Out-Law News 1 min. read

High Court upholds an inspector's decision to waive a £1m affordable homes payment

The High Court has dismissed Medway Council's challenge of a planning inspector's decision to waive a £1 million affordable housing payment.

In 2007, the Council granted planning permission for a mixed-use development which included 332 new homes. The developer, Byrne Estates (Chatham) Limited, entered a planning obligation which included a three stage payment of Council £1,000,380 for the provision of affordable housing.

By 2014, the residential units had been built and the majority were either sold or in rental occupation. However, some of the commercial units had been constructed as a shell but needed further works before they could be occupied.

The developers were projected to make a £12.35m loss. They submitted a viability appraisal to the Council and applied for them to remove the obligation to pay the £1m payment for affordable housing, arguing it was no longer viable.

The Council failed to determine this application and the developer made an appeal under section 106BC of the Town and Country Planning Act. A planning inspector modified the planning obligation and removed the affordable housing financial contribution.

According to the High Court judgment, Medway Council challenged this and argued that the development had completed and that "the existence of the affordable housing obligation had not delayed the delivery of the housing". Therefore, there was no justification under s106BA to remove the affordable housing obligation.

They also argued that the appeal did not fall within the scope of s106BA as on the date of the appeal submission, the residential development had completed. 

In Mr Justice Gilbart's ruling he said it was "necessary to start with a dash of realism about several matters." He stated that "in the real world of development and especially that related to regeneration such as this one, mixed use schemes are commonplace, so that one may often get housing elements and commercial elements" and "no developer of a mixed scheme would consider the important questions of investment, cash flow, return or valuation, without considering the scheme as a whole".

Mr Gilbart went on to say that "in this case the development included the commercial units" and "it was not wrong to describe the commercial development as incomplete... it was not in a state which could generate receipts or returns".

Mr Gilbart agreed with the developer and concluded that "the [developer] had shown that this challenge must fail". He granted the developer permission to apply for judicial review but dismissed the claim.

Planning expert Marcus Bate of Pinsent Masons, the law firm behind Out-Law.com, said "This challenge was doomed to fail. Councils have often tried to argue that schemes must have stalled in order to benefit from the S106BA process. There is no such legal requirement – the proper test being whether the scheme is economically viable”.

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