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Community Infrastructure Levy - Emerging issues

Since the Localism Act 2011 became law and the furore over the draft National Planning Policy Framework died down, both central and local government have been focussing on Community Infrastructure Levy (CIL).

What is CIL?

The Planning Act 2008 introduced CIL to give local authorities the ability to charge development for infrastructure that might be strategic, rather than specifically required in connection with a particular development. The Localism Act 2011 made some changes that meant that an element could be directed towards the community affected by the development that gave rise to the charge.

What is the current position?

At the time of writing, three local authorities have adopted a charging schedule which is the document that sets out how much money will be charged per square metre of development. In addition, the London Mayor's draft charging schedule setting out how much he can charge for Crossrail has been approved by an Inspector. Numerous local authorities have either produced a draft for consultation or embarked on obtaining (usually from external consultants) the information needed to draw up a charging schedule.

Once a charging schedule has been adopted by a local authority, the following development will be required to pay the relevant amount specified in the charging schedule:
  •  Development comprising 100m2 or more of new build floorspace
  •  Development of less than 100m2 of new build floorspace that results in the creation of one or more dwellings
  •  The conversion of a building that is no longer in lawful use.
What issues are emerging?

The charging schedules produced to date have been surprisingly simplistic. The Inspector's Report for the London Mayor's Charging Schedule described the approach as "very basic". The common methodology used by local authorities has been to engage a firm of chartered surveyors to produce a list of land values for different types of use and consider the impact of paying a particular level of charge on viability. Some local authorities have also split their administrative areas where different levels of charge would apply demonstrating different market areas.

In practice this will mean that development in one street could pay a higher level of charge than development in the next street. This is also an issue in considering whether development could be less costly in terms of the charge in a local authority where no charging schedule has been adopted, as compared to the neighbouring local authority which has adopted a charging schedule. For example, Bristol City Council has published a draft charging schedule which it hopes will be adopted by the autumn 2012 whereas South Gloucestershire Council has not published a draft and has no published timetable to do so. With the abolition of regional bodies, there would seem little prospect of a regional view on this issue being taken.

Potentially the way that the charge is intended to be levied could have an unintended impact on the way that developers proceed with their development. Although the charge does not become payable until reserved matters approval is granted (and implemented), the charge is averaged across all the types of development. Where development is undertaken in discrete phases it is possible that the charge for a particular phase might be higher than the charge that use would normally attract. This will have cash flow implications for the developer.

Is any development exempt?

Some types of development such as wind turbines are exempt from CIL. In addition, a charging schedule might identify certain types of development (that might ordinarily attract CIL) that will not be charged as it would make the development unviable.

Landowners which are charities using new development for charitable purposes are exempt, as is the element of any development that is social housing. The charging authority may also use its discretion and not charge charitable landowners where the development is to be retained as an investment and the profits are to be used for charitable purposes.

Regulation 55 of the Community Infrastructure Levy Regulations 2010 does provide relief for "exceptional circumstances". This regulation anticipates that there may be circumstances where a development would be unviable due to CIL being levied. However, the authority does not have to make relief available in its area. In Bristol, the City Council has decided not to make this relief available despite the overall burden on development being an increase of over 30% over and above the amount that would have been collected relying upon Section 106 Agreements alone.

What can we do?

If a charging schedule has been adopted in the local authority area where the development is to take place, it is important to ensure that the amount payable for CIL has been taken into account in arriving at the land value. It is important to note that the amounts set out in a charging schedule are subject to indexation. If the site is unviable, ask the local authority whether they will provide relief for exceptional circumstances. If the local authority is not prepared to provide relief and the proposed development includes other costs that would be paid via a Section 106 Agreement, there is still scope for those costs to be reduced in discussion with the local authority.

Where a charging schedule has not been adopted, it is possible that there are still opportunities to influence the process. Developers usually have a better idea of how development works and the land values for particular types of development than the local authority does, so there may be an opportunity to object to the amounts of CIL proposed. For housing developers, it is understood at the time of writing that the Home Builders Federation has engaged consultants to put its objections forward.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at February 2012. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.

TLT LLP is a limited liability partnership registered in England & Wales number OC 308658 whose registered office is at One Redcliff Street, Bristol BS1 6TP England. A list of members (all of whom are solicitors or lawyers) can be inspected by visiting the People section of this website. TLT LLP is authorised and regulated by the Solicitors Regulation Authority under number 406297.

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