What is a serviced parcel?
A serviced parcel is a piece of development land (usually benefitting from outline planning permission) to which all necessary infrastructure (access and services) has been or will be provided to the boundaries of such land.
Why are they sold?
If a housebuilder has a particularly large development site, and does not, for whatever reason, have the appetite to build out and sell the whole site it may choose to develop just part of it and dispose of the remainder via one or more serviced parcel sales. A serviced parcel sale enables the selling housebuilder to realise the value created by the outline planning permission and recoup costs sooner and without having to build out and sell houses across the entire development site.
Serviced parcels are attractive to buyers as they are “oven ready” in that they already have outline planning permission. Further, the selling housebuilder will be responsible for the provision of infrastructure to the boundaries of the parcel being sold and usually also retains responsibility for the discharge of the majority of planning agreement obligations.
What are the practical considerations?
There are various things which those involved in the sale or purchase of serviced parcels need to consider and these should be addressed in the sale contract. If there is likely to be more than one serviced parcel sale and therefore more than two housebuilders on different parts of the same development site, then it’s a good idea for them all to be party to a site wide developers collaboration / cooperation agreement which will create a contractual relationship between them all and prescribe the relevant rules of engagement.
The relevant practical considerations include, amongst other things:
Number of permitted dwellings
The overall number of dwellings permitted by the outline consent needs to be split between the various parcels and the housebuilders should covenant with each other not to exceed their respective allocations. The contract may also need to address the type and size of dwellings permitted within each allocation.
The parties need to decide how the section 106 affordable housing requirement is to be delivered. As is likely, if this is to be split between various parcels, the parties need to agree what that split should look like in terms of number, tenure and timing/rate of delivery so as not to prevent or delay the other housebuilder’s open market plot sales.
Other planning obligations
With the exception of affordable housing (see above), it’s usual for the selling housebuilder to retain responsibility for the discharge/delivery of all other planning obligations. The contract should specify exactly which planning obligations will be discharged/delivered by which party and in what timescales.
Planning permission conditions
Assuming that the outline planning permission does not allow the conditions attaching to it to be discharged on a parcel by parcel basis, the contract will need to specify who is responsible for discharge of such conditions and in what timescales. It may be that for some conditions responsibility needs to be shared. For example, a contamination/pollution condition may require a site wide ground investigation report to be submitted to the LPA and then for the recommendations of that report to be implemented and signed off by the LPA. The parties may decide that the selling housebuilder will be responsible for the submission of the site wide GI report but that each housebuilder will be responsible for the implementation of the recommendations on their respective parcels. For this the buying housebuilder will need reliance on the GI report whether by way of collateral warranty or reliance letter.
If the infrastructure to the boundary of the parcel is not already in situ at the point of sale, the contract should specify exactly what infrastructure is to be provided, to what capacities and levels etc and in what timescales.
The contract should also address responsibility for and timeframes for topping off the roads, entry into adoption agreements and the ultimate adoption of roads and sewers.
Consideration should be given as to how, if at all, these development obligations should be secured, for example, by way of financial retention.
If the parcel boundaries are not pegged out on site then it’s useful if the contract includes a coordinated boundaries plan and obliges the parties to meet on site before completion to jointly peg out the boundaries to accord with that plan.
Positive obligations to apply for reserved matters and build out
Whether such positive obligations should be imposed can be a very contentious issue. While it is not in anybody’s interest for the development to become a permanent building site, housebuilders will not want to be obliged to start or continue building in a falling market.
Flags and boards etc
Does the serviced parcel or the selling housebuilder’s retained parcel need the ability to exhibit flags and/or sale boards and/or directional signs on the others land?
The parties may want to control where the other places their construction compound so that it does not adversely impact their parcel.
While the above list is not exhaustive, it does give a flavour of the myriad of practical issues which the parties need to consider when trading a serviced parcel. Expert legal advice should be sought at an early stage.