by Ian Rowson
In recent years vast tracts of derelict wastelands on the north and south banks of the River Thames have been transformed, and nowhere has this transformation been more marked than in Docklands, where largely as a result of the efforts of the London Docklands Development Corporation and various private-sector initiatives regeneration has taken place on a massive scale.
A number of these developments such as Cascades, Gun Wharf and Canary Wharf have become synonymous with the 1980s — the age of Big Bang, the advent of the yuppie and global trading. But while much has been written about Docklands developments little attention has been focused upon the peculiar practical and legal difficulties in rebuilding part of London’s heartland adjacent to the River Thames. It is the purpose of this article to identify some of the particular legal difficulties that arise.
The navigation of the River Thames is governed by two statutory bodies, the Thames Conservators and the Port of London Authority. This article will consider only development falling within the jurisdiction of the Port of London Authority (PLA). The jurisdiction of the PLA is defined by the First Schedule to the Port of London Act 1968 as extending upstream as far as Teddington: above that point navigation of the River Thames is administered by the Thames Conservators.
One important consideration in acquiring a riverside site is the ownership of the riverwall, dockwall or other structure separating the site from the river. Under Schedule 1 to the Port of London Act 1968 the PLA is deemed to have title to, and thus be responsible for, the Thames from its landward limit, which extends down both sides of the river at mean high water level to the seaward limit, and includes “all islands, rivers, streams, creeks, waters, watercourses, channels, harbour docks and places”.
In the absence of any statutory provision providing that the PLA owns any dock or river walls separating a site from the river, a developer and his future purchasers must be aware that ownership will usually vest in the adjoining riparian owner. This is a matter of considerable importance, because ownership of a dock or river wall carries with it far-reaching and potentially onerous obligations of repair.
Although at common law there is no duty upon a riparian owner to keep his part of a river bank/riverwall in repair (see generally Hudson v Tabor [7] 2 QBD 296 and Thomas & Evans Ltd v Mid Rhondda Co-operative Society [1940] 4 All ER 357) the PLA have statutory powers under section 123 of the Port of London Act 1968 by notice to require the owner or occupier of a landing place or embankment which by reason of its insecure condition or want of repair is a hindrance to navigation to remedy its condition. Furthermore, the collapse of a river/dock wall is likely to have structural implications which may adversely affect the development itself.
In practice it can be very difficult for a developer and his future tenants or purchasers to limit liability for future works of maintenance and repair to such a wall. In circumstances where a site is developed under the terms of a building licence entered into with the London Docklands Development Corporation (LDDC) it may be possible to obtain an indemnity from the LDDC at the time of entering into the building licence and to require a covenant for indemnity to be given in the transfer of the reversion when it is transferred to the developer upon completion of the scheme.
In practice, however, such an indemnity is likely to be difficult, if not impossible, to obtain. Furthermore, it may be qualified to the extent that it applies only to the external face of such a wall, which is likely to create difficulties of interpretation. The likelihood is that the developer — and ultimately the purchasers or tenants of the development — will become responsible for the future costs of maintenance and repair of such a wall.
This can be a matter of considerable concern, because many of these walls may be old and, quite apart from structural damage and damage arising from wear and disrepair and exceptionally adverse weather conditions, there is also the very really danger of impact damage from a seafaring vessel. Given these problems, it is essential for a prudent developer to recognise the difficulties that exist at the inception of a development and to relieve the burden for future purchasers/ tenants. This will also have the advantage from a developer’s standpoint of pre-empting any potentially difficult inquiries that may be raised by surveyors or solicitors acting for prospective purchasers of a development.
In my experience, however, there is no perfect solution. Those who construct and purchase riverside developments have to be prepared to foot some of the commercial risks inherent in such ventures. This argument in itself, however, is unlikely to find much favour with the building societies, banks and other financial institutions. Furthermore, now that the euphoria associated with Docklands developments has died down — and given the retreat in the residential market-place that has occurred during the course of the last few months — it is likely that future purchasers and those who advise them are likely to take a much more circumspect view than they might have done in the heady days of the mid-1980s.
In practice there are certain steps that can and should be taken. One possibility that a developer should consider is to try to insure the risk of the wall. Such cover may, however, be very difficult to arrange and the premiums are likely to be high. The level of indemnity available is likely to be another problem faced in such circumstances, as are the risks for which cover can actually be obtained.
In my opinion the most satisfactory solution is to set up a sinking fund, with the developers making an initial and substantial contribution to it. The relative cost to a developer is likely to be small when considered in the context of the development as a whole, and the marketing benefits of presenting a scheme to the public that has been thoughtfully and carefully considered are likely to outweigh the cost to the developer in any event. It is important that specialist advice should be obtained on the level of contributions and the way in which such schemes should be administered. The funds should be held in trust for the benefit of the tenants or purchasers on a given development, so as to provide maximum protection, particularly as against third parties in the event of liquidation or receivership. The Landlord and Tenant Act 1987 appears to recognise that this is the correct way of dealing with reserve funds in residential schemes, and it is suggested that increasingly tenants of commercial developments will wish to see such contributions protected in this way.
Another problem frequently encountered by developers is the treatment of “river features” and “structures” adjoining a development when they rest not on dry land but, by virtue of their own weight, on the bed of the river Thames. By section 66 of the Port of London Act 1968 any landowner constructing or maintaining a structure which rests on the bed of the river is required to obtain a licence from the PLA. Such a licence will usually be required in circumstances where a riparian landowner requires to construct, place, alter, renew, maintain or retain works in, under or over land belonging to the PLA.
This requirement has considerable significance, because features such as jetties, platforms, and wharfs can greatly add to and enhance a development. This is particularly true with residential schemes with direct river frontage where such features can constitute important selling features.
The basic difficulty of any licence is that it confers upon the licensee a personal as opposed to a proprietary interest in land. In practice the PLA is unlikely to accept anything other than the barest of amendments to such licences, and a developer is likely to find himself compelled to accept the grant of a licence on terms which are potentially onerous, including rights for the PLA to terminate the licence upon six months’ written notice to remove the works from the river and reinstate the river bed, to maintain the works to the PLA’s satisfaction, and to accept responsibility for any siltation or erosion which in the opinion of the PLA is caused by the works.
A particular difficulty that can and has often arisen with Docklands-style developments is the role of jetties as amenity features. It is often the case, particularly with high-class residential schemes, that jetties are used for the purpose of creating amenity space or riverside walkways.
It may, for example, be the case that the relevant planning authority (which in many cases will be the LDDC) may grant consent for a development on condition that a public riverside walkway is constructed on a jetty and that the public should have access to such a walkway at all times. Such a condition may become impossible to implement if the developer holds the jetty under the terms of a licence granted by the PLA. In practice the solution would be to require a long lease from the PLA, but they have shown themselves reluctant to grant leases of the riverbed. It would thus be impossible to dedicate such a walkway as a public walkway.
One reason why these difficulties have arisen is because of the uncertainty as to who will ultimately become responsible for the future maintenance and repair of such walkways. The relevant local authorities, for example the London Boroughs of Tower Hamlets and Southwark, will not generally adopt such walkways under the terms of section 38 or 52 agreements.
The PLA’s attitude seems to be that by granting “licences” of riverworks as opposed to “leases” of the riverbed they are protecting themselves against this particular potential future liability. While it is generally accepted that much of the responsibility for Docklands infrastructure will ultimately be passed on to the local authorities, it is easy to perceive that the responsibility for features resting on the bed of the Thames might at a future date be passed on to the PLA. In a sense this would seem entirely logical, since the PLA licenses the river works under section 66 of the Port of London Act 1968 and has statutory power to require the payment of a licence fee (which in many cases may prove to be very substantial), the removal of the works and the reinstatement of the riverbed.
Given that the PLA has benefited considerably from the redevelopment of London’s Docklands, it is not inconceivable that the legislature may ultimately determine that the PLA should be made responsible for their future upkeep.
A further difficulty of the PLA licence is that such licences are always “non-assignable”. Once a developer has entered into a licence with the PLA so as to be able to commence or complete his development he may find himself with a liability from which he cannot divest himself. It may be possible in the fullness from time to surrender the licence and arrange for a new licence to be granted to, say, a residents’ management company. However, such an arrangement may well prove to be unsatisfactory to the PLA which may refuse to co-operate with such proposals on the basis that such a company would offer an inadequate covenant, in which case a developer may find he has inherited an albatross.
If, for example, many years after a developer has completed a development the feature were damaged by collision the developer could be faced with the cost of repairing the structure and reinstating the river bed. These costs could be substantial and run into hundreds of thousands of pounds. Similarly, if for whatever reason the PLA were to terminate the licence and require removal of the river works and reinstatement of the river bed in accordance with the terms of the licence the scenario would be the same. Although the development may have been concluded both successfully and profitably an indefinite contingent liability would be inherited.
The problems, however, are not confined to the developer. If a developer is successful in surrendering his licence and obtaining the grant of a new licence to a residents’ management company then the purchasers of the scheme will inherit the same liability. The existence of this liability is likely to be equally unpalatable to them. In commercial terms the best practical solution for either party is for indemnity insurance to be maintained. It should be possible to value the cost of complete destruction and reinstatement of, say, a jetty (or other riverside structure) and in practice the risks are likely to be easier to insure than a dock river wall as the maximum liability is likely to be easier to value.
If a developer who retains the ownership of the structure under licence insures the risk of damages or destruction then he will be protected against future liability for the cost of the premium. The purchasers of the development will also be protected against any future risk of maintenance of the structure. Furthermore, if the maintenance of the structure is of benefit to the scheme as a whole it may be possible to set up a trust whereby purchasers contribute to the cost of the policy by way of service charge contributions. In any residential scheme, however, such an arrangement would have to be very carefully considered against the background of the Housing Acts and the Landlord and Tenant Act 1987.
In conclusion it can be seen that although a very great deal has been achieved in London’s Docklands the complexity of redevelopment has created many legal difficulties that are not commonly encountered. In particular, the problems arising from repair and maintenance of river and dock walls, licences from the PLA and the potential for conflict between the vested interests of the various statutory bodies involved are all perennial ones in London’s Docklands. While what has been achieved should not be underestimated, only time will tell us the extent to which the problems alluded to have been grappled with successfully and what legacies remain for the future.
