The benefits of owning public spaces if you are a developer

This is an extract from an online magazine called “Regenerate Now”. The article is by Howard Bassford and appeared in November 2006. It is about whether developers should seek to control the public open space in their developments.

Basically, if you think you (the developer) may be able to build on the public open space or other useful spaces later on, keep hold of it; if there is money to be made from it in any way, shape or form, try to keep hold of it and try to make sure the local authority doesn't have a share in it; if it is likely to cost you money, pass it on to others as soon as possible but make sure you retain the right to things which might generate income such as car parks and lifts, leaving others to cover the costs of everything else. If you really have to involve the local authority, try to get the them in partnership with something that will give them a bit of profit from something you own so that they get a bite of the cherry too, but try to avoid this if possible.

In other words, ensure that wherever possible, you have everyone on the site by the short and curlies.

The items marked in bold are my highlights from this article.

“The benefits of control
Retaining ownership makes possible a more comprehensive maintenance programme and allows more control over who has access to the public spaces and how they are used.
Retaining ownership means retaining the ability to benefit from future development. Control can be used to prevent dedication of open space as a highway. In years to come, the reduced risk resulting from the ability to close and reconfigure public realm may make future development more certain. Be aware, though, that opportunities may be limited by Section 106 agreements preserving the nature of the public space. Local authorities may even seek a share in any commercial opportunities.

Meeting the cost of ownership
Maintenance costs will inevitably be borne by a developer who owns and manages public spaces. Even if the local authority takes over the public space, it may still require the developer to contribute to the cost in advance by a commuted sum.
If paying for maintenance, developers look to occupiers to fund these costs, often via service charges. If the development is sold on a freehold basis, an estate service charge could be set up either through the use of rent charges or by a chain of positive covenants to contribute to maintenance cost when purchasers acquire their “plot”.

Ongoing responsibilities
Many developers wish to avoid continuing responsibility once a development has been completed and sold. If public spaces are not already sold to others, the developer will need to transfer ownership and management to achieve this.
Where the development is sold off on a leasehold basis, the developer is most likely to sell the freehold of the entire development, including the public space, to an investor.

If the development is primarily residential, developers need to be aware of the statutory rights of residential tenants to acquire the freehold. The value of the freehold to a potential third party buyer is likely to be reduced as a result and the developer may prefer to sell the freehold, including the public space, to a management company controlled by the tenants. Indeed, as residential tenants have a collective statutory right of first refusal, there may be no choice.
Where the development is sold on a freehold basis, public spaces may be transferred to a specially set-up management company, usually owned by the owners of the individual plots. The developer is likely to set up a management company for the ownership and management of common parts which are not public spaces (for example, private car parks or lifts) and vesting the public spaces in such a company would therefore make sense. "

How much of this do you think EDDC knows or cares about?

What might you do, for example, if you live in a leasehold flat on a development site. The developer says "OK you guys, you can manage your own block now, you don't need us". Now, isn't that nice of them. EXCEPT they still own your car park and your lift. Your lift needs replacing. OK says the owner (the developer) that will be £100,000 - £50,000 for the work and £50,000 for me for having all the trouble of owning the lift and having to get the work done. And what if you think your lift needs replacing but the person who owns it doesn't agree?

And what if the developer owns the Town Square and decides to build another shop on it, or what if the supermarket owns it and they decide to extend their car park?