Developing a sense of community

The proposed Community Infrastructure Levy is meant to help deliver infrastructure that supports development. Caroline Bywater looks at the detail.

The consultation period relating to the draft Community Infrastructure Levy (CIL) regulations has now ended and whilst the Department for Communities and Local Government is busy reviewing the responses, local authorities are no doubt considering whether charging the levy would be appropriate for them.

The levy is intended to fund the provision of infrastructure identified by the local authority as necessary to support development in their local and sub-regional area. The government’s aim is to introduce a system that is fairer, more transparent and simpler than the current s106 regime. It will not be obligatory to introduce the new system but, if this is done, the charge is mandatory on all development that falls within its remit. This will be all development of new buildings, or to existing buildings, subject to a de minimis threshold of 100 sqm and an exclusion for householder development. There is a further exclusion for charities and consultees have been asked for views on offering a discount for affordable housing development.

So, if a local authority is minded to charge CIL, what must it do? It cannot charge CIL without having in place a charging schedule which sets out its CIL rate (or rates – these can vary for different types of development or locations). To get to that stage, the authority must have in place an up-to-date development plan which is used to assess the amount of development likely to come forward, the cost of the infrastructure needed to support that development and the impact that CIL will have on the viability of that development. Once that has been considered, the draft charging schedule is open for public consultation and is then subject to examination in public by an independent inspector. Interestingly, there are currently no obligations to regularly review the schedule or to report on timescales for the delivery of infrastructure.

The charging schedule must set a CIL rate on a ‘per square metre’ metric. It is currently proposed that the levy is charged on gross development rather than net although we await to see if the final regulations are amended so that the levy is charged on more of an impact basis. The planning authority can index link the charge.

Where it is relevant, CIL becomes payable on the commencement of development, although the draft regulations contain an anomaly in that the quantum of the charge is calculated when planning permission ‘first permits’ the development and this, thanks to some somewhat confused definitions, could well be after development has commenced. In essence, planning permission ‘first permits’ development when a full permission is granted (or when final approval is given if pre-commencement conditions require details to be approved) or on approval of the final reserved matters pursuant to an outline application. It may be that final regulations permit payment by instalments.

Planning authorities will need to inform the person liable to pay CIL how much is due. It is possible for a person (most usually the developer, we expect) to assume liability for CIL but the landowner is ultimately liable in default. The liability can be entered as a local land charge and if payment is not made on time, interest becomes payable. Local authorities are also able to take advantage of a number of enforcement powers to try to recover unpaid levies. These include issuing a stop notice to prevent further development until CIL is paid. Failure to comply with such a notice will be a criminal offence with a financial penalty of up to £20,000.

Local authorities will need to carefully consider whether to implement CIL. For those authorities that are happy with their precedent s106 agreements, or tariff systems, there may seem to be little benefit in moving to the new system – and indeed there may be concerns about the impact of staffing and funding resources the preparation of the charging schedule and monitoring will entail. However, the draft CIL regulations also contain provisions which would restrict the use of tariff and negotiated s106 contributions with the effect that CIL may become the only real way to maintain funding levels.

In relation to s.106, the proposals are to place the Circular 5/05 tests on a statutory footing. As a result, anything that goes beyond providing mitigation that is directly related to the relevant development will be ultra vires and invalid. It is anticipated that s106 agreements will still be used to secure the provision of affordable housing but care must be taken to avoid ‘double recovery’ under both CIL and s106.

Of course developers also have concerns over the working of CIL and it remains to be seen whether the final version of the regulations will be amended to take any of these into account. One of the biggest concerns relates to the actual delivery of the infrastructure. Developers have no say in what projects their CIL payments are put towards but in many cases certain infrastructure will be vital to make their developments work. What if this infrastructure does not come forward? Not only might this render their scheme unworkable but it may also result in a failure to provide the mitigation envisaged in an environmental impact assessment – and on that basis the scheme may not be acceptable in planning terms at all.

The final regulations are expected to come into force on 6 April 2010 although, since the close of the consultation period, the Conservative party has indicated that it may not go ahead with CIL proposals. We will have to wait and watch for the next step.

In the meantime, a growing number of developers are seeking clauses in s106 agreements that are currently being negotiated to ensure that if CIL becomes payable on schemes for which they have already signed up to deliver s106 obligations, the local authority will reimburse a sum equivalent to the CIL payment. On the whole, local authorities seem to be accepting that such clauses are reasonable.

Caroline Bywater is a senior solicitor at Mills & Reeve. She can be contacted by email: This email address is being protected from spambots. You need JavaScript enabled to view it..