We use cookies to give you the best online experience. By using our website you agree to our use of cookies in accordance with our cookie policy. Learn more here.Close Me
Matters are simply at the consultation stage at present and therefore it is possible only to give a broad outline of the proposals as they currently stand. (Matters may become much clearer after the Budget on 22 March 2006). Here is a summary of the proposals as they currently stand:
Who pays it?
The person undertaking development.
How is it calculated?
The speculation is that it may be around 20% of the increase in value attributable to the permission to which the development relates. There may be phase payments and a lower rate for brown field land.
When is it payable?
On commencement of development – but it is calculated by reference to the value at the date of the permission.
Is it additional to or alternative to section 75 agreements?
Additional. Section 75 agreements should, after PGS, not require "strategic" infrastructure development but section 75 agreements might still be necessary for e.g. affordable housing, landscaping, phasing and "local" infrastructure. The difficulty of distinguishing between strategic and local infrastructure may prove to be a problem in practice.
What, if any, option does not allow "pass back" to the landowner?
The consultation does not propose any relief for a developer who has to absorb the cost himself.
Will Scotland do something different?
Unlikely. This is a UK Treasury initiative. (However any change to "planning gain" arrangements would require the consent of the Scottish Executive – who have previously rejected proposals like PGS). A separate solution for Scotland may be preferable, however, given the differences in planning regime, housing strategy and property law north of the border.
Who will spend the money and on what?
The Treasury collect the money – who say that the "overwhelming majority" of the funds will be spent on local and strategic infrastructure in the Region from which the revenue is collected. It is not clear to whom the money will be passed for spending or how this will link in with the Barnett formula.
Is it only residential development which is affected?
No – it applies to all property development.
When will it come into force?
2008 is the current proposal.
What should I do meantime?
a. Developers:
Check existing option and conditional sale agreements to establish the ability to pass back the cost to the landowner. If there is no pass back, consider negotiating an amendment to the agreement.
Make sure that any current negotiations for options and conditional sales allow full pass back to the landowner.
Make sure that any section 75 agreement currently under negotiation prevents double charging for the same cost in the event of PGS being introduced (it is at least possible that PGS could, if introduced, be levied on developments started after the introduction of PGS but which were consented before hand).
Start as many developments as possible before 2008 to avoid the application of PGS.
b. Landowners:
Be aware of the possibility of PGS.
Consider the necessity for a "minimum net price" net of PGS in any negotiations.
Consider whether land should be withdrawn from the market until PGS is either not proceeded with or repealed – a potentially difficult political and long term judgement to make.
What is wrong with the proposals?
It may discourage new house building which, at least in England, is said by the Government to be urgently required.
The division between what can still be required by a planning authority under the section 75 agreement as planning gain and what the PGS is intended to fund is not clear enough.
There is a lack of control over the PGS funds and there is no ability to ensure that the PGS funds are applied to specific works being carried out within a specific timescale – which may be a problem where those works are required to support a particular development.
The whole proposal seems to be at odds with Scottish Executive thinking – which may result in a Westminster/Holyrood clash. There could be serious practical difficulties in implementing a new UK wide tax which is inextricably linked with devolved matters such as planning and housing strategy.
Payment of the PGS "up front" might have implications for the viability of projects and increase the risk profile.
PGS appears to involve complex valuation issues and would be costly to administer.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Readers should not act on the basis of the information in this article without taking appropriate professional advice upon their own particular circumstances.
In Dawnus Construction Holdings Ltd v Marsh Life Ltd [2017] EWHC 1066 (TCC), the Claimant (Contractor) brought enforcement proceedings against the Employer (Defendant), in relation to an adjudication...
A recent Court of Session decision has rejected a contractor's claim for damages against a third party, where that third party had affected progress of the works.
A recent decision on restrictive covenants surprisingly saw the court award in favour of a developer who had already built a social housing development in breach of a restrictive covenant
The NEC3 form had the (widely publicised) aim of encouraging cooperation, collaborative working and a fair allocation of risk between the parties to the contract
It is well established that a landlord can oppose renewal of a business lease if he demonstrates settled intention to demolish, reconstruct or carry out substantial construction works to the premises or a substantial part ...
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Planning TV: The Housing White Paper And Speeding Up Delivery
