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Vol 11 No 1 Spring 2005

Published by The College of Estate Management

and issued to all its students and staff

The College of Estate Management compiles this bulletin
for current and former students as an aid to your studies
and future careers.
CEMicircular covers all courses and includes
information about important developments and topical
issues in the world of surveying and property. You should
not, however, rely on the extracts in CEMicircular as your
only source of information. They will seldom offer more
than a brief summary of a new topic or recent issue and
some points are bound to be omitted, perhaps giving undue
emphasis to the material included. You are therefore urged
to read as widely as possible, including making use of the
Internet, and it is vitally important that current students
study the course material. This could make the difference
between superficial knowledge and real understanding.
To help you keep up to date, look out for the following
captions against items:

CEMicircular WebWatch gives details of related

websites where additional information can be sourced.
Latest Research indicates material that has been
generated by recent research, including projects carried
out by CEM and other institutions.

Editors note
The editor of this circular is Gaye Pottinger, Senior Research
Officer at CEM. She would be pleased to hear your views
and comments on its structure, content and presentation.
Contributions or suggestions of material for inclusion are
also welcome. Please write to Gaye Pottinger at the College
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Tel 0118 986 1101 Fax 0118 975 0188/5344




Roof design

Siphonic drainage

Structural movement

Historic environments and the DDA

Book historic buildings measured surveys



Defined provisional sums

Managing risk

Settling claims


Corporate social responsibility

The Milau Viaduct, France

Public procurement



Affordable housing quotas

Sports development NY style



Cross border investment and due diligence

New accounting rules



Confidentiality and legal privilege

Liability insurance

Civil law and common law

UK Freedom of Information Act



Adverse possession

Service charges



PPG3 Planning for mixed communities

Planning obligations

Planning application approvals



Actors and property

Office building obsolescence



Evicting tenants and mental health

Leasehold reform changes

Right to Buy valuation



Valuing wildlife, recreation and leisure

A rural village



Confidentiality of rents

Rent review arbitration award

Rent-free periods and fitting out



New researchers

Book Real Estate and the New Economy

Keeping it in the family

Hong Kong accreditation

Becoming a licensed home inspector

Student assignment queries



Roof design
When designing a roof it is important to get the structure
right to ensure it will not collapse or blow away. This
article examines the basics of good design, including a look
at wind loading on photovoltaic panels and consideration of
snow loading. The relevant British Standards covering many
aspects of roof design are highlighted, plus the transitional
arrangements to new European standards that came into
effect at the end of 2004. The author, Keith Roberts, is a
chartered civil and structural engineer based in
Oxfordshire, UK, who specialises in roofing and cladding
(Architects Journal, aj focus, November 2004 pp.1923).
The interest in mounting solar-energy systems on the top of
exposed roofs has raised questions about the risk of them
blowing off. Experience tells us that lightweight
components, such as television aerials and satellite dishes,
are often the first to be damaged or come loose during a
severe wind storm. When placing lightweight photovoltaic
(PV) panels on a roof, it is important to ensure that they will
stay up there securely for the life-time of the building. The
Building Research Establishment (BRE) has recently
published Digest 489, giving recommendations for
calculating wind loading on PV panels.
The digest was published in August 2004 following work
undertaken as part of a Partners in Innovation (PII) project
funded by the Department of Trade and Industry. The PII
project team included manufacturers, PV specialists, trade
associations and the BRE.
To determine whether or not a solar panel will be blown
off a roof requires an estimate of the applied wind pressure,
which can then be used to check that the applied loads on the
fixings and roof structure below are not excessive. The
starting point is to determine the wind pressure for the site.
The digest helpfully gives a simplified method, based on a
minimum amount of information known about the site. For
example, the dynamic wind pressure for a 10m-tall building
on a level site in Nottingham would be 1.2kN/m2.
The digest gives recommendations for the coefficients of
pressure for PV modules mounted in four different ways.
The panels are usually aligned at a slope of around 350 to
the horizontal and facing south. The digest gives more
detailed information about the selection of the coefficients
and the assumptions made. Arrays of PV tiles are considered
to be air-permeable where the individual PV units are no
more than six times the area of the surrounding individual
roof tiles. For a solar panel mounted on a stand near the roof
edge, the peak coefficient of pressure would be 1.8, acting
in suction.
Knowing the dynamic pressure for the site, the
coefficient of pressure and the area of each PV module
allows you to calculate the design wind pressure. For the
worked example, the wind suction-loading acting on a single
solar panel each approximately 2 0.6m, or 1.2m2 in area,
mounted near the edge of the roof located in Nottingham

would be 1.2 1.8 1.2 = 2.6kN. This is equivalent to

265kg of weight acting in suction. One way to picture this is
to imagine roughly five 50-kilo bags of cement acting
upwards, trying to lift the solar panel up off the roof, The
wind can exert large forces on roof cladding and
PV modules mounted on roofs are often in exposed
locations and will be subjected to buffeting by gusts of wind
throughout their lifetimes. Its important to stop them
working loose and falling into public areas, so assessing the
performance of PV installations under wind loads is
important. BREs Digest 489 is welcomed in giving the basic
information for designers and roofers to assess these risks
and is essential reading for those involved in this specialist
Changing the code within the next few years, the British
Standard Code of Practice for Wind Loading on Buildings
(BS 6399 Part 2) is to be replaced by the new Eurocode 1:
Actions on Structures Part 1.4 General Actions Wind
Actions (BS EN 19911-4). This standard has now been
approved formally by the CEN (European Committee for
Standardisation) and it is expected that the full document,
including the UK National Annex, will be published by the
end of 2004.
This will be followed by a transition period, with the two
standards running in parallel. As with the previous
changeover from CP3 to BS 6399, time and resources will
have to be allocated for training in understanding the new
Eurocode and putting it into practice.

Specifications for roof systems that refer to the current standard

and give site parameters such as basic wind speed, altitude
and terrain will need to be amended, of course.
Let it snow
Apparent changes in weather patterns in recent years have
reduced the number of times we have experienced heavy
falls of snow during the winter months. However, the need
remains to assess the design snow-load in accordance with
BS 6399 Part 3 and ensure a roof structure can withstand
this. The UK is considered to have a maritime climate. This
means that most parts of the country will experience a
maximum snow-load condition resulting from a single
snowfall rather than as a result of snow accumulation over
several months. The British Standard is based on this
principle of a single snow event.
Essentially, there are two basic types of snow-loading:
the uniform snow-load dependent on location, altitude and
roof pitch; and an asymmetric snow-load resulting from the
redistribution of snow by the wind, causing drifting into
valleys and against parapets and obstructions. The weight
density of snow in a local drift is assumed to be 2kN/m2. A
method for estimating the snow-load shape coefficients for
asymmetric snow-loading is given in the British Standard,
which was last reissued in September 1996 with further
explanation in BREs Digest 439. One effect often
encountered on large building complexes with lightweight


roof constructions is that additional purlins are necessary on

lower roofs adjacent to taller structures to support local
snow drifts, which can be as much as 2kN/m2 in England and
Scotland experiences higher snowfalls each winter. On
steep-sided metal roofs in urban areas, there is the risk of
snow building up and slipping, falling on to pedestrians at
ground level. This can be overcome by fixing snow guards
around the perimeter of the roof, a detail that is common in
Scandinavia and Canada. In the UK, Corus manufactures
snow guards specifically for attaching to Kalzip roofing
systems. The long-range weather forecasts for a severe
winter may be a timely reminder to be aware of the potential
for snow-loading on our roofs.
Useful contacts
BRE 01923 664000
BSI 020 899 69001
Corus Building Systems 01942 295500
Imagination Solar 084S 458 3168
PV Systems 029 208 20910
Solar Century 020 780 30100
Keith Roberts can be contacted at

Approved Document A, Structure (2004 Edition), Building
Regulations (

BS6399Part1:1996, Design loading for Buildings, Part 1:

dead and imposed loads

BS6399Part2:1997, Design loading for Buildings, Part 2:

wind loads (corrected and reprinted 2002)

BS 6399 Part 3:1988, Design loading for Buildings, Part

3: imposed roof loads reprinted 1997)

BS5268: Part 2: 2002, Structural use of timber:

permissible stress design

BS 5268: Part 3: 1998, Structural use of timber: trussed

rafter roofs

BS S950: Part 5: 1995, Structural. use of steelwork:

design of cold formed thin gauge sections

B58118: Part 1: 1991, Structural use of aluminium

BS8110:Part1:1997, Structural use of concrete

BS 5534: 2003, Slating and tiling (including shingles)

BS 5427 Part 1 1996, The use of profiled sheet for roof

and wall cladding on buildings

BS 6229: 2003, Flat roofs with continuously supported

coverings Code of practice I

Important note: For detail design, reference should be made

to the full published documents.


TABLE: Basics of good roof design: structural issues

Load shapes
Load type



Question: What are the magnitude and loading of the applied roof loads?
Uniformly distributed load (udl); point load on any square with 125mm side
Typical values
material, thickness
interlocking concrete roof tile = 0.480.55 kN/m2
1.2mm thick profiled steel sheet = 0.12 kN/m2
1.5mm PVC membrane = 0.03 kN/m2
with access
udl = 1.5 kN/m2 , point = 1.8 kN
no access
udl = 0.6 kN/m2 , point = 0.9 kN
location, altitude,
single-story pitch roof in London, field area = 0.7 kN/m2
topography, building height five-storey flat roof on hillside in Glasgow, eaves = 6 kN/m2
and shape, local zones
location, altitude, roof shape, Lowland England, udl = 0.3 kN/m2
obstructions to drifting
Highland Scotland, drifting = 8 kN/m2
lighting and other building
0.250.50 kN/m2
services, water tank
230 litre (50 gallon) = 2.3 kN/m2

BS 6399 1 (2)

BS 6399 3 (4)
BS 6399 2 (3)

BS 6399 3 (4)

Components supported:
Load combinations:
What to check:

Question: Will there be proper support to the roof component?

to give proper support to the roof component and to allow fixing
tile, membrane, insulation, vcl, metal cladding
(dead + live + services), (dead + snow), (dead wind)
factored flexural strength > factored applied bending stress
(D + L) deflection < span/200, (D + W) deflection < span/90 (for profiled metal sheet (11))
Factors of safety:
refer to BS for detail
Typical spans
Size, thickness
Tiling batten
50 25mm
BS 5534 (10)
18mm, 25mm
BS 5268: Part 2 (5)
Steel deck
0.7 to 1.5mm thick,
BS 5950: Part 5 (7)
35 to 200mm deep profile
Aluminium deck
0.9 to 1.5mm thick,
BS 8118 (8)
35 to 200mm deep profile
Precast concrete plank
110 to 300mm
BS 8110 (9)
In-situ concrete slab
110 to 300mm
BS 8110 (9)
Stressed skin design: check adequacy of connections
Important to refer to manufacturers published literature
What to check:

Question: Will there be proper support to the roof deck?

to give proper support to the roof deck and allow fixing
factored flexural strength > factored applied bending stress
(D + L) deflection < 0.003 span (for timber joists (5))
Load combinations:
(dead + live + services), (dead + snow), (dead wind)
Typical spans
Thickness, depth
Timber joist
40 100 75 225mm
Timber purlin
50 150 75 225mm
Timber truss
40mm thick
Steel Z section
Steel RSA, UB or RHS
Precast concrete beam
Important to refer to manufacturers published literature
What to check:

BS 5268: Part 2 (5)
BS 5268: Part 2 (5)
BS 5268: Part 3 (6)
BS 5950: Part 5 (7)
BS 5950: Part 1
BS 8110 (9)

Question: Will the roof blow away?

to prevent wind damage
consider the load path in which the applied wind load acting on the roof component is transferred
down to the foundations. Check each link of the chain to ensure that the factor of safety is
High-risk roofs:
exposed site location, tall buildings, lightweight construction, large opening into spaces below
Load combination:
(dead wind)
Other information required: pull-out strength of fasteners and materials being joined


Siphonic drainage
Siphonic roof drainage systems were first installed in
Scandinavia in the late 1960s and are now used worldwide
as the best way to drain large roofs. Unfortunately, a
number of high profile failures in the 1990s caused doubts
about the performance of siphonic systems that are
misleading, because the problems were to do with poor
installations, explains Dr Malcolm Wearing, secretary of
the Siphonic Roof Drainage Association (SRDA)
(Architects Journal, aj focus, November 2004 pp.2632).
Siphonic drainage is actually very simple in principle, and
all systems work in exactly the same way. Baffle plates
inserted in the outlets restrict air entering the top of the
drainage system, which, when combined with carefully sized
pipework, causes the system, horizontal and vertical, to run
In a very similar way to a simple tube siphon (such as
you would use to empty a fish tank), the action of water
dropping down the downpipe will cause a negative pressure
to form at the top. This pressure can be harnessed to suck
water along a collector pipe installed horizontally,
connecting the outlets at high level.
The benefits this gives are:

each gutter will have only one or two downpipes, and

these can be located at the end of the building,
allowing free use of floor space by eliminating
downpipes and therefore reducing columns;

the horizontal collector pipe can be very close to the

gutter, allowing full use of internal space;

underground drainage can be eliminated internally in

a building, and can be reduced significantly
externally, which can provide considerable cost
savings and enhance construction programmes on all
sites particularly on contaminated ones; and

for sites with a requirement for SuDS (sustainable

drainage systems), siphonic drainage will allow water
to be delivered at a designated point at shallow
depth, which can reduce the construction costs
significantly, especially for pond-based solutions.
What to specify
When specifying siphonic drainage, there are a number of
key factors that must be covered. These are:

Rainfall intensity the rainfall levels should be

determined from BS EN 12056-3: 2000, using the
projected building life and a suitable factor of safety.
The contents of the building should be considered as
well as the building type. The more years that are
specified, the lower the risk to the building will be,
but the more expensive the system, so there is always
a balance to suit the acceptable level of risk.

Filling time and gutter calculations it is vitally

important that the siphonic contractor provides
calculations to show that the system will fill within
one minute, and that the gutter will function correctly
meaning it will not over-top. In the UK, the design
rainfall event (the most intense period of a storm) is

two minutes, and so a siphonic system must begin to

function within half this time or the roof could flood.
In the past some companies have claimed that their
systems do not need to fill to operate, but this is
simply not correct. Gutter calculations should be to
BS EN 12056-3: 2000, using outlet data from a
British Board of Agrement (BBA) certificate or other
third-party source.
Pipework the majority of siphonic drainage
systems in Britain use high-density polyethylene
(HDPE) pipework. This can be connected either by
using electrofusion couplings, which are heated by
internal elements, or by butt-jointing, where the cut
ends of the pipe are melted and then forced together
under pressure to make a joint. Butt joints should
only be made using a machine incorporating a jig and
control system to monitor the temperature, time and
pressure required. Site butt-jointing of HDPE should
only be allowed in a specification if factory
conditions are set up on site so that consistent quality
can be guaranteed. Metal pipe systems (cast-iron,
galvanised or stainless steel) can also be used for
siphonic drainage. The specification should detail that
installation should be according to the manufacturers
recommendations for negative pressure.

Dont bother to specify a self-priming outlet they all selfprime.

Where should siphonics be specified?
The answer is that almost any building can be drained
siphonically, but with the following provisos:

large industrial, storage or retail buildings will show

much greater benefit gains over gravity drainage in
fact, it would be almost impossible to drain some of
these buildings by gravity;

the gutters or flat-roof areas must be large enough to

accept a siphonic outlet, and must have adequate
access for maintenance gutters in inaccessible
locations might not be so suitable;

all drainage can produce unwanted noise in areas

sensitive to sound, siphonic systems, like gravity
pipework, may need acoustic insulation.
What can go wrong?
In the 1990s there were a number of high-profile failures of
siphonic roof drainage systems, which led to the technology
becoming suspect in some peoples eyes. This is, however, a
great shame, as in all cases poor design was the cause, not a
failure in the system. The key reasons for failure were:

One or two companies set up in the industry without

an adequate level of technical knowledge and
designed systems where the negative pressure was so
great that pipework actually collapsed under the
pressure, causing serious flooding of the building.
This would not have happened if the pipework had
been designed using suitable software, such as is used
by all members of the newly set-up Siphonic Roof
Drainage Association (SRDA).


Many specifiers exploited a loophole in the previous

drainage standard and designed systems to operate at
75mm/hr. These systems worked perfectly well, but
were overwhelmed by higher rainfall events, which in
the south and east of England could occur every year
or so. It should be stated that this was also a problem
with gravity drainage, but the link was not so
obviously made. The new standard BS EN 12056-3:
2000 closed this loophole, and so it is no longer an
issue with siphonic drainage, but continues in some
gravity systems.

What is happening today?

The current siphonic roof drainage industry is more mature
than the one that existed in the 1980s, with a wider spread of
major companies. A draft British Standard, dealing
specifically with siphonic roof drainage, has been drawn up,
and is about to go to the BSI committee procedure. This will
help define good practice in an industry that for so many
years, in Britain, has been forced to set its own procedures
for good practice.
In another step towards raising the industry profile, the
SRDA was established. The association has the goal of
bringing together companies to promote good practice.
Members of the association must show that they have:

a suitable outlet, pipework and hanging system; and

a functional computer-based flow-balancing program.

All these systems should have third-party accreditation.
In addition to these requirements, member companies will be
audited by the association to determine, on randomly chosen
projects, whether their design, installation and customer
service meet the required standards.
With these stringent criteria for membership, any
specifier using an SRDA member can be sure that they are
placing this vital part of their project in the hands of a
company that has the expertise to do the job properly.

CemiCircular WebWatch
For more information on the association, or siphonic roof
drainage in general, email or visit

Structural movement
This article is a version of Clive Richardsons annual
Christmas lecture to the RICS / College of Estate
Management Postgraduate Conservation Programme at
Reading in 2004. In it he reviews the seven causes of
structural movement by reference to changes in building
techniques over the centuries, and addresses the question:
should we be concerned about structural movement in
Clive Richardson is a structural engineer and technical
director of Cameron Taylor, Bedord. He is also engineer to
the Dean and Chapter of Westminster Abbey, visiting
lecturer at the Architectural Association, and technical
secretary of the ICE/IStructE CARE Panel (Conservation
Accreditation Register for Engineers). (Building
Conservation Journal, Number 37, 2004, pp.6-11.)
In the immediate post-war years, when we were grateful for
any accommodation which had survived the Blitz, attitudes
to odd cracks were relaxed. When redecorating, my father
would gleefully summon us children to see finger-wide
cracks discovered beneath the wallpaper, before
ceremoniously plugging them with newspaper and Polyfilla.
No panic attacks for him, whereas nowadays I am
increasingly called out to pronounce upon hairline plaster
cracks dramatised by white emulsion paint.
Expectations of building performance have become
unreasonably high. It is time for reactions to be tempered by
considering the issues.
The great forces of nature are capable of breaking down
mountains, so we must not assume that a mere building will
last indefinitely. Regular maintenance and occasional
structural intervention are essential to slow the process of
deterioration and to extend the life of a structure.
Intervention may be aimed at conserving a building
indefinitely, but a more realistic view may also be taken,
with finite expectations for both original fabric and repairs
(see Table 1).
What is structure?
Those parts of the building fabric which confer significant
strength, stability and integrity. Roof carcassing, floors,
walls, frameworks, and foundations form the principal
structural elements. Non-structural fabric such as plaster,
render, windows and doors can also help stiffen a structure,
but their contribution is not to be relied upon in a significant
What is structural movement?
Subsidence, heave, sway, bouncy floors, bulging walls,
cracks, expansion and contraction are all forms of structural
movement. Such movement occurs all the time, and usually
its magnitude is so small that it passes unnoticed. Only when
movement threatens the use or safety of the structure need
we be concerned.


TABLE 1 How long should buildings last?

Depending upon the financial, technical or material resources available, new structures or structural repairs may be designed to be
serviceable for a specified minimum period. This might be:

between cyclical inspections

a loan repayment period

full repairing and insuring lease duration

30 years (Housing Corporation rehabilitation cycle)

60 years (Housing Corporation new-build)

80100 years (a lifetime the laymans expectation)

ad infinitum (Listed Buildings and Scheduled Monument)

TABLE 2 Thermal and moisture movement of masonry

Fired clay brickwork
Sand-lime brickwork
(mm/m length of wall)
Permanent moisture
+ 0.6 (expansion)
0.25 (contraction)
Reversible moisture
Reversible thermal
Values given are average. See BRE Digest 228.
Values vary, depending upon exposure, restraint and pre-compression.
Movement is given for 30oC temperature range.
Portland stone is the Rolls-Royce of masonry materials for dimensional stability.

Concrete brickwork
0.6 (contraction)






TABLE 3 Movement of monitoring equipment

Nature of movement
Level divergence

Verticality divergence

Stains and cracks

Appropriate equipment
Water level
Spirit level
Dumpy level
Precise level (bar-coded staff)
Infra-red EDM (holographic prisms)
Tape extensometer
Perspex tell-tales
Vernier markers
Transducers (LVDT)

Equipment accuracy
0.01 degree


The seven causes of structural movement

New structures are designed to carry their own weight and
imposed loads so that strains are kept within reasonable
limits; safety factors are included to cater for variations in
quality of materials, design and construction inaccuracies,
and random/accidental forces. In historic structures,
detrimental movement results from inadequate design and
construction, decay and ill-considered alterations.
1 Inadequate strength
Before the advent of calculus and the modern engineer,
early historic structures largely succeeded due to generations
of craftsmen constructing buildings in accordance with what
they knew to have worked previously, and avoiding
construction that had failed to perform. In other words,
safety factors were incorporated by experience rather than
calculation. Nevertheless, in medieval timber structures it is
common to find that secondary floor joists are often larger
than they need be, while primary beams are undersize and
sag excessively.
Apart from this, and some more singular problems, it is
perhaps surprising that inadequate strength is generally not
more of a problem.
From the start of the Industrial Revolution, the increasing
involvement of engineers, first with grand buildings and
latterly more humble structures, ensured more adequate
sizing of structural members. Exceptions include domestic
buildings with timber floors overloaded by subsequent office
2 Lack of continuity or togetherness
The vast majority of the nations structures are low-rise
unframed buildings, where the individual components are
predominantly held together by gravity and friction. Most
such structures (speculative Georgian and Victorian housing,
for example) have outperformed the expectations of their
constructors without the involvement of engineers and
despite the ravages of two world wars. However, as
buildings relax and become frail with age, the single kindest
way of increasing their longevity is normally to tie them
together. Conversely, the lack of continuity leaves the
structures vulnerable to disproportionate damage.
3 Material decay
Water is the principal agency affecting the decay of most
structural materials, causing:

frost damage of masonry

rot of timber

rusting of iron and steel.

The battle can largely be won by giving a building a good
roof and ensuring that driving rain is thrown clear of the
external walls by generous drips, throatings, over-sailing
copings, and bonnets; and by controlling rising damp with a
damp-proof course (dpc) or by ensuring that the ground is
well-drained, and the bottoms of walls are well ventilated.
4 Dimensional instability
Stone, brick and concrete expand and contract with changes
in moisture content and/or temperature. The resultant strain

must be accommodated by the structure, or deformations and

cracks will occur. If movement is cyclical, then such cracks
may grow due to the ratchet effect of debris in the cracks
preventing full closure.
In most UK structures the principal loadbearing element
is masonry. Different types of masonry move at different
rates, and sometimes in opposing directions (see Table 2).
This can give rise to differential movement and distortion.
Fortunately most walls constructed before 1914 were set in
lime mortar, which can accommodate considerable amounts
of movement without cracking, due to creep (continual strain
under constant stress), whereas more modern walls set in
cement mortar require more frequent provision of movement
joints. (See sketch 1.)
5 Subsoil and foundation inadequacies
Early medieval timber buildings had their main posts dug
into the ground, but almost all buildings which still survive
had sill beams resting on low masonry plinths. Medieval
masonry buildings had walls which were built straight into
the ground without any attempt to disperse the load over a
broad foundation; latterly the walls were sometimes stepped
out or corbelled to provide a wider distribution of the load
on the soil, thus reducing settlement.
In good ground, corbelling continued until the first world
war, latterly with a shallow strip of concrete first cast into
the trench, about 500mm below ground. In poor ground,
short timber tiles were sometimes driven before commencing
the masonry. With the advent of modern mild steel and
reinforced concrete around 1900, foundations became more
Movement of shallow spread foundations is commonly
caused by normal constructional settlement, mining, leaking
drains, shrinkable clay, tree-roots, changes of water-table,
tunnelling and additional loads. (See sketch 2.) Flexible
historic buildings are often better able to cope with
movement than modern rigid structures, thanks to the
prevalence of soft lime mortar, massive walls, timber frames,
arches, and vaulted construction. Modern structures with
slender walls set in hard cement mortar with brittle plaster
and no cornices will show every crack. (Further reading
ref 4.)
6 Overall instability
A lack of bracing can ultimately lead to collapse. Many a
medieval church, for example, has had a gable end rebuilt
following movement of its unbraced roof: this was prevented
in more elaborate construction by diagonal wind-braces
which were inserted in the plane of the rafters. In modern
times, engineers learned this lesson again, when the 18m
span unbraced trussed rafter roof over the Rock Ferry
School gymnasium collapsed in 1976. Victorian shopfronted terraces are also prone to leaning sideways, being
perched on the slender columns. (Further reading ref 5.)
7 Alterations and overloading
Notched floor joists for services, doorways cut through
trussed partitions, partly removed chimney breasts and
overloaded floors are the most popular abuses of buildings.
Many such alterations become obscured over the years, and


Table 4

is structure

Sketch No 1: The evolution of wall construction and the

rising need for movement-joint


causes and
repair defects

is use to
remain as

structure be






Ronan Point the ultimate stage of structural

movement is collapse!

Sketch No 2: Partial underpinning


it is only investigative work that will uncover the cause of

the distortion. (See sketch 3.)
Acts of God and accidents are less predictable, except for
domestic gas explosions, of which there are about 100 every
Explosions cause high pressures and suctions for very
short durations. These dynamic loads cause overload, stressreversal and dynamic rebound of structural elements. Ductile
materials, such as steel and rc, perform better than brittle
materials such as timber, masonry and glass.
Modern framed buildings have good natural resistance to
explosions, particularly after 1970 when the Building
Regulations were amended in the wake of the 1968
progressive collapse of Ronan Point, to require better
continuity of structures. (Further reading ref. 3.) (See
photo of Ronan Point.)
Assessment of stability
Against this background of potential causes of movement, it
is hardly surprising that buildings seldom perform perfectly,
and rarely acquire true stability. But is this important? If a
building has sufficient commodity, firmness and delight, then
the odd distortion can be part of the charm, particularly for a
historic structure.
Although intervention by engineers may be unnecessary
for the odd symptom of movement, the need for equilibrium
must be borne firmly in mind when exercising the 100-year
rule. It is a powerful argument to say that if a structure has
stood for some years why should it not stand for another
year, and subsequent increments to infinity?
Although nothing may have apparently changed during
the period of observation, structural fabric gradually
degrades due to weather, thermal and moisture cycling, and
dynamic loads. In so doing, structures can tiptoe towards
disaster, and we must therefore be quite sure that a building
which may only be showing signs of historic movement has
indeed acquired a new state of equilibrium and is not having
its margins of safety eroded perilously close to failure.
A stable structure is a system of pent-up forces. Force
never sleeps and will take any opportunity to cause
Structural movement is serious when the safety margins
of strength, stability or integrity have been significantly
eroded, or the movement is progressively leading to failure
within a specified period. For a relatively modest structure
such as a house, no action may be considered necessary
unless the structure is likely to fail within a period of
perhaps five years. For a cathedral, a much larger safety
margin would be necessary, of perhaps fifty years due to its
scale and the high cost involved in carrying out major works.

Expectations for the duration of a repair may also vary (see

Table 1).
An engineering assessment of the seriousness of any
particular symptom of structural distress is not just by
calculation, but also through an understanding based on
practical experience of the performance of structures and the
intangible contribution of the non-structural fabric, such as
the stiffening effect of horsehair in old plaster, or modern
sheet flooring.
The Building Research Establishment offers some
guidance on the seriousness of crack widths, but this must be

used circumspectly.
Cracks should be examined to determine their cause, not
rigidly filled in to see if they reappear, as this may restrict
cyclical movement causing the problem to escalate. Careful
examination can reveal the direction of movement, and
whether movement is ongoing. (See sketch 4.)
In particular:

Look at crack faces how have they come apart?

Are the arrises fresh and clean?

Is there old paint or filler in the cracks?

How old are the decorations?

If the probable cause of the structural movement is still
unclear or if the movement is suspected to be progressive,
then movement monitoring may be warranted. (See Table 3.)
Monitors are aids to diagnosis and prognosis, but are of no
use if sudden structural failure is likely.
Hopefully the days have long gone when well intentioned
but misguided builders stuck glass tell-tales across cracks
with disfiguring blobs of resin, in the vain hope that their
demise would explain the cause of the cracks. Mostly the
glass would come unstuck, or schoolboys like me would
break the glass for fun. The arsenal of equipment available
today is vandal-resistant, and, when used wisely, gives
meaningful results. Once the causes have become clear, it is
straightforward to eliminate them, and also make repairs.
(See flowchart, Table 4.)
Structural movement need not really be a problem when
considered rationally. Although structures rarely acquire true
stability, cracks and bulges are not always serious, and crack
monitoring is not automatically necessary. What needs to
change is peoples expectations.
The Victorians had the right idea; cornices to conceal
movement between ceiling and wall junctions, woodwork
painted chocolate brown to camouflage joint shrinkage, and
stretchy lincrusta wallpaper to obscure random cracks.
Further Reading
1 Richardson C (1985), The AJ Guide to Structural
Surveys The Architects Journal: 26.624.7.
2 Richardson C (1988), Distorted Walls Survey,
assessment and repair The Architects Journal: 13.1.
3 Richardson C (1993), How to minimise bomb damage
The Architects Journal: 30.6.
4 Richardson C (1996), Subsidence and Underpinning
The Architects Journal: 22/29.2.
5 Richardson C (1998), Explaining the bookend effect
The Architects Journal: 16.7.
6 Gordon J E (1978), Structures, or why things dont fall
down. Penguin Books Ltd, London.
7 Appraisal of existing structures (1996) (2nd edn),
IStructE, October.
Contact details:
Clive Richardson, Cameron Taylor, Bedford
Tel: 020 7262 7744


Sketch No 3: Medieval box frame

Sketch No 4


E Historic


and disabled access

Historic places must do more to improve access for the

disabled to their sites and services in the light of UK
disability legislation but expensive alterations are not
always needed. Gaye Pottinger, senior research officer, and
Henry Russell, tutor in building conservation, at The
College of Estate Management in Reading discuss the
findings of CEM research published in January 2005
(Estates Gazette, 29 January 2005, pp.6869).

Castle battlements and dank dungeons are great fun to

explore, but they are not accessible to everyone. UK historic
sites visited by millions of tourists every year were not built
with disabled access as a consideration.
Social inclusion is now high on the policy agenda, and
since October 2004 the Disability Discrimination Act 1995
(DDA) has required reasonable building alterations to
improve access to services. But what is reasonable and how
are things changing for disabled tourists visiting historic
Research presented earlier this month by the College of
Estate Management shows that insufficient progress has been
made in improving disabled access to historic sites and listed
buildings in the UK. This includes visitor attractions and
guest accommodation where access to the tourism service is
dependent upon access to buildings.
The study, sponsored by insurance company Marsh & Co
and the Mercers Company, stresses that tourism businesses
can and should do more to improve disabled access by
focusing on the visitor experience and adopting
organisational and procedural changes first, before
instigating possibly expensive or unnecessary alteration
works. This is important, because the DDA is first and
foremost about access to services, not buildings.
Small hotels and guesthouses appear particularly
unaware of the legislation and are slow to adjust. This could
be explained by the poor dissemination of information and
guidance. But it is significant because 99% of the UKs hotel
and restaurant enterprises are small businesses (49

employees or less), and these businesses are not exempt

from the DDA provisions on building adjustments.
Although the DDA allows some flexibility by requiring
businesses to make only reasonable adjustments,
reasonableness depends on a number of factors, including
the organisations size and resources. Small tourism
businesses in particular have failed to undertake access
audits to identify changes they could make relatively easily
and those they could defend as unreasonable. This failure
leaves them open to action under the DDA.
Provision determined by the disabled
However, conducting an access audit, making service
changes and altering buildings does not provide complete
certainty nor a once-and-for-all solution to disabled access,
because disabled customers will determine the adequacy of
provision. Also, it seems likely that acceptable standards will
change over time. The research therefore emphasises the
need to consult and involve the disabled and disability
groups in defining reasonable access. Businesses also need
to keep their access arrangements under review.
The great historical significance of many UK tourist
destinations also means that they deserve sympathetic
management and conservation, and keeping them in
economic use is also crucial to their survival. Historic
attractions generate an estimated 320m annually in ticket
sales. Making historic places that are open to the public
equally accessible to the UKs 8.5m disabled people
therefore means that tourism businesses must find ways of
balancing the apparently conflicting requirements for access
and conservation.
This balance still favours conservation, in the face of
uncertainties about what constitutes reasonable disabled
access. Larger organisations operating from historic
buildings both hotels and visitor attractions are waiting
to see what the courts will decide when the legislation is
tested. Because the DDA lacks an enforcement agency,
unlike other public interest legislation such as health and
safety, enforcement action will come from aggrieved
disabled individuals, possibly supported by the Disability
Rights Commission. Notwithstanding the DRCs preference
for reconciliation, service providers fear that the courts may
take a different view of reasonableness that could involve
them in considerable expense.
Meanwhile, access solutions at historic places must be
treated on a site-by-site basis, reflecting their unique nature.
This demands flexible attitudes on the part of service
providers, planning authorities and disabled visitors. An
attractions manager interviewed for the research explained:
Every property we have is different, so even if weve got
listed building consent to do something at one property, we
might not get it at another. I think thats difficult because it
means that visitors might see something happening, such as
the installation of a lift, in one town rather than in another.
Sometimes alternatives to full physical access at heritage
sites, such as audio-visual presentations and virtual tours,
can be acceptable to disabled people. But a tendency to
equate disabled access with wheelchair access may lead
some smaller enterprises, such as guesthouses, to do nothing,
or to cease operating rather than make access improvements.
All businesses need to recognise that permanent wheelchair


users are a minority of disabled people, and much can be

done to improve access for all, including those with less
obvious mobility impairment, sight- and hearing-impaired,
and people with learning difficulties. A great deal can be
achieved through staff training and changed business
practices to deliver improved customer care, before
contemplating building alterations.

CemiCircular WebWatch
The full research report Historic environments and tourism:
improving access for disabled people is available free from
the College of Estate Management website
Hard copies can be purchased from CEM Publications.

Not enough trained advisers

Despite high-profile examples of successful access schemes
in the historic environment (for example, the redesigned
entrance of The Queens House, Greenwich, and the use of
IT facilities at Shakespeares birthplace, Stratford-uponAvon), it seems that there are not enough trained and
experienced advisers to ensure high-quality solutions.
Not all professionals appreciate either the range of needs
or specific facilities appropriate for disabled visitors and
how to balance these against conservation objectives. This
presents a challenge and an opportunity for property
professionals, a challenge that is also being addressed by
education and training providers.
To sum up, progress with disabled access to heritage
tourism has been slow and requires more attention by
individual service providers, supported by government
initiatives to disseminate information and promote current
policy. Service providers that fail to respond run the risk not
only of court action but also the loss of business from
disabled people who, with their friends and families, may
choose to visit places that are more accessible to them.
Raising the access stakes could ultimately be to
everyones benefit. One carer for a wheelchair user says: I
could become disabled tomorrow then what am I going to
do when I want to visit certain places? I would go mad if I
had to be stuck at home, not able to see places. It would be
very important to me.

Getting around historic buildings

The Disability Discrimination Act 1995 Part III came into
effect in October 2004 and requires reasonable adjustments
to buildings to facilitate disabled access.
The DDA definition of disabled is wider than that used in, for
example, employment legislation. It is based on the medical
rather than the social model of disability. The social model
recognises the disabling nature of the environment, whether
organisational, social or physical, and looks for solutions by
altering that environment. The DDA is not a property statute
and therefore premises cannot be said to be DDA compliant
it is the services that are offered to the public that must be
Under the spirit of the DDA, disabled visitors to historic sites
should be offered the same level of access as other
members of the public, and need not be admitted on those
occasions when public access is restricted in the interests of
There is no small business exemption under the DDA, which
also applies equally to services that are free as to those that
must be paid for.



Book Historic buildings

measured surveys
A new book, Measured Survey and Building Recording for
Historic Buildings and Structures, editor Ross Dallas and
published by Historic Scotland (2003 ISBN 1-903570-92-1)
is reviewed by Henry Russell, Tutor in Building
Conservation at the College.
Historic Scotland has an exemplary record in publishing
books and guidance for the practitioner, and this guide is one
of that series. Their publications are intended for Scotland
but deserve wider readership. The editor, Ross Dallas, is a
chartered surveyor, who has contributed to the Colleges
Conservation of the Historic Environment Programme as
well as to the RICS Building Conservation Journal. This is a
working handbook and is probably best used as a reference
work. It is packed with detail and as such is not an easy read.
Dallas starts by stating the aim of the book, which is to
describe the survey tools and methods for recording historic
sites, as a means of gaining a better understanding of them.
In the historic environment it is axiomatic that a building or
site must be fully understood before any changes are
implemented. A detailed survey and record of a building is
just one of the ways of doing that. The process is known as
conservation-based recording and analysis CoBRA (see
Kate Clark (2001) Informed Conservation, English
The survey techniques described are those that have
wider application to building and land surveyors. In the
historic environment they are being taken up and used by
archaeologists too, and many of the contributors to this book
are archaeologists. In recent years, the skills of archaeology
have been lifted from the ground, turned 90 degrees and
applied to buildings.
The use of standard plans elevations and isometrics of
buildings are discussed. The old Royal Commission on the
Historical Monuments Recording historic buildings: a
descriptive specification (1996) RCHME, Swindon,
currently being revised) is a good guide for recommended
drawing conventions. Probably most interesting to surveyors
will be the chapter on survey techniques, and the advantages
and disadvantages of each. These fall into three main
categories: hand survey (tapes and levels), instrument survey
(theodolite and laser scanning), and photographic survey
(rectified photography, stereo photogrammetry and


Hand survey has its uses with small buildings and small
areas of detail, such as traceried windows. It has the
advantage that, through close inspection and measurement,
the surveyor gains a detailed understanding of the structure.
Instrument survey is good for rapid survey to produce a low
level of data. Total station theodolites now use reflectorless
technology, so inaccessible points can be plotted. Laser
scanning has the possibility of both rapid survey and high
level of detail, because a scan is able to capture a whole
series of points known as a point cloud. It is still in
development, as special computer programmes are needed to
read the massive amount of data generated, but has the
advantage of generating 3D modelling.
Of particular application to historic buildings and to
archaeology are the photographic survey methods.
Rectified photography and photogrammetry are used where
the irregular detail on elevations needs to be detailed. They
are good at producing stone-by-stone records of buildings
for archaeological analysis. Rectified photography uses
standard medium- or large-format cameras. The images are
then enlarged to scale. Photogrammetry combines
photography with CAD, using a stereo viewer to extract
survey information from photographs using specialist
cameras. It is not a cheap option but produces high quality
There are other methods which do not fall readily into
these categories, such as radar surveying techniques, useful
in locating hidden features such as chimney flues. Case
studies illustrate the use of the techniques described.
The problem with any assessment of particular tools is
that they will soon be superseded as technology advances,
but this book very usefully details the survey methods
available with their advantages and disadvantage. It is very
well illustrated, but use it as a reference work, not a
CemiCircular WebWatch
Dallas R (Ed) (2004) Measured Survey and Building
Recording for Historic Buildings and Structures can be
obtained from Historic Scotland (22.50). The book
comprises 9 chapters, 180 pages and 184 illustrations. For
more details go to:


Defined provisional sums
What is the difference between a defined provisional sum
in the JCT98 contracts and an undefined one? Ann
Minogue, partner with solicitors Linklaters, explains that it
has nothing to do with price certainty (Building, 3
December 2004, p.49).
As a novice to building contracts I was baffled by the
jargon used in them. For example, I had no idea what was
meant by the term provisional sum. It soon became
obvious that it was synonymous with black hole. The sum
was no more than a figure inserted by the professional team.
If the work covered by it was to be carried out, an
instruction had to be issued; that instruction was then valued
as a variation; and extensions of time and loss and expense
claims could then follow.
So what is the point of provisional sums? Presumably it
is to forestall criticism about increases in the contract sum.
Does the employer ever understand that the contract sum
and the date for completion include these black holes? The
answer in my experience is almost always no.
Still more mysterious jargon has since been included in
the JCT standard form in relation to provisional sums.
JCT98 includes a distinction between a defined provisional
sum and an undefined one. Probably only quantity
surveyors expert in the standard method of measurement can
explain the difference exactly, but the distinction seems to be
that, for defined work, there is enough information in the
contract to enable the contractor to price preliminary items,
to allow for the work in its programme and to assess its
impact on other work. But if that is the case, then surely it is
also possible to price the work itself?
Take the example of a reception desk an item
commonly covered by a provisional sum. The argument is
I think that the contractor can anticipate the preliminaries
and programme issues arising from the supply and
installation of a reception desk even though it does not know
the precise details of the desk to be supplied. So a defined
provisional sum is inserted.

But surely if the contractor does not know, for example,

whether the reception desk is to be made from some scarce
granite with long delivery times, or alternatively glass which
might be available immediately, it cannot accurately assess
the preliminaries and programme implications of its supply
and installation?
Accordingly, the mystery of the defined provisional sum
unravels and the architect is back where it started it must
not only value the reception desk itself as a variation, it must
also look at the effects it has on other work, adjust the
preliminary items and it may have to give an extension of
time and, potentially, allow for loss and expense.
It must also be remembered that this concept of the
defined provisional sum appears only in the JCT standard
form 1998 edition. It does not appear in JCT With
Contractors Design. Again, why is this? It is presumably
because the employers requirements document, which is
incorporated in this form when it is signed, is the limit of the
design to be carried out by the employers professional team.
Any gaps in that design are to be filled by the
contractors proposals, and produced by the contractor either
before the contract is entered into or in detailed design
information afterwards. In other words, if work is not
properly defined in the employers requirements, it is for the
contractor to define in whatever way it chooses. It can
decide whether the reception desk is granite or glass, and if
the employer objects and wants to secure a higher quality
product, it must issue a change order anyway.
All of which means that the distinction between a defined
provisional sum and parts of the works that the employers
requirements simply does not define in detail is meaningless.
And what should the professional team tell their client
about the distinction? They should confess that it is a
distinction without real meaning unless and until the design
for the reception desk is agreed. No employer should be led
to believe that it is possible to buy any certainty if the
contractor does not have enough design information to price
the works.



Managing risk
Its better to face up to construction risks than ignore them,
says Tony Bingham, barrister and arbitrator. The question
is, do you take the umbrella approach or the mushroom
approach, or one of the other four ways to manage risk?
(Building, 27 August 2004, pp.4849)
Heaven knows your construction work is heaving, bubbling
over with risk. There is a real chance that the job will make
a loss, that you will get the blame, that the firm will go bust.
In fact, there is so much risk that it is best not to think about
No, no. Stop turning a blind eye to bloody risks. Turn
that idea on its head lick risk by looking it in the eye,
then managing it to make it more likely not to happen. This
is where a University of Reading report, commissioned by
the RICS, comes in handy. Its called The Management of
Risk Yours, Mine and Ours.
Now the RICS must be fed up with being kicked in the
groin; time for a pat on the back. And if this RICS president
fella Barry Gilbertson really does want to get his members
back to a sense of belonging, do something really useful,
old chap. Take that theme in your report and help every
RICS builder, QS, manager, measurer, valuer to get good at
making it more likely that good things will happen. And do
it within their membership fee. In other words, for free.
The RICS report says risks are inherent in all
construction projects. Yes, yes, they can be transferred,
accepted, managed, minimised or shared but they must not
be ignored. The traditional way of insulating yourself from
risk is to treat it as another four-letter word and pass the
price to the consumer. Another tradition, says the RICS, is to
play off the subcontractors against each other to gain the
cheapest price. The report says, taking on a risk at bid stage
in the hope of passing it on to somebody else is folly in
todays business environment.
Apparently there are five ways to tackle risk (I think
there are six):

The umbrella approach: where you add a large risk

premium to the price.

The ostrich approach: where you assume that

somehow you will muddle through.

The intuitive approach: that says dont trust all the

risk analyses, trust your intuition and gut feeling.

The brute force approach: that focuses on the

uncontrollable risk and says we can force things to be
controlled which of course you cannot.


The snowboard approach: that says you are on a

snowboard on the downhill run, you have pre-planned
and analysed where the pitfalls are and you have
taken corrective action. Some things can be
controlled, others cannot. For example, speed and
route can be controlled, the weather and the
competition cannot. Focus on the actions needed to
manage the risks throughout the run, arrive safely and
win through.

And the sixth? Every QS will tell you that the

construction industry uses the mushroom approach: keep
everyone in the dark, then chop their legs from under them
when nobody is looking.
Six ways to handle risk
Now lets get down to it. Risk is the combination of the
probability of an event and its consequence. If we can
fathom these two and have a mindset of making it more
likely that good things will happen, this will be fun. So, what
is probable? First, at building concept stage, it is probable
that the budget set by the client will be insufficient for the
level of quality and performance expected from the project.
Then at design stage it is probable that the design team will
fail to design within budget and by then the job is under way.
Also, it is probable that there will be lack of design coordination among the design consultants and little respect for
design management. Then, at construction stage, it is
probable that there will be changes in design and
requirements, and in consequence programme delays and
disruption. And, all that will lead to disputes.
So, having fathomed the probability of events and
fathomed the consequences, how can we make it more
likely that good things will happen? Easy, really. The good
thing is that you will have a whopping catalogue of disputes
and this will bring a smile to the face of all us adjudicators,
arbitrators and dispute sorter-outers, and, of course, the
RICS. Last year it made about 10,000 arbitral-type
appointments at 300 a go. So, come on keep making it
more likely that good things will happen

CemiCircular WebWatch
The report referred to, The management of risk: Yours, mine
and ours, commissioned by the RICS Project Management
Faculty from the University of Reading, can be found at the
RICS members website at this link:


Settling claims

When it comes to settling a claim under a building contract,

drawing up the final agreement yourself without the aid of
an expensive lawyer might appear simple and attractive, but
beware there is rather more to it than agreeing the figure.
Melinda Parisotti, in-house barrister at Wren Managers,
explains how to make sure the agreement means what it says
(Building, 8 October 2004, p.53).
DIY claims handling is only for the stout of heart.
Nevertheless, many claimants and defendants alike will wing
it alone without legal assistance, regardless of the undeniable
risks. Reaching an agreement without legal guidance is one
thing. Drawing up a settlement agreement one that does
what you think it does is quite another.
Looking at this principally from the payers perspective,
I have set out below some of the many pitfalls just lying in
wait, should you venture into the hazardous world of
settlement agreements without a trusty legal hand to grasp.
First of all, check that person with whom you are dealing
has the authority to negotiate and sign the settlement
agreement, so that it will be binding on their organisation.
Hopefully the main players will come to mind when
drafting your settlement agreement, but there may be other
parties, including associated companies, who should be
named as part of the deal, even if they are not making any, or
any significant, contribution in monetary terms. Otherwise,
they might come knocking on your door the next day in
respect of the very matter you thought you had just
dispensed with. And, of course, even if named, there may
still be issues as to whether the deal is legally binding on
third parties.
On a related point, you may, as the payer, require an
indemnity from the payee in respect of any claims third
parties might bring against you.
If you ask somebody who has just come out of a
settlement meeting if they know exactly what figure they
have settled at, you might expect an indignant retort. But
inquire whether their figure has addressed the questions of
legal and expert costs, VAT, interest and the like, and they
may start looking a little sheepish. The settlement agreement
should clarify whether these matters have been included. If
not, it should specify how they are to be dealt with.

Insurers simply do not take kindly to surprises. If you are

relying on them to cough up the readies, you need to be sure
they are going along with the deal. And bear in mind you
will still be on the hook for any excess. Can you produce it
by the agreed date?
You need to specify the date of payment in the agreement
or you can be certain that the claimant will be snapping their
fingers for their money before the ink on your settlement
agreement is dry. Again, if you need to pay by instalments,
that must be stated in the agreement.
Is foreign currency involved? Bear in mind the extra time
and costs involved in the transfer. You may also wish to
agree a set exchange rate so that a major fluctuation in the
rate between settlement and payment does not catch you out.
I covered the question of full and final settlement in a
previous article (Building, 20 September 2002, page 57).
Depending which side of the fence you are on, you may wish
the settlement to be full and final, or you may prefer to leave
the door open for future claims. Obviously it is in the payers
interests that the settlement agreement should stem all future
claims, even if unrelated to the matter in hand, but that is
rarely the intention of the claimant. However, somewhat less
rarely, this draconian interpretation is the unintentional effect
of sloppy settlement wording.
Is confidentiality an issue? If so, say so. It might also be
worth agreeing with the other side how to field any queries
arising from third parties [also see item on Confidentiality
and legal privilege in the Law section of this
If a claim is made against you as a consultant or
contractor, you may intend that your fees for the job be
wrapped up in the settlement figure. Either way, you need to
As far as admitting liability is concerned dont! The
payee has your money, so he does not need your grovelling
admission at this stage, and it could have all kinds of adverse
repercussions not least the triggering of independent
If you still manage to make a dogs dinner of your
settlement agreement, at least be sure it clarifies which law
and jurisdiction apply. You will need to know this when you
spend the next two unhappy years tied up in litigation over
its interpretation.



Did the building of the London Underground Jubilee Line
cause the pipe to burst, or would it have happened anyway?
Susan Lindsey, barrister at Crown Office Chambers,
discusses how the but for test can be used to exclude things
that are not a cause, but is still not a reliable test of
causation (Architects Journal, 11 November 2004, p.48).
For 75 years the 36-inch cast-iron water main under St
Thomas Street, Southwark, served its function, taking in its
stride the vicissitudes of life (Thames Water v London
Regional Transport; judgment 18 August 2004). Then,
between 1995 and 1997, London Underground built the new
Jubilee Line nearby. On 24 October 1999 the pipe suddenly
failed, giving rise to claims that amounted to many millions
of pounds.
Thames Water blamed London Underground (LU),
alleging it had compromised the ground support for the
main, causing damage to the pipe. LU opposed the claim,
saying the pipe was so loaded already by historic stresses
and strains that its actions were simply the straw that broke
the camels back. That, it said, was not sufficient to give rise
to a legal liability.
Similar arguments might arise in the context of a building
contract to carry out works to an existing building. For
example, unbeknown to a contractor, previous works may
have seriously compromised the structure. As soon as the
builder starts work, damage results, triggered by the new
work. Other issues arise, including what the contractor is
obliged to do and what it should and could have noticed
before starting work. But how does a court approach
questions of causation of damage in such cases?
In Thames Water, HHJ Wilcox took the well-known
starting point of what is called the but for test. At first sight
this appears a useful and straightforward test. If but for the
defendants actions the damage would not have occurred,
then the defendant is liable. But the test runs into problems,
particularly when there is more than one possible cause of
The judge referred, among other authorities, to Lord
Hoffmans speech in Banque Bruxelles Lambert v Eagle
Star, the well-known case about the extent of damages
payable by a valuer who negligently over-values property
that turns out to be inadequate security, in part because of a


fall in the property value. Lord Hoffman gave the

illuminating example of a mountaineer who, before setting
out on a difficult climb, asks a doctor whether his knee is fit
enough for him to undertake the journey. The doctor has a
quick look and declares the knee is fine. The mountaineer
sets off, but suffers an injury that is unrelated to his knee but
is a foreseeable result of mountaineering. But for the
doctors advice, the mountaineer would have stayed at home,
suggesting the doctor is liable. But common sense says that
is wrong. There is no sufficient causal connection between
the doctors advice and the loss suffered by the mountaineer.
So the but for test is a filter that can exclude things that
are not a cause and identify things that are a potential cause,
but it cannot be a reliable test of causation. Instead, the court
has to decide on a common-sense basis what caused loss,
and within the context of what it was that the parties were
supposed to be doing.
In applying this common-sense approach to the facts of
Thames Water, the judge had to consider extensive evidence
about the underground conditions, both in geological terms
and in terms of man-made events that had altered the ground
over time. He also heard about the condition of the pipe and
the stresses and strains it had been subjected to, including as
a result of London Undergrounds works. The documents
referred to ranged from post-war bomb-damage maps, back
through 18th century maps showing street realignment, to
archaeological records of Roman and mediaeval activity.
The judge had the benefit of expert evidence on the
significance of all this data in relation to the pipe failure, as
well as expert assistance from metallurgy experts about the
fracture damage to the pipe.
Applying a common-sense approach to this wealth of
technical data, the judge concluded that LUs work caused
differential settlement in the made ground around the pipe,
triggering localised movement in the alluvium beneath the
failed piece of pipe, thereby overloading the pipe joint.
Had the settlement caused by LU not happened, the pipe
would have continued in use for many more years. Hence
LU had caused the damage, and was liable.
CemiCircular WebWatch
The website of Crown Office Chambers offers a good selection of
articles and case notes covering current construction law


Corporate social responsibility

The UK construction industry still has a poor record for
work-related deaths. Following the announcement of a
proposed corporate manslaughter bill in November 2004, a
survey by consultants KPMG showed corporate social
responsibility rising up companies agendas. Angela
Monaghan reports on the survey findings (Building, 3
December 2004, p.20).
Corporate social responsibility, or CSR, was pushed up the
governments agenda at the end of November 2004, when a
draft corporate manslaughter bill was unveiled in the
Queens speech. The proposals are far-reaching, with
negligent company directors facing imprisonment or fines on
personal wealth when a member of staff is killed in the
The stakes have been raised, and the building industry as
a whole is finally waking up to the fact that it has to take
CSR seriously in order to be ahead of the game. A survey
published by consultants KPMG last week showed that CSR
is catching the attention of more companies, and is creeping
up the industry agenda albeit slowly.
KPMG interviewed 226 industry people, 98 of whom
were from quoted companies. The survey showed that almost
70% believe that CSR has a large commercial impact on
business, compared with about 50% last year.
However, at a time when construction-related deaths are
still hitting the headlines, and as companies struggle to
attract the levels of staff they need, the survey shows that the
importance of having sound CSR policies is still not fully
understood. The issues involved are wide-ranging and
include health and safety, environmental and pollution
control, community development, social accountability,
ethics and integrity and stakeholder engagement.
Thirty-four per cent of those questioned said business
was affected by public opinion of CSR , but this represented
only a 10% increase on the 2003 figure, and most
respondents still said that public opinion had no effect. This
seems all the more strange at a time when staff shortages are
one of the industrys major concerns. Younger people are
increasingly concerned with the overall ethos and values of
the company they choose to work for demonstrated by the
fact that the CSR section on company websites receives the

greatest number of hits from graduates and

potential employees.
More than half (51%) of those questioned said that
clients were sending out questionnaires at the prequalification stage of a tender. Just 28% were asked to
engage in detailed discussions on CSR, but this figure was
still more than the 11% recorded last year and will no doubt
continue to rise.
The responses also indicate that most investors and
shareholders do not raise the issue, although, again, the past
year has seen an increase in those who do, from 17% to
A panel of eight industry executives invited by KPMG to
discuss the survey said that addressing CSR issues would
become more common as clients drove it up the agenda.
Public sector and blue-chip clients are most concerned with
CSR policy, said the panel, partly because those clients are
the ones that tend to have a policy in place within their own
Richard Whittington, head of building and construction
at KPMG, said: Our survey shows that the industry is
moving slowly towards embracing the CSR agenda. The risk
to businesses reputation of not actively engaging with the
CSR agenda can be huge. Our survey demonstrates that these
issues are now beginning to be addressed and debated
throughout the sector.
One surprising statistic revealed in the survey was the
lack of concern and awareness among people in financial
roles about the new non-financial reporting regulations to be
imposed on UK quoted companies in four months time.
The operating and financial review (OFR) will require
companies to report on staff, environmental, social and
community issues, so that they are more transparent about
their strategies. Yet, despite the imminent changes, 61% of
those in finance roles questioned by KPMG said that they
did not anticipate including CSR issues in their OFR
disclosure. And this is despite the fact that, for quoted
companies, a bad reputation in the public domain can have a
direct and negative impact on a share price a problem to
which Jarvis has fallen victim.
CSR is clearly keeping more directors awake at night
than this time last year, but it would seem that more than lipservice has to be paid if the industry is to attract new





The Millau Viaduct, France

Foster and Partners Viaduc de Millau in southern France is
the highest and longest cable-stayed bridge in the world, at
nearly 2.5km, carrying the A75 motorway across the Tarn
Valley. It was opened in December 2004 by President
Chirac and promises not only to alleviate a traffic
bottleneck but also to become a tourist attraction in its own
right for the scale and elegance of its construction. Thomas
Lane describes the feat of construction, talks to the engineer
and meets some enthusiastic locals (Building, 24 September
2004, pp.4652).
Cest magnifique!
For three years, frustrated motorists using the A75 motorway
in France have been tantalised by progress on Europes
largest civil engineering project. The drive from Bziers in
the south starts out well enough, as you hurtle northwards
through mountain scenery. Frustration sets in 19km south of
Millau, as the motorway empties its traffic on to the
equivalent of an A-road and you slow to a grinding crawl it
can take up to three hours to get through the town and back
on to the A75 north of town. Eventually, however, the road
dips and rounds a corner to reveal a vast panorama: a huge
2.5km wide valley slices deep between two elevated
plateaux and a nearly completed motorway viaduct strides
across the void.
This structure rouses a host of emotions. The first is
amazement at the sheer arrogance of trying to bridge such a
gap. But then you marvel at the brilliance and scale of the
engineering. You also wonder how on earth permission was
granted and how the contractors kept off protesters in one of
the most beautiful parts of France. The how did they get
away with it feeling is tempered by the extraordinary
elegance of what is after all a motorway bridge this makes
more sense once you realise architect Foster and Partners
was involved in its design.
Finally there is the anticipation in knowing that next year
there wont be infuriating traffic jams to plough through but
the chance to fly across the valley on the Viaduc de Millau
and on to Clermont-Ferrand.
Above all else, however, rises one question: how did they
do it?
The Viaduc de Millaus vital statistics read like an entry
in a book of records. It is the worlds longest multi-pier
cable-stayed bridge, at just 40m short of 2.5km, and the
highest at 343m. Seven piers step delicately across the valley
over the River Tarn to support the deck. These are not the
usual Mr Blobby style motorway piers but are hexagonal in
plan and curve gently towards their apex from the base. Each
pier splits in two like a tuning fork 90m short of the deck to
make the structure appear even more refined.
These piers are the highest in the world. To put this in
perspective, if the Eiffel Tower was sitting in the River Tarn
it would barely protrude above the deck. Pylons rise 90m
above the deck, elegantly mirroring the forked design.
Cables fan out from the pylons to transfer loads from the
deck down into the piers.
It has taken many years to get to this stage. A range of
options were explored between 1987 and 1989, according to

Michel Virlogeux, who at the time was the head of bridge

engineering at the government-run major roads division, the
Service dEtudes Techniques des Routes et Autoroutes.
Suspension bridges in two different locations were rejected
because of local opposition and unsuitable ground, and a
bridge combined with a tunnel was rejected because of its
complexity. We were practically in front of a wall, says
Virlogeux. The director of road engineering said it is not
possible to span one plateau to the other because of the
length of the span and for aesthetic reasons. This got
Virlogeux thinking. At this time I had the idea of the cablestayed bridge.
This idea was adopted and eventually culminated in a
competition in 1994 to select a winning design. The
government realised it had to go to exceptional lengths to
win the public over to the idea. A project from the
administration would not have been accepted, says
Virlogeux. Everything that comes from the administration is
to be fought against. The best way was to have a
competition, as the public accepts the decision of a jury.
The second strand to the strategy of winning over public
opinion was to make the viaduct more visually acceptable by
insisting an architect be on each team. It was unusual that
the project stipulated that all the competing teams had to
have an architect in the team, says Norman Foster.
Foster says his design differed from the other entries in
one important respect. They had let a competition for a
bridge over the River Tarn, he explains. Every entry had
made a response that focused on this very small river. These
were large-span structures with symbolic arches over the
river. My point was that this was not a competition for a
bridge over the River Tarn. We have not done a bridge over
the River Tarn but the most economical crossing between
two plateaux that also happens to cross the River Tarn. In a
way we have taken a divergent, philosophical line. The
highest part of the columns just happened to be where this
tiny dribble of a river is.
The architect and engineers worked closely together on
refining the design once the result of the competition was
announced in 1996. The bridge is in many ways a perfect
synthesis between architecture and engineering as aesthetic
considerations combined successfully with engineering
demands. An example is the forked piers. This bridge relies
on very stiff piers and pylons combined with a flexible deck.
The piers need to be very wide so they dont bend towards
an asymmetric load on the deck. But because the bridge is
2.5km long, thermal expansion up to 600mm is possible at
either end. Because this movement is incompatible with the
two wide piers at each end of the deck, the solution is to
divide them into two so they can provide the necessary
stiffness yet accommodate thermal movement.
Foster has turned this into an aesthetic virtue. All the
piers share the same forked design as it lightens their
appearance, and much effort has gone into shaping the piers
to make them as elegant as possible. They are multifaceted
for added visual interest and also incorporate grooves that
cast shadow lines that vary in width according to the time of
day. The piers are also arranged on a slight curve, giving the
bridge a radius of 20km. This is intended to add to the visual
impact of driving across, as motorists can see the bridge
unfolding before them.


enough and Eiffage kindly obliged by bringing the scheduled

completion date of 10 January 2005 forward to the week
before Christmas. President Chirac snipped the ribbon to
spare motorists seasonal gridlock and the chance to
experience a new, tantalising view of Millau that, traffic
permitting, will last just three minutes.
What the locals think of the viaduct
Viviane de Sousa, camp site owner
Although the traffic jams will go, people are worried that
businesses will go, too. Now two out of three people support
the construction of the viaduct. Five years ago it was half and
half; as people have seen the project develop they have
become more accepting of it, and the fact that it will get rid of
the traffic and is physically beautiful does make it more
acceptable. At the moment there is a buzz in Millau because
of the visitors and the workers who have bought houses and
business to the town. The question is, what will things be like
in five years time?

Virlogeux says that when engineering demands made

meeting aesthetic requirements difficult, Foster was very
accommodating. Originally Foster wanted a triangularshaped deck in section but tests showed that this wouldnt
work. We put it in a wind tunnel and it was a disaster, says
Virlogeux. He says the deck behaved in a similar way to the
deck on the Tacoma Narrows Bridge in Washington state,
USA, which in 1940 started swaying and ultimately
collapsed in high winds.
Virlogeux wanted to use a trapezoidal deck that he had
previously used on the cable-stayed Pont de Normandie. He
says the architect could have insisted on the triangular deck,
as the politicians had stipulated that nothing could be
changed without the architects agreement. I met with Foster
and explained that we had the same problem as Tacoma. He
said no problem and changed the design in ten minutes
and we went back to a trapezoidal shape.
All the effort put into finely honing an aesthetically
pleasing solution has paid off, as there have been virtually no
protests either before or during construction. The A75 cuts
through the traditionally isolated and poor region of the
Massif Central, and was intended to open the area up.
Virlogeux says people were very much in favour of the
motorway because it was hoped it would bring economic
benefits and halt rural depopulation. Also, Millau residents
were sick and tired of the traffic jams that made getting into
and around the town a nightmare. The population was very
upset by the delays to the project which doesnt usually
happen, Virlogeux explains. We have exactly the opposite
situation in the French Alps where a proposed motorway has
been completely blocked.
Indeed, the construction of the Viaduc de Millau has
become something of a celebratory experience for France.
Eiffage, the contractor for the viaduct, built a visitor centre
under the emerging structure and says 400,000 people have
visited since work begun. The town has helpfully signposted
several vantage points where the viaduct can be more fully
appreciated and these are populated by hordes of snappers
armed with digital cameras.
For the A75 motorist the bridge could not open soon

Monsieur Perez, estate agent

I have always been in favour of the viaduct, as it is a good
thing for Millau. Everybody in Millau is tired of the traffic jams
throughout July and August. The project has brought lots of
tourism to Millau; many people have come to see the viaduct
being built. Everybody in France has heard of the project,
and wherever I go I take a photo to show people how good it
is as I am proud that the viaduct is here. It is a shame that a
French architect did not win the contest, but Mr Foster has
created a magnificent viaduct. I think the fact that it is so
beautiful means more people have accepted the project.
House prices have been going up in the area, although that
is true in all of France. Local people are concerned about
what will happen after it opens, but I think that many people
will still stop off at Millau to admire the viaduct.
Herv Bougnol, hotelier
I think that the viaduct is a good thing for Millau because
there is a big increase in tourism at the moment and I have
noticed we are getting busier. Something had to happen, as
everyone has become fed up with what happens every
summer the whole of the town is brought to a standstill by
the traffic jams. I do not think that in the long run Millau will
suffer. People will still come, as there are lots of things
happening around here. The viaduct is a national project, and
the other two options, a route far to the west or a tunnel
under the mountains, would have left Millau out of the
picture. I think that tourism will increase after the viaduct
opens as tourists were put off in the past by the traffic jams;
they were so tired of trying to get through, they didnt want to
The viaduct is handsome, which is good as nobody locally
would have put up with a design that was not going to look
good. The competition was a good idea it was fair and the
outcome needed to be good for the people of Millau.
Clement Forin, stationer
Of course something needed to change as the town was
brought to a standstill every summer. The architect produced
a fine design and the viaduct looks very good. At the moment
there are lots of visitors to the town, but I dont know if the
viaduct will be good for Millau in the long run as I think
everyone will just head for the coast without stopping.
However, at least the traffic jams will stop.


How the Viaduc de Millau was constructed

The French contractor Eiffage won the concession from the
French government to build and operate the 320m structure
for the next 75 years, using the money from tolls to fund its
construction. Marc Legrand, the director-general of
Compagnie Eiffage du Viaduc de Millau, the Eiffage
subsidiary set up to build and operate the viaduct, says, We
have worked on large projects including the TGV and the
Pont de Normandie but never on a project of this scale
before. Eiffage had to respect the overall design and had to
ensure the viaduct would last at least 120 years, but was free
to select a suitable construction method.
The seven piers were constructed simultaneously on
substantial foundations that will be buried once the viaduct
is completed. Their construction was tricky because of the
complex shape and because of the giddying heights
involved. Once the foundations were finished, specially
made self-climbing formwork was brought in to build the
piers in 4m high lifts, with one completed every three days.
Every lift has different geometry, says Vincent Bonnefous,
Eiffages director of works. The formwork consists of a
series of panels that can be changed for ones of different
sizes to suit the geometry. In some places a panel would be
used only once. The piers are hollow inside and have wall
thicknesses ranging from 600mm to 1200mm.
Once the point where the piers split was reached, a
completely new set of formwork was brought in to construct
the two forks together. This was the difficult part, says
Bonnefous. Because of the dense steel reinforcement there
was very little space and it was difficult to get it to work. We
were taking four to five days per pour but we managed to get
this down to two days once we understood how it worked. It
was very difficult but we did it.
Indeed, Eiffage had to make some design changes
because of the densely packed reinforcement. There was a
lot of steel at the top of the piers because of the high loads,
explains Legrand. Norman Foster accepted some slight
changes where the piers met the deck but we respected the
overall design.
The piers are solid for the last 18m except for voids
needed to accept 100m long cables to pre-stress the piers.
These prevent cracking and are intended to make the
structure more durable.
The construction phase with the biggest wow factor was
the steel deck ... assembled on the ground at each end of the
bridge and progressively pushed out over the void from each
side until the two halves met at the highest point of the
valley. Unsurprisingly this is the biggest bridge launch ever.
We decided not to use concrete for safety reasons, as it
would have meant having men work at heights of 245m,
says Legrand. Another benefit is that steel is lighter, so the
stay cables are reduced from 25 pairs to 11 and the deck is
4.2m deep instead of 4.6m. This gives a cleaner result.
Extensive temporary works were needed for the launch.
Because the deck is pushed out over the valley without its
final supporting pylons and stay cables, each 342m long
section of deck between two piers had to be propped in the
middle. Seven giant steel towers provided this support.
These are essentially oversized crane support towers.
However, the highest section of the bridge couldnt be
supported in this manner because it spans the section of the

valley directly above the river. The solution was to erect the
pylon and stay cables on the leading section of each half of the
deck only to provide support for this final section. As the river
is on the north side of the valley, 1743m of deck was launched
from the south side, and 717m from the north.
The deck was fabricated in sections by Eiffage steelwork
subsidiary Eiffel at its two factories. These sections were
brought to site and welded together on a production line at
each end of the bridge to form a complete, painted deck
section with the balustrade pre-fitted. After three weeks the
171m long sections, enough to span between pier and
temporary support, were finished.
A special weather forecast was made to ensure that average
windspeeds did not exceed 35km/h over the next four days
prior to launching the deck over the void.
The biggest problem was how to slide the deck over the
piers. You couldnt push too hard horizontally on the piers as
this would damage them, says Jean Pierre Gerner, Eiffels
director of works responsible for the deck. The answer came in
the form of 64 devices called translators positioned on top of
the piers and the temporary supports. Devised by US specialist
Enerpac, these are computer-controlled, synchronised
hydraulic transfer jacks that lift the deck slightly, push it along
by 600mm, drop it again, then repeat the process. This moved
the deck along at a rate of 10m/h so it took two days for the
deck to move the full 171m to the next support.
The biggest concern was that the deck would become stuck
between its supports during the launching operation. The
worst-case scenario was that the deck would get stuck 5m
before it reached the support, says Gerner. We had an
emergency system to make it safe ... but it never got stuck.
On 28 May 2004 the two halves of the deck met 270m
above the Tarn with a difference of only 10mm, according to
After welding the two halves of the deck together, the next
stage was to lift the steel pylons into place and attach the
cables to permanently support the deck. The temporary
supports were then dismantled and clear plastic aerofoils
attached to the balustrade to deflect the winds that whistle up
the valley while allowing drivers a view over the sides.
Lighting is installed inside the split piers to subtly illuminate
the bridge it has no other lighting, in order to minimise its
impact on the landscape. Six kilometres north of the viaduct is
the high-tech toll collection and command centre.
Commissioning authority
The French Government
Project owner and operator and main contractor
Compagnie Eiffage du Viaduc de Millau
Foster and Partners
Project manager
Setec, SNCF
Civil engineers
Eiffage TP, EEG-Simecsoc
Structural steel engineer
Concrete contractor
Eiffage TP
Steelwork contractor



Public procurement
A European Court of Justice ruling on 11 January 2005
affects the awarding of public service contracts. This update
is from Law-Now, the on-line Information service of law
firm CMS Cameron McKenna, and is reproduced with their
kind permission.
The European Court of Justice (ECJ) ruled on 11 January
2005 that public bodies cannot award public service
contracts to companies which they own jointly with private
investors, regardless of the percentage of public holding,
unless they have first held a tender process. This means that
such contracts must be awarded in accordance with the EU
procurement rules which require formal invitations to tender.
In Stadt Halle and RPL Recyclingpark Lochau GmbH v
TREA Leuna, a disgruntled competitor challenged the award
by the City of Halle of a contract to design a waste disposal
plant. The contract had been given to a company in which
the City of Halle had a 75.1% shareholding (the rest being
held by private investors) without formally issuing a call for
Note that this decision relates to contracts awarded by
public bodies, not by utilities. There is no provision in either
the current or the new public services contracts directive
which mirrors the provision in the current and the new
utilities rules allowing the award of certain contracts to
affiliated undertakings without the need for a tender process.
The ECJs ruling also confirmed that such challenges are
not barred by the fact that the award decision was taken
outside a formal award procedure and prior to a formal
invitation to tender. The court stated that as soon as the


contracting authority has gone beyond merely preparatory

steps and its decision is capable of producing legal effects, a
challenge is possible. The reasoning was that otherwise EU
law would not provide effective and rapid remedies.
However, the ECJ clarified that acts which are merely
preliminary studies of the market, or purely preparatory and
form part of the internal reflections of the contracting
authority with a view to a public award procedure, cannot be
challenged in this way.
For more information on this case, or on other procurement
issues, please contact:
Susan Hankey at or on +44 (0)
207 367 2960, or
David Marks at or on + 44 (0) 207

CemiCircular WebWatch

The website of the European Courts of Justice can be

found at
To see the ECJs press release on this case, use this
The full text of the ECJ judgment can be found at:
For the on-line information service of law firm CMS
Cameron McKenna, go to


Affordable housing quotas
The government is determined to achieve a dramatic
increase in affordable housing provision and commercial
developers must do their bit.
No longer can they make their contribution in the form of
cash payments to planning authorities. Increasingly they are
required to build the affordable housing themselves, as part
of residential or mixed-use schemes, even if they have little
experience of this market.
This policy has created growing demand for advice from
valuation and planning surveyors. Companies that develop
property, such as Prudential Property Investment Managers
(PruPIM), which is building a mixed-use scheme with 600
houses at GreenPark near Reading (see panel) want to know
how much they will be paid for the affordable housing, and
they need guidance through the morass of quotas, grants and
policy initiatives that go with the territory.
GVA Grimley formed an affordable housing unit 18
months ago. Led by GVAs head of planning Stephen Brown,
it is expected to double in size from 12 specialists in 18
months. Similarly, the residential team at Drivers Jonas,
which includes valuers, building surveyors and project
managers, has grown from 10 to 15 in the last 12 months.
This is a good market for consultants because of all the
grey areas and uncertainties, notes Chris Baldwin, valuation
partner at Drivers Jonas. People need to draw on experts for
The imposition of a 50% affordable housing target in
Westminster last month, the launch of a pilot scheme to
channel money direct to developers instead of through
housing associations, and the drafting of new planning
guidance (see panel) will all add to the demand for advice.
At Drivers Jonas, valuers are advising developers on how
much they are likely to be paid for the affordable housing
element of a scheme. Baldwin says 40 developers have
contacted him in the last 12 months wanting answers to this
question, which can make or break their plans. They are
usually either considering a bid for a site with an affordable
housing requirement or have already bought the site and are
exploring their options.
Housing partners
Unfortunately, there are no easy answers. Much depends on
whether the developer can join forces with a housing
association that has grant funding available to pay for the
housing. The Housing Corporation distributes this grant to
housing associations every two years.
Drivers Jonas will try to identify housing associations
that a developer can partner with on a particular scheme.
Ideally this takes place six months before a planning
application is submitted, Baldwin says. His department
claims in-depth knowledge of the field because it has worked
with housing associations for 15 years; historically it
provided loan security valuations to housing associations
when they wanted to raise money.

A further complication is that the regulations that govern

when grants can be used are unclear. In November 2003 a
ruling appeared to ban the use of grants to pay for houses
built through section 106 agreements negotiated between
developers and local planning authorities. Baldwin believes
this was an unsuccessful attempt to force down land prices.
But these rules are not rigidly enforced and the result is more
The issue of how much the developer will receive for the
affordable housing is often not resolved until section 106
negotiations are completed, Baldwin says. For this reason
the more experienced developers never assume more than
break-even for the affordable element when they bid for a
Direct funding
The Housing Corporation has begun an experiment whereby
some funds will be allocated directly to commercial
developers instead of being channelled through housing
associations (fact file).
In the longer term, Baldwin predicts that developers who
build affordable housing directly will need valuation advice
when they want to sell or lease the stock to housing
At GVA Grimley, valuation partner Jacob Kut is working
with his firms planning team to help developers negotiate
affordable housing percentages with local authorities. For
example, where a local authority wants 50% affordable
housing and a developer only wants to build 30%, Kut will
calculate what impact each figure will have on the residual
value of the site. The residual value is the difference between
the total value of the finished development and the
developers costs and profit. In theory, what remains is what
the developer can afford to pay for the land.
In these scenarios Kut can roughly work out how much
will be paid for the affordable housing. If the percentage
required by the local authority is so high that the sites value
is below the market rate established by the use of
comparable evidence the developer can use it to argue for
a lower proportion of affordable housing. The developer
may also argue that an alternative use for the site such as
offices would be more profitable.
Stephen Brown, head of planning and the residential
team at GVA Grimley, says the analysis is unbiased. Kuts
work has to stand up in a planning inquiry if necessary and
he uses Toolkit software produced by the Greater London
Authority for this purpose. He says that in almost every case
where Toolkit has been used, clients have been able to agree
a reduction in the amount of affordable housing required by
the local authority.
Kut has completed around 20 so-called viability testing
exercises in the last 12 months with Toolkit. The good thing
about the Toolkit is its focused everybodys minds, says
Kut. If a local authority asks for a package of goodies in a
section 106 agreement, they can see in black and white the
effect it has on land values and the potential impact on the
amount of affordable housing.


Brown believes viability testing will become more

widespread following the redrafting of government guidance
on planning contributions (see panel). This department is
expanding and theres greater awareness among developers
of the value of this service.

PruPIM seeks a partner

Prudential Property Investment Managers is negotiating an
affordable housing deal with Reading Borough Council for its
GreenPark scheme in Berkshire.
Phase 3 is to be a mixed-use development of 600 homes and
250,000 sq.ft (23,225 sq.m) of office space. The councils
planning rules require a 50% affordable housing element but
PruPIM hopes to agree a lower percentage in recognition of
its contributions to new transport facilities, in particular a new
railway station.
This is the first time PruPIM has been involved in affordable
housing negotiations and Drivers Jonas has been brought in
to help. A planning application is due in the second quarter of
this year.
Kevin Ashman, PruPIMs director of project management for
the third phase, says the amount of grant that may be
available to pay for the social housing, and hence its overall
value to PruPIM, is still unknown. Drivers Jonas is helping to
identify housing associations to partner PruPIM, which could
improve the chances of winning grants.
PruPIM hopes to use the experience of GreenPark for a
much larger residential scheme at nearby Kennet Valley
Park, which has space for 7,500 homes.
There doesnt seem to be any certainty and things shift like
sand, reflecting government priorities, says Ashman. It must
also be difficult for housing associations to plan in the long
term, because of the uncertainty about their access to

Affordable housing today

The affordable housing world can appear to be on shifting
sands for the commercial property developer. Here are some
of the latest developments:


Last month the Office of the Deputy Prime Minister

overruled Westminster City Council by insisting on a
requirement for 50% affordable housing on all new
residential schemes in the councils unitary development
plan. The ODPM only wanted a 30% requirement (see
Property Week news, 17 December 2004, and letters, 7
In Julys Comprehensive Spending Review, chancellor
Gordon Brown announced extra funds to build an
additional 10,000 affordable homes each year by 2007/
08, in addition to the 19,500 a year currently built.
The government has launched a pilot scheme to allow
commercial developers to bid directly for some of the
funds that would normally be distributed through housing
associations. The deadline for expressions of interest
was 11 January and all the big housebuilders are thought
to have applied. Some 200m will be available under the
pilot, split across 10 projects. It is a tiny sum compared
with the 1.67bn distributed to housing associations by
the Housing Corporation, but advisers such as Drivers
Jonas believe the amount given directly to developers
could increase rapidly to as much as 1bn if the pilot is

The government is updating its guidance on planning

contributions. The new draft Circular 1/97 includes a
clarification of the basis for affordable housing
contributions, although observers say the rewording will
fail to make negotiations quicker or more transparent.
Consultations on the draft closed this week.

Developers and RSLs fume at social

housing shake-up
Each side complains of unfair bidding advantages under the
Housing Corporations new grant system. By George Hay
(Building, 21 January, 2005, p.16).
Developers and registered social landlords have hit out at the
Housing Corporation over its handling of proposals to
extend social housing grants to developers.
Each side claims it is being unfairly singled out in the
run-up to the allocation of the corporations 3.2bn grant for
2006/08, for which developers will be allowed to bid for the
first time this year.
The housing sector is worried that the corporations drive
for efficiency, in the light of the governments Gershon
review to cut public sector waste, will cast individual
housing associations in a bad light.
Last year, the corporation proposed creating an efficiency
index for the operational costs of RSLs. The index, which
was launched this week, has been altered amid strong
protests from the sector after it complained that there was no
Now RSLs are worried that the corporation will make the
same mistake by creating an inaccurate picture of each
housing associations efficiencies on development costs.
One senior source at a leading RSL said that a hastily
conducted audit would be unfair as it would not differentiate
between genuine efficiency and associated costs borne by
individual firms.
The source said: One of the concerns we have is that if
youre doing [an index] youve got to look at all the work we
do on social inclusion that adds to our costs. At the moment
none of this would show up in their data.
Tom Dacey, chief executive at the Southern Housing
Group, said he hoped the efficiency data would not give rise
to a bureaucracy of costs.
He said: The Housing Corporation has a legitimate
interest in using public money efficiently. But we hope that
the introduction of the development phase would take
account of the lessons learned from the efficiency index.
Meanwhile, lawyers representing private developers have
complained that their bids for the grant will be restricted by
corporation red tape.
Lawyer Wedlake Bill said that RSLs would be given an
unfair bidding advantage because bidders with a proven
track record in social housing management would be
favoured. This would disadvantage developers as they are
usually partnered by RSLs, which then apply for the grant
and manage the social housing.
The Housing Corporation said it would judge all the bids


received against common value-for-money criteria but would

make allowances for new bidders. A spokesperson said: The
corporation wants housing associations and unregistered
bodies to participate in the same programme and is
committed to ensuring fair treatment.

Letter in response to article

(Property Week, 11 February 2005, p.46)
Advice, yes; compensating mistakes, no
Your article on the provision of affordable housing
(professional + legal, 28.01.05, p.85) concentrates on the
need for developers to obtain suitable professional advice
about a site they are contemplating.
This is to be applauded. However, there does appear to
be some misunderstanding about the availability of grant aid.
It was suggested that the November 2003 ruling, which
states there should be no grant for housing provided under a
section 106 agreement, was an attempt to force down land
prices. This is not the case.
The value of a site will always depend on what can be
done with it. If a planning requirement dictates that a certain
percentage of the site should be for affordable housing, then
the value will reflect that.
Any developer paying a price for a site before
investigating this can only have himself to blame.
However, grant aid for any purpose, affordable housing
included, is limited.
It is a nonsense to throw money at a site where the
affordable element is already ensured through planning. This
compensates the developer for a loss they would not have
suffered had they paid the right price originally.
Andrew Wearmouth, St Albans City and District

Sports development NY style

New Yorkers are witnessing one of the biggest planning
debates in years as the New York Jets take on a media
conglomerate over plans for a new football stadium. Those
in favour cite the prospect of an Olympic bid in 2012 and
regeneration of a run down area in fact arguments very
like those currently taking place over developments in
London and Manchester, UK. New York Post executive
editor Steve Cuozzo reports (Property Week, 21 January
2005, p.21).
New York has had its share of bitter land-use brawls, but
none to compare with the one over a proposed new football
stadium and convention centre on Manhattans far west side.
Previous battles over Columbus Circle and Times Square
were played out in political back rooms, newspaper columns
and in carefully managed public rallies. The match-ups
typically pitted community activists and their political
stooges against developers and their political patrons.
This time, the public spectacle also includes two
powerful and ruthless corporate adversaries Robert
Woody Johnson IVs New York Jets, of the National
Football League, which play in New Jersey but desperately
want a new Manhattan stadium; and Charles and James
Dolans Cablevision, the sports and media conglomerate that
owns Madison Square Garden and provides cable television
to millions of New Yorkers. The two have fought their war
with a deluge of extravagantly produced pro- and antistadium TV commercials.
The $1.4bn stadium project, officially the New York
Sports and Convention Center (NYSCC), would rise on top
of an exposed railroad yard between 11th and 12th Avenues
and between 31st and 33rd Streets. The Jets would pay
$800m to build the 75,000-seat arena that would host the
teams ten home games each year; the city and state of New
York would each contribute $300m for a retractable roof and
for the platform above the yard on which the stadium would
be built.
Capital focus
Because the rail yard is owned by the Metropolitan
Transportation Authority, a state agency, the project is
exempt from the citys tortuous land-use review procedure.
Instead, the sale of development rights above the tracks and
most fiscal and infrastructure issues are up to legislators in
Albany, the state capital. It is the powers there at which all
the lobbying efforts must ultimately be aimed.
The NYSCC is no conventional sports arena. As
conceived by architect Kohn Pedersen Fox, it doesnt even
look like a stadium, but rather a generic rectangular box
festooned with a blaze of outdoor lighting displays. Thanks
to engineering that permits overnight reconfiguration of
seating, floors, and virtually everything else under its sliding
roof, the NYSCC would serve most days as a hall for
conventions, exhibitions and entertainment uses. The idea is
for the NYSCC to complement the adjacent Jacob K Javits
Convention Center, which isnt big enough for some trade
shows and which lacks certain facilities such as rooms for
plenary sessions the NYSCC would provide.


In fact, no protocol has yet been established requiring the

state-controlled Javits and the privately owned NYSCC to
operate in tandem. But the city desperately needs to see the
project approved if it is to have any hope of hosting the 2012
Olympics which the bookmakers say are more likely to be
awarded to Paris or London. Few New Yorkers are enthused,
but luring the games is a pet project of mayor Michael
Bloomberg and his chief deputy Dan Doctoroff. They can
kiss the dream goodbye if the stadium is not on track by July,
when the International Olympic Committee will choose a
City Hall also touts the stadium as a lynchpin of a
comprehensive scheme to develop the vast, far west side
south of 42nd Street an underused backwater of
warehouses, parking lots and low-rise tenements sprawling
from Eighth Avenue to the Hudson. To visitors familiar only
with the density of Manhattans commercial core, the
relative desolation of these westerly precincts can come as a
Bloomberg views the NYSCC as critical to transforming
the area, which has just been rezoned to promote up to 26m
sq ft of new office space and apartments and budgeted for
new parks and a subway line extension.
But critics, citing data from other US cities, argue that
the NYSCC would do little to stimulate economic
development. Even if they are right, however, no one can
argue that the stadium would not bring a vibrant, productive
use to a site now home to no use at all.
NYSCC proponents say it will generate more than
enough tax revenue to pay off the $600m in city-state bonds;
detractors say the public will be on the hook if the tax
windfall doesnt materialise. Beyond the rational fiscal
objections lie far-fetched claims that the NYSCC will


somehow doom Broadway theatre and cause toxic sludge to

be dumped into the Hudson.
The NYSCC is backed by large companies, such as
Merrill Lynch, and by labour unions salivating for a piece of
the action. The opposition is propelled by Cablevisions
Dolans, who fear the project will compete with Madison
Square Garden. Theyve spent more than $8m on a media
campaign. School teachers and firefighters moan in TV
commercials that the city wants to subsidise a useless
stadium at a time of budget crisis and municipal layoffs.
Phone campaign
Johnsons Jets counter-attacked, raving against Cablevisions
lies and pointedly reminding viewers that the Garden pays
no real estate taxes under a concession dating from the
1970s. Last week, the Jets began a phone campaign to
encourage Cablevision subscribers to switch to different
cable providers.
The irony is that the media slugfest may not influence the
outcome greatly, which will probably be determined by three
men in Albany. Governor George Pataki endorses the
NYSCC but it is not clear to what extent. The others have
yet to make up their minds: Sheldon Silver, the speaker of
the State Assembly, and Joseph Bruno, speaker of the State
The two politicians control the two houses of New York
States banana-republic legislature, and their votes will
largely decide whether or not to approve the states $300m
bond issue, which the project needs to proceed.
Most New Yorkers are eager to get it over with
whatever the outcome. Even without the Olympics, the
struggle has provided enough spectacle to hold us for a long
time to come.


Cross border investment and
due diligence
Crossborder investment activity in Europe is on the
increase and with it a common approach to technical due
diligence has emerged, together with investor interest in
vendors packs. Jo Stocks, managing partner of property
and construction consultant Watts & Partners, examines the
trend and the implications for UK property professionals
selling services in mainland Europe (Property Week, 10
September 2004, p.47).
European investment volumes could reach their highest
recorded level in 2004 and total e89bn (60bn) by the end of
the year. More than a third of this is accounted for by crossborder activity and, says research by Jones Lang LaSalle,
that interest is mainly focused on Spain, France and
My experience supports this conclusion. Around 60% of
my firms clients in Europe fall into the cross-border or
global category and most appear to be turning their attention
to France, the Netherlands and Spain, where industrial,
retail, office and residential property are all on the lists of
The growing popularity of European transactions has
brought with it the acceptance of due diligence as a common
service standard across the continent.
In the Spanish market, German and Dutch investment
funds have introduced dynamism by looking at a wider range
of sectors. Traditionally, the main investors have been real
estate companies or funds linked to large development
corporations, banks or insurance companies. Their primary
interest has been big buildings located in the main cities.
Now, however, attention has turned to industrial
developments, logistic units, shopping centres and business
districts in the suburbs. Indigenous investors are following
suit and are looking for non-residential opportunities.
The huge acceptance of sale-and-leaseback transactions
is attracting interest from traditional businesses that
recognise the opportunity to liquidate funds that will allow
them to make new investments.

Property consultants working for international and panEuropean clients note the emergence of a common service
standard where, in particular, technical due diligence is
In many European countries, this process has not been
associated with property purchase, or at least not to anything
like the level of detail that in the last few decades has
become commonplace in the UK and US. In France, where
everything is governed by the Napoleonic Code, investors
have historically relied on insurance to safeguard them
against property-related problems rather than carry out
technical due diligence before purchase.
In Spain, a tasador is appointed to provide a building
valuation and a limited technical assessment. However, this
is a description of the property rather than a report of its
Devil in the detail
The big international investors are not willing to accept this
laissez-faire approach, and this is where technical due
diligence comes into its own. Consultants offering the
service not only look in detail at the condition of a property
asset but also ensure the buildings compliance with statutory
requirements. Vendors as well as purchasers are now
showing an interest in technical due diligence, which takes
the form of a vendors pack that can be made available to
prospective buyers and contains all the relevant reports.
Anecdotal evidence suggests that this growth in technical
due diligence is resulting in what we in the UK would
consider a more professional approach to property
transactions in local markets too, as smaller investors follow
the lead of their international counterparts.
However, this does not mean that UK consultants can
simply export their services into mainland Europe and
expect to succeed in local markets. Perhaps more than ever
before it is vital to understand the individual cultural
differences that exist and adapt the services on offer
Each nation state has its own traditions and often
complex local property regulations and legislation. Only
those with detailed local knowledge, as well as the ability to
provide clients with the comfort of the same type and level
of information that they are used to at home, will succeed in
what is now an increasingly sophisticated marketplace.



New accounting rules

New international accounting rules took effect in the UK on
1 January 2005, changing the way that businesses must
represent leases of occupied property on their balance
sheets. Molly Dover outlines the new requirements,
including the checklist devised by the British Property
Federation (BPF) to help decide whether a lease is an
operating lease or not (Property Week, 7 January 2005,
In 2005 the property departments of corporate occupiers will
come under closer scrutiny from finance directors than ever
Detailed breakdowns of all leases worldwide are being
prepared, as occupiers attempt to comply with the new
International Accounting Standards (IAS) that came into
effect at the start of the year.
The impact of the new rules on quoted companies that
occupy property is significant: leases will have to be
capitalised on the balance sheet, thereby increasing liabilities
and reducing the value of the company. It has left corporate
real estate chiefs scratching their heads, and many are
reluctant to discuss the new rules until they have worked out
the impact on their businesses.
Experts already predict that the new standard will change
the way occupiers lease property.
John Story, property investment manager of 14bn global
conglomerate Unilever, says: The changes may encourage
shorter leases or an increase in break clauses.
The changes he refers to are set out in IAS17, which lays
down new guidelines on how to differentiate between an
operating and a finance lease.
Finance leases transfer the risks and rewards of
ownership of an asset to the lessee, even if the actual
ownership is not legally transferred, whereas in an operating
lease the risks and rewards of ownership remain with the
lessor. The two types of leases are dealt with differently in
company accounts, so it is important to correctly determine
the type of lease an occupier has.
Lease differences
The new standards mean that long property leases can now
be classified as finance leases and could therefore have to be
capitalised on the balance sheet. This means the full cost of
the lease is shown on the balance sheet as a cost, as if the
leased property were a freehold asset, which reduces the
overall capitalisation of the company. By contrast, an
operating lease does not need to be capitalised, so the cost
can be spread across the length of the lease.
This change is the first step towards a capitalisation of all
leases. The International Accounting Standards Board
(IASB) hopes to introduce another standard within two to
three years so that all leases are treated in the same way, and
the cost of a lease is clearly shown on the balance sheet.
Story says: Going forward, the IASB wants to bring all
leases on to the balance sheet so differentiating between
operating and finance wont be an issue, as all leases will be
treated the same.
However, not all occupiers are fully prepared for the

immediate changes. A lack of readily available data on their

existing property commitments means some occupiers are
struggling to assess whether the length of their leases is
appropriate to their operational business.
Landlord inducements or rent-free periods are also
treated differently by the new standards. Whereas in the past,
these would be spread over the period to the first rent
review, under the new standards they must be spread over
the entire life of the lease. The changes may encourage
shorter leases or an increase in break clauses John Story,
Helen James, financial director of Dixons Group Retail
Properties, explains that this does not just apply to new
leases: You have to go back to the commencement of all
existing leases and respread any inducements or rent-free
periods over the entire length of the lease.
The new accounting standards mean that not only will
companies need to know details of the length, inducements
and rent-free periods of all their leases, they will also have to
reassess how those leases are classified. IAS17 determines
the classification of a finance and an operating lease.
Under the old UK regulations, SSAP21, a finance lease
was one whereby ownership of the property was effectively
transferred to the lessee for example, if the property would
have reached the end of its useful life by the end of the lease
or if the lease payments equated to 90% or more of the value
of the property.
Under IAS17, the criteria are not so clear cut.
Now, if the lease payments equate to a substantial
proportion of the value of the asset then the asset must be
treated as a finance lease. There are no precise guidelines as
to what a substantial proportion is, so it will be up to
auditors to interpret it as they see fit.
The new standards are principle-based, and so they are
not specific about how they should be interpreted. Although
the idea of IAS is to provide greater transparency, clarity and
ease of comparison between companies throughout Europe,
experts predict it will take at least 18 months for a common
interpretation to be adopted.
Question time
The British Property Federation has tried to reduce the
confusion surrounding the definitions in IAS17 by producing
a list of questions to consider when deciding how to classify
a lease (see box). If the answer to all the questions is no,
then the lease is considered an operating lease; but if a
company answers yes to one or more questions, then further
work is required to determine a leases classification.
Helen James claims that the distinction between
operating and finance leases is not such an issue for retailers,
many of which are subject to upward-only rent reviews.
If your lease contains upward-only rent reviews, that is a
very strong indication that it is an operating lease, as the
risks and rewards of ownership remain firmly with the
lessor, she says.
However, leases that come about as the result of a
financing transaction, such as a sale-and-leaseback, may be
more difficult to define. If a company has carried out a saleand-leaseback it is likely to have agreed a fixed rent, rather
than signing a lease with upward-only rent reviews. In the
case of a long lease with fixed rents, the occupier will need


to study the guidelines closely to determine whether or not it

can qualify as an operating lease.
For UK quoted companies, at least, the days of tucking
away lease liabilities from the eyes of analysts, investors and
even the chief executive are numbered, pushing occupiers
further towards continental-style shorter leases.

The BPF checklist: is it an operating or finance lease?

The BPF has compiled this list of questions to assess
whether a lease is a finance lease, which would need to be
represented on the balance sheet, or an operating lease.
If the answer to all questions is no, the lease is an operating
lease; but if the answer to one or more is yes, further review
is necessary to determine the lease classification.

Does the lease transfer ownership of the asset to the

lessee by the end of the lease?

Does the lease give the lessee the option to purchase

the asset at less than the open-market value?

Does the lease contain terms that result in the gains or

losses from fluctuations in the residual value of the asset
accruing to the lessee?

At the inception of the lease, is it reasonable to assume

that the lessee and lessor expected either
a the lease term to be for the major part of the
economic life of the building, or
b that the residual value on expiry of the lease term
would be negligible?

Has the payment structure of the lease been derived with

reference to specific interest rates and returns on risk
which would be required by a lender?

Does the lease allow the lessee to cancel the lease, and
if so does the lessee have to bear the lessors losses, as
predetermined in the lease terms?

Are the buildings of such a specialised nature that only

the lessee can use them without major modification?

Source: British Property Federation



Confidentiality and legal
A recent decision in the UK House of Lords has set new
boundaries to legal privilege, which provides a protective
cloak against the usual requirements to disclose documents
to the other party to a dispute. Katie Bradford, partner, and
Ben Hatton, associate solicitor, in the property and finance
litigation group at Linklaters, explain the nature of legal
privilege and warn that creating a document that falls
outside this protection can lead to serious consequences
(Estates Gazette, 4 December 2004, pp. 126128). (Also
see items on the new UK Freedom of Information Act and on
Confidentiality of rents in the Valuation section of this
issue of CEMicircular).
In Three Rivers District Council v Bank of England [2004]
UKHL 48; The Times 12 November 2004, the House of
Lords set the boundaries relating to legal advice privilege.
Documents that fall outside this remit may need to be
disclosed. But what does disclosure entail, and what exactly
is privilege?
What is disclosure?
Orders for disclosure require a party, in both litigation and
arbitration (but not expert determination), to disclose the
existence of relevant documents to the other side. The
documents may then be examined and used in the dispute.
Business confidentiality is no defence. The requirement
includes documents that:

adversely affect a partys case; or

support the other sides case.

Disclosure relates to documents within a partys control,

and so includes those held by agents, including managing
agents, and, for many purposes, lawyers and other advisers.
The duty extends to anything in which information of any
description is recorded, including tapes, CDs, computer
disks and drives, e-mails, photographs, maps, plans, day
books, diary entries, casual handwritten notes, and drafts. It
is often not appreciated that data that has been stored on a
computer can be retrieved, even if it was deleted years
previously: delete does not mean erase.
Example: Landlord and Tenant Act 1954
A landlord in lease renewal proceedings under Part II of
the Landlord and Tenant Act 1954 has served an
opposing section 25 notice on the tenant, citing the
redevelopment ground in section 30(1)(f). However, the
landlords internal estate manager has e-mailed the
landlords surveyor saying that there is no real intention
to redevelop the premises. This would be disclosable and
would destroy the landlords case.


Example: Rent review

Before a rent review date, the landlords valuer writes to

the landlord to advise on a quoting rent, stating that it
believes that the maximum reviewed rent should be no
more than 20 per square foot, but that it recommends a
higher quoting rent to get the negotiations under way.
That letter could be disclosable, and could seriously
undermine the landlords case and the valuers
credibility. Even verbal recommendations could be
disclosable if the landlord had noted them in its budget
or board papers.
Privileged protection
Documents that are privileged may be withheld from the
other side. The three most significant grounds for claiming
privilege are: (a) without prejudice privilege; (b) litigation
privilege; and (c) legal advice privilege.
(a) Without prejudice privilege
Correspondence is protected as without prejudice when it is
genuinely aimed at settling the dispute. It would be wrong to
assume that simply marking a letter without prejudice gives
it this protection (and a document may be without prejudice
even if it does not use those words). Without prejudice
documents must not be disclosed to the court or arbitrator.
Calderbank letters written without prejudice save as to
costs are a limited exception. These can be shown to the
decision maker when he or she is deciding the question of
(b) Litigation privilege
Litigation privilege protects only those documents that come
into being from the time when proceedings were reasonably
contemplated. Such documents include communications
between a solicitor and its client or between either of them
with a third party, which have been created for the dominant
purpose of obtaining or giving legal advice relating to the
litigation or obtaining evidence for use in the proceedings.
But when are proceedings in contemplation? In most
1954 Act lease renewals, the parties will reach agreement on
the terms of a new lease, and the application for a new
tenancy never goes to court. Under recent amendments, the
parties can agree to extend the date for the tenant to issue its
court application. Arguably, where negotiations are going
well, even after the service of a termination notice,
proceedings are never really in prospect. Yet the landlord
and tenant will still be receiving advice from valuers and
this may not be protected by privilege.
When is arbitration reasonably in prospect in rent
reviews? Possibly only once a rent has been quoted or an
application for the appointment of an arbitrator has been
made. How can a dispute arise before the landlord and
tenant have communicated their views on the likely rent?
In USA v Philip Morris Inc (No 1) [2004] EWCA Civ
330; (2004) 148 SJLB 388, the Court of Appeal allowed a
partner at Lovells, who acted for British American Tobacco


(BAT), to be interviewed in US proceedings on BATs

strategies on document retention and destruction in the
context of potential future claims concerning the harm
caused by smoking. BAT had argued that all communications
were subject to litigation privilege. However, the court held
that litigation was merely a possibility at the time the
communications were made, which was insufficient.
Is the test objective or subjective? Faced with a
notoriously contentious landlord that has never settled a rent
review, is it possible for a tenant to argue that arbitration was
reasonably in prospect from an early stage? Although an
independent expert has no power to order disclosure, in a
subsequent court case (perhaps a lease renewal of an
adjacent unit) or rent review arbitration, a valuers advice to
the landlord can be opened up because litigation privilege
never applies to expert references.
When can it truly be said that litigation is reasonably in
prospect? Mostly, this will not be until a late stage and
many documents will therefore be disclosable.
(c) Legal advice privilege
Legal advice privilege applies to confidential
communications between lawyer and client that concern the
giving or obtaining of legal advice. It does not cover advice
given by other professionals to their clients.
Court of Appeals view
The circumstances in which legal advice privilege may be
relied upon were curtailed by the Court of Appeal in Three
Rivers, which followed the collapse of the Bank of Credit
and Commerce International (BCCI) in July 1991. The Bank
of England claimed privilege over communications between
itself and its legal advisers in respect of its preparation for
the Bingham Inquiry, which was to investigate the banks
supervision under the Banking Acts, and the collapse of
BCCI. The Court of Appeal held that legal advice privilege
did not extend to the notes or internal memoranda of the
banks employees, which had been generated for the banks
lawyers in preparation for the inquiry. Lord Phillips MR
All such material is, in our judgement, prepared for the
dominant purpose of putting relevant factual material
before the Inquiry in an orderly and attractive fashion,
not for the dominant purpose of taking legal advice upon
such material.
This decision had serious implications for day-to-day
transactions between lawyers and clients, communications
between whom would be protected by privilege only if the
dominant purpose was advice concerning the clients legal
rights and obligations; this would not include presentational
advice. Concern was such that the government, the Law
Society and the Bar Council all sought, and were granted,
leave to make submissions in the recent appeal to the House
of Lords.

Three Rivers in the House of Lords

On 11 November, the House handed down its response. In a
judgement that offers comfort to clients and their in-house
and external legal advisers, it moved away from the Court of
Appeal approach by expressly confirming the absolute
nature of legal advice privilege. Hence, confidential
communications between a client and its lawyer are
privileged from production where the lawyer has been
instructed in a relevant legal context. This includes advice
on a clients private rights, public law rights, obligations and
liabilities, and extends to presentational advice on
evidence. Thus, the drafts of a clients witness statements for
a planning inquiry (which are not protected by litigation
privilege) are protected by legal advice privilege.
This is good news for clients, but the lords refusal to
review the definition of client is disappointing. The Court
of Appeal had adopted a narrow definition, so a company
should ensure that only those with authority to act on its
behalf enter into communications with lawyers. Also, both
external or internal communications with lawyers should be
tightly managed to restrict dissemination within the client
organisation. Privilege may be lost if advice is shared too

Key points and tips: What you need to know about


The duty of disclosure concerns relevant documents

within a partys possession or control

Litigation privilege is the widest form of protection. It

covers strategic and presentational matters, from the
stage that litigation is reasonably in prospect.

The circumstances in which legal advice privilege may

be relied upon were reduced by the Court of Appeal in
Three Rivers, where it was held that it would not protect
advice on presentational matters.

The lords have decided that legal advice privilege

protects confidential communications between a client
and its lawyer where the lawyer has been instructed in a
relevant legal context including presentational advice.

Documents that a party would not want the other side to

see should not be created, unless they are drawn up in
such a way as to attract privilege. Companies should
develop document-management and retention strategies
to avoid such problems.

The lords did not deal with the Court of Appeals

restrictive view of client. Companies should develop
internal communication strategies communications with
lawyers, external or internal, should be managed and



Liability insurance
The decision in a recent case, involving a claim by Bovis
against its insurer, provides a dire warning that while
liability insurance might seem to offer contractors a degree
of comfort, the extent of their liability needs to be precisely
established. John Murdoch, professor of law, Reading
University, discusses the significance of the ruling for the
construction industry and beyond (Estates Gazette, 4
December 2004, p.133).

Key points

Neglect error or omission means more than just


But an insureds liability must be firmly established

before the insurer has to pay

The potential liabilities facing contractors engaged on

construction projects can be mind-bogglingly large. One
would hope that they are covered by liability insurance. But
are they? In Lumbermans Mutual Casualty Co v Bovis Lend
Lease Ltd [2004] EWHC 2197 (Comm);
[2004] 42 EG 160 (CS), a contractor incurred a massive
liability owing to the way in which that liability arose and
was assessed, and, furthermore, because the contractor was
unable to bring itself within the wording of the insurance
policies designed to protect it.
What is negligence?
Bovis was the design-and-build contractor on a major
Glasgow development. Disputes arose, following which
Bovis started proceedings against its client, the developer
Braehead, claiming unpaid fees of almost 38m. Braehead
counterclaimed, alleging mismanagement of the project,
defective and non-compliant work and liquidated damages
for late completion, which, depending on the calculations,
totalled either 75m or 103m.
Prior to the trial, the parties reached a settlement
agreement under which Braehead paid 15m. However, this
agreement did not specify how much, if any, of Boviss claim
above 15m could be regarded as valid, nor did it indicate
how much substance could be attached to Braeheads
counterclaims. Boviss solicitor valued those counterclaims
at just over 19m. Accordingly, Bovis sought an indemnity
for 19m from its insurer.
The insurer refused to pay and started legal proceedings,
seeking a declaration that it was not liable. Following a pretrial hearing, a number of issues relating to the correct
interpretation and scope of the insurance policy in question
were tried as preliminary issues. These rulings are of
widespread importance for the construction industry and
Clause 1 of the primary insurance policy contained an
undertaking by the claimant to indemnify Bovis up to a
specified limit:
for any sum which the Insured may become legally
liable to pay arising from any claim first made against

the Insured during the period of insurance as a result

of any neglect error or omission or breach of warranty of
authority in the conduct of the Insured arising from the
carrying out of activities and duties.
One of the preliminary issues concerned the phrase neglect
error or omission in clause 1: in particular, whether this
meant anything more than negligence, and also whether it
would cover liability for breach of contract.
It is worth pointing out that, if the phrase were held to
mean simply negligence, this could lead to litigation in
which a contractor would be strenuously asserting that it has
been guilty of negligence, while its liability insurer would be
arguing that it has not. Colman J ruled that the phrase
applied, not only to negligence but also to any non-negligent
conduct that gives rise to legal liability (such as that arising
under the rule in Rylands v Fletcher (1868) LR 3 HL 330).
On the second question, the judge decided that since
clause 1 concerned those liabilities which arise
independently of constituting a breach of contract, it would
not cover liability for breach of contract as such. However,
where the insured partys conduct would constitute both a
breach of contract and another form of liability (neglect
error or omission), the liability would be covered.
When does liability arise?
The significant ruling arose out of the insurers argument
that its liability to indemnify the contractor covered only
such sums for which the latter was legally liable, and that
this required the ascertainment of such sums by judgment
in litigation, arbitration award or settlement. Moreover, since
the settlement agreement provided no clue as to how the
parties had valued the contractors liabilities, the insurance
cover had not been triggered.
Bovis argued that settlement agreements rarely ascertain
the precise amount of loss (and, therefore, liability) that
flows from a default. Even where a settlement agreement
purports to do so, a liability insurer is not bound to honour
the agreement. It is free to challenge the figures, and will be
liable to cover only the amount for which the insured can
show liability. Since public policy favours the settlement of
litigation wherever possible, it must be possible for Bovis to
bring extrinsic evidence to show that the settlement
agreement had treated it as being legally liable and what the
extent of that liability rightly was.
Colman J acknowledged Boviss contention that when
the ascertainment relied upon is by way of a settlement
agreement, the assured needs to prove, by extrinsic evidence,
that it was liable and that the amount of liability at least
equates to the sum paid in settlement. But the judge was
faced with the question of what exactly triggers a liability
insurers obligation to indemnify the insured.
A non-starter
Having referred to a body of precedent (notably Bradley
v Eagle Star Insurance Co Ltd [1989] AC 957), the judge
held that a global settlement agreement of the type found
here, which does not impose on the insured any identifiable
loss in respect of any identifiable insured eventuality, did
not show that Bovis had suffered a loss for which it was
entitled to cover under the policy. The claim against the


insurer therefore failed from the outset: there was nothing to

be repaired by any kind of extrinsic evidence.
This decision will serve as the direst of warnings to
anyone thinking of settling claims against liability insurers.
Unless the agreement identifies both the nature of each claim
and the amount of loss notionally attributed to it, the
perceived security of liability insurance may prove to be

Civil law and common law

Increasingly property professionals are involved in crossborder business and property transactions within Europe
(see also item on Cross border investment in this issue of
CEMicircular). Legal tradition in Europe has two main
strands: civil law and common law. James Reeves MA, a
property manager at Andrew Reeves, discusses the question:
How different are these legal traditions, and do their
differences lead to incompatibility? (Estates Gazette, 7
August 2004, pp.6061).
Legal tradition is based on deeply rooted, historically
conditioned attitudes concerning the nature of law and the
way in which it is, or should be, made, applied, studied,
perfected and taught: see p.14 of J H Merryman (1985) The
civil law tradition: An introduction to the legal systems of
Western Europe and Latin America (2nd edn).
Europe has two dominant legal traditions: continental
civil law and the common law of England, Wales, Northern
Ireland, and, to some extent, Scotland. The merging of legal
systems is often considered to be impossible because it
would go against everything upon which nations identities
are built. But it has been suggested that this assertion arises
from an insular and provincial common-law world-view. In
1955, Arthur T Vanderbilt wrote at p.164 of The
reconciliation of the civil law and the common law: It will
come as a great surprise for us [common law world
inhabitants] to learn how much the civil law and common
law have had in common for centuries.
English common law dates back to the first three centuries
following the Norman Conquest, when it was enforced
throughout the country in place of local law based on
custom. Today, common law is case law. It comprises the
decisions of English judges in tens of thousands of disputes,
as set down in reports published over the past 500 years.
The civil law of continental Europe derives from the law
of ancient Rome. It was imposed following the victories of
Napoleon and developed under the influence of the French
Civil Code of 1804. The code was founded on the premise
that a purely rational system of law could be created, free
from the prejudices of the ancien rgime and arising from
the sublimated common sense of the people. Its moral
justification was founded on its conformity with the dictates
of reason, its fundamental precepts being based on a claim to
universality: see p.91 of AN Yiannopoulos (1977) Louisiana
Civil Law System: Part 1.
Conceptual differences
A major difference between the two systems is that in civil
law doctrine takes priority over jurisprudence, whereas in
common law the opposite is true. In France, the function of
the legislator is to legislate and the function of the courts is
to apply the law. The core of English law is to be found in
judge-made precedent, but legislation has priority over
judicial decisions. It is therefore easy to exaggerate the
differences between the two systems.
The French judge will focus on the legal principles,


which are identified from the code and from legislation. He

or she will trace their history, establish their function,
determine their domain of application, and explain their
effects in terms of rights and obligations when making a
The common law doctrine of precedent operates in a
different way. The English judge will consider previous
cases where these are drawn from the same legal principle
and are based on similar relevant facts. Explicit judge-made
rules apply to this process, and although English judges may
sometimes propose new rules to cover a fresh set of facts,
they cannot create law in an area where there is none. Nor
can they in effect create statute law to fill the gaps, although
some judges have been accused of doing so Lord Denning
most notably. As Lord Wilberforce said in Royal College of
Nursing of the United Kingdom v Department of Health and
Social Security [1981] 1 All ER 545, at p.565: There is one
course which the courts cannot take they cannot fill gaps
(and) attempt themselves to supply the answer, if the
answer is not to be found in the terms of the Act itself.

analogous texts in order to determine the meaning of the

statute by reference to its purpose, together with the
preparatory work on laws prior to enactment. Academic
commentary on these sources is also deemed relevant.

Style and rules

Statutes drafted under the two jurisdictions have distinct
styles. Civil law codes and statutes are concise, while
common law statutes are precise. The former provide no
definitions and principles are stated as broad, general
phrases. The latter, on the other hand, give detailed
definitions, and complicated rules will often set out lengthy
lists of specific applications or exceptions.
This difference is linked to the function of statutes. Civil
law statutes do not require precise explanations because they
are not intended to be read restrictively. They do, however,
need to be stated concisely, otherwise they would be subject
to endless interpretation. Common law statutes do not need
to be concise; they will be drafted to apply comprehensively
to specific circumstances. But they should be precise,
otherwise they could stimulate litigation, in which the court
will be required to provide precision.
In England, certain rules and presumptions are used in
the judicial process of interpretation. These include:

It would seem that a teleological approach to interpretation

is required if the English legal profession is properly to
interpret the ECJ rules. It has been argued that the English
courts are beginning to examine the design and purpose of
legislation so as to produce the effect intended, rather than
sticking literally to the words of the text. It should be noted
that the ECJ has adopted features normally associated with a
common law jurisdiction, including a consideration of its
previous decisions and abiding by previous authority.

The literal rule: words that are reasonably capable of

having only one meaning must be given that meaning
whatever the result.
The golden rule: ordinary words must be given their
ordinary meaning and technical words their technical
meaning, unless this would lead to absurdity.
The mischief rule: if an Act aims to cure a defect in the
law, any ambiguity must be resolved in such a way as to
favour that aim.

These rules might not be ideal when interpreting a

rapidly changing area of law because they constitute a
pragmatic, judge-made mode of interpretation. In addition,
the Interpretation Act 1978 defines a number of words and
expressions and provides that the same definitions are to
apply in all other Acts, except those that specifically state
The French approach towards statutory interpretation
draws on the function of the court; that is, to examine the
relevant texts. When in doubt, a judge may consult

European Court of Justice

The European Court of Justice (ECJ) has adopted
predominantly civil law principles. This can pose problems
of interpretation for English courts. Lord Denning made this
point in HP Bulmer Ltd v J Bollinger SA (No 2) [1974] Ch
401 when, at p.425, he stated that:
The EC Treaty lays down general principles. It
expresses its aims and purposes. But it lacks precision.
It uses words and phrases without defining what they
mean. An English lawyer would look for an interpretation
clause, but would look in vain All the way through the
Treaty there are gaps and lacunae. These have to be filled
in by the judges, or by Regulations or directives. It is the
European way.

The differences between the two systems are significant. But
it is important to consider whether these lead to
incompatibility. Arguably, the EU context is all-important. Is
it necessary for the systems to cohere, and to what extent has
this already been achieved?
Various Acts and treaties suggest convergence,
particularly those behind institutions aimed at building
Europe as an economic, political, social and even military
union. The European Convention on Human Rights 1950,
the Treaty of Rome 1957 and subsequent treaties, and the
decisions of the ECJ have all furthered co-operation. They
have been drafted primarily with civil law principles and
procedures in mind. This may not suit all common law
jurists, although few today are as sceptical as Lord Denning.
England (and the UK) could become isolated by its
reliance on the common law system. But it seems likely that
the common law approach will modify EU law and that both
traditions will have to adapt in order to embrace the law of
Europe. Perhaps the differences between the two approaches
are not so fundamental. As R David and J E C Brierley
(1985) stated nearly 50 years ago (see p.112 of Major legal
systems in the world today (3rd edn):
The difference between the two families of systems
today is less one of different conceptions of law and its
role in society than it is one of the different techniques
utilized to create a social order founded on the same
basic premises and directed to the same goals.


The UK Freedom of
Information Act
On 1 January 2005 a general right of access to information
held by public bodies in the UK came into being. This
means that the many and varied dealings between public
bodies, private businesses and individuals previously
undisclosed are now open to greater public access. In the
property and construction sectors this could include matters
relating to planning, building contracts, professional
services and property transactions, although certain
commercially sensitive information can still be protected.
This article, covering the main features of the Act, is from
the website of law firm CMS Cameron McKenna,, and is reproduced with their kind
The Freedom of Information Act 2000 (the Act) came fully
into force on 1 January 2005. The Act gives individuals or
businesses from any part of the world a general right of
access to any information held by a public authority in the
UK, including information held prior to the Act coming into
The Act creates a risk that commercially sensitive
information could become available to competitors or public
interest groups. Any businesses dealing with public
authorities should therefore be concerned to minimise the
risk of disclosure of their confidential information by a
public authority. The other side of the coin is that the Act
provides businesses with an opportunity to discover more
about their competitors and relevant government policies.
The general right to information
The Act provides a right of access to all recorded
information held by public authorities, subject to certain
exemptions. Any person making a request for information to
a public authority is entitled:

to be informed by the public authority whether it holds

the information; and
if such information is available, to have such information
communicated to him.

The Act considers these two rights separately, but in

practice they may merge.
Definition of public authority
A wide range of bodies are designated as Public Authorities
for the purposes of the Act, including government
departments, various central and local government bodies,
health authorities, advisory committees and agencies, and the
Bank of England.
The Secretary of State for Constitutional Affairs also has
the power to designate other bodies as public authorities for
the purposes of the Act, eg companies that exercise an
outsourced function from a public company.

Time for compliance and costs

A public authority generally has 20 working days in which to
respond to a request for information, and is entitled to
charge a fee for providing the information.
Exemptions to disclosure of information
A public authority will not have to disclose information
where an exemption applies. These fall into two specific
1 Absolute exemption
Although there are eight categories of information to which
an absolute exemption applies, perhaps the most relevant for
commercial businesses is confidential information. Under
this category an absolute exemption applies if the requested
information was provided to the public authority in
confidence, ie if the information was disclosed by the public
authority, the disclosure would be an actionable breach of
confidence by the public authority.
The following factors are relevant in determining
whether an obligation of confidence has arisen:

the circumstances under which information was provided

to the public authority; and
whether the information has the necessary quality of
confidence, ie it must not be trivial, nor must it be
readily available by other means.

Companies will need to be very precise about what is

marked as confidential; the simple marking of documents
with words such as confidential will not necessarily ensure
that the information will fall within the exemption, as the
information may not actually have the necessary quality of
The Information Commissioner has advised that public
authorities should set out formally the circumstances under
which it would regard information as confidential. It has also
advised that public authorities should refuse to include
contractual terms that purport generally to restrict the
disclosure of information held by the authority.
2 Qualified exemption
There are 16 categories of information that will only class an
exemption if, in all the circumstances of the case, the public
interest in maintaining the exemption outweighs the public
interest in disclosing the information (the public interest
The one of most concern to businesses will be that of
commercially sensitive information. Information will be
commercially sensitive if it:

constitutes a trade secret; or

its disclosure would or would be likely to prejudice the
commercial interests of any person (including the public
authority); and
the public interest in not disclosing the information
outweighs the public interest in disclosing it.

If the information is used for the purpose of trade, or if it is

obvious that the owner would regard the release of the



information to be commercially advantageous to rivals, this

may constitute a trade secret.
Commercial interests is a wider concept, relating to a
persons ability to successfully participate in a commercial
activity. In deciding whether the release of such information
would prejudice someones commercial interests it would be
necessary to consider all of the surrounding circumstances.
For example, the price submitted by a contractor in a PFI bid
is more likely to be commercially sensitive during the
tendering process, but less likely to be so once the contract
has been awarded.

The following actions will help to minimise the risk of

confidential or commercially sensitive information being
released into the public domain:

Compliance and complaints

Any person who believes that their request for information
has not been dealt with correctly can make a complaint to the
Information Commissioner, who has responsibility for
policing the Act. His decision on any complaint can then be
appealed to the Information Tribunal.
The Information Commissioner and the Department for
Constitutional Affairs have both published guidance on the
Act, including guidance on confidential information,
commercially sensitive information, and on the public
interest test.
The Lord Chancellor has published a Code of Practice,
setting out the standards public authorities are expected to
meet in order to comply with their obligations. The Code
also provides guidance on the procedures for complaints that
public authorities should follow.
Remedies and protection
Once the information has been released into the public
domain, the commercial and legal reality is that it is virtually
impossible to halt the damage caused and to stop its further
The Code has made it clear that a public authority is
unable to contract out of its obligations under the Act when
negotiating public sector contracts.
It is therefore essential for a business to be in contact
with the public authority with which it deals. If the public
authority agrees to notify the business that it has received an
information request, and that it intends to release
information that is potentially confidential, there is an
opportunity to prevent disclosure via court injunction, if it
can be shown that the information falls within one of the


Review what information has already been provided to

public authorities.
Ensure clear procedures are in place for any future
release of information to a public authority.
Try to agree a consultation process with the relevant
public authorities to ensure that the company is notified
of any requests for its information.
Try to ensure that the company is given a specified
period of prior notice regarding the release of its
information by a public authority. This notice period
would give the company a time frame within which to
decide whether or not to seek an injunction prior to the
release of the information.

If you have any further questions on this article or the
ramifications of the Freedom of Information Act in general,
please contact:

Bill Carr on +44 (0) 20 7367 2002 or at
Tony Marks on +44 (0) 20 7367 2508 or at
John Armstrong on + 44 (0) 20 7367 2701 or at
Lisa Benjamin on +44 (0) 20 7367 2328 or at
David Short on +44 (0) 20 7367 2054 or at

CemiCircular WebWatch

The UK Freedom of Information Act is overseen by the

Information Commissioners Office go to for more
information about rights under the Act, including
guidance for small businesses. This site also covers Data
Protection Act issues.

The full text of the Act can be found at Her Majestys

Stationery Office via this link:


Adverse possession
In the UK adverse possession is more usually thought of in
terms of squatters who have moved into a property and
managed to stay in occupation unchallenged for at least 12
years. However, adverse possession can also be a landlords
nightmare, due to a lesser known provision in the Limitation
Act 1980. Guy Fetherstonhaugh, barrister at Falcon
Chambers, and Simon Woodhead, barrister at Mills &
Reeve, review the provisions and provide a glimmer of hope
(Estates Gazette, 11 September 2004, pp.138139).
In recent times, squatters have enjoyed some notorious
success in the courts. This ranges from the formerly unlawful
(but now landed) inhabitants of Lambeths ignored housing
stock (LambethLondon Borough Council v Blackburn
[2001] EWCA Civ 912; (2001) 82 P&CR 494), to the
successful appellants (and now owners of valuable
development land in Oxfordshire) rewarded for their
perseverance by the House of Lords in JA Pye (Oxford) Ltd
v Graham [2002] UKHL 30; [2003] 1 AC 419. Such
squatters have acquired title by virtue of 12 years adverse
possession, pursuant to section 15 of, and paras 1 and 8 of
Schedule 1 to the Limitation Act 1980.
Schedule 1 also contains a less well-known provision,
although one that is used to equally devastating effect.
Paragraph 5 (see box) allows title to be acquired where a
tenant under an oral periodic tenancy stops paying rent, and
12 years pass with the tenant remaining in possession. At the
expiry of that 12-year period, the tenant not merely escapes
all liability for the previous six years rent (the first six years
being barred in any event by section 19 of the 1980 Act),
but, to add grave insult to slight injury, also becomes entitled
to its landlords title to the land in question.
Rent Act-protected tenants
Where the occupant is protected by the Rent Acts, it may be
thought that this melancholy result would not arise, not least
because the landlords remedies are constrained by the Rent
Act legislation. But not so. In a number of cases decided by
the Court of Appeal, it has been held that the fact that
statutes such as the Rent Acts confer security of tenure on
the occupier of land does not prevent that occupier acquiring
title under the Limitation Acts in the same way as any other
In the leading authority, Moses v Lovegrove [1952] 2 QB
533, the defendant, who was a tenant under an oral weekly
tenancy, made his last payment of rent to the landlord in
1938. In 1939, the premises were brought within the
provisions of the Rent Restriction Acts. In 1952, the landlord
issued possession proceedings. The defendant claimed that
the landlords title had been extinguished by the Limitation
Act 1939. The landlord contended that the defendants
adverse possession had ceased with the commencement of
the rent restriction legislation, because the landlord then had
no right to recover possession.

The Court of Appeal held that the defendant had been in

adverse possession for the entire period, and that the
provisions contained in the Rent Acts did not alter or qualify
the character of the defendants possession. Although the
Rent Acts prevented the landlord from ejecting the
defendant without a court order based upon statutory
grounds, it was merely a barrier to the landlords right of
action to possession, and did not convert what was
previously adverse possession into permissive possession.
1954 Act-protected tenants
It might be thought that the same result would apply in the
case of a business tenant, that is, a tenant occupying
premises for the purposes of its business under Part II of the
Landlord and Tenant Act 1954. Indeed, that is the view taken
by James Munby QC (now Munby J), albeit obiter, in Long v
Tower Hamlets London Borough Council [1997] 05 EG 157.
However, in Onyx (UK) Ltd v Beard [1996] NPC 47,
Michael Hart QC (now Hart J) voiced a rather different view
(but, again, without having to decide the point). He said:
There seems to me, arguably, a tension in the case of
a business tenancy between the effect of section 9(2) of
the Limitation Act 1939 and the effect of section 24(1) of
the Landlord and Tenant Act 1954.
It might be thought that the problem of oral periodic
business tenants remaining in occupation for 12 years
without payment of rent is one that could not arise in
practice. After all, business is business. Having a business
tenant without a written agreement must be rare enough;
having a business tenant without a written agreement who
then does not pay rent for 12 years must be so rare as to be
fanciful. Surely? Well, apparently not, as the experience of
the landowners in the two cases referred to above suggests.
Moreover, there may be many small areas in England and
Wales where unproductive pieces of land are subject to
informal agreements at rents that are so low (in view of the
nature of the land) that their eventual non-payment provokes
little or no reaction. This was the position in Perry v New
Islington & Hackney Housing Association unreported 14
January 2004.
In the 1950s, Mr Perrys father, a scrap dealer, had taken
over approximately an acre of land in Hackney, at a rent of
10 shillings per week. In 1982, Hackney Council (which had
by then acquired the reversion) decided to use the site as a
car park, and served a section 25 notice on the father,
terminating his tenancy. At the same time, the council
decided that they should no longer accept rent. An
application to court for the grant of a new tenancy was duly
made; this was opposed on the redevelopment ground of
section 30(1)(f). The proceedings were then adjourned to
allow for negotiations, which came to nothing. The last step
in the proceedings was taken in 1986.
Some years later, the site was sold to the defendant, a



housing association, which planned to develop the site for

much needed low-cost social housing. By this time, the site
was worth a great deal of money, and Mr Perry argued that
he had acquired title by adverse possession, in view of the
long-standing non-payment of rent. Mr Perry therefore
issued proceedings for a declaration to that effect. It was
common ground between the parties that:

the possession had commenced with an oral periodic

rent had not been paid for a period exceeding 12 years
prior to the commencement of proceedings; and
the tenancy had always been governed by the 1954 Act.

Mr Perry argued that the Rent Act cases applied with equal
force to a business tenancy protected by the 1954 Act. The
housing association responded that, although both statutes
conferred security of tenure upon tenants, they operated in
ways that were critically different for the purposes of
Schedule 1 to the 1980 Act. In particular, the 1954 Act
prevents the right of action to recover land from accruing,
with the result that the limitation period cannot begin to run
in cases to which it applies.
The relevant provisions are contained in section 24(1),
which provides that a tenancy to which this Part of this Act
applies shall not come to an end unless terminated in
accordance with the provisions of this Part of this Act, and
section 64, which provides for the date specified in the
section 25 notice to be substituted by a later date, being
three months after the date of final disposal of the tenants
application to court for the grant of a new tenancy and not
at any other time. To put it another way, it is implicit that
para 5 of Schedule 1 applies only to periodic tenancies that
in the ordinary way are terminable by notice to quit. The
combined effect of sections 24(1) and 64 of the 1954 Act is
that a landlord cannot determine a business tenancy simply
by serving an ordinary notice to quit.
Judge Cowell accepted the housing associations
arguments and held that it was implicit in sections 15 and 17
of, and para 5(1) of Schedule 1 to, the 1980 Act that there
should be a right of action to recover land (section 15(1))
and a period during which a landowner may bring an action
to recover land (section 17) and, more particularly, a right
of action on the part of a person entitled to the land subject
to the tenancy. The judge concluded:
[F]or paragraph 5(1) to apply there must be not only, as
here, a tenancy from year to year or other period (in this
case a weekly period) without a lease in writing, but there
must also be no impediment precluding the determination
of the tenancy, that being an essential feature without
which the right of action to recover the land cannot arise.
In short, the paragraph presupposes that the tenancy is
one determinable by notice to quit. In 1939 there may
well have been or were no such periodic tenancies
without a lease in writing which were not determinable
by notice to quit; at any rate the usual tenancy was so


He distinguished Moses. In that case, the continuation of the

tenancy was merely a qualification on the landlords right to
possession, since the service of a notice to quit would end
the estate of the tenant. In Perry, the continuation tenancy
a complete and insurmountable barrier which no
ordinary notice to quit could remove.
The right of action to recover land would have arisen in
Moses following the service of a valid notice to quit. In
Perry, no right of action could arise because the continuation
tenancy was not terminable by notice to quit. The judge
therefore dismissed Mr Perrys claim. An application to the
Court of Appeal for permission to appeal was subsequently
Given the enactment of the Land Registration Act 2002,
particularly those provisions affecting and restricting
squatters rights, it might be thought that this decision will
achieve little more status than a footnote in the history
section of the texts on adverse possession. But it should
provide some encouragement to those landowners who are
beset by problems similar to those faced by the housing
association in Perry. We suspect that many will take heart
from this decision.

Limitation Act 1980

Paragraph 5 of Schedule 1 to the 1980 Act provides:
(1) Subject to sub-paragraph (2) below, a tenancy from year
to year or other period, without a lease in writing, shall for the
purposes of this Act be treated as being determined at the
expiration of the first year or other period; and accordingly
the right of action of the person entitled to the land subject to
the tenancy shall be treated as having accrued at the date
on which in accordance with this sub-paragraph the tenancy
is determined.
(2) Where any rent has subsequently been received in
respect of the tenancy, the right of action shall be treated as
having accrued on the date of the last receipt of rent.


Service charges
The traditional floor-area-based method of calculating
service charges in multi-let buildings is out of date and the
time has come for an update, argues Edward FenwickMoore, associate at Hartnell Taylor Cook (Property Week,
7 January 2005, p.30).
The correct apportionment of service charges among
occupiers in a multi-tenanted commercial scheme is often
overlooked and can become a cause for disputes between
landlord and tenant.
Traditional methods, whereby expenditure is apportioned
according to floor area, might sometimes be unfair for
example, in the case where an anchor tenant pays a reduced
service charge rate as a reward for taking more space.
The basic principles of the apportionment of expenditure
have been well established in Service Charges in
Commercial Property A Guide to Good Practice (the
Modern leases generally provide for a fair and
reasonable apportionment of service charge expenditure,
based on the physical size, nature of use and the benefit to
the occupier of particular costs in accordance with the terms
of the Guide.
However, the Guide was last updated in 2000 and the
trading habits of occupiers, particularly those in mixed-use
retail and leisure schemes, have evolved since then.
Hartnell Taylor Cook has been advising clients on several
mixed-use retail and leisure schemes where new methods of
apportionment are being considered. They include
restaurants, health and fitness clubs, casinos and cinemas, as
well as conventional shops.
More often than not, mixed-use retail and leisure
occupiers trade at different times of day for example, a
casino will operate mainly at night and a conventional shop
during the day.
In addition, some tenants will benefit to a greater or
lesser extent from a particular service to the common or
retained areas of the scheme.

A takeaway restaurant, for instance, may create a greater

volume of rubbish in the common areas than another
occupier trading during the same period.
As a result, other forms of applying the service charge
are being considered and implemented. In one of these
schemes, labour-intensive services such as cleaning and
security have been apportioned according to both the trading
hours of the occupiers and floor area.
We compared the anticipated trading hours of a
particular occupier against those of all occupiers over a set
period to determine a time-based contribution. Thereafter we
also prepared a conventional apportionment by reference to
floor area.
The overall apportionment of the expenditure of these
services was calculated by splitting the difference between
the two. For example, if a tenant has 10% of the space in a
development and its opening hours equate to 20% of the
combined opening hours of all the tenants, it will pay 15%
of the charges.
The tenants and their advisers are content with this
method. However, its success will rely upon regularly
checking and reviewing occupiers hours of trade, and the
centre manager or management surveyor will have to collate
this information. It may not be easy in practice, but makes
for a fairer and more flexible system.
In this example, the total floor area occupied by a tenant
was still part of the service charge calculation, because the
landlord wanted to ensure that the charge still bore some
resemblance to the more typical market rates that tenants
are familiar with.
Conventional methods of apportionment will
undoubtedly remain suitable for most circumstances, but
practitioners must be open to other methods.
Apportionment by reference to trading hours is one
possible method, but it would also be prudent to look at
others. Technology permitting, service charges could also be
apportioned by reference to footfall or the volume of
transactions by each occupier.
It would be wrong to suggest that apportioning service
charge by reference to floor area is no longer viable. But
there is room for new methods and the industry must
consider these.



PPG3: Planning for mixed
In January 2005 the UK government issued a consultation
paper on the proposed Planning Policy Guidance Note 3
(PPG3) which offers developers more influence on local
housing and greater freedom to meet market needs. A news
item by Gwyn Roberts from Property Week (4 February
2005, p.53), is followed by the letter issued by ODPM on 24
January 2004 inviting responses to the consultation by 15
April 2005.
Developers could be about to be given a much greater say in
local planning if a PPG3 consultation paper issued by the
ODPM last week receives popular assent.
If the Planning for Mixed Communities consultation
paper is approved, housebuilders will be able to build
according to market need rather than to the strictures of local
authorities. They will also be fully integrated into the
preparation of local housing assessments.
House-builders have broadly welcomed the proposals.
The government seems to have realised that it had been
allowing local authorities to dictate the size and affordability
of housing, said Pierre Williams of the Housebuilders
Federation. This is prescriptive and goes against what most
people aspire to.
However, some developers are concerned that the
consultation document could drag smaller developers into
the affordable housing arena.
If projects of 1215 properties become liable for the
provision of affordable housing, as suggested in the
consultation paper, some are concerned that an important
area of supply may dry up.
A house-building source said: Not only could this limit
sites but it could snare up the system with an increased
amount of negotiations between builders and local planners.
Planning for Mixed Communities follows on from a 2003
consultation that found there were clear differences between
local authorities and developers on the subject of how to
build the correct mix of housing.
During this earlier consultation process, ministers felt
that local authorities had ignored a demand-driven approach
in favour of a housing supply based on size and type of
Many felt that this approach was restrictive and took no
account of the particular circumstances of the site and the
housing market at the planning application stage.
In the case of market housing it was also felt that this
approach could deter developers from providing housing.
The consultation document suggests that although
affordable housing should still be based on size and type,
local authorities will no longer be able to select the housing
Private housing could also benefit from a revised
approach that will focus on market conditions.

The document states: Local authorities should plan for a

range of different households likely to need housing over the
plan period and not for a range of size and type of housing
based on floorspace or numbers of rooms.
Planning authorities will also be encouraged to include
housebuilders in their local housing assessments.
Private housebuilders have a good understanding of
local housing markets. We want to encourage much more
dialogue between the local authority and the developer
before the planning process begins, said a spokesperson for
the ODPM.
The consultation, which closes on 15 April, addresses the
demand-side of housing. The ODPM intends to consult on
the supply side of the planning system later this year. This
will address the way land is allocated and released.

ODPM, 24 January 2005

Dear Colleague,
Planning Policy Guidance Note 3: Housing, Consultation
Paper: Planning for Mixed Communities
ODPM received some 474 responses to the July 2003
consultation on the proposed PPG3 update titled
Influencing the Size, Type and Affordability of Housing.
We have also, since the close of the formal consultation
period, held discussions with a range of stakeholders about
possible policy approaches. These discussions have focused
to a large extent on the issues surrounding planning for a mix
of housing.
The consultation and subsequent discussions have
established that there is a difference of view amongst
practitioners about how best to plan for an appropriate mix
of housing in an area. Some consultees have supported an
approach by which local planning authorities make provision
for a specified mix based on the size and type of housing (in
terms of floorspace or numbers of rooms). Others feel this is
too prescriptive an approach, particularly at site level, where
they feel account needs to be taken of the particular
circumstances of the site and the market at the time of
submitting a planning application. In the case of market
housing some felt that this approach could deter developers
from providing housing, and therefore have an adverse effect
on supply.
Against this background, Ministers have decided to develop
further the approach to planning for a mix of housing types
and sizes set out in the consultation draft Influencing the
Size, Type and Affordability of Housing. The revised
approach is reflected in the consultation draft PPG3 update
Planning for Mixed Communities attached to this letter
(Annex A).


The proposal is that in relation to affordable housing, as

defined in the draft update, the approach to planning for an
appropriate mix of housing should continue to be based on
size and type. This approach appears to be generally
supported by local planning authorities and housing
In relation to market housing, the revised approach focuses
on the needs of households, and recognises the need to take
account of market considerations and to provide a degree of
choice. It suggests that local planning authorities should plan
for the range of different households likely to need housing
over the plan period and not for a range of size and type of
housing based on floorspace or numbers of rooms.
A key objective of the policy is to create mixed and inclusive
communities that offer a wide range of housing and promote
social inclusion. To do this local planning authorities
policies must be based on a robust evidence base the local
housing assessment. The consultation update emphasises the
importance of developing the assessment in collaboration
with key stakeholders, including housebuilders, who
understand, and have to take account of, housing markets.
The final policy will be accompanied by practice guidance
on local housing assessments and planning for mixed
communities which will help local planning authorities
develop an evidence base which deals with all the salient
matters, but which is succinct and fit for purpose, and which
can be regularly updated. This guidance is currently in
preparation. The intention is to involve stakeholder
representative bodies in developing and finalising this
This consultation update addresses the demand-side
aspects of planning for housing. Later this year, the ODPM
intends to consult on proposed changes to the way in which
the planning system allocates and releases land for housing
in response to market signals. The supply-side update to
PPG3 will represent the Governments proposed response
(with respect to PPG3) to the recommendations in the Barker
Review of Housing Supply.
Effect of the changes
The proposed policy changes would replace paragraphs 9 to
17 of PPG3, Annex C would be updated with new definitions
and Annex D would be updated with the details of new
practice guidance. DETR Circular 6/98 (Planning and
Affordable Housing) would be cancelled.
Regulatory impact
The attached Partial Regulatory Impact Assessment (RIA)
(Annex B) makes a provisional assessment of the impact of
the policy in terms of the costs, benefits and risks of the
proposal. Your views are welcomed on any aspect of the RIA
and in particular the costs and benefits of the proposed
policy approach for your organisation.
We look forward to receiving comments and views on the

proposed PPG3 update, and on the Partial RIA. Responses

are invited by 15 April 2005. You may wish to use the
attached form (Annex C) in making your response. This sets
out questions on which we would like your views.
Responses and any questions about the consultation, should
be directed to:
Alex Lessware
ODPM Planning Policies Division
Zone 4/J5
Eland House
Bressenden Place
London SW1E 5DU
Telephone: 020 7944 3300
Fax: 020 7944 3949
It would be helpful if responses from representative groups
could give a summary of the people and organisations they
We intend to publish a summary of responses to this
consultation by the end of July 2005 on the ODPM website.
Paper copies of the summary will be available on request.
All responses will be made public unless confidentiality is
specifically asked for. However, correspondents should be
aware that confidentiality cannot always be guaranteed, for
example where a response includes evidence of a serious
crime. Any automatic confidentiality disclaimer generated by
your organisations IT system will not be respected unless
you specifically include a request to the contrary in the main
text of your response.
This consultation is being conducted in accordance with the
Governments Code of Practice on Written Consultation.
The criteria are reproduced in Annex D to this letter. Any
procedural observations or complaints about the consultation
exercise should be sent to:
David Plant
ODPM Consultation Co-ordinator
26 Whitehall
Information on how and where you can obtain copies of this
letter and attachments and access to other publications
produced by the ODPM is available on the ODPM
publications home page.
Yours sincerely,
Jeni Fender
Planning Policies Division
4/J5 Eland House
Bressenden Place
Direct line: 020 7944 3912
Web site:


Planning obligations
A UK government consultation on proposed reform to the
system of planning obligations, which enable local
authorities to require developers to undertake supporting
works and infrastructure, came to a close on 25 January. In
this article Martin Edwards, specialist planning barrister in
39 Essex Street Chambers, and John Martin, solicitor and
director of property law research at Pinsent Masons,
speculate on the impact of possible changes (Estates
Gazette, 11 December 2004, p.82). The outcome will be
covered in a future edition of CEMicircular.
Key points

The planning obligation offers flexibility

The new draft circular seeks to clarify existing policy and

promote speed, certainty, transparency and

This month, we revisit one of our perennial favourites the

planning obligation. The unsung hero of the development
process, it provides much-needed flexibility. The uses to
which it has been put have expanded in recent years to the
extent that planning gain is now openly talked about in
polite circles. It is therefore not surprising that it is again the
subject of a draft circular, the consultation period for which
expires on 25 January 2005.
A stop-gap measure?
Whatever changes may result, the eventual replacement
circular could prove to be a stop-gap measure. It is clear that
any changes will be made in advance of potentially more
major reforms to the system in the next 23 years in
response to the Barker Review of housing supply: that is, the
introduction of the planning gain supplement or some other
form of tax on the uplift in development value following the
grant of planning permission.
It is also clear that the regulation-making powers for
planning contributions in sections 46 and 47 of the Planning
and Compulsory Purchase Act 2004 will not be used for the
time being. Thus, any changes will be subject to the existing
legislative framework.
The draft circular aims to promote speed, certainty,
transparency, accountability, and to clarify existing policy.
Thirteen main changes are mooted. The most significant of
these is the retention of policy tests, in a simplified form, by
placing greater emphasis on the need for planning
obligations to make the development acceptable in planning
terms. Thus, a link will be required between the
contribution sought and the presence of a relevant policy in
local or national planning policy.
The boundaries of acceptability in planning terms have
widened, for example in respect of affordable housing and


green transport plans. The requirement of reasonableness

remains, but the simplification could lead to an explosion
in the use of planning obligations. In order to limit this, it is
proposed that the planning obligation should remain an
impact-mitigation or positive-planning measure linked to
planning necessity, rather than being used for tax-like
purposes. It is intended to discourage the offering by
developers of facilities that are not required by the
development, in order to make clear that planning
permission is not being bought or sold. However, defining
the boundary of acceptability has dogged the planning
system for years, and it is debatable whether this revision
will make matters better or worse.
Affordable housing provision was one of the earliest
signs of the widening scope of planning obligations. The
consultation paper acknowledges that there was a perceived
lack of clarity in Circular 1/97. It is therefore proposed to
separate out affordable housing policy from impactmitigation or compensation policies, which the paper
tellingly admits is legitimising current practice.
Maintenance contributions by developers have also
proved to be a difficult issue. A balanced approach is being
advocated, whereby planning authorities can require such
contributions, but only for a limited period and with
payments agreed in advance.
Its all change
The proposal that examples of appropriate uses of planning
obligations should no longer be given is a major departure
from the current guidance. Instead, if a local community
decides, via its planning processes, that development should
comply with certain agreed policies, such development could
be required to contribute to the matters within those policies
through planning obligations, unless these can be addressed
by way of the planning application or conditions. Policing
might be necessary for this to work effectively, possibly by
closer government scrutiny of planning gain policies in
emerging development plan documents.
Other changes aim to speed up the process of negotiating
planning obligations, so the use of standard formulae and
charges within clear parameters is to be encouraged.
Similarly, new guidance will be given on the use of standard
forms of agreements and undertakings. These seem sensible,
as does the encouragement to developers to use unilateral
undertakings in conjunction with applications in the interest
of speed. Thus, the unilateral undertaking may lose its
unfortunate hostile connotation and be viewed as a more
positive instrument.
With the possible exception of the revised policy tests,
the proposed changes seem practical and workable. Whether
they will be a stop-gap measure or will become more
permanent will depend upon the success of the reforms
brought about by the new Act.


Planning application approvals

UK councils are now handling planning applications more
quickly according to figures issued by the Office of the
Deputy Prime Minister in early December 2004. However,
the statistics may conceal skulduggery in the handling of
planning gain agreements, according to Leonard Goodrich,
head of property and planning at law firm Lewis Silkin
(Regeneration & Renewal, 11 February 2005, p.21).
With mixed-use development projects a key part of the
Governments policy of delivering sustainable communities,
there is a move towards greater speed and transparency in
the planning system. Keith Hill, the ODPMs minister for
planning, was in seasonal spirit when on 10 December last
year he announced figures which showed that local
authorities are hastening the process of dealing with
planning applications: These figures are an early Christmas
present for communities across the country, he said. People
have a right to expect their planning applications to be dealt
with in a timely manner. These figures show that our
combination of targets and resources is having a very
positive effect on decisions.
According to Hill, Authorities are getting better: 161
authorities are classed as improving, 22 more than in the
last checklist in March 2004, with only 21 poor
performers. And you thought that only our schools had to
cope with league table pressures! Hill said: I know that a lot
of councils have worked really hard to drive up performance
and they should be commended for that.
However, all is not rosy in the garden of planning. I am
aware that there have been accusations that these
performance figures may have been brought about by
councils, in some cases, adopting unacceptable behaviour to
meet targets, said Hill. Then he got reassuring. Research
we have commissioned has found no overall evidence of
this, but we do listen very carefully to what people tell us
about this and if we find systematic abuses we will act
quickly, he said. We are committed firmly to targets for
handling applications, but these must not be bought at the
expense of quality. We have performance indicators that
look at the quality of decision-making as well as speed.
Despite Hills confidence, there is some evidence that
councils are finding ways to improve their performance
figures without actually improving their performance in
particular, around the issue of planning gain agreements.
Ever since the 1971 Planning Act, local planning authorities
have been able to make agreements with developers and
landowners to facilitate development proposals. Known
nowadays as section 106 agreements, these operate as a
mechanism by which local authorities can secure benefits
from a development. A local planning authority may, for
example, insist that a developer provides affordable housing,
transport links, community centres, schools and other
infrastructure, in order to meet the councils local strategies
and service the needs of the users and residents of the new
Typically, during the tortuous process of negotiation
through which developers and planning authorities agree a
planning approval, the relevant planning committee will
resolve to grant consent subject to the settlement of a section

106 agreement with the developer, landowner or both. This

agreement secures the planning obligations that are required
to ensure that the development proposal complies with
policy objectives, and without which the planning
application would not be granted permission to proceed.
Those of us involved in these dark arts of planning have
tales of the considerable delay and frustration entailed in
securing section 106 agreements and the development
consents which they facilitate. I know of one major mixeduse scheme which was agreed in a committee resolution five
months ago, subject to the agreement of a section 106
agreement, but the developer has yet to receive even a first
draft of the section 106. When the first draft finally arrives,
there will no doubt be continuing negotiation while the
public stakeholders in education, highways and housing
argue over the amendments. Section 106 agreements
sometimes also go beyond the powers authorised in law, for
example, by imposing a requirement to transfer land to
another body, such as a housing association.
The delays, complexity and conflict which mark the
settlement of section 106 agreements can create great
frustration on both sides. Nonetheless, despite the temptation
to get moving on new developments and to hand in
favourable figures for the ODPMs league tables in theory,
the planning committees resolution should only become
written planning permission once a section 106 agreement
has been signed. So, mindful of Hills enthusiastic yuletide
comments, I was surprised when I came across an unusual
document recently. It was a written planning consent for an
inner city, housing-led, mixed-use regeneration scheme,
which contained an interesting condition: the development
could not be initiated until a section 106 was concluded. The
condition even outlined the obligations, which would consist
of affordable housing and landscaping work.
This was strange, particularly in the light of longstanding
government guidance which states that, where the local
authority wishes to agree a section 106, it may not do so by
granting written permission incorporating a requirement that
the section 106 be settled. In this case, a planning consent
had been issued and was technically capable of
implementation, but if the developer had begun construction
without agreeing the section 106, they could have been
served with a breach of condition notice.
Why did the local planning authority issue consent in
these terms? It is unlikely that it was to facilitate the early
delivery of development, since the section 106 agreement
still had to be negotiated. Indeed, a cynic might conclude
that this was merely an attempt to demonstrate to the ODPM
that the council merited inclusion on the more cheerful of
Hills performance tables.
Rather than engaging in the massaging of statistics,
perhaps stakeholders should collectively focus their efforts
on concluding the development consent package in full at an
earlier stage? Hopefully, this will become easier when the
ODPM finalises the model form of planning agreement and
the best practice provisions on which it is now consulting: if
implemented, these should represent significant and long
overdue steps forward. In the meantime, league tables will
clearly have some impact on the process of securing
planning permission. So let us hope that the ODPMs
mission towards transparency and efficiency successfully
changes the realities of planning, as well as their reporting.



Actors and property
From spatial awareness to training, actors are playing a
part in helping property people improve their performance,
says Adam Tinworth (Estates Gazette, 27 November 2004,
What on earth could actors have to do with property? The
former specialise in the creation of the illusory, transporting
people into the realms of fiction. The latter is a bricks n
mortar business, dealing with the tangible reality of the built
However, there is an overlap, and more people are
drawing actors into the property industry. For one thing,
actors specialise in turning empty spaces into realistic
places, with only a handful of props to help. They can
perform within a space that does not exist and, by interacting
with it in a realistic way, convince people of its existence.
Show and tell
On the most prosaic level, canny building marketers have
used actors to create a sense of what unlet buildings could be
like in use. Land Securities Landflex team made extensive
use of actors during the launch of the Empress State building
in Londons Earls Court last year, for example.
At a more advanced level, Howard Morgan of Kingsley
Lipsey Morgan has been working with Marcus Freed of City
Drama to use actors in training for the property trade and
associated industries. The idea is to take the dreaded role
play out of training, and let professionals act out different
scenarios instead, in a series of events called Property
Live!. A combination of scripted scenes and improvised
interactions between actors in character following the
suggestions of the audience can help them understand the
relationship between property professional and customer.
While they may sound experimental, the sessions have
been running for four years, and satisfied clients include
such respectable property names as the Crown Estate, Land
Securities and Nabarro Nathanson.
Actors have an understanding of space that we lack. In a
one-day seminar last month, Jones Lang LaSalle looked at
this, bringing academics who specialise in theatre to talk to
both JLL people and their clients, along with one faintly
bemused journalist. The academics, who included Simon
Shepherd and Simon Macklin of the Central School of
Drama and Professor Mick Wallis of the University of
Leeds, made it plain that this wasnt an untested theory but
was based on serious research into the way people perceive
spatial use and relationships.
The Leading Edge series are forums for sharing
knowledge and ideas which are practical in application,
explains Francesca Hughes, European director of strategic
consulting at JLL. She describes some of the earlier sessions
of the day, including Stanhopes Stuart Liptons talk on
looking at workspace in a different way.


Space for productivity

The inclusion of the academics gave us a curious mix of
their theory and some very practical experimentation with
the ideas (see box) of how enhanced understanding of space
could lead to enhanced productivity. Hughes describes the
way it allowed people an insight into the psychology of
space, something that is usually considered only by interior
designers and unhappy, bored employees. It was, she
suggests, both a practical and theoretical look at the
concepts behind what Lipton had been saying.
How was the session, the last of the day, received?
Overall, the response was very positive, she says. We
asked people to score each session and that one had the most
normal distribution curve.
Some of the other sessions received more feedback,
indicating that people didnt warm to the idea quite as much
as they did to other parts of the day. But then, when have
people ever enjoyed being challenged, especially when a
free drink at the end of the day is only a few minutes away?
The theory seems sound. It remains to be seen if the
property industry will act on it.
Your place in space: when moving the furniture can be
an eye-opener
Half a dozen prominent property people stare at a bottle, all
but ignoring their colleagues, who are frantically shifting
furniture around. The bottle has become the focus of their
combined attention. What is the meaning, no, the purpose of
the bottle? They fret over it, even as their colleagues shift
chairs around them.
These perplexed souls are caught up in a spatial awareness
exercise, at an event organised by Jones Lang LaSalle and
overseen by various academics. Participants have been set
the task of using six chairs, a table and a bottle of water to
create a physical space that emphasises one chair as
belonging to a person in authority.
Property people are, by nature, competitive, so emotions
start running high quickly. The groups seek to find the right
solution although the amusement on the academics faces
betrays the fact that there almost certainly isnt one.
There are three groups, and the solutions they find are as
revealing about psychology as they are about spatial
awareness. For their person in authority, two of the groups
choose women with long, dark hair the only two such
people there. The other chooses the most senior Jones Lang
LaSalle person present. Only one group looks at the
environment around the objects as part of their exercise,
using the window and door to emphasise the person in
These exercises came at the end of a long day of discussion
held by JLL on the modern workplace. The chance for
physical activity was seized by the attendees, who had to
shift their little tableaux again to take that person in authority
and destroy their power.
The point of the exercise was to display the ways psychology
and space interact and, in particular, the ways certain
objects in a space can take on an almost totemic importance
because they dont have a clear meaning in that space, like
the bottle in this exercise. A few of the people looked deeply
unconvinced but, for most, it was an eye-opening experience.


Office building obsolescence

With building life-spans shrinking, landlords should be
prepared for sudden obsolescence and investors must plan
for early retirement, says Alistair Ross Goobey, director of
Argent Group, president of the Investment Property Forum
and a governor of the Wellcome Trust (Estates Gazette, 15
January 2005, p.40).
In December 2004 I indulged in nostalgia about 20
Fenchurch Street, the Land Securities building that is part of
the DKW deal for its new office in Gresham Street.
Buildings that are 35 years old may well be ripe for
redevelopment, but what about those less than 15 years old?
As I crossed the Millennium Bridge the other day I
noticed that Thames Exchange, on the north-east side of
Southwark Bridge, was being either demolished or
substantially rebuilt. I moved into a brand new Thames
Exchange with what was then James Capel in the early
1990s. Nostalgia aint what it used to be.
Depreciation of office buildings is real, and should be
factored into every decision about investing in the sector. I
have tried in vain to elicit true internal rates of return
numbers for offices held over prolonged periods. My
suspicion is that the numbers are not very attractive.
Some evidence of this is contained in a paper written on
the findings of a recent Investment Property Forum research
project on depreciation that was presented to the IPD/IPF
conference in November. The research group, from the
University of Reading Business School and IPD, measured
both relative rental and capital depreciation on different subsectors, as well as the annual capital expenditure on the
High street offers better deals
These measurements, on samples of actual properties in the
IPD database over 19 years and 10 years, showed quite wide
variations between sectors, as one would expect. We have all
been told that the joy of high street shops is that the retailers
spend the money for refurbishment, so the landlords liability
is limited. The research suggests that this is true, with
landlords capital expenditure on shops (in the 10-year
sample) being only 0.40.5% pa.

Shopping centres have 2.4% pa of their capital value

spent each year, but this has had the effect of maintaining the
rental and capital growth of such older centres at the rate of
the newest.
This is not the case with offices. In the City and West
End, 1.1% pa of capital value is spent on such investments
by the landlord, but that does not prevent capital values from
being affected as the properties age. What was grade A space
10 years ago is not grade A space today. The impact of
ageing on the relative performance in capital values is
dramatic. City offices are affected by 3.6% pa, according to
the research, with other office investments being affected by
between 2.2% and 3% pa. Counter-intuitively, rental values
do not seem to be as badly affected.
According to the most recent Drivers Jonas Crane
Survey, there has been a start to speculative construction in
the West End but not in the City. Similarly DTZs Central
Offices Review shows some decline in availability, and a
modest reduction in offices under construction, but total
space available is still approaching the levels of the
recessionary early 1990s.
Taking the short-term view
The question is whether anyone really takes these sobering
statistics into account when they invest in offices. I rather
doubt it. In markets like todays, the prime motivation is to
find something in which to invest. If the market says the
yield on prime offices is 6%, then that is the price at which
they will transact. Few, if any, investors will take the view
that a total rebuild will be necessary in between 15 and 30
If such percentages are knocked off the current yield,
investment looks pretty unattractive. Only with luck will the
investment be sold to another sucker on an even tighter yield
and on the back of short-term rental growth, and the IRR for
the holding period will be quite satisfactory, since no capital
expenditure will have been necessary.
In a game of pass the parcel, someone is left holding the
property when the music stops. Perhaps being a ground
landlord was not as foolish as it used to seem; that is where
the real value lies. The tricky thing is to determine when
obsolescence impacts value. It is likely to happen quite
suddenly and later rather than sooner. But to ignore the
evidence seems a foolish gamble.



Evicting tenants and mental
The provisions of the UK Disability Discrimination Act 1995
have become relevant in relation to possession proceedings
against residential tenants under housing legislation. Sandi
Murdoch, senior lecturer in law, Reading University,
examines recent cases and explains that evicting tenants on
grounds of anti-social behaviour can be difficult if they
suffer from a mental illness and can be done only if they
endanger others (Estates Gazette, 23 October 2004, p.141).
Key points

A tenants antisocial behaviour may be caused by a

mental condition that triggers the protection of the DDA

In such cases, the making of a possession order cannot

be regarded as reasonable unless the landlord shows
that it reasonably believed the health of another person
to be endangered

In North Devon Homes Ltd v Brazier [2003] EWHC 574

(QB); [2003] 22 EG 141, it was held that a landlord could
not obtain possession against an assured tenant whose
antisocial behaviour amounted to a breach of her tenancy
agreement. This was because her behaviour was attributable
to mental illness and the landlords attempt to evict her fell
foul of the Disability Discrimination Act 1995 (DDA). The
fact that the landlords action was unlawful under the DDA
did not in itself determine the possession proceedings under
the Housing Act 1988. However, it was relevant to the
conclusion that it would not, in such circumstances, be
reasonable to order possession. This point has now been
considered in Manchester City Council v Romano;
Manchester City Council v Samari [2004] EWCA Civ 834;
[2004] 4 All ER 21.
The legislative framework
The legislation governing both private and public sector
residential tenancies includes grounds under which landlords
are entitled to seek possession against a tenant who causes
nuisance or annoyance to neighbours and others. Possession
will be ordered only where it is reasonable to do so.
However, in recent years, and especially in cases involving
public sector landlords that have obligations to other tenants,
the courts have been more minded to grant orders for
possession. The hardening attitude towards antisocial
behaviour is further illustrated by the new section 218A of
the Housing Act 1996 (inserted by section 12 of the AntiSocial Behaviour Act 2003). This requires every local
housing authority, housing action trust and registered social
landlord to prepare a policy in relation to anti-social
behaviour together with procedures for dealing with such
However, as Brazier showed, the relationship between
this policy and that outlawing disability discrimination is far


from straightforward. The DDA provides that it is unlawful

for anyone managing premises to discriminate against a
disabled person by evicting that person or by subjecting him
or her to any other detriment. A disabled person is
discriminated against if, for a reason that relates to the
disability, he or she is treated less favourably than others
who do not suffer from that disability and it cannot be shown
that the treatment in question is justified. In the context of
eviction, the most likely justification, as permitted by the
DDA, is that the landlord was reasonably of the view that the
eviction was necessary in order to protect the health or
safety of any person. Thus, where, as research shows is often
the case, antisocial behaviour is caused by mental illness, the
public sector landlord appears to be caught between a rock
and a hard place unless it can demonstrate that the eviction
was justified.
Romano: A double case
In Romano, the Court of Appeal heard two appeals raising
almost identical issues. In both cases, orders for possession
had been made on the basis of the tenants antisocial acts,
and in neither had the DDA point been taken at the trial. But
Brazier provided the basis for the appeals because one of the
appellants provided medical evidence of a depressive illness
and the other of a borderline personality disorder. Having
examined the DDA, its code of practice and the relevant
authorities, Brooke LJ was satisfied that, provided the
appellants could establish that they were disabled, the
councils decision to evict them because of behaviour
attributable to their mental impairments would amount to
discrimination, unless it could be justified.
On the justification issue, he concluded that the court
should ask whether: (i) the landlord held the opinion that it
was necessary to serve a notice seeking possession and/or to
bring possession proceedings so that the health of an
identified person or persons would not be put at risk; and (ii)
that opinion was objectively justified. Health was to be
regarded as a state of complete physical, mental and social
well-being and not merely as the absence of disease or
infirmity, although trivial risks to a persons health should be
When eviction is justified
In both appeals, difficulties arose in deciding whether the
tenants were disabled as a result of mental impairment. This
was largely owing to the late stage at which the DDA point
had been raised. In neither case was this question decisive,
since the court was satisfied that the councils decisions had
been justified because the tenants behaviour posed a risk to
the health of their respective neighbours. In Romano,
frequent and serious loss of sleep caused to the tenants
neighbour was proved, and in Samari it was shown that a
neighbour suffered from depression as a consequence of the
tenants behaviour.
The court made it clear that once a landlord becomes
aware that a tenants behaviour could justify a possession


order, it must now consider whether that tenant is suffering

from a mental condition that could lead to the application of
the DDA. In such an eventuality, the landlord will need to
prove that, before taking steps to evict, it formed a
reasonably held opinion that the tenant was endangering the
health and well-being of neighbours.
The court expressed its concern over the possible
problems of applying the DDA to possession orders where
there is no requirement for the order to be reasonable, and in
non-residential cases. As the law stands, absurd and unfair
consequences are clearly possible and the court urged
parliament to undertake a review.

Leasehold reform changes

Implementation of the next phase of the UK Leasehold
Reform Act 2002 will give long residential leaseholders
further protection and rights from February 2005. This
News Release (2004/0289) from the Office of the Deputy
Prime Minister (ODPM) on 25 November 2004 outlines the
new provisions.
From February 2005 long leaseholders in England will have
improved protection and rights with the implementation of
the next phase of provisions in the Commonhold and
Leasehold Reform Act 2002.
Leaseholders will benefit from further protection against
the threat of forfeiture, and will have to receive a written
demand from their landlord for the payment of ground rent
before it becomes payable.
Leaseholders of houses will be able to choose their own
buildings insurance for the property rather than use an
insurer nominated or approved by their landlord. Also the
valuation date for the collective enfranchisement of flats
will be fixed at the date the initial notice is served. This
avoids unnecessary arguments and removes the possibility of
delaying tactics being used by either party to try and gain a
Housing Minister Keith Hill said the latest reforms would
provide long-awaited protection and certainty for
leaseholders. They will prevent certain abuses from taking
place, and will recognise the majority stake that a
leaseholder normally has in their house by giving them the
right to take out their own building insurance.
The latest provisions will:

require landlords to demand ground rents in a specific

manner before they are able to take any action or impose
any penalties for late payment;
require landlords to first satisfy a leasehold valuation
tribunal, court or arbitral tribunal that a disputed breach
of a covenant or condition of the lease has occurred
before they are able to take any forfeiture action;
prevent landlords from forfeiting leases as a result of
trivial debts that consist of ground rent, service charges,
administration charges (or a combination of them) where
the debt does not exceed 350, unless all or any part of
the sum has been outstanding for more than 3 years;
prevent landlords from insisting that leaseholders of
houses use a particular insurance company nominated or
approved by them to insure their house;
fix the valuation date for collective enfranchisement of
flats at the date that the initial notice is served.

Two outstanding provisions from the Commonhold and

Leasehold Reform Act 2002 require further detailed work
with a view to implementation at a later stage. These relate
to Right to Enfranchise and the accounting requirements
imposed on landlords.
Background notes
1. The Commonhold and Leasehold Reform Act 2002



received Royal Assent in May 2002. The 1st

Commencement Order was made on 17 July 2002, and
the 2nd Commencement Order was made on 4 August
2003. These Orders commenced a large number of
residential leasehold provisions.

6. The 1st Commencement Order (The Commonhold and

Leasehold Reform Act 2002 (Commencement No.1,
Savings and Transitional Provisions)(England Order
2002) brought into force on 26 July 2002 provisions to:

2. The 3rd and 4th Commencement Orders were made on 8

September 2003 and 14 July 2004 respectively, and
related to the introduction of Commonhold on 27
September 2004.
3. The 5th Commencement Order (the Commonhold and
Leasehold Reform Act 2002 (Commencement No.5 and
Saving and Transitional Provision) (England) Order
2004/3056) brings into force various provisions of the
2002 Act in relation to England. They include:

preventing landlords from insisting that leaseholders

of houses use a particular insurance company to
insure their house (s.164);
requiring landlords to demand ground rents in a
specific manner before they are able to take any
action or impose any penalties for late payment
preventing landlords from forfeiting leases as a result
of trivial debts that consist of ground rent, service
charges, administration charges (or a combination of
them) where the debt does not exceed 350, unless
any part of the sum has been outstanding for more
than 3 years (s.167);
requiring landlords to satisfy a leasehold valuation
tribunal, court or arbitral tribunal that a disputed
breach of a covenant or clause in the lease has
occurred before they are able to take any forfeiture
action (ss.168 & 170);
fixing the valuation date for collective
enfranchisement of flats at the date the initial notice is
served (s.126)
consequential amendments and repeals made by the
2002 Act in other Acts.

4. All of these provisions come into force on 28 February

5. The following Regulations needed to implement various
sections of the Act were made on (Commencement Order
16 November; Regulations 22, 23 November).

7. The 2nd Commencement Order (Commonhold and

Leasehold Reform Act 2002 (Commencement No.2 and
Savings) (England) Order 2003/1986 (C.82)) brought
into force on 30 September 2003 and 31 October 2003
various provisions of the 2002 Act in relation to England.
They include:


Commonhold and Leasehold Reform Act 2002

(Commencement No.5 and Saving and Transitional
Provision) Order 2004. SI 2004/3056.
Leasehold Houses (Notice of Insurance Cover)
(England) Regulations 2004. SI 2004/3097.
Rights of Re-entry and Forfeiture (Prescribed Sum
and Period) (England) Regulations 2004. SI 2004/
Landlord and Tenant (Notice of Rent) (England)
Regulations 2004. SI 2004/3096.
Leasehold Valuation Tribunal (Procedure)
(Amendment) (England) Regulations 2004. SI 2004/

abolish the residence test (other than for

leaseholders of houses who occupy the house under a
business tenancy or a head lease);
limit the resident landlord exemption to cases where
the landlord carried out the conversion (collective
raise the commercial limit for blocks of flats from
10 percent to 25 percent (collective enfranchisement);
remove the requirement for at least two-thirds of
qualifying leaseholders to participate though
participating leaseholders would still be required to
own at least half the flats in the block (collective
give new rights to personal representatives of
deceased leaseholders of both flats and houses;
improve the rights of leaseholders of houses who
have extended their leases under the terms of the
1967 Act they were given the right to buy their
freehold and the right to security of tenure if and
when their extended lease expires;
provide that marriage value should be disregarded
where leases have more than 80 years left to run;
provide that, where marriage value does apply, it
should be split 50/50 in all cases;
widen the right to seek the appointment of a new
manager for a block of flats, where the existing
management is at fault; and
widen the specific grounds under which the terms of a
lease can be varied by a court.

a new right for long leaseholders of flats to

collectively manage their building (RTM) subject to
complying with certain qualifying rules;
changes to the definition of service charges and rights
to challenge these charges;
changes to the provisions relating to requests for
insurance information from the landlord;
the right to challenge other charges under leases and
charges in relation to estate management schemes;
the application of various landlord and tenant
provisions to Crown land;
extension of the jurisdiction of leasehold valuation
tribunals and consolidation of the provisions relating
to their procedure; and consequential amendments
and repeals made by the 2002 Act in other Acts.
new consultation requirements in relation to service
charges (from 31 October 2003).


8. The 3rd Commencement Order (The Commonhold and

Leasehold Reform Act 2002 (Commencement No.3)
Order 2003/2377, and the 4th Commencement Order
(The Commonhold and Leasehold Reform Act 2002
(Commencement No.4) Order 2004/1832, brought into
effect the provisions in Part 1 of the Act relating to
Commonhold, on 27 September 2004.
9. After the 5th Commencement Order, there will be two
remaining provisions from the Commonhold and
Leasehold Reform Act 2002:

Right to enfranchise Powers to introduce

regulations that would require collective
enfranchisement to be exercised through a RTE
company. There is further detailed work to be done to
find an effective and workable means of achieving the
policy objectives, but, in the meantime, leaseholders
wishing to enfranchise will continue to be able to do
so under the current legislation, enjoying the benefits
of amendments already introduced under the 2002
Act which relaxed eligibility requirements.
Accounting provisions Provisions that will require
landlords to keep service charge monies for each
group of service charge payers in separate
(designated) accounts, and provide a regular (yearly)
statement of account together with other relevant
information. A consultation exercise was recently
conducted upon the content of the regulations. The
responses to this exercise are currently being

CemiCircular WebWatch

Commonhold is a new way of owning interdependent

property, and any issues about this are dealt with by the
Department for Constitutional Affairs (DCA). Media
enquiries: 020 7210 8500.

Copies of the Commonhold and Leasehold Reform Act

2002, the Commencement Orders, and the Regulations
are available from the Stationery Office: telephone: 0870
600 5522, or e-mail

Free initial advice on residential leasehold issues can be

obtained from the Leasehold Advisory Service (LEASE).
LEASE is an independent advice agency funded by the
government and is staffed by officers with legal training.
They can be contacted at 7074 City Road, London,
EC1Y 2BJ. Tel 020 7490 9580 (lo-call 0845 345 1993). Email Website: Leasehold Advisory

ODPM website:




to Buy valuations

In 2004 the College of Estate Management research team

completed a study for the Office of the Deputy Prime
Minister into an apparent increase in the number of Right to
Buy (RTB) applicants who appeal against the first valuation
of their home. The study, the first to make a comprehensive
review of the valuation process for RTB, found that tenants
who make a valuation appeal often lower the price of their
home. The full research report can be found at the CEM
website (see webwatch below). This report about the
research is by Lucy Barnard for the Estates Gazette (22
May 2004, pp.140141).
When Margaret Thatcher gave council tenants the right to
buy their council homes in 1980, it was heralded as the sale
of the century. The policy represented Thatchers ideology of
freedom from state control, private ownership and
The policy has been hotly debated over the years, yet
when New Labour came to power in 1997 the party
promised not to reverse it.
But with 1.6m council homes in England having been
sold off over the past 25 years, and social housing
development failing to keep pace, the government has
struggled to limit the sales in the areas of greatest demand.
It tried this first by replacing the maximum 50% discount
with nine regional discount limits from 22,000 in the North
East to 38,000 in London. Then, when this failed to check
the 46% of council tenants who apply to buy their homes, it
slashed the discounts for tenants in the 42 local authorities in
London and the South East from 38,000 to 16,000.
But, despite making noises about suspending the right-tobuy altogether, so far the government has shied away from
doing so, in the face of negative press coverage about
tenants making vast profits on their homes and unscrupulous
agents exploiting the system.
But fresh research from the College of Estate
Management at Reading, commissioned by the ODPM, has
found that the tenants who appeal the official valuations of
their council homes are routinely having more than one-tenth
knocked off the asking price, especially in London. It is yet
another headache for a government keen to stem the tide.
According to the report, more than one-third (36%) of
landlord valuations were reduced by more than a tenth on
appeal, while only 2% were increased, a phenomenon
described by the report as a cause for concern.
The report found that the number of appeals in England
has shot up by 50% over the four years since 1997, from
around 3,500 each year to nearly 5,500. In London, appeals
since 1998 increased to one in 10 of all admissions, owing to
high house prices and the impact of discount capping.


Moreover, the 25% of councils with the highest appeal

rates accounted for more than half (54%) of all appeals and
nearly a third (31%) of all right-to-buy admissions.
So, are we selling our precious and diminishing housing
stock too cheaply?
Michael Newey, chair of the RICS Public Affairs
Committee and chief executive of Broadland Housing
Association, says yes.
Its a nonsense that tenants are able to push the value of
their properties down further through appealing, says
Newey. These people are getting a substantial discount
anyway, and the housing market in the areas where we find
most people wanting to exercise their right to buy is moving
so fast that it is likely that the house will be worth even more
than the initial valuation.
According to Newey, the undervaluing of council
housing is a real problem for housing associations such as
We are finding that in lots of areas the income we
receive from selling off council homes in no way covers the
cost of replacing them, he says.
Hard-to-find comparables
But Ian Coulson, managing director of Coulson Property
Services which values right-to-buy property in the
Manchester area, says: We often find it hard to come up
with comparables for RTB flats, although as time goes on
there are more. The district valuers from the Valuation
Office Agency receive information on all property
transactions in their area, so they have more accurate
comparables than most council valuers, who tend to rely on
data from agents.
A spokesman from the VOA says: The VOA has access
to sales evidence and uses it as the basis for its valuations.
With the Land Registry now able to disclose sales
information, for a fee, to anyone, we are all on a fairly even
footing, but it is unclear how many local authority valuers
use it.
The Reading report recommends a valuation Code of
Practice by and for local authorities and VOA valuers to
reduce the discrepancy.
But, as the pressure mounts to make it harder for council
stock to be sold off at a discount, and house prices continue
to rise at astronomical rates, any proposed ways round the
system are likely to face close scrutiny.

CemiCircular WebWatch
This valuation report has been published online by the Office
of the Deputy Prime Minister:
It can also be accessed via the CEM website at


Valuing wildlife, recreation and
Diversification has become a common feature of rural
businesses that are increasingly unable to rely wholly on
agriculture and other traditional sectors for a long-term
livelihood. So how important is wildlife to local economies,
in terms of generating income from tourism, leisure and
recreation activities? The issues arising from this question
are explored in this paper by Dr Ian Rotherham, Simon
Doncaster and Dave Egan of Sheffield Hallam University
(Countryside Recreation, Vol 12 No.1 Spring 2004, pp.12
The Wildlife Leisure Industry is often neglected and
overlooked in concept or reality. Yet its importance to
environmental conservation and hence sustainability, and
increasingly for local economies, is significant. More
recently, too, there is increased awareness of the value of
wildlife-based recreational activities in helping to deliver
improved health at all levels physical, emotional and
psychological. Attempting to tease apart the trends and
issues is not easy, and wildlife experiences, resources and
services are intimately interlaced with those of heritage
landscapes, archaeology, and general outdoor activities.
A quick look at the economics confirms this importance.
In the USA nature conservation, and associated wildlife
leisure and tourism, are massive. Southwick Associates
(1994) estimated that each year in the USA, 24 million
people go bird-watching. They spend more than $5 billion,
helping to employ 190,000 workers. In Australia, tourism
activities concerned with the Great Barrier Reef earn $90
million per year; whilst in Florida, reef-based activities are
worth around $1.6 million (Eber, 1992). The Galapagos
Islands World Heritage Site and Biosphere Reserve in 1989
had 32,500 visitors, with around 50,000 per year expected
by 2000 (Shackley, 1996).
These figures present a picture of a very major industry.
They also bring into sharp focus the ecological and indeed
economic risks if exploitation is not carefully managed to be
sustainable. It is therefore surprising that these key issues
seem to hold little sway with policy-makers and planners
when it comes to protecting locally important wildlife sites.
Similarly there are serious issues in terms of lack of
support or in investment in our nature conservation services
and advisors those that deliver much of this important
resource. A quick look at the employment figures for local
authorities, or at their staff structures and development
reviews, or even of our National Parks, and the numbers and
status of, say, ecologists, archaeologists, countryside
managers and rangers, does not make for encouraging
reading. And yet it is within these areas of work that the
basis for an important market sector is visioned, assessed,
managed, protected and promoted.

The status and professional standing of workers in these

fields is currently a serious concern for their institutes and
associations, and the level of political awareness of their
importance and potential is poor at almost every level. What
is even more strange is that the economic and political
justification for better recognition and more reasonable
career progression is probably not the traditional argument
of the environment (in all its manifestations) as a good and
important thing to care for. No, it runs far deeper than this.
These areas of work have roles and importance that are
critical to quality of life, to sustainability, and to local
economies. This is where the true value lies, and it is to a
great extent apparent through the delivery, directly or
indirectly, of environmental leisure and recreation.
Some of these issues and ideas were examined in two
critical review papers in 2000 (Rotherham et al. and Beard
et al.). In these we established the broad nature and scope of
two critical areas of activity the wildlife leisure industry
and the outdoor leisure industry. We addressed and defined
the key aspects of this complex sector. This included the
scope and relationships inherent in the continuum
encompassing wildlife leisure (from nature conservation via
eco-tourism) through to mass-market tourism.
The context, significance and role of leisure and tourism
within the environmental conservation industry are now
clearly established, and examples of economic importance
are provided. In particular we suggested that it is important
to recognise Wildlife Leisure as a concept to help inform
discussions of sustainability, of tourism, and of rural
development. This change of focus is also needed within the
relevant environmental professions in order to elevate their
status and better recognise their critical role in the definition
of strategy and the delivery of practice.
The mutual relationships between local economies, ecotourism and environmental and heritage conservation is well
documented. It is tightly established in the definitions of
eco-tourism, for example, Ecotourism Society (1998),
Jaakson (1997), Roe et al. (1997), Sun and Walsh (1998).
Positioning wildlife leisure and tourism within leisure and
tourism frameworks is important in providing definitions and
establishing concepts. With current trends towards rural
extensification and the redirection of former agricultural
subsidies (in the UK and across the European Union),
recognising links and associations between wildlife leisure
and the rural framework is increasingly vital.
The substantial contribution of many nature
conservation activities and wildlife-related leisure to the
wider economy has generally been overlooked. However, in
recent years the economic significance of the Wildlife
Leisure Industry has begun at last to be more effectively
assessed and documented. The results are startling. The
Suffolk Coast and Heaths Area of Outstanding Natural
Beauty in south-east England received 6.3 million visitors in
1997 of which 2.3 million were countryside visitors (Ardell
pers. comm.). Translated into economic impacts, and further
assessed in terms of quality of life and health benefits, the
VALUE written broadly is colossal.


Research from the RSPB, the Forestry Commission, and

the National Trust has produced similarly impressive
assessments of their effects on locations, and on regional
economies and their communities.
There are many other aspects of this hidden role of
environmental quality, but space doesnt allow a full
discussion within this short paper. However, the point is
made, and it is interesting to note that most of this research
originates from two main sources. These are either voluntary
sector organisations clearly wishing to establish the nature
and importance of their roles more effectively, for both local
communities (where tensions may sometimes arise) and for
government, and government land management agencies.
The latter are seeking to establish more effectively their
roles in the leisure and tourism sectors in the eyes of central
government, and in the face of weak markets for their
primary produce.
Yet conservationists and environmental professionals
have tended to focus on their own priorities and areas of
expertise in this case wildlife conservation and
management, and perhaps on education. Whilst
understandable, it seems that this has disadvantaged the
industry in terms of wider recognition and, we would
argue, professional status.
A genuine fear and distrust of economic modelling and
valuations by the sector may be an underlying issue. The
current research being undertaken at Sheffield Hallam
University helps address this. The application of appropriate
economic models to this industry helps to establish its
relationship more fully with the wider socio-economic
context. This aids its recognition by key players in the
leisure and tourism sectors. It is also obvious that these
arguments can help in addressing the inertia and lethargy of
major politicians and their parties in understanding the
critical importance of the environment in all aspects of our
lives and our existence.
The background
Rising membership of environmental and wildlife
conservation organisations in the UK and around the world,
and the increasing importance to conservation of leisure
aspects of environmental participants, form a backcloth to
this debate. With all these the economic benefits that arise
are huge and generally overlooked.
The popularity of nature/wildlife-based television and
associated leisure is very high, with wildlife and naturebased programmes significant in popularity ratings. Include
programmes on gardening and animals in general, and the
situation is even more impressive. Wildlife-based
documentaries and associated productions are regularly in
the top viewing tables. The BBCs Animal Zone, for
example, had UK viewing figures of 2.5 to 3.5 million, with
65 to 70,000 visiting the associated website on a weekly
basis (Munford, 2000). The presenters of these programmes
become celebrities and, as household names, the spin-off
books, videos etc are bestsellers; and this is big business.
Recreational visitors tourists and day visitors have a
big impact on local and regional economies; as a component
of regional tourism they are important. In Lincolnshire, for
example, Gibraltar Point National Nature Reserve is the
countys second most important visitor attraction after

Lincoln Cathedral. It currently attracts around 160200,000

visitors per year (Gibraltar Point National Nature Reserve
Management Report, 1999). The reserve also attracts
substantial grant aid and generates both full-time permanent
employment, seasonal and part-time jobs, and contract work.
So far little of this has been effectively quantified or
recognised in terms of its contribution to the area.
Again, on the east coast of England, another example of
economic importance is that of the small ships and boats
(such as the Yorkshire Belle at Bridlington) that run thriving
businesses carrying wildlife enthusiasts to see bird reserves
and seals along the cliffs, islands and sand-banks of the
coast. This activity provides an important service to tourists,
and revenue to operatives, maintenance contractors, and
service suppliers. As part of a suite of activities, it attracts
visitors and tourists to the area, supports hotels and pubs,
and provides revenue to suppliers of guidebooks, maps,
cameras and films, binoculars and telescopes, outdoor
clothing, other merchandise and memorabilia.
All this activity depends on environmental quality,
provision of suitable and accessible sites (with the key
species visible!), and the back-up support of information to
enthusiasts and the wider public.
Tourism and the developing world
Shackley (1996) notes the figure provided by the World
Tourism Organisation (1993) that global tourism has an
annual turnover of c.$3 trillion, and from the World Travel
and Tourism Organisation that 204 million people are
employed directly or indirectly through the industry. The
estimated contribution of tourism revenue to developing
countries is c.$55 million, and global nature-based tourism is
growing at c.20% pa.
The importance of this industry to developing economies
is potentially very great. More than 70% of visitors to
Ecuador, for example, are motivated by an interest in
wildlife. Etosha National Park in Namibia is home to 114
species of mammal and 340 species of bird. Attracting
45,000 visitors per year, it generates income of c.2 million.
The Costa Rican Tourism Authority expects a 300% increase
in natural history-based tourism by 2000. From around 1,500
to 3,000 visitors in 1980, it had increased to 250,000 by the
mid-1990s. The Iguazo Falls in Brazil already attract two
million visitors per year.
Wildlife recreation in developed countries
The sector is also big business in the developed economies.
A few examples help demonstrate this:

Around 10,000 people visited Pembroke, Ontario, to see

the annual flocking swallows, generating an estimated
About 17,000 bird-watchers visited Canadas Point Pelee
National Park in 1987 to see the spring bird migration,
giving an estimated revenue of C$6.3 million.
The Sea Life Centre at Blackpool, England, had 600,000
visitors in 1992.
In the USA, the National Aquarium at Baltimore,
Maryland, was opened in 1987 as part of an urban
renewal scheme, and within three years had created 300
jobs and generated $88 million in tourism revenue.


According to Robinson and Bolen (1989), the annual spend

by USA residents on wildlife viewing trips is around $4
billion, and they also spend $600 million on field guides,
bird houses, bird food and bird baths. In 1980 this included
$500 million on birdseed.
Whale watching in the USA involves around 1.5 million
visitors per year, spending c.$1 billion. In California alone,
in 1981, whale watching attracted 235,000 people, and was
worth around $2.2 million per year.
With basking shark watches and dolphin viewing this is
also an expanding activity in the UK, with centres around
Scotland and in the south-west of England.
A number of key reports in recent years help gauge the
impact on rural economies. The work of Rayment and
colleagues at the RSPB is especially helpful. Smith and
Harley (1993) looked at visitor spending at RSPB reserves
in the late 1980s, and an estimated 7.7m extra spending in
local economies directly associated with visits to RSPB
reserves, and noted that overnight stays increased economic
benefits from visitors to the local area.
CEAS Consultants in 1993 in The Economy of
Landscape and Nature Conservation in England and Wales
noted the lack of studies on multipliers associated with
nature conservation activities in the UK as a whole. For
tourism generally, a multiplier of 0.250.45 was usually
applied. This assumes that for 1000 of tourist expenditure,
250450 of net income is injected into the local economy.
For employment generation, a multiplier of 0.1 was used; ie
for every 10,000 of direct expenditure there was one fulltime job equivalent (FTE). In estimating net income from
visitors attributable to conservation, crude estimates were
made on the proportion of total UK tourism revenue. With
assumed wages, salaries and profits at 3040% of gross
income, there was a ratio of 3:1 of visitor expenditure to
direct conservation expenditure. Rayment (1995) and CEAS
(1993) indicated levels of expenditure in local economies on
nature conservation as 384 million in England and 44
million in Wales.
Brooke and Rayment developed these ideas further in a
report for the RSPB, The Environment and the Regional
Economy: Opportunities for the Regional Development
Agencies (1999). This brought together key information
recognising that, in the past, nature conservation has been
viewed as a limiting factor for economic development.
However, the authors suggested that nature conservation is
increasingly being seen as a significant source of
employment and income. This was through:

direct employment in nature conservation;

expenditure on nature conservation;
conservation schemes (eg agri-environment and
woodland management initiatives);
attraction of visitors and their expenditure on local goods
and services.

Direct employment in nature conservation in Britain was:

England: 7,666 (1991/2)

Wales: 1,065 (1991/2)
Scotland: 6,680 (1996).

Data from two case studies provide examples of the trends:

Leighton Moss Nature Reserve in North Lancashire: 22
full-time or part-time staff, and 100,000 visitors per year.

Abernethy (Osprey Visitor Centre in Scotland): eleven

people directly employed and 1.7 million per annum as
visitor spending attributable to the nature reserve,
supporting the equivalent of 69 full-time jobs. This gives
a total of 87 full-time jobs in 1996, with further jobs due
to expenditure by the reserve on contractors, goods and

Some examples of wildlife leisure and tourism as

economic forces in the countryside
Geoff Broom Associates (1997) suggested that tourism in the
English countryside is worth c.8 billion per year; a huge
economic force. Important here is the proportion attributable
(directly and indirectly) to natural heritage and to wildlife
leisure. CEAS (1993) suggest that 350450 million of
tourism expenditure in England and Wales in 19912 was
related to nature and landscape conservation. Along with this
they give figures of 53,500 jobs, ie six jobs for every one
directly employed in conservation itself. Crabtree et al.
(1992) noted 149 Scottish wildlife sites to which they
attributed 30 million of visitor spending, supporting 1,200
jobs along with 300 directly employed.
Mackay Consultants (1997) noted that natural-heritagerelated tourism and recreation are more significant
generators of employment than is work directly related to
natural heritage. 82% of visitors to Scotland gave scenery
as a reason for visiting, and the total holiday tourism
expenditure contributed 1.7 billion to the Scottish economy.
This supports around 8% of the total workforce.
They concluded that the natural heritage makes an
important contribution to the Scottish economy. It not only
provides employment in conservation-related activities, but
also by providing the basis for one of Scotlands most
important industries: tourism. (An estimated 105 million
per annum was related to natural heritage). They also
recognise that a source of tension is the poor economic
feedback into managing the resource. This is a point we
discuss later.
Looking at wildlife holidays in Scotland, Sime and
Crabtree (1991) found the annual turnover of 41 businesses
ranged from 1,000 to more than 196,000. They also found
that designated wildlife sites (ie nature reserves) were the
most important element in the total economic effect of
wildlife and its conservation.
Their later research focused on surveys of visitors to this
type of site in Scotland, including all National Nature
Reserves, Forest Nature Reserves, Scottish Wildlife Trust
Reserves, RSPB Reserves, National Trust for Scotland sites,
and some smaller sites as owned by local authorities. They
found a total of c.3.9 million visitors per year, with an
average of 23,000 per site. A detailed evaluation of the
Orkneys, Wester Ross and Highland Perthshire gave visitor
expenditures of 0.67 million in Wester Ross (12.80 per
visitor), 1.78 million in Orkney (41 per visitor) and 2.79
million in Highland Perthshire (14 per visitor). They
calculated retention multipliers in the local economy of 1.24
(Orkney), 1.18 (Wester Ross), and 1.34 (Highland


Hooper (1991) evaluated ferry passengers to the Orkneys

to help assess the importance of tourism to the economy of
the islands, and the contribution of wildlife tourism to the
overall tourist profile. Green tourists spent 2.3 million,
wildlife tourists 26.9 million, and others 14.8 million. The
average spend per visitor was 26.90 in summer, and 32.90
in spring.
Crabtree et al. (1993) also considered the economic
value of open-air recreation in Scotland. Looking at rural
tourism, they found an income of c.400 million per annum,
ie c.25% of the total tourism expenditure for the country.
Most of the 400 million was spent in country towns, with
an estimated 10% (ie 40 million) accruing to land-based
businesses and households. Using multipliers they estimated
a net income of 200 million and 20,000 FTE jobs.
However, the total number of jobs was higher due to the
seasonality of the work and its often part-time nature. They
estimated expenditure by day-trippers in Scotland as 25
million per annum, with an associated generation of 6.5
million in rural income, though this may be too low.
Smith (1992) investigated wildlife tourism in Devon
based on the RSPBs Exe Estuary Avocet Cruises, with 853
users paying 7.50 per ticket, giving a total revenue of
6,400. Around half of their sample bought nothing from the
local area except their ticket an aspect of planning and
development that is important to consider if local economies
are to benefit from visits. This aspect of leaky tourism is an
area that desperately needs more detailed study in terms of
its relevance to wildlife and heritage visits.
It is clear that rural development can no longer rely on
agriculture and traditional sectors for economic growth and
social cohesion (WTTC, 1999). With travel and tourism
worth around 10% of the global economy and growing, they
bring potential for economic growth. This is along with an
increasing market for experiences of nature, heritage and
cultural traditions. There is potential to create jobs with a
strong link to agriculture, construction and other local
activities. This can help stem the migration of people from
rural areas; offer good opportunities to young people;
encourage small and medium enterprises; stimulate local
food production, crafts, community pride, heritage and
nature conservation; sustain local services; and enhance
quality of life.
In this introductory account, we touch on many areas,
and skim over much that merits closer attention. However, it
is worth considering briefly the role of tourism in leisure, in
terms of our starting point of the concept of the wildlife
leisure industry and the importance of recognition of this by
relevant professions. Failure to get involved and to
understand more clearly how the various players together
forge this emerging sector is a serious problem. Indeed we
have already alluded to the consequences of this failure.
Unfortunately, though, the impacts dont stop here. There
is an emerging crisis in terms of a chronic lack of
recruitment to university degrees and other training in
countryside and conservation-related areas. In part this
reflects a lack of awareness of career opportunities by
parents and by schools careers advisors and others. The
message is simply not getting though. However, it is also

increasingly the case that students or trainees will leave their

educational establishments with the burdens of significant
personal debts. In this case their career choices are directed
away from vocations that they might see as worthwhile and
satisfying but poorly paid, towards those offering a fast
buck, and a quick fix to their financial circumstances.
So how does this relate to valuing environment
associated recreation? Well, it does so directly and
implicitly. The relationship between environmental quality
and those that deliver it, and mainstream issues of economy
and employment, health and quality of life, need to be made.
This needs to happen in order to raise the profile of the
associated professions to redress the imbalances of
recognition and status within organisations, between
professionals that help direct and deliver these resources and
services countryside managers, ecologists, archaeologists,
educators, rangers and trainers, and those who choose to be
the organisational managers and administrators.
Without better structures, careers and recognition based
on professional skills, standing and quality, and not
necessarily related to the number of (often junior) staff in the
management pyramid below we will fail to attract the
numbers and calibre of key professionals into the sector.
Without the professionals, the services and support
structures that are needed cannot be delivered. In which case
the circle cannot be squared, and neither the environment
nor the economy will be sustainable.
But there is more! One consequence of a more effective
profile, and the recruitment of good, well-rewarded
professionals, is a more vibrant countryside and
environmental sector. To achieve this it is necessary to
develop a far more effective promotion not of the
importance of the environment, but of the opportunities to
work in it. More directed promotion about opportunities;
more good professionals working in the countryside and in
related areas, and in the delivery of education, training and
environmental activities such as wildlife recreation will
mean more visitors to nature reserves and country parks,
more members of conservation and other heritage groups,
more environmental leisure visitors, more overnight stops at
hotels, more sales of outdoor equipment etc, and a more
vibrant rural economy.
Particularly if this can be harnessed to the consumption
of local foods and other local products, and the enjoyment of
local culture and wildlife experiences, then the idea gets
right to the core of many of the current problems for the
rural economy.
The key is education writ broad, and the motto should
be: Education, education, education. This fulfils many
objectives, and of course we should be doing this and also
conserving the environment and heritage resources, because
these are inherently good things to do. However, that isnt
winning the arguments not when the crunch really comes.
Linking these same ideas and objectives to local economies,
and of course to quality of life and health and consequent
economic benefits might just make policy makers and
politicians take it a little more seriously.
The final but perhaps key thought on this situation relates
to the need to understand what tourism is and, as
importantly, what it is not. A recent meeting of the Institute
of Ecologists and Environmental Managers on Upland


Environments and Tourism highlighted the inherent

problems that may spring from a lack of cross-disciplinary
discussion. There is a widespread view reinforced
following publicity after the most recent foot-and-mouth
disease crisis in the UK that tourism per se is a panacea for
all economic ills of the wider countryside. It is not.
There are two main reasons and many supplementary
ones for this. This first is that in many cases tourism and
other recreational activities dont directly support or
facilitate the management of the wider landscape in which
they take place and indeed are often critical in their being
attractive areas to visit. (It might be argued that some forms
of game management and country sports do address aspects
of this). However, most tourism doesnt, and in many cases
(of course not all) the financial costs of managing the
resource and the benefits from visitors are not placed with
the same organisations or the same people. This is a big
difference between modern tourism and more traditional
rural economic activities.
The second key point to remember is that much tourism
is both fickle and seasonal, when what we need in the rural
economy is a degree of stability, reliability and
predictability. This suggests that leisure, tourism and
recreational activities can support and aid rural regeneration,
and they can make vital services etc viable, but they wont
replace or supplant more traditional rural economies. Again
this is where, for success, we need to establish the links back
to managing the resource; and, yes, the key is good
professionals on the ground to make it happen.

Beard C, Egan D and Rotherham I D (2000) The

changing role of outdoor leisure: a critical review of
countryside tourism. In: Reflections on International
Tourism. Environmental Management and Pathways to
Sustainable Tourism, Robinson M, Swarbrooke J, Evans
N, Long P and Shapley R (Eds), Centre for Travel and
Tourism, University of Northumbria, Sunderland, 119

Contact details

Ian Rotherham is a Principal Lecturer responsible for

research on environmental leisure and tourism, ecology
and environmental change and related economic issues at
Sheffield Hallam University. email:

Dave Egan is a Senior Lecturer specialising in rural and

environmental economics. email:

Simon Doncaster is a postgraduate researcher working in

collaboration with the Countryside Agency. email:

School of Sport and Leisure Management, Sheffield

Hallam University, City Campus, Howard Street,
Sheffield, S1 1WB.
The Countryside Recreation Network covers the UK and the
Republic of Ireland and provides access to information and
people concerned with countryside and related recreation
matters. More information, including access to the journal,
can be found at

Key references
Full details of references given in the text are provided in the
following papers:

Rotherham I D, Rose J C and Egan D (2000) A critical

evaluation of the wildlife leisure industry: an emerging
component of leisure and tourism. In: Reflections on
International Tourism. Environmental Management and
Pathways to Sustainable Tourism, Robinson M,
Swarbrooke J, Evans N, Long P and Shapley R (Eds),
Centre for Travel and Tourism, University of
Northumbria, Sunderland, 229245.



A rural village
Poundbury in Dorset, created Prince Charles, is a rural
village like no other, says Graham Norwood. Strict controls
on design, construction and management is leading to
higher property values than adjacent areas and attracting
wide interest in the schemes success (Estates Gazette, 27
November 2004 pp.121122).
Poundbury, the Prince of Wales sustainable development
dream in Dorset, is attracting the attention of investors,
retirees, developers and the deputy prime minister.
In 1988 the Duchy of Cornwall appointed renowned
master-planner Leon Krier to create a vision for the 420-acre
site on the western edge of Dorchester. Construction began
in 1993 after extensive public consultation.
Phase 1, a 168-acre site, was completed in 2002 by local
builders committed to the principles of sustainability. Some
220 homes, a pub, a caf and shops were created, but it is the
appearance, layout and materials that make this development
like no other.
The Commission for Architecture and the Built
Environment (CABE) described its colours as muted and
However, the schemes life has not been easy compared
to those of mainstream developments. Builders know they
are being supervised, at least indirectly, by the Prince of
Wales mechanism to vet designs and standards.
Building plots are sold off separately and controlled via a
legally binding agreement with each developer before the
freehold is released. Some 20% of phase 1 homes were
social housing, with 35% of social housing in phase 2, and
this may be higher in later phases. The Poundbury Building
Code, covering facade design and materials, applied to phase
1 buildings, but a stricter design guidance document applies
to all future phases.
Poundburys management company Manco is funded by
a 100 per household contribution from residents, plus a
small levy on any profits enjoyed by owners who sell and
leave the area. It represents owner-occupier residents and the
tenants of commercial units. It was set up to supervise
maintenance of open spaces, right down to communal
courtyards and garages, and to monitor long-term
Meet the stipulations
A raft of legal and management agreements has been applied
to control long-term change. These include the stipulations,
which extend the influence of Manco over matters regarded
elsewhere as permitted development, and therefore not
requiring planning permission or extensive consultation.
Therefore, Manco applies the design guidance and
prevents visual disfigurement of the carefully created
architectural harmony, according to its constitution.
Such is the price of sustainable perfection, but there have
been hiccups along the way.
A group called Poundbury Residents Opposed to Density
protested when local builder Woodpecker Properties sought
agreement for 31 affordable housing flats at a density


equivalent to 132 dwellings per ha, which is twice the

governments guidelines and three times the number of
dwellings in parts of Poundbury. The groups objection was
upheld at a planning committee meeting in August.
And then there are property prices. A three-bedroom
house that cost 180,000 when new in 2001 was recently
sold for 300,000; a five-bedroom house costing 295,000
in 2002 is now priced at 399,000. Local estate agents say
that these are about 30% higher than for comparably sized
properties elsewhere in Dorchester because of the prestige
and lifestyle benefits associated with Poundbury.
There is a strong awareness of Poundbury among
investors and, as a result, prices are higher, says John Revell
of Cornhill Estates, a local property investment company.
Because of the high prices, typical buyers tend to be in
their 50s, so are less socially mixed than originally
anticipated in the masterplan. An estimated 30% of residents
are retired.
For the moment, younger residents commute to Poole or
Bournemouth, although the original master-plan hoped they
would live and work in Poundbury, resulting in less traffic
and pollution. However, this may change when jobs are
created nearer to home in the later phases of development.
Yet despite the rigour of building and the occasional
compromise, there is no doubting the sense of pride that
developers have working on the scheme.
Its a real joy. To build here guarantees youre seen as
being able to deliver a product of the highest quality, says a
spokeswoman for Westbury Homes, one of the few national
volume builders involved. Westbury is building 15 units in
the next phase.
Dorset building firm CG Fry describes working in the
town as a privilege and says the challenge of the next seven
years will be to retain the community atmosphere when the
population of the immediate area increases by almost
Six thousand square metres of manufacturing space, with
a potential for 200 jobs, will soon be completed as part of
phase 2, and another 200 homes will be occupied within a
year. Over the same time, a park will be laid out to the north,
surrounded by more development. By 2011, Poundbury will
have 2,250 dwellings and 65,000m2 of employment space.
One recent visitor was clearly impressed. Why cant
every estate be like this? asked deputy prime minister John
Now theres a thought.
Poundbury: the statistics so far

It contains 220 homes in 21 property types (mainly threeand four-bedroom terraced and detached houses), a pub,
shops and caf in the village centre.

The average density is 34 dwellings per ha; a typical

garden is 43m2.

Street design, approved by Prince Charles, emphasises

continuous facades that are largely uninterrupted by
parking bays or garages; vehicles are parked in internal
courtyards, or in on-street or back-garden bays.

20% of homes are social housing rented through the

Guinness Trust housing association, and are pepperpotted throughout the development.

Poundbury attracted 30,000 visitors in 2003.


The work and rest masterplan

By 2011, Poundbury will be a live-work community of

2,250 dwellings with 65,000m2 of employment space.

At least 35% of homes will be social housing allocated to

people on local waiting lists for rent.

One-third of the 400-acre site will be landscaped public

open space. Native trees such as beech, plane, horse
chestnut, ash, cherry and whitebeam are to be planted on
all streets and courtyards.

The building strategy must incorporate energyconservation features such as insulation, double glazing,
condensing boilers and water meters; all services,
including telephone, electricity, gas and drainage, are
housed in single channels in each courtyard at the rear of
properties; and terrestrial and digital television is cabled
to every house.

Residents are to be made members of a management

company that maintains communal facilities.



Confidentiality of rents
The case discussed here by Jonathan Ross, head of property
litigation at Forsters, provides an example of the way a
confidentiality clause was successfully employed in a
tenancy agreement to prevent disclosure of a rent in relation
to a rent review (Property Week, 3 December 2004, p.52).
Although such clauses may therefore become more popular,
they do not necessarily offer complete protection (also see
article on Confidentiality and legal privilege in the Law
section of this issue of CEMicircular).
The message
Landlords and tenants who want to stop their rent deals
being disclosed to third parties for use as comparable
evidence in rent arbitrations can benefit from using a
confidentiality clause in their documentation.
The case
In Council of the Borough of South Tyneside v Wickes
Building Supplies (4 November 2004), the claimant landlord
sought the disclosure of an agreement for lease recently
entered into between Allied Dunbar Assurance and B&Q in
relation to premises known as West 5 Centre, in Acton. The
claimant and the defendant tenant considered that the terms
agreed for the Acton letting would serve as an important
comparable in relation to the rent review of council-owned
premises in Alperton, occupied by Wickes. Given that B&Q
and Wickes are competitors in the DIY market, B&Q was
anxious not to disclose the terms of the Acton letting,
particularly as Wickes had been an unsuccessful bidder for
the Acton site.
The claimant had issued witness summonses on both
B&Q and Don Jordison of Threadneedle Asset Management,
the agent of Allied Dunbar, requiring them to produce
documentation relating to the Acton letting. The claimant
argued that this documentation was particularly significant in
relation to the rent review, given the proximity of Acton to
Alperton, and that the planning consents for both premises
were identical and related to businesses in the DIY sector.


The witness summonses were resisted by both B&Q and

Jordison on the basis that the terms of the Acton letting were
not relevant, disclosure was not necessary in order to deal
with the rent review fairly, and that the terms were
The agreement for lease on the Acton B&Q store
contains a confidentiality clause requiring each party to treat
the terms secret.
The judge decided that the witness summonses should be
dismissed. While he accepted that the documents would help
the arbitrator deal with the rent review, he concluded that
there were other comparables and material available, and
that the arbitrator could still make a fair award using the
information available to him. Furthermore, he considered
that, as Wickes was an unsuccessful bidder for the premises,
it would have information about their letting value which
could be relied upon instead.
Insofar as confidentiality was concerned, the judge was
appreciative of the fact that the information was acutely
commercially sensitive. While making clear that
confidentiality is not an absolute bar to disclosure being
ordered if the lease documents are clearly relevant and
required for the fair disposal of a rent review, the judge
stated that the court will take into account the interests of the
other parties and, when documents are clearly confidential,
will subject any application for disclosure to particularly
close scrutiny.
In this case, the judge felt the information was so
commercially sensitive that production could be resisted on
the grounds of confidentiality alone.
In cases where such information was not so commercially
sensitive, and would clearly provide useful assistance in the
fair disposal of a rent review, he said a confidentiality clause
may be overridden.
In light of this judgment, both landlords and tenants may
wish to insert confidentiality clauses in their letting
documents to assist them in resisting disclosure. This
practice is not currently commonplace. It is conceivable that
this judgment could lead to the widespread adoption of
confidentiality clauses, which would limit the amount of
comparable evidence for rent reviews.


Rent review arbitration award

This report of a rent review arbitration award that was set
aside by the High Court, after a serious irregularity
occurred, provides a number of lessons for arbitrators and
rent review surveyors, not least the value of an aural hearing
and draft award in complex cases. Jonathan Ross, property
litigation partner at Forsters, reviews the case in St Georges
Investment Company v Gemini Consulting (Property Week,
29 October 2005, p.70).

The message
An arbitrator settling a rent review must decide the rent
payable only on the basis of the submissions made by the
parties. If the arbitrator uses the evidence in a different way,
valuers for both sides must be given a chance to make
representations about it.
The case
In St Georges Investment Company v Gemini Consulting,
the High Court set aside an arbitration award of 1 October
2003 made by Anthony Salata over a rent review of offices
on the lower ground floor, 1 Knightsbridge, London SW1.
The court decided there had been a serious irregularity
that had resulted in substantial injustice to the claimant
landlord and said Salata should reconsider the award.
The arbitrator had determined that the rent payable on
review should be 472,624 a year.
This fell midway between the 646,502 figure of the
landlords valuer and 313,400 from the tenants valuer.
However, the landlord went to the High Court, arguing
that this figure was too low because the arbitrator had
discounted the rent on a different basis to that submitted to
him by either party and that there was no basis for this
Both valuers had used a rent review of premises on the
third floor of the building, which were also let to the
defendant, as the best comparable.
Their arguments centred on what discount should be
applied to the third-floor rent of 55/sq ft (592.02/sq m) to

reflect the differences in the premises under review. The

landlords valuer argued for a 30% discount and the tenants
valuer argued for 65%.
In his award, the arbitrator discounted the rent by 40%
but then applied a further discount of 9% because it
considered that the lease of the premises under review had
more onerous terms.
The landlord argued there was no justification for this
further discount because the more onerous terms had already
been taken into account in the first discount of 40%, and that
its valuer never had a chance to make any representations as
to whether any further discount was appropriate.
It is notoriously difficult to challenge an arbitration
award in the courts because of the need to prove serious
irregularity and substantial injustice. It is not enough simply
to prove that the arbitrator came to the wrong conclusion.
Award in draft
Nevertheless, the landlord succeeded.
The court found there had been a serious irregularity
because the valuation method used by the valuers took
account of all possible discounts and the arbitrator had not
made it clear that he thought there should be any further
discount, neither had he allowed the two sides to address this
The court drew attention to the danger in arbitrations
determined on the basis of written representations and
without a hearing of an arbitrator reaching a conclusion not
envisaged by the parties. In such cases, the court thought it
might be sensible for the arbitrator to issue his award in draft
so the parties have an opportunity to comment upon it before
it is finalised.
The court concluded there had been a substantial
injustice as, although the final figure was around midway
between the parties valuations, it was not clear that the
arbitrator intended to reach this midpoint. The court said the
arbitrator had become confused by the valuation methods
used and had double-counted any discount for onerous lease
terms by applying a further discount of 9%.
Both parties must now wait to see whether Salata
changes his award.



Rent-free periods and fitting out

Does the lack of a rent-free period for fitting out retail space
entitle tenants to a lower rent at review time? Mike Crump,
partner with King Sturge, explains the arguments deployed
by landlords and tenants over interpreting the lease,
discusses the market conventions and examines the practical
realities (Estates Gazette, 27 November 2004, pp.124
There is a valuation adage that goes: Value as you devalue.
Rental evidence derived from the analysis of comparable
transactions is the determining factor in rent review, so it is
up to the valuer to ensure that the evidence is of a high
An industry has developed around this in relation to rent
reviews and valuations. Many well-established rules and
precedents have been developed relating to allowances for
lease terms, physical issues and appropriate adjustments for
payments. It is this last area of capital payments and rentfree periods that should be considered.
Here the battleground is growing between the landlord
and tenant.
Day-one rents
A relatively new tactic adopted by tenants is the day-one
rent issue.
Where there is no express provision in the rent review
clause that the rent payable by the tenant should be exclusive
of a rent-free period for fitting out, the tenant may argue that
as he will not receive any rent-free period for fitting out on
the hypothetical letting, he is effectively paying a rent from
day one.
The length of the rent-free period for fitting out will
depend upon the nature of the premises and the extent of the
proposed fit-out.
In the context of the retail market, it is common practice
to allow three months rent free for fitting out most high
street and shopping centre units. Anything above this is
considered a landlords incentive and is discounted
In the case of the day-one rent, the tenant will commonly
claim an end allowance of 5%, which amortises a threemonth rent-free period over the first five years of the term.
Thus: rent (100%) 4 (three months rent free) 5 (first
five years of the term) = 5%.
Is this a fair and reasonable approach? The issues
involved demand consideration.
A literal approach to the interpretation of the review
clause would suggest that if there is no disregard of rent-free
periods, and that the comparables include a rent-free period,
then the tenant must receive his discount.
However, many arbitrators are unhappy with such an
interpretation. For example, while there may be no express
assumption relating to the grant of a rent-free period in the
hypothetical lease, equally in the vast majority of cases,
there will be no express provision that we are to assume a
hypothetical tenant will not receive an appropriate rent-free
period either.


At worst, most leases are neutral on this point. It would

be unusual to grant a lease that allows future rental
concessions to the tenant on review (as per the day one
issue). In such circumstances, one would expect the
intentions of the parties to be expressly stated in the
Rent-free periods are customarily granted for fitting out,
and their length, as discussed earlier, will reflect the nature
of the premises.
No repeat of rent-free period
As anyone involved in leasehold acquisitions will know, the
parties negotiating the lease accept the rent-free period as a
one-off at the start of the lease, and it is not intended to be
repeated on future reviews.
Conversely, for the day-one issue to stand up, it must be
assumed that the intention of the parties was that the tenant
on each review was to receive the benefit of a rent-free
period for fitting-out purposes.
But this would appear to go against commercial reality.
And why should the tenant be allowed a reduction on every
review, simply because of the possibility of vacant
possession? If there was such an intention, then surely again
it would be clearly stated in the lease.
Where there is no express assumption relating to the
grant of a rent-free period in the hypothetical lease, and also
where the day-one rent issue applies, then the discount
achieved on the initial hypothetical letting must also apply to
all subsequent reviews.
Where the hypothetical term is 10 years or longer, the
tenant will receive a discount on each subsequent review,
and the longer the hypothetical term, the greater the benefit
will be for the tenant.
It is not unreasonable to suggest that the hypothetical
tenant would be prepared to bid more in terms of rent in
return for a 5% discount on each and every future review.
In the case of the 25-year hypothetical lease term, one
could argue that the tenant would pay a premium rent,
notwithstanding the day-one argument, in the knowledge that
he would receive a discount on all future reviews.
It would also undermine arguments for a discount for a
hypothetical term that is longer than the market norm. At the
very least, one would expect the discount for a day-one rent
to be cancelled out by the benefit of receiving a discount on
all future reviews.
The argument thus is polarised between a literal
interpretation of the day-one issue and consideration of the
commercial and practical realities surrounding it. The key
question, as it is so often in rent review clause practice and
procedure, what was the intention of the parties?
Devaluation of tenants incentives
It is an accepted convention that on the letting of new
properties, the tenant is granted an initial rent-free period to
enable him to complete his fit-out works before the rent
In retail, the accepted norm is three months rent free and
any rent-free period in excess of this, or additional capital
contribution, is classed as tenants incentives and devalued
accordingly with a consequent reduction in the headline zone
A rent.


However, there is no consensus on how long a period or

indeed how the capital contribution (including excess rentfree periods) should be devalued. The conventional
valuation approach is to amortise the total incentive package
on a straight-line basis. There are more complex approaches
that can be made involving valuation tables and tax
considerations, although the straight-line approach does give
a common benchmark.
The term over which the capital contribution is to be
devalued is problematic, but there are certain ground rules,
listed at left. Should the incentives be valued over five years,
10 years or the term of the lease? The truth is that the valuer
must look under the surface and consider each case on its
merits and be clear in his own mind exactly for what purpose
the incentive has been made.


Shop fitting or soft fit-out
Accepting that there are sectorial differences, from a retail
perspective, contributions towards shop fitting are usually
devalued over a five-year period. This is because many
retailers will often refit after five years (in part or in whole)
and will often write off their shop fitting costs over a five-year
However, we must be clear as to what we understand by
shop fitting. My interpretation is that this includes what one
might call the soft fit-out elements, including trade fixtures,
lighting, suspended ceilings and carpets. It does not include
hard fit-out works, such as staircases, lifts, WCs and other
building works.
Hard fit-out
Staircases, escalators and lifts have a much longer shelf life
than the soft fit-out items noted above. It would be
appropriate to discount any contribution made in respect of
these items by not less than 10 years, and depending on the
circumstances, over the length of the lease.
Tenants inducements
A capital payment or extended rent-free period may be
granted to induce the tenant to take the lease.
This should be easy for the valuer to deduce. In my view, in
these circumstances, it would be appropriate to discount the
incentive package over the length of the term.
Therefore, in analysing extended rent-free periods and
capital contributions, the valuer must make an attempt to
discern and understand why and for what purpose the
incentives were granted. The better he understands the
reasons underlying the payments, the more accurate the
devaluation of the comparable evidence and the subsequent



New researchers
Since autumn 2004 the College has recruited three new staff
to its research team. They are pushing forward current and
new projects, including:

the response of UK housing developers to brownfield

development (part of the SUBR:IM project);
the impact of flood risk on residential and commercial
property in the UK; and
the effect of teleworking and on the work travel policies
of UK companies.

Michael Waters BSc, Research Assistant, is a recent

Geography graduate from The University of Sheffield
(2003). He was selected as a representative on the
SOCRATES-Erasmus European study programme, where he
spent five months at the University of Turku, Finland (2002).
During this period Mike examined urban regeneration in
Finlands industrial centres. He was formerly assistant
negotiator and surveyor at Robert Williams, Exeter. Mike is
currently working on the EPSRC SUBR:IM brownfield
research (

Sarah Kenney BSc(Hons) MSc MRICS, Research

Officer, graduated in Geography from The University of
Leicester in 2000. She then went on to complete her
Masters in Rural Estate Management at the Royal
Agricultural College in 2001. She has since spent three years
working as an acquisition surveyor for GVA Grimley in their
Telecoms department, dealing with planning applications,
negotiations along with lease and rent reviews. She qualified
as a Chartered Surveyor in 2003.

Book Review
Real Estate & the New Economy
The impact of information and communications technology
This book, published in February 2005, shows how new
technology affects the shape and form of real estate in our
towns and cities. It examines how Information and
Communications Technology (ICT), as one of a number of
forces for change in commercial and residential property, is
impacting on owners and occupiers and is also leading to
changes in markets and professional services.
Yasmin Pocock BEng MSc, Research Officer, graduated
in Regional and Town Planning in Indonesia in 1995 and
obtained her MSc in Real Estate at the University of Reading
in 1998. She has worked for Jones Lang LaSalle Indonesia/
PT Procon Indah until 2003. As the senior analyst of JLL
Advisory, she performed research and executed consultancy
projects, specialising in the retail sector. At CEM Yasmin is
currently working on the EPSRC SUBR:IM brownfield
research (

Strong theoretical framework

Comprehensive summary of the concept of the new
economy and how technological change is driving real
estate markets and products
Experience drawn from the authors empirical research
and other work in the UK and US
Supported by a book website see
Academic and practitioner team, including College of
Estate Management researchers.

Paul McNamara of Prudential Property Investment

Managers said of the publication:
The authors of this book are to be applauded. They have
sought, through their socio-technical approach, to look
at the complex interactions between technology, society
and economics. as someone who earns his living by
advising one of the UKs largest property investors on



which properties to own and where, this book is very

timely... In writing this comprehensive and very fully
referenced text, the authors have done us all a great
Published by Blackwell Publishing | 424 pages | ISBN
1405117788 | Paperback | 45.00 each plus p&p.
Order from:
Blackwell Publishing, c/o Marston Book Services, PO Box
269, Abingdon, Oxon OX 14 4YN
Tel: +44(0) 1235 465 500. Fax: + 44(0) 1235 465 556

Keeping it in the family

It is believed that Barry Cartmell and Clare Cartmell (ne
Turner) are the only husband and wife team to hold the CEM
Diploma in Shopping Centre Management qualification.
They worked together at the original Bull Ring Shopping
Centre in Birmingham between 1994 and 1997, when Clare
was employed as Buildings and Administration Manager and
Barry as Office Blocks Manager. In 1995 Clare obtained her
Diploma in Shopping Centre Management and shortly
afterwards the couple married. Armed with her qualification,
Clare applied for, and was appointed to, the position of
Centre Manager at the Swan Shopping Centre, Birmingham.
In 1997 Clare left the Swan Shopping Centre to take up a
position with Wimpey Homes. The then Client, Cadogan
Properties Ltd, and specifically Mr Brian Leaver, knowing
of Barrys involvement in Property Management, took a
gamble and offered the vacant position of Centre Manager to
him, which he accepted. In 2002 Clare returned to the Swan
Shopping Centre as Deputy Centre Manager; the team were
professionally re-united. Barry obtained his Diploma in
Shopping Centre Management in 2004. Both now have
considerable experience in shopping centre management, but
it is their expertise in different areas that helps them to work
together successfully and to complement each other.

Hong Kong accreditation

The Postgraduate Diploma and MSc in Surveying, awarded
through studying the Colleges Graduate Development
Programme, are now recognised by the Hong Kong Institute
of Surveyors, as well as the Royal Institution of Chartered
Surveyors, as exempting qualifications for professional

Becoming a licensed home

The College of Estate Management is working with SAVA to
provide the education, training and assessment designed to
suit all those wishing to become Licensed Home Inspectors
(LHIs), whether existing practitioners or new entrants. This
is a brief introduction to the steps being taken a fuller
version can be found at the College website
The UK Housing Act 2004 requires that from 2007 anyone
marketing a home must assemble a Home Information Pack
(HIP), so that the information needed by buyers and sellers
is available when the property is marketed, and uncertainty
and abortive costs reduced.
The HIP will contain a Home Condition Report prepared
by an LHI. National Occupational Standards (NOS)
developed by government detail the required knowledge &
understanding and competences of individuals wishing to
become LHIs.
Information about the NOS and the Home Condition
Report can be obtained from the web-site of the Home
Inspectors Certification Board at
Further information is also available on the web pages of the
Office of the Deputy Prime Minister on
Housing Act 2004 Einstein Surveyors Channel
College tutor Ben Elder features
on the January Einstein Surveyors
Channel, discussing the Housing
Act 2004 and the introduction of
Home Information Packs and
Home Condition Reports. Einstein
is a subscription service used by
large companies and local and
national government, as well as
small individual firms, to
contribute towards CPD/lifelong
learning for surveyors and other
professionals. The portal includes the Surveyors Channel
(TEN), which many surveyors will be familiar with.
How do I become a Licensed Home Inspector?
New Entrants
The content of the College Diploma in Surveying Practice
(DipSP) meets many of the knowledge & understanding
elements of the NOS for LHIs. The College is also working
on a bolt-on Home Inspectors module for this course to
cover areas of the knowledge & understanding for LHIs.
The SAVA Assessment Centre (a partner organisation) will
then undertake the assessment of competence required for
It is anticipated that the bolt-on module will be available
from autumn 2005 and that it will also be suitable for
successful students on other College courses who wish to
become LHIs.


Existing Practitioners and Part-Qualified Candidates

Existing and part-qualified practitioners are recommended to
register with the SAVA Assessment Centre. The College is
working with SAVA to put in place appropriate training to
deal with any skills gaps and to assist candidates when
applying for a Home Inspectors licence. For further
information, please contact SAVA:
Tel: 0870 837 6565
Other useful websites:

Student assignments queries

When sending queries about student assignments to, please remember to include:

your student number; and

the assignment number and its title.

Carole Fogg and Martyn Knox deal with about 17,000

assignments, projects and dissertations every year, and
failure to provide this essential information will slow down a
reply to your query.


The College of Estate Management

Qualify by web-supported distance learning
The College provides distance learning courses and other products and services designed to meet the needs
of the property professions and construction industry at every level.

Distance Learning Courses

Entry level course

Diploma in Surveying Practice (leads to Tech RICS)

Undergraduate courses
The University of Reading

BSc(Hons) Building Surveying

BSc(Hons) Construction Management
BSc(Hons) Estate Management
BSc(Hons) Property Management
BSc(Hons) Quantity Surveying

Graduate Development Programme

MSc in Surveying (University of Reading)

Postgraduate Diploma in Surveying

Postgraduate courses

MBA in Construction and Real Estate (University of Reading)

MSc/PgDip in Conservation of the Historic Environment (University of Reading)
MSc/PgDip in Facilities Management (University of Reading)
MSc/PgDip in Property Investment (University of Reading)
MSc in Real Estate (University of Reading)
Postgraduate Diplomas in Arbitration and Project Management

The Web is used to reinforce course teaching through on-line discussion, researched web sites and data resources such as EGi.

In-house training

CPD services

Tailor-made courses delivered to both

the public and private sectors. Clients
include the MOD, PACE and Shell.

A wide range of CPD study packs, research

reports and other publications is available
direct from the College.
Quote ref: CEM2005

Patron: HRH The Prince of Wales

Based on the campus of The University of Reading

Director of Student Services,

The College of Estate Management,
Whiteknights, Reading
RG6 6AW England.
Tel: 44 (0) 118 921 4607/8

A centre of excellence for the property and construction sector worldwide