Ed John deals with building leases whilst Harry Spurr explains changes to the CIL regime.
Q: I am the landlord under a building lease. In return for constructing a new office building, the tenant was granted a 50-year lease at a geared rent (25% of open market rent). The tenant now claims it does not need my permission to assign even though this is a requirement of the lease. Is the tenant right?
A: There are special rules for building leases. Where the lease:
- is an “old lease” (i.e. entered into before 1 January 1996 or granted pursuant to an agreement for lease entered into before 1 January 1996);
- is for a term of more than 40 years;
- has been granted in return wholly of partially for the “erection, or the substantial improvement, addition or alteration of buildings”; and
- has a term of more than seven years left to run
then a more relaxed regime on alienation applies. Regardless of the terms of such a lease, the tenant does not require the landlord’s permission for any assignment, unless the transaction occurs within the last seven years of the term. The same provision also applies to any transaction by the tenant’s undertenant. Your tenant must however give you notice within six months of completion of the relevant transaction. That regime also applies to underletting, charging or parting with possession, except that it applies to both “old” and “new” leases.
Q: Following recent changes to the rules on the Community Infrastructure Levy and section 73 consents, I am confused about the implications for a number of my sites. For example, in one case, I plan to apply for a section 73 permission to vary a scheme for which no CIL is currently payable, but where the Local Planning Authority is in the process of introducing its charging schedule. What would be the implications in such a case?
A: Under the old rules, all new planning permissions give rise to a CIL liability for the development permitted where there is a charging schedule in place. This means that, in your case, there would be CIL liability for the entire development arising as a result of the grant of a section 73 consent, as it is a new planning permission.
However, the Government has recently made changes to the regime. Under both the old and the new rules, if your section 73 consent is granted prior to the introduction of CIL, no CIL will be payable, obviously.
But if, on the other hand, your section 73 consent is granted following the introduction of CIL, the levy will be payable only if the section 73 scheme attracts greater liability than the original scheme would have done had CIL been in force at the time. The amount payable will be the difference between the two, and liability will fall due once the section 73 consent is implemented.
Q: On the same site there’s an existing and onerous section 106 obligation that applies to subsequent permissions. What’s the position here – will I get any credit for this if CIL becomes payable on my section 73 scheme?
A: Under the CIL rules, old and new, there is no right to any set-off to take account of liability under a section 106 agreement. So in practice this is a matter that you will need to negotiate with the LPA in the context of the section 73 application.
Q: What happens if, following the grant of my section 73 consent, I change my mind and decide to revert to the original scheme?
A: Under the new rules CIL will be payable on the permission most recently commenced or recommenced. In practice this means that CIL will be charged on whichever planning permission is being operated under at any one time.
Q: In relation to another of my developments there was already a charging schedule in place when the original planning permission was granted, so CIL is owed. But the section 73 consent I am seeking will trigger a different CIL liability because there will be a small change in the amount of floorspace.
A: In a case where a section 73 consent is granted and CIL liability has already been triggered in respect of the original planning permission the developer will either pay, or receive a rebate in respect of, any difference between the original CIL liability and the section 73 CIL liability.
Q: On another site there’s a good chance I’ll be able to get away without a section 73 application, relying instead on non-material amendments using the section 96A route. What will be the implications for CIL liability in this case?
A: Where consent is granted for a non-material amendment pursuant to section 96A there is no new planning permission and therefore no new CIL liability arises. This is irrespective of whether there was a CIL liability when the original permission was granted, or whether there is a charging schedule in place at the date of the section 96A consent.
Q: Finally, I have one planning permission that it unlikely to be implemented before the 3 year deadline. I may, therefore, want to extend the period within which to begin construction. What do I need to know about CIL here?
A: Following another recent change in the law it is now possible to “extend” any planning permission granted prior to 1 October 2010. In effect this leads to the grant of a new planning permission but the new rules on CIL will include a specific exemption. This will mean that there is no CIL liability where a new permission is granted so as to extend the implementation period for an existing one, provided there was no CIL payable on the original permission.