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06/06/2016

Legal view: First dibs for Londoners

Words:
St Katharine Dock

New Mayor of London Sadiq Khan has pledged to give “first dibs” on housing to Londoners. Khan said he would expect developers to market new homes to Londoners first, to prevent wealthy international investors buying properties and using them as “asset lockers” rather than homes. Matthew White looks at how and whether it would be possible for Khan as mayor to do this.

The planning system is not generally concerned with property ownership. Because planning permission runs with the land, it is the land use planning implications of development that are relevant, not who will own or occupy the development once it is built.

Thus, a planning permission was quashed by the High Court where planning conditions required new homes only to be occupied by people on the housing waiting list, and granted them security of tenure for 10 years, because this was so fundamental a departure from rights of ownership (R v Hillingdon LBC, ex p Royco Homes Ltd [1974] QB 720).

On the campaign trail, Sadiq Khan explained that he would achieve his objective through Section 106 Agreements. But such agreements, and what you can use them for, are tightly constrained by the law. Section 106(1) of the Town and Country Planning Act 1990 provides that a planning obligation may only:

(a) Restrict the development or use of land;

(b) Require specified operations or activities to be carried out in, on, under or over land;

(c) Require land to be used in any specified way; or

(d) Require a sum or sums to be paid to the local planning authority.

Advisers should always pay heed to these provisions because the courts do quash obligations that fall outside the specified categories. In 2013, the High Court quashed a planning permission where an obligation prohibited the owner from applying for a parking permit. This was held not to be a valid s.106 obligation because it did not meet the requirements of any of sub-paragraphs 106(1)(a)-(d) (Westminster City Council v Secretary of State for Communities and Local Government and Mrs Marilyn Acons [2013] EWHC 690 (Admin)).

Using an agreement to control the marketing of sales of new homes is therefore fraught with difficulties because it does not obviously fall within any of the categories in section 106(1). Even a Grampian-style obligation, for example – restricting the use of the development until a marketing strategy approved by the council has been complied with in full – would be at risk of being unenforceable as a device designed to circumvent the statutory restrictions.

“Controlling who is entitled to buy and sell homes is an issue that goes much deeper than a catchy campaign slogan”

It seems that the only way to achieve Khan’s policy would be through an agreement under a general power such as section 111 of the Local Government Act 1972, or a voluntary commitment such as the ‘Concordat’ promoted by Boris Johnson and already signed up to by more than 50 developers.

This is not just a London issue. In May, residents of St Ives voted in a referendum to prevent developments of second homes. New houses will only be granted planning permission if they are reserved for people who would live in them full-time and who do not have another home elsewhere. This is essentially the same issue as the Mayor of London’s “first dibs” policy: both are concerned with homes that are unoccupied for long periods of the year. A local developer has already challenged the legality of the referendum.

There are fundamental planning issues at stake here, including the vitality and viability of our cities, towns and villages. But it is very difficult to regulate a purchaser’s intentions when they buy a home, let alone enforce a minimum occupation requirement.

It is perhaps not surprising that planning powers are inadequate, given that the root cause of the problem is not in planning itself. Land and housing are freely traded without the ownership restrictions commonly encountered in other countries. Controlling who is entitled to buy and sell homes is an issue that goes far deeper than a catchy campaign slogan – and is almost certainly beyond the Mayor of London’s powers to change.

Matthew White is head of planning at Herbert Smith Freehills LLP

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