Airspace development schemes

Owners of suitable buildings should consider how best to maximise the value of their rooftop space.

Those with the necessary experience, resources and appetite for development may choose to undertake the construction themselves. However, for many owners, alternative arrangements may be more practical.

One straightforward option is to sell the airspace interest to a third-party developer with the expertise and financial means to carry out the project. In some cases, this may involve selling the freehold reversion, which could result in the loss of future ground rent income.

The advantage of this approach is that the owner avoids the challenges of managing the development process and resolving potential disputes between existing leaseholders and a new rooftop developer. The transaction may be structured either as a property sale or, where the property is owned through a company, through the sale of shares in that company.

Another increasingly popular approach is the grant of a rooftop or airspace lease. Together with any necessary rights, such as licences for alterations and scaffolding rights, these arrangements enable a developer to carry out construction while providing them with a legal interest in the rooftop space.

Alternatively, a property owner may grant a developer rights to undertake the construction works without transferring a proprietary interest in the airspace itself. In such cases, careful consideration must be given to how the parties will receive a return.

One solution is to enter into a joint venture agreement, under which the owner and developer agree in advance how the completed units will be managed, sold and how profits will be divided. Another possibility is a promotion agreement, providing for the marketing and sale of the newly created dwellings and setting out how proceeds are to be distributed. Where the developer does not hold an interest in the rooftop, the owner will generally remain responsible for granting leases to the eventual occupiers or purchasers.

The range of available structures gives both property owners and developers considerable flexibility when negotiating commercial arrangements. Payments may be made upfront before construction begins, or alternatively the owner may agree to receive payment from the proceeds of future sales once the development has been completed.

If you would like advice on the most appropriate structure for a rooftop development project, please contact Meaby & Co at info@meaby.co.uk or by telephone on 020 7703 5034

We also have a website dedicated to this area of law: Rooftop Law