Unpacking UseItOrLoseIt

This “use it or lose it” catchphrase has appeared again this past week in the House of Lords Economic Affairs Committee’s report, Building More Homes. Paragraphs 129 to 139 of the report’s section on Planning Reform set out the “criticism made of the large house builders…that they hold land suitable and with permission for building, yet build at a slow pace and thus maximise the profit from each development”.

The conclusion is arrived at:

“139.We recommend that local authorities are granted the power to levy council tax on developments that are not completed within a set time period. This time period should be negotiated when planning consent is sought and be varied according to the size and complexity of a development. To ensure that the local authority also has an incentive to accelerate the process, the clock should start to run only when the local authority has signed off all conditions and obligations“.

But how would this possibly work or help? Let’s go back to the start (copyright, Coldplay).

Permission deadlines

Since the Town and Planning Act 1968, permissions have had deadlines for implementation (and, in the case of outline planning permissions, for submission of reserved matters applications), so as to give some certainty after a defined period of time as to whether a development that has been approved is going to take place or not. The statutory default deadline for implementation was five years, but in England (not Wales) this was reduced to three years by the Planning and Compulsory Purchase Act 2004. If a deadline is missed, the permission lapses and development cannot proceed without a fresh planning permission being obtained (bringing with it large expenditure of time and cost and often a high degree of political risk).

Developers will not acquire a site with the benefit of planning permission if they are not comfortable that the permission will not lapse before they are in a position to carry out their development. Similarly, what funder would fund a purchase, or pre-development activity, if there is a risk that the permission will lapse?

In practice longer deadlines are routinely negotiated in the case of larger developments.

Extending the life of permission

The ability to extend the life of planning permissions by way of section 73 was removed by the Planning and Compulsory Purchase Act 2004 (from 24 August 2005).

A power to renew permissions was then introduced on 1 October 2009 (for permissions granted before that date, later extended by a year) in the wake of the financial crisis. The Planning Practice Guidance is silent on the point, simply saying that section 73 cannot be used to extend time limits, but in fact renewal is still possible for very limited categories of pre 1 October 2010 permissions (see Article 20, Town and Country Planning (Development Management Procedure) (England) Order 2015).

(Incidentally, some LPAs, including Westminster City Council, use a format for section 73 permissions that automatically repeats the standard time limit conditions, referring to a deadline that runs from the date of the permission – at best confusing if intended to refer back to the date of the original permissions, at worst ineffective if a reference to the date of the section 73 permission).

Preserving the life of permissions

Frequently, a developer perceives a risk that he will not be ready to carry out development by the planning permission deadline, which may be for all manner of reasons. The accusation raised is often of “landbanking” (to which Barratt’s Philip Barnes has provided a riposte in an interesting March 2016 blog post.

The works required under section 56(4) of the Town and Country Planning Act 1990 to implement a planning permission need not be very significant at all:

“(a) any work of construction in the course of the erection of a building;

(aa)any work of demolition of a building;

(b)the digging of a trench which is to contain the foundations, or part of the foundations, of a building;

(c)the laying of any underground main or pipe to the foundations, or part of the foundations, of a building or to any such trench as is mentioned in paragraph (b);

(d)any operation in the course of laying out or constructing a road or part of a road;

(e)any change in the use of any land which constitutes material development

The courts have long held (reversing a previous judge-made concept) that “colourable” intent is irrelevant. You can be open with the world that you are simply digging the trench to carry out a “material operation” for the proposes of section 56.

The greater problem often arises from a separate judge-made concept: with limited exceptions, you need first to have complied with all relevant pre-commencement planning conditions. I commented in my blog post Let’s Talk About Conditions on the Government’s proposal to discourage further LPAs from imposing unnecessary pre-commencement conditions.

Complications and misunderstandings also often arise in that where section 106 obligations are expressed to be conditional on commencement of development, preliminary works such as site clearance, remediation and demolition are commonly excluded from the definition of commencement of development – rightly because otherwise contributions would be paid unnecessarily early – before the effects arise from the development that are to be mitigated by way of the contributions. So it can be possible to keep a permission alive by carrying out limited works of implementation that do not amount to commencing the development for the purposes of the section 106 agreement (no such flexibility of course with CIL).

There is also unnecessary uncertainty arising from the fact that the LPA cannot certify (in a way that is legally binding) that the works carried out were sufficient to keep the permission alive until the deadline for implementation has passed, by which time it is too late if the works were in fact insufficient. This arises because the only useful certificate would be a CLOPUD under section 192, certifying that the balance of the development authorised by the permission can be lawfully carried out without the need for further permission and until the implementation deadline has passed this would necessarily be the case in any event regardless of the purported works of implementation.

It’s not just about the start

One disconnect at the moment is that of course it is not the first trench being dug that is important – it’s the creation of homes and jobs. It is very rare indeed to see any planning conditions or section 106 obligations that require development to have reached defined milestones within particular time periods or to be completed with any particular timescale. That would be anathema to any funder. What if there is a collapse in demand or development suddenly becomes unviable? In the downturn we saw many projects mothballed after a start on site.

The most that we see is occasionally the inclusion of review mechanisms that kick in if development hasn’t been carried out by a particular deadline (a three year completion deadline, following which the approved affordable housing abatement would fall away, was indeed included in the late lamented section 106BC).

The only statutory remedy for LPAs is that, at least in theory, they can serve a completion notice under section 94 of the Town and Country Planning Act 1990. However, the completion notice procedure is almost never used (has anyone had any recent experience of it?). It is long (at least 12 months’ notice needs to be given), cumbersome (confirmation by the Secretary of State) and only erases planning permission for those parts of the development that have not yet been carried out, which doesn’t really help anybody. An unwieldy stick.

Use it or lose it

So what if we make it even harder for developers to extend or preserve the life of permissions, or penalise developers who don’t proceed?

1. Developers will think hard before making an application for permission that exposes themselves to the risk of penalties or that will be so transient that it will have little value – there will be fewer applications in the first place. Some people may say “good – cut out the time wasters”. However, it is in the nature of the commercial development process that many schemes will only become “real” once the application is made and funders/end-users are secured. So you would be seeing off at the start a number of schemes that would otherwise proceed in due course to deliver homes and jobs.

2. We will need to work out who we are actually looking to penalise/encourage – which means understanding the various permutations of arrangements between land owners, developers (whether under a development agreement, promotion agreement, agreement for sale conditional on planning or under an option) and funders.

3. We will need to work out how any penalty is actually to be triggered and quantified. Looking at the Lords Committee’s recommendation:

– how to negotiate the length that development will take? On a large mixed use development it could well be a decade or more.

– what is “completed”?

– what is to stop the developer going slow in achieving reserved matters approvals and discharge of conditions if the clock doesn’t start ticking till then?

– how is the level of notional council tax to be calculated, prior to reserved matters approval and years before the mechanism is actually triggered? Why council tax? Is this only of concern for housing development?

– what if a development is altered or abandoned?

Some tentative suggestions

1. Consider ensuring, by way of policy guidance, that in relation to any phased planning permission there be a separate implementation deadline for each phase. Implementation deadlines should be realistic – three years is tight for all but the simplest of schemes (the standard “permission in principle” three years and five years deadlines in section 150 of the Housing and Planning Act 2016 are likely to be unrealistic in many instances).

2. Consider enabling LPAs to certify, when implementation works are carried out, that they are legally sufficient to preserve the life of the permission

3. Encourage, by way of policy guidance, that LPAs secure in section 106 agreements a review of the section 106 obligations after a reasonable period, if the development hasn’t been completed, so as to ensure that they remain consistent with current circumstances (with disputes referred to an independent expert), or only allow derogations from full policy requirements where specified numbers of dwellings are ready for occupation by an agreed deadline (fair enough when the case made for permission in the first place will often have been the urgent unmet need for housing in the area). Potentially could the CIL regime also be adapted to provide time-related carrots and sticks?

4. Review the completion notice procedure to see whether it can be made fit for purpose.

5. Do all we can to make the planning application process in the first place as straight-forward as possible, so that we don’t have to spend quite so much time finding ways around the horror of having to embark on a fresh planning application.

6. Provide a policy and economic climate where permissions are granted for development that is likely to be, and remain viable, and where therefore there should be no need for prevarication on the part of a developer.
No EU law was used in the writing of this blog post.
Simon Ricketts 16.7.16
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