Protecting property developments from risk of judicial review
PROPERTY developers have a myriad of considerations to make when planning projects of any scale, chief among which is ensuring they bring all stakeholders including local residents, along with them.
Fail to do so and an unpopular planning application, even if passed, may never progress to the construction or completion stage, should those opposed to it seek a judicial review.
While a judicial review represents an accessible and affordable option for those wishing to resist a development, it can have the opposite effect on those behind the planning application. There are, however, ways to mitigate these risks, including the purchase of a judicial review indemnity policy – a growing trend among property developers and others.
It is important because more than half of all applications for judicial review are successful, according to Government statistics, and only the very small majority are found to have no merit whatsoever.
It is of course true that all planning applications carry, by their very nature, an element of risk. The costs associated will vary depending on the size of the scheme, and where a judicial review is concerned, they can become extreme.
The cost may not only be to those planning the project, either. A high-profile case in Belfast concerns plans for a large office block in the city which developers say has the potential to create 350 jobs during the building process and provide space for more than 2,500 permanent jobs once complete.
The plans were given the green light by council officials last year, but those living near to the proposed scheme were granted the leave to seek a judicial review, at best delaying the project and the promise of jobs.
The stretching of timescales is one of the major contributory factors to increasing costs on projects subject to judicial reviews, and can severely damage the developer's profit margins.
Should a judicial review challenge be upheld and planning permission quashed, the developer is likely to suffer significant losses on the project caused by a drop in property value, the costs of aborting the work, increased cost of lending as well as penalties under agreements with third parties.
In some cases, even if the concerns of those that brought the judicial review are addressed, the local planning authority may be unable to re-grant planning consent despite it having been in place previously, potentially leaving the developer owning a site that is worth a fraction of what they paid for it.
However, many of these financial losses can be covered where a judicial review indemnity policy is in place.
The added security also allows for work to commence on site as soon as planning is granted, rather than waiting until the period during which a claim for judicial review can be made to expire.
Seeking strong professional guidance before and during the planning process can help ensure projects remain on course for completion while keeping developers free from the potentially costly burden attached to facing a judicial review process.
:: Richard Willis is managing director of Willis Insurance and Risk Management