The September CIL Reforms: impact on developers
In a previous article, "A summary of the September reforms to the Community Infrastructure Levy", I summarised the key reforms to the CIL regime which came into effect on 1st September 2019.
In this article, I briefly highlight some of the key impacts that the changes to CIL will have on developers.
- Pooling restrictions
Under the previous CIL regime, local authorities were prevented from pooling more than 5 planning obligations, this restriction has now been removed. From 1st September, local authorities are able to decide whether to fund infrastructure requirements through S106 Agreements, CIL or a combination. It is anticipated that the removal of pooling restrictions will simplify development on sites with multiple ownership.
- Change to floorspace by S.73 applications
The reforms aim to provide clarity to the CIL position where floor space is increased as a result of a S.73 application. Previously, some local authorities had attempted to charge additional CIL under a S.73 application on the floor space already permitted by the original planning permission as a result of indexation. The new rules have clarified that increased indexation cannot be applied to floorspace already permitted. The chargeable amount should be recalculated for a S73 application as follows:
- any increase in floor space will be charged at the latest indexed rate; and
- any decrease in floor space will be calculated based on the indexed rate in place at the time the development was originally permitted.
- Monitoring fees
Case law had cast doubt on the ability of local authorities to charge monitoring fees for less complex developments. However, the new CIL regulation clarifies the legal position and confirms that local authorities are permitted to seek a 'fair and reasonable' contribution from developers, towards the monitoring and reporting of planning obligations through S.106 agreements. In practice monitoring fees were often included in S.106 Agreements and therefore this change is unlikely to have a significant practical impact on developers. The statutory regime may prove to be beneficial for arguing that costs should be reduced on the basis that they are not 'fair' or 'reasonable'.
- RICS CIL Index
The CIL regulations require collecting authorities to apply an index of inflation to each relevant CIL rate. RICS has now developed and published an annual index, with the support of the Ministry of Housing Communities and Local Government. The index is based on the BCIS All-in Tender Price Index and will assist with ensuring that increases in CIL are linked to market conditions. The index figure will be published on or around 1 November each year and will apply from 1 January of the following year.
- Social housing relief
Social housing relief provides relief from paying CIL on the portions of chargeable development intended for social housing.
The CIL changes mean that social housing relief will no longer be lost where chargeable development commences prior to a valid commencement notice being submitted to the collecting authority. Instead, surcharges are imposed, equal to 20% of the amount of CIL that would have been payable if the relief had not been granted, or £2,500 (whichever is lower).
These changes have removed a risk associated with phased sites which are being developed by multiple developers, whereby the failure of one developer to serve a commencement notice may prejudice the availability of reliefs to the others.
These impacts have generally been well received, they bring some clarity around points where developers and local authorities have been clashing. So at least some points of contention have been removed!
If you have any queries regarding the changes to CIL or CIL liability generally, please contact a member of the Planning Team.