The CIL Regulations 2010 came into effect on 6 April 2010. It is important for Education Institutions to bear in mind the consequences of CIL, especially when thinking about developing or expanding campuses, facilities and student accommodation which may trigger a liability to CIL.
What is CIL?
CIL is a levy whose overall purpose is to ensure that the costs incurred in providing infrastructure to support development can be funded wholly or partly by owners or developers of land. Although local authorities do not have to introduce CIL in their area, their opportunities to raise funds for infrastructure from development will be curtailed from April 2014, unless they do. CIL is chargeable on all net new builds over 100 sq m (save for buildings such as substations and wind turbines, in which people do not normally go).
CIL must be applied to funding “infrastructure”. The word has its normal meaning and the definition in the legislation merely adds that it includes things such as roads, medical facilities and educational facilities. CIL does not currently cover the provision of affordable housing, but there is a current consultation on whether that should change.
Setting the rate
A charging schedule must be drawn up for consultation and public examination, before a local authority can charge CIL. Many authorities have started work on preparing their schedules and a few are already adopted. In setting CIL, the costs of infrastructure and the effect on viability of development in the authority’s area are the key factors. An authority can set different CIL rates for different areas or uses of development. Guidance says that differential rates are only permitted on the grounds of economic viability.
We have already seen evidence in the preliminary draft of CIL charging schedules that differential rates will be set for certain uses, including student accommodation. Some of these have even proposed a CIL rate for student housing schemes at a markedly higher rate to that for ordinary residential schemes. This comes down to the question of viability and the healthy residual land values which student development can generate in a number of areas.
Given the potential for differential CIL rates for student accommodation schemes, education institutions (in particular, higher education institutions) should keep an eye on the draft charging schedules being developed by charging authorities in their area. Preliminary and draft charging schedules will be published for consultation, which gives the opportunity to comment on the proposed charging rates.
Who pays and when
CIL will only become payable once a local authority’s charging schedule is in place and once “chargeable development” is commenced. There are provisions for phased developments in the case of outline permissions.
First off, it is worth bearing in mind that aside from the exemptions for charities mentioned later in this briefing education institutions are not exempt. It may be that in a particular case a nil rate may be charged for education use, but there is no general exemption for education use. CIL liability is not restricted to developments by commercial developers.
Primarily, it is the landowners of the land within the red line of the planning permission, or relevant phase, who are liable .Where there are two or more owners liability is apportioned according to value. However, it is possible for a person to assume liability for CIL by submitting an “assumption of liability notice” to the collecting authority. This would normally be a developer: Landowners will often want to impose this obligation to assume liability in their contractual documentation with developers.
There are some exemptions/reliefs from the liability to pay CIL, some of which are applied at the discretion of the charging authority. It should be noted that exemptions are lost if development is commenced before the claim is determined by the authority, and claims for exemptions must follow a set procedure.
Liability to CIL does not arise for development, if on the day the planning permission is granted for that development there is no charging schedule in effect in that area. Care must be taken,however, where an application is made to “vary” conditions on an earlier permission, if CIL has been adopted meanwhile in the area.
Mandatory & discretionary exemption for charities
Education Institutions will often be registered charities and as such may benefit from exemptions from liability to pay CIL. There is one mandatory exemption which applies so long as a test is satisfied. This test requires the owner of the land subject to the CIL charge to be a charity or charitable trust and to use the chargeable development wholly or mainly for their purposes (alone or in conjunction with another charitable institution).
The other relief available for charities is discretionary and relies on the charging authority choosing to make the relief available in the area. The key relief available here is for situations where the chargeable development is to be held wholly or for the greater part by a charitable institution (either alone or alongside other charitable institutions), as an investment from which the profits will be applied to its charitable purposes. Again, certain tests must be met for this relief to be available.
CIL and section 106 agreements
This is not the end of section 106 agreements. They are still available and relevant even where CIL is adopted. However, the CIL Regulations restrict the circumstances in which section 106 agreements may influence planning decisions.
Some changes have been made to planning obligations via the CIL Regulations. These must be 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. If these three criterias are not met, the permission will be vulnerable to successful judicial review. Further restrictions on taking section 106 agreements into account when granting planning consent also apply.