Recently there has been a lot of noise about the draft National Planning Policy Framework, but the Community Infrastructure Levy (“CIL”) is a change that is already in place and will have a real impact on developments over the coming months. Now that the first local authorities have had their CIL charging schedules approved, we expect a wave of other authorities to follow in their footsteps meaning that more and more developers will become liable to pay a CIL charge over the coming months. So, as CIL thunders towards us and with hopes of increased development activity over the next year, we have put together a list of “top tips” that all developers and landowners who are looking to progress schemes in the near future should think about.
CIL is a charge that local planning authorities can impose on landowners and developers so that they contribute to the cost of providing the infrastructure needed to support development of their area. Where imposed CIL will largely replace the existing system of negotiated contributions under section 106 agreements with a tariff based system based on the amount of new floor space created.
Newark & Sherwood and Shropshire have become the first two planning authorities to have had their CIL Charging Schedules approved in recent weeks. The differences in the charges applied to development in these areas are highly localized. Developers should expect other authorities to gain confidence from the outcomes of these examinations, making it likely that this local variation will be replicated in other areas. The levy imposed on a scheme in one area could therefore be very different from that imposed on a similar scheme down the road.
Shropshire’s charging schedule imposes no liability on commercial floor space and a maximum of £80 per square metre on residential development. In contrast, Newark and Sherwood’s proposed rates vary according to development type and location. Developers of residential schemes will pay nothing in certain areas, while in other zones to the east and the south of the district they will be asked to pay rates of between £45 and £75 per square metre. New retail development will be charged at between £100 to £125 per square metre.
The draft CIL charging schedule for London provides for a charge of between £20 and £50 on most forms of development in the capital and is intended to raise £300 million towards Crossrail. It is likely to be introduced during the course of the next year.
Concerns have been voiced about the degree of local variation, suggesting that it could affect the viability of development in different locations and favour those boroughs, like Shropshire, imposing a lower or nil rate tariff. It remains to be seen if those concerns will be borne out.
What is clear is that we can expect to see the number of adopted CIL charging schedules to increase sharply over the next 12 months. Given local variations and differences from contributions secured under the “traditional” section 106 route, CIL could have a significant bearing on the viability of schemes. Landowners and developers therefore need to be alive to these changes and consider the following key questions:
1. Has your local authority adopted a Community Infrastructure Levy Charging Schedule? If it has, CIL will be applied to any qualifying development which may have a significant bearing on the viability of your scheme.
2. Has a draft CIL Charging Schedule been published? The likely date of adoption will be important in considering the timetable for promoting a scheme through the planning system. Note that in some cases CIL contributions may actually be less than would be required under a negotiated section 106 agreement.
3. Are your proposals for the scheme sufficiently settled yet? Be aware that whilst CIL does not apply to planning permissions granted before a Charging Schedule is adopted, it would apply to any variation to a planning permission under section 73 or a renewal permission extending the time for implementation granted after a Charging Schedule was adopted. There is often a need for section 73 variation applications on larger development schemes and so the risk of triggering a CIL payment at a later date and how this relates to existing section 106 obligations needs to be considered.
4. Is what you are being asked to pay reasonable? In negotiating section 106 obligations ensure that local authorities are reminded that all planning obligations must be necessary; directly related to the development; and reasonably related in scale and kind to the development (regulation 122 of the CIL Regulations 2010).
5. Is there scope to renegotiate with the local authority? If viability is still an issue in relation to a development with the benefit of planning permission, consider discussions with the local authority to renegotiate the section 106 agreement. The Government has advised local authorities to consider this approach. Some local authorities are still resisting such renegotiation but it is certainly worth consideration. Remember to involve the County Council as well where there are significant contributions payable to the County which could be reduced.