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I’m starting a property development company; what legislation do I need to know about?
Breaking into the property development industry can be a rewarding enterprise, but you’ll likely face a number of challenges on the way. Aside from being great at selling, developers must excel at marketing, project management, property market analysis, and most importantly, understanding what buyers want and need.
Applied in the right way, these skills can all contribute to the success of a property development company. But before you get started, there are a number of legislative and regulatory requirements any successful developer should be aware of. Here, we’ll get you up to speed on some of the most important things to know.
Planning and Regulations
Before you begin any development project, the first thing you’ll need to consider is planning permission, as you can’t legally make big changes to a property without it. In order to gain permission to change a property, you’ll need to make an application to the Local Planning Authority (LPA) in the area that your property falls.
Some types of work can be undertaken without planning permission, as per your Permitted Development Rights. While these options tend to be relatively minor in scope, they may present an attractive option for developers looking to cut down on red tape and lead times.
On top of this, you’ll also need to make sure that your plan falls in line with UK building regulations. Essentially, they are a set of legal requirements governing the design and construction of a building which is outlined in The Approved Documents, available to download here. The Regulations cover three key areas:
- Health and safety
- Resource conservation (of energy and other resources)
- Disabled access
If you’re a property developer in England or Wales, you’ll need to follow The Building Regulations to the letter — whether you’re developing an existing property or constructing a new one. Scotland enforces its own separate set of standards, as does Northern Ireland.
Health and Safety
While legal regulations are important, you will also need to consider your employees. As a developer overseeing projects on building sites, you’ll need to take care that you follow the relevant health and safety regulations. As per the Construction Design and Management (CDM) Regulations (2015), developers are responsible for the safety of on-site workers. This includes:
- Drawing up a safety plan with the contractor before work begins
- Having a designer prepare a health and safety file
- Arranging how time and resources will be allocated
- Maintaining and reviewing safety standards throughout the duration of the project
- Ensuring the principal designer and contractor comply with their duties.
Portable Appliance Testing
At the construction stage, your workers will be handling a range of potentially hazardous electrical equipment. As a developer, it’s your legal responsibility to ensure that all electrical appliances used by your business are safe, as per The Health and Safety at Work Act of 1974, and The Electricity at Work Regulations of 1989. The simplest solution is to have a licensed contractor or company regularly carry out a Portable Appliance Test on your site equipment, to ensure they are up to standard. While PAT testing is not a legal requirement in itself, it will provide evidence that you’ve lived up to your duty of care, in case something does go wrong.
Property development companies require several types of insurance to protect against a number of risks that go hand-in-hand with their line of work. As a developer, you’ll require liability insurance to cover against the day-to-day damage that could occur on a working building site. This includes: public liability, which covers against claims by individuals who have been injured or have had their property damaged from your work; employer’s liability, which protects against claims by employees injured in the course of their work for you; and directors and officers liability, which covers against claims made directly against company directors and management.
On top of this, you’ll also need to consider cover as you come to the final stages of the build. Right of Light Indemnity insurance will protect you against claims made by neighbours who argue they have had their amount of light reduced due to your development work. And once you’ve completed the build, building warranty insurance will protect you against claims in defective in workmanship and professional indemnity will cover you in case clients claim inadequate advice, services or designs.
Once you’ve successfully completed the development stage, you’ll need to think about the end-goal for your properties. If you plan on leasing out your developments, you will be required to meet all the regulatory requirements that come with being a landlord. For example, if you lease a residential property to three or more independent people (i.e. not a family), you’ll need to obtain a House in Multiple Occupation (HMO) Licence. Each property meeting HMO criteria requires its own licence, and each licence must be renewed every five years. You can apply for an HMO licence via Gov.uk.
Other requirements you’ll need to meet include: providing an Energy Performance Certificate, fitting and testing smoke and carbon monoxide alarms, and undertaking property repairs whenever necessary. You can find further information on leasing here.
However, before you can start building your property development enterprise, you’ll need to consider company formation. For property developers, that typically involves registering as a limited company, taking out the necessary insurances and finding a registered office (if you’re starting small, that might mean registering your own home).
If you’re wanting to just focus on your business, then formation can seem an overwhelming task — so we’re here to help. Whether you’re looking to register as a limited company or sort out administration, our formation packages can take the stress away from the formal parts of creating your company.