Developer can’t dodge paying extra £750,000 for land

Elizabeth Crouch, Senior Associate and Head of Residential Conveyancing considers a recent Court of Appeal case where a developer has been ordered to pay an extra £750,000.

A developer has been ordered to pay an extra £750,000 for land that was sold subject to the condition that the price would increase if planning permission for houses was granted.

The issue arose after the developer purchased property from a landowner to redevelop for residential use.

The contract provided that the extra money would be payable if the local planning authority agreed to the development of 60 residential units on the site.

Planning permission was granted but the developer denied liability to pay.  It argued that the contract terms only applied if the 60 units could be lawfully built, whereas it had transpired that such a development would contravene the building regulations because of incompatibility with fire escape provisions.

The judge at the first hearing ruled in favour of the landowner and that decision has been upheld by the Court of Appeal.

It held that the regime for planning consent and the regime surrounding building regulations were entirely separate in their purpose, legislation and enforcement.

The trigger event for the extra payment was clearly concerned with planning permission; there was no mention in the agreement of compliance with building regulations or any other requirement that might need to be satisfied before the residential units could be built.

If it had been intended that the trigger event should require any such compliance, the parties would have said so clearly in the contract.  Both were experienced developers and had been professionally advised.

Please contact Elizabeth on 01697 72378 if you would like more information about the issues raised in this article or any aspect of property law, or alternatively, click here to send an email.