Roof/Air Space Developments

Pressure to build more houses. Planning laws relaxed. Freeholders concerned only with the windfall value which appears to come with a planning consent but then selling on: too much business sense to take the development risks themselves? Or did they run realistic figures and find that, actually, there is doubtful value or profit margin?

Pre-Covid, with low interest rates, favourable material costs and plenty of skilled labour, there was land cost and profits to be made. Not now – except in a few cases. An analysis of auction sales in the second half of 2022 and first half of 2023 as recorded at Essential Information Group (EiG), shows more than half did not sell (withdrawn, postponed or failed to sell), some reported to have been sold were re-offered in the next or another sale, and few sales were backed up by Land Registry records of a completed transaction. Trace back the records and there are a number of cases where a freeholder received planning consent, what looks like a dealer bought it in a private deal, submitted it to auction with a low reserve (presumed to be for the purpose of drawing in prospective buyers attracted by a low reserve), but remains the registered owner (whatever the auctioneer published).

At Finn House, Bevenden Street, London N1 planning permission was refused for additional roof space flats. The Planning Inspectorate, presumably under Government pressure, allowed the appeal on 20 July 2023 but subject to a dozen or so conditions, some of which must be satisfied before development commences which are virtually impossible to satisfy. It does not help that the roof space development lease demises the air space above the surface of the roof: the roof is pitched and tiled!! This sort of Gung ho attitude to the legal framework for a very complicated development is partly why we sometimes refer to these developments as a game. The apparent intention is not to carry out the development, more to extract value from a novice developer or from a Tribunal determination on an enfranchisement claim.

In one on-going case in North London, the lessees have claimed enfranchisement, the landlord has claimed substantial value for one extra flat on the roof despite a planning refusal, but there is an appeal pending. The FtT has issued a direction that the landlord must deliver a Statement of Case setting out what expert reports it will rely on in evidence. May be the FtT have realised that establishing value for air/roof space development requires a lot more than just a planning consent, and it is unfair that landlords expect to rely on that, leaving lessees on their own to have to commission reports from engineers, building surveyors and fire officers to prove their case that, in reality, the proposed development is not feasible (sometimes not even possible) in construction terms.

But the enthusiasm for roof space developments has sometimes attracted less experienced developers with private financial backers without the robust procedures and checks of traditional lenders. At Spring Apartments, 40 Nightingale Lane, London N8, a roof space lease for one flat on a timber-framed roof with timber common staircase was sold at auction for £192,000 in September 2022. The intending developer then found that the existing top flat would have to move its front door along, or the top flight of existing stairs would have to be taken out, redesigned and reinstalled. This is sadly not the first time we have come across inaccurate plans submitted for planning permission purposes. The developer had thought of craning in a pre-formed construction for the proposed flat on to a timber-framed roof: the rather basic plans submitted showed no indication of a steel grillage being provided, bearing on the main outside walls in order to support it! At a different block in South London, a roof development of three additional flats was constructed in pre-formed units and craned into position once the access staircase and structural bearing points had been prepared. A temporary roof had been removed for the craning operation but there was then a rain storm and the existing top-floor flats suffered extensive damage. Insurance companies (building, developers and contractors), all denied liability. The lessees served proceedings, the developer (a single-purpose vehicle) sold the new flats and a Receiver was appointed. The litigation continues.

The roof developments which work have accurate, detailed plans, viability reports on engineering, services, construction and safety matters, together with support from the lessees of the existing flats (usually because there is something in it for them), together with reliable builders with adequate professional support.

Tribunals do now seem to be receptive to viability evidence and residual valuation evidence, whereas they previously preferred market comparable evidence. A straightforward text book approach is giving way to a more realistic and careful consideration of the individual circumstances of each case. We shall see how that develops.

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