Lack of build over consents and acting for commercial lenders
Friday, 21st October 2016
The Transfer of Private Sewers Regulations 2011 provided for all previously private sewers and lateral drains to be transferred to the ownership of regional Sewerage Undertakers. This had the implication of making all previously private sewers, public.
Under the Building Regulations 2010, Schedule 1, Part H4 the consent of a Statutory Undertaker is required for building works over a public sewer. Where 'public foul sewers' and or ‘public surface water sewers’, run under land, an owner of such land cannot build on or within three meters of the centre line of such a sewer without the consent of the Regional Sewage Undertaker. This is referred to as 'build over consent' or a 'building over agreement'. Such agreement provides the Statutory Undertaker with rights to access the sewer for the purpose of maintenance. A building over agreement will also lay out the responsibilities of the Statutory Undertaker to make good any damage caused.
In situations where a private sewer was built over prior to it transferring to the ownership of a Sewerage Undertaker retrospective build over consent is not required. In these circumstances what certainty is there for a property owner, whose property was constructed prior to the transfer of the sewer from a private sewer to a public sewer, in relation to the obligations of the Statutory Undertaker to make good any damage caused.
This becomes more of a concern when acting for a commercial lender. How can you satisfy a commercial lender where a Water & Drainage Search reveals that a property has been built over a public sewer and there is no evidence of build over consent that there is no risk in relation to a Statutory Undertaker entering the property, digging up the floor to access the now public sewer and not making good any damage?
Obtaining information from the Water Authority to confirm if build over consent should have been in place or if the sewer had previously been private and transferred as a result of the Transfer of Private Sewer Regulations 2011 is next to impossible. Therefore, satisfying a commercial lender that build over consent was not necessary becomes difficult. A commercial lender needs to be satisfied that in a situation where a Sewerage Undertaker requires access to a sewer lying under a property the works will not affect the value of the Property and the bank's security and there needs to be some certainty as to the responsibility of a Statutory Undertaker to make good any damage caused in the absence of a formal building over agreement.
Section 114 of the Water Industry Act 1991 provides that if a sewerage undertaker enters to inspect a sewer and it is found that the sewer is a in proper condition the Sewerage Undertaker shall make good any damage done as soon as possible. This could be considered enough in these circumstances to satisfy a commercial lender.
There is a further issue in trying to establish if there should have been a build over agreement. In circumstances where a public sewer has been built over without the necessary consent under the Building Regulations 2010 then the usual penalties and enforcement action will apply. It becomes a difficult and lengthy exercise in trying to establish whether the sewer in question was originally a private sewer subject to the Transfer of Private Sewers Regulations 2011 and therefore a building over agreement would never have been required or whether the sewer in question has always been public and a building over agreement should have been in place.
The fall-back position in relation to residential property and a lack of build over consent seems to be indemnity insurance. However, as commercial property lawyers know, obtaining indemnity insurance in relation to commercial property is considerably more expensive. The answer is not clear. Costs must be incurred in investigating the history of the sewers under the property to be satisfied of the position or costs must be incurred in obtaining an indemnity policy. Either way it is an awkward situation that the Transfer of Private Sewer Regulations did not envisage and is only likely to become more common as properties which would have been over private drains pre-2011 now find themselves over public ones.
This article was written by Sarah Cross and Alex Tomlinson.