Planning permission adds to the value of land. But can a party who obtains the permission benefit for the uplift in value even though not the landowner? Generally the answer to this question has been no. However, in the recent case of Cobbe -v- Yeomans Row Management the court held otherwise.
The facts were slightly unusual. A landowner (Yeomans) and a developer (Cobbe) agreed basic terms for the sale of a site and the understanding between the two of them was that a formal contract would be entered into once planning permission had been obtained by the developer. Relying on this arrangement, the developer made a planning application and, after negotiation, successfully obtained a planning permission. The landowner then indicated it was not prepared to proceed with the sale except on terms which differed from those originally agreed.
The developer felt entitled to some compensation for the time and effort expended in obtaining the planning permission.
Clearly there was no enforceable contract for the sale of land because the legal formalities required by section 2 of the Law of Property (Miscellaneous Provisions) Act had not been complied with (i.e. a contract for the sale of land must be in writing and signed by both parties). However, on the facts the court were prepared to determine that a "proprietary estoppel" had arisen in favour of the developer which allowed the developer to share in the uplift in value created by the permission.
There were a number of factors that led to this decision including:
- The parties initially felt they had agreed the basic terms of the transaction and each felt honour bound to proceed with a sale/purchase notwithstanding the absence of a legally enforceable contract – all points of principle at the centre of the commercial deal had been agreed. Although there were still points of detail to be tidied up, such as security for overage and the best way to structure the document from a tax point of view for both parties, this did not affect the court's decision.
- The developer, having relied on the arrangement, had expended considerable time, effort and money in trying to secure planning permission. The landowner by its actions had induced the developer to continue with this work.
- The landowner at some stage during the planning process changed its mind and decided to renegotiate the deal once planning had been obtained. In effect the landowner took unconscionable advantage of the developer.
The court awarded the developer one half of the increase in value of the property due to the grant of the planning permission. This was, in effect, created by giving a lien to the developer over the property for these monies.
The facts of this case are slightly unusual but it illustrates that it is possible for a party to be compensated for the successful efforts it has made in order to increase the value of a property.
