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Friday, 30 September 2011

Squatting: Hot Weather, Heated Debate

Like the unseasonably hot weather, the debate on the government’s proposed criminalisation of squatting is sending the mercury soaring as the temperature rises.

On Monday the Guardian published a letter from 160 leading legal figures saying a change in the law relating to squatting is not needed and accusing ministers of fostering “ill-informed debate”. I reported on that letter in my post Squatting Law is Being Misrepresented.

The letter provoked many responses, including this letter to the Guardian from Conservative MP, Mike Weatherley, who thunders:

“The self-proclaimed experts who signed the letter, sheep-like, have a huge vested interest when it comes to fees after all.”

Why is it that whenever lawyers try to defend a position on matters such as squatting or, to use another example, legal aid – in either case areas of expertise hardly offering up Goldman sacks of derivative backed wealth – the argument is reduced to a slanging match about lawyers’ fees? Let's face it, if they were only in it for the money, those lawyers would be trousering the more Goldman-like figures on offer in Big Law.

It’s a cheap shot.

More substantively, Mr Weatherly argues:

“The police will not assist with an eviction in most cases without the backing of a magistrate's order. This takes sometimes a few hours, sometimes it's the next day. In the meantime, the unlawful occupiers will have been damaging your home, using your electricity, drinking your wine and sleeping in your beds.”

But there’s the rub. It is a question of enforcement. Creating a new law would not necessarily solve that. The Police should be directed to enforce the existing law.

David Smith on the nearlylegal blog writes a cogent reply to Mr Weatherley’s letter from the point of view of someone with years of experience in dealing with squatters, mostly for the benefit of property owners. He says:

“Squatting a property rightly occupied by someone else is already a criminal offence. One the Police are generally reluctant to spend effort enforcing. Creating a new offence of squatting in general ignores the value of squatting in making efficient use of empty property and is not likely to make the Police change their enforcement priorities.”

The issue is generally talked about in terms of residential property, because that is where most of the squatting takes place.

Commercial property owners have to obtain a court order before they can evict squatters.

As well as addressing enforcement of the existing law for residential property, there is, I believe, a case for making the same law apply equally to commercial premises (Option 2 in the government’s consultation document – for more on which see my post Squatting: Should it be Made a Crime?).

The consultation ends soon on 5 October 2011.

NPPF: Are the Gloves On or Off?

The debate concerning the National Planning Policy Framework (NPPF) consultation, which closes on 17 October 2011, continues.

But has the slugfest I referred to in More Planning Ping Pong calmed down?

Yesterday, the National Trust (NT), which seems to be leading the campaign against the NPPF and setting the agenda, put more flesh on the bones of its objections by issuing its manifesto called Planning for People, headlined “We believe in growth – but not at all costs”.

It says “planning exists to serve the economy, society and the environment” – which is what the government is saying too, so the argument is about how you achieve that goal.

The government seems nervous at the prospect of alienating NT members, as demonstrated by the Prime Minister’s letter last week.

The NT says the NPPF, by being weighted so heavily in the interests of economic development, does not deliver the truly sustainable approach that it promises; fails adequately to define how decisions are to be made, leading to greater uncertainty and delay; and that by insisting on a default “yes” to development, takes power further away from local people.

Specifically, the NT says:

1.    The planning system should not be used as a blunt tool proactively to drive development.
2.    Planning should promote genuinely sustainable development – multiple outcomes for people and environment as well as growth.
3.    Clause 130 of the Localism Bill should be revoked – financial payments should not be rewarded in the planning process.
4.    The NPPF should see no weakening of protection for designated countryside and heritage – planning should continue to protect the wider countryside for its own sake.
5.    The NPPF should adopt an explicit “brownfield first” approach.
6.    The NPPF should provide a 5 year supply of land for housing, but the requirement to identify an additional 20% of land should be dropped.
7.    The default “yes”, and the requirement to grant permission where a local plan is out of date, indeterminate or silent, is irresponsible and must be removed.
8.    Localism should be real – communities should be given genuine power to shape their area for the better.
9.    It is fundamentally wrong that neighbourhood plans should be led and funded by business; any plans, whether at neighbourhood or local authority level, should be genuinely community led.
10.  There should be a limited third party right of appeal, in circumstances where consent is granted for development that is inconsistent with the local plan. This should be guaranteed by the Localism Bill.

In the other corner, the BPF, whilst welcoming the NT’s call that the NPPF should adopt a more explicit requirement to develop brownfield land before greenfield sites, has at the same time slammed as “economically naive” the NT’s insistence that businesses cannot be considered part of their communities – the gloves are off on that point.

“Businesses should be just as entitled as residents to have a say in how their areas are developed and communities need jobs if they are not to wither and die – or become just dormitory settlements”

The BPF has responded to each of the NT’s 10 points – the gist of the BPF’s response being that in most cases the NT has either misread or misinterpreted the NPPF and that this could be dealt with by rephrasing and clarification. The BPF does not however agree at all with the NT’s stance on business, as quoted above, and does not support the NT’s call for limited third party rights of appeal.

It is only in relation to a prioritisation of brownfield land development that there appears to be agreement between the BPF and the NT (although the BPF stresses that there is not enough brownfield land to deliver all the homes and jobs). But that’s a big point nevertheless, so the government should take note.

A little more nuance has now entered the debate; they are still slugging it out, but perhaps the gloves are back on...for now at least.

Photo by Snow0810 via Flickr

Thursday, 29 September 2011

Restrictive Covenants: They Won't Just Go Away

Sometimes a landowner can’t develop a piece of land or change its use without first getting someone else’s consent, because there’s a restrictive covenant on the title.

Restrictive covenants “run with the land” and so bind all future owners and are effective provided there is land defined in the covenant which benefits from it.

I have written before about the problems that can arise from these covenants, for example what happens when the person whose consent you need is dead; and the introduction of competition law into the mix.

The law relating to restrictive covenants in general is old and complex, and the limited methods and opportunities that exist for modifying or removing them are unsatisfactory – as recognised by the Law Commission which has proposed reform which may eventually become law – see my June post Law Commission Blows the Cobwebs Out of Land Law – and the government is currently conducting a consultation on the use of restrictive covenants in the pub industry.

Quite often developers or landowners will go to the expense of getting planning permission before they have dealt with a covenant on the title which prohibits want they want to do.

This can be an expensive mistake.

Getting rid of covenants is not straightforward.

If the covenant holder won't negotiate or can't be found, you have to apply to the Upper Tribunal Lands Chamber (which used to be more memorably called the Lands Tribunal). The tribunal has powers under section 84 of the Law of Property Act 1925 to modify restrictive covenants or discharge them completely, which removes them from the title.

The rules that govern these applications are too complex to set out here, but basically amount to the tribunal having to balance the interests of the person applying for removal of the covenant and those of the person who has the benefit of it.

Recent cases have shown that the tribunal will not just consider the ultimate use of the land that is being proposed, but also any disturbance in the short term that might be caused by the construction works.

Whether or not the tribunal will take that disturbance into consideration depends on the specific facts of each case.

So for example, in a recent case before the tribunal (Perkins [2011] UKUT 219 (LC)), the tribunal refused to modify a restrictive covenant to allow a developer to build a new house on his land, and that refusal was based on the disturbance likely to be caused to the neighbourhood during the construction works.  

The people who had the benefit of the covenant said that the roads were too narrow for construction traffic and that parking in the immediate area was already a problem. The development site was situated around a square, and the lorries would have to negotiate two sides of it, which could potentially cause damage to parked cars, verges and planting on the square. The tribunal therefore decided that “the facts of this case are exceptional in terms of potential disturbance, and do justify giving special weight to this factor” and refused the application to modify the covenant.

So the tribunal will take account of whether one of the purposes of the covenant is to protect holders of the covenant from intolerable nuisances during a period of construction, and not just look at the proposed end use.

The lesson here is to scrutinise the land’s title right at the outset, even before applying for planning permission, to find out whether there are any restrictive covenants and, if there are, to consider their wording carefully with your advisers.

Tuesday, 27 September 2011

Economics, a Flying Pig and the Shard

Socrates became the first, perhaps only, economist when he said:

“True knowledge comes in knowing that you know nothing”.

I posted back in August that it seems like the only boom industry right now is economic punditry.

And there were some interesting and amusing examples of this in the Guardian yesterday.

Peter Preston was moved to comment that when it comes to the economy, nobody knows anything.

“You don't, in fact, need relevant academic qualifications to run big economies – or to talk the economy talk. You can simply opine away. Even those who study philosophy, politics and economics...simply get a philosophy, define their politics, then find an economic theory to fit.”

If economics is not a science, is it an art or artifice?

“Everybody has a view. Virtually everybody can convince themselves that they're right. But look at the record and stress the words "knows". Nobody knows anything.”

So it has a lot in common with tasseography – or the reading of patterns in tea leaves, coffee grounds, or for the louche Keynesian, wine sediments.

Paul Kingsnorth writes of this economic collapse as a “crisis of bigness.”

“The crisis currently playing out on the world stage is a crisis of growth. Not, as we are regularly told, a crisis caused by too little growth, but by too much of it. Banks grew so big that their collapse would have brought down the entire global economy. To prevent this, they were bailed out with huge tranches of public money, which in turn is precipitating social crises on the streets of western nations. The European Union has grown so big, and so unaccountable, that it threatens to collapse in on itself. Corporations have grown so big that they are overwhelming democracies and building a global plutocracy to serve their own interests. The human economy as a whole has grown so big that it has been able to change the atmospheric composition of the planet and precipitate a mass extinction event.”

A theory first put forward by Leopold Kohr in the 1950’s.

“Socialism, anarchism, capitalism, democracy, monarchy – all could work well on what he called "the human scale": a scale at which people could play a part in the systems that governed their lives. But once scaled up to the level of modern states, all systems became oppressors. Changing the system, or the ideology that it claimed inspiration from, would not prevent that oppression – as any number of revolutions have shown – because "the problem is not the thing that is big, but bigness itself".”

Kohr didn’t think the human scale economy would ever really happen, other than in a period of respite between the gigantic global system falling in on itself, like a giant star, and the whole cycle of growth beginning all over again.

Then again, as Charlie Brooker asks, if capitalism has failed, how the hell do we pay for our Shreddies?

“The complete collapse of capitalism would bring on an identity crisis of staggering proportions. You mean we listened to all those advertising jingles for nothing? We memorised PIN codes and coveted "brands" and shuffled round shopping malls in search of personal validation – and we were wasting our time? And those eerie puppet people who dressed like Apprentice contestants and sat on the Bloomberg channel burping out phrases such as "collateralised debt obligations" and "securitisation" and "facilitate" and "drill-down" and "going forward" – those people were boggle-eyed bullshitting lunatics and the entire system was a tosser's delusion? None of us could ever have guessed. We didn't have to guess. We knew. We knew.”

Once again we are being fed mind-boggling figures when central banks talk of bail-outs.

It would take you eleven and a half days to count to a million, assuming you could count a number-a-second and weren’t foaming at the mouth with insanity in the meantime.

So how are we to comprehend the idea of trillions? Robert Peston can say the word “colossal” all he likes, but the numbers (if they even are real numbers) are beyond comprehension.

Debt seems to have travelled upwards on the scale of bigness – starting with individuals, then the banks that lent them the money, followed by the states that bailed out the banks and now the super states who are left holding the round fizzing bomb that’s about to explode...or not.

Still, I wouldn’t want you to think I was claiming to know something about all this. Pigs might fly.

In fact, a pig did fly yesterday as Pink Floyd re-enacted the artwork for their 1977 album “Animals”, which saw a pig flying above Battersea Power Station in London.

I won’t post a photo (you can see some here) or I might find myself on the wrong end of one of the Floyd’s infamously litigious salvos.

Gigwise reported a spokeswoman for the band saying:

"Sadly, two weeks prior to the event the original neoprene glued pig was officially declared not airworthy and a brand new high-frequency welded PVC replica Pink Floyd pig has been made for the occasion."

That’s clear evidence of the march of human endeavour, whatever the economists might say. Welcome to the machine.

Which brings me, illogically, to the Shard – a challenge for any helium enhanced pig.

I posted some photos in June showing the progress made in its construction so, by way of an update, at the top of this post (in case you were wondering) is a photo taken a few days ago outside London Bridge Station.

Will future generations regard this tower as the start of a renaissance of economic power, or the final towering hubris of a collapsed financial system?

Or neither?

Who knows?

And if that hasn't depressed you, listen to a trader called Alessio Rastani on the BBC yesterday, then run for the hills! Mind you, some people think it's a hoax, which really does go to show you can't be sure about anything.

UPDATE 28/09/11 Apparently not a hoaxer according to the Telegraph, but not a high flying trader either. Who cares? What he said seems to have struck a chord...or is he just the modern equivalent of the scaremonger running around telling everyone "the end of the world is nigh"? Again, who knows? However, I guess the BBC might have to be a bit more careful who it interviews in future!

Monday, 26 September 2011

Squatting Law is Being Misrepresented

The Guardian reports a letter from 160 leading legal figures saying a change in the law relating to squatting is not needed and accuses ministers of fostering “ill-informed debate”.

The letter, published in the Guardian today, says that ministers' obfuscation and media misreporting have created "fear for homeowners, confusion for the police and ill-informed debate among both the public and politicians on reforming the law. [In] failing to challenge inaccurate reporting, ministers have furthered the myths being peddled around squatting".

The government is currently carrying out a consultation on whether to make squatting a crime. The consultation ends on 5 October 2011.

Responding to the lawyers' letter, housing minister Grant Shapps said:

"The guidance I published earlier this year makes clear to homeowners where the law stands on squatters, however commonsense suggests there should be quick and tough sanctions available when someone's home is squatted, without the homeowner necessarily needing to bring a civil case.”

However, as many commentators have pointed out, it is already a criminal offence for anyone who goes on to residential premises and remains as a trespasser to fail to leave those premises on being required to do so by a displaced residential occupier (a homeowner) or protected intending occupier (someone intending to move into the property).

There’s a further explanation of those terms and summary of the relevant law in my post Squatters in My Home! Can I Call the Cops? and a more general look at the consultation in Squatting: Should It Be Made a Crime?

The police can arrest any trespasser who does not leave. The displaced or protected occupier can use force to enter the property and reasonable force to remove the trespassers. 

Arguably, the criminal law does not need changing, but there does appear to be a problem with knowledge of that law and with its enforcement.

Rather than adding headline-grabbing new offences to the statute books, it might be more useful if the outcome of the consultation led to an improvement in the enforcement of existing offences, so that the interests of homeowners are protected properly and quickly.

That means working with the police and ensuring they are adequately trained and resourced to deal with the problem.

It doesn’t make for such a good sound bite though.

Thursday, 22 September 2011

NPPF: More Planning Ping Pong

Here’s another snapshot (metaphorical, not the one above!) of the slugfest that is the National Planning Policy Framework (NPPF) national debate sparked by the government’s consultation on reform of the planning laws.

For background, if you are new to this blog, here is a link to previous posts.

National Trust chairman, Simon Jenkins (who I’ve always admired) gets a pasting from Colin Wiles in The Two Faces of Simon Jenkins on Inside Housing.

Wiles accuses Jenkins of running a misleading campaign against the NPPF and the National Trust of hypocrisy:

“They don’t appear to want a single scrap of countryside to be built upon, (even though they themselves built 200 homes in the grounds of their Cliveden estate in the heart of the green belt.)”

Jenkins is also accused of double standards in advocating that a new airport for London should be built in the “wilderness” of the North Kent Marshes – to the annoyance of local countryside campaigners.

Wiles concludes:

“The problem is that the voices of the homeless and badly housed are not being heard in this debate. It is the well housed and the well heeled who are dominating the discourse. But the National Trust does not speak for me and I hope it does not speak for you either. As the Trust’s Director General Fiona Reynolds once said, “The Trust, I’ll be honest, can be seen as an organisation that’s middle-class and slightly remote." I think that hits the nail on the head.”

A good point regarding the homeless, although I’m somewhat cynical about the extent to which their plight is genuinely top of the agenda of any of the more vocal participants in this debate (apart from the homelessness organisations, like Shelter).

Everyone’s got to live somewhere, and a lot of the anti NPPF talk does smack of NIMBYism.

Property Week reports that, this morning, National Trust director general, Dame Fiona Reynolds, outlined a shopping list of amendments to the government’s planning proposals during a debate with planning minister, Greg Clark, which also included representatives of the British Property Federation and British Chambers of Commerce.

This looks like it was a useful session, with more nuance than polemic from both sides – but I wasn’t there so I only have PW’s report to go on – for all I know they were throwing iced buns and Garibaldis at each other.

Reynolds said greater clarity needed to be added to the ‘presumption in favour of sustainable development’, so that it did not favour the economy. Further proposals (with my two-pennyworth in italics) included:

·         Assurances from the government that the presumption would not lead to chaos while local authorities scramble to draw up Local Plans (not sure how the government will be able to give that assurance).

·         Clearer wording of the obligation to develop on brownfield land first (this has also been advocated similarly by the BPF).

·         Rebalancing of the presumption to favour heritage as much as economic growth (this goes to the essence of what is meant by “sustainability”).

·         Drop requirements for councils to allocate an additional 20% of developable sites against their five year housing requirement.

·         Extend green field protections than limited heritage protections to ordinary “every day” green field land (surely not all green field land needs to be protected?)

·         Limit possible risks arising from businesses financing council’s local plans (if councils are guilty of bias then judicial review proceedings might be appropriate anyway).

·         Introduce limited third party right of appeal.

These seem like sensible suggestions, although in an age when jobs and housing are at a premium I’m not sure what is meant by the presumption “not favouring the economy”, if that is what she said (I only have the report to go on).

What about third party rights to appeal?

It does appear unfair on the face of it that the only person with a right of appeal at the moment is the applicant for planning permission if the application has been refused. If permission is granted, objectors have no right of appeal, only the more limited right to bring judicial review proceedings for a procedural irregularity or unlawfulness, but not on the substance of the decision itself. The argument against will be that it will cause the very delay and complexity the reforms are designed to combat – it depends what is meant by “limited” right to appeal. If it isn’t limited in some way, some objectors will just appeal against every decision made, for something to do.

Property Week is compiling views on the NPPF. It urges you to email your views to development@propertyweek.com.

Please feel free to rant about it here too!

Photo by tpurk via flickr

OFT Targets Sharp Selling Practices

The Office of Fair Trading (OFT) has this week launched a consultation on draft guidance to estate agents and property developers, which aims to help businesses handling sales of property and land in the UK comply with the law on misleading marketing and unfair business practices.

Although mostly aimed at estate agents dealing with the sale of residential properties to private consumers, the guidance also applies to property developers and house builders who market and sell their own property.

Specifically, the draft guidance focuses on two pieces of law: the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) and the Business Protection from Misleading Marketing Regulations 2008 (BPRs).

CPRs prohibit traders from using unfair commercial practices in their dealings with non-business consumers, so they prohibit estate agents from engaging in commercial practices that are unfair to sellers and buyers of residential property.

BPRs prohibit traders from using misleading practices in their business-to-business advertisements, so they prohibit estate agents from using misleading marketing when they advertise services to potential business clients or market commercial property for sale.

The guidance provides an overview of the regulations and examples of the types of trading practices or conduct that are likely to breach the regulations.  It also suggests some practical steps which estate agents or developers may wish to take to ensure compliance with the law when they:

·         advertise for new business, including through flyers and newspaper adverts

·         provide advice to new clients and take new instructions

·         market properties, including when property details are put on internet portals

·         negotiate and make sales

·         deal with complaints.

Examples of non-compliance include:

·         Wrongly describing the main characteristics of the property for sale, for example its location or size of the rooms

·         Using out of date photographs that no longer provide a true picture of the property 

·         Giving mis-leading information about service charges

·         Failing to provide relevant information that you are aware of about the fitness of the property for sale (for example there are serious hidden defects)

·         Engaging in high pressure sale techniques (for example persistent or aggressive telephone calls).

Currently, the Property Misdescriptions Act 1991 (PMA) is often used to address misconduct in this sector although the CPRs and BPRs also apply. The Department for Business Innovation and Skills (BIS) recently consulted on the repeal of PMA and is currently considering its response. Further information is available on the BIS website.

The OFT consultation ends on 9 December 2011.

Wednesday, 21 September 2011

NPPF: Weather Warning – Expect More Hot Air

The UK continues to bask in a warm front of hot air created by the great NPPF debate; a balmy and barmy Indian summer of planning polemic.

Last week Communities Secretary Eric Pickles blasted planning lawyers:

"I don’t see a system that allows planning silks to buy a Maserati or spend an extra week at their villa in Tuscany as one that is going to improve the lot of my fellow man."

He added that expensive planning delays had created an imbalance where, because of planning restrictions, there was now a situation where office space in Manchester can be "more expensive to develop than in Manhattan"

Pickles also accused people who object to the draft National Planning Policy Framework (NPPF) of having not read the document properly.

Meanwhile, communities minister Andrew Stunnell told the Lib Dem conference that planning “isn’t brain surgery” and should become a “community-owned” operation.

Stunnell said:

"If you go back to 1947, you find that the 1947 Town and Country Planning Act had in it a presumption in favour of development, unless material considerations dictate otherwise... The row now is that we’ve got a presumption in favour of sustainable development. The difference between 1947 and 2011 is not the presumption in favour of sustainable development; it’s the addition of the word sustainable. The row should have taken place 70-something years ago. We’ve had that presumption in the planning system in one form or another ever since 1947."

However, that still begs the question of what “sustainable” actually means, and rather skates over a few decades that were strangers to both good planning and good taste.

The Lib Dem backbenchers remain to be convinced as yesterday, at their conference, they called for a stronger definition of sustainable development to be included in the NPPF.

Queen of Shops or High Street Tsar (depending on your absolutist ruler of choice) Mary Portas has warned that proposed planning reforms will weaken the protection of town centres against out-of-town developments; a tad embarrassing for the government to have one of its advisers criticising a flagship policy.

Although perhaps even more embarrassing is Conservative MP Zac Goldsmith, who advised Mr Cameron on environmental issues while in opposition, saying the government was delivering "contradictory messages" over the changes to planning rules, which risked handing a "blank cheque" to developers.

And the Telegraph reports flooding campaigners have also joined the calls of dissent over the planning reforms. The National Flood Forum has spoken with environment minister Richard Benyon to raise concerns over the removal of flood risk definitions from the planning laws.

Charles Tucker, chair of the National Flood Forum, said:

“Although the NPPF includes a provision for flood risk assessments, the definitions that set out what those risks are have been withdrawn so the policy cannot be implemented in a structured and consistent way...Ultimately it could mean that councils will not be able to stand up to developers and it could see much more development on flood plains. The people who buy the houses ultimately lose out.”

The National Trust continues to promote its anti NPPF petition and its chairman Simon Jenkins urges us to “ignore these self serving tycoons” who defend the NPPF. This campaign has garnered such support that the Prime Minister has now written to the National Trust promising to protect the countryside. What will that mean in practice?

The twin goals of growth and sustainability (meaning environmental and sociological sustainability) ought not to be mutually exclusive.

Getting rid of red tape is not a bad idea either, even if it might mean a bad day at the showroom for commission-hungry sellers of Italian sports cars (although I suspect it won’t).

However, clearly the NPPF needs some work if it is to reconcile the different interests that have waged war during this consultation. One example, as the BPF acknowledges, is that the NPPF needs to say more about brownfield development.

Will the gales of defensiveness or outrage blowing respectively from industry lobby groups and countryside campaigners subside and give way to more nuanced blue sky thinking?

There may be a lull in the storm when the consultation ends on 17 October 2011, but it is unlikely to last long.

Tuesday, 20 September 2011

Building Leases: A “Do It Yourself” Solution for Tenants

If you are a prospective tenant with sufficient cash or funding, and knowhow, and you have a strong bargaining position, for new builds it might make sense for you carry out the development you want to occupy yourself.

You can do this by using a building lease.

A building lease will contain construction obligations similar to those found in more traditional agreements for lease, but instead of the landlord being the one to carry out the work, it will be the tenant.

This might be because you are a large well-known corporate occupier who is more able, in today’s financial climate, to secure funding than a small developer; or you are simply better off financially and so can manage the cash-flow, being reimbursed at a later stage by your landlord.

In those circumstances, it might benefit you to be able to take control of the development yourself, rather than having to rely on your landlord to build to your specification (and then having to sue your landlord and rely on the wording of the agreement for lease if they get it wrong).

By using a building lease, as tenant you would control the works and the timetable leading to completion, and would be better able to manage your specific requirements and any variations that might become necessary as the works progress. You would be able to use your own contractors who know your business, and with whom you might have built up a relationship over many years.

This arrangement would also enable you to manage the progress of works so that your internal fit out is carried out at the same time as the shell is being finished off, rather than having to wait until after the practical completion certificate has been issued by a landlord-developer before being able to commence fit-out.

This would save you time and money.

A building lease will give you more protection than simply having a licence to build with a lease being granted after completion. This is because, with a building lease, you will have an asset before the works are carried out, and you will be able to register your interest at the land registry. If the lease is long, it might even have a capital value itself and be used as security for bank financing.

For shorter leases, where the landlord is reimbursing the cost of construction, you can include a right to set off any of the building costs that the developer has not paid against the rent payable under the lease.

The building obligations will be similar to those usually undertaken by landlords in agreements for lease, and are likely to include obligations to build in a good and workmanlike manner to a specification annexed or referred to in the lease; to remedy defects; to allow the landlord to inspect the works; and probably to provide the landlord with a set of warranties from the construction team.

In most cases the landlord will have obtained planning permission before the building lease is granted, although another possibility would be to enter into an agreement for the building lease to be granted once planning permission had been obtained.

As tenant, you would be obliged to insure the works during construction. Following practical completion, responsibility for insurance would pass to the landlord in return for you paying an insurance rent in the usual way.

Of course, the landlord will want some protection in the event that you do not substantially complete the works by a certain date or breach other building obligations. The landlord may want the ability to forfeit the lease if that happens, although (without getting too technical) the risk for the landlord is that you might be able to apply for relief against forfeiture.

If the landlord does not have sufficient confidence in a tenant, it may prefer to use an agreement for lease instead, where the tenant is responsible for carrying out the works as a licensee and the lease is not granted until the works have been completed. The landlord would include a right to terminate the agreement before the lease is granted if the work is delayed beyond the particular date. However, this is not as good for the tenant as having a building lease for the reasons outlined before.

If a building lease is used, it will include the usual tenant’s covenants found in conventional leases, but most of those covenants will only take effect once the building has been practically completed, because it would not make sense for them to do so earlier.

One aspect of some building leases (ie those granted for terms of more than 40 years by private landlords) that differs from conventional leases, concerns provisions relating to subletting. I wrote about this in June - see What is a Building lease? Why is it treated Differently? for more detail. Briefly, despite what the lease says, unless there is a total ban on subletting, you don’t need to get your landlord’s consent until the last 7 years of the term. You just need to give the landlord notice within 6 months.

There are other details that need to be taken care of in a building lease, which I won’t go into here, but the basic point is that for some tenants in the current market, it makes sense to do it yourself.