Private Planning and the Great Estates (2/5)

Part II: Basics of Leasehold Development and Planning on the Great Estates

(This is Part II of my publication that I have split into five for Substack.)

See: Part I, Part III, Part IV, Part V

From the seventeenth century onward countless town planners (who would never have called themselves that) were engaged in imposing rationally conceived patterns of growth and development on London. For the most part they were not associated with any political body but were connected with one or another of the ground landlords or building speculators who were ultimately responsible for the face which London presents to the world¹

The Georgian crescents and squares of Bath, the quiet Victorian streets of North Oxford and many seaside towns were built similarly – the phenomenon was not exclusive to London. But the comparatively cheaper land values in these places in the nineteenth and early twentieth centuries meant that London levels of rebuilding and intensification did not occur. 

Part II explains the fundamental operation of estate development – how estates decided to lay out streets, sewers and other improvements before the construction of houses through building leases. Importantly, these houses were held on leaseholds with restrictive covenants. 

Formation and definition of the great estates 

The great estates of London are mostly aristocratic lands granted or sold by the crown, mainly but not entirely after acquisition by Henry VIII in the dissolution of the monasteries.² The core estates have historically included the Grosvenor estate (Duke of Westminster), the Bedford estate (Duke of Bedford), the Portland estate (Duke of Portland), the Cadogan estate (Earl Cadogan) and the Portman estate (Viscount Portman). In addition, much urban development was carried out by the Crown Estate and various church bodies – largely consolidated into the Ecclesiastical and then Church Commissioners³ – and various smaller estates, such as the Alexander estate in South Kensington.

It is difficult to define a great estate; here it essentially means a long-lived corporate entity with urban landholdings of considerable value. In London, a great estate can be geographically concentrated but of high value, such as the former Portland estate (Howard de Walden estate) of just over 100 acres. This more expansive definition includes estates beyond those core ones of the West End.

The greater estates are significant because of the density at which it was economic to build and the scale at which they planned. The lesser estates had fewer competing aims, less interest in grand planning and replanning (in part because of the lack of economic rationale due to comparatively low land values). The greatest aristocratic estate is the Grosvenor, especially when it comes to its rebuilding of Mayfair in the nineteenth and early twentieth centuries.

To this day, the part of London stretching east from Kensington to Bloomsbury and north from Chelsea to Bayswater is primarily made up of leasehold properties. Recent legislative changes have somewhat decreased the share of leaseholds in this area that estate agents call ‘prime central London’, but a mere 30 years ago, leaseholds accounted for four-fifths of sales.⁴

It is also worth emphasising that historically the extent of the estates was greater than today. Even the wealthiest, the Grosvenor estate, sold off Pimlico in the twentieth century due to financial pressures, and the Portman divested itself of the northern part of its Marylebone estate. Among the parts of inner London built by estates but no longer controlled by them are a portion of east Mayfair (Grosvenor), an area west of Regent Street (Burlington), Maida Vale (Church Commissioners) and the Canonbury portion of Islington (Northampton).⁵ Even in places where the underlying estate retains freehold ownership and exercises some degree of control over leaseholders, the estate may have been sold whole or in part to new owners, including private corporations. This is true of many of the smaller estates, such as the South Kensington; and even the Bedford’s Covent Garden estate was sold in the twentieth century.⁶ In a more patchwork way, leasehold reforms and enfranchisement processes, by which owners of leaseholds can forcibly purchase the underlying freehold, have taken their toll on all the estates. 

Other new, primarily commercial but increasingly mixed-use developments were built by companies such as British Land and quangos such as London Docklands. Some see these companies – to be discussed later – as inheritors of the great-estate tradition.⁷

Beginnings of the great estates 

Although the church lands surrounding the City were seized and redistributed by Henry VIII just before the Elizabethan age, when London grew dramatically, it took time for development to occur.⁸ The first paradigmatic estate to develop on these new lands was the Earl of Bedford’s Covent Garden – originally the co(n)vent gardens of Westminster Abbey. After first building his own Bedford House and yielding income from (illegal) existing buildings on the property, the Earl of Bedford applied for permission to build, which he received in 1631.⁹ The pioneering architectural historian John Summerson attributes the permission to Charles I’s interest in and general inability to emulate ‘the splendid architectural achievements of a Henri IV in Paris or an Urban VIII in Rome’.¹⁰ By means of agreeing to employ the services of the architect Inigo Jones, and a substantial payment of £2,000, the Earl gained his permission. Before the Civil War, other developments occurred but not on the scale of Covent Garden, which initiated the idea of a central square – albeit not a garden square – surrounded by fine aristocratic houses backed by mews. 

The first great crescendo of estate development occurred over the late seventeenth century as London emerged from the Civil War (1642–51), the Great Plague (1665) and then the Fire (1666). Before the Fire, the Earls of Southampton and St Albans had begun work on Bloomsbury Square and St James’s Square respectively.¹¹ After the Fire, these projects were finished and building by private estates continued in fits and starts until the twentieth century, by which time nearly all land within inner London had been developed. Simultaneously, the centre of economic and residential activity generally shifted north and west from the City. 

Certain things had to happen for an estate to be developed. The estate had to receive any permissions required by the Crown or, later, Parliament. These were stipulated because of either building restrictions or limitations on the aristocratic holding of lands, often including entail, where previous generations had put restrictions on lands to ensure retention of ownership for descendants. While the eldest son might hold the title, many of the rights included within the inherited bundle were limited.¹² The current head of the family was only the tenant for life and severely limited in action by strict settlement. Reforms could be made without the state but the practicalities were difficult. 

Until later reforms, private Acts of Parliament called Estate Acts were often required prior to development. Other situations, such as enclosure of the commons, similarly required private Acts.¹³ Situations varied but the disposal of land was difficult. Development was simplified if the freehold was retained by the estate and the development occurred through leasehold. Some land was developed and sold on freehold but most was developed on leasehold. This feature resulted in different incentives and capacities for redevelopment, both in terms of enabling good redevelopment and constraining value-destroying redevelopment or uses. 

Prior to the nineteenth century, many of the services now provided by local authorities were provided by the estate, such as paved and maintained streets, gardens and sanitary utilities. 

Planning and building the estate 

estate would formulate a plan. This often fell to the estate surveyor in concert with builders and other interested parties. The planning process was itself constrained by perceived commercial demand. This section considers some aspects of the planning and building process. 

While the estate had an interest in the commercial viability of the houses, it was the builder/developers¹⁴ themselves who bore most of the direct risk because the houses themselves were often built speculatively. A builder entered into an agreement with an estate to build one or more houses according to mutually agreed specifications. They would be liable for a ground rent but this was often kept low during construction, as estates soon learnt to prioritise actual completion. Other schemes were used to provide builders with liquidity so that a street should not be left half-completed. 

The estate would lay out a general plan of varying complexity depending on the circumstances. At the most basic level it would include not only a plan for streets but often other amenities as well. Much of the construction on the finest estates was carried out by large builders such as James Burton or Thomas Cubitt, who were often intimately involved with the planning. On smaller projects the builder/developers had less such involvement. Building agreements stipulated requirements for the architectural character and materials, according to the plan of the estate and ultimately the perceived market. With building complete the estate as freeholder would issue a lease to the builders. In return for taking on the building cost – and complying with the building agreement – the builder would hold a marketable lease for a set number of years. At the end of the lease the property would revert to the freeholder. The interest of the underlying estate, which was not responsible for the building cost but held the reversionary interest, was understandably towards higher quality, while the builders themselves were more cost conscious. 

In areas such as Eaton Square in the Grosvenor estate’s Belgravia or the earlier Bedford Square in Bloomsbury (which inaugurated the practice in London), one architectural design would cover multiple terraced houses around the square.¹⁵ These were targeted at the upper middle classes and were situated between the freestanding aristocratic houses, which they emulated in design, and the more standard terraced houses. Before Bedford Square, most attempts at development on squares focused on aristocratic detached homes (many later demolished, with exceptions such as the present Wallace Collection on Manchester Square); terraced houses were a secondary concern. 

In general the scale of the developments led to interest in providing focal points for streets. Most often this consisted of an estate church. Sometimes these would be inset within garden squares, such as St Michael’s in Chester Square. For the larger builders, at the higher end, much of the interest in architecture was commercially generated: ‘The initiative for making a range of houses or an entire square an imposing architectural unit often came from the builders themselves.’¹⁶ 

For the most part, however, the surveyor of the estate set out standards and private builders could customise within those constraints. For instance, a building agreement might require such features as a slate roof or simply be expressed in terms of outlay (e.g. a building of a certain minimum cost). Some of these contracts would refer to regulatory categories outlined in the Building Act 1774 (described in Part IV). 

For the best estates, sewers and streets were constructed by the estate as the buildings went up and costs recouped on a frontage basis. For instance, on the Grosvenor estate in the early eighteenth century, sewers were constructed, ‘the money being recovered from lessees on the granting of their leases, usually at the rate of six shillings per foot frontage for those plots which fronted on to the streets under which the sewers lay’.¹⁷ Similarly, the cost of streets and squares was recovered by a charge based on how many feet a particular plot fronted.¹⁸ Other similar provisions could be made for stables let separately.¹⁹ 

The provision of these amenities was largely commercial. While having one’s name associated with good developments yielded social benefits (especially for the highest class of titled residents sought by estates), there was also a direct commercial benefit. The market at the time demanded wide streets, drainage and open squares. The idea of ventilation, or circulation, was prized, with underlying economic logic: ‘of course the quantity of ground appropriated to these ventilators is merely calculated so that the increased rental of houses enjoying the sight of a tree, may compensate for the loss of ground from the immediate purposes of the speculator.’²⁰ 

Flexibility of leasehold contracting and covenanting 

For the most part the system just described was entirely flexible at the outset of any contracts. Covenants that failed to work well would not be used again. Market circumstances in different areas determined what types of development were feasible for estates, and changes in economic circumstances determined what an estate could demand. 

The length of building leases also varied. Donald Olsen states that although the original building leases on the Covent Garden portion of the Bedford estate began with 31-year leases, they stretched to 61 years in Bloomsbury and even 80 years. In general the length of building leases increased until around the end of the eighteenth century, when 99-year leases became common until the trend began going the other way.²¹ 

One particular type of covenant adopted by the estates attempted to deal with potential negative externalities emanating from uses of property. These could include clearly noxious uses, commercial uses more generally or some in between. For instance, nearly all estates banned businesses – such as tanneries or smithies – that would dramatically restrict the marketability of neighbouring properties.²² Others banned commercial enterprises altogether and the traffic they drew, providing the separation of uses that civic zoning achieves in, for example, the USA.²³ As the temperance movement grew, some restricted pubs on moral grounds, on the impetus of either the landowner or neighbouring tenants.²⁴ In places where necessity demanded activities with spillover effects, estates sought to limit them. For example, in 1869 there were 19 slaughter houses in Mayfair, Belgravia and Pimlico, technically prohibited though only four were considered a nuisance and restricted.²⁵ Estates tailored restrictions to the tenor of the neighbourhood, resulting in, for example, limits on subletting in some neighbourhoods but not others. The general desire for only certain types of class-mixing also led to regulation in planning – here the finest squares had the most restrictions. 

The point is that this was a flexible system: because of its leasehold nature, when the leases expired the estate, as freeholder, retained the ultimate rights to update covenants.²⁶ Since the freeholder was incentivised to maximise the total value of the estate, not just the interests of any single leaseholder, they acted in ways that were economically efficient. Whereas a single leaseholder with interest in only one house might be willing to sublet to users who have a negative impact on neighbouring properties, estate ownership internalised these potential external effects. While estates were concentrated, most of the externalities had their effects within the estate. Estates captured the benefits of positive spillovers and encouraged them; and bore the costs of negative spillovers and discouraged them. 

The landmark great estates of West London were capable of finding their desired high-end market, but farther-flung developments in areas such as Clerkenwell and Notting Hill, to say nothing of those more distant, were unable to attract – or retain – the kind of tenants for whom they were built. While these estates could attempt to fight the market by stipulating that leases were for whole houses, they could not resist the underlying trend and often caved in, allowing leaseholders to divide existing houses. It was better to find a lower-status market than no market at all. 

Higher-end residents were willing to bind themselves, knowing that if they were restricted, so were their neighbours. Since the estate itself was concerned with the reversionary value of the properties, it had a vested interest in enforcing the covenants. If past covenants were found insufficient, new clauses could be inserted either during renewal or in contracts with new tenants. As Stephen Davies argues, the diversity seen in the outcomes and content of leases and covenants is a sign of the market working, not its failure.²⁷ It is to be expected that where net benefits – benefits for which added revenue exceeded cost of provision – were secured by the provision of goods, estates provided them. After the 1774 Building Act, as Simon Jenkins notes: ‘in order to conform to the new law as and to attract tenants, an estate now had to be properly paved and lit, its houses had to be securely built to one of the four graded specifications and its leases and titles had to be sound.’²⁸

This system had profound long-term advantages. At the end of the lease the structures built reverted to the underlying landowner. The decisions made by older generations – and locational luck – made later ones incredibly wealthy. This long-term interest seems to have been imperative in their thinking to an extent inexplicable through pure financial logic. As Olsen writes: ‘By actuarial tables the reversionary value of a lease with more than forty years to run was said to be negligible, less than a single year’s purchase.’²⁹

Land sold on leasehold allowed the underlying landowner to impose binding restrictive coven-ants that were more difficult or impossible to enforce if the land was sold freehold. Apart from the legal constraints faced by the aristocrats or the long-term revenue desired by institutional investors such as Eton College in North London or St John’s College in North Oxford, selling-on leasehold gave ongoing legal benefits to the buyer of the leasehold. While positive covenants – that is, covenants that require actions rather than prohibiting them – are enforceable on the initial buyer who agrees to them, they are unenforceable on future owners. Consequently, while negative covenants run with the land, positive covenants do not (in the UK; the USA is more complicated). Before more widespread public regulation, these covenants and the broader leasehold system enabled positive spillovers and prevented negative ones. While residents were constrained and forced to contribute to the upkeep of their shared amenities, so were their neighbours. 

Expiration of leases, renewal and dilapidations 

At the end of the lease the ground landlord would either issue a new repairing lease for both land and improvements, as was most common (raising the rent in the process), or take total possession. In both cases the reversionary nature of the leasehold was foundational. At the end of the lease the rights would revert to the grantor of the lease – the estate. If leaseholder – whether the resident or a third party – and landowner agreed to extend the lease, the rent the former paid to the latter would increase from the ground rent to a higher one reflecting the reversion of any improvements. If the two parties did not agree to extend, the landowner now also owned the improvements in addition to the underlying land, and could renovate, add on, raze or just lease the building to another tenant. 

Over time, incentive problems – from the estates’ perspective – emerged around reversionary value resting with landowners while cost of upkeep lay with leaseholders. In both initial leases and subsequent repairing leases, lessees agreed to bear the cost of upkeep, and specific clauses and covenants on issues such as repainting stucco, attempted to deal with these problems. For instance, on the Grosvenor’s Mayfair estate, ‘Beginning in 1854 all leases contained a covenant requiring stucco-work to be painted once every seven years and all wood and ironwork twice.’³⁰ Furthermore, contracts began to include a clause about charging dilapidations – costs associated with bringing property into good repair at the end of the lease, with inspections beforehand. 

Conclusion

Beginning in the seventeenth century, commercial contracts and commercial interest allowed private planning to flourish at the estate level. It was largely through these flexible means that estates responded to changing market conditions. After the initial permission to grant leases and following the rudimentary regulations described further in Part III, estates had the power to carry out the type of planning the state would increasingly take on in the nineteenth century. 

This planning power was constrained by market forces. While leases prevented changing rules on existing contracts, when they terminated, landlords had vastly more power. Furthermore, they were incentivised to provide utilities, as well as maintain architectural standards and restrictions, according to their own interest in the value of ground rents they would receive and the reversionary value of the properties. Part III examines another advantage of the leasehold system that emphasises the increased power with which estates operated at termination of lease. 

This is Part II of my publication that I have split into five for Substack.

See: Part III

Part I, Part IV, Part V

1. Donald J. Olsen, Town Planning in London: The Eighteenth and Nineteenth Centuries (New Haven, CT and London: Yale University Press, 1964), p. 6. 

2. Olsen, Town Planning in London, p. 7; Simon Jenkins, Landlords to London: The Story of a Capital and its Growth (London: Constable, 1975), p. 17. 

3. For example, the Bishop of London’s lands in Paddington. 

4. Philippe Bracke, Edward W. Pinchbeck and James Wyatt, ‘The Time Value of Housing: Historical Evidence on Discount Rates’, The Economic Journal 128:613 (August 2018), pp. 1820–43; https://doi:10.1111/ecoj.12501 

5. Many more could be added to this list; some of them will appear later 

6. Why estates largely wanted to retain ownership until the early twentieth century and why they often chose to divest afterwards can be explained by a combination of desire to diversify portfolios, real and perceived risks of land ownership, tax optimisation and the changing financial models of home-building and ownership. 

7. Sarah Yates and Peter Murray, Great Estates: How London’s Landowners Shape the City (London: New London Architecture, 2013), p. 005. 

8. Jenkins, Landlords to London, p. 24. 

9. John Summerson, Georgian London (New Haven, CT and London: Yale University Press, 1945), p. 13. 

10. Summerson, Georgian London, p. 12. 

11. Summerson, Georgian London, p. 22. 

12. Many of these rights were removed in the late nineteenth century with the Settled Lands Acts 1882–90. 

13. Private Acts of Parliament empowered or benefitted private individuals or bodies rather than the general public. 

14. Some of the most successful developers were also builders but this was not always the case. 

15. As taste changed in the nineteenth century this practice became less common. 

16. Olsen, Town Planning in London, p. 19. 

17. F. H. W. Sheppard (ed.), Survey of London: Volume 39, the Grosvenor Estate in Mayfair, Part 1 (London: The Athlone Press/University of London, 1977), pp. 6–9; https://www.british-history.ac.uk/survey-london/vol39/pt1. 

18. For the larger builders, the credits and debits could become more complicated, as they were simultaneously contracted to carry out the building works. The general point is the ability of market provision. 

19. Sheppard, Survey of London, pp. 13–16. 

20. Olsen, Town Planning in London, p. 18, quoting John Weale, London and its Vicinity Exhibited in 1851 (London: John Weal, 1851), p. 770. 

21. Olsen, Town Planning in London, pp. 30–1. 

22. Sheppard, Survey of London, pp. 47–66, para. 28. 

23. Sheppard, Survey of London, pp. 47–66, para. 27 

24. Olsen, Town Planning in London, p. 165; Sheppard, Survey of London, pp. 47–66, para. 76 

25. Sheppard, Survey of London, pp. 47–66, para. 32. 

26. Unlike freehold land, where the restructuring of covenants is a thorny issue, the fact that it was leasehold had dynamic benefits. 

27. Stephen Davies, ‘Laissez-Faire Urban Planning’, in The Voluntary City: Choice, Community, and Civil Society, ed. David T. Beito, Peter Gordon and Alexander Tabarrok (Ann Arbor, MI: University of Michigan Press, 2002), pp. 35–6. 

28. Jenkins, Landlords to London, pp. 61–2; emphasis added. 

29. Olsen, Town Planning in London, p. 20. 

30. Sheppard, Survey of London, pp. 47–66, para. 25.