With a shortage of sites coming to the market, are Brownfield sites a legitimate opportunity for strategic land development? We explain what a Brownfield site is, the pros, cons and legal facts you need to know.
What is a ‘Brownfield’ site?
A “Greenfield” site describes previously undeveloped land, whereas “Brownfield” is a term used for previously developed land that may or may not be affected by contamination.
What are the pros of Brownfield sites?
- There is great availability of Brownfield sites available than Greenfield sites, so arguably land values may well be more attractive for a Brownfield site
- Developing Brownfield sites reassigns economically obsolete land
- There is a capacity of over 1,000,000 homes on the UK’s Brownfield land just waiting to be developed
- As the land has been previously developed, there may be infrastructure in place that can be utilised in a new development
- In 2020 the government announced that owners of vacant and redundant freestanding buildings of a footprint of up to 1,000 m² would be able to fast track the planning process for demolish and rebuilding new residential developments. This was used to kick start the construction sector following COVID
- Brownfield land is seen to offer significant biodiversity value, particularly in urban environments because species found on Brownfield land are often rarer than those found in the countryside, contributing towards the development’s Biodiversity Net Gain (BNG).
At present, the government requires a site to obtain at least 10% BNG, making Brownfield land an attractive option for developers as an opportunity to provide a habitat bank, offsetting any habitats lost during development and remedial works.
Developers will need to check whether the Brownfield land that they are looking to purchase can actually be used towards their BNG however, as urban Brownfield land, which does not contain protected or priority habitats such as wetland and woodland fen or land which would face genuine viability difficulties, would be exempt from BNG.
What are the issues with Brownfield sites?
- Potential toxins remain on the land which continues to impact air and water quality, which could affect human or animal health if remediation is not done correctly
- It decreases the property value of anything built on site, particularly where local people already know the historical use of the site
- There will be strict environmental regulations that must be complied with when cleaning up the site, which can be costly and prohibitive and the sites will need to undergo a comprehensive environmental risk assessment before they can developed
- It can be delayed, because there are number of assessments that are needed to be carried out in addition to any works taking place to remedy the contamination at the site
- There are sometimes issues for finding funding for the site. However, this is becoming less of an issue if you can provide information on the contaminants and the potential costs at the outset so that the lender is fully aware of those costs
- Many developers are not willing to incur the expense of carrying out those full site investigations without contractual certainty and land owners may be reluctant to allow intrusive investigations on the land until a contract is in place
How to approach a Brownfield site as a strategic land opportunity from a legal perspective
Historically, many developers/promoters rely on a conditional agreement in order to deal with Brownfield matters such as contamination and it is often the condition of the agreement that the site is cleared up.
But what is the solution when more investigation is required, or there is a lengthy timeframe for clean-up, or where you have an unallocated contaminated land site, is there something else you can do?
Why not consider the site for your strategic land portfolio? Whilst conditional contracts give a landowner more certainty the risk profile is considerably higher so this can result in a lower appetite for these deals.
The benefit of option/promotion agreements is that you generally have a longer period than a conditional contract in order to deal with planning matters, as well as any issues with contamination and at the end of the process, there is no requirement to purchase.
Some key things to think about from a legal perspective:
- Why not include a set of ‘contamination obligations’ which relate to site clean-up? These could trigger your planning obligations when you get to certain point in the clean-up process, or run in tandem, but it could be a useful tool to de-risk what otherwise looks like a site with healthy potential
- Consider whether you could deduct the costs of investigation and even the costs of clean up in the same way you would for infrastructure or planning costs. Whilst the developer/promoter takes on the risk, there is an incentive in the later recovery
- Conservation covenants are being used more now where it leaves the developer (and any future landowner) with responsibilities to maintain any habitat banks/BNG on Brownfield. These covenants are then binding on the landowner in the future so this will need to be considered when looking at what the parties want to agree
- Is there scope for a voluntary agreement between the developer and ‘responsible bodies’ to ensure long-term works are carried out the habitats on a site?
- Don’t forget that most landowners will require letters of reliance and/or collateral warranties from those employed to carry out any demolition and remediation works in particular.
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