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Regeneration from a Legal Perspective – Here to Stay or Gone Tomorrow?

Wed 07 May 2008

Regeneration has been a buzz phrase in the property market for the last few years but with the economy potentially heading into a down turn after the sub prime crisis in the USA what does the future hold for the UK regeneration projects?  Roger Fitton and Francesco Ferrari partners at, specialist law firm, Winckworth Sherwood look at what regeneration has come to mean for  house builders, registered social landlords (RSL), local authorities and the communities and where it is all heading?

How has regeneration evolved?

A recent trend we have seen in the market is for residential developers to become involved in schemes with a greater amount of commercial space/use.  The regeneration world has evolved from mainly residential led schemes to more mixed use schemes with the focus on improvement of the community.  For example with projects involving local authorities trying to regenerate run down city or town centres, it is not just a question of building more homes, the vibrancy of the town centre itself is at the heart of the project and this necessarily requires retail and other commercial uses, such as hotels and car parking, to become very much more part of the project.  Regeneration is not just about the provision of housing it is about the creation of accommodation and facilities of various sorts that will sustain a community and improve the quality of life of those living or working in such communities.

It has become apparent that many of the house builders and other stakeholders usually involved with regeneration or mixed use schemes are working very closely with other third parties to deliver regeneration projects.  This is often done by the creation of joint venture, single purpose vehicles for the undertaking of specific regeneration projects.  One of the evident changes in this climate is that you have an increasing interest in partnerships; private with public sector, residential with commercial sector and with different parties working closely together in a new way.  Different stakeholders are coming together to regenerate areas jointly. 

So what does this mean from a legal standpoint? 

Whilst consortia and joint ventures may have many appealing qualities such as the bringing together of stakeholders with very strong covenants and track records in their chosen field (such as social/open market, residential and commercial) having a number of stakeholders involved in any joint venture and regeneration project  adds layers of complexity.

Even though the parties are working closely together towards a common aim each party will necessarily have its own specific requirements.  An example of this is housing associations that are regulated by the Housing Corporation. 

In addition different stakeholders need, at least to some extent, to be advised separately and regeneration projects raise many legal issues and therefore in terms of pure legal requirements regeneration schemes require lawyers who have a view on a wide range of issues not just one speciality.

Many of the larger regeneration schemes are led by government agencies such as the London Development Agency (LDA) and English Partnerships (EP) and developers also need to take account of and provide for their active involvement. These government agencies, a bit like the Housing Corporation, have their own benchmarks for quality control, performance indicators, benchmarks for deliverability etc, and all these must be considered in order to deliver projects.

A key challenge to the regeneration lawyer is dealing with the various and divergent interests of the stakeholders who are now commonly comprised and form joint venture regeneration partnerships.  A good regeneration project lawyer must be able to span a number of disciplines and assemble a team that can deal with all legal aspects of a regeneration project and further, project manage that team.

The legal disciplines required to deal with a regeneration project can span from conveyancing (site assembly, acquiring land) to dealing with the creation and establishment of the joint venture itself (company, commercial) and all sorts of contract negotiations.  Many regeneration sites also require land assembly by way of Compulsory Purchase Orders (CPO) so advice on statutory processes/timescales is also often required.  In addition planning lawyers need to be brought to the fore to secure planning consents and concluding s.106 planning agreements.

In addition many joint venture regeneration companies raise finance from external funders and therefore a banking team is required in order to secure project financing.

The regeneration lawyer needs to understand the different motivations behind each stakeholder involved in a project and provide for them in negotiating documentation.

The regeneration project lawyer becomes a project manager and must understand all aspects of development and must have a good basic understanding of all other aspects which may be involved in delivering a project so as to recognise when a problem may arise and thereafter involve specialist lawyers within the team (such as planning, commercial etc) to deal with specifics.

A regeneration lawyer must, above all things, be pragmatic and must know when to compromise as the delivery of a successful regeneration project requires give and take and close partnering between the various stakeholders.  This is not to say that the parties cannot protect their own vested interests but the parties must work well together to produce a successful project.

So what does the current downturn mean for current regeneration initiatives?

In the current climate many of the larger regeneration schemes will continue.  They are backed by government agencies such as the LDA and EP and are sponsored by these organisations.  In addition by their very nature many regeneration projects are long term investments and therefore may not be as susceptible to short term variances in the market.  Also many stakeholders, such as RSLs and local authorities, are not as sensitive to market conditions (and arguably in the case of RSLs, are also countercyclical) and so many of these projects can still be driven forward.

Issues may arise in terms of securing project funding on as previously favourable terms but this is not an insurmountable task.  Private investment/involvement from residential and commercial developers may also become hard to secure.

Government agencies have a mandate to deliver housing in accordance with government guidelines and policies and particularly in certain parts of London.  The Olympics, has also helped to promote and encourage projects.

In addition like a healthy rose bush there is no harm in the occasional pruning for the bush to continue to grow and the housing market is often seen in this way.  Perhaps we are just simply in a period of pruning.

What will the future key legal issues be for this market?

Given the current market one of the key project issues is likely to be banks being considerably more stringent in due diligence terms and on the covenant strength of the stakeholders involved in regeneration.

The merging of the Housing Corporation with EP may also cause interesting changes.  It is yet to be seen, as it is still yet unclear, what impact this will have as EP is one of the leading government agencies which is sponsoring regeneration particularly in the south and southeast.


Roger Fitton – Managing Partner

Francesco Ferrari – Partner


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