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Profits Made by Property Developers Reflect the Risks They Take

CranesImages of fat cat property developers persist in the public mind, but the reality is that profits are almost never generated without significant risks being taken. In a case exactly on point, a company that paid £13.25 million for an urban site with a view to building new homes had its proposals scuppered by a High Court ruling.

The company bought the former Territorial Army centre from the Ministry of Defence following a tendering exercise. It initially proposed 150 new homes on the 0.58-hectare site, in blocks ranging from four to seven storeys. That was later reduced to 112 units, and a maximum of six storeys, but planning consent was refused by the local authority.

A government planning inspector rejected the company’s challenge to that decision on the basis that the height of proposed new buildings would harm the character and appearance of the area. Pinpointing serious shortcomings in the proposals, he said that the privacy and outlook of some neighbouring properties would be badly affected.

After reducing the number of proposed units to 96, the company again applied for planning consent. This time, the council did not object to the scale or design of the proposals, but it again refused consent on grounds that the site was ideal for the provision of affordable homes. Taking into account its strategic target that new residential developments should generally be 50 per cent affordable, the council said that the maximum reasonable number of affordable homes should be built. The refusal of planning consent was again upheld by a planning inspector.

In ruling on the company’s appeal against the latter decision, the Court accepted that the inspector had made a mathematical error in rejecting its plea that 10 per cent affordable housing represented the maximum reasonable provision that could be achieved whilst maintaining the project’s viability. However, in dismissing the challenge, the Court found that the inspector’s overall conclusions were untainted by that error. It was clear from the inspector’s reasoning that he would necessarily have reached the same decision in any event.