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Listed Hospital Developers Bit Off More than They Could Chew

Conditions attached to planning permissions often impose substantial burdens on developers which must be met regardless of market conditions. In one case which illustrated that point, a company took on the task of paying for the restoration of a listed Victorian hospital shortly before the property crash intervened.

The permission granted to the company for residential and business development of the long vacant and crumbling hospital and its 20-hectare grounds was subject to a requirement that it contribute £4.8 million to a building restoration fund. Due to the property market collapse, the planning consent was not implemented. However, the company’s obligation to make the financial contribution subsisted.

In order to save the hospital from imminent collapse, the council paid more than £940,000 for urgent works to be carried out. It sought reimbursement of those costs from the company and ultimately issued a compulsory purchase order, enabling it to buy back the entire site from the company. Following public inquiries, the councils’ decisions were upheld by government planning inspectors.

In seeking judicial review of the inspectors’ rulings, the company claimed that the council had embarked on a fraudulent course of conduct with a view to its own financial benefit. It was alleged that the council was intent on compulsorily acquiring the site at a very low price so that it could be sold to another developer.

In rejecting those claims, however, the High Court noted that the company had been evasive and had singularly failed to progress the development or to take any steps to preserve the heritage asset. The council had been put in a difficult position and had understandably lost faith in the company. It was not sensibly arguable that the council had improperly interfered with the company’s attempts to sell the site privately and the latter’s allegations of fraud were bound to fail.