NEWS

Enabling airspace development via joint venture agreements – the BRAC approach explained

11.03.2022

Interest in airspace development has gained momentum in recent years, yet the notion of ‘owning’ the space above a building remains abstract to many and investing in what is essentially ‘fresh air’ continues to be an area of much debate.

Lenders often remain perplexed by this seemingly ‘non-standard’ approach to construction and there are a variety of models for the financial and legal aspects of such projects.

BRAC Contracts has been involved in numerous airspace development projects both as main contractor and, through our sister company BRAC Developments, as the developer too.  It is in the developer role that we’ve pioneered the joint venture (JV) model for such projects and MD Adam Clark explains why he believes that this is the way forward.

For many years, extensions to increase the size of a building were traditionally focused on side-returns, wraparounds, simple single-storey rear extensions, over-structure extensions above a garage or similar, or even a loft conversion. The common denominator in each of these is the clear ownership of the property against which the work will be carried out – the garden, the loft, the garage etc. But the notion of ‘owning’ the air above a building remains abstract at best, in spite of the fact that as a property owner, you do indeed also own the rights to the airspace above that property, whether that’s a single dwelling, a multi-dwelling block or commercial unit.

Indeed, larger blocks – whether residential or commercial – are frequently the focus of airspace projects due to their potential to deliver multiple new units. Often, an airspace developer will approach a freeholder to purchase the rights to the airspace above their building, in much the same way a landowner might sell some of their land to a developer, either on an unconditional or subject to planning basis. Otherwise, the freeholder will engage a specialist developer to deliver the project for them in an approach that mirrors ‘traditional’ extensions. 

We do things differently!

After being engaged as lead contractor on several airspace projects, in recent years we’ve also assumed the role of both contractor and developer, taking a joint venture approach to such projects. In doing so, it appeals to the freeholder by virtue of mitigating perceived financial risk, whilst also acting as reassurance that the project is being delivered by experts.

So, what does this mean in practice? Until recently, the value – or perceived value – of the airspace above an existing building has proved prohibitive to a developer wishing to purchase it. The freeholder is left without the rooftop development being realised and, significantly, without enjoying the profits as a result. 

With our approach, we don’t exchange funds to purchase the airspace. Instead, we enter a contractually binding JV agreement with the building’s freeholder before proceeding to manage all aspects of feasibility and the planning process. At this stage, there is no obligation on the freeholder to continue with the project and so the commitment, along with the risk, is very much on our part. 

Naturally, we work to identify potential projects that we believe will i) receive planning permission and ii) prove to be financially viable – we’d be mad not to!

Assuming all parties agree, the team at BRAC Developments then manages the entire process with minimal disruption to existing residents. The freeholder entrusts their building to us and in return, we take on the financial commitment – an approach which we believe is both fair and attractive.

Once a project is completed and all costs – whether they’re related to the construction, legal or sales aspects of the project – have been realised, the profits are shared between the two parties as per the original JV contract. We believe that this approach leaves the freeholder in a better financial position than if they’d held out for a sale of the airspace rights.

It’s an approach we took at our recent project at Tait House in North London, so we’ve got track record of how it works in practice and if this sounds of interest please contact Adam on 01268 573 933 or complete the contact form here.