Mixed-Use Development Case Study

Our Commercial Property Team has in recent years advised developer clients on the acquisition of a considerable number of town and city centre properties, their redevelopment as “mixed use” buildings (typically retail/office space at ground floor level with flats above) and the disposal of them in part or whole.

The transaction documents have generally included contracts of sale; planning agreements; loan security documents; transfers; appointments of consultants and collateral warranties; managing agents’ appointments; long leases of apartments and leases for varying terms of the retail/office space.

Acquiring, developing, managing and disposing of mixed use properties presents challenges in respect of which specialist advice is required.  These transactions require careful planning and foresight. Where appropriate we have consulted with our developer clients’ other professional advisers including architects, surveyors and accountants to produce the best outcomes for our clients.

Issues and Solutions

Investigation of title – Before our client exchanges contracts we will carry out conveyancing searches and raise enquiries with the sellers’ solicitors and review the title to the property.  If there are covenants or rights that may prejudice the ability to develop the property we will advise on the options available including seeking releases, insurance and taking proceedings under section 84 of the Law of Property Act 1925.

Planning - As planning permissions and, in some cases, listed building consents are required to permit redevelopment, we have advised clients on the appropriate conditions precedent to put in contracts to purchase the properties.  This is so that our clients are not obliged to buy any properties that are not capable of profitable development should a planning consent contain onerous conditions. Following exchange we continue to advise our clients on compliance with the conditions precedent, serving any notices that are required, while simultaneously negotiating the detailed terms of planning agreements required by the planning authorities.

Mortgageability of the Apartments – As the intention is often to sell the apartments in the buildings on long leases following completion of the redevelopment, we have advised our clients on the requirements of potential buyers’ mortgage lenders to ensure that they are marketable.  In particular, we have where necessary advised our clients of the need to ensure that flat purchasers have the benefit of home warranties that are compliant with the requirements of lenders who are members of the Council of Mortgage Lenders (CML).  We have advised developer clients where necessary on the amendment of building contracts so that the key requirements of certain approved warranty scheme providers are reflected and on issues that may arise with certain lenders as a result of the proposed configurations of the redeveloped buildings. 

Management – As the consultation requirements in connection with the recovery of residential service charges are extensive and can be difficult to manage, we have advised clients on the appointment of specialist managing agents before selling the apartments to simplify the process of collecting service charges in the future.

The Ownership Structure - We have advised our client on the most efficient ways to hold properties and have prepared the necessary documentation.  By way of example, landlords generally want to have the ability to deal with the commercial parts of the building quickly.  The Landlord and Tenant Act 1987 can give tenants under long leases of residential properties the right of first refusal in respect of transactions affecting the buildings in which they are located.  This can mean that landlords are obliged to serve notices on the residential tenants when they want to let the commercial part of a mixed use building.  Our clients have wanted to avoid potential delays going forward and the commercial space is often let on a long lease to a tenant which will in turn sub-let to tenants paying an open market rent. 

Summary

If you are a developer of one property or multiple sites our Commercial Property Team has considerable experience of advising clients on the profitable development of mixed use properties and can advise you on ways to avoid the potentially costly pitfalls. We pride ourselves on our enthusiasm for getting involved in projects early on and our ability to think ahead so that our developer clients’ options remain open.

Contact us

Our expert commercial property team is on hand to provide you with any advice or information you need in relation to mixed use property development. Call us today on 0345 872 6666 or contact the team for a no obligation discussion. 

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