The recent judicial review case of Parkhurst Road Limited v Secretary of State for Housing CLG and London Borough of Islington 2018 is a salient reminder that the starting point in valuing a development site requires an assumption that account must be taken of the costs of complying with all relevant planning policies.

In this case a developer that had paid £13.25m for a site for the construction of 112 homes was refused planning permission for failing to comply with the Council's affordable housing planning policy and had to go to the High Court resulting in significant delays and costs.

In this important decision, the Court prioritised Islington’s 50% affordable housing planning target across the Borough against the price paid by the developer and the site viability assessment that had resulted in a reduced affordable housing offer of 10%, following that assessment.

The key points of note arising from this case are that developers should:

  • take care in calculating their maximum bid for a site in the light of all relevant planning policies, especially if paying significantly above existing use value to incentivise a landowner to sell;

  • not assume that affordable housing requirements will be automatically scaled back on development viability grounds, especially where the lack of viability is closely connected to the land price paid;

  • ensure that clear evidence beyond the viability impact linked to the price paid is provided with the viability assessment to the local planning authority; and

  • review market value concepts in light of this judgment in which the judge also invited the RICS to reconsider its 2012 Guidance Note on viability.

    If you are purchasing a potential residential or mixed development site where viability will be a concern in terms of securing a suitable planning consent, take professional valuation advice from an experienced qualified consultant before finalising your offer.

    The above article is for guidance only and does not constitute specific legal advice. For further advice on development site acquisitions, option agreements or land promotion agreements please contact commprop@prettys.co.uk