move towards recycled aggregates and industrial
by-products.
environmental impact of a building's operation, the industry

is actively seeking ways to reduce the energy and materials
used to manufacture the product. This, together with
improved health and safety, increased manufacture and
construction efficiency, and the development and
implementation of an industry-agreed sustainability strategy,
means that precast concrete is able to provide a
construction solution that truly offers 'more from less'.
So in addition to the inherent benefits of precast concrete

that offer the potential to significantly reduce the
The
Concrete
Centre
website,
at
www.concretecentre.com,
contains
technical
information about the use of concrete in construction
and offers a number of specialist seminars and
conferences.
Lighting design
Well designed lighting is all important to the success of retail and leisure centres. Increasingly, businesses are also looking
for energy savings and good environmental performance. Good news then that the latest technology is making a lot of
exciting options available, as this Checklist by Scott Brownrigg and Barbour shows (Building, 19 May 2006, p. 75).
energy prices increase this will become an increasingly

significant issue for building operators.
Lighting in the retail and leisure sectors has two

fundamental functions; apart from the basic requirement to
provide illumination, it must make products and services
look more appealing to customers. Indeed, display and
specialist lighting for hotels, health clubs, shops and
particularly supermarkets is fundamental to the success of
those operations. Studies show good lighting creates a
positive ambiance that will result in more sales This
relationship between the practical and the aesthetic is
fundamental to the success of any lighting design.
2. Technologies
Luckily new technology is on hand to help the specifier meet
the requirements of the regulations. The use of LEDs,
compact fluorescents, fibre-optics and better controls can go
a long way to delivering exciting and energy-efficient
displays.
LEDs, for example, are becoming more powerful and are
available in many colours including bright white. They offer
very long life some say they will outlive the building they
are in. Several manufacturers offer fittings consisting of
clusters of LEDs, which can be used as an alternative to
energy-intensive and heat-emitting metal halide lamps.
1. Energy issues
Supermarkets and large shops are reconsidering the use of
daylight in a move to reduce energy bills and improve their
environmental profile. This move away from large areas of
energy-intensive lighting creates the need to focus on more
sophisticated ways of achieving an attractive result.
In contrast, LEDs are very cool running and enable light to

come from many point sources; these can be linked together
to create lines or shapes.
Additionally, the new Part L imposes greater constraints on

display lighting than the 2002 version. It requires lighting to
have an initial efficacy of no less than 15 lamp-lumens per
circuit-watt, including any transformer or ballasts.
Additionally display lighting must be capable of being
switched off when not required and less intense forms of
lighting should be used for safety or cleaning activities. As
LEDs are also available pre-mounted in strips to give evenly

distributed illumination in flooring or wall panels. Units can
also edge-light glass or perspex, delivering a constant or
changing colour.
4
Fibre-optic lighting can deliver a range of effects. The fibres

can be woven into mats, carpets and curtains or built into
fixtures and fittings. Fibre-optics can also be used where
temperature can be an issue, such as with food displays.
Due to their long life they can also be permanently built-in.
to maintain closing a significant area of any commercial

premises is normally not an option.
Consider using long-life LEDs or fittings that can be lowered
to change bulbs. Many businesses change bulbs on a
programmed schedule although this can be wasteful of
resources.
Fibre-optics can be used in wet areas or in inaccessible

details as the lamp can be located some distance from the
ends of the fibres. One light source can feed a large number
of fibre optic bundles, delivering light in a pattern or
distributed evenly. These can create colour effects and have
a built-in filter system.
Remote sources using fibre-optics reduce the need to

disrupt displays. To reduce their lighting load, supermarkets
and some large shops are considering the reintroduction of
roof lights to save energy.
If in doubt, a risk assessment needs to be drawn up to
identify the issues and help define a safe solution.
Small fluorescent tubes smaller than a pencil typically 8

mm in diameter are available. These are a strong source
of light and are useful to illuminate small spaces such as
display cases, or for more general illumination where they
can be hidden within an edge detail.
Control systems are becoming more sophisticated the use

of wireless or control signals sent through the main electrical
wiring make the control of individual fittings easier and more
cost effective. Controls can also save energy by reducing or
switching off unwanted fittings to a pre-programmed
sequence or in response to a range of parameters.
3. Safety lighting
Some of these technologies can also be used for safety
applications.
Escape routes require a minimum level of illumination as set
out in BS 5266. Additionally, the clear definition of building
elements, as required by disability regulations, can conflict
with design aspirations. The balance for the designer is to
ensure both aspects are covered. Lighting in stairs and
circulation must be modelled around the stair geometry.
LEDs built into stair nosings, handrails and edges can
create dramatic effects and ensure the safety of users.
5. Key points
Consider the technologies from several aspects, not just
aesthetics:
4. Practical issues
All equipment must be capable of being safely maintained.
This can be difficult owing to a number of factors. Consider
the location and the manner in which the bulb would need to
be replaced. High-level lighting can prove costly and difficult
Many small sources of light are often much better

that a single, big-bang approach
Energy conservation is climbing up the agenda,

especially with clients
New regulations should be seen as a design

opportunity.
Specialist help should always be considered at the

detailed design stage.
Subject guides similar to this are available from
Barbour ABI as part of its Construction Expert and
Specification services. For further information contact
Barbour ABI on 01344 899280 or visit their website at
this
link:
www.barbour.info/content/about
services/construction.asp.
Restoring Pugins Grange

When restoring a historic building one of the issues facing the project team is whether to return the building to its original
condition or keep subsequent alterations and additions. In this article about restoration of the house built by Victorian
architect Augustus Pugin for his family, Kenneth Powell explains why, in this case, it was decided to do away with later
changes (Architects Journal, 13.07.06, pp. 2839). The restoration was completed in June 2006 and the house is now
available for holiday lettings through the Landmark Trust (see WebWatch below).
Grange was a solid and essentially rational building that

reflected Pugin's practical, builderly approach to design.
Small wonder that it inspired later Goths like Butterfield and
Street and was an exemplar for much Victorian domestic
architecture. But the effects of the sea air on the stonework
were all too obvious (though the Whitby stone used for the
adjacent church has hardly weathered at all) and the house
had been poorly maintained for some decades.
A most substantial Catholic house, not very large but

convenient and solid.' This was Augustus Welby Northmore
Pugin's vision (set out in a letter to a friend in September
1843) of the house he was planning to build on a cliff-top
site at Ramsgate, Kent, a place he had known from
childhood holidays.
Pugin was 31, a fervent Catholic convert, the author of
Contrasts, architect of many churches and Sir Charles
Barry's collaborator on the rebuilding of the Palace of
Westminster. He was the father of seven children and
happily married for the second time; his first wife had died
giving birth to his first child. The Grange was to be a
practical family house as well as Pugin's workplace he
loved the sea and ships and part of a complex of Gothic
buildings that included the church of St Augustine, which he
founded and endowed and in which he was buried, and a
community of Benedictine monks.
The philosophical issues of the project related to the

additions and alterations made after Pugin's death, chiefly
by his eccentric bachelor son Edward Welby Pugin. An
architect of distinction in his own right, working extensively
in Britain, Ireland and Belgium, E W Pugin also fancied his
chances as a developer which led to his eventual
bankruptcy. (He died, aged 41, drugged and mad, in 1875.)
Edward Pugin's genuine attachment to The Grange, which
had been let after his father's death and was in a 'dull and
miserable' state, drove him to take up residence there in
1861, installing his stepmother, Jane (who died as late as
1909), and siblings, and adapting the house in tune with his
own lifestyle.
It was completed in little more than a year but the architect's

young wife Louisa did not live to see it and Pugin himself
died nine years later, insane, at the age of 40. The house
remained in the possession of the family until 1928. A few
years earlier, John Summerson had found Pugin's youngest
son Cuthbert, then well into his 80s, living alone in part of
the adjacent monastery, surrounded by his father's furniture,
books and works of art. 'Rarely have I felt so vividly the
illusion of slipping back in time,' Summerson recalled.
In two principal phases of work, Edward greatly extended

the kitchen, adding further bedrooms above; created more
bathrooms; built a conservatory along the west wall of his
father's library (where he stripped out the shelving);
extended the sitting room into the garden; and completely
reorganised the entrance sequence to the house, with
imposing gates to the main road The Grange was
originally entered unobtrusively from a side lane and a
timber-and-glass covered way extending out from the front
door. (By the 1860s, Roman Catholics were no longer the
social pariahs they had been 20 or 30 years earlier and
external display had become a safe enough option.)
Following Cuthbert Pugin's death, the family's connection

with Ramsgate was severed. The Grange became a school,
run by the monks of St Augustine's Abbey. After many
vicissitudes, but now listed Grade I, it was acquired by the
Landmark Trust, with support from the Heritage Lottery
Fund (HLF), in 1997. Nearly a decade later, with over 2
million invested in its restoration, the house has become a
holiday home available for rent, the 183rd historic property
taken on by the trust.
Internally, Edward's alterations reflected his aspirations for a

relatively conventional and expansive domestic life: door
openings, for example, were widened and Pugin the elder's
ecclesiastical chimneypieces elaborated with fruity
ornament.
Was there ever a practical alternative? Extraordinarily, a

treasure trove of furniture and fittings from The Grange,
including Minton plates, was discovered in the 1980s in a
Catholic presbytery in Oxfordshire. The entire collection was
acquired by the government and placed in the Speaker's
House at the Palace of Westminster. In theory, it might have
been possible to borrow some of these items, along with
others from public and private collections, and refurnish the
house as a museum piece, assuming that the National Trust
or another such organisation could be persuaded to take it
on. But the practical chances of this happening were always
slight.
Much of A W N Pugin's furniture was dispersed, Further

alterations made by Cuthbert Pugin, a mediocre designer
including a billiard room in the kitchen court and a clumsy
reconstruction of the roof, done after a lightning strike in
1904 set it alight were entirely detrimental in effect.
Landmark's instinct from the start was to return The Grange
to its pre-1861 condition, before later Pugins 'diluted' its
quality the expression used by the trust's historian,
Caroline Stanford. This implied that all of E W Pugin's work
should be stripped away in line with recommendations made
by SPAB architect John Macgregor as long ago as 1947
The issues facing Landmark were as much philosophical as

practical. Built of brick with dressings of Caen stone, The
6
Doors have been replicated to the original pattern by John

Hardman Studios, which manufactured the long-lost
originals. The library shelving has been reinstated the
outline of the shelves was found behind later paper. The
painted ceiling in this room had survived and was restored,
serving as a model for the restoration of the damaged
ceilings to the sitting room and dining room. Pugin's private
chapel has been maintained as a 'quiet space'. The altar
was removed to the Pugin Chantry in St Augustine's in 1930
and a timber replica is being made. One of the few
unexpected crises affecting the interior was the poor
condition of the main staircase, where the discovery of dry
rot led to its being dismantled and rebuilt using as much of
the original timber as possible.
Macgregor advised demolishing the 'badly constructed,

untidy additions which will always be giving trouble with
upkeep'. The natural reaction of English Heritage (EH), the
HLF and the Victorian Society was to resist this approach,
arguing that the later alterations were part of the history of
the building and of value in their own right.
The practical arguments for cutting the building back were,
however, obvious. The additions had created, in places,
awkward junctions that were hard to maintain, encouraging
the decay of the structure. The conservatory had been
dismantled many years before. For Stanford, the simple
lifestyle of A W N Pugin, who tolerated 'not a bit of lumber or
useless furniture', was more in tune with that lived by 21stcentury Landmarkers than the bourgeois pretensions of his
eldest son. The huge kitchen, for instance, added by the
latter, was a gloomy space, she says, awkwardly joined to
the adjacent Catholic presbytery.
'It was a seminal work by a great architect and the right

course was to restore it to its original form, says Caroline
Stanford, and this is the course that the Landmark Trust has
pursued at The Grange with visually stunning results. The
fact that the house will be lived in it is already heavily
booked rather than fossilised by the National Trust is
surely to be welcomed.
The debate over the treatment or E W Pugin's work

continued even after work had started on site, initially with
Donald lnsall Associates as architect (succeeded in 2005 by
Thomas Ford & Partners). The case for returning The
Grange substantially to its pre-1861 state was underpinned
by an exhaustive historical analysis by consultant Paul
Drury, backed up by detailed archaeological investigations
that extended into the gardens. EH, the HLF and the local
authority backed Landmark's proposals and even the
Victorian Society compromised on its initial opposition. E W
Pugin's covered entrance way has been retained, along with
his swaggering gateposts, and one bedroom has been
maintained in his style. Otherwise, he has been largely
expunged from the history of The Grange.
E W Pugin enthusiasts too few in number may still find

the basic proviso of the project objectionable, and it certainly
raises continuing questions about the correct approach to
the restoration of historic buildings. A fundamental problem
with E W Pugin's work at The Grange was its marked
discontinuity with that of his father. According to critic
Jonathan Glancey who once tried to buy the house
Edward turned the Grange into 'a richly foliated backwater'.
Where the father's work was rational, hard-edged and lean,
the son's was effusive, decorative and (if one dare use the
adjective) rather effeminate.
The clean-cut look of The Grange, as restored, is a result of

extensive reconstruction and replacement of stonework. The
parapet of the tower had to be entirely rebuilt, as did the
chimneystacks. Other stonework was retained and repaired
wherever possible, but much was beyond repair. As Thomas
Ford partner Paul Sharrock explains, the sudden availability
of quantities of high quality Caen stone brought a change of
plans; it had been proposed to substitute Bath stone.
Sourced from mines reopened with EU subventions, the
hard Caen stone is already being used on other historic
building projects in Britain.
It is not surprising that it is Pugin the elder, who singlehandedly redirected the course of English architecture, who
remains a figure with a strong appeal for architects and
designers. Perhaps some of them will stay in his beloved
house, that combines 'the delight of the sea with Catholic
architecture and a library', and find inspiration in its romantic
rationalism.
As part of the project, the roof was returned to its original,

double-ridged profile (lost in 1904), with bargeboards firmly
attached by reinstated 'tusk tenons' in the Pugin manner.
The repointing of the brickwork reflects the efforts made by
main contractor R J Barwick to match the quality of the
original workmanship. Barwick's work, and that of specialist
contractors, is well up to the usual Landmark standard.
Credits
Inside the house, of course, many compromises had to be

made if it was to be made habitable for people accustomed
to power showers, central heating, effective lighting and
other modern conveniences. Furniture of suitable character
was assembled by Landmark's furnishing team only a
massive kitchen dresser survives from Pugin's time. Internal
decor has been reinstated, using machine-printed wallpaper
featuring Pugin's motto, 'En Avant', and black martlet
emblem the cost of hand-blocked paper was prohibitive.
Paul Drury Partnership: Paul Drury
Architects
Donald Insall Associates
Thomas Ford & Partners
Building analysis
Archaeology
Canterbury Archaeological Trust
Project manager
Robertson & Dawson: Ron Dawson
Quantity surveyor
7
Bare Leaning & Bare: Adrian Stenning
The Wall Paintings Workshop
Structural engineer
Decorator
The Morton Partnership
Mackays Decorators
Main contractor
Specialist paint finishes
R J Barwick Construction Services
Tomfoolery: Trish Murray
Stonework
Stained glass
PAYE Stonework
The Stained Glass Workshop: Keith Hill
Mechanical services
Wallpapers
Mechelec
Cole & Son ('En Avant' and 'Strapwork')
Electrical contractor
Watts of Westminster (Jane's Room)
E Saunders
Carpets
Cartoon room
Ulster Carpets
Town Brothers
Door furniture, brass shields
Paint analysis
John Hardman Studios
Catherine Hassall
Landscaping & furnishing
Paint conservation
Landmark Furnishing Team
The principal rooms of The Grange are open to the
public on Wednesday afternoons by appointment
through the Landmark Trust: telephone 01628 825920.
For rental bookings telephone 01628 825925 or visit
www.landmarktrust.org.uk.
CONSTRUCTION
Construction delay
The results from computer-based analysis can never be better than the quality of the data input to the programme. Rubbish
in, rubbish out as the saying goes. Two recent cases show how this is true when assessing the causes of construction
delay, in this article by Stephen Lowsley, consultant programmer, and Christopher Linnett, chartered quantity surveyor,
(RICS Business, May 2006, p. 32).
project. Worse still for the expert, Judge Wilcox decided that
parts of the analyses collided with reality.
Almost ten years ago a judge in an English construction

case made it clear that extensions of time should be made
on the basis of methodical calculation, not vague
impression. So, when an experienced programming expert
appeared in court more recently, with a report based on
many hours of methodical analysis, he probably did not
expect to get roughed up in the judgment. However, that is
what happened, and not once but twice.
As regards the use of as-planned impacted analysis, this

too did not find favour with the judge because it takes no
account of the actual events which occurred on the project
and gives rise to a hypothetical answer. These comments
are particularly interesting given that Recorder Toulson QC
appears to have relied on an as-planned impacted analysis
to decide the extension of time due in the Barker case.
The judgment that told us it was simply not good enough to

make an impressionist assessment of an extension of time
was made in John Barker Construction Ltd v London
Portman Hotel Ltd in 1996. In that case, Recorder Toulson
QC criticised the project architect, whose extension of time
award, he said, bore no logical or reasonable relation to the
delay caused and was based on an impressionistic
assessment rather than a logical and methodical calculation.
Drawing conclusions
What do these cases tell us about construction delay
analysis? Is it that many architects and programming experts
are incapable of properly assessing extensions of time? Is it
that judges struggle to understand complex construction
delay cases? Is it that all delay analysis techniques contain
flaws (the view of the adjudicator reported in Try
Construction Ltd v Eton Town House Group Ltd, 2003 [BLR
2003 p.286])? Is it simply that construction delay analysis is
fiendishly difficult? Is it that, whatever you do to assess
delay, you will be heavily criticised?
In the more recent cases of Skanska Construction UK Ltd v

Egger (Barony) Ltd (2004) and Great Eastern Hotel
Company Ltd v John Laing Construction Ltd (2005) there
was no suggestion that experienced expert delay analysts
had used impressionistic assessments to assess two
complex claims. On the contrary, the experts adopted
methodical techniques commonly used in construction delay
analysis. However, the work of two of the experts in these
cases did not impress Judge Wilcox, who presided in both.
Although it is the negative comments made by Judge Wilcox

that catch the eye, his judgments do also contain some
helpful advice to all those involved in the assessment of
construction delay claims.
In the first of the two cases, Eggers expert used a logiclinked critical path network program to produce what the
judge called a sophisticated impact analysis. However, as
noted by Judge Wilcox, even if the logic used in a program is
impeccable, the reliability of [a] sophisticated impact
analysis is only as good as the data put in. In this regard
Judge Wilcox found that the data used did not, at least in
part, reflect what actually occurred on site and was reliant on
the untested views of Eggers management team. Having
decided that the data used by the expert was unreliable, it is
not surprising that the judge decided that the experts
conclusions were unsafe.
In Skanska v Egger, Judge Wilcox found the expert engaged

by Skanska to be objective, meticulous as to detail, and not
hide bound by theory when demonstrable fact collided with
computer program logic.
Furthermore, Skanskas experts analysis was accessibly
depicted. Similarly, in Great Eastern v Laing, Judge Wilcox
found that the expert for Great Eastern had produced an
objective evaluation based on comprehensive and accurate
research of the key facts. And on the thorny issue of
causation and concurrency the judge relied on the principle
established in Galoo Ltd and others v Bright Graham Murray
(1994): that questions of causation are unravelled by the
application of common sense.
In the case of Great Eastern v Laing, the expert for Laing

used a retrospective analysis of the as-built programme to
determine the critical path and to assess the periods and
causes of delay. He also used an as-planned impacted
analysis to review the concurrent delays. The judge
dismissed the critical path analysis as, at best, a
retrospective theoretical construct, which did not match the
views expressed by the parties during the currency of the
So the message appears to be:
keep analyses simple and transparent
be objective
base assessments on the key facts
do not slavishly follow results produced by

computerised analysis.
Stephen Lowsley is a consultant programmer and
spends much of his time carrying out retrospective
delay analyses of construction projects for contractors
and employers. Christopher Linnett is a chartered
quantity surveyor who regularly acts as an adjudicator,
expert witness, arbitrator and adviser. Together they
have written the book About Time: Delay Analysis in
Construction, published by RICS Books. For details
visit www.ricsbooks.com.
Reconstruction of the UKs 90,000 capacity flagship sports stadium at Wembley ran into trouble in August 2004, when
subcontractor Cleveland Bridge left the site over its dispute with main contractor Multiplex. The 757m project was originally
scheduled for completion in August 2005, but is now unlikely to be ready for the Football Association to stage main events
until June 2007. Rudi Klein, barrister, chief executive of the Specialist Engineering Contractors Group and chair of the NEC
users group, gives his Post-match analysis of the litigation surrounding the contract dispute (Building, 16 June 2006, p.
51).
Trouble at Wembley Stadium
applications was not repudiation. Therefore, it was

Cleveland Bridge, in withdrawing from the site, that had
signalled its intent not be bound by its subcontract.
The Cleveland Bridge and Multiplex litigation is a stark

reminder of one of the worst periods for construction the
early 1990s, when adversarial anarchy reigned and
construction became the primary consumer of the High
Court's services. This, as we all know, led to the Latham
report in 1994.
Even so, Multiplex does not come out of this smelling of

roses. The judge was taken aback by its aggressive tactics,
particularly in issuing certificates at the lowest valuations it
could defend. Multiplex had committed one breach of
contract, which was not, in itself, repudiatory.
This litigation is also a reminder that poor practice in

procurement, contracts and payment persists. There are
those who would have us believe that the industry has fallen
into a lovey-dovey stupor in which teamworking has
replaced subby-bashing. As far as Wembley is concerned,
"partnering" might have been the name of a crater on Mars.
Mr Justice Jackson concluded that neither party had won an

outright victory and urged them to resolve their differences
in mediation. Anybody mediating this contest will need
supernatural powers.
Essentially, the dispute stemmed from what Cleveland

Bridge perceived to be persistent under-valuation, spurious
counterclaims and non-payment or late payment by
Multiplex. Many of the problems were to do with the
valuation of variations and the cost and time consequences
of carrying out varied works. Coupled with talk of an
"armageddon plan" to destroy the company, Cleveland
Bridge felt justified in removing itself from the site.
The seeds of this litigation were sown even before Multiplex

came into the picture. All design risks were passed down the
supply chain, and the design that supply chain inherited had
to be changed to make it work, hence the variations.
Multiplex had alleged that there were shortcomings in
Cleveland Bridge's design work; Cleveland Bridge
complained about late design information. Also, initial
programmes became unrealistic and had to be changed.
Multiplex went in on a lowest price contract, expecting its
supply chain to accept the risks relating inherent in that.
Mr Justice Jackson was dismissive of Multiplex's attempt to

make a meal out of "project Trafalgar", a strategy by
Cleveland Bridge to justify its withdrawal from the site. The
question was whether Multiplex's conduct amounted to a
repudiatory breach of contract; if it did, that would have
enabled Cleveland Bridge to withdraw from site. A
repudiatory breach means a party must have demonstrated
by its actions that it no longer wishes to be bound by its
contract.
The facts of this dispute are highly relevant to the review of

the Construction Act. Yet again, we have a situation where
the payer has been able to say: "I've got the money catch
me if you can!"
There simply isn't the means for the payee to establish, by
the date of payment, that a certain amount is owing. The
payer is able to tell the payee, "This is what I will pay",
without having to provide any detailed justification for paying
less than the sum claimed. The payee is forced to go to
adjudication or cease work. Perhaps, Cleveland Bridge may
have had a stronger case for exercising its statutory right to
suspend its contract under the Construction Act.
Although Mr Justice Jackson deplored elements of

Multiplex's conduct, he said it did not amount to a
repudiatory breach. Indeed, its willingness to take disputes
through the subcontract dispute procedures showed that
Multiplex still intended to be bound by the contract.
Furthermore, making incorrect deductions from payment
10
There is a good recent article

the Wembley Stadium constru
Olympic Delivery Authority, are you taking note?
Let's hope we learn from this sorry saga. The critical lesson
is early buy-in to the design from the delivery team. At that
stage, design risks and risks that bear on time and cost can
be effectively managed.
Joint names insurance

How long should joint names insurance be maintained following practical completion of construction? This question was
considered in a recent Court of Appeal case and the decision is discussed by Sue Lindsey, barrister at Crown Office
Chambers in London (Architects Journal, 20.07.06, p. 44).
One benefit of standard contracts is that a body of case law

builds up on the interpretation of particular forms, with the
result that the industry knows how they work. The Court of
Appeal has recently ironed out a wrinkle in Clause 6.3b of
the 1993 revision of the JCT Minor Works form (TFW
Printers Ltd v Interserve Project Services Ltd, 27 June
2006). The clause sets out the optional insurance provision
of the employer taking out joint names insurance. The
question concerned how long the employer was obliged to
maintain the insurance the clause is silent on the subject.
related to an obligation that continued after practical

completion.
It was held that there is no contractual mechanism in Clause
6.3b enabling the employer to instruct reinstatement of loss
and damage after practical completion. That is because the
only mechanism in Clause 6.3b to order such things is a
variation instruction. The employer cannot issue variation
instructions after practical completion. It did not make sense
for the insurance obligation to continue after practical
completion but, for the employer, to have no power to give
appropriate instructions ensured that losses arose.
Shortly after the practical completion of works carried out by

Interserve, the building was flooded, and TFW blamed
Interserve. Interserve argued that the employer should have
maintained the joint names insurance until defects had been
made good, and that Clause 6.3b barred TFW's claim. TFW
argued that it was only obliged to maintain joint names
insurance up to practical completion, and thus the contractor
did not have the benefit of any protection after that date.
Clause 6.3a is the optional provision for joint names

insurance taken out by the contractor. The Court decided
that obligation ceases upon practical completion, and that
there is no good reason why the period of the insurance
obligations under Clauses 6.3a and 6.3b should be different.
The judges also considered the commercial common sense
behind the clause. The more sensible a particular
interpretation, the more likely it will have been what the
parties intended when they made the contract. The Court
concluded that when possession passes to the employer at
practical completion, it makes sense for the employer to
bear the risk of damage to the building and its contents from
then on. While the contractor may have to return to deal with
defects, there may be none. Thus the contractor's ongoing
interest in the building after practical completion is likely to
be minor and possibly non-existent. The other consideration
in relation to defects is that the contractor is obliged to
The judge at first instance agreed with Interserve, but the

Court of Appeal disagreed, finding that the employer's
insurance obligation ceased at practical completion. Many
reasons were found for interpreting the contract in that way.
The Clause 6.3b obligation relates to 'the Works', and to
insuring unfixed materials and goods delivered to the Works.
The Court found that these references related to the work
and materials required to bring the project to a finished
state, and that it was therefore unlikely that the clause
11
remedy them at its own cost. That does not square with the
contractor having the benefit of insurance cover paid for by
the employer during the defects period.
See the website of Crown Office Chambers,
www.crownofficechambers.com, and look under
Articles, where you will find up-to-date building and
construction related case notes by several of the
barristers.
12
Specifying apartment blocks

Specifying construction details for a small-scale development is a whole lot different to a large scheme, because the
standards, regulations and requirements that apply are different and much more complex as scale increases. That is one of
the reasons why small is beautiful because it's usually a lot less hassle. To remove some of that hassle, Scott Brownrigg
and Barbour Index explain the key points to specifying for an apartment block (Building, 16 June 2006, p. 73).
The scale of residential construction ranges from single

houses to apartment blocks and multi-phase mixed-use
developments. Across this range, a significant change of
understanding is required by the specifier to ensure the right
level of quality and efficiency.
Ventilation Once this was just a matter of fitting a kitchen

extractor fan; these days, ventilation needs to be considered
for individual homes. The more complex requirements of
new Part F and Part L make the inclusion of fully ducted
systems in apartment and other large-scale developments
common.
Scale is at the core of this dilemma because one-off and

small developments are entirely different from mixed-use
schemes, apartment blocks, and multi-phase developments.
Quite often, errors occur because principles and techniques
used for small projects are inappropriately applied to large
ones.
Security Security and fire alarm systems must be included

in all large schemes. These require a level of understanding
far beyond that of most small companies equal to that of a
commercial development.
Circulation Lifts are not a legal requirement but are a
commercial necessity in developments higher than four
storeys. Their inclusion in schemes below this level is
dependant on the market positioning of the apartments.
Large schemes involve complex standards, regulations and

requirements. Where "deemed to satisfy" standards will do
for small works, full calculations are needed on the larger
projects. This requires a complete change of attitude,
knowledge and experience.
Vertical circulation needs to be considered carefully and a

fire assessment strategy should be undertaken for mediumsized to large projects. For very large projects, complete
population flows should be modelled to test the design.
Key areas to consider

Fire protection Fire protection for individual homes is
straightforward, but apartment blocks need careful
consideration. The specifier must consider the means of
compartmentalisation and each dwelling must have a fireresistant perimeter, as must all common areas. Further
compartmentalisation will be necessary if the dwelling has
any internal dimensions of more than 9 m or is multilevel.
Maintenance Maintenance and cleaning strategies must be

considered on most projects at the design stage under the
Construction (Design and Management) Regulations. For
larger projects, these will be quite sophisticated and need
significant consideration.
The neighbours The Party Wall Act and Neighbouring Land
Act place duties on the specifier and the team to ensure that
the project respects its neighbours and can be maintained
appropriately. These may need specialists to be involved
early in the design and for the specification of the perimeter
fabric to be for highly durable materials that provide easy
access. Party wall, floors and structure that are rarely
encountered in small projects need to be resilient and
ensure that many years of service will be achieved.
Fire escape cores must be positioned to ensure that flight

distances are within the maximum allowed and terminate in
a place of safety.
Structure Structural considerations increase in complexity
with the size of the development. Frames must also provide
fire and to some degree acoustic separation. For this
reason, heavyweight concrete is often appropriate. The
need for good environmental performance will also require
the use of heavyweight construction.
Procurement Procurement can be straightforward in small

projects but needs to be carefully controlled in larger
schemes. The specifier must have a clearly defined brief
and ensure that the project details are robust enough to
survive the procurement process. It is disappointing that
procurement is still the weak link in many large-scale
projects, usually because it is isolated, money-oriented and
simplistic. The specifier should be aware of these issues
and endeavour to influence the client before it is too late.
Services Services provision takes on completely different

scope with increases in scale. Small-scale rule-of-thumb
provisions can no longer apply and all elements need to be
calculated and specified accordingly. For example, large
developments may need fully integrated control systems.
Heating and cooling requirements must be carefully
calculated, although the use of air-conditioning is being
made more difficult under the new Part L of the Building
Regulations. Specifiers need to consider the co-ordination of
the M&E elements and the building fabric from an early
stage of detailed design.
Other issues Once of the advantages of large projects is

their economies of scale, which mean a wider choice of
materials is available to the specifier. However, the specifier
must consider the use of materials with low embodied
energy and also the need to reduce waste on site.
Durability, sustainability, quality and workmanship are all
13
significant issues that affect the experience of the home

occupant. In small-scale developments, it is understandable
that there is a wide range of performance. In larger
schemes, these should all be established beyond doubt and
delivered seamlessly. It is noticeable that commonly there is
a failure to deliver and that can often be attributed to a lack
of appreciation of the challenges that develop with large
projects.
Watch points
Treating large projects as small ones with bigger

numbers is to be avoided
Look carefully at regulations and standards
Have systems and procedures in place for large

projects
Make good use of procurement on large-scale

projects, but be careful of more onerous standards.
Small-scale principles rarely work with large

projects
Subject guides similar to this are available from Barbour
ABI as part of its Construction Expert and Specification
services. For further information contact Barbour ABI on
01344 899280 or visit their website at this link:
www.barbour.info/content/about
services/construction.asp.
14
DEVELOPMENT
Flat-pack housebuilding
There are something like a hundred fertighaus (factory house) companies in Germany that typically build a few hundred
homes each year. The production lines are reminiscent of car factories, with wall and roof panels moving through with a
minimum of human intervention. Christine Eade asks: Is flat-pack construction a green approach to housebuilding?
(Property Week, 21.07.06, pp. 5859).
had planned. Rehm was taken on by Baufritz to head its UK

operation and to import its prefabricated houses.
Planning officers who work for local authorities in certain

rural areas of southern England are turning their attention to
the lives of a few affluent, politically correct and adventurous
residents.
New concept
These people have bought plots of land on which to erect

Baufritz prefabricated houses. When these flat packs arrive
on fleets of lorries from Erkheim in Bavaria, the preconstructed walls and roofs are as green as the countryside
of Kent, Dorset, Herefordshire and Hampshire, where the
UKs first Baufritz houses will soon be built.
The UKs sudden interest in prefabricated houses must

seem strange in Germany, where manufacturers display
wooden houses alongside roads, so that motorists can see
the latest in prefabricated homes. In England, the concept is
so new that Rehm took a press party to Erkheim, where
Baufritz has a factory, showhomes and showrooms.
Suddenly, flat-pack construction has appeared on the

property sectors radar because of its ecological soundness
and cheapness. The sector first came to prominence a
couple of years ago when Huf Haus, another German
prefabricated property builder, appeared on several
television lifestyle programmes in the UK. Later this year,
English Partnerships promises to send local authorities a
tool kit on how to promote and design prefabricated homes.
Rehm hopes to submit the first planning applications later

this summer. The clients have already bought 0.5 acres (0.2
ha) plots of land, and are generally financing their projects
from the sales of their homes from which they wish to
downsize. But they are not buying a cheap home, since the
average price of a Baufritz property is 229,000 (158,566),
excluding the cost of the land. The building cost of one of
the companys UK homes is 139.35/sq ft (1,498.89/sq m)
more expensive than in Germany because of the costs of
transporting the kit.
Baufritz is certainly in tune with UK thinking in terms of its

ecological purity. The insulation between the inner and outer
walls is stuffed with wood shavings mixed with whey from a
Bavarian dairy a far more natural padding than chemically
created foam. But it fails to satisfy the requirement for
cheapness, as every property is bespoke and only 240 are
manufactured a year.
Rehm says the clients already have clear ideas about

design, but he becomes exasperated when they request a
four-bedroom house with five bathrooms hardly
ecologically friendly.
I dont just want to provide eco-homes for affluent people
that would be too exclusive and not in keeping with my
philosophy, he says.
That is why Oliver Rehm, the managing director of Baufritz

UK, which opened an office in Cambridge in January, is
negotiating with rich and ecologically aware customers, as
well as planning officers, to build the first Baufritz homes in
England.
After months negotiating with clients and planning officers,

Rehm is getting an insight into British tastes. The clients in
Poole are affluent, and as I dont think the council wants to
lose such people, they are being generally friendly and
open-minded, he says. But in Sevenoaks, they are very
conservative.
Rehm was already established in the UK commercial

property scene before he became involved with Baufritz. He
was one of the architects responsible for masterplanning
Development Securities and Wrenbridges Cambourne
Business Park in Cambridge.
Rehm is concerned that local planners might want a brickbuilt pastiche of a Baufritz timber-frame construction, which
are made out of wood from Germany and Finland.
But like many property people who come to the UK from the
continent, Rehm encountered problems when he decided to
move into residential development.
To his relief, Herefordshire planners have agreed to allow

the proprietor of the Verzon Hotel in Ledbury to develop
chalets for holiday lets in the grounds of the hotel, even
though it is a Georgian building. The planning officer
wanted new buildings of a contemporary design, says
Rehm.
I could never find a building contractor that could deliver the

quality I wanted to achieve, he says. I got really dispirited,
because I wanted to find someone who could deliver what I
15
He has also been approached by a developer in Portsmouth

to create affordable housing at 116.13/sq ft (1,250.02/sq
m) between 20% and 30% higher than the general price of
affordable housing.
By next year, these fleets of lorries could be crossing the

North Sea and unloading in Ledbury, Poole, Sevenoaks or
Portsmouth. If they are, Baufritz could become a new status
symbol and the ultimate badge of ecological living.
Pure indulgence
Potential customers from Germany, Switzerland and Austria
visit Baufritzs amazingly indulgent HausSchneiderei in
Erkheim. The 385,900 sq ft (35,851 sq m) showroom
features mock-up house interiors, works of art, consultation
rooms and childrens play areas. This is where customers
plan their dream homes, in the kind of lavish environment
that only a family-run company with no outside shareholders
to count the cost could indulge itself.
Why prefabricated housing works in Germany

Germans pay high tax on overtime so there is an
incentive to increase production from regular working
hours.
Germany hasnt experienced the housing booms and

busts that we have had in the UK. Consequently,
German builders are confident enough to invest in
manufacturing facilities.
Fritz-Kramer explains that when her mother contracted

cancer in the 1970s, Baufritz decided to rethink its strategy
and to manufacture its houses from natural materials.
Unlike in the UK, Germans rarely seem to sell family

companies and they tend to invest for the long term.
Baufritz is a good example: it is owned and managed
by the fourth generation of the Fritz family.
The managing director herself lives in a Baufritz house.

Since every one is customised, she also confesses to the
unecological addition of a double garage.
The basic German house shape is simpler and less

variable than its British equivalent. It lends itself to
prefabrication.
Planning permission for homes in rural districts is

much easier to obtain in Germany and the selfbuild
market is much larger, maybe ten times the size of
the UK.
Without wishing to resort to oversimplistic

stereotypes, Germans seem to be naturally good at
organisation, teamwork and manufacturing. In
contrast, Brits are more inventive, more willing to
experiment and quicker to embrace change. All
these factors combine to explain why prefabrication
has taken off in Germany but struggled in the UK, for
its expensive to change horses when you have
invested huge amounts of money on one particular
method.
Baufritz was founded by a carpenter, Sylvester Fritz, in 1896

in Erkheim, as a joinery where craftsmen made the
framework for wooden roofs. Today, Baufritzs managing
director is Dagmar Fritz-Kramer, his great-granddaughter.
The companys factory is a good example of recycling.

Twenty years ago, Hubert Fritz, Dagmars father, bought the
Munich horticultural shows exhibition hall and reassembled
it as a factory in Erkheim. Here, the gypsum walls are
manufactured, some with heating ducts between the inner
and outer layers, so that the heating system does not cause
dust, as is the case with an exposed radiator.
The wood shavings and whey are mixed and sprinkled into
the cavity walls dry, or the mixture would smell of cheese.
Every Monday morning, four or five lorries leave the factory
laden with the components of a house, including 10 to 16
roof sections, between five and seven ceiling parts, and 10
to 12 pieces of the outer wall.
When the lorries arrive, the pre-constructed staircase is
erected first to cut down the need for ladders. Within three
months, the house is complete.
Source: Extract from Ovolo Publishing online

housebuilders update blog, article by Mark Brinkley, 5
July 2006 (see WebWatch for link to full article).
The English website of Baufritz can be found at www.baufritz.de/company_profile/en/. For another interesting article
about
the
German
approach
to
factory
produced
housing,
go
to
this
link:
www.ovolopublishing.co.uk/housebuildersupdate/2006/07/baufritz-biological-housebuilders.html
FINANCE
Facts about UK REITs
Back in March 2006, the UK property industry was celebrating the Chancellor's decision to introduce REITs. In this article,
Molly Dover provides a handy summary of the main facts and features of this new property investment vehicle (Property
16
Week, 31.03.06, pp. 3536).
1. What is a REIT?
3. What property can go into a REIT?
A real estate investment trust is a tax-exempt means of

investing in property. To become a REIT, a company must
be listed on a recognised stock exchange, which does not
include AIM. Any AIM-listed company that wishes to convert
will have to move to the full list.
A REIT must contain a minimum of three properties, and the

value of no single property can represent more than 40% of
the portfolio's combined value. However, multilet shopping
centres count as multiple properties, because they are let to
more than one tenant, and are therefore the only properties
which could become a single-asset REIT. Properties
occupied by the REIT itself cannot be included.
After REITs are introduced on 1 January 2007, a company

listing on the stock exchange could choose either to list as a
REIT or as a traditional property company.
Investment property must account for at least 75% of the

value of a company's total assets. Developments are not
included, but once a development is complete it can be
transferred into the REIT.
The company will have to pay an entry charge, equating to

2% of the market value of its properties. The charge can
either be paid in full immediately, or can be spread over the
first four years in annual instalments of 0.5%, 0.53%, 0.56%
and 0.6%.
Any form of rental income can be included. Land Securities'

outsourcing arm Trillium, which generates income not only
through commercial rent but also through unitary charges,
should therefore be able to convert.
The company must ensure that its profits before capital

allowances will cover its interest payments on any financing
by 1.25 times, which equates to a gearing level of about
80%.
4. How would Tesco become a REIT?
Ninety per cent of a REIT's profits must be distributed to its

shareholders as a dividend.
Any company with significant freehold property can become

a REIT by setting up a separate company to hold its
property assets.
The draft legislation unveiled in the pre-Budget report last

December stated that no single shareholder could hold more
than 10% of a REIT. But this rule was relaxed in the Budget
last Wednesday, and REITs will now be allowed to have
shareholders with a stake of more than 10%.
Although properties that are occupied by the REIT itself are

not allowed to be included for example, a property owned
and occupied by Tesco could not be put in a REIT this rule
can be avoided by splitting the business in two.
If the business is divided into a property company and a
separate operating business, the property company could
become a REIT. It would own all the company's property
assets and lease them back to the operating business.
However, the REIT must not pay more than 10% of its
dividends to any one shareholder. The government
guidelines suggest a trust could be set up to hold the
dividends until the shareholding is reduced to less than
10%.
This would be more cost-efficient than a traditional sale and

leaseback, as the company would have to pay a REIT entry
charge of 2% of the asset's value rather than Capital Gains
Tax of 30% on any profits from the sale.
If a property is sold by a REIT, the REIT will not have to pay

Corporation Tax on the profits, as long as the property has
been held in the REIT for a minimum of 12 months.
The op co/prop co' structure is already in place in

companies such as care home operator Southern Cross: the
operating business owned by private equity house
Blackstone is to be floated later this year, while the
company's properties have been sold to the Royal Bank of
Scotland (news, 10.03.06). RBS could put the properties
into a REIT.
Completed developments that are transferred into a REIT as

investment properties must remain in the REIT for at least
three years, otherwise the property will be liable for
Corporation Tax when it is sold.
Any building work that costs more than 30% of the fair', or
current value of the building will also be classified as
development, and therefore the property must be held for
three years following the work to qualify for tax-exempt
status.
Goldman Sachs is leading a consortium to acquire Britain's

largest ports company, Associated British Ports, for 2.3bn,
and is likely to be considering spinning off the company's
property into a REIT. ABP has an investment portfolio of
570m, but its operational property is likely to be far greater,
all of which could be put into a REIT.
2. When do REITs come in?

REITs will be introduced on 1 January 2007. From that date
any quoted property company will be able to convert to a
REIT if it fulfils the criteria set out by the government and
pays a conversion charge.
All the large retailers such as Tesco, Sainsbury's and Marks

& Spencer have significant property portfolios and will be
considering putting them into a REIT. Other likely
candidates include BAA, Wyevale Garden Centres, Luminar
and any companies that have significant property assets.
Before REITs are introduced, the draft legislation that was

outlined in last week's Budget will be published in detail in
the Finance Bill, which is expected in about a week's time.
The legislation will then go before a House of Commons
standing committee for approval, and is expected to be
granted royal assent by the end of the summer.
17
5. How does Land Securities become a REIT?
6. Who pays what to convert?
The main concern for Land Securities or other property

companies intending to convert will be ensuring they meet
the criteria for example, ensuring that 75% of their income
is from rental income or that their gearing is not above 80%.
The conversion itself should not be too arduous and unlike
when a company floats, there should be no need for
financial advisers to be appointed if the company is already
listed.
Conversion charge table
Simon Mellis is finance director of Hammerson, which

already holds assets in the French equivalent of a REIT.
When we converted in France, we had to get a listing on
Euronext, but we are already listed in London,' he says. It is
a question of electing to become one and then meeting the
conditions. It is not a particularly complex process.'
A company that is considering a REIT conversion will still
have to fill out tax returns, even though it will be tax-exempt.
If it is a private company, it will need to list on the stock
exchange.
Gross asset value

(bn)
Conversion
charge (m)
British Land
16.8
335
Land Securities
14.0
280
Liberty International
7.7
153
Hammerson*
6.5
91
Slough Estates
5.4
108
Brixton
2.5
50
Great Portland Estates
1.2
24
Derwent Valley
1.1
23
*30% of Hammersons portfolio is in a French REIT

Source: Citigroup
7. What is the downside to REITs?

With the euphoria that has engulfed the quoted property
sector in the last 10 days, you would be forgiven for thinking
that the entire sector was looking to jump on board the new
REIT vehicle as soon as it is introduced next year.
But there are several quoted property companies, such as
Quintain or Helical Bar, whose high level of development or
company structure will make conversion difficult. These are
likely to remain as traditional property companies, at least
initially.
REITs could be bad news for property unit trusts. Capital is
expected to be invested in REITs rather than in property unit
trusts, which have traditionally been offshore vehicles
designed to avoid tax.
With an onshore tax-exempt structure on offer, it is unlikely
that investors will choose to invest in property unit trusts, as
it is easier to remain onshore.
8. What will REITs do to the market?

The introduction of REITs will bring a huge boost to the
property industry. Citigroup predicts that the sector will
treble in size to around 100bn over the next five years.
Property companies that convert to REITs will trade at a
premium to net asset value, which will significantly increase
their market capitalisation and will lead to a far larger
property sector than exists today.
Companies that do not convert to REITs will see their
shares trading at much lower levels relative to net asset
values than those of their peers who have converted, and
18
shareholders will suffer as companies will be paying higher

levels of tax than their counterparts.
for the long term rather than selling them, leading to a lack
of liquidity in the investment market.
The investment market, which has seen yields continuing to

fall to record lows across all sectors, is likely to become
even more competitive as property companies become
more acquisitive in preparation for REITs.
But Hughes remains confident, saying: Regardless of who

owns the assets, there will always be room for our
profession as long as we can prove we are needed.'
To take advantage of the predicted boom in the property
market when REITs are introduced, agents need to
familiarise themselves with the basic rules and regulations
surrounding the new vehicle to ensure they are best placed
to advise the new vehicles.
Cash cannot be held in a REIT, so there will be increasing

pressure for REITs to reinvest money they receive from
disposals, which will add to the strength of the investment
market.
The leasing market is unlikely to be affected to the same
extent as the investment market, as REITs will not bring
significant changes to occupiers or to developers.
10. Will REITs be overvalued?

Although the property industry has been clamouring for
REITs, they will not necessarily be a safe bet for investors
when they are introduced next year.
9. I am an agent. What do REITs mean for

me?
The already overheated investment market will only become

more competitive as companies become more acquisitive to
prepare for REITs, meaning that investors could be caught
out buying into the property sector at the top end of the
market.
REITs are good news for property agents as they will

encourage more money to enter the property market.
Alastair Hughes, chief executive officer for Europe at Jones
Lang LaSalle says: In the short term it could lead to more
transactional activity as the big players who want to
establish themselves as a REIT with one particular area of
expertise for example, London offices or shopping centres
want to bulk up in those areas.'
The fundamentals of the property industry will not change

it will remain a cyclical industry and although the upward
trend is continuing for now, it cannot go on forever.
With property shares already trading at an all-time high
following the Budget announcement, Morgan Stanley
property analyst Martin Allen warns that when REITs are
introduced, their shares will be overvalued.
There is a fear among investment agents that REITs could

buy up the majority of assets in a sector and then hold them
See the HM Treasury website to find discussion
documents and Finance Bill provisions covering the
introduction of REITs: www.hm-treasury.gov.uk.
A draft Statutory Instrument governing the operation of
UK REITs can be found at the HM Revenue & Customs
website
at
this
link:
http://www.hmrc.gov.uk/drafts/uk-reits.htm.
19
PFI refinancing
The refinancing of UK PFI contracts has become controversial because of windfall gains made by private companies at the
expense of public services. Back in May 2006, healthcare pressure group London Health Emergency said private companies
stand to reap profits of 3.3bn. Findings on this issue, following the Commons Select Committee on Public Accounts in April,
are reviewed in this item from Law-Now, CMS Cameron McKennas Online Information Service (received 9 June 2006).
Peter Coates of the PPP Unit (Department of Health) was

recently asked at a meeting of the International Project
Finance Association where the Department of Health now
stood in relation to the refinancing of PFI Projects in light of
the Select Committees criticisms. He answered that the
Treasurys view of refinancing was very robust in that PFI
contracts post July 2002 contain mandatory refinancing
provisions and contracts entered into prior to that period that
do not address refinancing in their provisions are governed
by the voluntary code.
The refinancing of PFI Projects continue [sic] to be a focus

of concern in the PFI sector. On one hand, the benefits to
both the public and private sector are clear; on the other,
reports such as that released by the National Audit Office
last April [2006], highlight concerns with the current
mechanisms that apply to refinancings (both specific
contractual arrangements (in accordance with PUK/OGC
guidance and otherwise) and the voluntary code that applies
where there are no contractual arrangements to share
refinancing benefit). Most recently, the Select Committee on
Public Accounts published their findings in relation to the
Norfolk and Norwich University Hospital refinancing which
were summarised with the damning sentence:
However, he also indicated that whilst the Treasury took this

robust view, they were not and would not be the civil
servants/Accounting Officers who appeared before the
Select Committee and that the Department of Health PPP
Unit were currently reflecting on their next steps.
We would not expect to see another Accounting Officer

appearing before this Committee defending what we believe
to be the unacceptable face of capitalism in the consortiums
dealings with the public sector.
Certainly, the criticism levelled at those appearing in front of

the Select Committee has been a cause of the current
paralysis in the refinancing market. There are a number of
projects in the health sector (and indeed other sectors)
where a refinancing option is being actively considered and
certainly the Department of Health is not publicly rushing
forward to conclude any of these. The National Audit Office
has noted that the refinancing market shows little recent
activity. It is clear that NHS Trusts with deficits are keen to
secure the financial benefits (either upfront or through a
reduced Unitary Payment) that a refinancing can offer.
Particular criticisms identified by the Select Committee

included:
the extension of the contract term notwithstanding

uncertainty regarding the services required from
the NHS over the next 30 years and the refinancing
increase in debt would be covered by termination
payments on Trust voluntary termination both of
which reduce the Trusts ability to terminate if (for
example) it wanted to fundamentally change the
service specification.
the significant increases to the internal rate of

return for the investors in the project.
the public sectors share of the refinancing gains

being unacceptably small (in the eyes of the Select
Committee) relative to the private sectors share.
It may well be that the increased public sector share in

projects signed post July 2002 (50% rather than the codes
voluntary 30% share) will make it easier to convince future
Select Committees that PFI Refinancings represent value
for money, but this is a conundrum yet to be resolved.
For further information from CMS Cameron McKenna
contact:
Andrew Ivison
London
+44 (0) 20 7367 3410
In considering this refinancing, the Trust bore in mind that

this project did not contain a contractual arrangement to
share in refinancing gains, the voluntary code therefore
applied and the share apportioned to the Trust was in
accordance with the voluntary code (30%). The position in
relation to termination payments is consistent with current
indications from various lenders that were they to refinance
a project and increase the level of debt, they would expect
that these sums would be covered by termination payments
in all circumstances where senior debt is paid out in full.
Despite adherence to the voluntary code, the Trust and the
Department of Health received the stinging rebuke above.
Nancy Eller
London
+44 (0) 20 7367 3412
Mark Oliver
London
+44 (0) 20 7367 2556
20
The Law-Now website can be accessed at www.law-now.com.
Recent articles about PFI refinancing can be found at the website of SocietyGuardian.co.uk via this link:
http://society.guardian.co.uk/privatefinance/story/0,,1771783,00.html.
Information about UK Government policy on PFI and PPP (Public Private Partnerships) can be found at the HM Treasury
website
via
this
link:
http://www.hm-treasury.gov.uk/documents/public_private_partnerships/
ppp_index.cfm.
21
LAW
Contaminated land liability
A recent High Court case concerning an old gasworks site, subsequently redeveloped for housing, establishes the principle
that the remediation of land contamination will, under a statutory transfer scheme, fall to the present owner even if it is not
the polluter. Martin Edwards and Justine Thornton, barristers at 39 Essex Street Chambers, explain in their article Left to
clear up the mess (Estates Gazette, 17 June 2006, pp. 16870).
A recent High Court judgment is the most important

contaminated land case to date involving the operation of
Part IIA of the Environmental Protection Act 1990. In R (on
the application of National Grid Gas plc) v Environment
Agency [2006] EWHC 1083 (Admin); [2006] 21 EG 130
(CS), the claimant company was challenging an
Environment Agency decision that it was liable for
contaminated land that it had inherited on the privatisation of
the gas industry. Although the claimant had not caused the
contamination, its predecessors had, and it inherited their
liabilities by virtue of a statutory transfer scheme.
Appropriate person
The claimant sought judicial review of the defendant's
decision. Forbes J dismissed the application but gave the
claimant permission to seek leave to appeal from the House
of Lords.
The basis upon which Transco was made liable is that the
contamination had been caused by one or more of its
statutory predecessor companies that had operated the site
until 1965.
The main issue turned on how "appropriate person" is to be
interpreted. Under the contaminated land regime, the
"appropriate person" is the entity that takes responsibility for
the clean-up. But is it to be interpreted, as the claimant
contended, in accordance with traditional company law
doctrine, whereby different companies have separate legal
personalities, so that the claimant could not be responsible
for the activities of another company? Or, as the defendant
argued, in the context of the contaminated land regime and
the purpose of transfer schemes? The policy underlying the
contaminated land regime is the "polluter pays" principle.
The defendant contended that parliament intended
responsibility for remediation to fall on the polluter, rather
than subsequent innocent owners or the public purse.
Meanwhile, the statutory framework for the gas industry
indicated that parliament had intended that there should be
a seamless transition between the succession of companies
operating the gas industry.
An ordinary story
The significance of this decision to the property industry is
illustrated by the ordinariness of the factual background.
The site was an old gasworks that, in 1966, had been
developed for housing, and now consists of 11 homes. In
2003, the land was designated as contaminated under the
contaminated land regime, after a resident discovered a pit
filled with a tar-like substance in his back garden. The site
had been operated by a succession of gas companies
dating back to the early 20th century. During this time, the
industry had been nationalised in 1948, reorganised in 1972
and then privatised in 1986.
Former gasworks sites have long been recognised as one of
the more troublesome contaminating uses because of the
nature of the associated contamination. The issues raised in
this case concern around 2,000 former gasworks sites,
approximately one-half of which had not been owned by
British Gas plc at the time of privatisation.
Forbes J agreed with the defendant. He held that the

relevant provisions of the contaminated land regime had to
be given a purposive construction. Where assets, rights and
liabilities transfer under a clear chain of statutory provisions
that ensures continuity, parliament's intention that
responsibility for contamination should be borne by the
original polluter would best be furthered by construing the
term "appropriate person" as including, not only the original
polluter but also its statutory successors.
The defendant agency had taken over responsibility for

regulating the site because the pollution involved the
contamination of groundwater. It identified the gas industry
collectively, and the claimant in particular, as being liable for
the clean-up, along with the company that had built the
housing development. Since the latter no longer existed, the
defendant took the view that it could not ask the claimant to
remediate the site. Instead, it carried out the clean-up works
itself, using public funds, and sought to recover one-half of
the cost from the claimant. The defendant would not
exercise its power to recover the cost from the
owners/occupiers of the housing development on the basis
that they had purchased the land in good faith and with no
knowledge of the contamination.
The decision has significant financial implications for the

claimant; the estimate for remediation was up to 700,000.
A common grievance
This situation is not rare, involving, as it does, ongoing
activity by an undertaking that has led to contamination, but
where the identity of the body carrying out the activity has
changed so that the original body (or bodies) whose act or
22
statutory construction based upon various ministerial

statements made at the time the legislation was passed.
acts caused the contamination no longer exists. Such

bodies include public or private undertakers in sectors such
as utilities and railways; local authorities that have operated,
for example, landfill sites and government departments that
have been subject to statutory reorganisation. In these
cases, the changing identity of the body has been effected
by, or has involved, the statutory transfer of its property
rights, liabilities and obligations. The decision will have
particular resonance with professionals, especially property
lawyers, who advise clients wishing to purchase, develop or
occupy such sites.
In this particular case, the wording of the relevant transfer

scheme in the privatisation legislation is contained in section
49(1) of the Gas Act 1968. This provided that all property,
rights and liabilities to which the British Gas Corporation was
entitled or subject immediately before the transfer date
became the entitlement or responsibility of the privatised
company. The issue, therefore, was whether the reference
to liabilities referred to crystallised liabilities or contingent
liabilities. Although the judge did not rule specifically on this,
it must be taken to refer to contingent liabilities; that is,
where the acts/omissions giving rise to the liability have
taken place even if the liabilities have yet to crystallise.
The claimant is not the first to express a sense of grievance

at the retrospective imposition of liability for activities that, at
the time they were carried out, were lawful. An illustration of
this is where land was remediated many years previously in
accordance with the then best practice but where standards
changed so that the company involved becomes liable for
further clean-up. The claimant's further grievance was that it
had not caused the contamination but had inherited the
retrospective liability.
In considering the effect of the transfer scheme, the judge

focused on Walters v Babergh District Council (1983) 82
LGR 235, which concerned an action for negligence and/or
breach of statutory duty under the Public Health Act 1936.
There, Woolf J held that "liabilities" should be construed to
include "contingent or potential liabilities" on the basis that
the public should be able to look to the new authority or
company regarding those matters in respect of which it
could have looked to the old authority or company. Put
simply, the public's position should be no better or no worse.
Important decision
This may seem hard, but it is one could argue an inevitable
consequence of a regime that was designed to ensure the
clean-up of the country's historic legacy of contaminated
land.
Implications
The provisions of transfer schemes on the transfer of
liabilities tend to use the same wording. If this decision
survives the appeal process, it could have significant
implications for other sectors, including power, railways and
telecommunications. However, it may be unclear whether
the relevant statutory transfer scheme intended to transfer a
"liability" that did not exist at the time of the scheme, to the
extent that it arose decades in the future out of legislation
that was not even envisaged at the time the scheme was
enacted.
National Grid is important because the court has opted for a

purposive construction of the regime and the policy intention
to make the polluter pay for clean-up. It is the first success
for the regime on its own terms, and also the first real
indication of why the regime, with its concept of
retrospective liability, was a significant legal development.
This is also thought to be the first time that the House of
Lords decision in Pepper (Inspector of Taxes) v Hart [1993]
AC 593 has been used to win an environmental case. Their
lordships ruled that, in specified circumstances, the rule
against allowing courts to refer to parliamentary material as
an aid to construction could be relaxed. Forbes J thus
accepted the defendant's arguments on the issue of
The case serves as a timely reminder of the potency of longtail liabilities associated with contaminated land.
23
Multi-letting liabilities
A recent legal case found a building occupier, which just happened to be a firm of architects, liable for injuries caused by a
defective lift even though the occupier was not responsible under its lease for maintenance of common areas. How can this
be? Sean McAllister and Mark Shepherd explain in this item for Property Direct (the occupier magazine of Property
Week, 09.06, p. 1).
Small businesses renting office space in multi-let buildings

could face huge legal bills and damages claims for failing to
ensure the common areas meet maintenance obligations.
PRP argued that the lift was not work equipment but part of
the building itself and that under its lease, the landlord was
responsible for repairing the lift.
The wake-up call comes from the outcome of a legal case

where an office occupier, and not the landlord or managing
agent, in a multi-let building was successfully sued for not
maintaining a lift in the common part of a shared building.
But the court decided that work equipment had a wider

definition that included lifts within the common parts of a
shared building. It noted that PRP could have taken steps
under the lease to require the landlord to maintain the lift.
The Court of Appeal found PRP Architects, which occupies

offices on the second floor at 1 Lindsey Street, London EC1,
liable for injuries suffered by its receptionist, Ms Reid, when
she used the office lift in the common parts of the building
(PRP Architects v Reid, 28 July 2006).
Its a stark reminder to occupiers, said Gary Cassidy,

consultant at law firm Lovells. You must not think your
responsibility ceases beyond your doorstep, even if you
have no primary control.
He said tenants of multi-let buildings must ensure their
landlords comply with their repairing obligations to avoid
liability for any injuries suffered by one of their employees as
a result of any defective equipment in the common parts of
the building they occupy.
Reid suffered serious injuries when her hand and arm were
caught in the lift door. She sued her employer, PRP, for
failing to maintain the lift equipment. Safety devices, which
would have prevented the accident, were not in operation.
Jonathan Ross, head of property litigation at law firm

Forsters, said that depending on whether Reid could return
to work, the payout could be enormous.
Despite having no responsibility for the repair of the lifts, the

court held that PRP was liable under the Provision and Use
of Work Equipment Regulations 1998 and had to pay
damages likely to be a five figure sum. Under the
regulations, every employer is required to ensure that work
equipment is maintained in good order and repair.
Small businesses should make sure their insurance covers

the possibility of claims like this being brought against them,
he added.
A case commentary can be found at the Law Gazette
website. Use the link below or go to
www.lawgazette.co.uk, choose Archive and enter the
case name and date in the search facility.
http://www.lawgazette.co.uk/inpractice/lawreports/v
iew=details.law?GAZETTEINPRACTICEID=298949
24
RESIDENTIAL
HMO licensing
Mandatory licensing of houses in multiple occupation (HMO) came into force for the whole of England on 6 April 2006, under
Statutory Instrument 2006 No. 372. A summary of the main provisions is given in this article from The Estate Agent (April
2006, p. 22), the journal of the National Association of Estate Agents (NAEA).
To grant a licence the local authority must be satisfied that:
There has been a great deal of confusion about what

constitutes an HMO and the ODPM (Office of the Deputy
Prime Minister) awareness campaign has not exactly helped
the situation with their publicity which stated that landlords
without a licence could not collect rent without qualifying
the statement with words like but only if its an HMO.
The ODPM said that it would not change the campaign and
that they wanted landlords to check and be sure whether
their properties came under the new scheme.
The recent ODPM press release included the following
information:
the proposed licence holder, the landlord or

managing agent, are fit and proper people
properties
and
satisfactorily
the accommodation meets all minimum standards

such as sufficient number of toilets, kitchens,
basins and bathrooms for the number of residents
tenancies
are
managed
Local authorities can attach additional conditions when

issuing licences.
Properties that fall under the new legislation are those with
three or more floors and five or more tenants belonging to
two or more households. In practice, this mainly means
bedsits and student houses.
Definitions
Raising the standard of properties in the private rented

sector is the key driver behind the Governments
introduction of licensing. HMOs provide a much needed
supply of affordable housing; however tenants in larger
shared housing are often vulnerable to poor housing
conditions. Added to this, it is estimated that less than 5 per
cent of landlords in England are members of a professional
association. With many more landlords operating with just
one residence and without being attached to any official
body or association, licensing should also serve to
encourage more professionalism in the sector.
Applications for a licence can be made from 6 April 2006
and operating without having applied for one by 3 July 2006
is a criminal offence. Failing to comply carries significant
penalties with landlords or letting agents facing fines of up to
20,000, a criminal record and potentially, rent repayment
orders.
To assist in determining whether or not a property is liable
for licensing and to provide guidance on the application
process, the Office of the Deputy Prime Minster (ODPM)
has launched a website www.propertylicence.gov.uk. It also
contains general information and sets out to answer
questions anyone involved may have.
The introduction of licensing will encourage greater
collaborative working between the private rental sector and
local authorities and standardise existing accreditation and
registration schemes, making the process simpler for all to
understand. Local authorities will be expected to give
landlords support to deal with the increased responsibility
they face under licensing.
1.
Definition of a household For the purposes of

licensing a household comprises any tenants who
are members of the same family living together
including couples (whether or not they are married),
relatives and half-relatives or step-relatives, adopted
and fostered children. A group of friends sharing a
house will not be a single household.
2.
What constitutes a fit and proper person? The

licence application form asks landlords and agents
for details of any unspent convictions for the
following offences:
Any offence involving fraud or other

dishonesty, or violence or drugs or any
offence listed in Schedule 3 to the Sexual
Offences Act 2003
Any unlawful discrimination on grounds of

sex, colour, race, ethnic or national origins
or disability in, or in connection with, the
carrying on of any business;
Contravention of any provision of the law

relating to housing or of landlord and tenant
law; (including any civil proceedings that
he/she has lost)
Failing to declare unspent convictions is a criminal

offence and will be subject to a fine of up to 5000. It is
also likely that that if a licence holder fails to reveal an
unspent conviction and it subsequently comes to light,
any licences held could be denied or revoked. Having an
unspent conviction for one of these offences does not
25
automatically mean that a landlord or agent will be denied

a licence. Each application will be considered on its own
merits. The circumstances of an offence and its
relevance to the licence application should be taken into
account. Legislation indd 2 31/3/06 10:26:02
This article has been reproduced by kind permission of The
Estate Agent magazine. For further details about this
publication go to www.naea.co.uk/events/publications.asp.
A full copy of Statutory Instrument 2006 No. 372, The
Management of Houses in Multiple Occupation
(England) Regulations 2006, can be found at the
website of the Office of Public Information,
www.opsi.gov.uk,
via
this
link:
www.opsi.gov.uk/si/si2006/20060372.htm
A number of local authorities have published
documents detailing additional conditions that they
will attach to HMO licences. Check the website of the
local authority in the area you work in to find details.
UK local authority websites can normally be found
using the name of the council, usually the main town
in the area, for example www.bromley.gov.uk. As an
example, Bromley has designated an additional
licensing scheme and details can be found at this link:
http://www.bromley.gov.uk/housing/enforcement/
houses_in_multiple_occupation_public_legal_not
ice.htm.
CEM Research
Energy efficiency and HIPs
This press release from the College of Estate Management in September 2006 reports why Energy efficiency will become
an HIP issue for homeowners.
From 2007 the energy rating will become an essential
part of the house buying process, with the idea that the
homeowner is presented with enough information to
decide on cost-effective solutions when investing in
energy efficiency. As this will disclose new
environmental information related to the house purchase
before a sale is agreed, property values will undoubtedly
be questioned.
House purchasers are likely to pay more for energy

efficient homes according to preliminary research
undertaken at the College of Estate Management.
The research undertaken in response to this years RICS
Environmental Faculty Research Award found that the value
of energy efficiency amongst householders is set to increase
once energy ratings for residential property are introduced
next year. The principal researcher and prize winner, Mike
Waters, based at the College of Estate Management, stated
that these results indicate that purchasers will seek to
negotiate a reduction in price for homes that have a poor
energy rating, once purchasers are equipped with a greater
amount of information on a homes environmental
performance. He went on to comment that:
Energy Performance Certificates are being introduced in the

UK in 2007 under EU Directive 2002/91/EC4 and will
provide a useful mechanism for making recommendations
on the environmental performance of residential property.
The Certificate will include reference to current legal
standards and benchmarks in order to make it possible for
consumers to compare and evaluate the energy
performance of a particular residential unit. Furthermore, the
Certificate will be accompanied with recommendations for
the cost-effective improvement of energy performance.
Consumers will welcome the additional environmental

information supplied and it appears from these early
results that energy performance certificates will raise
public awareness on residential energy improvements
26
The research stated that amidst rising energy costs, the

availability of energy efficient products, in both new and
older property, is becoming increasingly important and
therefore the potential for financial savings from greater
energy efficiency could be a key driver to marketing ecoproperty. Mike Waters concluded that:
The introduction of Energy Certificates may also
successfully raise the profile of energy efficiency
upgrading, leading homeowners and potential
purchasers to see it as a sound capital investment.
Photograph: Mike Waters (right) receiving the
congratulations from Ben Elder, Director of Business
Development at the College of Estate Management.
The full paper can be accessed on the College of Estate
Managements website at www.cem.ac.uk. For further
details please contact Mike Waters on 0118 921 4688
or at m.waters@cem.ac.uk.
27
MANAGEMENT
Research
The out-of-town retail sector

In July 2006, Verdict published its research report UK Out-of-Town Retailing 2006, examining the latest changes for this
sector driven by both the market and retailers, including trends over the last 10 years and extensive sector-by-sector fiveyear forecasts and analysis. Christine Eade takes a look at the Verdict prediction that supermarkets will drive recovery in
the out-of-town retail sector (Property Week Supplement, 21.07.06, p. 35).
But the report concludes: The underlying retail landscape is

set to improve.
Recovery play
Until this year, research into the retail warehouse market
published graphs that defied gravity.
It argues that retailers including B&Q, MFI, Currys and

Comet are slowing their store expansion programmes to
improve performance in existing stores. A graph in the
report shows that shoppers are likely to spend more in every
type of shop on retail parks.
Rents increased, and tenants and investors wanted to add

to the space they already had. The fact that the
development pipeline was emptying only served to fuel
demand from those who wanted to invest in or occupy
space.
The driver in the supermarket sector is Tesco, according to

Alastair Lockhart, Verdicts senior retail analyst, who
compiled the report.
Then researchers began to publish the bad news. This

spring, Savills predicted in its Retail Warehousing Bulletin
that the relatively dull turnover in the housing market will act
as a drag on retail spending growth out-of-town, particularly
amongst those retailers who are most dependent on house
moves to drive their sales.
You have got to look at the number of extra stores Tesco is

going to introduce over the next few years, he says. And
Sainsburys, which was concentrating on putting its house in
order, has now started to focus on out-of-town development
more aggressively.
Then last month, Colliers CREs Midsummer Retail Report

identified 9m sq ft (836,120 sq m) of empty retail
warehouses, both newly built and abandoned by retailers,
leading to a 7% vacancy rate.
He believes that the supermarkets non-food concepts will

account for the extra out-of-town sales in the general
merchandise category.
Lockhart says: ASDA hasnt got such a strong pipeline for
supermarket developments, but it intends to roll out Asda
Living. Tescos new format, Tesco Home Plus, should also
drive sales of general merchandise, along with Halfords,
which sells car parts.
Stuart Anderson, a director of Jones Lang LaSalle, believes

the figure could rise, explaining: There are tenants who are
willing to move away for a payment from their landlords.
With a small premium, they would trade down into smaller
units.
Lockhart attributes the predicted comeback in furniture and

floor covering to Ikeas expansion. He explains: Ikea has
comparatively few sites in the pipeline, but the new stores
will be large and will incorporate a more upmarket format.
And it will have competition from Ilva.
But last week it seemed that retail warehouses were back

on track and once again attracting rave reviews.
Co-operative attitude
Verdict Research, which has the co-operation of 200
retailers, published its annual out-of-town retail report,
predicting that sales from retail warehouses could increase
by 27.3% over the next five years to 109.2bn (see chart
[opposite]).
This is going to reverberate round the out-of-town market,

so that the smaller players will have to take notice. This
market has not been well catered for, and has been hit badly
by weak consumer confidence and a weaker housing
market. Now there is scope for people to replace their
furniture and they are beginning to do it.
Last year, Verdict concedes, was the toughest on record for

the sector. Retailers increased their sales by only 3.8% to
85.8bn, compared with the average over the previous five
years of 6.2%. The closure or part-closure of five furniture
chains caused 200 retail warehouses to come on to the
market.
Lockhart is equally upbeat about the electricals market now

that plasma screen televisions have reduced in price.
Sales in DIY superstores fell by 2% last year, but Lockhart
predicts a recovery because the sector has stopped rolling
out a big-box format and increased sales densities from less
space.
28
retailers like River Island will restrict their expansion to

fashion parks.
The projected increase in the sale of clothes and shoes from

retail warehouse parks during the next five years, because
of planning laws to protect the high street, seems ambitious.
But Lockhart says fashion retailers will find space although
not necessarily the most attractive space. Space will be
created when bulky goods retailers, trading from a retail
warehouse with open A1 consent, move to units with a
restricted consent, thus freeing their old stores for fashion
retailers.
The retail warehouse park fraternity is unaccustomed to

setbacks, and will welcome the Verdict report. But the
question remains whether, given strict planning laws, the
growth of the internet and stagnant retail sales, retail
warehouses can once again defy gravity.
He believes that Next, New Look or TK Maxx will trade well

away from the coveted fashion parks, although some
Details about obtaining the full report can be found at
the Verdict website www.verdict.co.uk. Be warned
its not cheap.
29
Repairing obligations
Repairing obligations to main structures can fall either on the tenant or the landlord, but drafting the lease provisions is not
easy and if the wording is open to interpretation the parties can ultimately end up in court. Sandi Murdoch, senior lecturer in
law at the University of Reading, shows why it is so important to examine each lease very carefully in relation to the
allocation of repairing liability (Estates Gazette, 10 June 2006, p. 163).
should not apply to structures that fall entirely within the

envelope of a unit and exclusively serve that unit.
Key points
The meaning of "main structures" depends upon its
context in the lease as a whole
As Neuberger LJ pointed out, this would require words to be

implied into the covenant, which he did not think was
appropriate in this case. The lease did, elsewhere, limit
certain obligations to items other than those serving only
one flat; had the parties wished to achieve a similar effect
here, they could easily have done so.
It is not desirable to try to apply rigid meanings to

particular words
The drafting of lease provisions under which repairing
obligations are allocated between landlord and tenant is
fraught with difficulty. The number of cases in which the
courts are asked to decide whether particular work is the
responsibility of one party or the other is a fair indication that
these drafting problems are not always overcome.
He also thought that, in any event, it would be difficult in

practice to identify items that serve only one unit. Here, for
example, the floor joists, although situated within one unit,
gave structural support to the partition walls of other flats.
He therefore concluded that there could be no implied
limitation on the words used and that the outcome hinged
purely upon whether the joists formed part of the "main
structures of the Property".
In the most recent of these Marlborough Park Services Ltd

v Rowe [2006] EWCA Civ 436; [2006] 23 EG 166 (see p166)
the Court of Appeal has re-emphasised that, ultimately,
the meaning of words depends upon their context and that
previous case law should not be slavishly followed.
Main structures
Cracks in the walls
Counsel for the appellant pointed to Toff v McDowell (1993)

69 P&CR 535, where it was held that the landlord's
obligation to repair the "main structure" did not extend to the
floor between two flats. However, equally, there were other
cases, such as Hallisey v Petmoor Developments Ltd [2000]
NPC 114 and Ibrahim v Dovecorn Reversions Ltd [2001] 30
EG 116, where balcony floors were held to be part of the
main structure. In the Court of Appeal's view, these cases
merely emphasised the need to consider the wording of
each lease in its context. For example, in the present case,
the wording used was "structures" rather than "structure",
and thus might, in any event, be subtly different.
The respondents in Marlborough were the tenants of a

ground- and first-floor maisonette on an estate in
Washington, Tyne and Wear, under a long lease granted in
1981. Cracks appeared in their first-floor walls (and in those
of a number of the other maisonettes), which were found to
have been caused by movement in the wooden floor joists
between the ground and first floors.
These joists not only supported the floor but also provided
lateral support to the partition walls between the
maisonettes. A structural engineer maintained that, without
remedial work, there was a risk that the floor would partially
collapse and the support for the walls would be reduced.
Under the terms of the lease, the appellant was obliged to
maintain, renew and decorate the roofs and "main structures
of the Property". The tenants' covenants included the
obligation to keep the "demised premises (other than the
parts thereof referred to in [the landlord's covenant]) in
good and tenantable repair".
Neuberger LJ had no doubt that the joists formed part of the

"structure". The approach adopted in Irvine v Moran [1991] 1
EGLR 261 was commended as "a good working definition to
bear in mind, albeit not one to be followed slavishly". This
makes it clear that the structure consists of those elements
that give a building "its essential appearance, stability and
shape [it is not limited] to those aspects which are loadbearing but must be a material of significant element in
the overall construction".
The issue for the court was whether the obligation to repair
the joists fell within the tenants' covenant (in which case the
respondents would have to fund the entire works) or the
landlord's (so that the cost would be covered by the service
charge and therefore shared by all the tenants on the
estate). The trial judge decided that the joists formed part of
the "main structures" and thus came within the appellant's
responsibilities. The latter appealed.
Not just structural

However, it still had to be decided whether the joists were
not just structural but formed part of the "main" structures.
Although this was to some extent a matter of impression, the
Court of Appeal concluded that they were part of the main
structures:
The appellant's first contention was that the words "main

structures" should be qualified so as to cover only those
items that come within the ownership and control of the
landlord or that serve more than one unit. The expression
they play a significant part in keeping the building stable and

sound in that they provide a degree of support for the walls.
Their failure would impinge directly on the effectiveness of
30
the walls and, therefore, ultimately on the integrity of the

building. They would be regarded by any ordinary person as
an essential part of the building While they are not "main"
to the same degree as external walls or the roofs, they are
certainly more "main" than, say, the floorboards or even
completely non-load-bearing internal partition walls
Because of their structural function the management
company and the tenants would be more likely to have

expected [their] maintenance to be the responsibility of the
management company rather than individual tenants. This
point is reinforced by the fact that the work in question would
be tolerably substantial and would be to the benefit not
merely just to the one tenant of one unit but to the tenants of
a number of units.
Break clauses
Material compliance with the lease provisions is often a precondition to a tenant's right to break. Case law on this issue is
sparse, but a recent judgment sets out the legal test, as discussed here by Sandi Murdoch, senior lecturer in law at the
University of Reading (Estates Gazette, 13 May 2006, p. 171).
The lease gave the tenant a right to break on 1 April 2004

that was conditional upon it having "materially complied"
with all obligations up to the break date. In order to ensure
that its break was effective, the tenant had appointed a
surveyor to advise on, and then oversee, all repairs that
were necessary to achieve material compliance. The
landlords had been invited to participate in this exercise but
had declined to do so. The tenant spent almost 1m on
works to the building but, after it vacated, the landlords
immediately alleged that the lease was not at an end
because of substantial breaches of the repairing obligations.
Key points
Materiality must be assessed by reference to the
landlord's ability to relet or sell without delay or additional
expense
Material compliance does not permit simply trivial
breaches
Subjective considerations are irrelevant
In the bad old days, a tenant's right to break was usually
made conditional upon the tenant performing its obligations
under the lease. This meant that even the most trivial of
breaches (classically of the tenant's repairing or
redecorating covenant) would prevent the exercise of the
break.
The trial judge considered the one previously reported

decision on the legal effect of a precondition that requires
that there shall be "no material breach", namely Commercial
Union Life Assurance Co Ltd v Label Ink Ltd [2001] L&TR
29. There, Judge Rich had been satisfied that the
qualification of "no material breach" was intended to mitigate
the rule requiring strict compliance with the lease covenants
so that the right to break was not lost because of a trifling
breach. He went on:
As tenants have got wiser and breaks have become more

prevalent, this practice has changed. Either the break is
subject only to the requirement that the tenant has paid the
rent, or the tenant is merely obliged to be in "substantial" or
"material" compliance with its covenants. Surprisingly, the
case law on this modification has been sparse, but a case
upon which we commented (EG 14 January, p109) Fitzroy
House Epworth Street (No 1) Ltd v The Financial Times Ltd
has just been considered by the Court of Appeal ([2006]
EWCA 329; [2006] 19 EG 174 (see p174)), and its ruling is
of unquestionable importance.
[A] breach is material if, but only if, having regard to all the
circumstances, and to the proper efforts of the tenant to
comply with his covenants, as well as the adverse effect on
the landlord of any failure to do so, it will be fair and
reasonable to refuse the tenant the privilege which the lease
otherwise grants. The extent of any breach, the practicality
of quantifying the damage arising out of it, the efforts made
by the tenant to avoid it, the genuine interest which a
landlord had in strict compliance are all material factors in
determining materiality.
Had the break been operated?

The issue for the court in this case was whether the tenant
had successfully operated its break. The outcome had
significant financial implications. At the break date, the
market was at its nadir. If the tenant failed to terminate, it
would be liable for some 2.5m rent, unless it could dispose
of the lease. If the lease were at an end, the landlords faced
an uphill task in finding a tenant for premises that they had
not sought to market since the tenant's departure in April
2004.
Reasonable steps
Judge Thornton, sitting as a judge in the Technology and
Construction Court, thought that Judge Rich's approach was
correct and equally applicable to the present case. Having
considered the alleged breaches, he concluded that each
had been minor and that even when taken together they still
31
amounted to trivial breaches of the repairing obligation. He

regarded it as highly relevant that the tenant had taken all
reasonable steps to comply with its obligations and that the
landlords had unreasonably declined to become involved
and had chosen to see whether they could catch out the
tenant on a technicality. He thought that the outstanding
defects did not affect the landlord's prospects of reletting or
the terms that could be achieved. He therefore ruled that the
tenant had successfully operated the break.
expense. Where the provision is absolute then any breach

will preclude an exercise of the break clause. But I see no
justification for attributing to the parties an intention that the
insertion of the word "material" was intended to permit only
breaches which were trivial or trifling Nor is it, in my view,
of any assistance to consider whether the word "material"
permits more or different breaches than the commonly used
alternatives "substantial" or "reasonable". The words
"substantial" or "material", depending on the context, are
interchangeable. The word "reasonable" connotes a
different test.
Correct test
The landlords appealed, arguing that the trial judge had
applied the wrong test and that he had drawn incorrect
inferences from the evidence on the materiality of the
breaches. Sir Andrew Morritt, Chancellor of the High Court,
examined the authorities and agreed that the trial judge and
Judge Rich in Label Ink had applied the wrong test. A
precondition relating to material breaches is certainly
intended to modify the strict rule but not by reference to
subjective criteria, such as what is fair and reasonable. In
his view:
The decision of Judge Thornton could not therefore stand

since he had taken into account irrelevant considerations
such as the behaviour and motives of the parties. This
meant that the Court of Appeal had to apply the correct test
to the facts as found by the judge. The Chancellor did not
think that the landlords' criticisms of these were well
founded. The findings showed that the landlords' ability to
relet the property had not been impeded by the outstanding
breaches. Accordingly, the appeal judges were satisfied that
there were no material breaches and that the break had
been effective.
Materiality must be assessed by reference to the ability of

the landlord to relet or sell without delay or additional
Negotiating lease renewals

In the UK the Landlord and Tenant Act 1954 has been the bedrock of business tenancies since its introduction. However,
landlords and tenants are increasingly spurning the 1954 Act in favour of negotiation. Paget Lloyd, director of landlord and
tenant services at Nelson Bakewell, asks is this An act whose time has come? (Property Week, 25.08.06, pp. 6061).
At Nelson Bakewell the end of our financial year, 30

September, is fast approaching.
more than 12 months from the date of lease termination,

which for many investors and occupiers, is simply too late.
This year has confirmed a noticeable trend of the last four

within the landlord and tenant team: while annual fee
income is up, the percentage derived from lease renewals
continues to fall. This shift has prompted me to consider the
factors changing our workload.
From an investors perspective, the potential for voids

associated with lease expiries damages investment values.
Simply waiting to see what happens is too passive an
approach, particularly given that portfolio valuations project
up to five years ahead.
The Landlord and Tenant Act 1954 remains the fundamental

piece of legislation that governs the renewal of business
tenancies in England and Wales. Despite being revamped
as recently as June 2004, its relevance is called into
question by occupiers and investors as their approach to
lease renewals becomes increasingly sophisticated.
Mature relationship
On the other hand, occupiers want to match their lease
liabilities to their business strategies and need to budget for
capital expenditure on real estate and for wider decisions
relating to their occupational portfolio.
These days, investors and occupiers enjoy a more mature
relationship and, in many cases, try to understand each
others needs and objectives, and recognise the value of
acting in partnership for mutual benefit.
It is widely accepted that lease renewal under the 1954 act

[sic] can be costly and time consuming. Formal notices must
be served at prescribed intervals, and legal advice, expert
testimony and court time may be needed to reach
agreement, all of which can incur hefty fees.
By contrast, a renewal process under the 1954 act that may

ultimately involve the court does nothing to enhance the
relationship for either party. The result is that renewal
discussions outside the framework imposed by the act are
The process is often adversarial and inefficient. In addition,

there is an element of brinkmanship: notices are served no
32
now far more commonplace. Some of our investor clients

initiate up to 75% of their renewals early and by negotiation.
For leases entering the last five years of their lives, there is
a growing desire to talk early.
Ten years on, portfolios are tightly matched to operational

requirements. Property occupation and budgeting is also
more highly organised.
Although it is possible to do this within the 1954 act renewal

framework, the restrictions imposed by the OMay principle
which requires that the terms of a new lease generally follow
the terms of the existing one put the onus on the party that
proposes a change to show that it is fair and reasonable
(OMay v City of London Real Property Co, 1983).
Speed dating
The difficulty is compounded by an impending court date,

which can be used to put pressure on the other party should
they oppose the proposal. In instances where the tenant
initiates the discussion well before expiry, say three years,
the landlord becomes aware that a tenant is organised and
may choose to look elsewhere if it is unable to secure the
terms it requires. Crucially, it also has time to do so.
Similarly in the retail sector, the cost and regularity of shopfitting in an ever-more competitive environment means that
certainty of lease length is increasingly important.
At the same time, occupiers businesses are evolving ever

faster. Most industries are high-tech and the average fit-out
spend on a building is much higher than it would have been
10 years ago, so investment on leasehold property must be
matched by an appropriately long lease.
An illustration of the changing landscape is found at the

Cadogan Estate, which owns large parts of the Kings Road
and Sloane Street, in central London. A high percentage of
new lettings and renewals now involve 10-year leases
outside the 1954 act. Both landlords and tenants see the act
as superfluous to the negotiation of new lease agreements
and possibly even obstructive to the development of a
valuable landlord and tenant relationship.
On the other hand, if a landlord has redevelopment plans

that do not coincide with expiry of the lease and which,
therefore, would not secure it possession under the act, the
issue can be factored early into the discussions, which then
have a better chance of a successful outcome for both
parties.
That these leases often include annual rental increases

linked to the Retail Prices Index, rather than upward-only
rent reviews, is a powerful sign that the beginning of
landlord and tenant relations based on mutual benefit rather
than mutual antagonism is here to stay.
While these issues existed 10 years ago, there has been a

fundamental shift in attitude towards property investment
and occupation by landlords and business over the last five
years. Investors portfolio valuation criteria look further and
further ahead for long-term, high performance. On a large
property occupied by a good-quality covenant, the
uncertainties of a lease expiry represent the potential for
huge loss of income and capital value.
Despite this shift, most new leases are still drafted within the
terms of the 1954 act. It is simply too good a safety net for
tenants to lose, in terms of security of tenure, and too
powerful a tool for the landlord to lose in terms of gaining
possession. For these parties, the act remains a
fundamental and relevant piece of legislation.
Rather than wait for a possible void period, investors are

keen to take the initiative, manage the situation in advance
and remove any possible negative impact on value. The
hope is that discussions will dovetail with similar concerns
on the occupier side as the lease enters its final phase.
Nevertheless, more and more lease renewals will be agreed

by negotiation well before contractual expiry, particularly
within the institutional sector. We manage large landlord
portfolios, which, in previous years, have produced plenty of
lease renewal instructions. Now we find that many expiries
have been the subject of early, negotiated renewals outside
the act, leaving landlord and tenant surveyors with relatively
few lease renewals to deal with.
This shift in investor outlook has been matched by

occupiers, who are now more forward-thinking about their
property needs. The average occupier 10 years ago
probably had a far larger portfolio with a higher proportion of
freeholds, often with built-in surplus to boot. On top of this,
they were probably more fatalistic about what happened at
lease expiry.
Most clients, both investors and occupiers, will demand this

type of forward-looking asset management-based advice in
the future.
33
Statutory Instrument 2004 No. 1005, which covers the
notices to be served under the 1954 Act can be found
at this link: www.opsi.gov.uk/si/si2004/2004
1005.htm.
Guidance on procedures under the 1954 Act can be
found at www.communities.gov.uk/index.asp?
id=1163444.
Note: The Department for Communities and Local
Government (DCLG) was formerly the Officer of the
Deputy Prime Minister (ODPM).
34
PLANNING
Design and access statements
In the UK, design and access statements must now accompany most planning applications. The statements are intended to
explain how applications comply with policies and standards and will certainly involve applicants in producing greater
amounts of paperwork, but will they aid or hinder the planning process? Chris Baker investigates (Planning, 4 August 2006,
p. 16).
From [mid August 2006, it became] mandatory for the

majority of planning applications to be accompanied by
design and access statements.
are the options we have considered.' Then planning officers

or the community can look at it and see the thinking behind
the application."
The statements, required under section 42 of the Planning

and Compulsory Purchase Act 2004, are intended to show
how developers have tailored their schemes to the wider site
context. But Planning's recent online survey of the quality of
applications (Planning, 30 June, p14) suggests that many
planners are already worried about performance in this area
(see panel).
Scott compares the process to a maths exam. "You need to

show your workings so that the examiner can see how you
got to the answer or where you went wrong," he explains.
"Planners can look through the statement and see where
the scheme has complied with or departed from the relevant
codes or policies."
The statements are not meant to represent an onerous task,
he points out. "Developers have been producing similar
documents for a while. It just makes sense to show that you
have considered all the options when you make an
application. They are only a tool. They cannot guarantee
that the end product will be better."
Design statements already arrive with many applications,

either because the local authority requires them or the
developer or architect supplies them as good practice. Now
all major proposals excluding householder, change of use
and engineering and mining operations will be required to
have one.
It remains to be seen whether the industry has its toolbox in

order. Several respondents to Planning's survey queried the
value of the latest requirements. They voiced concern that
statements reveal too few clues about how proposals have
been pieced together and complained that the site context is
too often ignored.
Applicants will have to explain how their developments

tackle a wider range of issues. Statements will need to detail
how the scheme has been designed and account for the
amount of development planned. They will explore how
buildings and public spaces will be arranged on the site and
the relationship between them.
The scale, appearance and landscaping of the development
will have to be explained. Developers will need to show how
their plans cater for disabled people in the use of individual
buildings and across the whole site. Statements will have to
take on board vehicular and transport links and inclusive
access.
Scott agrees that context is crucial and says it will have to

be reflected in the mandatory statements. "There is
evidence of house builders parachuting in stuff that is out of
context," he observes. "These schemes are essentially
identical throughout the country. The statements require the
applicant to show that they have gone through the proper
design process."
They may need to specify buildings' energy performance.

Applicants can also use statements to highlight whether
buildings meet standards such as lifetime homes or Building
for Life. They also offer an opportunity to show how public
consultation has influenced the proposal.
The social context, including what local people want out of a

development and what the developer will bring to an area to
improve it, will also have to be considered. Applicants will
have to show not only how they have tackled planning policy
but also growth or decline in the economy.
The Commission for Architecture and the Built Environment

(CABE) has issued guidance on drafting design and access
statements. The idea is that they will enable architects and
their clients to explain and justify applications, explains
CABE policy adviser Lee Scott. "They establish a dialogue
between the applicant and the planner," he maintains.
The present list of reserved matters is also being

overhauled. Developers submitting outline applications will
be able to ask for five aspects access, appearance,
landscaping, layout and scale to be put back for later
considerations. Each of these factors is subject to much
more stringent definition than ever before.
"They are designed to give a brief outline of why the

developer is putting in an application for permission," he
adds. "This is a chance for the developer to say: 'This is
what I was thinking when I designed this building and these
David Brock, planning partner at solicitors Mills & Reeve,

notes that much more material will have to be produced to
accompany applications. Architects, highway engineers and
35
other professionals will need to get involved at an earlier

stage in the pre-application process, he predicts.
This cocktail of additional material, unfamiliar procedures
and more precise definitions could lead to more
opportunities for legal challenge, Brock warns. He draws a
parallel with the environmental assessment regime: "A
sometimes overconfident attitude by government and
applicants led to a plethora of successful challenges to
permissions due to inadequate content or procedural
irregularity."
But communities secretary Ruth Kelly says: "We need to
build more homes to meet demand. This requires higher
densities, which makes good design even more crucial. We
want developers to push standards further so that local
authorities can insist on, and say yes to, better buildings and
places."
Whether design and access statements will achieve this
remains to be seen. But it is already obvious to many
observers that the procedures will result in a lot more work
for everybody involved in the application process.
"My authority generally requires a design statement

for all applications in excess of six houses. In many
cases, unfortunately, the brief seems to be guided
by the layout rather than being prepared
beforehand and guiding the development."
"The new requirement for design and access

statements is likely to raise fresh challenges for
those submitting housing applications."
"As with most applications, whether using an

architect or not, the context of the development is
rarely considered, unless it has some marketing
advantage such as a Thames view. Many
considerations are an afterthought, such as the
environment, accessibility, inclusive design, safety
and security."
"Very little attention is paid to accessibility by noncar transport such as walking routes or access to
bus stops. If developers were required to pay more
attention to sustainability issues, non-car access
would emerge as a higher priority."
Source: Planning survey of applications quality, June 2006.
Design statements: planners experience
"Most design statements are poor in their analysis

and in identifying how the analysis has informed
the design process, assuming that it has."
Design and Access Statements: How to Write, Read
and
Use
Them
is
available
at
www.planningresource.co.uk/doc.
Planning and flood risk

The UK Government first issued planning guidance on flooding (PPG25) in 2001, but has found the need to delineate flood
risk responsibilities more clearly in a new Planning Policy Statement (PPS25), report Mark Bromwell, head of the
environment group and Stephen McNaught, head of the London planning team, at law firm Dundas & Wilson (Planning, 9
June 2006, p. 16).
Two years ago, the DTI's Foresight Future Flooding report
estimated that 1.5 million people in the UK live at high risk
from flooding while annual damage is around 1 billion. The
report (Planning, 30 April 2004, p4) predicted that by 2080,
these figures could rise to 3.5 million and 25 billion
respectively, partly because of climate change.
ensuring that flood risk is properly considered in the

planning process. Local authorities only have limited
statutory powers and responsibilities regarding flooding and
will be weighing up other considerations, not least priorities
for development of brownfield sites.
In the past, the absence of specific government guidance
and a tendency for councils to give insufficient weight to the
agency's advice has allowed development in areas
susceptible to flooding. PPG25 gives the agency a lead role
Although flood management is a landowner's responsibility,

the Environment Agency has a supervisory duty over all
matters relating to flood defence and a strong interest in
36
Draft PPS25 also improves on PPG25 by making the

Environment Agency a statutory consultee on flood risk.
This would involve amendments to the General
Development Procedure Order 1995 to establish a legal
requirement for planning authorities to consult the agency in
situations where there is a high flood risk.
in providing flooding advice for strategic planning and in

determining individual applications.
PPG25 requires planning authorities to apply a sequential
test. In allocating land or approving an individual application,
councils should be able to demonstrate that there is no other
suitable land in a flood zone of lower risk. The guidance also
encourages developers to consider the test when preparing
applications.
This duty would have no effect if the planning authority were

free to ignore the advice tendered. This is addressed in the
proposal for a direction for planning authorities to refer major
development applications in flood risk areas to the secretary
of state where they wish to act against a sustained objection
from the agency.
Since publication of PPG25 in 2001, there has been a

reduction in planning applications granted contrary to
Environment Agency flooding advice. Yet there are still
cases where its advice is ignored. The government is
currently consulting on a planning policy statement to
delineate responsibilities more clearly.
The agency's willingness to pursue cases where flood risk

has not been properly considered was shown in R ex parte
Environment Agency v Tonbridge and Malling Borough
Council [2005]. The council granted planning permission for
a sheltered housing scheme in a zone 3a high-risk area
despite agency objections. The agency sought judicial
review on the grounds that the council had not complied with
PPG25's sequential test.
Draft PPS25 (Planning, 9 December 2005, p2) clarifies the

sequential test through a classification system for
vulnerability to flooding. The categories are:
Essential infrastructure.
Vulnerable developments such as police stations

and sheltered homes.
More vulnerable uses such as homes and schools.
Less vulnerable developments, such as shops and

offices.
Water-compatible developments such as marinas

and sports facilities.
The council contended that as the sequential test had been

carried out at the strategic planning stage, it was
unnecessary to carry out a fresh test. But Mr Justice Lloyd
Jones concluded that PPG25 clearly intended the sequential
test to apply to both strategic planning and individual cases,
although he agreed it would be acceptable for applicants to
draw on work carried out for strategic planning purposes.
The judge accepted that the fact the sequential test was not
expressly referred to did not automatically imply that PPG25
had not been followed. But he stated that if the test was not
expressly applied it might be difficult for a court to be
satisfied that it had been met. The application was sent back
to the planning authority for reconsideration.
Certain combinations of flood risk and vulnerability should

never be permitted, while others can only be justified if they
pass an "exception test" that lowers the sequential test
standards for brownfield developments (see panel).
This test is to be applied during the strategic planning stage,
but can also be used to determine individual applications. To
meet the test it must be shown that a development is on
brownfield land or there are no other brownfield options
available, it contributes to sustainable development and it
makes a positive contribution to managing flood risk.
If published in its draft form, PPS25 will leave less room for
manoeuvre than PPG25. Conversely, the brownfield
development goals of national planning policy in PPG3
should be easier to achieve in flood risk areas through the
exception test, provided that positive contributions to flood
defence measures are made.
The test permits planning authorities to allow development

on land of higher flood risk than the sequential test advises,
as long as the developer makes a contribution such as the
installation of flood defences. Annex G of PPS25 invites
planning authorities to consider entering into section 106
agreements or imposing planning conditions to facilitate
flood prevention or alleviation works.
Flood risk zones: appropriate uses
The exception test provides a degree of resolution to the

conflict between prioritising brownfield development and
avoiding flood risk. The UK's industrial past, based around
rivers and ports, has left large areas of potential
redevelopment land in flood-prone areas. Both PPG3 and
PPG25 acknowledge the scope for conflict, but neither
provides the guidance to resolve it.
Zone 1: Low probability of flooding: All land uses

appropriate.
Zone 2: Medium probability of flooding: Water
compatible, less vulnerable, more vulnerable and
essential infrastructure uses all appropriate. Highly
vulnerable uses should only be permitted if they pass
the exception test.
The preference for brownfield land in the exception test is in

line with councils' obligations under PPG3. But the
requirement for developers to provide suitable defences also
satisfies flood risk issues. This should go some way towards
resolving the troublesome dichotomy.
Zone 3a: High probability of flooding: Water compatible

and less vulnerable uses permitted. More vulnerable
and essential infrastructure uses only permitted if they
pass the exception test. Highly vulnerable uses should
not be permitted.
37
Zone 3b: Functional floodplain: Water compatible uses

permitted. Essential infrastructure uses should only be
permitted if they pass the test. Less vulnerable, more
vulnerable and highly vulnerable uses prohibited.
Source: Draft PPS25
Recently published College of Estate Management
research into the impact of flood risk on property
stakeholders, including developers, investors and
occupiers, will shortly be available at the CEM website,
www.cem.ac.uk, under Research.
Nature conservation
Areas in the UK identified for special protection in terms of wildlife conservation are acting as a block on developing adjoining
land. This report is from Law-Now, the online information service provided by law firm CMS Cameron McKenna (Law-Now,
15 September 2006).
The Special Protection Area (SPA) in the Thames Valley is

causing problems for developers.
5. Whether measures will be taken to protect the protected

sites affected.
English Nature is advising against any development within

400m of the Thames Basin Heaths SPA and only within 5km
if other green space is provided to reduce the number of
visitors to the SPA. This is due to concerns about the impact
of development on birds in the SPA. The Government and
the relevant local authorities are trying to find solutions that
will allow development to proceed. However, for some
developers this is too little too late; many schemes have
already been refused planning permission. These cases
highlight the importance for developers with sites near to
SPAs of dealing with this problem early on in the
development process.
These steps impose a heavy burden on any applicant for

planning permission near to an SPA or SAC.
Developers considering building near a protected site should
contact the local authority and English Nature at a very early
stage in the planning process to try to agree a route that will
protect the environment and allow the development to go
ahead. At best, developers are likely to have to provide
alternative open space. At worst, development may be
prevented entirely.
Acknowledgement
This information is provided courtesy of Law-Now, CMS
Cameron McKennas free online information service.
Law-Now provides updates on all areas of the law from
arbitration to water and acquisition finance to telecoms.
Using email and our website, Law-Now provides a
personalised information service on key legal
developments you choose what information you wish
to receive from a list of topic areas. See www.lawnow.com to find out more about Law-Now and how to
register.
European Union countries must identify and protect areas

that are home to rare birds, plants and animals. These areas
are known as SPAs or Special Areas of Conservation
(SACs).
Development near to a protected site must pass a number
of tests before planning permission can be granted.
1. Whether the development is likely to have significant
environmental effects on the protected area.
2. Provision of detailed information to enable the local
authority to assess whether the development will adversely
affect the protected site.
If you would like further information on Circular 05/2005

please contact Clare Tyler (+44 (0) 20 7367 3089) or
Tony Kitson (+44 (0) 20 7367 3556).
3. Whether there are alternative sites for the development

that would have less impact on the protected site.
4. Whether there are imperative reasons of overriding public
interest why permission should be granted.
38
Brookwood Heaths SSSI; Bourley & Long Valley SSSI;

Bramshill SSSI; Broadmoor to Bagshot Woods &
Heaths SSSI; Castle Bottom to Yateley and Hawley
Commons SSSI; Chobham Common SSSI; Colony Bog
& Bagshot Heaths SSSI; Eelmoor Marsh SSSI; Hazeley
Heath SSSI; Horsell Common SSSI; Ockham & Wisley
Commons SSSI; Sandhurst to Owlsmoor Bogs &
Heaths SSSI; and Whitmoor Common SSSI.
About SPAs, SACs and the Thames Basin

There are over 4,000 Sites of Special Scientific Interest
(SSSIs) in England, covering around 7% of the
countrys land area. Over half of these sites, by area,
are internationally important for their wildlife, and
designated as Special Areas of Conservation (SACs),
Ramsar sites or Special Protection Areas (SPAs).
Special Protection Areas (SPAs) are among the most
important sites for wildlife in the country. They form a
European series of sites which protect birds and their
habitats, providing them with increased protection and
management. The Thames Basin Heaths SPA is
designated because of its internationally important
numbers of Dartford warblers, woodlark and nightjar.
Source: English Nature

Additional information: Keith Payne on 01635 268881 or
email keith.payne@english-nature.org.uk.
The Thames Basin Heaths SPA contains 14 SSSIs in

Berkshire, Hampshire and Surrey. These are Ash to
For more information about SPAs and SACs in other
parts of the UK, see the English Nature website at
www.english-nature.org.uk.
39
PROPERTY
Property insurance commissions
In the UK, brokers and property managers may soon be forced to reveal how much commission they receive for arranging
property insurance, the cost of which is passed to tenants under lease conditions. Its time for more transparency according
to Adam Benzine (Property Week, 11.08.06, pp. 7273).
When a tenant signs a standard FRI (fully repairing and

insuring) lease, it commits to paying for insurance charges,
a proportion of which will pass in the form of commission to
the broker, property agent or manager that has arranged
that insurance.
The RICS rules of conduct are pretty clear: we fall under

Financial Services Authority regulation, says Paul Bagust,
manager of the institutions commercial property faculty.
RICS members are bound by a strict code of conduct. You
should disclose all fees to clients and not just when asked.
But Im not really aware of any people that have come to us
with complaints.
Few tenants know how much commission they are paying,

but it can be as much as 40% of the premium. Furthermore,
there are fears that instead of shopping around for the most
cost-effective policy, the property manager may choose to
buy the policy from the company that offers the largest
commission.
The code is under revision as we speak. At present its

something being discussed. Communication and
transparency are two issues we know cause discontent for
tenants, and anything that will improve that is going to be a
good thing, especially in relation to fees.
Yet this nice little earner may soon be over. Two weeks
ago, Lloyds of Londons Market Association called on the
Financial Services Authority to step in and intervene to
force brokers and property managers to reveal the
commissions they receive.
However, Southam says: Having to ask is not transparency,

and if you do ask, quite frequently they will duck and try and
hide from it. Ive had one broker who, when asked, said to
me, oh, its the usual commission.
At the same time an investigation by the European Unions

Competition Commission has been announced that also
aims to shine the spotlight on these secret payments.
Well, I replied, on the figures Ive seen ranging from 10%

and 1,000%, do you want to tell me what usual is? There
are responsible landlords out there who are doing it
properly, but they are few and far between. The majority
hide in the sand and hope they can still make good fortunes
out of it, rather than being responsible.
The secrecy surrounding the insurance commissions

received by brokers and property managers, especially for
block insurance, is a sore point for many in the property
industry. Roger Southam, chairman of property asset
management company Chainbow, says many managing
agents take too high a commission for arranging insurance
and are not providing tenants with the transparency they
should be.
Charles Woollam, a partner at property services firm

Donaldsons, agrees that greater transparency would benefit
the industry, if only by reducing errors of calculation.
Its widely accepted by most occupiers that the best cover is
not necessarily the cheapest, and its always better to err on
the side of caution when determining the amount to cover,
says Woollam. However, greater transparency would
eliminate unnecessary errors and remove another great
source of tension between landlords and their tenants.
Theres supposed to be transparency, and then theres

reality, and the two are entirely different things, says
Southam. What I would deem to be transparency is having
a building insurance summary sheet list of who has taken
what money from a premium.
The FSA regulations just need to say that the building

insurance summary must specify the amounts, says
Southam. I think that if there were to be transparency
tomorrow, there would be an outcry.
And they should have to put the amount in too, not a

percentage. Lets have complete transparency over how
much money these bastards are ripping off the common
man for.
Robin Gordon-Walker, a spokesman for the FSA, says that

for now, there will continue to be no obligation for property
managers and brokers to reveal their commissions.
The RICS rules of conduct state that a member shall

disclose to his client the nature and, where known, the basis
or amount of any fee, commission or other benefit (other
than that agreed with his client) that he stands to gain as a
result of his appointment by the client.
Property managers need to be authorised by us and follow

our guidelines, says Gordon-Walker. If they are carrying
out insurance activities, they have to follow our rules, but we
do not require commission disclosure.
Code of conduct
40
Theres been a lot of discussion in the market around the

FSA making disclosure mandatory and, certainly if a
customer asks whats being earned, he needs to be told. But
doing a complete review of the competition now is just
idiotic. As usual Britain is at the forefront of regulation and
implementation.
The person doing the general insurance has to be very

transparent about cost, but theres no requirement for the
broker, property manager or the intermediary to disclose
commission, even if it is asked for.
While the FSA may be reluctant to force brokers to reveal
the commissions they receive the EUs competition
commissioner, Neelie Kroes, intends to investigate the sale
of insurance in the UK.
Open house
However David Workman, senior partner with property
management firm Workman, says brokers and property
managers can avoid regulation and legislation if they are
simply prepared to be more open with clients.
In January last year, US firm Marsh & McLennan, the

worlds largest insurance broker, was forced to pay $850m
(449m) to settle a lawsuit after New York attorney-general
Eliot Spitzer accused the company of steering clients to
insurers that paid the largest commissions.
Its kind of an open house at the moment, he says. Theres

a lot of discussion and a lot of worried brokers. I think they
are all trying to clean up their act as quickly as they can. It is
better than it was, but its certainly nothing like right yet.
And with Kroes who has the power to issue fines worth up
to 10% of a firms revenue set to examine the UK
brokerage market, total transparency could effectively
become forced upon the industry.
Im not talking about the big brokers, as they are ultracareful about admitting what theyre doing. But if you move
down the line to the middle band of brokers, theres still
quite a lot to be done yet. The tenant is still getting a bad
deal.
Yet Eric Galbraith, chief executive of the British Insurance

Brokers Association, says Kroess investigation is
unnecessary because the UK market self-regulates more
effectively than the US insurance industry.
There are work transfer agreements in place between

brokers and insurance companies at the moment for which
no work is being done thats the plain truth. The secret to
the whole thing is transparency, and at the moment, there
simply isnt enough
Spitzer found that there was some bid-rigging from Marsh &
McLennan and all of a sudden the whole industry was tarred
with the same brush, implying that there was inappropriate
practice happening, says Galbraith. But what the
commission is doing is absolutely idiotic. Its a typical
position from the EU, and all someone is doing is trying to
raise their profile on a Spitzer-type level.
The market and the environment have changed. I know it
went on in the past, but whether it still does I dont think
so.
Easements
Easements can help or hinder developers and property owners. But what are they? Peta Dollar, real estate professional
support lawyer at Dechert LLP, explains how easements arise and the effects, both positive and negative, that they bring to
bear on the use and enjoyment of property (Estates Gazette, 5 August 2006).
An easement is a particular kind of right enjoyed by one

property over another. Thus, not every right that benefits a
property will be an easement.
None of the following can constitute an easement:
What is an easement?
In order to constitute an easement, a right must satisfy the
following requirements, laid down by the Court of Appeal in
Re Ellenborough Park [1956] Ch 131:
It must benefit one property (called the dominant or

benefited land) and be exercised over another
property (the servient or burdened land).
It must serve the dominant land and be "reasonably

necessary for the better enjoyment of that land".
It must be capable of being an easement.
The owner of the dominant land and the owner of

the servient land must not be the same people.
41
A right for a particular person or class of persons to

use a right of way that is not associated with that
person or persons' ownership of a property; for
example, a public right of way (because it does not
benefit a particular property).
A right of way over land in Cornwall that benefits a

person who owns land in Northumbria, for instance
(because the right of way may benefit that person's
business, but cannot contribute to the better
enjoyment of the land in Northumbria).
A right of way for a person across his own land

(because the land that is benefited and the land that
is burdened cannot have the same owner).
A right to a view (the courts have held that this is not

capable of being an easement).
A right to the exclusive use of land, preventing the

owner of the burdened land from using it in a
reasonable way (because this will usually be a
lease, not an easement).
A right to remove something from the burdened

land, such as game, timber or crops, or to graze or
pasture animals on the land so that they remove (by
eating) crops on the land; this type of right is known
as a profit prendre and can exist either as a
benefit for the benefited land or independently in
gross.
an easement when the sale takes place, provided

that the right is necessary for the reasonable
enjoyment of the land that is being sold, and so long
as this is not excluded by the transfer.
This relies upon long usage of the right, which is

then presumed to have been lawfully granted at
some time in the past. Generally, the use must have
been enjoyed openly, without force, and without any
permission having been given by the owner of the
burdened land. Evidence of a licence permitting the
exercise of the right will prevent an easement from
being created, which explains the many notices that
exist, stating that the usage of a right of way is by
the permission of a particular owner, thus preventing
time running against that owner for the acquisition of
a right of way by prescription. It is normally easiest
to acquire an easement by prescription by relying
upon the provisions of the Prescription Act 1832.
The most common types of easement are:
A right of way.
A right to use service media for the passage of

services, including water, gas, electricity and other
services.
A right of light (and air).
A right of support (from a building or land).
An easement can be extinguished in various ways:
By express release:
If the person with the benefit of an easement enters
into a deed that releases it, the easement will be
extinguished.
By implied release:
If an easement is abandoned, it may be
extinguished. This can arise where the easement is
not used for a long period (there is no specified
period of non-use for inferring abandonment), or
where the benefited land is altered so that it cannot
benefit from the easement.
Nature of easements
An easement can be created in a number of ways.
An express grant:
This often happens on a sale of part, where the seller
grants rights to the buyer over the seller's retained
land, or grants to himself (by means of a reservation
contained in the transfer deed) rights for the benefit
of his retained land over the land that is being sold.
By operation of law:
If the benefited land and the burdened land come
into the ownership of the same person, the
easement will be extinguished. Alternatively, if an
easement is granted for a term of years, the
easement will be extinguished when the term comes
to an end.
An easement can be either a legal easement or an equitable

easement. The former must be granted forever (similar to a
freehold) or for a term of years (similar to a leasehold). It
must also be granted by deed (or by legislation or a will) or
be deemed to have been granted by deed (such as an
easement acquired by prescription), and satisfy the
requirements for registration at the Land Registry, otherwise
it will take effect only as an equitable easement, despite
being granted by deed.
By prescription:
By statute:
For instance, compulsory purchase powers exercised
under statute may cause an easement to be
extinguished. The Land Registration Act 2002 may
lead to an easement that is not obvious on inspection
of the burdened land and that has not been recently
used to cease to be exercisable against a buyer of
the burdened land who has no knowledge of its
existence.
An implied grant:
This, too, often happens on a sale of part, where no
express grant is contained in the transfer deed, but
where a grant can be implied because of the
circumstances. For example, where part of the land
is sold and there is no way of getting to that land
without crossing the seller's land, an easement of
necessity across the seller's land will arise.
Similarly, where the seller has been using a right
over the part of his land that he is retaining for the
benefit of the part of his land that he is selling, that
right, or quasi-easement, will, under the rule in
Wheeldon v Burrows (1879) LR 12 ChD 31, become
Changes in benefited land

The scope of an easement that has been created by an
express grant will be reliant upon the construction of the
document containing the grant. However, where an
easement has been created by an implied grant or by
prescription, the scope of that easement will be restricted,
having regard to the manner and extent of use and the
42
character of the benefited land at the time the easement

was created. This means that any change in the nature or
use of the benefited land may potentially prevent the
easement from being exercised for the benefit of that land.
Why this matters

The absence of an easement necessary for the day-to-day
enjoyment of a property may have a substantial and, in
some cases, catastrophic, effect upon the value and
saleability of that property.
In McAdams Homes Ltd v Robinson [2004] EWCA Civ 214;

[2004] 3 EGLR 93, the Court of Appeal stated that two
questions must be considered:
Does the development of the benefited land represent a

radical change in its character or a change in its
identity, as opposed to a mere change or intensification
in its use?
Would the use of the benefited land as redeveloped

result in a substantial increase or alteration in the
burden on the burdened land? (The meaning of
"substantial increase or alteration in the burden" has
been widely construed on some occasions by the
courts.)
For example, following the decision in Hanning v Top Deck

Travel Group Ltd (1994) 68 P&CR 14 that a prescriptive
right cannot be acquired to do something that is prohibited
by statute, many owners of houses fronting common land
found themselves without a vehicular right of way across the
common, despite the fact that such a right had been
exercised by them and their predecessors in title for a very
long time. Mortgage lenders became reluctant to lend on
such properties unless an express grant of a right of way
could be shown thus preventing people from selling their
homes. In some cases, owners of common land demanded
substantial sums from the householders, which the owners
were obliged to pay if they wished to sell their homes; the
sums demanded were sometimes as much as 30% of the
value of the houses.
Where the answer to both questions is "yes", the easement

will be suspended for so long as the radical change of
character and substantial increase in burden are
maintained.
Parliament eventually intervened and legislated in order to

resolve the problem: section 68 of the Countryside and
Rights of Way Act 2000 allows a statutory easement of
access to be granted where illegality prevents the
acquisition of an easement by prescription. The House of
Lords subsequently overturned Hanning in Bakewell
Management Ltd v Brandwood [2004] UKHL 14; [2004] 20
EG 168.
The extent of the benefited land may also affect the scope of
an easement. For example, a right of way granted for
access to a specific parcel of benefited land cannot be used
to access a different area of land. Some cases suggest that
if access to the different parcel of land is ancillary to the
enjoyment of the benefited land, the access is permissible,
but others suggest otherwise. The position is far from clear
and a developer that seeks to rely on an easement to
benefit its development should investigate the issue
carefully.
Similarly, an easement that interferes with the day-to-day

enjoyment of a property could detrimentally affect the value
and saleability of that property. It could prove difficult to sell
a property that is subject to a right of way enjoyed by a third
party and such a right of way will prevent the
comprehensive redevelopment of such a property.
Further Reading
Gale on Easements Gale CJ, Maurice Spencer G, Sweet &
Maxwell
McAdams Homes Ltd v Robinson [2004] EWCA Civ 214;
[2004] 3 EGLR 93
Megarry & Wade: The Law of Real Property Harpum C,
Sweet & Maxwell
Re Ellenborough Park [1956] Ch 131
43
RURAL
Countryside cases
Although both the cases discussed here relate to the countryside, the decisions also have implications for owners and
occupiers living in more urban areas. In the first, Warren Gordon, professional support lawyer at Olswang, looks at a
couple's fight against a covenant restricting the use of their property. The second concerns the importance of employing the
right people to maintain properties, reported on by Jonathan Ross, head of property litigation at Forsters (Property Week,
16.06.06, pp. 6667).
on their land as well as horses, ponies, geese and chickens.

The Bowers also had a dog and three cats but, fortunately
for them, no complaint was made about them. The county
court decided that a number of the species of animals kept
on Bowers' land should not be there, including bullocks,
sheep and peacocks.
Animal tragic
The message An unfortunate neighbours dispute
concerning the keeping of animals exercised the minds of
the Court of Appeal.
The case A landowner has won its fight in the Court of
Appeal to keep an array of animals on its property despite
the objections of a neighbour (Broughton v Bower and
Another, 25 May).
The Bowers appealed.

It was for the Court of Appeal to decide the meaning of
undomesticated animals' so it could decide whether the
Bowers were in breach of their obligations. The court stated
that it was beyond argument that none of the animals kept
by the Bowers could be said to be undomesticated. They
were all species accustomed to be kept by or to living with
humans or to be brought under control and tamed.
This case concerned an unfortunate dispute between

neighbours about the keeping of undomesticated animals'
at a property.
Lady Delves Broughton owned a property in Nantwich in
Cheshire. Mr and Mrs John Bower were her neighbours.
Broughton's land had the benefit of a covenant restricting
what the Bowers could do with their property.
The Bowers' appeal that they be permitted to keep certain

animals such as bullocks, peacocks, chickens and cockerels
on their land was allowed.
The covenant provided that the Bowers' property should

only be used as a single private dwelling house and/or for
agriculture, as defined by the Agriculture Act 1947. In no
circumstances were female cattle, pigeons or any
undomesticated animals to be kept at the property.
Summing up: Broughton v Bower
Broughton alleged that the Bowers, in breach of their

obligations, kept a substantial number of racehorses and
geese at their property. The horses and geese were not
domesticated animals, Broughton claimed, and their
presence was a nuisance. In particular, she said they
hindered her in exercising her rights of way.
Broughton's claim never came to trial. Instead, the parties

entered into a consent order under which the Bowers
undertook not to keep any undomesticated animals,
including horses, ponies and geese, on their land and also
not to use their land for any business other than agriculture.
Broughton owned a property next to neighbours

who owned an array of animals.
She claimed the Bowers were in breach of a
covenant because many of the animals were
undomesticated'.
The Court of Appeal decided that the animals kept
were accustomed to being kept by humans, so
could be said to be domesticated.
Down to experience
The message A landowner needs to ensure it has engaged
sufficiently experienced or qualified contractors or
professionals to maintain its property to minimise its liability
for claims for personal injury.
Unfortunately, the consent order did not put an end to the

dispute. Broughton applied to the court for a declaration that
certain named species were undomesticated animals'. In
addition to horses, ponies, geese and female cattle,
Broughton complained about male cattle, including bullocks,
sheep, ducks, peacocks, turkeys, chickens, game birds and
fowl and poultry of any kind. The Bowers admitted that the
horses, ponies and geese were undomesticated animals.
The case The High Court has ruled that owners of an estate
in Somerset were liable to a motorcyclist who suffered injury
after colliding with a fallen tree (Poll v Viscount and
Viscountess Asquith of Morley, 11 May).
Poll suffered personal injuries after his motorcycle collided
with part of an ash tree that had fallen onto the highway
alongside the Asquith estate near Frome. The court had to
decide whether the collision was an accident for which the
The matter went to the county court, which found that the
Bowers kept turkeys, sheep, bullocks, ducks and peacocks
44
The court held that, if a level-two surveyor had been

retained, it would have appreciated that a multi-stemmed
tree was particularly prone to structural defects and would
have inspected the ash tree fully.
Asquiths could not be held liable, or whether it had

happened because of some negligence on their part.
Landowners owe a duty of care to persons using the
highway next to their land, under the Occupiers' Liability Act
1957 and The Defective Premises Act 1972. If landowners
are in breach of that duty, and that breach causes
foreseeable damage, the landowner can be held liable.
Although the Asquiths' expert argued that such an

inspection would not have revealed the defect because it
was concealed beneath the tree, the court found that a
properly trained surveyor would have known where to look
and would have located the defect.
Under case law, we all owe a duty to take reasonable care

to avoid acts or omissions that are likely to injure our
neighbour. Our neighbour is anyone who we might
reasonably have foreseen would be affected.
Given that the Asquiths' surveyor had made no inspection at

all, the court stated that the Asquiths could not convince it to
assume that a competent inspection would have revealed
nothing untoward.
The Asquiths employed Mr Rowe, an independent forestry

contractor, to inspect their many roadside trees. He did so
by driving past. If he noticed any defect or decay, he would
stop and make a more detailed inspection.
As a result, the Asquiths were found to have acted

negligently. The lesson to be learned by landowners is that it
is essential to employ the right level of professionals or
contractors if accidents and claims are to be avoided or kept
to a minimum.
He noted no defect with the ash tree so did not inspect it.
The ash tree in question is multi-stemmed. One stem had
fallen onto the road because of a hidden structural defect on
its underside.
Additionally, it is important to ensure they have adequate

insurance cover so that any claims that are made can be
passed on to them.
The principal issue for the court was whether the Asquiths
had employed a competent tree inspector. If they had not,
the issue was whether a sufficiently qualified inspector
would have identified the defect and ensured steps were
taken to prevent an accident occurring.
Summing up: Poll v Asquiths
There are three levels of tree surveyor. The experts for both
parties agreed that the work involved on the Asquith estate
required the expertise of a level-two surveyor.
Unfortunately for the Asquiths, Mr Rowe was only a levelone surveyor.
45
Poll was injured when his motorcycle struck a fallen

tree next to the Asquiths' land.
He claimed damages. The Asquiths argued it was
an accident and they were not liable.
The High Court held that had the Asquiths
employed a suitably qualified surveyor, the defect
in the tree would have been spotted. As a result,
the Asquiths were liable.
Research
UK farming
These latest facts and figures for UK farming from Ian Bailey, head of rural research at Savills, cover the strong demand for
farmland (Estates Gazette, 8 July 2006, p. 95) and the headline results from the IPD Let Land Index 2006.
Although there is more land on the market, strong demand

continues to drive up values.
Field of Dreams
Some 30% more farmland is on the open market compared
with this time last year.
Savills' farmland value survey shows that across the UK, the
average value for all types of farmland increased by just
over 4% during the first half of 2006, which on aggregate
puts the increase in average values at well over 30% since
the beginning of 2004.
Farmland values will remain firm as demand from farmers,

lifestyle buyers and investors remains strong and supply
relatively low.
Research compiled by Savills shows that the first half of
2006 has seen more activity in the farmland market than
during the equivalent period of 2005; indeed, the busiest
since 2002.
The residential component of farms has also strengthened

during the past six months. Savills' prime country house
index reveals that the average capital value of country
houses increased by 5.2%, with higher rates of growth in the
Home Counties and northern regions, including Scotland.
In the six months to the end of June, around 111,000 acres

were publicly marketed across the UK, compared with just
over 85,000 acres during the same period last year, an
increase of 30%. In Scotland, the increase in farmland
market activity was up by 75%, but in Wales activity was
marginally less.
An initial analysis of farm transactions indicates that farmers

are again active in the farmland market, with expansion
cited as the key reason for a purchase. Farmers may not be
the predominant sellers in 2006, with a more optimistic
outlook for commodity prices being a factor.
However, the long-term trend of declining volume still

remains. In England, the market has shrunk from about
675,000 acres in 1950 to about 200,000 acres in 2000.
Source: Savills/DEFRA
46
IPD Let Land Index

The 2006 IPD Let Land Index (to Dec 2005) shows that the performance of let farms weakened in 2005, but still
outperformed residential property. However, annualised over the last three and five years let land also gives a stronger
return than commercial property.
The headline results are:
For the year to December 2005 the total return for tenanted farmland was 9.4% compared with 18.5% in 2004.
This is due to reduced growth in the capital values during the year. Capital values of tenanted farmland were 7% in
2005 compared with15.7% in 2004.
The 10 year annualised return for Let Land was 13% at the end of 2005. This was substantially above the 10 year
annualised returns on equities (7.9%) and gilts (7.7%).
Income returns in 2005 fell slightly to 2.3%, still well below the long-term average of 4.1%. Mainly a function of the
increase in capital values but also reflecting pressure on farm rents.
The net disinvestment in tenanted farmland continues, with 4.9% of the investment assets held in the index sold
during 2005. The transactions boosted capital growth by only 0.1%. This disinvestment reflects a continuing review
of reversionary interests by investors.
Source: Savills
More information about Savills rural research, including
a copy of the full report on the IPD Let Land Index
2006, can be found at www.savills.co.uk. Contact Ian
Bailey at ibailey@savills.com.
47
VALUATION
Valuation and REITs
UK companies that are converting to real estate investment trusts (REITs), following introduction in January 2007, are being
urged to increase the rotation of their valuers to protect investors, reports Mark Jansen (Property Week, 23.06.06, pp. 88
89).
REITs should change their valuers far more frequently than

is the norm in the quoted property sector, because the
public will expect guarantees of the valuers' independence.
on quoted REITs to show their independence in this sort of

way.'
That is the view of several leading property company

directors and valuers, although others are emphatic that
there will be no need to increase valuer rotation when the
vehicles are launched in January 2007.
Image conscious
The feeling I have is that because of their likely appeal to
the public, not just institutions, REITs will want to be whiter
than white when it comes to how they govern themselves,'
adds Cassidy. That would include rotating their advisers.
Their relationship with the valuer is terribly important; the
public has to be absolutely confident that the valuations are
independent and objective.'
The issue has been controversial for several years. At a

Mansion House speech two years ago, Grosvenor's group
chief executive Jeremy Newsum called on property
companies to switch valuers every three years. This far
exceeds current RICS requirements.
In May 2005, British Land, the UK's second-largest quoted

property company, switched valuers from Atisreal, which
had done the job for 20 years, to Knight Frank.
Newsum's views are unchanged.

Where the public is relying on the valuation, rotation is
important for the credibility of the numbers,' he says.
We live in a transparent world where investors seek

openness,' commented finance director Graham Roberts at
the time (professional + legal, 10.06.05).
Nor is he talking merely about changing the final signatory of

the valuations, as the RICS recommends. He wants to see
REITs, and quoted property companies in general, change
their entire valuation company on a regular basis.
Knight Frank has also carried out the valuation work for
Land Securities, the UK's largest quoted property company,
for 30 years. With both companies having declared their
intention to convert into REITs, the prospect of increased
rotation could lead to Knight Frank losing both accounts
within a few years.
Changing individual valuers is better than no rotation, but it

doesn't deal with the question of a "house view" [emerging
from the same valuation company]'.
However, Land Securities' chief executive, Francis Salway,

strongly disagrees that increased rotation may be
necessary. I see no reason why it should change at all,' he
says. A REIT is a publicly quoted company with certain tax
status [and] we are already a quoted company.'
Michael Cassidy, a non-executive director of British Land

and a consultant to law firm DLA Piper, predicts that with
REITs, there will have to be a review of who you employ on
a frequent basis, leading to higher turnover of advisers'.
Cassidy argues that this will come about because of higher
standards of corporate governance' that have been evolving
in the quoted sector since publication of the the [sic]
Confederation of British Industry's Higgs Report three years
ago. Higgs called for the rotation of auditors; an upper limit
of 10 years' service for non-executive directors, to ensure
their independence; and for the role of chairman and chief
executive to be split.
Simon Melliss, group finance director of Hammerson, which

announced its intention to convert into a REIT in May, also
believes there will be no change. I think the simple answer
is no, I don't expect to [rotate valuers more frequently],' he
says.
Hammerson has used Donaldsons to value its UK retail
holdings for a long time' - Melliss isn't sure how many
years but brought in DTZ four years ago to value its UK
office properties. Melliss says the appointments are carefully
reviewed every three years.
Cassidy is now serving his last permissible year as nonexecutive director of British Land while Sir John Ritblat gave
up the role of chief executive in 2004, staying on as
chairman.
Robert Peto, chairman of both DTZ and the RICS's

international valuation faculty, says there is no need for the
RICS to tighten its rules.
I'm drawing the inference that after the Higgs report, it is

considered unacceptable to have too close a relationship
with one's advisers,' says Cassidy. I'm inferring that will
apply also to valuation firms I believe a well-accepted
code of practice will come about where there'll be pressure
What is the difference between a REIT and a quoted

company? They're both public companies,' he says. If the
48
majority of us are happy with the rotation programme we

have in place now, and none of us see it causing any
particular grief, why would one want to change it because
it's a REIT, as opposed to a traditional public company?'
Taking stock
We have been through this already and come to a solution
that was generally accepted,' says Peto. If the stock
exchange wish to change this, that's a matter for them. But
at the present moment there is no initiative coming out of the
RICS to review this matter.'
The RICS introduced new rules on rotation following the

Carsberg Report of 2002.
Most, but not all, valuers agree with Peto.
Sir Bryan Carsberg, former director-general of the Office of

Fair Trading, published a series of recommendations to
ensure valuers were objective and that the public could have
confidence in the system. His report was commissioned by
the RICS before the Enron scandal, but its publication in its
wake gave heightened poignancy to the findings.
I don't think the invention of REITs raises the likelihood of

rotation,' says Rupert Johnson, head of valuation at Knight
Frank. If I were a retail investor, I'd leave it to the company
to decide who they use as their valuer.'
This draws a sharp response from Cassidy. The retail
investor would certainly sit up and take notice if there was a
scandal at some point over the manipulation of values,' he
says.
Carsberg recommended that for third-party valuations

those produced for shareholders or unit holders firms that
carry out valuations should disclose their total fee-earning
relationship with the client, ie how much money they might
also be earning from the client, and the length of the
valuation relationship. Carsberg also called on the RICS to
publish guidance on rotating the personnel responsible for
the valuations.
Michael Brodtman, head of valuation for CB Richard Ellis,

thinks greater rotation is unlikely', while Rupert Dodson,
head of valuation for Cushman & Wakefield, says:
I don't see why there should be any greater or lesser
requirement to rotate.'
Several amendments were subsequently made to the RICS

Red Book, which lays down the rules for valuers, including a
practice statement calling on valuation firms to have a
policy on rotation of the signatory of the valuation', backed
by a recommendation that no one individual should be
allowed to sign off a client's valuations for more than seven
years. This falls far short of the rigour envisaged by
Newsum and Cassidy, yet Peto is unmoved.
One dissenter among the valuers is Jeremy Handley,

director of valuations for Jones Lang LaSalle. REITs will be
sold to all sorts of people,' he says. The whole corporate
governance issue will be more important and valuers need
to be part of that. I'd have thought you will get more rotation
of valuers.'
The views of Newsum and his fellow travellers may not be
popular, but they may yet be proved right.
Leasehold reform valuation

The decision in a recent Lands Tribunal case challenges the basis of valuing residential leasehold property subject to
enfranchisement and lease extension. Neil Crosby, Dept of Real Estate and Planning at The University of Reading
Business School, and Gaye Pottinger, College of Estate Management Research team, ask Has rationality finally arrived?
(Estates Gazette, October 2006.)
elements require a discount rate, but it was only the rate at

which to defer the reversion that was at issue.
Introduction
The decision of the Lands Tribunal over the set of
Leasehold Reform Act (LRA) cases addressing the
deferment rate has been announced and it appears to
confirm that, in future, the tribunal will expect financial as
well as property market evidence when coming to decisions.
The two issues addressed were the deferment rate and
hope value of a sitting tenant sale. This article will address
the first issue only.
Since the Leasehold Reform Act was enacted in 1967 until

very recently, both the Lands Tribunal (LT) and Leasehold
Valuation Tribunals (LVT) have employed conventional all
risks yield (ARY) approaches and have resisted attempts to
apply either more sophisticated techniques or rational yield
choice to residential property valuations under the Acts. In
commercial property markets, constant debates have taken
place concerning yields and technique. Residential
valuations were also included in this debate right from the
beginning with Wood (1972), Baum (1983) and Crosby
(1985) all suggesting that yield choice and methodology
within LRA calculations left a lot to be desired. Similar
Leasehold enfranchisement cases requires a capitalisation

of the existing ground rent plus a reversion to the capital
value of the property upon expiry on the lease. Both
49
debates took place within cases. In Gajewski v Anderton

and Kershaw [1971], Briddon v Field [1975] and Gunter v
Grainger Estates [1977] the tribunal was asked to take into
account the yield on long dated stock for determining the
ground rent capitalisation rate but in these and many other
cases the use of between 6% and 8% became the norm for
both capitalisation and deferment. In Rees v Scott and
Winfield [1977], the tribunal was faced with an explicit cash
flow approach from one of the witnesses but this was
resisted with the LT member commenting that the
cumulative undependability of long distance predictions
renders the calculation inherently unreliable.
The Tribunal adopted the last method as its preferred

approach to provide the framework to determine the
deferment rate. Although the use of the capital asset pricing
model in method (i) helped in our understanding of the
nature of the deferment rate, it was ultimately rejected as a
means of determining deferment rate due to the difference
of a single asset property investment to a single company or
group of companies, from which the data for the CAPM is
drawn. Method (ii) was rejected due to the difference
between rack rented yields based on short-term criteria and
the hypothetical market in freehold reversions. Method (iii)
was rejected for a number of reasons but basically the
Tribunal thought that evidence from the residential market
was influenced by LVT decisions. The rejection of market
evidence opens the door to a decision based on financial
market evidence.
However, an explicit cash flow is just an unbundling of

factors which are hidden within the application of an ARY
approach. Where these factors are bundled together in the
ARY they cannot be identified separately and the yield
therefore reverts back to a unit of comparison rather than an
investment indicator. As it has no rational investment basis it
can only be identified through market evidence of similar
properties. The core of the criticism of the application of
ARYs in LRA cases is that there is no market evidence of
the rates, particularly the deferment rate (CEM, 2000). Any
transactions are infected by the enfranchisement legislation.
The Tribunals approach was to determine a generic

deferment rate and then consider specific factors. In order to
decide on the generic deferment rate the valuer must
determine the real risk free rate, the risk premium and the
expected real value change over the life of the reversion.
Given that it is a real rate of return, the nearest surrogate
was virtually agreed by all the financial experts as index
linked gilts, although their relatively short history gave some
difficulty in agreeing a long-term average. Although it could
be argued that a spot rate at the date of valuation should be
used, and it was so argued by one expert, other experts
pointed out that long maturity spot rates were forced
downwards by the pension panic.
The decision
Two of the appeals were contested and each side called
both financial and valuation experts. The LT synthesised the
possible approaches to determine the deferment rate down
to four, which were as follows:
(i)
The decision relied on a longer term moving average

provided by one of the financial experts and adopted 2.25%.
It is not clear from the judgment whether or not this
represents a long-term rate or whether short-term cyclical
movements should be incorporated in the valuation.
Using a form of financial valuation known as

CAPM. The capital asset pricing model aims to use
market information to obtain the required return (R)
which is the risk free rate (RFR) plus a marketbased risk premium (RP). From this, asset growth
(G) needs to be deducted to obtain the deferment
rate (d): required return R = RFR+RP and
deferment rate d = R-G. Since both the risk free
rate and the growth rate contain inflation, inflation
cancels, leaving d = RRFR+RP-RGR, where RRFR
= real risk free rate and RGR = real asset growth.
The risk premium for the asset is the market risk
premium x beta an indicator of the systematic risk
of the asset. Three of the four financial experts
used property company returns to provide
estimates of beta.
Real growth was adopted at 2% pa and the Tribunal

suggested that they would have adopted this rate had
evidence suggested that house prices were above or below
trend. Given the long-term nature of many reversions, it is
not likely that a valuation undertaken at the peak or trough in
the housing market would materially affect the long-term
view of growth, but it would affect the growth assumption for
a shorter reversion.
This leaves the risk premium and, having rejected CAPM,
the Tribunal was forced back to a more qualitative approach
based on illiquidity and volatility issues. Relying particularly
on one of the financial witnesses more than others, they
chose 4.5% for the risk premium. Despite the rejection of the
CAPM, this result lies firmly in the ball park suggested by
three of the financial expert witnesses relying on the CAPM
if they also accept that the beta is around 1 as they
accepted evidence that a cash flow based on income is less
risky than one based on a spot figure of a capital reversion
in a number of years time.
(ii) Determination by reference to rack rental yields.

This was the method adopted by one of the
financial experts but rejected by the other three.
(iii) Derivation from an analysis of market sales of longterm residential reversions. This was the method
as adopted by one of the valuer witnesses.
(iv) As in (i) above, but, instead of reaching RP by the

application of beta to EMRP, making an
independent assessment of what the RP should
be. This was the method adopted by the Tribunal in
Arbib, and it was the method followed in part by the
other valuer witnesses and one of the financial
witnesses used this as an alternative method.
Having established a generic deferment rate of 4.75%

based on a 2.25% risk free rate, a 2% real growth rate
(deduction) and a risk premium addition of 4.5%, the tribunal
turned to specific factors: mainly length of term, location and
obsolescence.
50
Regarding length of term they concluded that over 20 years

a constant rate was appropriate and over 75 years it was
immaterial at what point in the market cycle the valuation
was taking place. However, lease expiries at less than 20
years should take market state into account.
unlikely to be disturbed in specific cases and that

transaction costs should not be deducted.
Having considered specific issues it declined to depart from
the generic rates of 4.75% for houses and 5% for flats in its
decisions on each case.
Location might be assumed to have a significant effect but

the LT decided that it would be reflected in the actual value
of the house rather than the deferment rate. The Tribunal
did leave the door open, however, for location to impact on
the deferment rate if specific evidence could be brought to
bear on a particular case. This implies that they believe that
the deferment rate would be the same regardless of whether
it was in Central London or anywhere else, and that relative
values cannot be assumed to fluctuate through time.
Differences are already expressed by the current level of
house prices in the area and over the long term it would be
difficult to argue that one area would improve relative to
another unless there are very specific reasons.
The implications of the decision

The message is clear. The Tribunal has on the back of
extensive evidence from both property market and financial
market experts decided in favour of a mainly financial
market approach to LRA valuations. Departure from these
generic rates should be only where specific evidence shows
them to be inappropriate.
This represents a major shift from the 40 years of LRA
reliance on finger in the air valuation based on an ARY
culture that has its roots in a quantity of similar market
transactions to make it work. It has long been the case that
leasehold reform has not had that market to underpin the
method. However, are we actually that much more
advanced or has the LT purely replaced the number with
another one. It has searched for a framework but has
concluded that there are compelling reasons why
fluctuations in market state should be ignored in settling the
deferment rate. With the possible exception of the real risk
free rate, the other inputs (risk premium and real growth)
appear to be fairly stable and as location is reflected in the
current vacant possession house value, this may lead to a
countrywide adoption of 4.75% rather than 6%.
The same conclusion was reached regarding depreciation

and obsolescence with it being reflected in the vacant
possession value rather than the deferment rate. There has
been a lot of work undertaken recently on depreciation in
commercial markets (IPF, 2005) and this work would
suggest that existing capital values do take into account
future depreciation although rental values do not. As we are
discussing capital values, it is reasonable to adopt the same
approach as for location. However, there is one proviso to
this. If past evidence of house price growth was used to
determine real growth in house prices, was the past
evidence based on a set of depreciating properties or a set
of indices which add new properties and do not reflect the
relative reduction in value of aging properties? Tenants may
wish to revisit this aspect in future cases.
This may let some LVTs off the hook. Having been very
reluctant to depart from conventional wisdom, some have
begun to appear like the dinosaurs of the valuation
profession. They may feel able to give a sigh of relief and
change 6% to 4.75%.
The Tribunal also considered the difference between flats

and houses and felt that the generic 0.25% difference was
The College of Estate Management research report
published in 2000 Relative values, Residential
Leasehold Reform in England and Wales, Valuation for
lease extension and enfranchisement can be
downloaded free from the College website,
www.cem.ac.uk go to Research and select
Reports.
51
NOTICES
New staff
Organisational changes
Sylvia Osborn MRICS joined the College of Estate

Management in September 2006 as a full-time Tutor in
Valuation. She gained a BSc (Hons) in Estate Management
from South Bank Polytechnic and an MPhil from the
University of Portsmouth, and also holds a Postgraduate
Diploma in Accountancy and Finance.
Ben Elder has been appointed Director of Business

Development, concentrating on raising industry awareness
of the College as the pre-eminent provider of distance
education for the real estate and construction sectors
internationally, including undergraduate and postgraduate
courses, corporate training and continuing professional
development (CPD).
She has worked in higher education for many years,

teaching on RICS accredited degree programmes and on
leisure property degrees.
Brian Kemp has taken over the role of Course Director for
the MBA in Construction and Real Estate from
September 2006. Management teaching previously
undertaken by Brian for the BSc and Diploma in Surveying
Practice courses has transferred to Malcolm Berry.
Before becoming involved in education, Sylvia worked as a

chartered surveyor in two London practices, specialising in
valuation and property management. She has a particular
interest in learning and teaching and is a member of the
Higher Education Academy. Her research interests are in
the broad field of leisure property and sports facilities
management and she holds membership of the Institute of
Leisure and Amenity Management.
CEM firsts in Vietnam and

China
Sylvia will be teaching mainly on CEMs Graduate Diploma

in Surveying, MSc in Real Estate and BSc in Estate
Management courses.
Hanh Nguyen, who received the MSc in Real Estate in July

2006, has also passed the RICS Assessment of
Professional Competence to become the first ever
Vietnamese MRICS. It was the College MSc that made this
candidate eligible to apply for RICS membership.
Malcolm Berry joined the College in

August 2006 as a Tutor in
Management. He graduated in Physics
from Reading University and then
worked for three years in computing
before
taking
a
Diploma
in
Management Studies at Brighton University. He resumed his
career in information systems, taking progressive roles as
project manager, systems manager and subsequently DP
director at Trafalgar Management Services, part of the touroperating group. Following this period of employment, he
completed an evening MBA in Finance and Property at City
University.
CEM has also produced the first ever mainland Chinese

MRICS by examination.
15% discount for students and PPN members

on all CEM publications
CPD STUDY PACKS
His later career as an independent consultant spanned 20

years, with over 30 clients in business, government and
industry, including names such as ADAS, Cluttons, the
Corporation of Lloyds and Glaxo Wellcome. In parallel with
this, he was founding managing director of Blackberry
Estates, a small developer active in residential in the southeast of England and commercial in the south-west. He is
now a founding director in the family business, Easyoak Ltd,
which specialises in residential refurbishment.
The College publishes over 40 CPD study pack titles a full

list is available on our website at www.cem.ac.uk. Our
range of CPD study packs is regularly updated and has
been designed to keep practitioners up to date with the
ever-changing requirements of the property and construction
industry. Those involved in academic study or who are
undertaking their APC have also found these study packs
most useful.
Malcolm is a Visiting Fellow at Reading University Business

School, where he teaches Information and Knowledge
Management and supervises graduate students enrolled in
the Knowledge Transfer Partnership; a collaboration with
industry. He will be contributing to all College courses that
involve management or information systems.
We are currently preparing new study packs and their

working titles are:
52
Energy Performance Certificates
Fire Safety Engineering
Sustainable Construction
A number of existing CPD study packs are also being

updated including:
Building Regulations
Changing the Home Buying Process
The Impact of the Civil Procedure Rules on Surveyors
The Expert Witness
Fire Engineering Solutions
Negotiating Skills
Project Management
LICENSED HOME INSPECTOR STUDY PACKS

The College has produced four study packs to assist
prospective Licensed Home Inspectors acquire the
knowledge and understanding required for the ABBE
Diploma in Home Inspection. These packs are intended as
gap fillers and are therefore aimed at partly qualified or
existing practitioners.
The following four study packs are available:
Coming soon
Podcast lectures to download to your MP3 player to listen to
any time, anywhere.
LHI1: Building Technology Low Rise Residential

Building Techniques
LHI2: Building Technology High Rise Structures

and Framed Buildings
LHI3: Building Pathology Residential Dwellings
LHI4: Home Inspector Practice
For further information or to place an order please refer

to our website at www.cem.ac.uk or contact CPD Sales
on +44 (0) 118 921 4634.
53
54
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Vol. 13 No.

CEMicircular WebWatch gives details of related

Latest Research indicates material that has been

The editor of this circular is Gaye Pottinger, Senior Research Officer

CEMicircular is produced twice a year, in the spring and autumn. It is

Whiteknights, Reading, Berkshire, England, RG6 6AW

the cost of doing so from the building owner. If the local

To most architects the words 'Building Regulations'

The other option open to the local authority is to bring a

Where works have been carried out before the local

Lastly, while Section 38 of the Building Act states that a civil

Precast concrete, already widely recognised for its fast

'air miles' CO2 impact of transportation. Timber and the iron

FABRIC ENERGY STORAGE

MORE FROM LESS

There are two types of FES: passive and active. With

To this end, the sector has established sustainability and

The use of FES significantly increases a building's

In addition, British Precast is working on a four-year

identify the economic, social and environmental

establish the precast industry's awareness of the

establish objectives, targets and indicators for

The project is currently examining the industry's

British Precast has been working with the British Cement

environmental impact of a building's operation, the industry

So in addition to the inherent benefits of precast concrete

energy prices increase this will become an increasingly

Lighting in the retail and leisure sectors has two

In contrast, LEDs are very cool running and enable light to

Additionally, the new Part L imposes greater constraints on

LEDs are also available pre-mounted in strips to give evenly

Fibre-optic lighting can deliver a range of effects. The fibres

to maintain closing a significant area of any commercial

Fibre-optics can be used in wet areas or in inaccessible

Remote sources using fibre-optics reduce the need to

Small fluorescent tubes smaller than a pencil typically 8

Control systems are becoming more sophisticated the use

Many small sources of light are often much better

Energy conservation is climbing up the agenda,

New regulations should be seen as a design

Specialist help should always be considered at the

Restoring Pugins Grange

Grange was a solid and essentially rational building that

A most substantial Catholic house, not very large but

The philosophical issues of the project related to the

It was completed in little more than a year but the architect's

In two principal phases of work, Edward greatly extended

Following Cuthbert Pugin's death, the family's connection

Internally, Edward's alterations reflected his aspirations for a

Was there ever a practical alternative? Extraordinarily, a

Much of A W N Pugin's furniture was dispersed, Further

The issues facing Landmark were as much philosophical as

Doors have been replicated to the original pattern by John

Macgregor advised demolishing the 'badly constructed,

'It was a seminal work by a great architect and the right

The debate over the treatment or E W Pugin's work

E W Pugin enthusiasts too few in number may still find

The clean-cut look of The Grange, as restored, is a result of

As part of the project, the roof was returned to its original,

Inside the house, of course, many compromises had to be

Paul Drury Partnership: Paul Drury

Bare Leaning & Bare: Adrian Stenning

The Wall Paintings Workshop

The Morton Partnership