Money Money Money: Accounting For CIL

This tweet from MHCLG has been nagging away at me for a few days:

The announcement of course was in relation to the 1 September 2019 commencement date in the Community Infrastructure Levy (Amendment) (England) (No. 2) Regulations 2019 and the Government’s updated planning practice guidance in relation to CIL , planning obligations and viability.

I covered the background to the changes in my 8 June 2019 blog post The Bottom Line: Updates On CIL And Viability.

There was quite a splash on 1 September, with a MHCLG press statement Communities to see how housing developers cash benefits them thanks to new planning rules (1 September 2019) and media briefings by planning minister Esther McVey, duly reported in the professional press eg Councils forced to spell out details of CIL deals (Housing Today, 2 September 2019):

McVey said builders “spent a whopping £6bn towards local infrastructure in 2016/17” but councils had not been required to report on the total amount of funding they had received or how it was spent, “leaving residents in the dark”.

She went on: “The new rules … will allow residents to know how developers are contributing to the local community when they build new homes, whether that’s contributing to building a brand new school, roads, or a doctor’s surgery that the area needs.”

What has been nagging away at me in the tweet was the gif image: “Developers paid £6bn in contributions in 2016/2017…Community Infrastructure Levy”.

Huge if true.

But it’s not.

I have tracked the £6bn figure back to a research report The Incidence, Value and Delivery of Planning Obligations and Community Infrastructure Levy in England in 2016-17 by Dr Alex Lord, Dr Richard Dunning and Dr Bertie Dockerill (University of Liverpool), Dr Gemma Burgess (University of Cambridge), Dr Adrian Carro (University of Oxford) Professor Tony Crook and Professor Craig Watkins (University of Sheffield) and Professor Christine Whitehead (London School of Economics) published by MHCLG in March 2018.

From the executive summary:

There has been an increase in the aggregate value of planning obligations agreed and CIL levied since 2011/12, up 61% from £3.7bn to £6.0bn in 2016/17 (50% after adjusting for inflation).

So the £6bn is the total of the value of section 106 planning obligations agreed (not paid) and “CIL levied”. This is the table in the research document:

⁃ “The estimated value of planning obligations agreed and CIL levied in 2016/17 was £6.0 billion. This central valuation is premised upon the assumptions identified in the appendix, corresponding to survey validity, respondent representation and the distribution of values.

⁃ When adjusted to reflect inflation the total value of developer obligations in real terms is almost identical to the peak recorded in 2007/08 (£6.0 billion), but significantly higher than in 2011/12 (£3.9 billion). These changes coincide with changes in the number of dwellings granted planning permission over time.

⁃ 68% of the value of agreed developer obligations was for the provision of affordable housing, at £4.0 billion. 50,000 affordable housing dwellings were agreed in planning obligations in 2016/17.

⁃ The value of CIL levied by LPAs was £771 million in 2016/17, with a further £174 million levied by the Mayor of London.

⁃ The geographic distribution of planning obligations and CIL is weighted heavily towards the south of England. The South East and London regions account for 58% of the total value.

⁃ Direct payment contributions continue to provide a large proportion of the total contribution value for non-affordable housing obligations

But I am pretty sure there is a confusion over “CIL levied” too. The table shows that of the £6bn, £771m was LPA CIL and £174m was Mayoral CIL. As with the money attributed to planning obligations, I suspect that these CIL figures represent the amount of CIL that is calculated to be payable if development eventually proceeds pursuant to permissions issued in 2016/2017. After all we can cross-check the £174m against the MCIL monies actually collected by the Mayor from the boroughs in 2016/2017 which this GLA table shows to be only £137m.

There is something else important. Over two thirds of the “whopping £6bn towards local infrastructure” that developers allegedly spent in 2016/2017 was not even towards “local infrastructure” as defined by the Government – it was towards affordable housing!

So it’s not that developers are not committing huge sums towards local infrastructure, and even greater sums towards affordable housing.

And it’s not that CIL will not over time secure increasing contributions towards the provision of local infrastructure.

It’s the inaccuracies and exaggeration. £6bn was not received by local authorities in 2016/2017 to be spent on local infrastructure. Local authorities did not even accrue the right to that amount in the future. The reality is that planning permissions were issued which, could, in due course , deliver (subject to the application of CIL exemptions and reliefs in the case of the £945m CIL component) up to around £2bn.

The minister accuses authorities of “leaving residents in the dark” as to funding received and spent. Greater transparency from MHCLG on the numbers it uses would be equally helpful.

Simon Ricketts, 7 September 2019

Personal views, et cetera

The Bottom Line: Updates On CIL And Viability

“Out of the blue and into the black

You pay for this, but they give you that

And once you’re gone, you can’t come back

When you’re out of the blue and into the black.”

(Neil Young)

Two double act dates for the diary:

12 July (Bob Dylan and Neil Young, Hyde Park)

1 September (CIL amendment regulations due to come into force, RICS professional statement on financial viability in planning takes effect).

I was going to force myself to write a dull, worthy and academic blog post on one of these, but I know what you want so 1 September it is.

CIL

The Community Infrastructure Levy (Amendment) (England) (No. 2) Regulations 2019 were finally laid before Parliament on 4 June 2019. They will be debated in the House of Commons and, assuming they receive an affirmative resolution, will come into force on 1 September 2019.

There was an accompanying press release, Communities to benefit from new housing infrastructure rules, and, more informatively, a more detailed document, Government response to reforming developer contributions.

Further regulations will follow:

The Government intends to lay the secondary legislation which will enable the delivery of starter homes later this year. Therefore, the Government also intends to introduce the regulations for the exemption of starter homes from the Levy later in the year.”

There has been some attempt at consolidation (although a single set of consolidating regulations really is overdue for those, particularly non-lawyers, without access to expensive online legal information subscription services):

The Government recognises that unconsolidated regulations can be challenging to understand, and that this challenge can be particularly acute when calculating Levy liabilities. To increase usability the Government has consolidated all regulations relating to the calculation of Levy liabilities into a single schedule. The Government will consider fully consolidating the regulations when any further regulatory amendments are made.

There will be some simplification in terms of access to information on indexation:

The Regulations have instead been amended to improve the transparency around indexation, while retaining the existing approach by indexing the Levy to the Building Cost Information Service’s (BCIS) All-in Tender Prices Index. The Government has asked the Royal Institution of Chartered Surveyors to produce a bespoke index for the Levy, based on BCIS. This will be produced annually and be made publicly available. The index will not change through the year, as BCIS forecasts can at present. The Government will review guidance to improve clarity, including making clear that from 1 January each year, the latest index figure produced by the Institution should apply. The Government also proposes to retain the proposal for charging authorities to produce annual rate summaries, which will further improve transparency, in particular for smaller developers. The changes to regulations will address several issues raised during consultation regarding how the existing approach to indexation is implemented.”

There are also some other detailed fixes of previous glitches, but largely the Regulations are as foreshadowed in its Reforming developer contributions Technical consultation on draft regulations (December 2018) and before that in its document Government response to supporting housing delivery through developer contributions: A summary of consultation responses and the Government’s view on the way forward (October 2018) which was the subject of my 9 November 2018 blog post An Update On CIL: Reform Promised, Meanwhile Continuing & Increasingly Expensive Uncertainties.

It really is the Never Ending Tour.

Viability

The RICS published its professional statement on Financial viability in planning: conduct and reporting on 28 May 2019, which comprises fourteen mandatory requirements which chartered surveyors must observe when carrying out financial viability assessments in a planning context. It is all strong stuff, not just vague exhortations of good practice. Breaches will be a disciplinary matter for the RICS member and his or her firm: “Sections within professional statements that use the word ‘must’ set mandatory professional, behavioural, competence and/or technical requirements, from which members must not depart.

The RICS covering statement says this:

Dissatisfaction has been expressed among some stakeholders in the sector about the standards to which viability assessments are being produced. The concerns extend from public representatives, the development sector, community groups and decision makers all of whom rely on viability assessments in a key public interest area. Questions about objectivity, conflicts of interest, transparency and contingency fees among others have been raised about those working for both the private and public sectors. While not all viability assessments are undertaken by chartered surveyors, in response RICS has strengthened our advice on these areas, the professional conduct of chartered surveyors and regulated firms undertaking viability assessments and the essential information which should be reported so that informed decisions may be taken transparently.

We have also produced this professional statement in recognition of the Mr Justice Holgate’s comments in the Parkhurst Road case requesting professionals to contribute to a more efficient public administration of planning. His further comments on the technical aspects of viability will be addressed in the review of our guidance note which will go to consultation over summer 2019.”

I covered those comments from Holgate J in my 27 April 2018 blog post Pointers From Parkhurst.

These are the key requirements:

“The RICS member carrying out the FVA must be a suitably qualified practitioner.”

“The report must include a statement that, when carrying out FVAs and reviews, RICS members have acted:

• with objectivity

• impartially

• without interference and

• with reference to all appropriate available sources of information.
This applies both to those acting on behalf of applicants as well as those acting on behalf of the decision-makers.”

Terms of engagement must be set out clearly and should be included in all reports. The RICS professional statement Conflicts of interest (1st edition, 2017) applies, but with the additional requirement that RICS members acting on behalf of all those involved must confirm that no conflict or risk of conflict of interest exists (see Conflicts of interest paragraph 1.1). The professional statement allows ‘informed consent’ management, which, subject to the circumstances, can be both pragmatic and appropriate. This should take the form of a declaration statement.”

A statement must be provided confirming that, in preparing a report, no performance- related or contingent fees have been agreed.”

Transparency and fairness are key to the effective operation of the planning process. The PPG (paragraph 021, reference ID 10-021-20190509) states that:

‘Any viability assessment should be prepared on the basis that it will be made publicly available other than in exceptional circumstances.’

Although certain information may need to remain confidential, FVAs should in general be based around market- rather than client-specific information.

Where information may compromise delivery of the proposed application scheme
or infringe other statutory and regulatory requirements, these exceptions must be discussed and agreed with the LPA and documented early in the process. Commercially sensitive information can be presented in aggregate form following these discussions. Any sensitive personal information should not be made public.”

“Before accepting instructions, if RICS members are advising either the applicant or the LPA on a planning application and have previously provided advice, or where they are providing ongoing advice in area-wide FVAs to help formulate policy, this must be declared.”

“All inputs into an appraisal must be reasonably justified. Where a reviewer disagrees with a submitted report and/or with elements in it, differences must be clearly set out with supporting and reasonable justi cation. Where inputs are agreed, this must also be clearly stated. Where possible, practitioners should always try to resolve differences of opinion.”

“In the interest of transparency, when providing benchmark land value in accordance with the PPG for an FVA, RICS members must report the:

current use value – CUV, referred to as EUV or first component in the PPG (see paragraph 015 reference ID: 10-015-20190509). This equivalent use of terms – i.e. that CUV and EUV are often interchangeable – is dealt with in paragraph 150.1 of IVS 104 Bases of Value (2017)

premium – second component as set out in the PPG (see paragraph 016 reference ID: 10-016-20190509)

market evidence as adjusted in accordance with the PPG (see PPG paragraph 016 reference ID: 10-016-20190509)

all supporting considerations, assumptions and justi cations adopted including valuation reports, where available (see PPG paragraphs 014 reference ID: 10-014-20190509; 015 reference ID: 10-015-20190509; and 016 reference ID: 10- 016-20190509)

alternative use value as appropriate (market value on the special assumption of a specified alternative use; see PPG paragraph 017 reference ID: 10-017-20190509). It will not be appropriate to report an alternative use value where it does not exist.
A statement must be included in the FVA or review of the applicant’s FVA or area-wide FVA that explains how market evidence and other supporting information has been analysed and, as appropriate, adjusted to reflect existing or emerging planning policy and other relevant considerations.

“During the viability process there must be a clear distinction between preparing and reviewing a viability report and subsequent negotiations.”

“All FVAs and subsequent reviews must provide a sensitivity analysis of the results and an accompanying explanation and interpretation of respective calculations on viability, having regard to risks and an appropriate return(s).”

“At all stages of the viability process, RICS members must advocate reasonable, transparent and appropriate engagement between the parties, having regard to the circumstances of each case. This must be agreed and documented between the parties.”

“For applicants, subsequent reviews and plan-making, FVAs must be accompanied by non-technical summaries of the report so that non-specialists can better understand them. The summary must include key gures and issues that support the conclusions drawn from the assessment and also be consistent with the PPG”

“Reports on behalf of both applicants and the authority must be formally signed off and dated by the individuals who have carried out the exercises. Their respective qualifications should also be included.”

“All contributions to reports relating to assessments of viability, on behalf of both the applicants and authorities, must comply with these mandatory requirements. Determining the competency of subcontractors is the responsibility of the RICS member or RICS-regulated firm.”

“RICS members must ensure that they have allowed adequate time to produce (and review) FVAs proportionate to the scale of the project, area-wide assessment and specific instruction. They must set out clear timeframes for completing work. If the timeframes need to be extended, the reasons must be clearly stated, both at the time and in the subsequent report.”

Well done technical author, Gerald Eve’s Robert Fourt, and his working group:

Jeremy Edge FRICS (Edge Planning)

Nigel Jones FRICS (Chesters Commercial)

Jacob Kut MRICS (Avison Young)

Simon Radford FRICS, Chair (Lothbury Investment Management)

Charles Solomon MRICS (GLA)
Peter Wyatt MRICS (Reading University)

(Albeit a very male group).

It may be that the stable door has already bolted but I do hope that the professional red lines in the statement give some reassurance that viability figures are not cooked up behind closed doors without appropriate professional discipline being applied, and strengthen surveyors’ position in discussions with their clients, whether from the private or public sectors.

The professional statement is separate from RICS guidance as to how to carry out financial viability appraisals in accordance with government policy, which is now very out of date. The professional statement says this:

“Since the publication of the NPPF 2018 and PPG 2018 (as updated in 2019) RICS has also been reviewing its 2012 guidance note to align it with the changed emphasis in current government policy; a second edition is forthcoming.”

The Government’s PPG guidance on viability was tweaked again on 9 May 2019. Having been through it and flagged changes from the previous 24 July 2018 version, I can’t really improve upon this summary, from the day it was published, by Matthew Spilsbury (Turley).

Hey hey, my my.

Simon Ricketts, 8 June 2019

Personal views, et cetera

Calculating Education Contributions

We class schools, you see, into four grades: Leading School, First-rate School, Good School, and School. Frankly,” said Mr Levy, “School is pretty bad…”

(Evelyn Waugh, Decline and Fall)

The government has been fine-tuning its guidance as to the extent to which developers in England should be required to fund education provision.

Serendipitously for this blog post, the High Court last month handed down judgment in Thompson v Conwy County Borough Council (Dove J, 26 March 2019). Not only does the case provide an introduction to some of the existing uncertainties, but, as is clear from Dove J’s introduction, there is a link to one of the greatest comic literary depictions of a private school:

The site in question in relation to these proceedings is the Fair View Inn in Llanddulas. It appears that Evelyn Waugh was at one time a patron of the Fair View Inn when he taught at a nearby preparatory school. The Fair View Inn features as “Mrs Robert’s Pub” both in his diaries and also in his first novel, Decline and Fall.”

Remember that section in Decline and Fall, where Paul Pennyfeather gets sent to Llanabba Castle School in north Wales to teach subjects he knows nothing about, and his trips to Mrs Roberts’ pub with Captain Grimes? (If not, do put this blog post down and pick up D&F – much more entertaining).

One of the grounds of challenge to the grant of planning permission for residential development on the site of the Inn was that the planning committee, in approving the proposal on the basis of a commuted sum towards education provision, “were misled by inaccurate information being provided in relation to education school capacity.” It was submitted by the claimant (a representative of the campaign group Passionate about Llanddulas) that “although members were advised that the commuted sum would be used to improve existing school facilities in the near future, including the construction of a new school, the position […] is significantly different. [The claimant] contends that the position in truth is that the school in Llanddulas will remain over capacity on the basis that there is no guarantee at present that any new school would be secured through the provision of a commuted sum for education“.

The local school is indeed already oversubscribed. The education officer sought a financial contribution of £17,009, towards the costs of a new school in due course, based on approximately two additional nursery and primary pupils being added to the local school population. An internal email from the education officer was disclosed: “… we will be building a new school there in less than 5 years and the money will come in handy!

The claimant sought to rely on correspondence from the same officer that post-dated the permission and which set out the steps that would need to be taken to secure Welsh Government funding for a new school, the outcome of which was uncertain notwithstanding confidence expressed by the officer.

Dove J unsurprisingly took the position that “the question of whether or not officers misled members should be considered on the basis of the material as known to the officers at the time of the Committee report, rather than taking account of matters that arose or came to light after the decision was reached.”

But in any event he held that what was later set out by the officer in correspondence was “not in substance different from the succinct email he sent to Ms Roberts earlier in the year, namely that the Education Section of the Defendant has it in mind to use the commuted sum towards the redevelopment of the school in Llanddulas within five years. In my view it would subject the advice that the members were given to an illegitimate and overly forensic scrutiny to suggest that it was necessary also to spell out the further statutory and administrative processes which would be required before the new school would be open for use. The issue about which members were being advised was the question of whether or not there was a legitimate objective for the commuted sum in respect of education. The advice which the members were provided with accurately reflected the view of the Education Section given by Mr Jones and did not in my judgment mislead them. I am therefore satisfied on the basis of the information which has become available since the grant of permission that the members were not misled. Thus, even were account taken of material provided after the decision the position remains the same.”

No point appears to have been expressly taken as to whether the contribution failed the regulation 122(2) test within the CIL Regulations:

A planning obligation may only constitute a reason for granting planning permission for the development if the obligation is—

(a) necessary to make the development acceptable in planning terms;

(b) directly related to the development; and

(c) irly and reasonably related in scale and kind to the development.

Nor whether it offended the (soon to be abolished) pooling restriction in regulation 123.

Whilst the permission thereby survived the campaign group’s legal challenge, when you step back for a moment, the basis for requirements for contributions towards education provision, and the expensive uncertainty which developers and residents in new developments are expected to put up with, is faintly bizarre. New homes may contain children. Those children would need schooling somewhere regardless of the particular development. And yet, an application for planning permission for residential development is an opportunity that the Government pretty much requires local authorities to take in order to reduce the financial burden on the state and on direct taxation to secure financial contributions towards new and expanded schools. That cost reduces the financial viability of schemes, thereby reducing the amount affordable housing that the developer can subsidise (I’ve commented before on that logical disconnect conveniently ignored by successive Governments looking to minimise headline tax rates – so building market housing increases the amount of subsidised affordable housing that needs to be provided does it?). And, as in that Llanddulas example, where development proceeds on the basis of a financial contribution to something somewhere in the future, the developer and those who end up living in the development are at the whim of demographics and the education department’s forward planning and funds-securing nous as to whether, and where, necessary school places will become available. Rarely is the lack of available school places a reason to refuse planning permission.

But this is the policy environment.

Relevant passages in the Government’s Planning Practice Guidance were amended on 15 March 2019:

What funding is available for education?

Government provides funding to local authorities for the provision of new school places, based on forecast shortfalls in school capacity. There is also a central programme for the delivery of new free schools.

Funding is reduced however to take account of developer contributions, to avoid double funding of new school places. Government funding and delivery programmes do not replace the requirement for developer contributions in principle.

Plan makers and local authorities for education should therefore agree the most appropriate developer funding mechanisms for education, assessing the extent to which developments should be required to mitigate their direct impacts.

Paragraph: 007 Reference ID: 23b-007-20190315

Revision date: 15 03 2019

What contributions are required towards education?

Plans should support the efficient and timely creation, expansion and alteration of high-quality schools. Plans should set out the contributions expected from development. This should include contributions needed for education, based on known pupil yields from all homes where children live, along with other types of infrastructure including affordable housing.

Plan makers and decision makers should consider existing or planned/committed school capacity and whether it is sufficient to accommodate proposed development within the relevant school place planning areas. Developer contributions towards additional capacity may be required and if so this requirement should be set out in the plan. Requirements should include all school phases age 0-19 years, special educational needs (which could involve greater travel distances), and both temporary and permanent needs where relevant (such as school transport costs and temporary school provision before a permanent new school opens).

Plan makers should also consider whether pupils from planned development are likely to attend schools outside of the plan area and whether developer contributions may be required to expand schools outside of the area.


When local authorities forward-fund school places in advance of developer contributions being received, those contributions remain necessary as mitigation for the development.

Paragraph: 008 Reference ID: 23b-008-20190315

Revision date: 15 03 2019

The Department for Education published some detailed guidance for local authorities on 11 April 2019 to help them in securing developer contributions for education and on the approach to education provision in garden communities.

The guidance purports not to “advise the construction/development industry on its duties or responsibilities in paying for infrastructure” or to replace or override “policy/guidance produced by other government departments“. However, if you are negotiating section 106 agreement obligations, it is essential reading.

Securing developer contributions for education sets out the following principles:

• Housing development should mitigate its impact on community infrastructure, including schools;

• Pupil yield factors should be based on up-to-date evidence from recent housing developments;

• Developer contributions towards new school places should provide both funding for construction and land where applicable, subject to viability assessment when strategic plans are prepared and using up-to-date cost information;

• The early delivery of new schools within strategic developments should be supported where it would not undermine the viability of the school, or of existing schools in the area.”

Planning obligations should “allow enough time for developer contributions to be spent (often this is 10 years, or no time limit is specified“. But personally, I would push against such long timescales save where specifically justified!

In terms of the inter-relationship between government and developer funding:

5. Central government basic need grant, the DfE free schools programme and other capital funding do not negate housing developers’ responsibility to mitigate the impact of their development on education. When the DfE free schools programme is delivering a new school for a development, we expect the developer to make an appropriate contribution to the cost of the project, allowing DfE to secure the school site on a peppercorn basis and make use of developer contributions towards construction. National Planning Practice Guidance explains how local planning authorities should account for development viability when planning for the provision of infrastructure.2 There should be an initial assumption that both land and funding for construction will be provided for new schools planned within housing developments

6. While basic need funding can be used for new school places that are required due to housing development, we would expect this to be the minimum amount necessary to maintain development viability, having taken into account all infrastructure requirements Where you have a reasonable expectation of developer funding being received for certain school places,3 and you have declared this in your SCAP return (or plan to do so), then basic need funding should not be considered available for those school places other than as forward funding to be reimbursed by developer contributions later.

7. There are other options besides basic need grant for forward-funding school places, including the use of local authority borrowing powers where necessary. Where developer contributions have been secured through a planning obligation, you can recoup the borrowing costs from developer contributions later, provided these costs have been incurred as a result of housing growth. Local authorities can bid for funding under government grant programmes such as the Housing Infrastructure Fund (HIF) as they become available, while developers delivering schools directly as an ‘in kind’ contribution may be eligible for loan funding from DfE or Homes England, allowing a new school to be delivered at an earlier stage in the development than would have been possible otherwise.”

Pupil yield factors should be based on up-to-date evidence from recent local housing developments“. DfE is working on a detailed methodology.

All new primary schools are now expected to include a nursery. There must be sufficient primary and secondary education up to the age of 19 as well as special educational needs and disabilities (SEN) provision.

The assumed cost of mainstream school places should be based on national average costs published by the DfE, adjusted to reflect regional costs differences. The cost of early years provision should be assumed as the same as primary provision. Contributions to special school provision should be set at four times the cost of a mainstream school place.

All temporary and permanent education needs should be properly addressed, including school transport costs and temporary school provision. Where appropriate, both a preferred and “contingency” school expansion project should be identified in a section 106 planning obligation.

23. You may wish to safeguard additional land when new schools within development sites are being planned, to allow for anticipated future expansion or the reconfiguration of schools to create a single site. ‘Future-proofing’ can sometimes be achieved informally through a site layout that places open space adjacent to a school site. Where justified by forecast need for school places, additional land can be designated specifically for education use and made available for purchase by the local authority within an agreed timescale, after which the land may be developed for other uses.

24. While developers can only be expected to provide free land to meet the education need from their development, the allocation of additional land should also preclude alternative uses, enabling you to acquire the site at an appropriate cost. Land equalisation approaches can be used in multi-phase developments to ensure the development ‘hosting’ a new school (and any additional safeguarded land) is not disadvantaged. Nevertheless, the market price for the land will depend on its permissible uses. Land allocated for educational use in a local plan would usually have no prospect of achieving planning permission for any other uses. Independent land valuation may be required to establish an acquisition cost. National Planning Practice Guidance provides advice on land valuation for the purposes of viability assessment.

(There are elements of paragraphs 23 and 24 with which I would take issue or which may be too generally expressed. For example, if the reservation of additional land for a school (or for further forms of entry to an existing school) and the need for those additional school places is not generated by the development within which the land is situated, why should that land not be acquired at the development value it would otherwise have enjoyed?).

The guidance annexes advice on compliance with state aid and public procurement legislation.

There is specific guidance on strategic developments and new settlements (with more detailed separate guidance on garden communities), including on multiple phase school provision, the timing of provision and use of viability review mechanisms where the initial education contribution has been reduced on viability grounds.

Whether your education contribution is in the low tens of thousands of pounds as per the Llanddulas case or in the low tens of millions of pounds, as may be the case with a new settlement, arriving at efficient, practical solutions is key. Travelling optimistically, let us hope that the new guidance will assist in arriving at those solutions, rather than encouraging authorities to add to the current list of requests.

Simon Ricketts, 13 April 2019

Personal views, et cetera

CIL The Merciless

Failing to serve a CIL notice can have huge consequences, as R (Shropshire Council) v Secretary of State (Mr C M G Ockleton, vice president of the Upper Tribunal, sitting as a High Court judge, 16 January 2019) illustrates.

Mr Jones, a self-builder, secured planning permission for a large new home with triple garage. Good news.

He received a liability notice for CIL assessing the amount of CIL that would be payable on commencement of the development as £36,891.43. Bad news.

He then applied for and secured full relief from CIL, relying on the self-building exemption. Good news.

In order not to lose the benefit of the relief, regulation 54B (6) provides that a “person who is granted an exemption for self-build housing ceases to be eligible for that exemption if a commencement notice is not submitted to the collecting authority before the day the chargeable development is commenced.”

You can see what is going to come next.

There was a section 106 agreement under which Mr Jones was obliged to notify the council when works pursuant to the planning permission were to begin, as the commencement date triggered a contribution of £9,000 under the agreement. Mr Jones sent the council an email with a heading referring to the section 106 agreement, notifying the council that works would commence the next day, which the council acknowledged, under the same heading.

Mr Jones didn’t send a separate commencement notice in the form required by the CIL Regulations.

The worst of news: he then receives a demand notice requiring the full £39,891.43 on the ground that the development had commenced without a commencement notice being sent to the council plus a surcharge of £2,500 for “invalid commencement“.

Mr Jones responded with a letter of horror and apology, saying that he knew about the Regulations and thought that he had given sufficient notice of commencement by his email of 10 July. The relevant Council official replied in sympathetic terms but pointing out that the CIL process is separate from the planning process and is controlled very precisely by national regulations in relation to which the local authority had no discretion.”

Mr Jones, then instructed solicitors and counsel (good money after bad) and after various exchanges his representatives appealed against the demand notice (or rather a replacement demand notice that the council issued, given that the deadline for appealing against the first demand notice had passed).

Good news: The inspector allowed his appeal: the inspector “accepted that “on a literal interpretation of the Regulations” the email did not include particulars required by Form 6 (the form specified for the purpose under reg 67) and failed to identify the LN reference, but that the “oversight” was not fatal to Mr Jones’ case, because the email did refer to the relevant site and planning permission and unambiguously specified the intended date of commencement. In these circumstances, at para 10, he held that “in practice, substance, form and all intent and purposes the email communication has the same effect as Form 6”. He said he was content that “the purpose behind CIL reg 67 has been satisfied in spirit at least” and “the apparent failure to strictly comply with the terms of reg 67(2) should be put aside”. There was in any event no prejudice to the collecting authority because it was aware of the date.”

Alarm bells ring – “satisfied in spirit at least” when you are dealing with the CIL Regulations??

Bad news: the council challenges the appeal decision in the High Court and the Secretary of State consents to judgment, leaving poor Mr Jones to fight on. Potentially £40k+ down and now in High Court litigation, with exposure to paying the council’s legal costs if he loses.

Even worse news: the High Court finds for the council:

First, the email did not amount to a valid commencement notice because it did not comply with the requirements of regulation 67 (2, which requires that it must:

(a) be submitted in writing on a form published by the Secretary of State (or a form to substantially the same effect);

(b) identify the liability notice issued in respect of the chargeable development;

(c) state the intended commencement date of the chargeable development; and

(d) include the other particulars specified or referred to in the form.”

Secondly, the case law does “not justify a process of simply looking to see the apparent purpose of the regulations and treating any act fulfilling that purpose as sufficient to comply with them. The Regulations make perfectly clear that the consequence of failure to comply is loss of the exemption; and failure to comply means failure to submit a notice under reg 67.

Finally the judge rejected the submission by Saira Sheikh QC “that in the circumstances of the present case the court should in its discretion refuse to grant relief to the Council. The requirements and the forms for fulfilling them are readily available, were made available to Mr Jones, and he accepted that he knew a commencement notice needed to be given. Only when the consequences of his failure were brought home to him in a substantial charge did Mr Jones claim that an email sent to the Council on an entirely different topic was his attempt to comply with the detailed requirements of which he was aware. There is no trace of any waiver or attempted waiver by the Council, and I do not see that Mr Jones could properly have interpreted the reply to his email in relation to s 106 as a waiver of the obligation to submit a commencement notice if he wished to maintain his self-build exemption. The argument based on the Inspector’s view that the Council should have told him (again) that he needed to submit a commencement notice is without merit: the Inspector was simply wrong about that. No system of administration could survive a duty imposed on a recipient of an email on one subject to remind its sender of all other notices on different subjects that he might want to send. The fact that the penalties are discretionary does not mean that the imposition of CIL itself is discretionary: it is not. The Council seems to have behaved as sympathetically as they could, imposing a minimum interest charge; and maintaining the imposition of the surcharge, in the absence of which Mr Jones would have no right of appeal. His difficulties have been caud maintaining the imposition of the surcharge, in the absence of which Mr Jones would have no right of appeal. His difficulties have been caused entirely by his own acts and I see no good reason to relieve him from the consequences at the expense of the ratepayers of Shropshire.

What an unforgiving process this is. As commented by solicitor David Brock in a tweet when Town Legal circulated this case yesterday:

The complications and traps of the CIL Regulations and self-builders are not really compatible. Which is odd given that Government encourages self- and custom-house building

Of course, the Government will say that it already has proposals in hand to deal with injustices such as this, in its consultation document Reforming developer contributions: Technical consultation on draft regulations. In Mr Jones’ situation there would now be (once the draft regulations are finalised and in force) “a surcharge equal to 20 per cent of the notional chargeable amount or £2,500, whichever is the lower amount.”

Clearly, the proposals will assist but cases such as that of Mr Jones illustrate both the absurdly rigid nature of the system but also the curious approach of charging authorities, on the one hand sympathetic, but on the other hand going out of the way to take court proceedings to overturn an inspector’s decision that might be said to have arrived at a morally right outcome by the wrong legal reasoning (which would admittedly have created a terrible precedent). And as for that sentence in the judgment…

“His difficulties have been caused entirely by his own acts and I see no good reason to relieve him from the consequences at the expense of the ratepayers of Shropshire“.

First of all, whilst mercy is not possible under the regulations and it is difficult to see how the legal answer could have been any different, surely a little sympathy expressed for Mr Jones might have been appropriate and secondly, this betrays some degree of misunderstanding as to the modern system of local government finance and I wonder how much money from CIL receipts Shropshire Council already has sitting in its accounts, to which it now adds this windfall?

Simon Ricketts, 19 January 2019

Personal views, et cetera

PS Good news last week: obviously subscribe to Tom Dobson’s new blog, Man Plans God Laughs, last week’s piece being on that consultation document. (NB pic below is of Charles Middleton as Ming the Merciless – who would obviously have enjoyed CIL – rather than of Tom, where the relationship is more nuanced).

Some Blog Post Postscripts

I’m conscious that these posts (this is the 149th) sometimes don’t age well – they try to capture a point in time and I don’t go back to change them unless I’ve got something really wrong or, worse still, there’s a misplaced apostrophe (they’re written on an ipad, on a train or at the kitchen table, as fast as my two fingers can move, so bear with).

So I thought I’d take the opportunity to note a few post-post updates…

CIL

Since my 15 December 2018 CIL Life post, the claimant in Giordano has applied to the Court of Appeal for permission to appeal, having been refused it by Lang J. Will 2019 see the Court of Appeal grapple for the first time with the joys of CIL liability?

Since my 9 November 2018 An Update On CIL: Reform Promised, Meanwhile Continuing & Increasingly Expensive Uncertainties post the Government published Reforming developer contributions: technical consultation on draft regulations (20 December 2018). The purpose of the consultation is to “ensure that the draft regulations deliver the intended policy changes and do not give rise to unforeseen consequences.” The consultation runs until 31 January 2019. Supporting guidance will accompany the final regulations.

As well as delivering on the proposals announced in October 2018 (I assume – I haven’t yet worked through some of the algebraic amendments), the draft regulations exempt starter homes from the levy, where the dwelling is sold to individuals whose total household income is no more than £80,000 (£90,000 in central London). The draft regulations also make a number of other clarifications to address various glitches.

The Trinity One litigation

My 8 September 2018 What If? The Trinity One Case post commented on a situation where a developer had sought to resist a claim for an affordable housing commuted payment on the ground that the basis for calculating the payment, the Total Cost Indicator figures previously published by the Housing Corporation, had ceased to exist. I mentioned that the position could change as a result of separate litigation underway in relation to the developer’s attempt to reduce its section 106 liability by way of the section 106BA/BC procedure.

Well, the position did indeed then change as a result of R (City of York Council) v Secretary of State (Kerr J, 22 October 2018). The case is of little general interest now given that it concerns the mechanism whereby developers could apply for modification or discharge of affordable housing obligations in a section 106 agreement on the basis that modification or discharge was required to achieve an economically viable development, which mechanism was brought to an end on 30 April 2016. But it will have been immense interest to the parties. Kerr J accepted Trinity One’s position that (1) its appeal against refusal of its section 106BA application was not out of time because it was sufficient for the application to have been made by 30 April 2016 and (2) the application could be made even after the development had been completed.

Land value capture

My 31 August 2018 Market Value Minus Hope Value = ? post was written whilst the House of Commons Communities and Local Government Select Committee was taking evidence in relation to its land value capture inquiry. The committee reported on 13 September 2018 and the Government’s response was published on 29 November 2018.

The Committee urged that the Government should consider appropriate mechanisms:

Our view is that there is scope for central and local government to claim a
greater proportion of land value increases through reforms to existing taxes and charges, improvements to compulsory purchase powers, or through new mechanisms of land value capture
.”

However, the response is a classic straight bat:

“The Government agrees that there is scope for central and local Government to claim a greater proportion of land value increases. The Government’s priority is delivery, in line with the Housing Minister’s commitments to provide more higher quality housing more quickly.


Changes to land value capture systems can have profound impacts on the land market in the short term, even where they are sensible for the longer term. Accordingly, the Government’s priority is to evolve the existing system of developer contributions to make them more transparent, efficient and accountable. It will of course continue to explore options for further reforms to better capture land value uplift, providing it can be assured that the short-run impact on land markets does not distract from delivering a better housing market
.”

Raynsford Review

My 9 June 2018 Judicious Review post commented on the interim report published by the Raynsford Review. The final report was published on 19 November 2018.

Public procurement

Finally, a long time ago, in my 6 September 2016 section 123…Go! post, I commented on Holgate J’s ruling in Faraday. That judgment has now been overturned in R (Faraday Development Limited) v West Berkshire Council (Court of Appeal, 14 November 2018) – see the Landmark Chambers summary.

2019

Plenty happened in planning law in 2018, despite much political focus being away from domestic issues. What will 2019 bring? Feel free to subscribe to this blog to get one quick take a week on what seems interesting to me at least. (And, shameless plug, do subscribe as well to Town Legal’s weekly updates of planning law cases and/or of Planning Inspectorate appeal decision letters).

Here’s to another year.

Simon Ricketts, 28 December 2018

Personal views, et cetera

CIL Life

One of the many frustrating aspects of the Community Infrastructure Levy regime is the confusing and limited nature of any right to appeal, which is particularly concerning given the varying interpretations given to the Regulations by different collecting authorities.

The first difficulty is working out what the appeal route in any particular situation is.

Appeals lie to the Valuation Office Agency in relation to:

⁃ Regulation 114 (where an interested person has asked the collecting authority for a review of the chargeable amount as is aggrieved at the decision on the review)

⁃ Regulation 115 (apportionment of liability)

⁃ Regulation 116 (charitable relief)

⁃ Regulation 116A (exemption for residential annexes)

⁃ Regulation 116B (exemption for self-build housing).

Recent VOA appeal decisions are here.

Appeals lie to the Planning Inspectorate in relation to:

⁃ Regulation 117 (decisions by the collecting authority to impose a surcharge)

⁃ Regulation 118 (determinations by the collecting authority of a deemed commencement date)

⁃ Regulation 119 (imposition by the collecting authority of a CIL stop notice).

Recent Planning Inspectorate appeal decisions are here.

A common theme in relation to the VOA and PINS appeals decisions is the frequency of misunderstandings as to the CIL regime on the part of those carrying out minor developments, the frequency of notices being missed or overlooked and forlorn attempts to avoid or reduce liability at a stage when development has already commenced and the horse has bolted.

Appeals can then proceed to the High Court if either of the parties considers that the decision of the VOA or PINS was wrong in law.

In relation to decisions of the collecting authority which are not listed above, for instance as to whether any exemption or relief should be granted other than charitable relief, the exemption for residential annexes and self-build housing – say social housing relief – the only possibility for challenge is for by way of an application to the High Court for judicial review. Not only is that a disproportionately cumbersome route for challenge when the issue could surely be dealt with by the VOA or PINS but, given that the possibility for claiming a relief or exemption is lost if it is not granted before development is commenced, few developers have the luxury of being able to wait for resolution of a disagreement over the relief or exemption before starting construction.

Surely all of this needs looking at again and simplifying as part of the Government’s current review.

I started thinking about all of this when reading what may be only the third High Court ruling in relation to CIL liability issues, R (Giordano Limited) v London Borough of Camden (Lang J, 13 December 2018). It’s a pretty straightforward case but I’m still not sure whether there was a VOA decision (and if not why the challenge was allowed to proceed) – maybe someone out there can help?

The issue was whether, in determining the relevant floorspace within the chargeable development, the test in Regulation 40 (7) (ii) was met as to whether there were “retained parts where the intended use following completion of the chargeable development is a use that is able to be carried on lawfully and permanently without further planning permission in that part on the day before planning permission first permits the chargeable development.” The floorspace represented by such parts wouldn’t attract CIL.

The claimant was intending to implement a planning permission for “change of use of third floor offices (class B1a) and vacant first and second floors (class B8) to create 3 x three bedroom flats.” Having received a liability notice for £547,419.09, it argued that the test was met because there was a previous planning permission which had been lawfully commenced for “change of use of third floor offices (class B1a) and vacant first and second floors (class B8) to create 6x two-bedroom flats (class C3), including rear extensions at first, second, third and fourth floors and associated external alterations.

Under the previous (pre-CIL) permission, the rear extension and alterations to the elevations of the building had been completed, and steel beams refitted internally, but the first, second and third floors were just stripped out, unpartitioned floors and were not yet capable of being used for residential purposes.

The claimant was attempting to rely on the floorspace deduction provided for in Regulation 40 (7) (ii) because it couldn’t show that any part of the building had been lawfully occupied for at least six months in the previous three years.

Lang J found that because the floorspace was currently incapable of being used for residential purposes it did not meet the test – a “potential” future use was not sufficient.

Stepping back, I would say that was a pretty large windfall for the local authority!

The only other two High Court cases I’m aware of are:

R (Orbital Park Swindon Limited) v Swindon District Council (Patterson J, 3 March 2016), where the claimant succeeded in mitigating its potential CIL liability by securing two separate planning permissions for its proposed works to a retail store, one of which permissions, for the introduction of additional space by way of a mezzanine, was not liable for CIL.

Patterson J had no difficulty with the deliberate CIL mitigation strategy adopted:

There is […] no manipulation of the system for any ulterior and/or illegal motive in accordance with the submissions of the defendant. Rather, the claimant has taken advantage of the legislative scheme which permits it to submit, in this case, two separate planning applications for each act of operational development that it wished to pursue. If it was not the intention of the legislature to permit that to occur then it is for the legislature to change it. At present, in my judgment, that is the consequence of the current statutory scheme.”

R (Hourhope Limited) v Shropshire Council (HHJ David Cooke, 2 March 2015), where the claimant failed in its submissions that the “in lawful use” requirement for deduction of floorspace would be met by anything less than actual use – it was not sufficient that the building (a former pub) was still available for lawful occupation, or that there was some residual storage of items left behind from when the pub had closed.

Is anyone aware of any others?

MCIL2

While talking about CIL, I thought it might be worth a brief post script about the Mayor of London’s MCIL2 (previously covered in part of my 9 November 2018 blog post An Update On CIL: Reform Promised, Meanwhile Continuing & Increasingly Expensive Uncertainties). The report of the examiner, Keith Holland, has now been published, recommending, with one minor modification, that the submitted charging schedule is appropriate, meaning that we can expect it to be adopted and take effect on 1 April 2019.

Despite the increasingly big question mark that there must be over whether Crossrail 2 (the basis for MCIL2) is politically deliverable at present (see my 1 July 2017 blog post Crossrail 2, Where Are You?) Mr Holland has no difficulty on that score:

In 2016 the National Infrastructure Commission recommended that Crossrail 2 be taken forward as a priority with the aim of opening in 2033. Costings for the project have recently been subject to an independent review. The results of the review are not yet public and at this stage there is no formal government approval for Crossrail 2. However, the need for new infrastructure to support the region’s growth was endorsed by the Secretary for State for Transport in July 2017 and there is no doubt that an extremely strong case can be made for Crossrail 2. Moreover, there is general endorsement for Crossrail 2 from those making representations.”

Of course many of us want to see Crossrail 2 proceed. But what if it doesn’t? That’s a lot of money being raised without a defined objective as to the transport projects to which it is to be applied and surely it would be wrong for it to end up being used, for instance, to address cost overruns in relation to Crossrail 1?

Simon Ricketts, 15 December 2018

Personal views, et cetera

Charles Alfred Meurer, Still life with money, pipe and letters, 1914

An Update On CIL: Reform Promised, Meanwhile Continuing & Increasingly Expensive Uncertainties

Well done for getting past the heading.

Someone recently asked me whether the Government ever changes its proposals as a result of a consultation process. For an example of just such a thing, I was able to point to the Government response to supporting housing delivery through developer contributions: a summary of consultation responses and the Government’s view on the way forward (29 October 2018). The proposals set out in the Government’s March 2018 consultation paper (summarised in my 10 March 2018 blog post Developer Contributions, CIL, Viability: Are We Nearly There Yet?) have been modified significantly as a result of consultation, mostly for the better in my view at least.

This blog post focuses on the changed proposals and then looks at some looming issues facing phased developments in areas where charging authorities are looking to increase rates (I’m focusing on the Mayor of London’s MCIL2 but I’m sure the issue is of wider application).

The Government response

The document acknowledges some of the flaws of the current system:

The complexity and uncertainty of the current system of developer contributions is acting as a barrier to the delivery of housing. The system does not react quickly to changes in market conditions or allow local authorities to effectively secure the contributions needed to support new development. It is also not as transparent as it should be; local communities are not clear what infrastructure is provided alongside new development. And the current system could also be more effective in securing funding towards strategic infrastructure and supporting cross boundary planning.”

The Government intends to consult on draft regulations “later this year” to implement the changes set out in the March 2018 consultation document, as now modified. It is important to note that the Government will “also consider whether changes could be made to the Community Infrastructure Levy to incentivise the build out of developments.” (perhaps something that Sir Oliver Letwin might have looked at but…).

The Government has now modified its proposed changes as follows:

1. The previous proposal to replace charging authorities’ current statutory consultation requirements, in relation to proposed charging schedules, with self-certification as to whether it has sought “an appropriate level of engagement” has been amended. The Government “intends to take forward a modified proposal to ensure that regulations continue to require charging authorities to consult on draft charging schedules, whilst removing the current statutory requirement for two separate rounds of consultation in every circumstance.”

2. The pooling restriction will now be removed in its entirety in all areas. Hooray! Although of course there is the risk that tariff-type section 106 contribution requirements will again become more prevalent, in my view the pooling restriction led to many unnecessary problems and uncertainties, which would have continued under the Government’s March 208 idea of only removing the restriction in in areas where specified criteria were met.

3. The Government had intended to introduce a two month grace period for developers to submit a commencement notice in relation to exempted development, to address disproportionately severe problems arising for eg self-builders who, if they fail to meet procedural requirements, find not only that they fail to qualify for any exemption but that all CIL due has become immediately payable. The Government will not now introduce the grace period (which local authorities considered could lead to practical complications) but instead will be “making changes to the penalties associated with the failure to submit a Commencement Notice prior to development being started. This will ensure that any penalty is set at a proportionate level and will not result in the whole liability becoming payable immediately.”

There may also be more guidance as to potential exemptions: “A number of responses sought additional exemptions to address the unintended viability impacts of Levy liabilities on particular forms of development. The Government will consider how guidance could be used to manage these effects by encouraging authorities to take account of these issues when setting Levy rates and choosing how they use existing powers for discretionary social housing relief. In addition, the Government has already committed to bring forward legislation to exempt Starter Homes from the Community Infrastructure Levy.”

4. The complicated proposal in the March 2018 consultation document that charging schedules might be set with reference to the existing use of land has been dropped. “However, the Government has reviewed this proposal and considers there are existing flexibilities in the Community Infrastructure Levy Regulations that, through the use of differential Levy rates, will allow local authorities to go some way towards achieving the objective of the proposed reform. The Government therefore proposes to make changes to guidance to support local authorities to set differential rates more effectively.

5. At the time that it publishes the draft amendment regulations, the Government intends to “consult on changes to indexation of Levy rates and the way in which it would be implemented“. Its current preference is to index CIL rates “for residential development to the House Price Index using local-level data on an annual basis” and to index rates for non-residential development to the Consumer Price Index. It recognises the transitional issues that will arise.

6. The Government still intends to remove the restriction in relation to section 106 obligations that relate to an infrastructure project or type of infrastructure that is set out in the authority’s Regulation 123 list. “New reporting standards, which are set out in the Infrastructure Funding Statement, will address concerns about double dipping by ensuring that there is transparency over how developer contributions from both CIL and section 106 planning obligations are being used, rather than by placing formal restrictions in regulations.” We need to watch this one with care!

In relation to one specific issue that often leads to wrangles: “The Government also recognises the need to address existing uncertainty around using section 106 planning obligations to collect monitoring sums. The Government therefore intends to take forward proposals to make clear that local authorities can seek a fee from applicants towards monitoring planning obligations. In developing these proposals, the Government will consider how best to ensure that monitoring sums are set at an appropriate level.”

7. The Government had intended to give combined authorities and joint committees with strategic planning powers the ability to charge a Strategic Infrastructure Tariff. “The Government has decided to take forward a modified proposal, to enable Combined Authorities with strategic planning powers to take forward a Strategic Infrastructure Tariff, and to encourage groups of charging authorities to use existing powers to more effectively support the delivery of strategic infrastructure through the pooling of their local Community Infrastructure Levy receipts. In the longer term, the Government will bring forward proposals for allowing joint planning committees to charge the tariff, and will review options for giving other groups the power to levy a Tariff.”

The Government had also included a final “catch all” question seeking any other comments. Particular issues that were raised in responses included “the definition of gross internal area, implementation of the Levy in particular circumstances (such as in relation to development that takes place in a number of phases or there is a change of use), and the operation of exemptions and reliefs, indexation and in-kind payment.

Issues such as these are indeed causing much uncertainty.

The implications of increased rates/MCIL2

Whilst we wait for eventual reform of the system, of more immediate focus are the implications of gradual increases by charging authorities in CIL rates.

In London, the Mayor of London is waiting for the inspector’s report following the examination into the draft charging schedule for MCIL2. MCIL2 is proposed to part-fund Crossrail 2, in the way that MCIL1 (together with a related policy of seeking section 106 contributions in relation to some areas and types of development) is part-funding Crossrail 1.

The charging schedule for MCIL1 was adopted on 1 April 2012 (which is why there are many section 106 agreements and permissions dated March 2012, as developers and boroughs scrambled to ensure that permissions were not subject to the levy!).

This table sets out borough by borough the significant sums of money that MCIL1 has now raised:

The section 106 contributions policy for Crossrail (set out in the Mayor’s Crossrail Funding SPG, updated March 2016) predated MCIL1 and provided for section 106 contributions based on the following table and plans:

The standardised wording included in relevant section 106 agreements provides that any MCIL1 which is payable reduces the contributions which are required to be made under the relevant section 106 agreement.

As long as the inspector’s report is received on time and gives it a clean bill of health, MCIL2 will be adopted on 1 April 2019. The changes in rates, compared to where the 2012 rates currently sit with indexation applied, are mostly not huge, but they are significant in some areas. In areas where the increases are material, I am sure we will see a similar rush to beat the deadline.

One uncertainty is of course whether the examination inspector will accept a charging schedule that is predicated on Crossrail 2 coming forward. Little has progressed on the project since my 1 July 2017 blog post, Crossrail 2: Where Are You? We are all still awaiting outcome of an independent affordability review being chaired by Mike Gerrard. The Mayor is hedging his bets, simply indicating:

Should the Crossrail 2 project not be taken forwards, the Mayor would be able to apply the MCIL 2 proceeds to fund other strategic infrastructure.”

Assuming that MCIL2 is waved through and the charging schedule is adopted on 1 April, the relevant point at which it takes effect is determined by everyone’s least favourite phrase in the CIL Regulations: “at the time planning permission first permits the chargeable development“.

For a non-phased permission, this is the date of the permission – easy.

For a phased outline permission, this is either “the date of final approval of the last reserved matter associated with that phase” or “if earlier, and if agreed in writing by the collecting authority before commencement of any development under that permission, on the day final approval is given under any pre-commencement condition associated with that phase“.

For a phased full permission, this is either “the day final approval is given under any pre-commencement condition associated with that phase” or “where there are no pre-commencement conditions associated with that phase, on the day planning permission is granted“.

It will be seen that (1) the revised charging schedule is liable to bite in respect any phase of an existing phased permission if sufficient progress has not been made in relation to reserved matters or discharging pre-commencement conditions in relation to that phase and (2) that there are inherent uncertainties in the drafting, eg

⁃ What does “associated with that phase” mean?

⁃ Does “any” mean “any” or, in fact, “all“?

As a final example of the inadequacies of the legislation: where there is a phased permission and a revised charging schedule is subsequently adopted, the only indexation that applies is of the amount arising from the initial charging schedule up to the end of the year prior to the date of the permission. There is no further indexation through to commencement of development or any indexation of the revised charging schedule insofar as it applies to the phases! Would it not be simpler and more predictable if indexation were not to stop at the initial grant of the permission and instead to continue through to final approval (or even commencement of development) in relation to each phase, but if the potential application of revised charging schedules were removed?

In case anyone has made it down this far…

In conclusion:

⁃ the proposed reforms, and most recent proposals, look to be mainly positive

⁃ but the whole regime really does still need simplifying: to state the obvious, significant liabilities can unexpectedly arise for the unwary – and large sums of money can turn on uncertain issues of interpretation.

Simon Ricketts, 9 November 2018

Personal views, et cetera