Why standard commercial property thinking doesn’t work for ports and harbours

Scotland’s ports and harbours are vital enablers of the energy transition, with the growing role of offshore wind and wider renewables activity intensifying demand for port land and infrastructure.

Sites historically used for fishing, general cargo or oil and gas are being repurposed for fabrication, integration, marshalling and long-term operational support.

This presents significant opportunities for commercial real estate developers, funders and occupiers, who have a major role to play in ensuring the land and property aspects of ports and harbours are fit for purpose.

However, as ports and harbours are regulated infrastructure environments and not standard commercial property assets, they operate under a different legal and commercial framework than a standard real estate asset would. This means those looking to operate in the ports and harbours sector face increased risk and delay to their projects if they treat them like standard industrial assets – getting the proper advice is essential.

Firstly, the powers held by harbour authorities are derived from (often historic) harbour legislation stemming from their traditional uses for fishing, cargo, oil and gas amongst others. This creates an additional layer of legislative complexity due to statutory controls and marine regulation which regulates how land and water space is used, including control over navigation, berthing and operational activity. Tenants of ports and harbours need to be aware of the statutory controls and build them into their expectations around  delivery and operation of their projects. From a financing perspective, non-standard occupation structures and consent requirements can also affect the robustness of security and step-in rights for lenders.

Further to this, separate rights may be required for seabed, foreshore and marine use. This usually requires consent from Crown Estate Scotland – not having the right permissions in place can delay projects.

Leases of land within ports and harbours can also sometimes extend to include quay walls, jetties or the seabed. These are often accompanied by complex repairing obligations that need to reflect the occupational arrangements. Bathymetric surveys (the aquatic equivalent of a topographic land survey) and/or dive surveys may be necessary to assess the condition of marine infrastructure. Parties should also carefully consider whether dredging will be required to support their operations, as this can trigger separate consenting requirements, environmental constraints and ongoing maintenance obligations.

Lastly, there is increasing pressure on port capacity, driven by the offshore wind sector which is competing for berthing space alongside other port users. It may not be possible for ports to grant exclusive use for berthing, which can lead to misaligned expectations and create risk at critical stages of project delivery.

For developers, funders and occupiers operating in the ports and harbours sector, there are a number of steps that should be taken with the support of expert legal advisers to avoid or mitigate the risk of disruption during critical project phases:

• Engage early to ensure legal structures reflect operational realities – are your agreements and contracts appropriate for what you are looking to achieve?
• Test assumptions around access, exclusivity and control – what rights and obligations do you have as part of your contractual arrangements?
• Understand the full ownership and consent landscape and allow for approvals within project timelines – what permissions do you require, when, and from who in order to deliver the project on time?

Burness Paull has experience acting for port authorities, developers, investors and occupiers on the full spectrum of legal and practical issues associated with operating within Scotland’s ports and harbours. Please get in touch with Stuart Gardiner, Andrew Little or your usual Burness Paull contact, if we can assist.

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