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Silence on CIL: Practical steps for Developers

The one major planning issue that the Government seems to have remained silent upon since the election is the Community Infrastructure Levy. The Conservative's Open Space Planning Green Paper included a firm commitment to abolish CIL. However this commitment seems to have been quietly put to one side.

However this commitment seems to have been quietly put to one side.

If it remains on the statute book CIL will impact upon every major development scheme across the country.

CIL can only be charged once local authorities have formally adopted a charging schedule. The charging schedules will be similar to development plan documents and will be adopted after a full consultation and public examination process.

Developers and landowners will need to participate fully in this process to ensure their views on the appropriate CIL rate in any particular area are taken into account by both Local Authorities and the approved Examiner. Once adopted there will be very little scope for renegotiation of the chargeable amount in contrast to the flexibility in the current Section 106 Agreement regime. Provisional guidance has been issues by CLG on the charge setting procedures.

However a more immediate impact is the effect of the Community Infrastructure Levy Regulations 2010 (which were bought into force on 6 April 2010) on the current use of Section 106 Agreements.

The previous Government was keen to ensure that it minimized the scope for double charging of both CIL and financial contributions under Section 106 Agreements. Regulations 122 and 123 of the CIL regulations have been introduced with the intention of limiting the scope of planning obligations in order to achieve this goal.

The Government's policy on Section 106 Agreements is currently set out in Circular 5/05.

This Circular sets out the tests that Section 106 Agreements are required to comply with. In practice, application of these tests (which are not strictly legally binding in any event) has been widely "stretched" as developers have agreed to local authorities' demands in order to secure planning permission.

Regulation 122 of the CIL regulations provides that a Section 106 agreement may only constitute a reason for granting planning permission for a development if the relevant obligation is:

* Necessary to make the development acceptable in planning terms;

* Directly related to the development; and

* Fairly and reasonably related in scale and kind to the development.

It is important to recognise that this regulation does not make any agreement that is not in accordance with these three tests unlawful, but rather that it may not be relied upon by a local authority as a reason for granting planning permission.

The true extent and scope of these tests and impact of this regulation will be established by the Courts over time.

In the meantime there are a number of practical steps that developers should consider to ensure their planning permissions are protected as far as possible:

* Where the local planning authority intends to rely on a Section 106 obligation as a reason for granting planning permission there should be a full paper trail between agent and officers establishing that the three tests have been passed;

* Such analysis should be set out in full in any officer’s report to Committee; and

* Consideration should be given to whether a relevant informative should be included in the reasons section of any planning permission decision notice to the effect that associated obligations have been relied upon and that the three tests have been passed (or even a clause inserted in the Section 106 agreement itself).

Rival developers and third party challengers will be reviewing decision notices and associated Section 106 agreements to consider whether a legal challenge can be made on the grounds of infringement of Regulation 122.

The CIL regulations also introduced a longstop date of 6 April 2014 after which a local authority’s ability to seek financial contributions under Section 106 agreements will be severely limited. Whilst CIL is in theory entirely voluntary this will force authorities to start drawing up their charging schedules sooner rather than later.

There are two key points that Developers will need to consider in the short term:

(i) the application of the CIL Regulations to their current and future Section 106 agreements prior to the adoption of charging schedules or April 2014; and

(ii) the need to participate in the charging schedule adoption process in areas where they undertake development activity

If you have any questions relating to CIL and its impact on your business please do not hesitate to contact Richard Max or David Warman.


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