2023 has seen a surge in single family rental (SFR) investment. Our Market Masterclass series on SFR, explores the rapidly emerging asset class and offers key insights from our lawyers to help you navigate this promising landscape.

In the fourth video in our series, principal associate Hannah Daeche explores the legal issues you may encounter with construction and offers her recommendations.

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Hannah Daeche: So some of the issues that housebuilders interested in single family rental might find is that, whilst they are still building homes and selling those homes, the people that are purchasing them are very different.

So typically housebuilders would be selling to individuals, whereas on a single family rental it is likely to be investors, who have a very different mindset to just your run of the mill purchasers.

So one of the issues they need to be looking at is what their underlying construction package looks like; from an individual's perspective it is very much geared about NHBC, but from an investor's it goes much wider than that and ensuring that the housebuilders have got a sufficient and robust construction package in place.

So one of the ways that I can help housebuilders address these issues is twofold, I guess. The first thing is if it is a new scheme we can kind of look at the construction documents, so make sure that they have got a really robust package that the investors are going to be looking to see.

Similarly if it is a project that has already under development and there is a decision to kind of switch midway through, what we can certainly do is look at housebuilders' existing underlying construction package and help them work out if there are any gaps, what those gaps are, potentially try and fill those gaps or if they cannot be filled just kind of come up with the story and the explanation of kind of what they have got, why they have got it, or why they perhaps have not got certain documents so if they can go to the investment market and actually just sell the position they have got.

So I do quite a lot of work on the housebuilding side. Traditionally this has been involved with helping them draft template construction documents – so consultant appointments, trade contracts and letters of reliance etc. – and latterly I have been working on a number of joint venture projects with several housebuilders where they are developing out sites together as part of a master development and kind of working with our corporate and real estate colleagues to kind of package that up and then also work on template construction documents like building contracts etc.

So I think I would be really well placed to help with this work because not only do I have a lot of experience on the housebuilding side, I actually also do a wide range of work for investors and institutional lenders as well so I think this gives me a really good balance of seeing things from both sides of the fence – so, kind of going back to what I was saying before of identifying perhaps gaps in what your construction package is, I have kind of looked at that from a lender or an investor perspective in the past so kind of know what kind of things they are looking for.

So I would recommend housebuilders that are looking to go into the single family rental market is to, for those projects where you are identifying it from the outset, is to kind of really sit and think how you want to deliver that project and your procurement route – so whether that is with a main build contractor, trade contractors, consultants etc. – and making sure that you have got documentation that appoints all of those parties in a robust manner right from the outset.

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