Development finance

Additional content on real estate development and funding can be found in the Development, structures and funding—overview topic.

Real estate development finance involves the acquisition and funding of a development site and the funding of a new development on it. Once developed the property may be sold by the developer to an investor or retained by the developer for its own investment purposes. The loan will be secured both on the property and the developer's rights under the constructions documents. A funder will be particularly interested in:

  1. the value of the site compared to the loan: The development site whilst under development will be worth considerably less than when the development is completed. The level of pre-lets or sales and, in the case of pre-lets the covenant strength of prospective tenants will be important criteria for the full development loan monies to be advanced to complete the project

  2. the development cost: the funder will want to ensure that the cost of designing, building, managing, letting or selling the development are well controlled and within budget in order that the project cost does not exceed the value of the

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Rent repayment orders and ‘person managing’ (Global 100 v Ross and others)

Local Government analysis: This was an appeal to the Upper Tribunal (Lands Chamber) by Global 100 (G100) against a decision of the First- Tier Tribunal (FTT) granting the respondent property guardian’s application for rent repayment orders (RROs) under section 43 of the Housing and Planning Act 2016 (HPA 2016). The London Borough of Haringey entered into an agreement with the company GGM in respect of a property it owned for live-in property guardianship services. GGM then granted permission for Global 100 (G100), a related company, to grant licences for live-in guardians, including the respondents to the appeal. The Local Authority did not receive any payment from the respondents but only a monthly consideration from GGM. The respondents applied to the FTT for RROs asserting G100 had committed an offence under section 72(1) of the Housing Act 2004 (HA 2004) by being in control or managing an HMO which ought to have been licensed. G100 tried to argue that Haringey was the ‘person managing’ under HA 2004, s 263(3)(b). The FTT accepted the agreement between Haringey and GGM was a licence and not a lease and that G100 was not the owner or the property and that but for this agreement Haringey would have received payments from the respondents. However, FTT held that the arrangement was not one ‘by virtue of which’ GGM received the payments and as it was G100, the FTT determined that the Haringey was not the ‘person managing’. The Upper Tribunal dismissed Global 100’s appeal and held that the FTT had not erred in law in concluding that Haringey was not the ‘person managing’ a property for the purposes of HA 2004, s 263(3)(b) and HA 2004, Sch 14, para 2. Haringey had entered into an agreement with GGM which permitted it to use the property for live-in guardianship services in exchange for monthly consideration. GGM then permitted a connected Global 100 to grant licences to property guardians in exchange for a fee. The Upper Tribunal held the FTT has not erred as there was no evidential basis for concluding that Haringey received any moneys from the occupiers ‘by virtue of’ the arrangement. Written by Tim Baldwin, barrister, Garden Court Chambers.

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