Finding solutions to flooding is a matter of high importance for the Government, driving changes in the law relating to foul and surface water drainage. This article explores the proposed changes and how they might affect land contracts.
Surface water drainage - a brief overview
The new procedure for the approval and adoption of Sustainable Drainage Systems (SuDS) and surface water drainage strategies is set out in Schedule 3 of The Flood and Water Management Act 2010 (FWMA 2010). It is expected to come into force in the Autumn.
The underlying principles are that:
- there is no automatic right to connect surface water run-off into the public sewer system
- any right to connect surface water run-off into the public sewer system is conditional upon the approving body pre-agreeing the SuDS strategy for the development
- no construction work which has drainage implications can be undertaken until the SuDS strategy and design has been approved by the approving body
Developers will need to consider how these new principles might affect the financial viability of a development and the build programme. In particular, when negotiating land values developers should be mindful of the additional costs that are likely to be incurred in securing SuDS approvals and implementing the designs.
Developers should also consider whether land contracts need to be conditional upon securing those approvals to ensure that they are obtained before a commitment to purchase the land, and construction can commence without delay following completion.
Connecting foul sewers - the intended new rules
Currently an owner of premises can connect his sewers to the public sewer and discharge the foul into it. Construction of and connection to the sewer system can commence at any time and the s104 Agreement can be negotiated and entered into whilst those works are ongoing.
The anticipated implementation of section 42 FWMA 2010 in the Autumn will qualify this right, so that connection to the public sewer can only be made if:
- a s104 Agreement has already been entered into in respect of the sewers
- the s104 Agreement includes provisions about the standard to which the sewers are to be constructed
- the s104 Agreement includes provisions about the adoption of the sewers by the sewerage undertaker
This does not prevent the developer from constructing the sewers or dwellings before entering into the s104 Agreement. However it does have its risks. The sewerage undertaker may refuse to enter into the s104 Agreement, or require variations to sewers that have already been constructed, because they are not of a suitable design, specification or standard. However if the developer obtains technical approval to the sewer system in advance, these risks can be avoided.
If a developer does commence construction before entering into the s104 Agreement, it should ensure that:
- all sewers are constructed to the relevant governmental standards and have technical approval
- the public sewer is of sufficient capacity to accommodate the additional foul sewerage from the development
Any delay in entering into the s104 Agreement will prevent plots from being connected to the public sewer, delaying build completion sign off. In turn, this will delay the sales program for constructed units, having a knock-on effect on the developer's cashflow.
Conditional contracts - new considerations
So, should land acquisition contracts be conditional upon obtaining approval of a SuDS strategy and completion of a s104 Agreement? We consider so.
In particular, developers should seek to make contracts conditional upon:
- obtaining approval of SuDS at the developer's absolute discretion - this will prevent delays to the development build and sales program and ensure that before committing to purchase the land, the developer has a commercially viable and implementable drainage strategy approved by the approving body.
- entering into a section 104 Agreement - this will ensure that all development sewers can connect to the public sewer and will be adopted.
One further point is the length of the contractual conditionality period. It is unlikely that developers will want to incur the costs of negotiating s104 agreements until such a time as they have secured a satisfactory planning permission and an approved SuDS strategy. We anticipate that the conditional period for the new conditions will need to be longer than that anticipated in current contracts conditional upon planning.