As the debate on the Community Infrastructure Levy (CIL) comes to the fore, and the property industry raises concerns that CIL may put regeneration schemes at risk, Stuart Andrews, head of planning and a partner at law firm Eversheds, helps navigate the CIL minefield.
The introduction of Community Infrastructure Levy (CIL) charging schedules by many local authorities is now gathering pace, as is demonstrated by the Mayor of London's CIL charging schedule which came into force on 1 April 2012. We have yet to see much progress in the Midlands, but local authorities are clearly gearing themselves up and this is reflected in the impending consultation exercise by Birmingham City Council. As a result, developers can expect a significant increase in the cost of development, but the complexity of the CIL regime also has the potential to cause unexpected difficulties when dealing with complex development schemes.
For example:
1. CIL has been widely reported as a tax on the net increase in floorspace of new developments, but in practice existing buildings may still be subject to the charge where they have been out of use for significant periods before the development is permitted.
2. Where a section 73 application alters details of a development after construction has begun, but before it is completed/has been used for a period of time, the entire development could incur fresh retrospective CIL charges.
3. If a section 73 application is made, landowners and developers could be forced to pay for the same infrastructure twice in the form of a CIL charge on top of a planning obligation.
4. The discretionary exemption where CIL charges would make a development scheme unviable will virtually never apply.
5. If different rates apply to different areas of a site, the location of social housing and the reliefs from liability which accompany it could significantly alter the total cost of CIL affecting the site as a whole.
6. Where several parties own different parts of the same development site, liability for CIL payments will be proportionate to the relative value of each interest in the site - the collecting authority's calculation of the relative value of these different parts of the site is likely to be controversial.
7. If a party assumes liability to pay CIL and defaults on its payments, the liability will fall back on the owners of the site. Therefore, landowners will want to ensure that liability is assumed by a party with sufficient covenanting strength and that robust indemnities are provided to protect against such circumstances.
In short, the CIL regime is a minefield and navigating your way around the charges is rarely likely to be straightforward.
