Residential property update

Now that the property market is more active, practitioners are again encountering transactions involving
a contract to buy a new property ‘off-plan’. As
a result of the mortgage market review, it
may be more difficult for a purchaser taking
an assignment of a contract or a sub-sale to obtain a mortgage.

This should be borne in mind when advising
a client who is looking at an off-plan deal. Even
if the right to assign or sub-sell is written into
the contract to protect the buyer if their circumstances should change, it may not be easy to find a buyer to take the property off their hands. Part 5 of the Council of Mortgage Lenders’ (CML) conditions requires the lender’s conveyancer to inform the lender straight away
if the seller has not owned the property for at least six months and any sub-sale must also be reported.

HS2 is very much in the news at present and practitioners dealing with properties that lie along the planned route have difficult issues to consider with their clients. Is it a good idea to buy a property which may be affected?

Following the consultation last year, the government published its decision document
in April 2014. It plans to help owner occupiers whose properties are effectively blighted but are not within the statutory compensation scheme, but will not assist someone who purchased after the route was announced. Details of the schemes to be offered have now been set out in a document called ‘Property Consultation for the London-West Midlands HS2 Route’ (July 2014, Cm8894).

Where a property is not within the safeguarded area but is likely to be substantially affected, compensation may be payable and, in particular, there will be a ‘need to sell’ scheme to assist owner occupiers who have a compelling need to sell but are unable to do so due to the HS2 plans. There is no outer boundary to this planned scheme. Caution should definitely be exercised by anyone who is thinking of buying a property in the vicinity of the HS2 route as they may well find the property difficult to sell. Practitioners should consider referring clients to a surveyor specialising in compulsory purchase and compensation for guidance on particular circumstances.

Regulatory developments

The Town and Country Planning (General Permitted Development) Order 1995 was amended last year to allow offices to be converted to residential use provided that the residential use commences before 30 May 2016.

However, some planning authorities are issuing article 4 directions, which have the effect of disapplying this change. Practitioners will now see examples of flats being offered to the market under the new rules. The applicant must give prior notification of the transport, highway, and contamination and flooding risks to the planning authority. Practitioners acting for buyers of properties converted under these rules should check that this preliminary process has been undertaken and approved. Building regulation approval is still required. There is likely to be some debate as to what constitutes commencement of residential use where a property is marketed after the cut-off date.

Developers would be well advised to put in place an assured shorthold tenancy where the conversion work is done but the flat is not yet sold in order to supply evidence of commencement of use. If this is not done, there could well be ongoing uncertainty as to whether or not the change to residential use was in fact lawful and this would affect future saleability of the flat.

In July the government issued a further technical consultation (DCLG 2014) with a view to further simplifying the planning system. It is proposed that the existing relaxation of permitted development rights in relation to conversion of offices to residential use should be extended until May 2019.

If enacted, this would ease the perceived difficulty for a developer undertaking conversion work shortly before the 2016 cut-off where the >> >> flats have not yet been sold. Changes are also proposed to allow light industrial buildings and warehouses to be converted to residential use by a similar framework to that currently available for offices.

In April, the Office of Fair Trading ceased to function, and its powers under the Estate Agents Act 1979 are now vested in the National Trading Standards estate agency team. This service is delivered by Powys county council, which is responsible for handling complaints about estate agents. HMRC now deals with registration of estate agency businesses. Solicitors whose clients have a problem in relation to the service offered by internet agencies need to be aware that since October 2013 the Estate Agents Act 1979 no longer regulates an agent who only advertises and/or offers an internet property portal, which merely provides a platform for private sellers to advertise their properties and a means by which a buyer can contact the seller, but does nothing else covered by the general definition of estate agency work.

Case law

Practitioners turn to section 62 of the Law of Property Act 1925 as a last resort where the rights required have not been expressly granted but may have passed on a transfer of land, which
was formerly part of a larger parcel. Wood v Waddington [2014] EWHC 1358 (Ch) gives guidance on the extent of the rights that may
be granted under section 62.

There has been another case decided in the saga of commons registration. In this case, an attempt was made to register a playing field in Whitby, which had been laid out and maintained as ‘a recreation ground’ under the Housing Act 1936, as ‘a town or village green’ (R (on the application of Barkas) v North Yorkshire County Council). The Supreme Court declined to allow the registration. It was pointed out that the public already had a right to use the field so section 15 of the Commons Act 2006 could not apply. The case shows that using registration under the Commons Act to prevent residential development of amenity land is fraught with difficulty.

The Court of Appeal case of Joyce v Darby & Darby [2014] EWCA Civ 677 is a salutary reminder of the need to carefully check the terms of restrictive covenants and to advise the client properly on a purchase of residential property.
In this case, solicitors were instructed in 2007 to act in the purchase of a property in Torquay for £460,000, which was funded in part by a mortgage. The buyer proposed to carry out alteration work including the installation of
a pool in the garden, a balcony extension and
other landscaping works.

The solicitors firm failed to advise their client that in 1985 the property had been acquired subject to a restrictive covenant requiring the consent of the owners of the neighbouring property to any external alterations. After completing the purchase, the buyer commenced the work and was threatened with an injunction by the neighbour. The buyer reinstructed the same solicitor, who continued to work for the buyer despite the potential conflict of interest. An order was obtained requiring the work to stop and the buyer’s partner’s business later failed. The property was then sold by the lender for £70,000 less than was paid for it. The court found the solicitors negligent in failing to advise, and the decision was largely upheld on appeal.

The solicitors were castigated for their ‘lack of professionalism’ in failing to give clear advice while dealing with the claim by the neighbours. The requirement for a conveyancer to provide comprehensive advice in writing to the client regarding all matters affecting the title to a property to be purchased is clear. Members of the public who choose their conveyancer purely on the lowest price offered for the work may have a rude awakening in the future as the quality of the service received is likely to be compromised.

Japanese knotweed

Residential conveyancers are continuing to encounter problems in advising their clients in relation to Japanese knotweed, particularly when it is identified on nearby land. The Law Commission has produced a report on the control of invasive non-native species (‘Wildlife Law: Control of Invasive Non-Native Species’, February 2014).

The report calls for the reform of legislation to allow species control orders to be made. Provisions in the 2014 Infrastructure Bill would enable the Environment Agency and certain other agencies to issue a species control order where a landowner fails to deal with an infestation. SJ

Glenda Ferneyhough is a partner at SA Law