Out-Law / Your Daily Need-To-Know

Delivery structures for garden communities

Out-Law Guide | 08 Dec 2021 | 6:29 pm | 5 min. read

The successful delivery of garden communities typically requires collaborative working by different public sector bodies, private landowners and developers, as well as with a range of other stakeholders.

This requires thought to be given to what the most appropriate structure is for delivering each stage of the project.

Choosing the right structure

Where there is more than one public authority stakeholder involved, such as multiple local authorities, there are various ways to bring public sector entities together, some more formal than others.

The creation of a separate legal vehicle might be appropriate in some cases to streamline the participation and governance arrangements, the contribution of land interests and to create a market facing offer. Dependent on a variety of factors this may drive the use of corporate structures or development corporation models to enable the large-scale co-ordination of public sector investment, planning and regeneration.

Which model is right for a particular project will depend on the nature of the public sector entities involved. Some models, like joint committees, are only available to local authorities, for example.

An important area of focus in any delivery structure is the interface with landowners and developers, for example through options or promotion agreements, and how comprehensive assembly of land interests can be achieved – whether through negotiation or compulsory purchase. Delivery models in this regard can entail collaboration arrangements, partnerships, joint venture models, land equalisation agreements and/or development agreements – each with their pros and cons.

The creation of a separate legal vehicle might be appropriate in some cases to streamline the participation and governance arrangements, the contribution of land interests and to create a market facing offer

Choosing the right structure to deliver long term stewardship of a garden community is vital too, as comprehensive development cannot be achieved without robust legacy arrangements.

Garden community projects will operate more effectively and be more attractive to private sector investors if all public sector partners are aligned and have bought into clear governance. Options in this regard include:

  • development agreements;
  • collaboration agreements; and
  • joint venture or partnership agreements.

At all stages, we recommend establishing clear objectives that set the framework for delivery of garden community initiatives and testing various delivery structures against them.

Land assembly structure considerations

Public sector bodies should work towards assembling the land needed to deliver a garden community from an early stage of the project.

By doing this, the bodies might be able to create opportunities for “land value capture”, which is where they can deliver public benefit from future increases in the value of land they acquire. The Land Compensation Act 1961 is subject to discussions over potential reform. Proposals would allow acquisition of land for specific purposes, such as for garden communities, with a lower amount of “hope value” assumed in the purchase price. Those proposed reforms should be monitored.

A clear delivery model for land assembly will create confidence in investors and stakeholders. It can also shape the approach to governance.

When considering what delivery model is appropriate, thought should be given to the objectives of the project and required or desired outcomes, as well as potential barriers to delivery that need to be addressed.

It will be appropriate to consider what additional control or influence will be necessary for public sector bodies to exercise to achieve those objectives, over and above statutory planning controls.

Also relevant will be the extent to which individual land parcels have been assembled for development and whether a master developer is in place or envisaged, as well as the effectiveness of the working relationship with the landowners and developers involved and extent to which objectives and ambitions for the garden community are aligned to that.

The right delivery model for land assembly will also depend on the opportunities available to make the garden community plans more commercially attractive to the private sector to support delivery, the expectations and mechanisms for land value capture and long-term stewardship, public sector appetite and opportunity to invest in delivery of the garden community, and the motivations and drivers for landowners to put forward their sites to be developed as part of a garden community.

A major consideration will also be the nature of any developer or commercial interest in the garden community landholding. Delivery model options in this regard may include:

  • Option agreements where a landowner agrees a developer can buy their land subject to obtaining a planning permission, formalised in an option agreement;
  • Land promotion agreements, in which the developer seeks the planning consent for development, and then offers the land for sale on the open market;
  • Developer agreements and collaboration agreements where two or more parties agree to work jointly to bring a development proposal forward; and
  • Equalisation agreements where all landowners/developers involved get a fair return for including their land in the development. This is regardless of what use it is specifically allocated for, or when it might be developed.

The development corporation model

Development corporations have been considered by some garden community project sponsors as a legal structure for delivering projects.

The route to establish a development corporation depends on the type of model being pursued.

For instance, urban development corporations (UDCs) and new town development corporations (NTDCs) are ultimately models that require the secretary of state to determine that it is “expedient in the national interest” for an area to be designated, and therefore developed, under one of these models. It is common for the development corporation to be established as part of the same legislative process that the relevant areas are subject to in this regard.

Generally speaking, the same is true of the more recent locally-led new town development corporation model (LLNTDC), except that the secretary of state in this context may appoint a local authority to be an oversight authority – i.e. overseeing the development of the area as a new town.

A mayoral development corporation (MDC) can also be established by a mayor of a combined authority in England, subject to the relevant powers available to the mayor of London being conferred on the relevant mayor of a combined authority. The statutory powers available to each mayor or combined authority will vary depending on the relevant devolution deal agreed for each area.

The creation of a “hybrid” development corporation model has been mooted. In essence, this would resemble a locally-led UDC. Primary legislation would be needed to establish a hybrid development corporation model, and that legislation would then shape the further steps that would need to be taken to establish a hybrid development corporation itself.

Before considering whether to establish a development corporation to deliver a garden community, authorities should ask themselves the following questions:

  • Will it better enable the large-scale co-ordination of investment, planning, decision-making and delivery, particularly if a number of authorities and stakeholders would otherwise be required to be co-ordinated?
  • Will it be a long term and focused body, spanning a number of political and economic cycles which is helpful when dealing with long term projects? There may also need to be some thought given to what the intention will be to secure the legacy and appropriate stewardship arrangements at the end of the development corporation’s existence.
  • How will it interface with existing authorities and stakeholders and be accountable?
  • Does it justify the time and resources to establish?
  • Does it have political support on the basis it will concentrate delivery focus?
  • Where necessary, does it have the required local political support in terms of conferring the necessary statutory powers, particularly in the context of establishing MDCs?
  • Does it offer any powers which are not otherwise available or not already being exercised by the ‘right’ body for the purpose of the development proposals?
  • Is there a robust ‘need’ case for a development corporation? Or are there other more effective ways of delivering on the relevant objectives and development proposals for an area?
  • To what extent does a development corporation want to be separate from central government? A number of development corporation models are centrally-led in their establishment and thought should be given as to how much central influence will continue to be exerted in the operation of the development corporation.