- Community Infrastructure Levy - Three Years On
- March 20, 2013
- Law Firm: Withers Bergman LLP/Withers LLP - New Haven Office
What is the CIL?
CIL is a charge on development and a means of funding infrastructure development, instead of, or alongside s.106 planning obligations. It is intended to be transparent and straightforward, allowing developers to calculate the likely costs of any development, as opposed to the individual, often drawn-out s.106 negotiations.
CIL will apply to the net internal area of development and is expressed in pounds per square metre (psm) of development. It is only charged on additional floorspace created by a development. This means that brownfield sites where existing buildings are redeveloped/demolished will attract a lower charge than greenfield sites. There will also be an exemption for new developments and extensions of less than 100sqm floorspace (unless they comprise one or more dwellings).
Who charges it?
Planning authorities can, but do not have to, charge CIL on development in their area. They can only do so once they have published an approved ‘charging schedule’. This schedule is developed locally in consultation with interested parties. The draft schedule is then examined by an independent examiner. The examiner may recommend approval, modification or rejection.
How much is it?
Those authorities that have drafted schedules have adopted very different approaches highlighting the local nature of the levy: they have to have regard to the total cost of infrastructure requiring funding from CIL, other sources of funding available (CIL is not intended to be the main source) and the potential effect of CIL on the viability of development in the area.
Market forces are key in determining rates - within London, Wandsworth has concluded that the market for residential development in one part of the borough could bear a charge of £575 psm, and £265/£250/£nil in other parts and £100/£nil psm for office development and zero for all other kinds of development - whereas Redbridge has taken a flat rate approach of £70 psm for all kinds of development. All development in London is also subject to the Mayor’s CIL of £50 psm which will be used to fund Crossrail. This will apply even in boroughs which have not yet adopted charging schedules.
As the charge is intended to largely replace s106 planning obligations, reference has been had to the rates usually obtained from developers in such situations - in Shropshire, after much debate, a lower level of £40 for residential development in Shrewsbury and the market towns was agreed against £80 elsewhere in the county. This reflected the rates obtained under s.106 agreements.
Some authorities have attempted to adopt differential charges within the same use class, mainly to charge retail superstores more than smaller retail units. These have been found by independent examiners to be economically unjustified.
Who pays it?
Freeholders, or leaseholders with leases of seven or more years remaining will be liable.
Multiple parties can agree to allocate liability between them, if appropriate, but must serve a notice assuming liability within 60 days of the commencement of development. If no-one assumes liability, it will default to the owners of the land, and subsequent owners will inherit liability.
It is therefore important for landowners and developers to agree at the outset who will be responsible for CIL, and for purchasers or new long-lease tenants of new sites subject to CIL to clarify who is liable for the levy. Tenants at sites subject to the levy will want to ensure that any liability for the levy is carved out of their payment obligations in the lease.
When is CIL payable?
CIL liability will be calculated from the date of the planning permission that 'first permits' the development. This will be the date:
- full planning permission is granted (i.e. not outline planning permission),
- planning permission is granted for change of use, or
- approval of the last reserved matters following the grant of outline planning permission.
It is payable the date the permission is implemented.
What reliefs are available?
- A mandatory 100% relief for social housing developments.
- A mandatory 100% relief where a charity uses the development wholly or mainly for its charitable purposes.
- A discretionary relief where the land is held wholly or mainly by a charity as an investment from which the profits are applied to its charitable purposes.
- Authorities can also offer relief if the levy would make the development non-viable, but a number of strict conditions must be met for this to apply.
What are the penalties for non-payment?
Surcharges and administrative charges will apply if liability notices are not served on time and or if payment is made late.
Authorities will also have the power to issue ‘stop notices’ requiring developers to cease development until CIL is paid or the stop notice withdrawn. Contravention of a stop notice will be a criminal offence subject to an unlimited fine.
What will happen to s.106 agreements?
Section 106 agreements will continue to be used for site-specific mitigation measures. However, developers cannot be double-charged for the same infrastructure through CIL and s.106. Authorities must set out what items it intends to fund through the levy otherwise they will not be able to fund any infrastructure through s106 once the levy is adopted.
What do I need to do?
If you are a
- developer considering a development in an area that has yet to adopt the levy, you should give careful thought to the timing of any application - with an aim to getting them approved before CIL is adopted.
- buyer or tenant of a new development, you will need to make sure that any CIL liability has been paid and that you cannot be held responsible for any of the charge unless it is part of the deal.