Land Journal - RICS

Land Journal
Building information modelling (BIM)
Not just new software – a different way of working
September-October 2011
rics.org/journals

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2 The Land Journal September-October 2011
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Contents
18
Cover story
6 BIM: A new dimension
Building information modelling represents
a revolution that cannot be ignored.
By Steve Pittard
4 From the chairmen
5 A work in progress
The property industry has welcomed proposed
changes to the law of easements, covenants and
profits à prendre. By Tim Andrews
10 Viability check
The new RICS guidance note Financial viability in
planning provides a much-needed framework for
viability assessments. By Jacob Kut
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6
12 Registering green
Plans to expand and improve green infrastructure in
Liverpool started with a unique mapping exercise.
By Tom Butlin, Chris Chambers and Fiona Ellis
16 Cashing in on energy
The Renewable Heat Incentive becomes operational
as the year-old Feed-in Tariffs are revised.
By Andy Bailey
18 Going with the flow
A rural surveyor in sleepy South Texas wakes up to
the arrival of oil prospectors and untold wealth.
By Richard Dockery
20 Fracking: Old technology, new
controversy
The drilling method that is changing the fortunes of
South Texas is causing ructions around the world –
including the UK. By Roz Wrottesley
22 Lateral thinking
There is a brief window for appeal against the
transfer of ownership of private sewers and lateral
drains to the utility companies. By Anita Kasseean
24 Why form a charitable land trust?
When the fate of a large estate looks uncertain, a
charitable land trust allows the owner to ensure it
remains intact for the public benefit. By James
Ruddock-Broyd
Editor: Roz Wrottesley T +44 (0)20 7334 3860 rwrottesley@rics.org Advisory group: James Kavanagh, Fiona Mannix, Rebecca Mooney and Tony Mulhall
(Land Group), Tim Andrews (Stephenson Harwood), Matthew Inman (Stratland Management), Philip Leverton (College of Estate Management), Rob Yorke (rural
chartered surveyor), Michael Rocks (Michael Rocks Surveying), Emma Randall (Kingsbridge Estates), Tim Woodward (rural chartered surveyor), Michael Birnie
(Buccleuch Estates), Marion Payne-Bird (consultant), Andrew Black (Tower Hamlets), Richard Fearnall (West Coast Energy), Frances Plimmer (College of Estate
Management), Duncan Moss (Ordnance Survey) Editorial and production manager: Toni Gill Senior sub-editor: Phil Blanshard Advertising: Lucie Inns
T +44 (0)20 7793 2477 lucie@sundaypublishing.com Designed and printed by: Annodata Print Services Published by: The Royal Institution of
Chartered Surveyors, Parliament Square, London SW1P 3AD T +44 (0)870 333 1600 www.rics.org ISSN: 1754-9094 (Print) 1754-9108 (Online)
Front cover: Courtesy of Mortenson Construction and RTKL Associates Inc. Provided by Autodesk, Inc
While every reasonable effort has been made to ensure the accuracy of all content in the journal, RICS will have no responsibility for any errors or omissions in the content. The views
expressed in the journal are not necessarily those of RICS. RICS cannot accept any liability for any loss or damage suffered by any person as a result of the content and the opinions
expressed in the journal, or by any person acting or refraining to act as a result of the material included in the journal. All rights in the journal, including full copyright or publishing right,
content and design, are owned by RICS, except where otherwise described. Any dispute arising out of the journal is subject to the law and jurisdiction of England and Wales.

From the chairmen
Planning & Development
In a mixed or free market economy, development depends on market
demand for most types of development. However, for development to
take place, there has to be a further element of assessment: viability.
Even if market demand is strong, no development takes place unless it
makes economic sense. In the market downturn, in spite of an everincreasing
need to provide homes, the obligation on private development
to contribute to public sector funding has rendered many developments
unviable. Last year, fewer new homes were built in the UK than in any
year since 1920s. Therefore, an understanding of viability has never been
more important for the assessment of whether or not a development
should go ahead and just how much a particular scheme can contribute
to the public sector.
Many planners within the public sector do not have training or
experience in the economics of development. To provide much-needed
assistance, the RICS Planning & Development Professional Group has
put together new guidance: Financial viability in planning (page 10).
Although it is aimed at the UK primarily, it has been written in general
terms and, with minor changes, could be rolled out to other parts of the
world. It promises to fill an important gap and is set to become a
standard text on the subject. I would like to thank all those involved in
its preparation.
Feel free to contact me on any subject at Richard.asher@eu.jll.com
Richard Asher
Rural
The process of restructuring the Rural Professional Group Board
is now complete and the first meeting is scheduled for early
October. The Board continues to represent the broad variety of
specialisms covered by rural chartered surveyors, but we have also
been careful to include large, medium and small firms to ensure
we address the concerns of all. While we do have a slimmed-down
Board, we are delighted to welcome four new Board members and
look forward to working with them on behalf of the profession.
I saw many of you at our recent very successful and wellattended
inaugural RICS National Rural Conference at the Royal
Agricultural College in Cirencester in June, and the Rural PG is
delighted to confirm that this will be an annual event in future. The
next opportunity to get together is again at the RAC, for the RAC
RICS joint Fellowship in Rural Land Management, on the morning
of Thursday 27 October. The recipient, Rob Yorke, will present his
paper entitled ‘New Demands; Old Countryside’ To reserve your
place, email Fiona Mannix at fmannix@rics.org
Finally, those of you who are already subscribers to Farmland
Market will agree with me that it is worth recommending to those
who are not. It is going from strength to strength, combining an
authoritative and indispensable guide to agricultural land prices
and trends in the UK with articles across a wide variety of topics
of interest to rural practitioners. If you are not familiar with it, you
really should take a look.
David Slack
4 The Land Journal September-October 2011
Environment & Resources
With my term of office as chairman of the combined Environment
& Resources Board drawing to a close, it was appropriate that a
recent Board meeting was held in Hamburg, Germany, where I am
based – and it cost less than a meeting in London, thanks to
careful planning! We used the opportunity to review our activities
and propose both UK and global strategic priorities in keeping with
the Board’s dual function. As well as addressing developments in
the core areas of environment, minerals and waste, the discussion
covered related issues, such as energy and climate change, and
explored the potential for co-operation with the other Land Group
PGs, an issue raised at the recent chairmen’s meeting.
Energy has been a recurring theme in government
consultations – for example on electricity market reform, to
which the policy working group responded. This issue of
the Land Journal picks up on it, with an update (page 16) on
the progress of FITs and the launch of RHI. But minerals and
environment are not being neglected; a new information paper
has been published on the Mining Waste Directive, which has
important implications for both practice areas. The document is
available now at www.rics.org
Meanwhile, our autumn conference in Bristol is just around the
corner: 6 October. The agenda includes presentations on minerals
planning and localism, energy from waste, aggregates and other
minerals-related issues. You can still book your place by emailing
events@rics.org or Charlotte Barrett at cbarrett@rics.org
Graham Bocking
Geomatics
This autumn, RICS Geomatics will be running its usual series of evening
lectures and engaging with a number of international conferences and
exhibitions, such as CLGE Tallinn 2011, InterGEO 2011 and Oceanology.
Visibility and industry recognition of RICS standards and members are
top of the professional group’s agenda for 2011-12.
Meanwhile, information sharing is always a priority and this issue of
the LJ contains a number of articles of significance. The cover story
on BIM is an excellent ‘entry level’ article for all Land Group members,
the Law Commission’s proposed changes to English land law are
explained opposite, and the mapping/GIS elements of managing
green infrastructure are explored on page 12, based on a new paper
published by Geomatics. It should be read in conjunction with the
recent P&D Green infrastructure in urban areas information paper –
which once again highlights the synergies in the Land Group.
With that in mind, please note that all members, no matter their
practice area, are more than welcome to join us at the evening lectures
series. Look out for a full list of subjects at www.rics.org/geomatics and
in the Land Group eNews.
Stuart Edwards

A work in progress
Creating easements and profits
The Law Commission has recommended that the
rules relating to the acquisition of easements by
implication and by prescription should be simplified.
Currently, there are a number of situations in
which easements are implied and three methods of
acquiring easements by prescription (that is, by long
use). In both cases, there are subtle differences –
and in some cases, these differences seem totally
arbitrary. This makes claims for implied or prescriptive
easements unduly complicated.
The report proposes abolition of the existing law
on implied easements and recommends that, in
future, it should be possible to imply easements only
where they are necessary for the reasonable use of
the land. This would be determined by five factors
laid down in the Bill.
Many had hoped that prescriptive rights would be
abolished altogether, but the Law Commission has
not gone that far. Instead, there would be a single
method of acquiring prescriptive rights requiring 20
years’ continuous use. To qualify, the right would
have to have been enjoyed openly and without force
or permission.
Land rights
Proposals by the Law Commission that would rewrite the law of easements, covenants and profits à prendre have
been well received by the property industry. Tim Andrews outlines the recommendations and prospects for change
The law of easements, covenants and profits
has developed in a piecemeal and apparently
arbitrary fashion over the centuries. While such
rights can enhance the value of a property, they can
also be a burden that reduces value and significantly
hampers development. To make matters worse, it is
often difficult to tell whether a property is affected by
such rights.
In June, the Law Commission published Making
Land Work: Easements, Covenants and Profits à
Prendre. The report concludes that the law in this
area is ripe for reform, recommending a number of
ways in which it might be simplified and modernised
to make it more appropriate to land use in the
21st century.
According to the report, around 75% of properties
in England and Wales either benefit from, or are
burdened by, these rights, so reform would have
an impact on all landowners from householders
to developers.
It is a comprehensive report containing a number
of sensible and well-considered recommendations
that have been generally well received by the
property industry.
The report includes a draft Bill which it is hoped
will be debated by Parliament and form the basis
of legislation.
Rights of light
Developers have become especially concerned
about possible rights of light claims following last
year’s court decision in HKRUK v Heaney, which
required a developer to remove part of a new
building that infringed the rights of light of a
neighbouring landowner. There is no doubt that
such concerns are delaying and may even be
preventing new developments. These arcane rights
could therefore be having a serious effect on the
economy, especially in the City of London.
As a result, there has been widespread
disappointment that the Law Commission has
stopped short of proposing much-needed reforms
in this area. The Law Commission’s view is that
this is a highly specialised area which merits closer
analysis, but because most rights of light are
acquired by prescription, the proposed reforms
to prescriptive easements should provide a
solid framework on which to base later reforms.
That being the case, it is unfortunate that the
proposed extension to the Upper Tribunal’s
powers to modify or release easements will not
apply to existing ones.
It is to be hoped that the Law Commission will
return to the issues of rights of light sooner rather
than later. Meanwhile, the Rights of light 1st ed
2010 guidance note outlines the approach to be
adopted by surveyors practising in this field. It is
available in the downloads section of www.rics.org
Definitions
Easement: a right enjoyed
by one landowner over
another’s land, e.g. a right
of way, a right of drainage
or a right of light.
Covenant: an obligation
relating to the use of land:
it can be restrictive
(e.g. a restriction on use or
building) or positive (e.g. an
obligation to repair a fence or
wall or to contribute to the
upkeep of a common
roadway).
Profit: a right to take
something natural from
another’s land, such as turf
or wood, including grazing
and fishing rights.
Many had
hoped that
prescriptive
rights would
be abolished
altogether,
but the Law
Commission
has not gone
that far
Continued on page 9
September-October 2011 The Land Journal 5

Technology
BIM: A new dimension
Building information modelling (BIM) promises to be the biggest development in architecture, construction and
asset management since the introduction of CAD systems. Steve Pittard explains the concept and its potential
impact on many areas of surveying
BIM is both a new technology and a new way of working. The
concept has been around for a while in the manufacturing and
engineering industries and is now beginning to make an impact
in the property and construction sectors. At a strategic level, BIM offers
the capacity to address many of these industries’ problems, including
waste reduction, value creation and the need to improve productivity.
The BIM process moves away from conventional word-processing
and CAD into the increased use of common standards and productorientated
representations. BIM changes the emphasis by making the
model the primary tool for documentation, from which an increasing
number of documents – or more accurately ‘reports’, such as plans,
schedules and bills of quantities – may be derived.
It involves not just new software, but a different way of thinking and
a radical shift away from traditional workflows. As the UK government’s
chief construction advisor, Paul Morrell, put it in a speech in May: “There
is a huge gulf between those who get it and those who don’t. Probably
the biggest misunderstanding is that some people think it is about
software. They can buy a cellophane-wrapped thing and that’s BIM.
It’s more about cultural change than it is about software and I think
that’s not understood.”
With BIM, there is a common information pool, to which all parties
(including architects, surveyors and contractors) have access. The
traditional convention of parties working with separate information pools,
using several different (and usually incompatible) software packages, is
no more. In essence, BIM involves building a digital prototype of the
model and simulating it in a digital world.
By combining technology with new working practices, BIM improves
the quality of the delivered product and the reliability, timeliness and
consistency of the process. Fortunately, the user is not restricted to
a ‘one size fits all’ approach. While the capacity to access and share
information is a prerequisite, BIM can be implemented at different levels
of sophistication and integration, and not all information needs to be
shared. However, the benefits increase the more information is shared
and reused and made available throughout all the various stages of the
design, construction and occupation lifecycle.
The power of one
In its most advanced form, BIM provides a single, co-ordinated source
of structured information to support all parties involved in the delivery
process, from design to operation. In other words, the system supplies
just one version of the truth. Because all the parties have access to the
same data, the information loss associated with handing a project over
from the design team to the construction team to the building
owner/operator is kept to a minimum.
A BIM model contains representations of the actual parts and pieces
being used to construct a building, facility or asset, along with geometry,
spatial relationships, geographic information, and the quantities and
properties of building components (for example manufacturers’ details).
Although it is often (mistakenly) referred to as 3D, 4D or nD, BIM should
not be confused with the number of dimensions used to represent a
building. At its simplest level, BIM provides a shared environment for all
information defining a building, facility or asset, together with its
common parts and activities. This includes shape or form, design and
construction time, costs, physical performance, logistics and more.
6 The Land Journal September-October 2011
More importantly, the information relates to the intended objects
(components) and processes, rather than the appearance and
presentation of documents and drawings. More traditional 2D or 3D
drawings may well be outputs of BIM, but instead of being generated in
the conventional way – i.e. as individual drawings – they can be
produced directly from the model as a ‘view’ of the required information.
As the American architect and consultant Matt Dillon writes in his blog
Breaking down the walls: ‘First, emphasis needs to be placed on the “I”
in “BIM”: “information”. That information can be either graphical or nongraphical,
either contained directly in the building model or accessible
from the building model through linked data that is stored elsewhere.
If you really think about it, in some ways, at a basic level, BIM doesn’t
necessarily require that the geometry that describes the building be a 3D
model at all. A data model is just as valid a model as a geometric model.
Be that as it may, when we think of BIM, a 3D geometric model of the
building is at least part of what comes to mind.’
BIM involves not just new
software, but a different way of
thinking and a radical shift away
from traditional workflows
By making the model the primary tool for the whole project team, BIM
ensures that all the designers, contractors and sub-contractors maintain
the original design and that the relationships between systems can be
explored and detailed fully. Working with BIM requires new skills, which
need to be acquired in practice.
However, BIM is not a panacea; it remains just as possible to
produce a poor model – in terms of its functionality, its constructability,
or its value – as it is to produce poor drawings, schedules or any
other more traditional form of information. Also, in the absence of any
proactive collaborative management effort, a model may end up being
prepared to suit the originator, instead of being structured and presented
with all parties to the design and construction in mind.
Ensuring that there is an agreed structure and exchange protocol
in place that suits all parties improves certainty, confidence and
consistency. By moving to a shared information model environment,
project failures and cost overruns become less likely. BIM certainly
means having a better understanding and control of costs and
schedules, as well as being able to ensure that the right information is
available at the right time to reduce requests for information, manage
change and limit (or even eliminate) unforeseen costs, delays and claims.
Clients are often in the best position to lead the introduction of BIM.
They understand the value of building or asset information and its impact
on their businesses and many now require BIM to specify the standards
and methods to be used in its adoption. It also makes it easier for them
to provide clear requirements for the operation and maintenance
information that should be handed over at project completion. Some

Silver Cross Hospital
Courtesy of Mortenson Construction and RTKL Associates Inc. Provided by Autodesk, Inc.

international clients are even going so far as to impose penalties for
lack of information (or the lack of it at established points in the
construction process).
More recent experience indicates a global trend for large clients and
government agencies to mandate the use of BIM, not only for delivery
of the building or asset, but also for use as a tool to manage it
operationally. In the UK, one of the key announcements in the
government’s recently published Construction Strategy was that public
projects must use BIM level 2 by 2016, demonstrating that BIM is very
much on the government’s agenda. Construction companies face the
very real prospect of exclusion from the public sector programme if they
cannot comply.
In essence, BIM involves building
a digital prototype of the model
and simulating it in a digital world
Reality check
However, the largest single barrier to exploiting BIM is lack of awareness
– or, as some might say, ignorance. Clients are frequently unaware that
they can have a major influence on the deliverables from a project and,
as a recent survey carried out by BCIS with the QS & Construction
Professional Group shows (see ‘The starting line’, right), surveyors
are not yet in a position to offer much-needed advice.
BIM has the potential to affect every aspect of the surveying
profession. It has applications for those involved with land, property,
facilities management and building surveying, as well as quantity
surveying, and should be seen as an opportunity to deliver new service
streams and to extend our professional reach into new areas spanning
the complete asset life cycle.
There is also little doubt that the introduction of BIM technologies
will automate some tasks currently undertaken by surveyors. A similar
challenge faces members of the design professions, where complex
modelling and analysis processes are also being automated. Far from
being a threat, the introduction of BIM presents a significant opportunity
to increase efficiency and eliminate wasteful, duplicated processes and
to create new service opportunities. Members of RICS need to be ready
to take any opportunity when it arises.
BIM is not going to go away, and so we must learn to adapt and
embrace it, or risk losing ground to others.
8 The Land Journal September-October 2011
The starting line
A recent survey of RICS members (primarily partners and directors) by
BCIS, carried out in association with members of the BIM Steering
Group, provides a valuable insight and baseline reference point for the
profession’s readiness to embrace BIM.
It clearly exposes the low use and awareness of BIM, with few
respondents recognising its potential to benefit what they do, and less
than 5% indicating any frequency of use. Of those members who
responded from the QS & Construction Professional Group, 98%
indicated that this was largely down to the lack of client demand,
while 95% pointed to a lack of training and education.
Clients and building owners, plus facilities managers, were seen as
benefiting most from BIM; perhaps interestingly, suppliers were seen
as benefiting least. Few respondents expected to increase their
baseline fees as a result of it, only 40% saw potential for expanded
services and a disappointing 30% saw no benefit in BIM for
themselves or their organisations.
When asked what RICS should be doing, the respondents gave
guidance on the use of BIM and training opportunities as their two key
requirements, with more than 50% of respondents indicating interest
in the latter. A more detailed analysis of the survey is available at the
QS & Construction practice area on www.rics.org
Steering the process
Having contributed directly to BIS and Construction Industry Council
(CIC) initiatives advising the government to promote BIM through
procurement, the RICS BIM Steering Group is working on a
programme of activity in line with its remit to promote the effective
use of BIM within the surveying profession.
Given the results of the BIM survey, the short term focus is likely
to be on communication, education and awareness. A podcast on
BIM is available to download from the RICS Online Academy:
https://training.rics.org/ (registration and download are free).
The steering group is chaired by Simon Rawlinson (EC Harris) and
includes Steve Pittard, Joe Martin (BCIS) and Simon Raine (Director
of Commercial Services at Faithful & Gould). If you would like to get
involved, please contact Alan Muse, Director of the QS & Construction
Professional Group at amuse@rics.org
Steve Pittard is a Senior Lecturer and Unit Co-ordinator at London South
Bank University and a member of the RICS BIM Steering Group. He is
also Chairman of the RICS QS & Construction IT Business Group, and
sits on the QS & Construction Professional Group Board
Courtesy of KlingStubbins and provided by Autodesk, Inc.
Related competencies include: T056, T072, T078

Continued from page 5
As far as profits are concerned, the Law Commission
has recommended that these should be created only
by written agreement and no longer by implication
or prescription.
A further recommendation is that a right to use
land in a way that prevents the owner from making
any reasonable use of it will not, on its own, prevent
that right being an easement. This paves the way for
car parking rights to be treated as easements – an
issue the courts have been wrestling with over the
last few years.
Extinguishing easements and profits
The Law Commission has also made a number of
helpful proposals about how easements and profits
can be brought to an end.
There has been considerable uncertainty about
how long an easement or profit must be unused
before it can be assumed to have been abandoned.
The rule of thumb used to be that 20 years was
enough, but one case suggested that even 175
years’ non-use was insufficient. Now the proposal
is that an easement or profit that has not been
used for 20 years may be presumed to have been
abandoned. However, it would still be possible for
the person with the benefit of the right to rebut this
presumption.
Another recommendation is that easements in
leases should automatically come to an end if the
lease is surrendered or the tenant acquires the
freehold. This would reverse the controversial decision
in the 2007 case of Wall v Collins, in which it was
held that such rights could survive the termination
of the lease. However, it is recognised that there is
a danger that important rights might be lost, so it
would be possible to elect that the rights survive.
The Law Commission has also recommended
that the jurisdiction of the Upper Tribunal (formerly
the Lands Tribunal) to release or modify restrictive
covenants should be extended to easements and
profits. It should also be easier to make a case for
the release of an easement. However, this will apply
only to easements created in the future, not those
already in existence.
Another interesting recommendation is the abolition
of the rule under which there can be no easement if
the land benefiting and the burdened land are in
common ownership. This will be particularly
welcomed by those developing estates. At the
moment, setting up an estate so that the individual
plot owners enjoy mutual rights over each other’s
land is fraught with difficulties. This proposal would
mean that developers could grant those rights before
selling off the plots and then simply sell the plots with
the benefit and burden of those rights. It will also
mean that a lender who has taken a mortgage over
part of a property will be able to ensure that the
mortgaged land enjoys any necessary rights over the
other part should it have to be sold.
Covenants and the new ‘land obligation’
One of the key proposals in the report is the creation
of a new ‘land obligation’ to replace freehold
covenants. Under the current system, there is a
distinction between restrictive covenants (which
can bind successors in title) and positive covenants
(which do not). However, land obligations will bind
successors in title, whether they are restrictive or
positive in nature.
This, too, will be particularly welcomed by those
setting up new estates, as they will be able to
impose obligations to repair walls and fences and
to contribute to the cost of maintaining estate
roads and services that will bind successors in title.
Currently, various cumbersome mechanisms are
used to achieve this, none of which is perfect.
Because land obligations will be an interest in land,
it will also be possible to register both the benefit and
burden of these at the Land Registry. At the moment,
the benefit of covenants is not registered and, given
the complex rules for the transmission of the benefit
of freehold covenants, it can be extremely difficult to
say with certainty who, if anyone, has the benefit of
a particular covenant.
The changes in the Upper Tribunal’s powers will
also apply to land obligations, so it should be easier
to make a case for modifying or releasing one.
However, these changes would apply only to newly
created land obligations. The old, complex rules will
continue to apply to all existing freehold covenants.
This will create a two-tier system, which will bring
confusion of its own.
What does the future hold?
The Law Commission has recognised that this
is an area of law that is long overdue for reform.
Unfortunately, there is no guarantee that any of the
Law Commission’s recommendations will become
law. Parliamentary time is at a premium and many
fear that this report, like others before it, will end up
gathering dust on a shelf in Whitehall.
Perhaps the fact that the proposals, especially
the simplification of prescription, will aid development
may prompt the government to take note. It is also
hard to imagine that the proposals will be particularly
controversial, which should mean the Bill making
smooth and swift progress through Parliament.
However, even if the Bill does become law, the
old law will continue to affect land for decades, even
centuries, to come. Reform cannot come too soon.
Tim Andrews is a Professional Support Lawyer
in the Real Estate Group of the law firm
Stephenson Harwood tim.andrews@shlegal.com
Related competencies include: T001, T007,
T051, T072
Land rights
One of the key
proposals in
the report is
the creation of
a new ‘land
obligation’ to
replace freehold
covenants
See the RICS suite of
neighbour dispute
guidance at
www.rics.org/land. The
new Party Walls 6th ed.
2011 guidance note will
be launched at RICS HQ
on 11 October.
Car parking rights as
easements: see
Residential Property
Journal July-August 2011,
page 20
www.rics.org/journals
September-October 2011 The Land Journal 9

Planning
Viability check
The new RICS guidance note Financial viability in planning will bring clarity and consistency to the debate
surrounding viability assessments in the planning arena, says Jacob Kut
All too often with development proposals, there is an unbridgeable
gap between perceptions of viability held by planning authorities
and what developments are actually capable of supporting
financially, given planning obligations and policy requirements. Clearly,
a shared understanding of development viability between local planning
authorities and the private sector is fundamental to achieving consistency
of both approach and assessment.
To address this issue, RICS commissioned the property consultancy
GVA and the University of Reading to write a guidance note on the
topic of financial viability in planning, working closely with an RICS subcommittee.
The objective was to provide local authorities, developers,
landowners and professionals with definitive and objective guidance
on evaluating the impact of planning obligations, including affordable
housing, other section 106 requirements and planning policy on the
financial viability of a proposed development.
The guidance, scheduled for publication at the end of next month
(October), provides a framework within which financial viability can be
assessed, regardless of the regulatory regime that is in place, or the
stage in the economic cycle. It is neither a prescriptive tool nor a financial
model, plenty of which have emerged over the last few years to assist
the assessment process.
Pre-guidance practice
Practitioners who have looked to decisions in planning cases for
guidance have been aware for many years of inconsistencies in the
treatment of similar cases. Numerous methodologies for viability
assessments have developed over the years in the absence of guidance
defining exactly how they should be approached.
On both sides of the planning divide, a key issue is to have financial
viability defined, with a clear definition of land value that can be used for
the purpose of appraisals. When undertaking appraisals, practitioners
need to be able to benchmark the residual value derived from the
assessment of a scheme. To date, the most common approach was
to adopt current use value (CUV), or a variant of this, CUV plus a
margin, with the margin often an arbitrary figure ranging from 10-40%
above CUV.
To many in this field, CUV does not reflect the workings of the market,
and most are well aware that land does not sell for its CUV, but rather for
a price reflecting its potential, known as ‘hope value’. No landowner will
sell a site for its value in its current use. The approach of CUV plus a
margin has persisted for many years because it recognises that land will
not be released without a premium above CUV and defines this as a
percentage uplift. It nevertheless remains unsatisfactory, as it assumes
land will be released for a fixed percentage (albeit within a range) above
CUV that is totally arbitrary and does not necessarily reflect the market.
Looking back at this approach with a view to writing the guidance,
I could only conclude that CUV plus a margin was the start of the
process of recognising the need to reflect hope value, but was never
academically challenged or fully tested for the logic of the approach.
In fact, it was a response to dealing with viability issues in a
guidance vacuum.
Structure of the guidance
The guidance contains four main sections, starting with a short property
market overview to illustrate the changing market context within which
10 The Land Journal September-October 2011
property development operates and its impact on viability assessment.
This is followed by a planning overview, which in turn leads into an
explanation of the key features of the development appraisal and the
definition of financial viability. Finally, the guidance considers which
benchmarks a residual appraisal for a specific scheme should be
measured against to assess viability.
The guidance also contains four appendices covering the relevance
of viability to planning, refinements to viability methodology, an outline of
what to include in a viability assessment and a glossary of terms. The
section on refinements to viability methodology considers the effects
of inflation and the use of value and cost forecasts in the assessment
of development viability.
The planning context
We have referred specifically in the guidance to the test for planning
obligations set out in Regulation 122 of the Community Infrastructure
Levy regulations 2010. This states that planning obligations may
constitute a reason for granting planning permission only if:
• it is necessary to make the development acceptable in planning terms
• the obligation is directly related to the development
• it is fairly and reasonably related in scale and kind to the development.
These three prerequisites within Regulation 122 are broadly the same
as three of the five policy tests for planning applications in circular
05/2005, annex B. Financial viability is a key consideration in this,
particularly in the calculation of whether or not a planning obligation
is ‘fairly related in scale and kind to the proposed development’. It
is acknowledged in circular 05/2005 that it may not be feasible for
developments to meet all the requirements set out in local, regional
and national policies if they are to be economically viable, therefore,
planners should consider the ‘balance of contributions’ that might
be sought instead.
Appraisal framework
The guidance references the established principles for appraisal
techniques set out in RICS Valuation Information Paper (VIP) 12. The
accepted method of valuing development land set out in this document,
the residual method of valuation, is acknowledged in the guidance
for use in two basic ways:
• to assess the level of return generated by the proposed project
where the site value is an input
• to establish a residual site value by inputting a predetermined level
of return.
In short, the financial viability test can use the level of developer’s return
or the residual site value as the benchmark for assessing the impact of
planning obligations on viability.
Defining financial viability
The guidance provides this definition of financial viability assessment for
the purposes of town planning decisions: ‘an objective financial viability
test of the ability of a development project to meet its costs, including
the cost of planning obligations, while ensuring an appropriate site value
for the landowner and a market risk adjusted return for the developer in
delivering that project.’

For
Sale
The fundamental issue is whether an otherwise viable development
is made unviable by the extent of planning obligations or other
requirements. A proper understanding of financial viability is essential
to ensure that:
• land is released for development
• developers obtain a market risk adjusted return for delivering
the project
• the proposed development can secure funding.
Where planning obligations reduce the site value for the landowner and
the investment return for the developer to less than a certain appropriate
level, land will not be released and/or development will not take place.
Defining site value
Our starting point for defining the land value element of viability
assessments was to look at the definitions the property industry is
familiar with, rather than invent new ones. Accordingly, we looked to
the RICS Valuation Standards to define the site value, once we had
decided on the definition of financial viability.
The guidance note concludes that site value should equate to market
value. However, such assessment of market value should have regard to
development plan policies and all other material planning considerations
and disregard what is contrary to the development plan. The return
to the landowner will therefore be based on market value after risk
adjustment, so it will normally be less than the current market value of
development land where planning permission has been secured and
planning obligation requirements are known.
Date of assessment
The guidance note provides advice around the significance of the date
of assessment. It recommends that the date be carefully considered
and agreed by the client, even though the decision of the local planning
authority on a planning application must be based on the material
considerations at the date of determination.
Purchase price and holding costs
There has been much to debate recently, both in regard to planning case
law and generally, around how the actual purchase price paid for a piece
For
Sale
For
Sale
For
Sale
For
Sale
Planning
of land/property should contribute – if at all – to the assessment of
viability. In preparing the guidance, the committee concluded that the site
purchase price might or might not be material to the assessment, but
that, in some circumstances, the use of actual purchase price should
be treated as a special case.
The guidance note sets out the issues to consider. It acknowledges
that land values change over time and that there might be a substantial
gap between the date the site was acquired and the date of the viability
assessment. During this period, site values can change. Similarly, it
acknowledges that some developers make unreasonable or overoptimistic
assumptions about the type and density of development
possible on a particular site, and/or the extent of planning obligations
that would be required, which can result in a developer overpaying for a
site. In any event, the guidance advises that the market value of the site
should always be reviewed at the date of assessment and compared
with the purchase price.
Conclusions
This is a very brief summary of the broad contents of the guidance note.
Viability assessments will always be complex and difficult, but RICS
hopes the guidance note will establish best practice for the future.
Greater clarity is long overdue on many issues, which, by remaining
unresolved so far, have resulted in inconsistent planning decisions made
in the absence of any guidance or framework.
At the time of writing, the Financial viability in planning guidance note
was scheduled for launch online on 31 October www./rics.org/land with
hard copies available two weeks later.
Jacob Kut is a Senior Director at GVA and was team leader of the
GVA/Reading University consultant team commissioned by RICS to
write the guidance note Financial viability in planning
Related competencies include: T023, T061, T073, T083
© iStockphoto.com/Steven Dern
For
Sale

Mapping
Registering green
The multiple benefits of green infrastructure are in no doubt, but how can planners plot its area and functions,
from providing shade to growing food, to ensure they are maintained or expanded? Tom Butlin, Chris Chambers
and Fiona Ellis demonstrate how mapping can help
12 The Land Journal September-October 2011
Green infrastructure is being acknowledged
increasingly, at all levels of planning, as
providing a multitude of benefits, particularly
where it is in comparatively short supply such as
large urban areas. Wherever it is located, there is a
strong argument that it should be planned for and
maintained in much the same way as ‘grey’
infrastructure to maximise the benefits to
communities and, in turn, return on investment.
One of the leading regeneration initiatives in
the North West, The Mersey Forest, defines green
infrastructure as ‘all plants and surface water,
wherever they occur. A few examples are a street
tree, the lawn in a private domestic garden, a
football pitch, a moor, a river, and the sea’.
Green infrastructure planning is completely
scalable: it can take place at the
neighbourhood street level all the way
up to regional or even national level
Green infrastructure planning is completely scalable:
it can take place at the neighbourhood street level
all the way up to regional or even national level.
The key at each level is an understanding of
the purpose of planning at that level, so that the
right type and resolution of information is gathered
and the outcomes from the process can be used in a
meaningful way by the levels of planning immediately
above and below.
Apart from the advantages to wildlife and
ecological diversity, the benefits of green
infrastructure to the health and welfare of the
communities that enjoy them is documented in a
number of studies, as is the converse link between
social deprivation and ill-health when communities
have very limited access to green open space,
especially in urban areas.
Local policy context and drivers
Within the Liverpool and Mersey region there are a
number of policy initiatives and incentives to identify
and improve green urban infrastructure. To make
progress, local and regional authorities, such as
Liverpool City Council, needed to develop a green
infrastructure strategy that would promote the
sustainable management of the natural environment.
As The Mersey Forest states in Liverpool City
Council’s Green Infrastructure Strategy (2010),
‘green infrastructure is a critical infrastructure for
the economy and health of the city’.
To that end, a database of the green infrastructure
resource was needed. Planning Policy Guidance 17
(PPG17, Planning for open space, sport and
recreation) provides a guideline typology that could
be adapted as required, while Ordnance Survey
MasterMap Topography Layer provided the
geographic framework on which to build the resource
register. To bring all these elements together into an
effective tool, the authorities turned to The Mersey
Forest to provide the necessary expertise in
geographical information systems (GIS), appropriate
resources and a good understanding of green
infrastructure functionality.
The Mersey Forest approach
The approach is based on the ‘Five steps to green
infrastructure planning’ process set out in the North
West Green Infrastructure Guide and shown in
Figure 1.
Compiling the register of green infrastructure
involved these main tasks, in order:
1. An assessment of data needs and availability
2. Data acquisition
3. Typology mapping
4. Functionality mapping
5. Needs mapping.
Typology mapping determines where the green
infrastructure resources are in the study area and
what type they are. It is carried out by first dividing
the study area into polygons of land (a parcel
system), each of which is then assigned a green
infrastructure type from a master list (or discarded if
there is no green infrastructure), following a consistent
set of rules. The master list has been derived largely
from the land-use types within PPG17, but also some
additional types where planning policy guidance does
not provide enough fine detail.
The most important dataset required is the parcel
system itself. OS MasterMap Topography Layer was
used for the following reasons:
• it is readily available to public bodies under the
Public Sector Mapping Agreement with Ordnance
Survey and is generally accepted as the UK’s
foremost mapping data
• the parcels are relatively small, which gives a high
level of detail and a high level of fidelity to reality
• it is regularly updated
• the parcels are designed to correspond well to real
parcels of homogeneous land cover on the ground
• Ordnance Survey gives the parcels several
attributes that help with assigning types to them.

The second most important dataset is aerial imagery.
The Mersey Forest used 25cm resolution colour
imagery sourced from local holdings, supplemented
by online datasets and other datasets as appropriate.
There are many other datasets that are useful
(especially open space surveys, which most local
authorities have carried out) for distinguishing
between various kinds of public open spaces
containing green infrastructure.
Assigning a type to the individual OS MasterMap
parcels is a process involving:
• a ‘bulk’ typing automated exercise based on
the attribution within OS MasterMap Topography
Layer and additional datasets, such as the open
space surveys
• some manual intervention
• the use of automated data extraction from the
aerial imagery.
The process assigns types to all polygons. The first
process above will correctly categorise about 80% of
the polygons. The remaining 20% or so will need to
be corrected and are examined manually or extracted
automatically from aerial imagery.
Once the initial register has been created,
containing each physical feature and its type, the next
stage is to assign a function or functions, bearing in
mind that each piece of green infrastructure can have
more than one, based on the typology list. Functions
include recreation, shading from the sun, heritage,
food production and so on, according to the benefits
that each item provides.
Once it has been determined which parcels of
land provide which functions, separate maps are
produced showing where each GI function is
performed in the study area. Alternatively, the
total number of functions for each parcel can be
calculated to produce a map of multifunctionality.
Such a map may be useful as an overview of the
existing situation and can form the basis of a more
detailed plan. It provides a level of certainty on the
number of functions and can support policy
formulation and post-implementation monitoring.
Figure 2 gives an example of a multifunctionality
map for Liverpool.
Case study: Liverpool Knowledge Quarter
The general methodology outlined here has been
applied to a number of development sites. This case
study illustrates the value of green infrastructure
mapping at the neighbourhood level.
The Liverpool Knowledge Quarter comprises four
institutions of learning: the University of Liverpool,
Liverpool John Moores University, Liverpool Hope
University and the Royal Liverpool University Hospital.
Despite occupying only 1% of Liverpool’s land area,
the four institutions employ around 7% of the city’s
full-time employed citizens. The economic importance
of the Knowledge Quarter is obvious, but the
Figure 1: The ‘Five Steps’ process
Figure 2: Multifunctionality mapping using The Mersey Forest approach
Mapping

Mapping
Liverpool Knowledge Quarter
Change in multifunctionality
Reproduction from the Ordnance Survey mapping with permission of Her Majesty’s
Stationery Office © Crown Copyright. Unauthorised reproduction infringes the
Crown Copyright and may lead to prosecution or civil proceedings.
TMF Licence No. 100031461 (2009)
Figure 3: Change in multifunctionality based on the original Climax Plan
14 The Land Journal September-October 2011
institutions also plan to invest heavily in redeveloping
the area over the next 20 years.
The trigger for applying the Mersey Forest
methodology to these redevelopment plans came
from the city’s economic development company,
Liverpool Vision. In July 2008, Liverpool Vision
published an urban design framework for the
Knowledge Quarter, authored by URBED, a
Manchester-based urban design consultant. It
included a plan showing what the arrangement of
buildings, streets and open spaces might look like in
20 years’ time, called the Climax Plan. The Mersey
Forest, together with Natural Economy North West
and other partners, suggested that a more detailed
look at the incorporation of green infrastructure would
be vital to the plan’s success and help to deliver
a wider range of benefits for this key area of the city.
In particular, The Mersey Forest was asked to
assess how the changes in the Climax Plan would
affect the green infrastructure of the Knowledge
Quarter site. The project had to maximise the benefits
of green infrastructure planning and implementation
to enhance:
• quality of place – the image of the area
• quality of life – the health and well-being of those
who live or work in the area or are patients at
the hospital
• quality of learning – creating a ‘knowledge
landscape’, a rich resource for study on the
doorstep of the universities.
These three objectives also have clear links to
several of the key themes within the city’s Green
Infrastructure Strategy and the City Region
Framework.
The customer needed a methodology that could
make an assessment of where each of 28 specifically
defined functions of green infrastructure are
performed within the Knowledge Quarter area, both
now and in the future as forecast by the Climax Plan.
The functions ranged from recreation to water
interception and wildlife habitats. Comparing the
existing situation and the Climax Plan in terms of GI
multifunctionality would allow an assessment to be
made as to whether provision would be more or
less functional.
Adaptability of the methodology
In the case of the Climax Plan, the methodology
illustrated that significant amounts of green
infrastructure functionality would be lost. On the
This approach has ensured that the GI element of the redevelopment
of this highly important site will match the GI quality of other public
spaces and amenities within the area

asis of this evidence, the Climax Plan was improved
to retain and add to the existing overall amount
of green infrastructure functionality. When the
methodology was applied again to the revised plan,
it demonstrated clearly that functionality would be
increased. This is shown in Figure 3 (opposite) and
Figure 4 (right). The Mersey Forest approach
prompted URBED to revise the Climax Plan to
increase the GI functionality. This approach has
ensured that the GI element of the redevelopment of
this highly important site will match the GI quality of
other public spaces and amenities within the area.
Conclusions
Green infrastructure has the capacity to meet
many different types of aspirations within a city or
community, from ‘big picture’ issues, such as climate
change and biodiversity, to very personal ones,
such as the health and well-being of a child. A precondition
for beginning to understand the benefits
of green infrastructure is to identify where such
resources exist, understand what kinds of resources
they are and assign function(s) to them correctly.
The development of a geospatial methodology to
create registers of green infrastructure with all this
information, based on detailed topographical data,
provides planners and developers with an adaptable,
robust framework for developing and implementing
policy, as well as testing, modelling and refining
site-specific plans. Thus, green infrastructure can
be optimised and return on investment realised by
all means possible.
Tom Butlin is GIS Co-ordinator with the The Mersey
Forest Team; Chris Chambers is a GIS Consultant
with Ordnance Survey; Fiona Ellis is Propositions
Portfolio Manager at Ordnance Survey
More information
The value of mapping green infrastructure by Tom
Butlin, Chris Chambers and Fiona Ellis is available to
download in full from the Geomatics practice area:
www.rics.org/geomatics
At the time of writing, a replacement for PPS17, Planning
for a natural and healthy environment, had been the
subject of consultation, but not yet adopted.
More information on PPG17 may be
found at www.communities.gov.uk
‘The value of green infrastructure’: an article in the
Land Journal June-July 2011 is available to
download from www.rics.org/journals
The Green Infrastructure in urban areas information
paper is available at the Planning & Development
practice area www.rics.org/planninganddevelopment
Related competencies include: T056, T061, T078
Liverpool Knowledge Quarter functionality
Revised Climax Plan
Change in multifunctionality
Reproduction from the Ordnance Survey mapping with permission of Her Majesty’s
Stationery Office © Crown Copyright. Unauthorised reproduction infringes the
Crown Copyright and may lead to prosecution or civil proceedings.
TMF Licence No. 100031461 (2009)
Figure 4: Change in multifunctionality based on the revised Climax Plan
Green infrastructure in urban areas roadshows – Nov/Dec 2011
Chris Chambers will be a speaker at this
important roadshow addressing the
mapping, planning, valuation and funding of
green infrastructure.
Mapping
For more information about the programme,
dates and venues, go to rics.org/events or
email Stephanie Clay of RICS East on
sclay@rics.org
September-October 2011 The Land Journal 15

Sustainability
Cashing in on energy
As another of the UK government’s policy mechanisms for meeting renewable energy targets, the Renewable Heat
Incentive, becomes operational, Andy Bailey reviews the development of the clean energy cashback scheme
Feed-in Tariffs (FITs) have been in operation
in this country for more than a year; enough
time for people to grasp the principles of the
system, but also for controversial aspects to be
highlighted and changes to be made.
To recap briefly: EU renewable energy directives
and UK domestic policy have set fixed targets for
renewable energy (RE) generation – namely, 20% of
total energy consumed across Europe to come from
renewables by 2020, with the UK’s share of that
translating to 15% of the UK total by 2020 (which
derives broadly from the relative figures for each EU
country dating from 2005). Two of the government’s
main policy mechanisms for furthering these RE
objectives are FITs, introduced in April 2010, and the
Renewable Heat Incentive (RHI), phase one of which
(for the non-domestic sectors) should be operational
by the time you read this.
FITs apply to renewable energy generated by wind,
solar photovoltaics, anaerobic digestion and hydro
and are, basically, payments made to those who
have qualifying and registered RE systems on their
properties producing electricity, from wind turbines
in factory car parks to solar panels on roofs or on
the ground in fields. Pretty much anyone can join
the scheme; the principal limiting factor is that an
RE generator must not exceed 5MW in size.
The ‘generation tariff’ is the main element of FITs.
It is a payment based on a rate per kilowatt-hour
(kWh) of electricity that the RE generation system
produces and is paid on the total output of the
system, whether it is consumed or fed into the
grid, so owners are paid for the energy they use.
On top of that, the ‘export tariff’ is a bonus
payment for every kWh exported to the electricity
grid, so the owner is effectively selling that electricity
to the electricity supply company, which can sell it
on. This payment incentivises energy efficiency, as
owners get paid for every kWh they don’t use and
are therefore able to export.
The lifespan of the FITs is 20 years for most
schemes, but 25 years for solar PV. The tariff is
fixed for the whole period at the original rate,
subject only to index linking. Accordingly, someone
registering a generator knows what rates will apply
to the system for the next 20/25 years. Although
FITs are established in law, the money is paid by
the energy suppliers, not the government. Inevitably,
the suppliers pass on the cost of the scheme to all
their customers, so the bottom line is that people
who don’t install RE generation will, in effect, be
subsidising those who do.
The different types of RE covered by the FIT
scheme have different rates of generation tariff
applied to them and the rates also vary according
16 The Land Journal September-October 2011
System type System size
to the capacity of the system. Figure 1 shows the full
table of rates since indexation was applied on 1 April
this year.
Initially, the tariffs were fixed until 31 March 2012
at what were expected to be the highest rates.
Thereafter, gradual decreases were expected, since
annual reviews would take account of, for example,
expected reductions in hardware costs (the principle
of ‘degression’). However – and this is where the
controversy lies – a review of the tariffs was fasttracked
by the government, because of concern
that an industrial level of uptake of large solar PV
systems (units above 50kW) was threatening to
absorb the funding allocated to FITs, to the detriment
of other technologies/beneficiaries.
Generation tariff
(pence/kWh)
Duration
(Years)
Anaerobic digestion * ≤500kW 12.1 20
Anaerobic digestion * >500kW 9.4 20
Hydro ≤15kW 20.9 20
Hydro >15-100kW 18.7 20
Hydro >100kW – 2MW 11.5 20
Hydro >2MW – 5MW 4.7 20
Micro-CHP 4-10kW 37.8 25
Solar PV * >10-100kW 32.9 25
Solar PV * >100kW – 5MW 30.7 25
Solar PV * Standalone 30.7 25
Wind ≤1.5kW 36.2 20
Wind >1.5-15kW 28.0 20
Wind >15-100kW 25.3 20
Wind >100-500kW 19.7 20
Wind >500kW-1.5MW 9.9 20
Wind >1.5MW-5MW 4.7 20
Figure 1: Generation tariff levels from April 2011 exclusive of August 2011 changes (* the rates for
AD and Solar PV are now being amended – see below)
System type System size Generation tariff
Solar PV >50kW – ≤150kW 19.0p/kWh
Solar PV >150kW – ≤250kW 15.0p/kWh
Solar PV
>250kW – 5MW and
stand-alone installations
8.5p/kWh
Figure 2: Changes to tariff levels from 1 August 2011 for solar PV systems above 50kW

Figure 3: Table of eligible technologies for RHI payments and tariff rates for phase 1 (industry, business and large organisations)
This review has resulted in the government
announcing reductions in the rates payable for solar
PV installations above 50kW. Figure 2 shows the
replacement rates that, at the time of writing, were
expected to be implemented by 1 August.
Given the reduction in the tariff rate for installations
over 250kW (and stand alone – i.e. on the ground,
rather than on roofs) from 30.7p/kWh to 8.5p/kWh,
it will come as no surprise that companies which
invested considerable sums in larger-scale
installations are deeply unhappy. An application to
the courts for a judicial review of the decision has
been launched, but at the time of writing, had yet
to be determined.
The government has taken the opportunity to
change the rates payable for AD as well, but in this
case upwards, as it was perceived that AD needed
more encouragement. So, again from 1 August, the
new AD rates are 14p/kWh for installations up to
250kW and 13p/kWh for installations from 250kW
up to 5MW.
A fixed ‘floor price’ for the export tariff has been
set at 3p/kWh, index-linked to the retail price index
(which makes it 3.1p now), whatever type of
renewable energy it applies to. However, you also
have the opportunity each year to opt out of this
fixed price and try to negotiate a better rate with
an electricity supply company.
Renewable Heat Incentive
The FIT arrangement is the first limb of what
is sometimes referred to as the ‘clean energy
cashback scheme’; the second limb is the RHI.
This is intended, basically, to do for renewable heat
generators and producers of biomethane what FITs
does for renewable generators of electricity. The
technologies included in the scheme are:
• biomass boilers (including CHP biomass boilers)
• solar thermal
• ground-source heat pumps
• water-source heat pumps
• on-site biogas combustion
• deep geothermal
• energy from municipal solid waste
• injection of biomethane into the grid.
RHI provides a continuous income stream for a
period of 20 years to any organisation that installs
an eligible renewable heating system, with the aim
of making it more commercially attractive than fossil
fuel alternatives. ‘Renewable heat’ means any heat
generated using a renewable technology or source –
for example, equipment that uses the sun, ground or
water to generate heat. Also included are ‘renewable’
fuels such as sustainably harvested wood and other
plants, biogas and the biomass content of eligible
waste streams.
The first phase of the scheme supports the
non-domestic sectors only – i.e. businesses, public
sector organisations, charities and not-for-profit
organisations, and industry. The plan is to expand
support to the domestic sector in 2012. In the
meantime, a limited scheme called the Renewable
Heat Premium Payment is going to be available to
selected households, essentially as a trial run. In
return for the payments, participants will be asked
to provide some feedback on how the equipment
works in practice.
As with FITs, the level of support will vary
depending on the type and size of the technology.
Figure 3 shows the table of rates that will apply and
the appropriate rate will be multiplied by the eligible
heat used.
At the time of writing, the first phase of RHI was
due to come into operation by the autumn, making it,
by all accounts, the first financial incentive scheme for
renewable heat in the world.
Andy Bailey is a Partner and Head of Energy
at Knights Solicitors LLP
andy.bailey@knightsllp.co.uk
Sustainability
Tariff name Eligible technology Eligible sizes Tariff rate (pence/kWh) Tariff duration (years)
Small biomass
Less than 200kWth
(kilowatt thermal)
Tier 1: 7.6
Tier 2: 1.9
Medium biomass
Solid biomass;
Municipal solid waste
(incl. CHP)
200kWth and above;
less than 1,000kWth
Tier 1: 4.7
Tier 2: 1.9
20
Large biomass
1,000kWth
and above
2.6
Small ground source Ground-source heat pumps;
Water-source heat pumps;
Less than 100kWth 4.3
Large ground source Deep geothermal 100kWth and above 3
Solar thermal Solar thermal Less than 200kWth 8.5 20
Biomethane
Biomethane injection
and biogas combustion,
except from landfill gas
Biomethane all scales,
biogas combustion
less than 200kWth
Related competencies include: M009, T028, T030,
T051, T054
September-October 2011 The Land Journal 17
20
6.5 20
RHI provides
a continuous
income stream
for a period of
20 years to any
organisation
that installs
an eligible
renewable
heating system

Point of view
Going with the flow
Texas-based rural appraiser Richard Dockery has the best of all worlds: the quiet rural life he wants and scope for
professional growth as he moves with some earth-shattering (literally) changes
Ilive in southern Texas. Texas is a large state, as long as 801 miles
(1,289km) across from east to west and 773 miles (1,244km) from
north to south. It is the second largest state in the union next to
Alaska, and the largest of the 48 states in continental USA. Its population
is 22m and growing quickly and its largest city, Houston, is the 4th
largest in the country. The urban centres are Houston, Dallas, San
Antonio, Austin, and El Paso.
Each region of the state is different from every other and the climates
can vary by 60°F from one city to another on the same day. It may be
snowing in the northern Panhandle, while the south bakes in the sun
along the border of Mexico. People here drive big trucks with large metal
grill guards and meaty, thick-walled tyres less for style than for function,
because the flora punctures tyres.
It is a place known for its cowboys, cattle and oil. All three still play a
dominant role in the state’s economic fortunes. More especially oil, as it
continues to lubricate our lives by balancing budgets and educating our
children. If you want to know the economic condition of the state of
Texas, just check the world oil commodity market.
I am a real estate appraiser and live in Three Rivers, which is located
75 miles south-east of San Antonio, half-way to the Gulf of Mexico near
Corpus Christi. We have a semi-tropical climate that is very warm and
humid. It has snowed twice here in the past 75 years. It is a very poor
part of the state, with low incomes, below-average high school and
college graduation rates and little development. That is changing, as
I will explain later.
The population of Three Rivers is 1,800 in a county of 10,000. My
core business area has a 50-mile radius and 60,000 people. The
neighbouring county to the west, McMullen, has only 800 people.
Life here is slow. The wheels do not turn too fast, which is the way
most people like it. Most farmers and ranchers say ‘fewer people, fewer
18 The Land Journal September-October 2011
problems’. They may be right. The population here has not changed in
the past 60 years, while the large cities have exploded in growth and
development. Most towns in South Texas were founded in the early
1900s and developed from large oilfield discoveries. Growth and
development waned as those fields eventually dried up, and business
left. Today, most small South Texas towns have a majority of immigrants
from Mexico, both legal and illegal, and a population of 2,000 to 3,000.
The economic base of this region remains aligned to agriculture and the
petroleum industry.
I came here, and stayed, for one reason: family. I wanted to raise my
family in a small community and since my wife is from Three Rivers, we
quickly decided this was the place. Most residents feel the same, but are
also attracted to the slower pace and low cost of living. This is one of the
cheapest places to live in the US. It is not always how much you make,
but what you keep in your pocket.
My business is divided into three parts: valuation, sales and
technology. I focus on appraising, but I am also a broker. I started
appraising homes for the local bank. Later, I sold residential homes and
ranches, realising that my market knowledge and skills were a perfect fit
for sales. As my education, knowledge and experience have increased, I
have taken on the more complicated assignments and now spend most
of my time valuing and selling the larger farms and ranches. People trust
my integrity and judgement.
Most farms here are non-irrigated, with the main crops being corn,
grain, sorghum and cotton. The water table in some places can be as far
as 5,000 feet below ground level. It comes out very hot – 150°F – and
very salty. There are few agricultural operations in the area, due to the
lack of consistent rainfall and the high risk associated with farming as a
result. The average rainfall is about 28 inches a year, which might come
in one or two months during the hurricane season. Cattle-ranching is

Images courtesy Richard Dockery
the primary land use.
Ranchers typically
maintain stocks at a level
of one cow per 10 to 15
acres. That might seem
low, but ranches here
can be 2,000 to 20,000
acres in size. Given the
inconsistent rainfall,
conservative cattle
stocking is the preferred
ranching practice.
Recreational hunting
is becoming the most
significant land use.
About 10 years ago, ranchers realised a significant new income source
from their property. Hunters from the city, trying to get away from it all,
were coming back time and time again for weekend hunts. As a result,
more and more ranches are being converted for quail and/or deer
hunting, as most buyers prefer recreational use to farming or ranching.
To ensure quality hunts, landowners erect eight-foot-high game fences
and stock ranches with deer known for producing large antlers.
Secondary businesses include white-tailed deer farming and quail
farming. Deer breeding is a growing industry, with some record bucks
selling for more than $100,000 (£62,000). These are amazing animals
with huge antlers.
A crude awakening
Although life here is simple and honest, things have changed recently.
In early 2010, oil companies announced that the horizontal drilling and
Point of view
From far left: a parched field of corn; another pipeline soon to be put in place; Richard with one of the hazards of
the job, a rattlesnake
Deer breeding is a growing industry,
with some record bucks selling for
more than $100,000 (£62,000)
hydraulic fracturing technology known as ‘fracking’ was coming to
our area. A 400 mile-long oil field called the Eagle Ford Shale was
now financially viable for exploitation and would bring new jobs and
development to the area. Oil pundits say this find is ‘the Big One’, and
able to satisfy the US’s insatiable thirst for oil for the next 100 years.
It has made a lot of people frothy with excitement. Companies began
leasing large swathes of land for oil and gas exploration. That activity has
exploded into a large drilling operation as new wells have come online.
Rumour has it that there are plans to drill approximately 90,000 wells in
the Eagle Ford formation over the next 10 years. That activity has
caused this sleepy, slow area to be abuzz with activity as land use
changes from agricultural to industrial oilfield.
So, what does this mean to the average landowner? Here’s the math.
Suppose you own 2,000 acres with 100% of the mineral estate. An oil
company will conservatively pay $3,000 (£1,855) per acre, called bonus
money, for the right to drill on your land. That immediately puts $6m
(£3.7m) into the pockets of a landowner who has never seen this kind
of money. When they do drill, successfully negotiated leases allow for
the owner to receive 25% of what is produced.
A typical new well produces 1,000 to 2,000 barrels of oil a day in the
first few months. That means the owner will receive his first cheque in
the amount of $500,000 to $1,000,000 (£309,000 to £618,000) the first
month! That 2,000 acre ranch has the capacity for 50 wells. An oil well
September-October 2011 The Land Journal 19
© Sue McNeill

Technology
Fracking: Old technology, new
The economic transformation taking place in South Texas is the stuff of fantasy, but the drilling method that has
made it possible – hydraulic fracturing, or ‘fracking’ – is immensely controversial. And now it is in the UK.
Roz Wrottesley reports
‘Cuadrilla Resources is a UK company… focused on bringing
together leading unconventional oil and gas explorers, developers
and technologists to unlock untapped unconventional resource plays
in selected parts of Europe. In the United Kingdom we are the first
company to explore unconventional energy sources. We are
currently working on two sites at the Bowland Shale near Blackpool
in Lancashire, and we have permission to explore a further four
nearby.’ – Cuadrilla Resources website
That uncomfortable word ‘unconventional’ was explained when Cuadrilla
Resources CEO Mark Miller appeared before the House of Commons
Parliamentary Energy and Climate Change Committee’s ‘Shale Gas’
enquiry in March: “We’re not really using unconventional technology,” he
said. “Shale gas exploration techniques, including hydraulic fracture, are
conventional and have been used across the oil and gas industry for
many decades. It is the resources that are unconventional.”
Indeed, hydraulic fracturing was introduced in the US by the energy
production company Halliburton in 1947, but has expanded dramatically
recently thanks to new horizontal drilling methods. With oil and gas
production in the US falling and hydrocarbons still the world’s leading
source of energy, the company argues that fracking is essential, as well
as being one of the most effective and safe methods available of
stimulating production. In fact, according to both Halliburton and the
Interstate Oil and Gas Compact Commission in the US, 90% of oil and
gas sites in the US make use of fracking technology to improve
production. By one estimate, shale gas will account for up to half the
natural gas production in North America by 2020.
The process
Where oil- and gas-bearing rock formations are relatively impermeable
and slow to release their reserves, large volumes of fluid (around 95%
water, plus sand and chemicals) are pumped underground under
pressure to fracture the reservoir rock and allow the oil or gas to escape
at a much faster rate. While the sheer volume of liquid causes the
fractures, the process is facilitated by the chemicals (usually including
will not produce forever, but it is mind-boggling to see people receive this
type of wealth overnight. It is literally like winning the lottery. What’s crazy
is that there are hundreds of instant, overnight millionaires – and some
billionaires – quietly filling up the local banks. The money is trickling
through the economy as people improve and upgrade their lives.
Best and worst
Long, hot, dry summers may be common in South Texas, but this year’s
is being called one of the worst droughts in Texas history. Municipalities
throughout the state are monitoring and limiting water use, but locally,
the strain is even more acute due to the explosion of development and
the influx of people putting pressure on the existing utility infrastructure.
Fracking uses a lot of water, and issues of volume and possible
20 The Land Journal September-October 2011
hydrochloric acid), which help to dissolve the rock and make it more
porous. The sand – or in some cases, ceramic beads – is deposited in
the cracks to keep them open. Other substances may be added to the
mix to aid the flow of fluid, including gelling agents and nitrogen gas.
Much of the fracking fluid is removed to allow the flow of oil of gas, but
some (as much as 20% and 40% by some estimates) remains trapped.
The oil companies claim it cannot reach the surface or pollute water
supplies, but opponents of the technology argue otherwise, claiming
that the process is the likely culprit in a number of reported cases of
deterioration in the quantity or quality of the water supply in the US.
As exploration for oil- and gas-bearing shale rock formations moves
from the US to Canada, Australia, parts of Asia, South Africa, the UK
and other European countries, such as the Netherlands and Poland,
Greenpeace is a leading opponent of the technology and provides
inspiration to local opposition groups. The environmental group lists
its main concerns as pollution of underground water sources, depletion
of water resources, a carbon footprint from fracking that exceeds that
of coal, landscape degradation and noise pollution.
Such arguments are having great resonance in some areas: in the
Canadian city of Quebec in June, 3,000 protesters joined a march
against shale gas drilling; in South Africa, sustained public opposition
to plans to drill for gas in the semi-arid Karoo area were put on hold in
April while the true ecological consequences are explored; in France, the
National Assembly voted to ban the practice in May and, at the time of
writing, it remained to be seen whether the Senate would agree, making
France the first country in the world to impose an outright ban.
Tremors in Lancashire
In the UK, the shale gas ‘find’ off the Lancashire coast near Blackpool –
at a site known as Preese Hall 1 – in the middle of last year was hailed
as the first significant find in Europe, with potential to make an important
contribution to the UK’s gas resources. Green Party objectors and a
report funded by the The Co-operative Group and published in January
called for a moratorium on fracking operations until the environmental
impact had been fully assessed. The report, produced by the University
of Manchester’s Tyndall Centre for Climate Change Research, referred
to a temporary ban on fracking in New York State (now lifted) prompted
contamination are being hotly debated. Given the severity of the current
drought, and the number of wells and people still to come to this area, it
is unclear how the water supply will hold up without more conservation.
So pundits argue about personal and corporate profits versus
posterity and the long-term effects on our aquifers. Certainly, there are
no quick, easy, or cheap solutions to be found by those responsible for
our water supply. I expect water to be the biggest challenge we face in
years to come.
New tricks
It won’t make it any easier that new ways of doing things are not
embraced here. Internet access, computers, and automation are not
part of the workflow, due to slow connection speeds, the cost of digital

controversy
One of the new landmarks in South Texas, reflecting the oil-rich geological formation that is Eagle Ford Shale
by suspicions that shale gas extraction carried a risk of ground-
and surface-water contamination. It also suggested that exploiting
unconventional gas and oil resources would only delay the
development and adoption of renewable alternatives.
However, the Department of Energy and Climate Change (DECC)
remains broadly supportive of shale gas exploration, and the Energy and
Climate Change Committee’s enquiry earlier in the year dismissed fears
about the safety of fracking and, in particular, the risk it might pose to
underground water supplies.
Fracking duly began in March, but two minor earth tremors in the
area in April and May have prompted Cuadrilla Resources to cease
operations voluntarily while experts investigate whether they were
caused by the drilling.
At the time, Brian Baptie of the British Geological Survey told The
Independent newspaper, “It is well-established that drilling like this can
trigger small earthquakes. We had a couple of instruments close to the
site and they show that both events were close to the site and at a
shallow depth,” he said.
“The timing of these two events, in conjunction with the ongoing
fracking at the site, suggests that they may be related.”
An operations status report published by Cuadrilla on 28 June said the
company was taking the ‘prudent and responsible’ course of suspending
operations until the company could supply DECC with a detailed geo-
conversion and the steep learning curve awaiting anyone directed to
deliver these services. Sensing an opportunity, I created an online title
research company that quickly researches ownership of land titles
through county records. Rather than have my services commoditised,
I have found a niche providing information online for the rural areas I
serve. I also created a GIS-based system for researching ownership
of the parcels of land the oil companies need. It has been a hit as more
people try to figure out who owns what and where.
I enjoy what I do, and feel lucky that few people have discovered the
good life in small-town America. My goal is to position myself between
the people with land, their needs, and what I can do to help them solve
new problems… inevitably, taxation.
The future looks bright. It’s a great time to be in South Texas.
Technology
mechanical report establishing whether or not there was a link between
the tremors and the fracking operations.
The company went on to say: “The intensity of the tremors is well
below anything that could be realistically considered as an earthquake
with any meaningful or tangible local impact. The tremors have not led to
any recorded structural damage or physical injury and the British
Geological Survey describes these tremors in a statement as ‘pretty
insignificant even by UK standards’.
“Contrary to some misreporting in the media, drilling operations are
not affected, as no link has been suggested between drilling and seismic
activity. Therefore the Grange Hill site is still active. Plans to drill at a site
near Becconsall, between Preston and Southport, are progressing and
public consultation is already under way with the local community and
officials. A community consultation event attended by over 100 local
people took place on 6 June.
“Cuadrilla is investing in more seismic monitoring equipment for the
operations, to enhance the coverage already supplied by the British
Geological Survey, which was installed after the 1 April event at
Cuadrilla’s request. Cuadrilla remains certain that its operations are
completely safe for people, property and the environment.”
That report was projected to take eight weeks to produce (meaning it
could be published around the time you read this), but might take longer,
depending on the availability of the necessary technical expertise.
Richard Dockery is Director of Dockery and Associates and a
member of RICS
richard.dockery@gmail.com
Related competencies include: T001, T049, T055
September-October 2011 The Land Journal 21
© Sue McNeill

Drains and sewers
Lateral thinking
The transfer of responsibility for private sewers and lateral drains on 1 October will be widely welcomed, but there
are caveats for landowners and developers, as Anita Kasseean explains
Until a problem occurs, many property owners are unaware that
they are responsible for the pipes that drain from their property
into public sewers. These include pipes that go beyond the
property boundary and may also serve other properties. There is an
estimated 200,000km of private sewers and drains in England and
Wales and, at present, liability for works on any private part of the
network lies with the owner of the property it serves. Needless to say,
repair bills can be very high.
What has happened?
New legislation, the Water Industry (Schemes for Adoption of Private
Sewers) Regulations 2011, came into force on 1 July, transferring
ownership of private sewers and lateral drains (explained below) in
England and Wales to water and sewerage companies. The new
regulations apply to both commercial and residential properties and
could have significant consequences for property owners and
developers.
No action is required from
owners, although they can
appeal should they wish to
retain ownership
Under the new regulations, water and sewerage companies are required
to use their existing powers under the Water Industry Act 1991 (WIA) to
effect a transfer of ownership of all private sewers and lateral drains that
connect to the public sewerage system as at 1 July 2011. The WIA
requires water and sewerage companies to serve a notice of the
proposed transfer on owners and to publish the notice in the London
Gazette and local/regional newspapers at least two months before the
date of transfer. The notice will specify which sewers and drains will be
transferred and the date on which they will become a ‘public’ asset
vested in the company. No action is required from owners, although
they can appeal should they wish to retain ownership. If there are
no appeals, the transfer of ownership of all private sewers and lateral
drains that are connected to the public sewerage system will take place
on 1 October.
Property owners and third parties with an interest (e.g. third-party
landowners whose land has a drain or sewer passing through it) can
appeal against:
• the proposed transfer of ownership
• a failure by the water and sewerage company to propose to transfer
ownership.
Appeals against proposals to transfer ownership must be made within
two months of either the notice being served or the notice being
published. If the notice is both served directly and published, property
22 The Land Journal September-October 2011
Defra has published these diagrams to illustrate how the new regulations
will affect responsibility for sewers and lateral drains. Above: division of
responsibility at present. Below: division of responsibility after 1 October
owners must appeal within two months of the later event. There is no
time limit on appeals against failures to propose transfer of ownership.
What types of sewer and drain are affected?
Private ‘sewers’ and ‘lateral drains’ are caught by the regulations.
A ‘sewer’ is a pipe that serves more than one property and includes
sewers and drains that are used for the drainage of buildings and
ancillary yards such as manholes, pumps, ventilating shafts and other
accessories belonging to the sewer, as well as the tunnel or conduit that
serves as a sewer.
‘Lateral drains’ are portions of pipes serving only one property that are
situated outside the boundaries of the property they serve.
What will not be affected?
Private drains that service individual properties and lie within the property
boundary will remain the responsibility of the property owner, as will
© Defra

The transfer of ownership under the regulations overrides any
agreements concerning ownership and/or maintenance of the
private sewers and lateral drains entered into by property owners
connections that do not drain into the public network (for example,
drains or sewers to cess pits and septic tanks).
Private sewers and lateral drains situated on or under Crown land are
also exempt if a notice of such exemption has been received by the
water or sewerage company from the government department managing
the land in question.
Private sewers and lateral drains owned by railway undertakers are
also exempt.
How will developers and landowners be affected?
1. Existing section 104 agreements
Anyone proposing to construct a sewer can enter into a section 104
agreement with a water and sewerage company whereby that company
adopts the sewer at a specified date after the work is completed,
provided the sewer is constructed in accordance with the terms of the
agreement. As a result of the new regulations, existing section 104
agreements are now mostly redundant, depending on whether the sewer
is built and connected to a public sewer.
According the new legislation, sewers that are subject to a section
104 agreement and are built and connected to a public sewer on 1 July
2011 will qualify for transfer under the regulations. The transfer date will
be either the date of transfer in the agreement or 1 October 2011,
whichever is earlier. The section 104 agreement will terminate on the
date of transfer, although the water and sewerage company will be able
to use the security provision in the agreement to recover any expenditure
it has incurred on work carried out on the sewer before the transfer.
Sewers subject to a section 104 agreement that are not built or
connected to the public sewer on 1 July 2011 will not qualify for transfer
on 1 October and the section 104 agreement will remain in place until
the transfer takes place in terms of the agreement.
For new-build sewers and drains, however, the position is slightly
different. The Flood and Water Management Act 2010 (FWMA 2010)
brought in new provisions relating to adoption. Once these new
provisions are in force (at the time of writing the enforcement date is
expected to be 1 October this year), all new lateral drains and sewers
(other than surface water drains) will need adoption agreements before
construction and connection to the public network. Such agreements
must include certain details about standards of construction, as well as
the terms of adoption by the water or sewerage company. Thus, once
the FWMA 2010 is in force, developers will need to liaise with water and
sewerage companies at an early stage to agree the terms of the
adoption agreement, including the construction details.
2. Lift and shift provisions
With potential redevelopment in mind, landowners frequently insist
upon a ‘lift and shift’ obligation, requiring a water and sewerage
company to move its apparatus at the company’s own cost in the
event that the landowner genuinely intends to carry out development.
In terms of the new regulations, landowners who have been granted
such a right will lose it.
While the WIA allows for landowners to request the removal or
relocation of a sewer, water and sewerage companies have discretionary
powers to charge a landowner for such diversions. Compensation claims
Drains and sewers
related to these types of matters are provided for in the WIA, with claims
for compensation determined by Ofwat. In light of this, landowners may
wish to consider whether there are any financial implications arising out
of their ‘lost’ rights.
3. Multi-let sites
Owners of large multi-let sites may find that the sewers are not
transferred under the new regulations, because the buildings on such
sites are considered to be within the same curtilage. Landlords will need
to continue to ensure that the service charge provisions within leases are
robust enough to cover any works required on sewers or drains that
have not been adopted by the water and sewerage company.
4. Maintenance and repair
The transfer of ownership under the regulations overrides any
agreements concerning ownership and/or maintenance of the private
sewers and lateral drains entered into by property owners. These could,
for example, be easements negotiated between neighbours, who might
prefer them to remain in place. Developers in particular, might have been
at great pains to retain ownership and control of the pipes and sewers
on their land, so that they could ensure their type, location and
maintenance fitted in with future development plans.
5. Increased bills
The most obvious downside for property owners is that the sewerage
element of water bills will increase to reflect the increase in the amount of
pipework that the water companies are responsible for. According to
Defra’s estimate, sewerage bills will rise annually, starting at an average
rate of £5 a year in 2011 and rising to £8 a year by 2019.
6. Access
Water and sewerage companies will have a right of access to any
sewers or lateral drains situated on private property and the transfer of
ownership could make it more difficult to build on top of sewers and
lateral drains, with consent being required from the relevant water and
sewerage company.
Next steps
Appeals can be made to Ofwat and the grounds may be either:
a) the sewer/drain does not meet the criteria for the transfer
b) the transfer would be ‘seriously detrimental’ to the appellant.
Anyone who is concerned about the changes should take early steps to
contact the relevant water authority to establish the authority’s intentions
and be ready to appeal against the transfer of ownership if necessary.
Anita Kasseean is an Associate in the Planning and Environment Group
at Stephenson Harwood
Anita.kasseean@shlegal.com
Related competencies include: T001
September-October 2011 The Land Journal 23

Land ownership
Why form a charitable land
Unable to depend on traditional succession and burdened by huge expenses, owners of large estates have to
fight to keep their heritage intact for future generations. Forming a charitable land trust is one solution, says
James Ruddock-Broyd
Charitable land trusts have been formed for centuries for a variety
of reasons. Some of the older ones were set up to provide an
investment income for charitable purposes, such as education
or religion. More recently, particularly during the 1970s and 1980s,
charitable trusts were formed to prevent fragmentation of historic estates
and ensure they remained a single entity in perpetuity for community and
public benefit.
Traditionally, the owner of such an estate was a steward of the land,
who used his wealth and influence to the benefit of the local community.
But he is becoming an increasingly endangered species who has to fight
for his survival. In many cases, the landowner has no direct heirs and the
risk of the estate being broken up under the burden of capital taxation is
a serious consideration. The liability for capital transfer tax (CTT), formerly
inheritance tax, is incurred on the transfer of assets, either during an
owner’s lifetime or on death. When most charitable land trusts were
formed in the 1970s, the tax had a top rate of 95%. Since 1979, the tax
rate has been reduced to 40% and recent changes in the law relating to
housing and farm tenure exemptions has allowed for the burden of CTT
on landed estates to be considerably eased. So far fewer charitable land
trusts are created.
Nevertheless, the planning required to keep an estate in private
ownership and maintain its viability for present and future generations is
considerable. A charitable trust allows the owner (the ‘settlor’) to exert
influence on the future of the estate through the trust deed and set
long-term objectives for the property. There might be other charitable
objectives, but the primary intention is usually to restore, preserve and
maintain the estate property for the public benefit.
Charitable status
Generally, there are two types of land trusts: a family trust and a trust
with charitable objects. The former ensures the long-term continuity of
family assets, while the latter allows a donor with philanthropic ideals
to form a trust for the ‘public benefit’ of a group of people or the
public at large.
A charitable land trust involves the irrevocable conveyance of the legal
estate in the land to a body of charitable trustees. As long as the Charity
Commission’s guidelines on public benefit are met, any land, with or
without buildings, may be settled on a charitable land trust, ranging
from a vast estate and mansion house to a garden or folly. The Charity
Commission’s guidelines relate to the use to which the capital and
income is put after settlement.
In order to satisfy the law of charities and the tax laws, the settlor
forsakes all the legal and financial benefits of ownership. Hence, rights
of occupation and all sporting rights have to be paid for at a full market
rent through the agreement of the trustees. In special cases it has
proved possible to set up a land trust for a limited period of, say, 99
years, but this is the exception rather than the rule.
While one of the driving forces behind the establishment of land trusts
is the burden of tax, another is the need for a structure to hold land in
trust for the very long term – something the law relating to private trusts
has for centuries sought to prevent. Charitable trusts, being exempt
from the rule against ‘perpetuities’, make it possible to ensure a property
is maintained intact for the public benefit for successive generations,
unaffected by the uncertainties of human mortality or accidents of birth.
24 The Land Journal September-October 2011
Trusts are formalised in the trust deed, which sets out the charitable
purposes, the names of the trustees, terms of office, conditions of
dismissal and reappointment, and so on. There are usually no fewer
than three trustees, and the settlor of the trust (the erstwhile landowner)
with his family could be among them. Even if there are other charitable
objectives, the primary intention is to restore, preserve and maintain an
estate for the public benefit. It was accepted by the courts (in re Verrall
[1916]) that the permanent preservation for the benefit of the nation of
lands and buildings of beauty or historic interest constituted a valid
charitable purpose, provided it was for general benefit and not only for
the benefit of the donor family. Thus, preserving the land as an estate is
not enough; there has to be some public benefit arising from its scientific
or historic interest or outstanding natural beauty.
Charitable trusts, being
exempt from the rule against
‘perpetuities’, make it possible to
ensure a property is maintained
intact for the public benefit for
successive generations
Public benefit
Until recently, the definition of charitable benefit had remained the
same since the 16th century: the relief of poverty, the advancement of
education, the advancement of religion and other purposes beneficial
to the community. After much consultation in the last decade, the
Charities Act 2006 was passed, extending the list of purposes to 13
and introducing an overriding requirement for ‘public benefit’. Whereas
there had been a presumption that any charitable purpose was for the
public benefit, under the current legislation this has to be demonstrated
to the satisfaction of the Charity Commissioners.
The purposes most appropriate to land charities are education,
community development, promotion of the arts, culture and heritage, the
advancement of science and environmental protection or improvement.
Preservation and conservation were included as purposes in the
draft Bill, and the Charity Commission produced a helpful booklet
in February 2001, No. RR9, outlining the conditions under which
preservation and conservation organisations could achieve charitable
status. However, these purposes were not incorporated in the Act and
such organisations have to provide expert evidence to support their
‘public benefit’ credentials.
The Charity Commission instituted ‘review visits’ to ensure charitable
trusts were fulfilling their obligations in terms of management and the
public benefit, but feedback from those who experienced such visits
indicated that commission staff did not always seem to comprehend the
nature and operational management of rural estates. However, principally
due to the recent severe public sector budget cuts, the review visits

trust?
have largely ceased and are now confined to situations where serious
concerns are raised.
The constitutions of land charities are many and varied, but
generally are of two kinds: grant-giving, where the surplus is awarded
to individuals and/or other charities, and where the surplus is reinvested
in improvements of the functional land and property.
Taxation
A charitable trust qualifies for a number of tax exemptions and reliefs on
income and gains and on the profits from some activities. A cardinal rule
is that income and gains must be used for charitable purposes only.
Subject to that, a charity may reclaim tax on income donated under
West Dean, West Sussex
Edward James inherited the 6,400 acre West Dean estate on the death
of his father in 1912. It remained in the control of his trustees until he
was 25 in 1932. Edward died in 1984, 20 years after creating his
eponymous charitable trust, the Edward James Foundation.
Although latterly he did not live at West Dean, for many years he
had wanted to find a way to preserve the family house and estate as
an entity, to put it all to some useful purpose and so prevent his estate
being broken up upon his death. The creation of a charitable trust
secured that continuity of purpose and ownership.
The primary objective of the foundation is education, focused on
an internationally renowned range of programmes in the visual and
West Dean’s magnificent manor house, now West Dean College
Land ownership
the Gift Aid scheme and on income (e.g. bank interest) received after
deduction of tax, but not dividend tax credits. Most investment income is
tax free, including rent and other income from land, but trading income is
normally taxable. To avoid paying the latter, many charities set up whollyowned
subsidiary trading companies and receive tax-free donations of
the company’s profits, which are reduced by the amount donated. Gifts
of land and shares from individuals may qualify for income tax relief on
the value donated.
Capital gains made by charities are tax free. A person giving an asset
to a charity does not pay capital gains tax, but the charity inherits the
base cost to the donor of the asset and could be liable for tax if it
disposes of the property later, when it has ceased to be recognised as
applied arts and practical conservation/restoration at West Dean
College. The college is also well known for its continuing education
programme of courses in art, craft, music, photography and gardening.
The estate continues to provide resources to help meet the
operational costs of running the college and fulfil its educational
objectives. Last year, the trustees broadened the foundation’s
charitable objectives to include, as a secondary objective, the
preservation of the estate to reflect its historical, architectural,
environmental and scientific importance. This has the effect of
‘locking’ the estate to the college, creating a mutually beneficial
symbiosis that precisely fulfils the founder’s original wishes.
September-October 2011 The Land Journal 25
© Edward James Foundation

Land ownership
Belsay, Northumberland
The Belsay Estate Trust was established in 1988 by the owner, Sir
Stephen Middleton Bt, after the estate had been owned continuously
by the Middletons for more than 800 years. Sir Stephen had no
direct heirs and was concerned that the impact of inheritance tax
and eventual distribution among the wider family would result in the
Belsay Estate being broken up and sold off.
Various options were considered to preserve intact the historic core
of Belsay, including heritage land designation and potentially exempt
transfers. However, none of these would have secured the future of
Belsay as Sir Stephen hoped, so after taking considerable professional
advice and with the support of his closest family, he decided to place
the core of the estate into a simple charitable trust. This included the
Medieval Belsay Castle was extended into a mansion in the early 1600s
a charity for tax purposes. Gifts and bequests to charities are not subject
to inheritance tax. Importantly, a charitable land trust does not have to
pay stamp duty land tax on the purchase of freehold or leasehold land.
A charity charging for the supply of goods and services may be liable
to register for and pay VAT, and VAT is usually payable on supplies
purchased by a charity, with a number of reliefs. One of the most
valuable of these for a land trust is the zero-rating of construction of
buildings for non-business charitable use and of certain works to listed
buildings. Charities enjoy mandatory relief of 80% on business rates
where buildings or premises are occupied for their own management
and administration purposes. Some local authorities extend this relief
on a discretionary basis so that no rates at all are payable.
Charitable land trusts have been in existence for a long time and many
communities, especially rural ones, have benefited from the philanthropic
motivation of settlors seeking to maintain historic estates in perpetuity.
26 The Land Journal September-October 2011
Grade 1-listed Belsay Hall and Belsay Castle, gardens and parkland,
residential and commercial properties within this area and in Belsay
village, and two farms that impinged on the parkland.
The objectives were to restore, preserve and maintain the property,
both as an historic setting for the hall and castle and in its own right,
for the benefit of the nation. The trust has a guardianship agreement
with English Heritage for the management of the hall, gardens and
castle, which are open to the public. Much restoration work has been
carried out on the parkland, some of which is open to English Heritage
visitors and the remainder to groups by appointment. The parkland is
let to local farmers for the grazing of cattle and sheep and the houses
are let, as far as possible, to local people.
Since such trusts benefit local people directly, as well as the wider
public, they have a valid claim to being perfectly in keeping with the
spirit of David Cameron’s ‘big society’.
James Ruddock-Broyd is a committee member and former chairman of
the LTA. He was assisted by Richard Sowler, a Barrister specialising in
tax and finance at Middle Temple Lane Chambers.
More information:
The RICS Rural Professional Group is represented on the LTA committee.
To contact the Land Trusts Association (secretary: Robert Keylock) telephone
+44 (0) 1722 412412, or email Robert.Keylock@wilsonslaw.com
Related competencies include: T046, T049, T055
© Angus Thompson

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