This is perhaps the route that delivers the most certainty that Homes for NHS Staff can and will be delivered on a given site. When a site is sold without planning (even with the benefit of contractual obligations) there is not the same incentive for a purchaser requiring profit from the site to negotiate effectively with planners to promote the provision of Homes for NHS staff.
Pursuing a planning consent provides the NHS estate owner with the greatest level of control over the type and tenure of homes to be delivered. This toolkit has already described some of the tensions but also the opportunities that exist within the planning policy framework. It enables NHS estate owners to take a lead on negotiations with the planning authority and to make a clear case as a public sector partner, for providing Homes for NHS Staff. Securing a planning consent also serves to de-risk the site, which in-turn should improve the site’s value and might increase the price that a potential purchaser is willing to pay.
The main disadvantage is that obtaining a planning consent can be costly, a resource intensive and lengthy process and carries risk of refusal. These risks can be managed and mitigated through the appointment of high calibre professional advisors who can also advise on whether securing a planning consent will provide the best opportunity to dispose of a site within appropriate time frames and optimal value. Where a local One Public Estate partnership already exists, NHS organisations can also benefit from the strategic and financial support available to facilitate positive partnership working.
As noted below, the planning obligation itself in relation to the Homes for NHS Staff would be included in the section 106 agreement which sits behind the planning permission.
Pros:
- Control over tenure and unit mix within the planning policy context
- Demonstrates that contractual provisions requiring Homes for NHS Staff are deliverable
- Maximises site value by addressing planning risk.
Cons
- Requires up-front investment
- Delays timing of disposal receipt
- No guarantee purchaser will implement the planning consent.
Regardless of whether a site is being disposed with, without or conditional upon planning consent, it is possible to require an onward purchaser to comply with the Homes for NHS Staff guidance via inserting appropriate clauses in the Lease, Transfer Deed and/or Development Agreement. Appointing a suitably experienced solicitor (especially in the provision for accommodation for essential workers) to advise you on the land transaction will also be able to advise on drafting and measures that carry the most efficacy in the context of the transaction. It is recommended that any obligation of this nature is included as part of the agreed terms for the disposal at heads of terms stage so the requirement is a known factor from the outset.
The main downside to this approach is that, in practice, contractual clauses do not necessarily carry weight in planning. In the event that a purchaser fails to convince the LPA of the case for Homes for NHS Staff and a consent is granted in line simply with local planning policy, there would be little recourse for the seller to argue that the purchaser was in breach of contract if they in-turn can demonstrate they have taken reasonable endeavours to comply. Reasonable endeavours might, for example, involve asking for Homes for NHS Staff to be included in the Affordable Housing Statement at Pre-Application stage and the LPA rejecting this in their formal Pre-Planning Advice. Subject to planning, disposals might afford a greater opportunity for an NHS estate owner to take a more proactive role in ensuring the planning argument is made, but this is not without risk of unintended impact on the final purchase price and in a ‘Subject to Planning’ disposal the timing of the receipt remains delayed.
Where a purchaser refuses to agree to a “hard-line” obligation to comply with the guidance, it may be possible to agree a “softer” obligation, to require the purchaser to seek to prioritise the allocation of affordable housing developed on the site to NHS staff. However, this should only be considered in circumstances where the purchaser will not otherwise proceed in line with recommended process.
Whilst restrictive covenants prevent or limit use of land and have the potential to impair value, positive covenants place an obligation on a freehold purchaser to do something. Unlike restrictive covenants, positive obligations/covenants in a transfer deed do not bind future owners. However, it is standard for a restriction to be placed against the registered title to the land (and therefore recorded with the Land Registry) to protect the seller’s position. Such title restriction may be a material consideration in planning.
When negotiating on Lease and Sale terms, a potential purchaser will want to know that they are not signing up to terms that will impair value through limited demand. It would be normal then for any such provisions to be backed via a nominations agreement that would incorporate cascade provisions.
Pros
- Straightforward to implement in all land transactions
- Applies regardless of the disposal route
Cons
- Does not carry planning weight
- Needs to be backed by nominations agreement to avoid impairing site value.
When affordable housing is developed as part of a planning requirement, it is usual for local authorities to require developers to enter into a nominations agreement for the allocation of affordable homes which would then be assigned to the purchaser of those homes. This is often secured through a S106 legal Agreement. In order to provide for the offer of first refusal for NHS staff on affordable homes, this would need to be negotiated into the agreement with the LPA. In any case, NHS estate owners will need to put in place nominations agreements with site purchasers to address how Homes for NHS Staff would be allocated. These documents would need to be aligned and it may make sense to set out your requirements as Heads of Terms and place a contractual obligation upon the site purchaser to negotiate a nominations agreement with the local authority to reflect these with the NHS Partner to be party to the agreement.
In order to ensure (to the greatest possible extent) that a purchaser can fulfil such a contractual obligation, NHS estate owners are urged to engage closely with local planning and housing officers to fully explain and identify the issues as to NHS staff housing and needs going forward. Engagement with the “right person at the right time” can help to influence the drafting and interpretation of any new local plan policies, to ensure the local affordable housing policy is consistent with the Homes for NHS Staff policy. The ideal position is that local plan policies include specific reference to Homes for NHS Staff policy requirements.
Nominations agreements should not carry with them any obligation upon the NHS Partner to provide nominations or underwrite rent/have responsibility for voids and service charge liabilities in order for the transaction to remain off balance sheet. Instead, the nominations agreement should stipulate the mechanism by which the owner of the affordable homes will notify the NHS Partner that homes are available for let/sale and the NHS Partner will be given a defined amount of time to nominate eligible candidates to which affordable housing units will be offered before the owner is able to seek to fill the vacancy elsewhere; usually with other NHS staff. Such provisions are known as cascade arrangements and will be familiar to most local authorities and registered providers.
To protect the NHS Partner’s position in respect of future disposals, it may be possible to seek an obligation whereby if a unit is occupied by a general needs tenant and that person subsequently leaves the property it can then be offered to NHS staff first before offering again to general needs.
You will need to consider how a prioritised list of applicants should be maintained and to what extent responsibility for maintenance of such a list can be devolved to the developer/head lessee whilst taking proper account of data protection issues under GDPR regulations.
Pros
- Aligns interests of NHS Partner, Site Purchaser / Head Lessee and local authority
- Neutral cost and value impact.
Cons
- Cascade provisions may mean opportunity to nominate tenant / purchaser is lost if NHS Partner cannot nominate a candidate in sufficient time.
NHS estate owners who have clearly identified the demand and need for Homes for NHS Staff, and have included this as one of their core objectives when preparing a business case, should consider the legal tools for implementation within the wider context of a decision of how to market and dispose of surplus sites and/or procure a development partner.
NHS estate owners must always bear in mind their obligations under the Public Contracts Regulations 2015 and tailored legal advice is strongly recommended to ensure any proposed transaction does not fall foul of legal obligations and place the NHS Estate owner at risk of a procurement challenge.
As highlighted in Planning and Viability, public sector partners such as local authorities, registered providers, Homes England and the GLA are well placed to understand the case for providing Homes for NHS Staff and to work with NHS estate owners to ensure that this objective is delivered.
By working with such partners with the support of One Public Estate, NHS estate owners can achieve market value for their disposals whilst ensuring that effective measures are in place to deliver Homes for NHS Staff.