E&I blocks bids to cash in on open market ‘loophole’

Between 2016 and 2022, it was possible to apply to transfer a local market home or list a new-build for the nominal fee of £500. Only one such application was ever received, in November 2021, and it was approved in December 2022.

In October 2022, the States noted that Environment & Infrastructure was developing new policies to control inscriptions on the open market. That work, which is not yet complete, includes setting a much higher application fee, which could potentially be £250,000 or more, and raise millions of pounds to help public finances.

Since then, no fewer than 11 applications have been received for properties to be added to the open market, and some applicants are known to be frustrated that E&I has refused to process them for the historic fee of £500.

‘In March 2023, the committee was alerted by multiple sources over a short space of time that the application that had been made in November 2021, resulting in a new inscription to part A of the open market register, was being regarded by some as having set a precedent,’ said E&I president Lindsay de Sausmarez.

‘It was alleged by these sources that a coordinated effort was under way by a group of people to exploit what they perceived to be a loophole, whereby a new inscription would likely be approved because the law provided for new inscriptions, but a detailed policy to limit, shape, regulate and control that provision was yet to be finalised.’

Some of the sources, most of whom were considered highly reliable, also told the committee or its officials that some of the prospective applicants were being supported by one or two deputies outside of E&I.

Transferring a property from the local market to the open market can add hundreds of thousands or even millions of pounds to its value.

After taking legal advice, E&I rapidly agreed that new applications would still be accepted, but that applicants would be informed that decisions would be made only after the introduction of policies to control new open market inscriptions and a more realistic fee structure for the privilege. At that time, no new applications had been submitted.

But the refusal to process the 11 applications received since then has come under fire from Deputy Mark Helyar. In a series of formal written questions, the former treasury lead raised concerns that holding onto applications may deny applicants their legal rights and prompt costly court actions against the States.

In replies circulated on Friday, E&I insisted it had acted properly and was protecting both States finances and the value of the open market.

Deputy de Sausmarez said there was a low risk of legal action from any developer, who would be risking ‘reputational damage... over what the committee considered would be widely seen as an unethical move, given that it would probably be viewed as an attempt to play the system to avoid paying a fair contribution of the significant uplift in value conferred by open market inscription, and in doing so threaten the stability of the open market’.

‘The committee considered the matter in detail. The advice from the Law Officers suggests that the committee is acting reasonably and in compliance with the law,’ she said.

‘The committee also considered the potential revenue that would be lost to the States if it capitulated at any threat of legal action, as the extant fee is only £500.’

E&I hopes to finalise its new policies and fee structure for inscriptions in the next few weeks.