Section 47 Agreements – Less haste more speed?

Introduction

An overview of the recent guidelines published in relation to the Regulation of Commercial Institutional Investment in Housing.

As a follow up to our article on the Government’s much publicised changes to stamp duty, we are seeing how the planning code is being shaped to further ringfence residential units for first time buyers.  Whilst every grant of planning permission will likely differ, below are some of the main points stakeholders should be aware of.

Regulation of Commercial Institutional Investment in Housing

On 20 May 2021, the Minister for Housing Local Government and Heritage published guidance (the “Guidance”) under Section 28 of the Planning and Development Act 2000 (the “Act”) in relation to the regulation of commercial institutional investment in housing.

The Guidance applies to all developments of five or more dwelling units (i.e. houses and duplexes) and establishes a requirement for a standalone agreement to be reached between developer and planning authority under Section 47 of the Act to regulate and restrict the end user of a dwelling unit.  The permitted user class is effectively the same as set out in our earlier note.

Are Pending Applications captured?

(A caveated) Yes.

While not necessarily dealt with in the Guidance, it would appear from a review of recent planning permissions that regardless of when an application was submitted, a final grant will contain an obligation that developers enter into a detailed Section 47 Agreement with the planning authority.

In one grant obtained this week, the relevant condition followed the Guidance and stated the Section 47 Agreement was to restrict use of all permitted residential units to first occupation by individual purchasers (i.e. those not being a corporate entity) and/or by those eligible for the occupation of social and/or affordable housing, including cost rental housing.

The caveat to this is by reference to Government commentary on the Sustainable Urban Housing: Design Standards for New Apartments.  In January 2021, Housing Minister Darragh O’Brien stated that any application (which in that context related to co-living) already in the system was lodged on the basis of the previous 2018 planning guidelines and therefore, would not be captured by the later Government guidance. The distinction as to why the co-living guidance could not apply retrospectively but the current Guidance can be applied as a matter of course is not altogether clear.

Where a grant of planning permission states that a Section 47 Agreement is required, the detailed terms of that agreement are to be negotiated and agreed between the date of grant and a date prior to commencement of the permitted works.

Are Section 47 Agreements new?

No.

Section 47 Agreements have been around a long time but have not been commonly used in the recent past. Most were historically entered into in Gaeltacht or similar areas as a tool for promoting housing for locals or family members in a particular area.

It is not surprising that Section 47 Agreements have been used to achieve the Government’s stated goal but there does appear to be significant planning authority discretion on the terms of any such Section 47 Agreement.  Section 47 of the Act tasks planning authorities to act as if they held lands adjoining the lands the subject of the grant.

As parameters are established, which will be dictated by further Government guidance, we expect grants of planning permission that issue in the short term to be less finessed than grants that issue in say > 12 months’ time.

All Section 47 Agreements will be placed on the planning register and so purchasers will be on notice of their existence.

Can a Section 47 Agreement be de-coupled from a grant?

No.

The obligations on a developer under a Section 47 Agreement will stand for the duration of the grant of planning permission.  Moreover, and problematically for development, the obligations may stand for a period following completion of a unit.  Even after say a two-year period has elapsed, it is not yet clear where the relevant threshold is in order for a developer to show that it has not been possible to transact a unit to a permitted user.

The Government has sufficient lead-in time to issue further guidelines to planning authorities in advance of an actual determination having to be made on this point.

Additional Observations

Whilst it is unlikely that a Section 47 Agreement is capable of being appealed, a developer could appeal indicative terms of a condition / parameters of the proposed Section 47 Agreement to An Bord Pleanála.  This raises its own difficulties as the material requirements of a Section 47 Agreement are to be negotiated and agreed with a planning authority in the period post grant but pre-commencement.

It is reasonable to expect that a planning authority’s threshold to agree to rescind a Section 47 Agreement will be high.  A developer will be required to show satisfactory evidence regarding the sales and marketing of the specified residential units, in support of any claim for recission of a Section 47 Agreement.  The relevant professional bodies will no doubt issue guidance to their members on what constitutes “satisfactory evidence”.

The effect and success of the Guidance will be judged over time.  Unit cost price would appear the most obvious ground for a valid claim of recission of a Section 47 Agreement.  If that comes to pass, measures such as the wholesale use of Section 47 Agreements will be viewed as well-intentioned but ineffective tools in regulating supply and end user availability.

We will continue to update our clients as the position evolves but please speak to your usual Philip Lee contact should you wish to discuss any aspect.

 

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