The Court of Appeal has unanimously rejected a London council's claim to over £0.5million of Community Infrastructure Levy (CIL).
The issue in R (on the application of Giordano Ltd) v Camden London Borough Council turned on the interpretation of regulation 40(7)(ii) of the Community Infrastructure Levy Regulations 2010 (as amended) (the CIL Regulations). The CIL Regulations were further amended on 1 September 2019 and regulation 40(7)(ii) is now paragraph 1(6)(ii) of Schedule 1 to the CIL Regulations.
What did regulation 40(7)(ii) say?
Regulation 40(7) allowed a deduction to be made in respect of '(i) retained parts of in-use buildings; and (ii) for other relevant buildings, retained parts where the intended use following completion of the chargeable development is a use that is able to be carried on lawfully and permanently without further planning permission in that part on the day before planning permission first permits the chargeable development.'
Why did it matter?
The case concerned two planning permissions.
- The first was granted in May 2011 and permitted a change of use from ' third floor offices (class B1a) and vacant first and second floors (class B8) to create 6 x two-bedroom flats (class C3), including rear extensions at first, second, third and fourth floors and associated external alterations'.
- The second was granted in June 2017 for a 'change of use of third floor offices (class B1a) and vacant first and second floors (class B8) to create 3 x three bedroom flats.'
The first planning permission was granted before the council had adopted a CIL charging schedule. However, by the time the second planning permission was granted, a CIL charging schedule was in place. The council notified the developer that it would be liable to a CIL charge of almost £500,000. This was later increased owing to non-payment of the original sum.
When is a use one which can be carried on 'lawfully and permanently without further planning permission'?
The developer disputed the claim to CIL. Its view was that it was not liable to pay CIL because, immediately prior to the grant of the second planning permission, the building could be used for residential purposes. Therefore the case sat within regulation 40(7)(ii) – no further planning permission was required to permit its lawful residential use.
The council argued that, despite the first planning permission, the building could not actually be used for residential purposed on the day before the second planning permission was granted because it was, effectively, a shell. Therefore, residential use could not take place without further works. The council's view was that regulation 40(7)(ii) was not satisfied.
The Court of Appeal preferred the developer's interpretation. Lord Justice Lindblom said that, whilst the language of the regulation was 'somewhat cumbersome', the natural and ordinary meaning was clear – 'on the relevant day, without any further planning permission having to be obtained, the use in question, together with any necessary physical works to the building, would be lawful, and that it would not be merely a temporary use.'
He went on to say that the CIL regime 'excludes a liability to pay CIL under a newly granted permission where the landowner is already lawfully entitled to use the same floorspace in the same way, and presumptively with the same burden on local infrastructure, and, in a case such as this, without paying CIL.'