The value of a good neighbour
Our towns and cities are becoming increasingly crowded but with the current demand for property with development potential showing little sign of abating, developers seem to be acquiring more challenging opportunities, including all manner of derelict properties and brownfield sites. In our dense urban environment, such redevelopment sites are often bordered by a number of adjoining Freehold and Leasehold property interests. The developer will usually want to build to the full curtilage of their site, in order to maximise the development potential and investment return.
Any experienced developer will have done their homework prior to acquiring a redevelopment site, and will have investigated restrictive covenants, Town Planning restrictions, Rights of Light analysis, land contamination, and other fundamental “due diligence” considerations. However, it is unlikely that prior to acquiring a site, that the developer would have established how cooperative his potential neighbours might be. Such co-operation often comes at a price.
As specialist Party Wall Surveyors, we are often also instructed to seek and formalise discretionary co-operation from neighbouring owners beyond statutory provisions to facilitate demolition and construction work at the boundaries. The scope of Surveyors statutory jurisdiction under the Party Wall etc. Act 1996 only provides access over adjoining land for certain scaffolding operations but never for crane oversailing. Further, the rather limited Access to Neighbouring Land Act 1992 does not afford access provisions for commercial development, forcing clients to seek the indulgence of their neighbours. If the neighbour has a mind to co-operate, their express consent is usually regularised under Licence. It is now that the developer will establish what kind of neighbours he has inherited.
Despite their commercial acumen, it seems to surprise many developers that the terms and conditions of such a Licence are determined by the neighbour and many neighbouring property owners will sense the opportunity to secure a windfall. The Licence will need to include some form of consideration, ranging from a token peppercorn to substantial sums of money. There are no statutory regulations or defined valuation principles as to what the amount of consideration should be, and a developer with no practical alternatives for their demolition or construction works can find themselves at the mercy of their neighbours.
Nevertheless, when endeavouring to negotiate with an adjoining owner we are asked to advise on a value to the co-operation being sought by the developer. At first principles, the value of consent for the erection of scaffolding or crane oversailing adjoining land is the opportunity cost of the builder considering the next most efficient way of facilitating the required demolition or construction works. For example, if the developer is proposing to build at the boundary and the adjoining owner is not prepared to consent without a prohibitive Licence fee, the opportunity cost would be a re-design of the proposed new building, setting back the new structure, so that scaffolding could be accomplished on the developers own land. The value of that loss to the developer would therefore be the difference in the net lettable area between the desired and “fallback” schemes.
In such instances, an adjoining owner may look to seek a proportion of the profit on the preferred scheme. On other occasions, in lieu of money changing hands, the neighbour may more practicably wish to take advantage of the convenience of a contractor already on site next door. For example, the neighbour might require the developer to undertake specified decorations of the neighbouring property, in consideration for the granting of the Licence.
Alternatively with crane oversailing, the developer may be able to accomplish a similar operation with a luffing jib crane, which perhaps would not need to oversail an adjoining building in the manner that a traditional boom jib requires free 360 degree rotational swing.
It is well established in the construction industry that a luffing jib crane and appropriately skilled operator are more expensive to procure than a traditional boom jib crane and respective operator. Further, a luffing jib crane is known to be less efficient, thereby causing an impact on the construction programme in comparison to the relative deftness of a traditional boom jib crane. Therefore, the commercially minded adjoining owner may well seek to benefit from the developers preference for a tower crane oversailing his property by seeking a proportion of the difference in operational and procurement cost than the relatively restricted luffing jib alternative.
Of course, in many instances adjoining owners do not apply any science whatsoever to the financial consideration which they seek and an arbitrary round number sum is applied to the granting of the Licence, particularly if the developer has not secured the consent or allowed for alternative options in good time before requiring to perform construction operations. In these instances, a developer will find himself beholden to the adjoining owner and pay a premium for securing express consent at short notice.
How we can help
We provide advice and assistance to both developers and affected neighbours, in respect of access, scaffolding or crane oversailing Licences.
Please contact us for more information and a free no obligation consultation.