In late July the Government published draft regulations on CIL along with a consultation paper. Many within local government and in the property industry have been assuming “it will never happen”, but it now seems likely that the regulations will be in force in 2010 and there are clear signs that local authorities will be forced to adopt CIL if they are to maintain (with opportunities to increase) current levels of receipts from development.
Who can charge CIL?
The intention is that councils who prepare development plans will be “charging authorities”. This will include district and unitary authorities, London boroughs, the Broads Authority and National Park Authorities. In London, the Mayor will also be able to charge CIL.
County councils, who grant certain planning permissions, will be collecting authorities but cannot charge CIL themselves. However, it is important to remember that this is a voluntary scheme from the council’s point of view –the idea is that potential charging authorities can decide whether or not CIL is appropriate in their area.
Are many authorities likely to adopt CIL?
Before the consultation paper and draft regulations were published, the signs were that there would not be a rush to adopt CIL. However, the draft regulations include a proposal to amend section 106 so that these obligations can only be taken into account, in granting planning permission, if they meet the requirements of the Government’s advice in Circular 5/05. Significantly, they must be necessary in order for the development to be approved and fairly and reasonably related to the development. This follows a recent Secretary of State decision letter in which a “tariff” approach by the local planning authority was frowned upon because gathering monies that way did not ensure that the contribution was necessary or properly related to the particular development. This is likely to mean that the increasingly popular “standard/formula charge” policy approach by many Councils will have to come to an end with an inevitable reduction in section 106 receipts. CIL may then be the only way forward.
If we grant planning permission before CIL is adopted in our area, will that mean CIL will not apply to that development?
Although there are some words of comfort in the consultation paper, the effect of the regulations as drafted would mean that even development consented via a permission granted before CIL is adopted, and with a section 106 obligation attached to it, would be liable to CIL if reserved matters or other pre commencement approvals come through after CIL is adopted. This is likely to be of concern to the development industry and, unless the regulations are amended to protect earlier planning permissions, the trend we are already seeing for CIL clauses in section 106 agreements will continue.
What are our key areas of legal risk?
Not pursuing CIL may expose the authority to the risk of reduced receipts from section 106 obligations in circumstances where, e.g. because a standard charge policy is applied, the requirements of Circular 5/05 may not be met.
If section 106 is amended as proposed, be alive to the increased risk of judicial review. This is likely to be good territory for third party challenges to planning permission and local authorities will need to be able to demonstrate, ideally in the committee report, how the proposed section 106 meets the requirements of the Circular in all respects.
In matters where there is discretion (in particular, with potentially controversial issues such as discretionary relief for charity investment property and differential rates) ensure appropriate consultation and take care that the evidence backs up the proposal.
There is a further risk of judicial review at the stage when the draft charging schedule is submitted to the examiner. The schedule must be accompanied by a declaration, approved at a meeting, that relevant statutory requirements have been met and that the charging authority has used appropriate available evidence to inform the charging schedule. Third parties may seek to challenge the declaration and thereby undermine the examination.
Bear in mind the importance of having robust evidence to justify the charging schedule, including evidence on viability. Given its significance, evidence is likely to be scrutinised at some length before the examiner and if it fails to persuade, the charging schedule may be rejected.