Real Estate Refresh Crichel Down Rules – Part 2

The practicalities

Catch up on our Real Estate Refresh – Crichel Down Rules – Part 1 here.

Prior to disposal A disposing organisation must notify the former owners of:
  1. its intention to dispose of the land;
  2. whether or not the Rules apply; and
  3. its decision that the land will not be offered back as it falls within the exceptions.

Where the Rules apply, the former owner has:

  1. two months from the date of notification from the disposing organisation to decide whether to purchase the land;
  2. once the decision to purchase has been made, a period of two months to agree the terms of the sale; and
  3. six weeks from agreement of the terms of sale to negotiate the price.

Can the disposing organisation dispose of the land on the open market?

The disposing organisation may dispose of the land on the open market in the following circumstances:

  1. the former owner does not respond to the notification of sale;
  2. the former owner does not wish to purchase the property.
  3. the terms of the disposal or price for the land cannot be agreed within the above time periods.

Where any of these circumstances apply, the disposing organisation must inform the former owner that the land is to be sold on the open market.

What if the former owner cannot be found?

The disposing organisation must try and obtain a current address for the former owners by contacting any agent or solicitor acting on behalf of the former owner when the disposing organisation acquired the land.

If the former owner cannot be found, the disposing organisation should display site notices advising of the intention to dispose, notify owners of adjacent land and place advertisements in The London Gazette, The Estates Gazette, two issues of a local newspaper and also on the disposing organisation’s website.
A former owner will have two months from the date that the last advertisement was placed, within which to notify the disposing organisation that it wishes to purchase the land.
In order to avoid delay in the disposal, advertisements should be placed promptly in the various publications. If no former owner then comes forward, the disposing organisation may sell the land on the open market.

Avoiding challenge

Where a disposing organisation decides not to offer the land back to former owners, it must be prepared for any judicial review of that decision. An application for review will usually arise when the decision not to offer back is notified to the former owner.
The procedure set out by the Rules encourages affected organisations to take into account all relevant information and ensures procedural fairness for any former owners. Any departure from this procedure can give obvious grounds for legal challenge.

Following the procedure will not necessarily render the decision not to offer the land back automatically fair.

By way of example, where notice has been properly served on a former owner and they have indicated an intention to serve notice opting to purchase the land outside the prescribed two month timescale, fairness may require the disposing organisation to agree to extend the relevant timescale in order to allow them to do so. This is notwithstanding the fact that the notice period for such notification would permit the disposing organisation to proceed to dispose on the open market where the notice has not been received within the two month timescale.

Keep a record

Disposing organisations are required to keep a central record of any transactions covered by the Rules, along with any exceptions to the Rules.

In order to enable a disposing organisation to evidence how the Rules were applied in relation to each disposal, it is good practice to keep a record on each disposal file of the following matters:

  1. the consideration of the Rules;
  2. whether or not the Rules applied;
  3. actions taken and reasons for the decision; and
  4. whether the land was sold to a former owner or on the open market.

Any buyer of land affected by the Rules will require evidence that the disposing organisation has followed the correct procedure.

It is therefore useful to have a record in respect of the affected land to enable the disposing organisation to readily provide details of how the land was originally acquired, steps taken to establish former owners, copies of all correspondence and consideration that was given as to the application of the Rules.

Having a contemporaneous record should avoid any delay caused by compiling such information at the time of subsequent disposal.

Proceeding with a sale on open market

Often the timetable for a disposal will not accommodate the delay required to ensure the potential judicial review period in respect of the application of the Rules or the decision not to offer back to former owners has expired.

Where an immediate disposal is required, the parties may agree to enter into a conditional contract, which allow for a deferred completion or suspension of the agreement for sale where a challenge is made until the challenge has been set aside.
Where the judicial review period has not yet expired, a buyer may insist upon a warranty from the disposing organisation in the agreement for sale, that either the Rules do not apply, or the disposal falls within one of the exceptions. A disposing organisation must feel confident in its application of the Rules to be able to give such a warranty.
It may be preferable for a disposing organisation to provide comfort to a buyer in this situation by providing indemnity insurance to cover the risk of possible judicial review, however dependent upon the value of the land, this could be costly.

Read our article on the recent High Court case of R (Charlesworth) v Crossrail Ltd and another [2018] EWHC 915 (Admin), which considered the application of the Crichel Down rules (“Rules”) in the context of Crossrail.

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