Understanding Biodiversity Net Gain: part one – developers
30 April 2024
Podcasts and videos
As we progress towards a greener future, the real estate industry faces many changes and new challenges.
Today, we dive into the first of a two-part special that looks closely at wildlife and its new place in the planning system.
Hosted by Senior Knowledge Development Lawyer, Louise Irvine, we take a look at Biodiversity Net Gain with Charlie Croft, Senior Associate in Forsters’ Commercial Real Estate team, and Sophie Smith, Associate in our Planning team. Together, we look at the Biodiversity Net Gain requirements outlined in the planning process, and how these obligations will impact developers.
Lifecycle of a Business – An Introduction to Incentive Arrangements and their Associated Tax Treatment
30 April 2024
News
Setting up and running your own business is an amazing achievement. It requires vision, creativity, motivation and stamina. On occasion, it can even bring you fame, riches and fortune. But it can also result in reams of paperwork and cause sleepless nights. And as someone once said to me about children “It doesn’t get easier, it just changes”, so the same can be said for your business throughout its lifecycle. From setting up to exit, it will force you to consider issues that you might not previously have known anything about and it will need you to make many decisions, sometimes very quickly. What it certainly is not is mundane.
With this in mind, the corporate team at Forsters, together with some of our specialist colleagues, has written a series of articles about the various issues and some of the key points that it may help you to know about at each stage of a business’s life. Not all of these will be relevant to you or your business endeavours, but we hope that you will find at least some of these guides interesting and useful, whether you just have the glimmer of an idea, are a start-up, a well-established enterprise or are considering your exit options. Do feel free to drop us a line or pick up the phone if you would like to discuss any of the issues raised further.
We’ve already discussed various topics, such as, set up, directors, funding and shareholder-related matters, but now let’s concentrate on “Employment: 9 to 5”.
An Introduction to Incentive Arrangements and their Associated Tax Treatment
In this article, we briefly outline some of the common types of share and cash incentives provided to directors/employees, and their associated tax treatment. Such incentives are a great way for businesses to attract and retain talent, ensuring that employees are rewarded in a way which aligns with the interests of a business more generally. In essence, they allow an employee to benefit from the growth in value of a business.
References to employees in this article include directors.
Issue of shares
Employees can be issued shares in a business. This gives an employee real ownership in a business straightaway (rather than an option to buy later), often with certain voting rights and the right to dividends. Such shares can be gifted or purchased by an employee.
Income tax will normally be due from the employee to the extent that the employee pays less than the market value of the shares that are issued to them. However, if the shares are subject to forfeiture provisions which last for no more than five years, a different tax treatment can apply.
A number of elections can also be made which will alter the tax treatment in some circumstances.
EMI schemes can be a very tax efficient way to incentivise staff, especially where a company has the potential for growth. Under the HMRC approved EMI share option scheme, employees can be granted options over shares (i.e. the right to acquire them at a certain price in the future) having a maximum value (at the date of grant) of £250,000. As with all option plans, the hope is that the value of the shares is worth more than the pre-agreed price at the time they are acquired.
EMI schemes can also include conditionality and time frames; companies can, for example, set performance or length of service milestones which need to be met before EMI options vest.
However, although EMI options benefit from favourable tax treatment, the company in question must be carrying on a “qualifying trade” and so it is not always possible to grant EMI options; for example, the business of owning and operating hotels is not a qualifying trade for EMI purposes.
CSOP share option scheme
Another form of HMRC approved share option scheme is the CSOP, under which an employee can be granted options over shares having a value (at the date of grant) of up to £60,000.
Unlike the EMI scheme, it is not necessary for the company to be carrying on a qualifying trade and, provided that the option is exercised, broadly, no earlier than three years from the time that the option is granted, the employee will not be subject to income tax on either the grant or exercise of the option. (Note that in some situations, it is possible for the option to be exercised earlier, for example, if the company is subject to a successful takeover.) Instead, the employee will be subject to capital gains tax (CGT) on the difference between the price paid on exercise and the market value of the shares when sold. At present CGT is payable at a much lower rate than income tax so this is a significant advantage of exercising a CSOP option.
Since CSOPs must comply with a number of HMRC conditions, it is necessary to ensure that these conditions are, and will continue to be, satisfied. In addition, given that the options have to be granted at a price equal to the current market value of the shares when the option is granted, a CSOP scheme will only act as a successful incentive if the share price increases after the date of grant.
Unapproved share option schemes
As the name suggests, unapproved share option schemes are not approved by HMRC and therefore the drafting of the scheme rules can be flexible. However, although income tax is not payable when the option is granted, on the exercise of the option the employee will be subject to income tax on the difference between the price paid on exercise and the value of the shares at that point.
If the shares are tradeable at the point of exercise (for example, because the exercise is triggered by an exit event such as a takeover) employer and employee national insurance contributions (NICs) will also be due.
Phantom share scheme
Under a phantom share scheme, the employee does not hold shares or a share option, but the economic effect is to track the performance of the shares as if the employee held shares or an option over shares.
Since the employee will only ever receive cash, the proceeds under a phantom share scheme are treated in the same way as other remuneration and so are subject to income tax and to employer’s and employee’s NICs.
Cash bonus scheme
A cash bonus scheme is treated in the same way as if the employee had received a salary and so the amount received under the scheme will be subject to income tax deducted under the PAYE scheme and also to employer’s and employee’s NICs.
What happens when an employee leaves?
With all incentive plans, companies should think about what happens to a participant’s interest once their employment comes to an end. It is important that this is made clear in any scheme documentation to avoid any later dispute. Typically, schemes will have a concept of “good” and “bad” leaver. “Good” leavers are normally those who leave due to no fault of their own (such as ill health or where they have been made redundant) and will often retain some of their interest (subject to any specific HMRC restrictions) – this could be all of it or only that which has vested before their employment ends. “Bad” leavers (such as those whose employment is terminated for cause) will often forfeit all of their entitlements.
If you would like to discuss any of the points raised in this article or incentive arrangements in any more detail, please get in touch with your usual Forsters’ contact or a member of the Forsters’ Corporate Tax team or Employment and Partnerships team.
Disclaimer
This note reflects the law as at 30 April 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice. In particular, incentive arrangements and their tax treatment are complex. This note provides a brief summary of the key points only.
The Economic Crime and Corporate Transparency Act 2023 – an overview
25 April 2024
News
The Economic Crime and Corporate Transparency Act 2023 (ECCTA) received Royal Assent in October 2023 and aims to reform the law relating to economic crime and corporate transparency. These reforms were begun by the passing of the Economic Crime (Transparency and Enforcement) Act 2022 (ECA), which we have previously written about, but ECCTA goes further and, in some cases, amends the ECA.
As such, ECCTA is a wide-ranging piece of legislation, touching on many areas. Certain parts are already in force, while others require secondary legislation before they can take effect. This overview summarises the key provisions. More detailed notes about specific areas will follow.
Register of Overseas Entities (ROE)
The ROE was established pursuant to the ECA and, broadly, requires the registration of overseas entities which hold UK property and such entities’ beneficial owners. ECCTA will result in several amendments to the current ROE regime. These amends generally close gaps which were left open by the ECA and as a result, ECCTA is an attempt to ensure that the true beneficial owners of UK property are registered, rather than other entities within the corporate structure. Many of the amends are now in force, but in some important cases are subject to transitional provisions that defer their practical effect until after 4 June 2024. Other measures require the drafting of secondary legislation before they can take effect.
The most significant changes expand the scope of who constitutes a registrable beneficial owner (RBO) where trusts are involved in the structure.
For example, ECCTA widens the definition of an RBO so that any corporate trustee in the chain of ownership will need to be registered, regardless of whether it was exempt from registration under the ECA. So, where an overseas entity is owned by a UK company which is then owned by a corporate trustee, the current ROE regime would only require the registration of the UK company as an RBO; however, the new regime will require details of the corporate trustee to be registered as well.
Currently, where UK property is owned by an overseas entity, which is acting as a nominee, the details of the beneficial owners of that nominee entity are required to be registered. ECCTA will close this loophole, such that the true beneficial owners of the property will need to be registered.
Another key change is that overseas entities which have not complied with their ROE updating duties or which have failed to provide additional information requested by the Registrar of Companies will not be able to register title to property at HM Land Registry and so will be prevented from buying or selling UK property until they comply.
Trust information held on the ROE which is currently protected from disclosure except to government and law enforcement is expected to become disclosable on application. Further regulations are needed on this particular change to determine who may bring such an application and on what grounds. Such secondary legislation is expected to be published later this year.
Companies House
ECCTA widens the powers and role of the Registrar of Companies and tightens the information and filing requirements for bodies corporate and limited partnerships.
Prior to ECCTA, Companies House was essentially a repository for certain information which, by law, had to be filed by (mainly) corporate entities. As such, the reliability of the register was restricted by the accuracy of the information provided, with the Registrar of Companies having limited power to query any aspects of this information, correct errors and follow up on inconsistencies. Under the provisions of ECCTA, the Registrar of Companies is better able to question the information provided and even reject it in certain cases.
Other provisions tighten requirements in relation to certain administrative details, such as registered office addresses and company names, some of which are already in effect.
Perhaps the most significant change for the majority of entities will be the requirement to verify the identity of both new and existing directors, members of limited liability partnerships, persons with significant control and certain people connected with limited partnerships. Although not yet in force, this will require such persons to verify their identity with Companies House (probably by scanning in a form of photo ID) and, in the case of directors, will preclude their being appointed until completed.
Currently governed by the Limited Partnerships Act 1907, limited partnerships will find that their information provisions and filing requirements will be quite substantially increased by ECCTA. The new provisions seek to better align these requirements with those in place for bodies corporate and so, for example, comprehensive information about the partners will need to be filed going forward.
The process of filing itself will also be more tightly regulated, with only ID verified persons or Authorised Corporate Service Providers (such as solicitors) permitted to make filings.
Strict penalties will apply for failure to comply, including fines and imprisonment. The person making the filing or causing the filing to be made could also be guilty of a criminal offence if such filings include any false statements.
Corporate criminal liability
Failure to prevent fraud
A new offence, failure to prevent fraud, has been created by ECCTA. This will hold large organisations liable for certain fraud offences which are committed by their associates (being an employee, agent, subsidiary or someone who performs services on the organisation’s behalf) if the organisation benefits from the fraud and does not have reasonable fraud prevention procedures in place. What constitutes “reasonable fraud prevention procedures” has not yet been clarified but we expect governmental guidance to be issued in due course.
The offence applies to “large” organisations only, i.e. those that in the financial year preceding the offence satisfy at least two of the following three conditions:
a turnover of more than £36 million
a balance sheet total of more than £18 million
more than 250 employees.
Corporate groups are caught if they cumulatively satisfy two of these thresholds. Although “smaller” entities are not caught directly by the legislation, we expect that those organisations which do satisfy the thresholds, will require their suppliers and other entities involved with their businesses to evidence that they have the appropriate procedures in place, resulting in the legislation having a wider remit than appears on a literal reading.
An organisation found guilty of the offence could be liable to an unlimited fine and of course, there is likely to be significant reputational damage.
Identification principle changes
Until the coming into force of ECCTA, a body corporate could only be found criminally liable for an offence if the actual offence was committed by an individual who represented the entity’s “directing mind and will”. As organisations have grown in size and management complexity over the last 50 years, this became an increasingly difficult criteria to fulfil, with the end result being that it was usually smaller organisations that were prosecuted.
ECCTA has now amended this area of the law by putting in place a new test whereby an organisation can be found liable if a “senior manager” acting within the scope of their authority commits one of the specified economic crime offences set out in the legislation.
If found guilty, the organisation will be subject to a (potentially unlimited) fine and the individual in question may also be imprisoned.
Cryptoassets
Additional powers have been granted to law enforcement agencies so that they are better able to seize and recover cryptoassets which are either associated with illicit activity or constitute the proceeds of crime.
Money laundering
ECCTA aims to tighten legislation which deals with money laundering by providing law enforcement agencies with new intelligence gathering powers and enabling businesses to share information between themselves more easily for the purposes of preventing, detecting and investigating economic crime.
Strategic lawsuits against public participation (SLAPPs)
SLAPPs, being legal actions essentially intended to harass and intimidate the other side, have become rather a media focus, often being brought against investigative journalists and other writers. ECCTA seeks to provide the defendants of these actions with more rights and protection.
Removal of statutory cap on Solicitors’ Regulation Authority (SRA) financial penalties
The SRA is the body which regulates solicitors in England and Wales. Prior to ECCTA coming into force, the SRA was restrained by a £25,000 cap on any financial penalty it awarded; this cap has now been abolished and no limit applies.
Disclaimer
This note reflects the law as atâ¯22 April 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice. In particular, ECCTA is a lengthy, detailed and complex piece of legislation. This note provides a brief summary of the key provisions only.
Changes to planning controls bring consistency to enforcement rules and increased powers to local planning authorities (LPAs)
25 April 2024
News
Reforms which change the planning enforcement rules set out in the Levelling-Up and Regeneration Act 2023 (LURA) will come into force on 25 April 2024.
It will now be the case that LPAs can enforce against all breaches of planning control for a period of up to 10 years. This marks an increase from the previous 4-year time limit for bringing enforcement action against building or engineering operations and changes of use to a single dwelling-house. The single 10-year tariff for bringing enforcement will apply where alleged operational development was substantially completed on or after 25 April 2024, or where the date of an alleged change of use to a single dwelling-house was on or after 25 April 2024. These changes will not apply where the alleged operational development or change of use occurred before 25 April 2024, as confirmed by a Government statement published earlier this month; this will be welcome news to developers, who will be ‘in the clear’ for enforcement action where an LPA has not taken action within 4 years and where they are able to demonstrate that any unlawful use of a single dwelling-house or unauthorised works were substantially completed on or before this date.
The regulations also give power to LPAs to use Enforcement Warning Notices (EWNs). EWNs constitute the taking of enforcement action and allow LPAs to invite regularisation applications when it appears that a breach of planning control has occurred.
The restriction on appeals against enforcement notices is a further key change to planning controls. Changes to Ground (a) (an application for retrospective planning permission) will limit circumstances in which an appeal against an enforcement notice can be brought on Ground (a). This will apply in circumstances where an application for planning permission has already been made to regularise the breach. These amendments do not apply to appeals against enforcement notices that were issued, and have not been withdrawn, before 25 April 2024.
The Planning Inspectorate will also have the power to dismiss appeals against enforcement notices and certificates of lawfulness on the grounds of undue delay by the appellant in progressing the appeal, unless steps are taken by the appellant, within a period specified by notice, to expedite the appeal. These changes do not apply to enforcement appeals or appeals against a refusal to grant a certificate of lawfulness that were made before 25 April 2024.
The Secretary of State also gains the authority to determine the procedure for lawful development certificate appeals.
Please get in touch with our Planning Team if you would like to find out more.
Second staircases mandatory in residential buildings over 18m from 30 September 2026
24 April 2024
Views
The Department for Levelling Up, Housing and Communities (DLUHC) has published its long-awaited guidance on second staircases in residential buildings in England. The update to Approved Document B brings certainty for developers navigating this area. Residential buildings over 18m will be required to have two staircases from 30 September 2026 save for those that at this date are “sufficiently progressed.”
Updates to Approved Document B
The updates to Approved Document B (the Government’s building guidance covering fire safety) were published on 29 March 2024. They confirm that all new blocks of flats over 18 meters being built from 30 September 2026 will be required to have two staircases.
There is an exception to this requirement where: “a building notice or an initial notice has been given to, or a building control approval application with full plans made to, the relevant authority before 30 September 2026 and either the building work to which it relates: a. has started and is sufficiently progressed before that day; or b. is started and is sufficiently progressed within the period of 18 months beginning on that day.”
‘Building notice’, ‘initial notice’ and ‘building control approval application with full plans’ have the meanings defined in the Buildings Regulations 2010.
Building works are “sufficiently progressed:” a. where the building work consists of the construction of a building, when the pouring of concrete for the permanent placement of the trench, pad or raft foundations has started, or the permanent placement of piling has started; or b. where the building work consists of work to an existing building, when that work has started; c. where the building work consists of a material change of use of a building, when work to effect that change of use has started.”
Background to the Two Staircase Policy
The second staircase policy was first announced by the Government back in December 2022. Then it was proposing to mandate second staircases in blocks of flats over 30 meters. The new policy was a response to the Grenfell tragedy in 2017 and growing public concerns about building safety standards.
public consultation, DLUHC announced the Government’s intention to lower the proposed height threshold to 18 meters. This reflected the views of industry experts including the National Fire Chiefs Council and the Royal Institute of British Architects. DLUHC acknowledged the development sector’s call for “coherence and certainty,” and promised further guidance as the Government moved to bring England in line with many countries in Europe, North America, and Australasia where second staircase in tall buildings are already mandatory.
On 24 October 2023, DLUHC provided a further update confirming that there would be a 30-month transitional period from when the new guidance was published.
Planning considerations
Building Regulations are not expressly considered as part of the determination of a planning application. However, legally, buildings must comply with the relevant Building Regulations standards when they are built. It is essential therefore that the planning permission reflects the Building Regulations anticipated to be in force at the time of construction.
However, from a planning perspective, the update is no more than a technical formality with second staircases already being treated by planning officers and planning committee members, particularly in London (following the Mayor’s announcement in February 2023), as a requirement for planning applications for new tall buildings over 18m.
The uncertainty around when the new two staircase requirement would come into effect, and at what height, has therefore meant that many development proposals have been on hold. A delay many developers cannot afford in the current economic climate of rapidly rising construction and borrowing costs. It is predicted that in London alone, it has delayed the delivery of at least 38,000 homes.
Revising a scheme to add a second-core often results in the need for a substantial redesign and often impacts on unit numbers and the proposed mix of unit sizes. It is unlikely these changes can be dealt with as a non-material amendment by the local planning authority, and therefore means a variation (s.73) to the original permission is required. This involves a new round of public consultation and where relevant, in London, referral to the Mayor. This is a risk as it can open up the principle of development for reconsideration which may no longer be acceptable, or viable for the developer, if the planning policy position has changed. The redesign itself may also have already impacted on rental/sales values and viability given the addition of a second staircase will reduce the development’s utilisable internal areas.
Future considerations
It is yet to be seen whether there will be any material impact on the value of single-core assets going forward. Currently, it is understood, that the lack of supply to meet demand is meaning that the market remains good for single-core assets which have effective safety measures.
However, how this plays out in the long-term will be interesting. Those holding dated single-core assets, which cannot be reconfigured, may be facing potentially extensive capital expenditure to upgrade their safety systems and depreciating values in circumstances where fire safety risks cannot be appropriately mitigated.
Institutional owners, funds cognisant of reputational-risk and end-users themselves are also driving demand for second staircases. There seems to a general public perception now that one staircase is “dangerous” and two are “safe.” Industry experts consider this to be an over simplification, which fails to consider building safety in the round; a criticism which has been expressly levied at the Government’s updated technical guidance. Experts state that a box-ticking exercise will not necessarily result in safer buildings, nor, is it always necessary for there to be two staircases, where other safety systems can be effective.
For more thoughts on this, please see Charlotte Youngs’ (Senior Associate, Commercial Real Estate) blog on the topic here.
Alfred Liu speaks to Citywealth on NextGens and bridging the generation gap
23 April 2024
Views
Private Client Partner, Alfred Liu, has provided his insight to Citywealth on how families and their advisors can bridge the gap between generations to transfer wealth successfully and harmoniously.
In the article, ‘The nexus of NextGen’, industry professionals discuss the key issues, and potential solutions, for connecting with the next generation of UHNW individuals. Alfred’s key takeaways are as follows:
Generational Differences:
Advisers working with multigenerational families must be aware of deeply ingrained generational differences.
These differences can lead to intrafamily disputes and disharmony, risking the fragmentation and dissipation of family wealth.
Advisers should help families establish common ground, identify potential generational differences, and develop constructive ways to bridge the divide.
Dynamic Wealth Transfer:
The “Big Wealth Transfer” should not be treated as a one-off event.
Viewing it as a process rather than an isolated event prevents complacency.
Strategies and frameworks must adapt to macro issues, geopolitical changes, and evolving circumstances.
The planning for wealth transfer should be dynamic, regularly reviewed, and capable of evolution.
Next Gen Considerations:
Next Gens (younger generations) have distinct experiences and relationships with wealth compared to their parents or grandparents.
They are often more internationally mobile, exposed to diverse cultures, and seek independence.
Advisers must be sensitive to these differences and support families in avoiding disputes.
Alfred reminds readers that wealth transfer is a process not a single event, and understanding the psychology of Next Gens is critical during intergenerational transitions.
Forsters promotes four Senior Associates in annual promotions round
10 April 2024
News
Forsters, the leading London firm, announces today the promotion of four Senior Associates to new roles with effect from 1 April 2024.
The promotions are as follows:
Private Client Senior Associate Alfred Liu has joined the Forsters partnership
Commercial Real Estate Senior Associates Joanna Brown and Andrew McEwan are promoted to Counsel
Rural Land & Business Senior Associate Victoria Salter-Galbraith is also promoted to Counsel.
Natasha Rees, Senior Partner at Forsters, said: ‘We have promoted four outstanding Senior Associates this year. They are all talented individuals who have consistently demonstrated exceptional legal expertise and a relentless focus on delivering results for our clients. They will all continue to contribute greatly to the success of the firm in their new roles. These promotions demonstrate the ongoing growth of and investment in the firm following our recent move to Marylebone and the arrival of Employment & Partnership partner Jo Keddie, Counsel Danielle Crawford and Senior Associate Daniel Parker’.
Alfred Liu joined Forsters in 2017 from Gowling WLG. Nominated as a Rising Star in The Legal 500, he was also named as one of ePrivateclient’s Top 35 under 35 in 2020. He advises high net worth individuals, fiduciaries and family offices on a diverse range of private wealth matters, particularly where there are international and multigenerational complexities. With family roots in Hong Kong, Asia is his second home and he has focused a large part of business on growing client relationships in the region.
Joanna Brown joined Forsters in 2020 as part of a team from Orrick. Her practice focuses on commercial real estate, including landlord and tenant matters with a focus on the retail sector. With a long track record of advising shopping centre clients, Joanna brings extensive expertise to the table in respect of major shopping centre developments, commercial office space and prime retail real estate across the UK.
Andrew McEwan trained at Forsters before qualifying into the Commercial Real Estate team in 2014. He has developed broad commercial real estate expertise but enjoys complex development work in particular. Alongside this practice focus, he plays a leading role at Forsters in shaping the use of generative AI and technology in relation to real estate transactions.
Victoria Salter-Galbraith joined Forsters in 2018 from Bircham Dyson Bell. Victoria was made a Fellow of the Agricultural Law Association in 2024. Named in ePrivateclient’s Top 35 under 35 in 2021, in addition to appearing in the CityWealth Leaders List since 2020 for Landed Estates & Property, she regularly acts on all aspects of agricultural and rural property matters (with particular expertise in historic property and viticulture).
As part of its ongoing focus on inclusion in the workplace and commitment to minimising employment barriers for people living with disabilities, Forsters is proud to announce it has obtained the UK government’s Disability Confident Committed Certification. Disability Confident is a government scheme designed to encourage employers to recruit and retain disabled people and those with health conditions.
Championing inclusion is a core part of Forsters’ strategy, and the firm’s EnABLE committee develops and drives initiatives which support individuals with disabilities. Most recently this has included contributing to the design of Forsters’ new premises in London’s Marylebone by engaging a third-party consultant to review the building plans from a disability perspective. Key adjustments were made to ensure that accessibility was at the heart of the design of the new offices.
Additional actions Forsters has taken to obtain Disability Confident Committed Certification include:
Promoting a culture of being Disability Confident and ensuring that all partners and employees have sufficient disability equality awareness including relevant training.
Introducing a comprehensive Workplace Adjustments Policy, which standardises the process, making adjustments easily accessible for people with all types of disabilities.
Forsters’ Talent team participating in training with MyPlus, a specialist disability consultancy, equipping them with enhanced knowledge and understanding of disability inclusion.
Providing a fully inclusive and accessible recruitment process with disabled people who meet the minimum criteria for the job being offered an interview.
Being flexible when assessing people so disabled job applicants have the best opportunity to demonstrate that they can do the job.
Supporting employees to manage their disabilities or health conditions.
Ensuring managers are aware of how they can support staff who are sick or absent from work.
Ensuring Forsters’ website is disability friendly.
Dearbhla Quigley, Chair of Forsters’ EnABLE committee, said:
“Our move to new offices in Marylebone is a major milestone for the firm and the fact that accessibility has been at the heart of its design is testament to the importance placed on creating an environment that works for all. The EnABLE Committee continues to seek out ways in which Forsters can be as supportive as possible to all of those with disabilities, whatever their form and however they are affected.”
Emily Exton, Forsters’ Managing Partner, added:
“People are at the heart of Forsters and securing Disability Confident accreditation is another stride towards ensuring access, equality and opportunity for all. Removing barriers to employment allows us to recruit and retain the best talent and is part of ensuring the kind of inclusive and diverse working environment which we know leads to provision of the highest levels of service to our clients.”
The introduction of the ‘Gateway Regime’ was one of the major building safety reforms arising from the Building Safety Act 2022 (BSA).
The Gateway Regime is a series of additional safety requirements (known as ‘gateways’) to be complied with at three major stages of the design and construction of a higher risk building (HRB) (i.e. those buildings that are at least 18m or seven storeys high which comprise at least two residential units or is a care home or hospital). Each gateway requires either consultation with, or formal sign off from, the Building Safety Regulator (BSR) before the next stage of the development can proceed. The BSR is the new building control authority for all HRBs in England.
Note: The Gateway Regime also applies to refurbishments of existing HRBs and other projects involving works on or conversions of buildings into HRBs. This note is intended to provide a brief overview of each stage of the Gateway Regime and how it will impact the life cycle of your HRB
Gateway 1: Planning and design phase – the fire safety statement
The first gateway is to ensure that fire safety matters in connection to the building have been considered at the planning stage. It has been a requirement for developers since August 2021 to submit a fire safety statement to the Local Planning Authority (LPA) alongside all planning applications for HRBs detailing the site layout, how fire safety will be managed in the building and how the emergency services can access the building among other matters.
The LPA will review the fire safety statement and will consult with the BSR before deciding whether or not to grant planning permission for a HRB. The LPA has the power to refuse planning applications where they consider the safety provisions contained within to be inadequate. An additional consideration to bear in mind for projects in London is that all major planning applications which require Stage 2 approval by the Mayor of London and relate to residential buildings over 30 metres must be designed to provide for a second staircase.
The Government has also recently announced that, from 30 September 2026, all new residential buildings in England above 18 metres must have a second staircase. Projects where a building notice has been given, or a building control approval application made, to the relevant authority before 30 September 2026 do not need to comply with the requirement for a second staircase provided that the building work has started and is “sufficiently progressed” by 30 September 2026. Compliance with the new rules around second staircases in England will be checked at Gateway 1. For more information on how this will impact your development please speak to our BSA team.
Gateway 2: Pre-construction phase
The second gateway is to ensure that building regulation requirements will be complied with and that building safety is considered during the whole construction phase.
The developer is required to submit to the BSR a building control application which demonstrates how the proposed construction works will comply with all applicable requirements of the building regulations. This is separate to the planning application process in Gateway 1 above and works of construction are not permitted to begin until the BSR has approved the application. The BSR has 12 weeks (8 weeks where works are to an existing HRB) or longer (if agreed) to either approve or reject the building control application.
While the statutory obligation to submit the building control application is on the developer, it is open for the developer and the contractor to allocate contractually responsible for Gateway 2 (and each of the gateways) and we can help you with the contractual negotiations in your sale contracts or forward funding agreements to achieve your desired outcome. We can also assist you in ensuring that key events in the approval process under Gateway 2 are accounted for in the contractual documents with sufficient time allowed for delays.
If the building control application has been approved by the BSR under Gateway 2, further points that could impact timing are:
the developer is to notify the BSR at least 5 days before ‘starting’ the works;
the developer is to further notify the BSR within 5 days of the work having commenced;
‘major changes’ to the construction of the HRB require BSR approval which can take up to 4-6 weeks to either approve or reject. While the ‘major change’ is being considered no work can take place on any area subject to a ‘major change’. A major change is one that has a significant impact on the design or fire strategy of the HRB; and
‘notifiable changes’ need to be referred to the BSR prior to implementation although these works will be able to proceed unless there is an objection within 14 days.
Gateway 3: Post-construction phase
The final gateway is to ensure that the building is safe for occupation. Gateway 3 requires the developer to submit a completion certificate application (or a partial completion certificate application if there is to be a sectional completion) to the BSR once the works have been completed and before the building is occupied. There is also a requirement to provide the BSR with 2 weeks’ advance warning before submitting this application so that they have sufficient time to manage workload.
The application will include handing over the ‘golden thread’ of information which includes as-built plans, documents demonstrating that the requirements of the building regulations have been met and signed declarations from the principal contractor and principal designer that the works and building comply with the building regulations. The BSR has 8 weeks to determine the application and an inspection will be carried out before deciding whether to issue a completion certificate.
If a completion certificate application is approved the legal owner of the building has to apply separately to register the building as a HRB with the BSR (automatic registration does not occur when a completion certificate is issued). It is possible to achieve partial approval of Gateway 3 with several parts of the building or development being able to commence occupation before others.
Residential parts of the HRB cannot be occupied before a completion certificate has been granted for the building and the building has been registered. It is a criminal offence to do so.
Conclusion
The new BSA regime is complex and carries serious consequences if breached. For more detailed advice on any of the points covered in this note please speak to member of the Forsters Building Safety Act Team who will be happy to provide further information and assistance. This note reflects the law as at April 2024.
