UK: Community Infrastructure Levy: Procedural Pitfalls, Section 73 And Retrospective Applications

The Community Infrastructure Regulations 2010 were introduced with the aim of providing a fairer, faster and more transparent system, and reducing reliance on Section 106 planning obligations which, by common agreement, can cause significant delay in the grant of planning permission.

With the consultation on developer contributions now closed, we take a look at some common issues arising from the present regime.

Landowners beware!

To benefit from reliefs, exemptions, and the option to pay by instalments, a party must have assumed liability for the levy.

However, in the event of default by that party, payment must be made by the landowners. Appropriate indemnities should therefore be considered when acquiring an interest in land subject to outstanding CIL liabilities.

Deadlines are deadlines

The system is rigid and there's not much room for flexibility.

Particular difficulty has been caused by the requirement that a commencement notice is served on, and received by, the Local Planning Authority (LPA) at least one day before development commences. Recent appeal decisions have made it clear that the onus is on the applicant to ensure that the notice is not only served but also received by the LPA.

The consequences of failing to serve a commencement notice can be severe, including the imposition of a surcharge and, critically, the loss of exemptions or reliefs. The LPA has little or no flexibility to waive these deadlines. When applying for reliefs, note that development must not be commenced until the LPA has formally notified the applicant in writing of its decision as to whether or not the relief is granted – failure to comply results in the relief being lost - even if the decision was to grant it!

Where is my money spent?

The LPA is required to have in place a Regulation 123 infrastructure list which sets out what CIL receipts are to be spent on. However, there is no further requirement for transparency.

Where there is a negotiated Section 106 obligation it should at least be clear what the monies received are being spent on and there will usually be some link (however remote) between the payment and the proposed development.

CIL monies can be spent on anything on the Regulation 123 list but if the money is not spent, there is no mechanism for repayment.

SECTION 73 PERMISSIONS AND RETROSPECTIVE APPLICATIONS

Some provisions that appear to be causing most difficulty are those relating to permissions granted pursuant to variation of conditions (under S73 TCPA 1990) and permissions granted retrospectively (under S73A TCPA 1990).

Section 73 permissions

The general principle is that CIL liability is restricted to any increase in chargeable development between the later permission and the original permission.

If the original planning permission pre-dates the introduction of CIL by the LPA, but the Section 73 permission is issued after its introduction, then the development will be liable for CIL to the extent that there is an increase in chargeable development.

CIL payments made in relation to the previous planning permission are offset against the new liability and a refund is payable if the previous payment was greater than the new liability. Note, however, that this offset must be applied for and evidence provided in respect of any payments already made.

Previous payments made under a section 106 agreement attached to the original (pre-CIL) permission are not taken into account when calculating the CIL liability in respect of the S73 permission.

Retrospective applications

So what happens if development goes ahead without planning permission and an application is subsequently made to regularise the position?

Simply, CIL Regulation 9(1) provides that CIL is charged on development for which planning permission is granted and so the levy will be chargeable on any development which receives retrospective planning permission.

The difficulty here arises in relation to deductions and reliefs, because most reliefs require an application to be made before the service of a commencement notice. However, CIL Regulation 7(5) provides that the date of commencement in relation to retrospective planning applications is the date of grant of the permission and so, logically, no commencement notice can be given.

This is a huge trap for builders relying on the self-build exemption who build otherwise than in accordance with planning permission, where the usual way of regularising the position would be via a retrospective application. Notwithstanding the fact that relief may have been properly applied for and granted in respect of the original permission, that relief will be inapplicable to any retrospective permission. A further application for self-build relief on the new application cannot be made, as the development will have already been commenced.

Consequently, careful thought is required before the submission of a retrospective application to regularise development which was either implemented prior to the introduction of CIL, or was subject to an exemption.

Conclusion

The developer contributions' consultation proposes a more proportionate approach to administering exemptions and this is to be welcomed. In the meantime, applicants and their agents should seek advice on the procedure. The consequences of failing to comply, or failing to comply on time, can be costly.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.