Must I obtain a utility search on a development site acquisition?

Posted: 16/12/2022

It is often assumed that utilities will be readily available to connect into, or easy to remove or divert on a new build development, and therefore there is very little importance placed on the installation and presence of service media during the planning stage. This presumption can be a costly mistake for property developers.

What searches should be carried out?

It is important to carry out enquiries of the relevant service providers – this includes gas, electricity, telecommunications, water, sewerage, drainage and even various rail operators.  The developer will then be able to identify:

• whether the existing services are sufficient;
• whether access rights for any apparatus belonging to third parties will limit the scope for development;
• where the nearest mains services are positioned; and
• whether the development site already has rights to lay services across any adjoining third-party owned land.

Inevitably, on a development site acquisition, it is vital for a developer’s solicitor to carry out a utilities search, which should reveal any apparatus belonging to utility companies within the boundary, and vicinity, of the property – accompanied with plans as standard.

Solicitors’ duty/liability

In the case of Spire Property Development LLP v Withers LLP, the relevance of utility searches/enquiries relating to utilities was reviewed by the court. The facts of the case are as follows.

In 2012, two property developers purchased two adjacent properties in London for development. After completion, the developers discovered that three high-voltage electric cables owned by UK Power Networks (UKPN) ran beneath the properties. Unless removed, the cables would significantly limit the scope of the re-development.

The solicitors acting on behalf of the developers did not carry out a power-line search. The developers asked their solicitors: (1) why the existence of the cables had not shown up before completion; (2) to elaborate on UKPN's statutory rights of access; and (3) if there was some kind of legal documentation relating to the laying of the cables on both sites.

The answers to the relevant questions were: (1) the receivers selling the property had extremely limited information and no knowledge of the property; (2) wayleaves do not need to be registered at the Land Registry, and it is entirely possible that a wayleave was granted some time ago when the cable was originally laid and not known to the seller; and (3) there was nothing revealed in the pre-contract due diligence referring to the cable identified by the developer.

The solicitors told the developers that the Electricity Act 1989 permitted UKPN to install power lines under private land (ie, without such rights having to be formally documented/registered against the title to the property). However, they did not advise the developers of their rights and potential remedies against UKPN. Taking that to mean that no solution was available to them, the developers reduced the scope of the development.

The developers brought claims in negligence against the solicitors, arguing that they had been negligent in failing to conduct a power-line search and advise them as to their rights and remedies.

Since the developers were probing the solicitors about what should have been discovered in relation to the cables before completion, and not to the developers' potential rights and remedies against UKPN, this did not point to a broader construction because it simply asked for the solicitors' thoughts on the specific questions. By answering as they did, the solicitors had not assumed a duty to advise on the developers' potential rights and remedies against UKPN.

The key statements from the judgement are:

• The solicitor's duty is limited to carrying out the tasks which the client has instructed, and the solicitor has agreed to undertake. The duty is directly related to the confines of the retainer. It is implicit in the retainer that the solicitor will offer advice which is ‘reasonably incidental’ to the work that they have agreed to carry out.
• In determining what advice is ‘reasonably incidental’, regard should be had to all the circumstances of the case, including the character, sophistication and experience of the client. In this particular case, the solicitor and developer were familiar to each other and involved in ongoing professional relationships on other projects, and the developers were both highly experienced and well-resourced. More burdensome responsibilities are likely to be placed on solicitors if their clients are inexperienced or vulnerable, with more limited responsibilities for experienced or sophisticated clients. In determining what is ‘reasonably incidental’ to the solicitor's engagement, regard may be had to the level of fees charged.
• It is important that solicitors are able to respond courteously and constructively to ‘one-off’ requests for information or advice from former or potential clients, or third parties, without fear of creating legal liability. When volunteering any such information or advice, solicitors need to take care to identify the limits of any assumption of responsibility in order to avoid the risk of litigation. Equally, those seeking information or advice from solicitors on an informal basis need to take care to understand the potential limits of the exercise and the extent to which they can reasonably rely on any response.

What clients and their solicitors need to be aware of?

• Utility searches, utility searches, utility searches – the importance of these during the due diligence process cannot be stressed enough. Often developers/clients do away with these due to the cost involved but this far outweighs the cost of unknown issues that may crop up after completion.
• If a developer/client is able to instruct a survey of the relevant utilities/apparatus crossing the site and produce an overlay plan, showing where these lie exactly in relation to the development proposals, then that is even better!
• Although the Spire case is useful is setting the parameters of a solicitor’s duty, it also emphasises the necessity of early discussions between the developer/client and solicitor to assess exactly what is required - this can range from a basic ‘red flag’ review to a fully enhanced ‘Rolls-Royce’ style report.

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