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The Court of Appeal has refused to allow a developer to exercise an option to purchase property with the benefit of planning permission because the developer had not obtained permission for the development of the whole, or substantially the whole, of the property: Hallam Land Management Ltd v UK Coal Mining Ltd.
Facts
The claimant was the assignee of the benefit of an option to purchase 45 acres of land in South Yorkshire, for which the assignor of the option had paid the princely sum of £5,000. It was a term of the option agreement that the buyer would apply for planning permission for development within a specified period. The option was exercisable by the service of written notice within the option period, on payment of £100,000 per developable acre. A 'developable acre' was defined as 'each acre of property in respect of which planning permission is granted for development'.
The local authority was not in favour of development, except as part of a larger, comprehensive scheme, but the claimant did obtain planning permission, following an appeal, to build offices on 2.5 acres of the site. The remaining 42.5 acres were designated as open space. It was a condition of the permission that the claimant would landscape approximately 40% of that land.
The claimant exercised the option and offered the seller £250,000 for the site. The High Court refused the developer's application for specific performance of the agreement, and the developer decided to pursue the case to the Court of Appeal.
Issue
Did the application for planning permission constitute an application to develop 'the property' within the meaning of the agreement?
Decision
The Court of Appeal ruled that the agreement referred to a planning application for 'the property', which was identified as comprising 45 acres of land. The grantee had paid very little for the option and the Court would not permit the seller to lose the chance of realising the value of much of the site. The planning application had to be for the whole, or substantially the whole, of the site. It was a question of fact and degree whether a planning application related to the whole of a property, but the 2.5 acre development was clearly insufficient. The claimant's application left 95% of the property undeveloped and it was not an application for the development of the property within the meaning of the agreement.
The developer suggested that, for planning purposes, landscaping work was capable of constituting 'development', but the Court reminded the developer that the courts will ascertain the meaning that a document would have conveyed to a reasonable person having all the background knowledge that would reasonably have been available to the parties at the time of the contract. The Court of Appeal rejected the technical construction in favour of the ordinary meaning of the word 'development', and went on to rule that, even if the technical interpretation was correct, landscaping 40% of the site did not constitute development of the whole, or substantially the whole, of the property.
Case references
Hallam Land Management Ltd v UK Coal Mining Ltd [2002] EWCA Civ 982
Source: Wragge & Co September 2002
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