Flexible friends

With the economic downturn and its implications for residential regeneration, housing associations are having to reconsider various aspects of projects that would have previously been considered ‘standard practice’. Outlined below are a few things to think about when undertaking a regeneration scheme:

Know who you are contracting with
For a regeneration project to be successful, the partners must trust one another. The traditional tendering process may be insufficient to find the right private sector partner. Lawrence Graham has been advising clients on a tendering technique that involves discussing proposals with a range of potential partners over an extended period. Entering dialogue with a range of shortlisted organisations enables the parties to develop their goals and aspirations for the project together, ensuring that the most appropriate contractor is selected to undertake the project.

Restructuring public funding
It is old news that private sector funding is no longer as forthcoming as it was 18 months ago and that it is not a good time to be marketing sales of private homes. The reallocation of public funding can ease the pressure making a regeneration project more attractive to private developers, providing them with the flexibility of commencing their marketing and disposal of homes for sale in a more favourable market. The HCA has acknowledged the financial difficulties developing organisations are facing and, in recent months, has introduced the possibility of grant funding availability at the acquisition stage of a regeneration project.

Flexibility in tenure and shares of future profits
With struggling shared ownership sales and banks taking a cautious approach to granting mortgages, different housing tenure mixes are being offered on different sites and incentives are being offered such as shares in future profits after construction, in order to fill new build properties.

Timing of transfer of land asset
Consider the timing and the nature of any land disposal to a private developer. Housing associations should consider using a building lease to allow a private developer to develop the private sale units, with a subsequent freehold disposal at a later stage. With carefully drafted forfeiture provisions in such a lease, a housing association will have greater control over the development to reduce the risk of the private elements not being constructed due to the private developer’s viability. Remember, ‘practical completion’ is a negotiable definition and may refer to the completion of infrastructure works, fit out, or once the homes are ready for private sale.

Adapting existing plans
Seeking opportunities to adapt existing plans rather than pressing on with new schemes is an avenue worth pursuing to ensure continued viability in the current climate. Market conditions mean that local authorities are more amenable to negotiation, whether that means altering section 106 planning gain agreements, or varying the conditions of planning consent.

avril.smith@lg-legal.com

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