Interest in airspace development has gained momentum in recent years and research that forecasts its impact on overall housing supply, coupled with relaxations to certain aspects of the planning process, has further exacerbated this. Yet, the notion of ‘owning’ the space above a building remains abstract to many and investing in what is essentially ‘fresh air’ continues to be an area of much debate with lenders themselves often perplexed by this seemingly ‘non-standard’ approach to construction.
Amongst the leading players within airspace development, a variety of models for the financial and legal aspects of such projects have been adopted and here, BRAC Developments’ MD Adam Clark explains why the team has chosen to take a joint venture (JV) approach to this work.
Whilst increasing the size of a building has traditionally focused on ‘extensions’, whether that’s a side-return, a wrap-around, a simple single-storey rear extension, an over-structure extension above a garage or similar, or a loft conversion, the common denominator in each is the clear ownership of the property against which the work will be carried out – the garden, the loft, the garage etc. Yet, when it comes to airspace development there remains a level of confusion around the fact that as a property owner, you do indeed also own the rights to the airspace above that property, whether that’s a single dwelling or a multi-dwelling block or commercial unit.
These larger blocks are frequently the focus of airspace projects due to their potential to deliver multiple new units. Often, an airspace developer will approach a freeholder to purchase the rights to the airspace above their building, in much the same way a landowner might sell some of their land to a developer, either on an unconditional or subject to planning basis. Otherwise, the freeholder will engage a specialist developer to deliver the project for them in an approach that mirrors ‘traditional’ extensions.
We like to think that we do things differently though.
Having been engaged as lead contractor on numerous airspace projects, we’ve now assumed the role of both contractor and developer, taking a joint venture approach to such projects. We believe that this will not only appeal to the freeholder in terms of mitigating perceived financial risk, but also by way of reassurance that the project is being delivered by experts.
So how does this work in practice? In so many cases up until now, the value – or perceived value – of the airspace above an existing building has proved prohibitive to a developer wishing to purchase it. The freeholder is, therefore, left without the rooftop development being realised and without profiting as a result.
With our approach, rather than exchanging funds to purchase the airspace, we instead enter a contractually binding Joint Venture agreement with the building’s freeholder and then proceed to manage all aspects of feasibility and the planning process. At this stage, there is no obligation on the freeholder to proceed with the project and so the commitment, along with the risk, is very much on our part.
Of course, we work to identify potential projects that we believe will i) receive planning permission and ii) prove to be financially viable – we’re certainly not in the business of hunting out risky options!
With a go-ahead agreed, the team at BRAC Developments goes on to manage the entire process with minimal disruption to existing residents. The freeholder entrusts their building to us and in return, we take on the financial commitment – an approach which we believe is both fair and attractive.
Once a project is complete and all construction, legal and sales costs have been realised, the profits are shared between the two parties as agreed in the original JV contract. We believe that in most, if not all, cases this will leave the freeholder in a better financial position than if they’d held out for a sale of the airspace rights.