Sheridan Treger examines why some local authorities promote Simplified Planning Zones and what this means for buyers and lenders of property.
Simplified Planning Zones (SPZs) in their current form were introduced in the Town and Country Planning Act 1990. But they have been around in planning legislation since at least 1971. Although good for business, they can be seen as problematic from the perspective of local authority planning departments. So only a small number of SPZs have been adopted across the country. Nevertheless, there is still interest and support for these schemes, as shown by the Hillington Park SPZ created in late 2014 by Renfrewshire and Glasgow City Council, and the continued success of the Slough Trading Estate SPZ, originally adopted in 1995 and renewed for the third time in 2014.
Though open to wider use, the SPZs that exist mostly authorise offices, research and development facilities and storage and distribution centres on previously developed sites. Examples include Birmingham’s Kings Norton Business Centre and the Heywood Distribution Park SPZ in Rochdale. With the growth of the internet-based economy the turnover of properties being bought and sold in SPZs has increased. Yet the relative rarity of these schemes means that the implications for businesses, investors and funders are not always well understood.
What are SPZs?
An SPZ is an area of land identified by a local planning authority (LPA) for specific development where the planning process is relaxed. LPAs are required by law to consider whether parts of their areas would benefit from such designation.
An SPZ sets out classes of development which are permitted without the need for applications for planning permission, subject to conditions, limitations and exceptions in a similar way to permitted development rights. An SPZ lasts for ten years, so development carried out under them must be carried out or begin within this period.
Local authority searches disclose whether a property is in an SPZ or whether one is proposed.
Why do LPAs promote SPZs?
SPZ “schemes” are used by LPAs to encourage economic development and investment. Developers and businesses operating with the zone have certainty that proposals which accord with the SPZ can be built. It means they can respond rapidly to market demand by making alterations to existing buildings or changes to use without the uncertainty and expense of the planning process.
An SPZ designation demonstrates LPA support for particular uses within an area and can in itself foster market confidence and encourage small to medium enterprises, as well as multinational companies, to locate there. Majority landowners on trading estates are often very supportive of the promotion of an SPZ for these reasons.
Not always so simple…
An SPZ designation does not mean that planning control has been abandoned or that a more relaxed approach to planning due diligence can be adopted by prospective purchasers or lenders. The following issues should be considered by any buyers or lenders of property within an SPZ.
- Buyers and lenders should establish that the use of properties and their construction is lawful.
- SPZs are usually promoted on previously developed sites. So the existence of standard planning permissions might still need to be considered. Whether the building was originally authorised by a planning permission or the SPZ, standard questions need to be asked about potential breaches of planning control. Have ten years passed since potential non-compliance with conditions or four years for development without any permission? Might there might have been concealment of breaches which would extend the period for immunity from enforcement action?
- In theory, a breach of one of the SPZ conditions and limitations means that the whole of that development is unlawful, not merely the extent of the excess. However, in practice, if an enforcement notice is issued by the LPA it would probably be limited to remedying the breach to ensure compliance with the SPZ’s terms or remedying any injury to amenity.
- SPZs can contain different sub-zones with different conditions and limitations applying in each zone. So it is critical to consider the location of the property within the SPZ to ensure examination of the correct conditions and limitations.
- Successful SPZs are often renewed after their ten-year statutory life. The Slough Trading Estate SPZ is on its third iteration and Birmingham’s Kings Norton Business Centre is on its second. In checking historic compliance, buyers should make sure they are applying the correct version of the SPZ.
- SPZs often require developers to submit commencement notices to the LPA (with drawings and access details) as well as post construction audits. This is to demonstrate compliance with the SPZ. Some LPAs make these submissions and their responses publicly available, but not always. Compiling a paper trail to demonstrate compliance for a future buyer can sometimes prove difficult. A buyer might accept some risk where a paper trail is patchy, on the basis that the risk of enforcement action is low if that would be contrary to the economic objectives of the scheme. If a buyer cannot accept any risk, obtaining a certificate of lawful use would place the matter beyond doubt.
- If building works are started but not completed and there are questions about which drawings the developer built them out in accordance with, it may be difficult to establish whether or not those works are lawful and in accordance with the SPZ. Helpfully, many SPZ schemes do not contain “conditions precedent”, which must be discharged before any development is commenced. So disputes as to whether or not any development was carried out without discharging such conditions, which would probably make the development unlawful, can be avoided.
- SPZs only cover planning permission. Consents relating to listed buildings, conservation areas, ancient monuments and tree preservation orders are still needed. Also, statute prevents SPZs from granting consent for categories of development listed in the Environmental Impact Assessment Regulations, though these types of development are very large, for example industrial estate development projects exceeding five hectares, and these Regulations unlikely to be triggered.
- Section 106 Agreements can be completed with major landowners to secure overarching infrastructure requirements for SPZs. These can contain obligations to make large phased payments and can be enforced against successors in title. Indemnities from sellers are common to resolve the issue.
- A buyer should ask questions about CIL as CIL payments may be due if any development carried out under an SPZ triggers a CIL liability.
Whilst planning certainty and flexibility make buying property within an SPZ an attractive investment, careful thought is still needed to establish the extent of any risks in buying or lending against such property.