Protecting the commercial case for development - essential tips for property developers

14 minute read
25 August 2016

Regeneration and development has long been a focus of public interest and activism. The public is increasingly aware of its rights around the disclosure of information held by public bodies, using disclosed information to scrutinise - and sometimes challenge - the planning and development process.

In this article, our Information Law and Property Law experts look at the recent case of Mr Jeremy Clyne v The Information Commissioner and London Borough of Lambeth, which highlights some of the issues in dealing with requests for disclosure made under the Environmental Information Regulations 2004 and outline five essential tips for managing this risk.

Mr Clyne made a request to see the developer's viability assessment for a London Borough of Lambeth development. At first his request was refused by the local authority. The Information Commissioner's Office agreed that exemptions to the obligation to disclose requested information had been correctly applied by the authority and the assessment could be withheld.

The Information Tribunal disagreed on the basis of a material public interest in seeing the information, which outweighed the interests of the developer in retaining confidentiality to protect its economic interests.

The case highlights that if a local authority has an existing planning policy which is overturned by a particular application, then there is even more reason to consider and give weight to the public interest in disclosure.

Environmental Information Regulations 2004 ("EIR")

The Environmental Information Regulations 2004 (EIR) apply to "environmental information", which is wide-ranging in scope and includes "measures such as policies, legislation, plans, programmes, environmental agreements" and "activities" likely to affect the environment, as well as related "cost-benefit and other economic analyses and assumptions".

The EIR requires public bodies such as local authorities to disclose the environmental information that they hold when requested to do so by members of the public.

This means that any environmental information supplied by a property developer to a local authority could be subject to disclosure. This information may include commercially sensitive material such as viability assessments and contract terms, information that a developer may prefer to remain confidential.

There are exceptions to the requirement to disclose environmental information. For information supplied by developers, one of the most relevant exceptions is where disclosure would adversely affect the confidentiality of commercial or industrial information "where such confidentiality is provided by law to protect a legitimate economic interest" (EIR, Regulation 12(5)(e)).

The exceptions to the duty to disclose are applied on a case by case basis, and are only engaged if the authority considers the public interest in non-disclosure outweighs the public interest in disclosure. Even if the information is supplied on a confidential basis in order to protect a legitimate economic interest (for example the developer's negotiating position), this will not protect information from disclosure under the EIR if the authority determines that the public interest is best served by disclosing it.

Mr Jeremy Clyne v The Information Commissioner and London Borough of Lambeth (EA/2016/0012)

This recent appeal before the First-Tier Tribunal General Regulatory Chamber considered the operation of the Regulation 12(5)(e) exception to protect a legitimate economic interest.

Mr Clyne made a request to see the developer's viability assessment for a London Borough of Lambeth development.

The local authority, and subsequently the Information Commissioner, decided that certain parts of the developer's viability assessment could remain confidential on the basis that they protected the developer's economic interest. The assessment contained potentially sensitive information, including the residual land value, expected profit margin, estimated construction costs and anticipated sale values for private and affordable housing (together with other data that it was claimed could allow someone to calculate them). This material supported the developer's case (which was accepted by the local authority) that there should be a much lower provision of affordable housing than local planning policy required - any more would make the development unviable.

The tribunal was asked to decide whether this information should be disclosed. It was argued that disclosure would compromise the development by exposing the developer's negotiating position with purchasers and building contractors. The appellant (an ex-councillor) contended that the public could not assess the viability argument that underpinned the lower affordable housing provision without seeing those figures.

The tribunal found that the Regulation 12(5)(e) exception applied. The material was commercial, a common law duty of confidentiality applied to it, it protected a legitimate economic interest - how the developer priced the scheme - and that disclosure would have an adverse effect for the developer, albeit a limited one.

In considering the public interest arguments around disclosure of the information, the tribunal noted that the objective of the EIR is to allow a community to have the information it needs to participate effectively in environmental decision making, including before planning consent is finalised. In this particular case, the transparency of the viability assessment was very important, since it allowed the public to understand the reasons why the developer was unable to fulfil core policy on affordable housing. While the public interest in withholding the information was significant because of the importance of respecting confidential information, it was "vastly outweighed by the interests in disclosure".

Although there was an argument that the requirement of openness might lead to viability reports becoming more generic and less useful for local authorities, the tribunal remarked that it has to assess the balance of public interest in each case. In this case, the developer would have had to provide the material that the Council needed to determine what level of affordable housing was possible. The tribunal did not accept the proposition that disclosure would have in any way endangered the development.

For this particular case, the tribunal found that:

  • Estimated sale values and/or average values based on unit size would not affect the developer's negotiation with prospective occupiers and purchasers, since such negotiations would take place by reference to the market at the time, whether for commercial or residential property.
  • The affordable housing average value per square foot should be disclosed, since this would have minimal impact on the developer's ability to achieve the best reasonable price from a registered provider. The tribunal did state that the fact there were only four affordable units in this scheme was a relevant factor.
  • Although figures for the gross developed value and marketing budget might enable other commercially-sensitive figures to be calculated, this information was not so sensitive that it would risk the development proceeding.
  • Construction costs and professional fees should also be disclosed - there was no reason to expect contractors to base their tendered fees on a viability assessment, since such assessments become outdated very quickly, and in any event, the public interest in disclosure of the material outweighed the risk to the developer's negotiating position.
  • The fact that the information had been thoroughly assessed by the local authority and also verified independently did not mean the public should not have the opportunity to review it.
  • The Council made various attempts to engage with the developer about what information should be disclosed, to which the developer was slow to respond. The tribunal did not look favourably on this, as it delayed the public's access to the information at a critical point in the planning process.

Five essential tips for dealing with local authorities

The Clyne case is not binding on future tribunals and the application of each exception to disclosure under the EIR will be based on the facts and public interest in each case. However, the findings of this tribunal may well be applied by local authorities in making their own disclosure decisions.

Based on this case and our experience at Gowling WLG, we can highlight five essential areas to consider when dealing with local authorities.

  1. Always bear in mind the possibility of disclosure when dealing with the public sector

    There is no hiding from the fact that the Freedom of Information Act (FOIA) and the EIR are part of dealing with the public sector. Private sector suppliers to the public sector need to be aware of the requirements on public authorities and implications of disclosure under FOIA and the EIR.

    There is general guidance issued by the Information Commissioner's Office on the EIR. Although implemented by EU directive, we expect the provisions of EIR to survive Brexit in largely the same form, being as the principles come from an international treaty to which the UK is a signatory in its own right.
  2. Manage information flow to local authorities and limit it to essential information

    Suppliers should always consider limiting information flow to a public authority. Some organisations appoint a single person on a transaction to filter and pass on relevant information to authorities. This provides some control over, and active consideration of, the content and amount of information being put at risk of disclosure.

    If information must be disclosed, an information manager can assess and plan for the potential effect on the business. The information manager can also make sure the confidential nature of the information is communicated to the authority. While there will always need to be some information sharing, often too much information is provided to the public sector. As well as putting the supplier's information at risk of public disclosure, over-sharing can create unnecessary work for the public sector, which may then be required to carry out searches and assess information (which they did not require in the first place) for disclosure if a FOIA or EIR request is made.
  3. Check for specific information or disclosure policies

    Some public authorities have specific policies about viability assessments, and it is always prudent to check whether the authority in question has published any guidance or policies, as these often cover transparency and disclosure.

    Both the Mayor of London's Housing Supplementary Planning Guidance and the draft London Borough Viability Protocol contain such sections. By taking account of relevant policies when preparing and managing information, you have some guidelines for mitigating the risk of an unhelpful disclosure.
  4. Limit contractual confidentiality clauses to truly confidential information; require consultation from the local authority before it makes disclosure decisions

    Confidentiality clauses in arrangements with public authorities will not override the authority's duties under EIR or FOIA. Many authorities use standard boilerplate contract clauses that acknowledge this. As part of recognising the possibility of disclosure, developers should approach confidentiality clauses realistically - using them to identify key pieces of information that are considered particularly sensitive. This will help direct the authority in its own decision making about what it has to disclose in response to an EIR or FOIA request.
  5. Respond to any requests from LA promptly and with detailed reasons as to why information falls within the exceptions.

    The Clyne case demonstrates that tribunals are not inclined to look favourably on developers which are slow to respond to local authority requests for input about whether information should be disclosed and reasons that support non-disclosure. As such, developers should always respond promptly and in a considered way.

    Public authorities and suppliers should ideally work closely together so that requests for the supplier's information are flagged to the supplier as early as possible. This then gives time to the supplier and authority to do the necessary (often very detailed) legwork of finding and reviewing requested information. Once located, the supplier and authority need to assess whether any supplier information should be withheld on the basis of applicable exemptions and even if that is the case, whether the public interest means that the information should still be disclosed (if the exemption is one to which the public interest test applies).

In summary

Developers should bear in mind that they may at some point be required to disclose environmental information - our experts in information law, real estate development and planning can help you navigate the issues for specific transactions. Please contact us if you would like to talk about avoiding disclosure of commercially-sensitive information in these situations or steps that could be taken to reduce the impact of disclosure on your organisation.

NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.

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