Coronavirus: care needed where deferring deficit pension contributions and expenses
Out-Law Guide | 05 Sep 2019 | 2:20 pm | 7 min. read
The UK government has also updated national guidance with new advice on section 106 Agreements, the Community Infrastructure Levy, Viability and data. There are a number of changes which planning authorities and developers should be aware of.
The latest changes to the regulations should assist both local authorities and developers who are developing strategic sites. The removal of regulation 123 'pooling restriction', for example, will make it easier to deliver major infrastructure projects, as it allows local authorities to combine CIL and 106 revenues towards the same infrastructure project or item.
The relaxation of consultation requirements will make it easier and quicker to adopt a CIL regime, and the new reporting regime should help track payments and for developers to reclaim any funds that have not been used. However, it is not clear whether these changes will create additional development expense that could hinder delivery, or whether the increased flexibility and transparency on use of CIL and section 106 obligations will have an overall beneficial effect.
The relaxation of consultation requirements will make it easier and quicker to adopt a CIL regime.
The commentary below looks at each of the principal changes.
Regulation 123 prevented local authorities from relying on planning obligations as a reason for granting permissions where the obligation related to infrastructure that would be funded by CIL revenues or where five or more obligations from other development section 106 agreements had already been funded that way.
Removal of the regulation gives local authorities two ways to provide greater flexibility for funding development: they can use as many planning obligations as they need to fund a specific piece of infrastructure, and they can use planning obligations and CIL revenues to fund the same infrastructure. It is a reversal to the previous restrictions on what was referred to as 'double dipping'.
It is not surprising that the government response to the CIL consultation recorded support for this change from 35 local authorities "because of the additional flexibility to fund and deliver infrastructure" these changes provide.
The relaxation of these controls provides some benefit to developers which require certain infrastructure improvements to be completed prior to occupation of their development, a certainty which could not be delivered by CIL under the old rules.
It does, however, result in yet more pressure on the viability of developments where payments for CIL and towards section 106 for the same infrastructure improvements can now be required.
And where a planning obligation is being relied on as a reason to grant permission, it is essential to remember that regulation 122 is still very much in force and being strictly applied by the courts and planning inspectors: the obligation must be necessary to make the development acceptable in planning terms; directly related to the development; and fairly and reasonably related in scale and kind to the development.
A Supreme Court ruling on whether community benefits of this kind are material planning considerations is awaited, but in the meantime a strict interpretation of regulation 122 should be maintained, and kept in mind particularly where 'double dipping' is being considered.
The main change to the CIL regulations relating to permissions granted under section 73 of the Town and Country Planning Act of 1990 (as amended) is that calculations previously divided between regulation 40, regulation 50 and regulation 128A are consolidated into a new schedule 1. Some complexity is introduced as different calculations apply to different types of planning permission, although the aim of the different calculations is to make the CIL payable fairer and clearer as to how it is calculated in different circumstances. Practitioners will need to take care to use the correct calculation for a particular situation.
Part 1 of the new Schedule 1 confirms that:
Part 2 clarifies how the chargeable amount should be recalculated for a section 73 permission.
Part 3 contains social housing relief calculations previously in Regulation 50 and Part 4 mostly deals with the CIL payable and largely replicates Regulation 128A, which is removed. It also confirms that:
There are also some amendments to the regulations themselves. Regulation 9 is amended to clarify that the chargeable development is the most recently commenced or re-commenced chargeable development.
A new regulation 58ZA allows social housing relief to be carried forward to the new section 73 permission and confirms that any instalment policy previously agreed will also apply to the new consent.
An amended regulation 128 confirms that developments are only liable for CIL if a charging schedule is in place for on the day planning permission is granted.
In 2015 the courts ruled that including administrative costs in a section 106 obligation agreement could be unlawful. That did not entirely prevent local authorities charging monitoring fees within the section 106 agreement.
The new CIL regulations confirm that a local planning authority may lawfully include a monitoring fee as a planning obligation if it is fairly and reasonably related in scale and kind to the development and does not exceed the local authority's estimate of its cost of monitoring the development over the lifetime of the related planning obligations.
Local authorities will need to be able to produce these 'lifetime estimates' and demonstrate that their costs are compliant with the tests in the regulations if they want to use these new powers effectively.
In addition the government is introducing a new reporting requirement that could be both onerous for local authorities and expensive for applicants who will no doubt be passed the cost of such reporting as part of the monitoring fees.
All 'receiving' authorities will now have to provide infrastructure funding statements to be published once a year, the first of which is due by 31 December 2020. The detailed requirements for these statements are set out in regulation 9 and schedule 2 of the regulations and must include: a list of the infrastructure projects or types of infrastructure which will be wholly or partly CIL funded; a report setting out details of neighbourhood CIL collected and spent and any CIL allocated but not yet spent; and a report detailing section 106 financial and non-financial obligations, which may also include details of section 278 agreements.
Where mayoral CIL is in effect, there must also be a statement explaining that mayoral CIL is also being charged in relation to part or all of the area.
The potentially significant costs of producing the infrastructure statements can then be passed onto developers, given monitoring fees can specifically include "reporting under these regulations".
The new reporting requirements should make it easier for developers and local authorities to monitor local authority spending and reclaim unspent contributions - particularly where local authorities adopt the standard tools recommended by the Ministry of Housing, Communities & Local Government (MHCLG) for collating and storing the relevant data. The parallel changes to the NPPG include guidance for local authorities on how to "format, label and publish" the contributions data – a sign of things to come in an increasingly digitalised world.
The new CIL regulations bring in two changes relating to local authority consultation requirements. Under the revised regulations, only one round of consultation is required for a local authority introducing CIL or revising their CIL rate, although there is discretion to do more.
The new reporting requirements should make it easier for developers and local authorities to monitor local authority spending and reclaim unspent contributions.
There is also a new requirement for local authorities to carry out a consultation where they are thinking about ceasing CIL charges. That consultation must be clear on the expected impact and what is in place to replace any lost income.
The new regulations also define who should be consulted, with the list including any neighbourhood forum.
Indexation should be also easier from October this year as the Royal Institution of Chartered Surveyors (RICS) has been working with MHCLG to develop a new annual index for CIL charges. This will be known as the RICS CIL Index, published in October 2019 and updated annually thereafter, and free to access from the RICS website.
Finally, there is also good news for anyone self-building or planning an extension. Under the current regulations, reliefs and exemptions depend on submission of a commencement notice and agreeing any reliefs before any works are commenced.
Under the new regulations, notice is not required at all for residential extension exemptions. Where a commencement notice is required but served late, relief is not lost entirely as is currently the position. There will, however, be a surcharge of 20% of the chargeable amount or £2,500, whichever is lower.
Coronavirus: care needed where deferring deficit pension contributions and expenses