One example is where one of the UK’s largest house builders applied for planning for 200 properties back in 2016, which was subsequently refused in 20201. The refusal follows four years of redesign, planning consultant fees and architect fees – not including a loss in the value of the land of GBP1.1m. Planning was ultimately refused and it may be the case that, given the amount spent on the planning and the reduction in the land value, the developer may not appeal the planning decision.
Another development in Bradford saw its application refused for plans for 44 new homes. Planning officers recommended that the plans should be approved but a government planning inspector refused planning on the basis that it would result in an intensification of the use of a substandard access road, which is deficient in terms of width, geometry and forward visibility that would be prejudicial to highway safety. The developer decided to appeal this decision which was ultimately unsuccessful despite Bradford Council having a long-term housing supply shortage. The costs associated with this are all shouldered by developers and their lenders and this would have been a huge blow to the developer.
When looking at the viability of a site for development, a number of things are taken into consideration, but planning is one of the first and one of the largest to overcome. Fees for site investigations, planning fees and all professional service fees are non-refundable. Once you factor in legal fees, pre-app fees, market research and appeal fees , if needed, the costs can mount up.
Abortive planning insurance is a new product being offered by a limited number of insurers. This policy covers abortive planning costs in the event that a planning application is refused on appeal. This helps transfer this portion of the development risk and comforts developers with the knowledge that abortive costs can be covered.
Planning is still one of the major risks affecting developments – it is hoped that insurance can be a way to mitigate the costs of a planning system that has not been reformed in decades.
Should you wish to discuss this product and how it might be relevant to your project further, please get in touch.