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Commercial property developers start to see impact of The Community Infrastructure Levy Regulations 2010

View profile for Alexandra Savage
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In April 2010 The Community Infrastructure Levy Regulations 2010 came into force under the Planning Act 2008. They are hoped to revitalise the planning process and regenerate communities – partly by using monies to be obtained from property developers.   Alexandra Savage here reviews the regulations and what this means for commercial property developers now that more Authorities are beginning to implement the levy.

The Regulations not only substantially reduce the scope of the well known s.106 Agreement (an agreement between a developer and the local authority outlining certain obligations the developer must fulfil by a specific time), but they also implement a new levy on developers which is chargeable in respect of all new builds with over 100 square metres of internal floor space.

Why is it then that so many developers have not heard about this new levy, let alone had to pay it? 

This is because at first only a handful of Authorities were implementing the new levy; it is only recently that the majority have started applying to adopt the new Community Infrastructure Levy (CIL). As an example, it was not until April this year that Fareham adopted the levy, whilst Chichester and Eastleigh are still in the throws of drafting charging schedules and preparing for the transition. It is, however, only a matter of time until all areas will adopt the new regime and it is thought that by 2015 most, if not all, will be charging CIL as part of their local development plans.

Why has CIL been introduced?

Local Authorities were increasingly struggling to force developers to comply with their s106 obligations and as a result were unable to foresee when and if they would be able to fund local infrastructure. In addition developers were finding that, as a result of increasing demands from banks and unattainable obligations within s.106 Agreements, their proposed developments were no longer financially viable. Flaws in the s.106 Agreement process started to become apparent as developers with larger proposals claimed that they were subject to disproportionately high demands whilst cynics argued that the more influential developers were gaining planning permission by offering generous terms within their agreements, thus undermining the application process. The Coalition Government proposed to address these matters by implementing the CIL Regulations 2010.

Why is this Levy any different to the obligations under s.106 Agreements?

Under regulation 122 of the CIL Regulations 2010 s.106 Agreements will now only be considered during an application process if the obligations are necessary to make the development acceptable in planning terms; directly relate to the development and are proportionate to the development in question. These narrow criteria leave very little scope for obligations and completely eliminate the ability for Local Authorities to seek obligations merely to benefit the local community. This is where CIL comes in. CIL can be used to fund a much wider range of projects such as refurbishing schools, building new playgrounds or building new bus shelters. The general idea is that the developer will pay this levy in order to benefit the community as a whole, thus negating the negative impact a development could have.

CIL also has the benefit of being set out in advance within a charging schedule, allowing developers to know financial costs up front. In addition, there is a distinct sense of accountability and transparency with the new set scale of charges and the need for the Local Authority to lay out their development plans for the local community, making it clear the purposes for which the levy will be used.

What does this mean for developers?

Essentially they will need to determine when the relevant Local Authority intends to adopt the CIL, if they have not done so already. They can then obtain a schedule of charges which will be set per square metre of additional internal floor space. The Local Authority still has the right to implement planning obligations within s.106 Agreements in addition to charging CIL and it is therefore important to find out about the rules in the area in which the development is to take place.

S.106 Agreements have primarily been used for affordable housing quotas and criteria since the introduction of the CIL and it appears they will eventually be eliminated completely. There are exceptions to the levy for buildings which are only intermittently used by people or those that are structures as opposed to buildings, such as wind turbines. It is therefore imperative for developers to speak with relevant Local Authorities as soon as possible to ascertain exactly what they will have to pay as CIL levies.

To find out more about The Community Infrastructure Levy Regulations 2010 you can contact Alexandra or the other members of the Commercial Property Team on 02392 753575 or email alexandrasavage@warnergoodman.co.uk.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.