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Background

In the given case study the present scenario presents a situation in which the company owns a large area that has mostly been used for official purpose. It consists of a ten storey office building and five small shops. The office building is very old and is there since 1969. Most of it remains vacant, however first three floors have been occupied at a lease of twenty five years. The shops have been leased for smaller duration.  The adjoining site consists of a small car park and a public house which is owned by the Education and Superannuation Fund. They want to sell of their rights; however the company does not wish to buy the same immediately. The company has contacted the development team for developing planning obligations that will help in reconstructing these properties into residential area and are seeking help for the same (Gurran & Bramley, 2017). The developers have been contacted for development of a planning obligation that will help in making the development acceptable. In this report we will analyze the likely cost of development of the planning obligation and how will the authorities deal with the same.  For the initiation we need to understand the main objective behind planning obligation and how does it function (Valtonen, et al., 2017).

Planning obligations forms the basis of the overall offer by the local authorities to develop such plans for comprehensive developments of sites taking into consideration such options that cannot be included in case of normal planning. These are mostly private agreements that are attached to make such development permissible. It is important to make the overall process of development of new areas hassle free and as per the legal requirements (Gurran & Bramley, 2017). Thus a party seeks professional developer’s help that will help them in development of this planning obligation within the total acceptable cost of the project. It consists of planning permission for making acceptable development in any particular area. Just in this given case the municipality and the local authorities wants development of two sites for residential purpose that may be normally acceptable under general planning terms. The overall test of acceptable development must be passed to make the planning obligations legal and acceptable.

The overall planning obligation consists of three particular tests that must be cleared to be concluded as an acceptable development of any particular area. The three tests include-

  • Planning must be directly related to the development
  • Planning must be fair and reasonable to the overall scale of development
  • Planning must be necessary to make the development acceptable in terms of planning.

If any development is satisfying these three conditions then they can be considered for planning obligations and the developers can help them in this case. In the given scenario the company wants that the area must be converted into a residential area and all the offices that are functioning there must be removed. The company is asking for planning obligation to make the overall development acceptable. In the given case it can be said that the test for the acceptable development is met because the planning is directly related to the overall development of the given area into a single residential complex (McClure, et al., 2017). It can be seen what various implication related to the total cost of the proposed strategy as per the given proposals. There are various reasons due to which the total cost of the project might increase and the developers need to see that these costs are regulated as much as it is possible. Various laws will be analyzed to reach to acceptable grounds like-

Understanding Planning Obligations

Community Infrastructure Levy (CIL) - The CIL is a planning charge that has been introduced by the planning Act 2008, to help the local authorities to help in the transfer of infrastructure to help in the overall development of the given area. This is an important charge that the developers have to pay, thus will be included in the total cost of the planning obligation. This charge might increase with increment in the total time of the development of the site or when the planning permission is attached with such conditions. Care must be taken to ensure that none of the cost is paid twice (Squires & Lord, 2017).

Section 278 Highway agreements – These agreements have been created for the local authorities in which payment in made either for the development or repair of the highways and thus can be included as a part of the overall planning obligations, as the development of the residential complex will include development of the highways in that area.

Applying the given facts to the case we can say that the total cost for the development of the residential site will include the planning charges along the charges with respect to the CIL. The CIL will help in development of the infrastructure hence payment for the same needs to be done. It will also include the highway charges as development of residential complex will mean more people will live in that area and they will make use of the local amenities parks, markets, better roads needs to be developed. Also the exemption for the affordable housing corporation cannot be availed in this case as the number of houses to be developed is more than ten. Also as developers focus should be given on fact that none of the payment is done twice. Care must be ascertained with respect to that. The developers must be a given clear on the total amount of money that they need to pay and what are the various ways by which payment can be made. Thus there will be full transparency with the total amount of money to be made and the overall development that will be done in lieu of the same.

Conclusion

From the above analysis it can be concluded that the local authorities will be benefited with the development of the residential areas as the offices are very old and dilapidated and also the local parties that own the residential parts are ready to sell of the same. It can also be concluded that the tests of acceptable development is cleared by the given company as planning is directly related to development. Thus planning obligations will help in making the overall development in terms of the planning and the overall likely cost will be within the limits if the local authorities and the developers see to it that none of the payment is done twice and total transparency is maintained with respect to the amount of payment made. The comprehensive development of the local site into residential complex will consists of different types of cost that might consists of legal charges or charges with respect to the local bodies and thus will consist of the total cost for the planning obligations.

Tests for Acceptable Development

In this task we will discuss the desire of the company to buy the rights of the adjoining site that is owned by the Education and Superannuation Fund, and the likely impact of the same on the overall planning scenario. The various aspects related to the same will be discussed in the given report hereunder.

The company will make a proposal to the aforesaid party for procurement of the right and that will consist of an option.

An option is an agreement that will consist of a special right attached to it that will enable the buyer to buy the property on fulfillment of certain conditions. It is mostly attractive for the developers. Once the planning permission is granted or any of the attached condition is fulfilled the buyer has the right to serve a notice on the seller to sell him the rights of the property. These option agreements are very helpful in situations where there is more than one owner of the property and thus the developer wants to have an option agreement with them that will help them in securing the rights of the property.

A conditional contract is a contract in which the buyer will buy the property once certain conditions are fulfilled. These are helpful in cases where the planning permissions have not yet been received.

In the given case if the developers go for option agreement then they will be more benefited as the property is owned by several owners and it is important that once the planning permission is sought the property must be bought.Once the planning permission is achieved this will trigger the option and the seller will then have to sell off the property. And also in any case if the developers are not able to get the planning permission or such permission that might affect the overall development unacceptably like conditions where the cost of the development will increase or where the overall development will not happen that the same speed as ascertained. In all that cases planning and development will not be acceptable and both the parties should then withdraw from the agreement. In case acceptable planning permission is achieved then once the conditions that will constitute to the planning permission is fulfilled the option will be triggered and then the seller will be under the obligation to sell of the property in all cases possible. This is one of the most important features of the option agreements where the seller cannot back off once the permission is granted. Planning permissions are of various types like personal planning permission and temporary planning permission.

  • Personnel planning permission means a situation in which the planning permission cannot be implemented by any other party other than the applicant. It has a negative impact on the overall development of the area.
  • Temporary Planning Permission- Temporary planning permission are such permissions that expires out after a limited time and thus renders the development unviable over the course of time(Bakir, 2017).

Costs Associated with the Development

Other conditions like limitation of the trading hours and restriction on the identity of the occupiers can affect the overall development. Hence if these conditions are attached to the planning permission then that must not be considered and such unacceptable planning conditions should be abolished to make the agreement viable.

Thus the developers must check the overall viability of the agreement with the aforesaid party before moving forward with the planning permission and buying of the rights attached to the property. All the prior conditions related to the planning permission must be checked and care must be taken to ensure that there is no increment in the total cost for the project because of the same. The parties are ready to sell off their rights as maintained in the case study so prior permission must be taken to make sure that there is no issue in the future because of the same. Other legal and ethical implications must also be studied before signing the contract and in any case the planning permission leads to adverse effects the developers must back off from the project (Mayntz, 2017). These are the few ways in which the developers can verify the agreement with respect to buying of the rights from the other side. The overall total cost of the project must be considered with respect to not only the development cost of the complex but also the amenities like roads and markets that the developers need to take care off. The cost of these increases with increment in the total time for the development of the area and also the overall planning permission that is granted to the said party with respect to the planning obligations (Kötz, 2017).

It must be checked whether or not the development scheme is financially viable or not. The overage must be calculated that is the total surplus that the company will gain from the development of the single residential complex. The total cost of the development process will be deducted from the total revenue of the project and from the same the surplus of the project will be calculated. If after deducting the total cost, there is a surplus then the development project must be accepted as it is financially viable and in any case if there is a deficit then it should be rejected. All the cost covering all the aspects must be taken into consideration to reach the desired conclusion from the development project (Elimam, 2017). The RSIC has proposed a guidance note that reads “Financial viability in planning” that covers the various financial aspects with respect to the planning obligations and how the same must be considered to calculate the total amount of overage that the company might earn out of the same (Pape, 2017). The various costs of developments like the CIL often leads the development programs non viable financially and hence care must be taken to make sure that none of the payments are done twice and the overall payment is regulated and done through secured sources. This will help in increasing the overall chances of making the project commercially viable and also financially sound for the company.

Conclusion

Thus it can be concluded that the developers must do proper negotiations with the other party and should make sure that there are no such conditions present that makes the development more costly or has any detrimental effect on the same. The planning permission must be free from such conditions and the company should see to it that on acceptance of the development project there is certain amount of overage that reflects the surplus that is earned from the development project. Thus all these factors must be considered before accepting the planning proposal. Considering all the legal and other implications will help the developers of the project in taking sound decisions. Thus from the overall analysis it can be said that only if the cost is within limits and the company is earning acceptable amount of surplus the company must accept the project only then.

Bakir, c., 2017. How do mega-bank merger policy and regulations contribute to financial stability? Evidence from Australia and Canada. Journal of Economic Policy Reform, pp. 1-15.

Elimam, H., 2017. The Role of Small Businesses (Small Scale Economic Projects) in Alleviating the Acuity of Unemployment. International Business Research, 10(3).

Gurran, N. & Bramley, B., 2017. Planning, Housing Supply and Affordable Provision in Britain. s.l.:s.n.

Gurran, N. & Bramley, G., 2017. Relationships Between Planning and the Housing Market. In: Urban Planning and the Housing Market. s.l.:s.n., pp. 85-120.

Kötz, H., 2017. European Contract Law. SECOND ed. UK: OXFORD.

Mayntz, R., 2017. Networked Governance. s.l.:Springer.

McClure, K., Gurran, N. & Bramley, G., 2017. Planning, Housing Supply and Affordable Development in the USA. In: Urban Planning and the Housing Market. s.l.:s.n., pp. 165-200.

Pape, T., 2017. Value of agreement in decision analysis: Concept, measures and application. Computers & Operations Research, Volume 80, pp. 82-93.

Squires, G. & Lord, A., 2017. The Uneven Geography of Financing Cities through a Betterment Tax: Using the Community Infrastructure Levy (CIL) in England.

Valtonen, E., Falkenbach, H. & Viitanen, K., 2017. Development-led planning practices in a plan-led planning system: empirical evidence from Finland. European Planning Studies, 25(6), pp. 1053-1075.

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