Developer must pay damages following contract dispute

A developer who failed to co-operate in seeking additional planning permission for a proposed tower block has been ordered to pay damages to the company selling the site.

The seller had obtained planning permission to construct a 34-storey tower on a large site. The grant was subject to a s.106 agreement, under which the seller had assumed affordable housing obligations.

The seller hoped to obtain enhanced planning permission for extra storeys to the tower.

The sale agreement therefore obliged it to make a further planning application by a certain date and stipulated that, if granted, the buyer would be required to pay extra to the seller.

The seller was required to submit its “”draft application”” for the buyer’s consent before applying for enhanced permission, but that consent was subject to a tight timetable and was not to be unreasonably withheld.

The buyer failed to give consent despite two requests.

The local authority nevertheless resolved to grant enhanced permission, subject to the buyer entering into a revised s.106 agreement containing increased affordable housing obligations. The buyer refused, so the enhanced permission was never granted.

The seller took legal action to recover the extra money to which it would have been entitled had the planning permission been granted.

The buyer argued that the first request for consent had been invalid because it was not sufficiently formal, and the second because of the absence of essential viability appraisals. It also said that the seller had deliberately failed to inform and consult about developments, which was a precondition of the agreement.

The High Court found in favour of the seller. It said the concerns the buyer claimed to have had about the planning applications were not only unjustified, but had also not been genuinely or reasonably held. Its refusal of consent had therefore been unreasonable.

Please contact Janice Young if you would like more information about the issues raised in this article or any aspect of contract law and litigation.