The successful installation of utilities plays a critical role in the success of all new build developments, but it’s a matter that is often not given the gravitas it deserves during the planning stages. The assumption that such services will be readily available is a common error, but it could be a costly mistake for property developers.
Here we offer a brief overview of the potential pitfalls and challenges that property developers need to fully consider when planning for utilities on their development, in order to avoid expensive or damaging delays.
What services or rights are needed?
Developers need to make sure that their projects can be connected to the relevant services, including gas, telecommunications, electricity, water, sewerage and drainage.
They should identify well in advance of work commencing whether the existing services to the development site are sufficient; where the nearest mains services are positioned; which services are important to their likely buyers or tenants; and whether the development site already has sufficient rights to lay service media across any third-party property that lies between the relevant mains services and the development site.
It’s important to bear in mind that a service provider who is supplying a new connection may require an easement, a wayleave agreement, or a lease for the land on which the equipment will be located in order to obtain permission to use it. They may also look to obtain any one of these agreements from a third-party landowner in instances where the service connection needs to pass over third-party land.
Securing services for a development site can be time-consuming and complicated. Rights over the development site will be a matter for negotiation between the developer and the service provider. Rights across third-party land can also be achieved by direct negotiation. Where this fails, the service provider may be able to exercise a statutory right to insist on the necessary rights being granted.
When acquiring a new site for development, a developer’s legal team will need to carry out detailed searches of all available utility companies. Their findings should be thoroughly documented alongside any accompanying plans as standard practice.
Often, these reports will raise critical questions for the developer, starting with how best they action findings within the search results? And significantly, how a development will be affected if the results aren’t acted upon in a timely enough fashion?
Working out how a development is going to be serviced is one of the most critical elements of the decision-making process for any new development. Ideally, the search results will show that all of the required services are available in the road via which the property will be accessed.
However, even if this is the case, the matter should not be put on the back burner. In fact, it’s imperative that services are attended to early in the programme, as one of the real modern-day impediments to a successful development is not getting the services in by the date planned in the building schedule. This is because physically making service connections to a development site is not always straightforward, even if the services are readily available.
When a search returns unexpected results
What if there is no power at the required level, close to the property, or the project is reliant upon a connection from a nearby sub-station that is on private land? What if there are services available in front of the site, but the road is private?
All of these scenarios have the potential to create long delays even for the most prudent developer, and delays can be catastrophic in the current climate. These examples show that the supply of services, in particular electricity, must never be assumed if a project is to be a success.
In these cases, agreements will have to be reached with the power company based on the cost of the connection, which can be a major financial outlay. Also, consider who will carry out the work. Whilst the developer can dig holes and install trenches, the power company will still need to lay the cabling and make the connections.
In one recent real-life project, the funding of a development failed because they could not get power to the properties, despite building works being complete, thus delaying sales, impacting the lending package, and eroding profit.
If services are on private land this will require a wayleave agreement with the landowner and the supply company. The supply company will have its own set of standard documents, but the whole process will still take time to complete.
Agree your utility supplies early
It is also important to pin down the cost of the required connections at the earliest opportunities, as such costs will need to be included in the development appraisal, particularly if the developer is seeking funding for its development.
If it is left as an unknown cost, the developer could see a large part of their profit disappear in providing services. So, get an early unconditional agreement with the supply company and make sure the cost of supply is agreed upon and not conditional upon unknown factors.
Uncertainty of supply could jeopardise the whole development programme and more importantly impact sales. It may be tempting to leave the research into the required services until later, but later might mean they are not available when the developer needs them.
Pass the search results immediately to your technical team and follow up relentlessly as the supply (or lack) of services can break a development if the absence of the connections means the units cannot go to market even when their construction has been completed. By instructing experienced property lawyers and taking steps at the outset, developers keep more control of the development process and mitigate the risk of expensive delays.
Karen Mason is a highly experienced commercial property lawyer and co-founder of Newmanor Law, a specialist real estate law firm, combining fresh technology with legal insight and compelling service to help property professionals achieve their desired outcomes. The firm deals with acquisitions and sales, construction matters, development, property disputes, landlord and tenant matters, along with debt finance and tax matters relating to property.
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