High Court judge rejects legal challenge over £295k Community Infrastructure Levy demand

Sir Tim Kerr, sitting as a judge of the High Court, said Herod Property’s case had failed and should not have been brought since it had an adequate alternative remedy, through appeal to an expert tribunal.

Herod had asked the court to quash Westminster’s demand for just under £295,000 arising from the company buying part of an office building in Bayswater and converting it to five residential flats.

There were four grounds: unreasonable failure to include retained parts of in-use buildings when calculating CIL; failure to comply with the CIL Regulations on material interests and on apportionment; unreasonable decision to issue the notices;  error on notice’s face.

Westminster said the claim was out of time and also opposed it on merits, saying Herod was the author of its own misfortune while the council had correctly applied the statutory provisions for collecting CIL.

Herod had taken the risk of commencing development without serving a notice to establish an exemption from CIL liability and Westminster’s actions were adequate and reasonable.

A company named E&O had owned 32 and 34 Palace Court and undertook to separate the two properties internally when Herod bought 32, initially continuing its use as offices.

In March 2022, it submitted a prior approval application for change of use to five self-contained flats.

Westminster gave approval but said the development must be completed by 18 May 2025 and noted that the property was potentially liable for CIL.

By April 2023, Westminster stated the “development commenced under general consent is liable to pay CIL".

Westminster’s CIL officer in 2025 signed a Notice of Chargeable Development for the change of use from office to five residential flats, for £294,959.75, made up of £253,349.08 for the defendant and £41,610.67 shown as for Transport for London (TfL).

Sir Tim noted it was common ground that TfL should have been identified as the Mayor of London.

The same day Westminster issued a demand notice for £380,326.30, additionally claiming surcharges totalling £49,387.10 and late payment interest of £35,979.45.

Sir Tim said it was “inescapable” that CIL regulation 64(1A)(b) placed responsibility on the developer for deciding whether it thinks the zero CIL exception applies.

A developer may lawfully not issue a notice if it considers the zero CIL exception applies, but regulation 64A made it clear that the collecting authority must serve a notice of chargeable development if the developer has not served one and the development has commenced.

“There is no exception to the authority's obligation to serve a notice merely because it is aware the developer relies or may rely on the in-use exemption, even if it agrees that the in-use exemption reduces CIL to zero,” Sir Tim said.

He noted the provisions are "not straightforward. Indeed, they are awkward and do not fit together easily.

“A developer such as this one, confident that the in-use exception will produce zero CIL, may well be tempted not to issue a notice of chargeable development. The language of regulation 64(1A)(b) tends to encourage this course. It is counterintuitive to issue a notice indicating that a development is chargeable while of the view that it is not.”

But he said a developer who does not serve a notice takes certain risks if the authority does not agree the in-use exemption produces zero CIL.

Sir Tim said hindsight was “a wonderful thing” but it was clear that a developer in Herod’s position should follow an eight-stage process starting with a check with the local authority, before commencing development, that it agrees the CIL payable will be zero, due to the in-use exemption.

“Where, as in this case, the developer does none of these things and does not engage with the collecting authority, the latter must exercise its CIL collecting functions as best it can, acting reasonably and lawfully in the normal public law sense,” Sir Tim said.

Taking the first and third grounds together he said: “The claimant is essentially reproaching the defendant with failing to uncover by detective work at public expense the information which the claimant neglected to provide to make good the in-use exemption and consequently show that no CIL was payable.”

Sir Tim said Westminster’s enquiries into ownership and occupation of 32 Palace Court did not provide immediate and clear answers.

"There was clear evidence of conversion into five flats and of sale and likely occupation of some,” he said.

“But there was no clear evidence about the duration or nature of that occupation. The defendant was entitled to say ‘enough is enough’.”

Westminster had neither committed Wednesbury unreasonableness or acted in breach of any Tameside duty, he said.

Rejecting the apportionment claim, Sir Tim said CIL liability crystallises on commencement and not on a procedural step such as issuing a notice of chargeable development.

Such documents state the collecting authority's view, and do not create a liability where none existed before they were issued and served, he said.

If no one has assumed liability, the owner of the land when development commences must be liable to pay.

“There is nothing unfair or inequitable about that result,” Sir Tim said: “It places responsibility for paying CIL on the party likely to benefit from the development.”

He found the error between the reference to TfL rather than the Mayor of London to be immaterial with no prejudicial impact on the claimant.

Mark Smulian