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Brownfield developments should not be seen as the easy option

Britain is simply not building anywhere near enough homes to cope with demand.

It is a basic, uncomfortable and very public truth.

The chancellor’s recent planning reforms, announced the day after the Budget, outlined a range of measures to tackle this shortage.

Three of the most significant changes involved former industrial brownfield sites.

One reform, which really set the tone for George Osborne’s vision of a housebuilding Britain, was to grant automatic planning permission for all suitable brownfield sites.

The hope is that by removing the need for the relevant local authority to grant permission to developers to begin construction, there will be fewer delays in building these much-needed homes.

“There are many risks associated with former industrial sites… that developers need to be aware of”

Whilst there can be little argument that these are positive steps by the Government to reduce the housing deficit, these reforms do not give developers a carte blanche and nor do they make brownfield sites an easy option.

There are many risks associated with former industrial sites after the planning stage that developers need to be aware of and actively limit their exposure to.

Judicial review coverage is a must for developers when planning consent has been granted but where there are concerns a legal challenge could be raised. 

Experience clearly shows that as these can be extremely costly and detrimental to construction timetables.

Cover for claims based on a party’s Right of Light is also growing in demand as urban growth in limited space usually dictates taller buildings. 

Both these exposures can impact on a scheme at any point during the development of a site and can be expensive to settle.

It is the environmental risks associated with former industrial sites, however, which can pose real financial risks for developers.

“All new owners of a brownfield site are responsible for the clean up of that area”

All new owners of a brownfield site are responsible for the clean up of that area, a task which can be both expensive and lengthy.

Moreover, by law the new owner can be held liable for past industrial operations and third party claims for historic and current contamination and pollution.

Costs for these can be underwritten and prepare the developer should a claim be brought or an unexpected discovery be made during the cleaning up operation.

George Osborne is right in believing the regeneration of brownfield sites could provide Britain with many of the houses it desperately needs.

With government subsidies and their often central location in some of the country’s biggest cities, they provide developers with an attractive investment opportunity, although risks remain that developers certainly need to be wary of.

Ian Blackadder is a real estate and construction partner at insurance broker, Lockton.

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