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Interpreting the term ‘detailed planning permission’ in an overage agreement

A recent case has highlighted the risk of using a term in an overage agreement that does not have a precise technical meaning in planning law.

Background

A property was sold with the benefit of outline planning permission. In the transfer, the buyer agreed to pay overage to the seller if ‘detailed planning permission’ was granted and the resulting residential or commercial units had a floor area exceeding 3,000 square feet. Detailed planning permission was defined in the transfer as ‘any detailed planning permission which grants planning permission for the construction of Units’.

The buyer obtained approval of reserved matters under the outline planning permission before the cut-off date. The seller argued that the approval of reserved matters amounted to the grant of detailed planning permission and that this triggered the overage payment. The buyer claimed that the approval of reserved matters was not the grant of a detailed planning permission. In the buyer’s view a detailed planning permission meant the grant of a planning permission that did not reserve matters for a later time.

Discussion

The planning legislation defines only ‘outline planning permission’ and ‘planning permission’. It does not use the term ‘detailed planning permission’, nor does it use ‘full planning permission’ which is another term that is often seen in overage agreements.

Planning permission grants consent to the carrying out of the development. Outline planning permission grants consent to the overall principle of a proposed development subject to the later approval of reserved matters such as details of the layout, appearance, scale, access and landscaping of the development.

A planning permission may also be granted subject to conditions that require details of specified aspects of the development (which were reserved as part of the original application) to be approved by the local planning authority before any development can begin.

The risk, as the parties in the current case discovered, is that using terms such as ‘detailed planning permission’ or ‘full planning permission’ leaves room for dispute about the parties’ intentions. What is a detailed planning permission, and is a planning permission that has reserved conditions a satisfactory planning permission even though certain matters are subsequently determined and approved?

Outcome

The court accepted the seller’s interpretation of the phrase ‘detailed planning permission’. Referring to legal text books and cases, the court held that the ordinary and natural meaning of the phrase was all the ‘approvals and permissions granted pursuant to an outline planning permission.’ It rejected the buyer’s argument that, because the planning legislation treats the process of obtaining planning permission and the process of obtaining reserved matters approval as separate processes, the phrase should not encompass the approval of reserved matters.

Lessons learned

The court’s interpretation of the meaning of the phrase ‘detailed planning permission’ is helpful. Strictly speaking, this interpretation applies in the context of the specific contract only, but will be persuasive in other cases as well.

However, care still needs to be taken when agreeing the terms of an agreement that is conditional on planning. For example, where a number of reserved matters applications are made following the grant of an outline planning permission, the agreement needs to make clear at what point the outline planning permission becomes a planning permission that satisfies the condition – which is likely to be only once all reserved matters have been approved.

Similarly, if ‘detailed planning permission’ means the approval of reserved matters following the grant of outline planning permission, how would the courts interpret the term where the parties are making an application for planning permission, rather than outline planning permission?

Where any agreement is conditional on planning, the best practice is to spell out precisely what form of planning permission satisfies the condition and not rely on generic terms such as ‘detailed planning permission’ or ‘full planning permission’ where the meaning may be open to different interpretations.

Loxleigh Investments Ltd v Dartford Borough Council [2019] EWHC 1274 (Ch).

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