CIL reform: What the dickens!

“Large amounts don’t grow on trees.
You’ve got to pick-a-pocket or two.”

On 1 September 2019, the CIL Regulations will be amended – yet again. Among the various technical changes is the removal of Regulation 123, which currently prevents local planning authorities using more than five section 106 obligations to fund a single infrastructure project. This is widely referred to as the “pooling restriction”.

This change has two significant implications for developers:

  • First, there will no longer be any restriction on local planning authorities asking for section 106 contributions towards infrastructure that is also being funded by CIL. This practice, known as “double dipping” means that developers could end up paying twice towards the same infrastructure.
  • Secondly, local planning authorities will no longer be restricted to spending CIL receipts on infrastructure that is specified in their Regulation 123 lists. Instead, an annual infrastructure funding statement will be published which sets out the infrastructure projects which the charging authority intends will be, or may be, wholly or partly funded by CIL; and which reports on CIL and planning obligations received and spent over the previous year.

How has this happened?

The pooling restriction was certainly a problem. In 2016, the City of London Law Society Planning and Environmental Law Committee was among the organisations that gave evidence to the government’s independent CIL Review Panel saying that the pooling restriction had become a barrier to the delivery of infrastructure, particularly in relation to strategic sites in multiple ownerships and involving multiple applications. The Committee recommended allowing applicants for major developments to opt out of the CIL regime in favour of negotiating a bespoke infrastructure agreement under existing section 106 arrangements instead.

Unfortunately, the changes to the Regulations only deal with one side of the equation. By removing Regulation 123, infrastructure can be funded by section 106 contributions once again. But by failing to allow major developments to opt out of CIL, the door has been opened to double dipping.

The government’s summary of responses to its technical consultation on the proposed reforms revealed that three private sector organisations expressed concerns about double dipping and four local authorities called for guidance to clarify the position on this issue. The government acknowledged the comments made about the use of CIL and section 106 planning obligations in this way and said that guidance will be provided on this issue. No new guidance has been issued yet, however.

My understanding of MHCLG’s view is that CIL receipts will never be enough to fund all of the infrastructure needed in an area, so it is legitimate to collect section 106 contributions in addition to CIL. But that view ignores the whole foundation on which CIL was originally established: to fund specific items of infrastructure identified by the local authority, with charging rates set according to their anticipated cost after independent examination.

The government considers that these reforms will increase transparency. But by removing Regulation 123 lists and allowing double dipping, the link between CIL rates and the cost of defined infrastructure projects has been broken. Consequently, from 1 September CIL will become a very complex land value capture mechanism masquerading as an infrastructure funding tariff.

Author: Matthew White, partner and head of UK planning practice, London

For further information please contact:

Matthew White
Matthew White
Partner and head of UK planning practice, London
+44 20 7466 2461

MCIL2 update – in force 1 April 2019

Last week, we published a post (see here) noting that the Mayoral Community Infrastructure Levy 2 (‘MCIL2’) was due to come into force on 1 April 2019, setting out details of the new charges, which developments would be affected and the implications for developers. By a letter dated 28 February 2019, the Greater London Authority (‘GLA’) has now confirmed that the Mayor of London has formally adopted the MCIL2 Charging Schedule and that it will indeed be brought into effect on 1 April. Two modifications have been made to the final version of the Charging Schedule, the most important of which is that the Elephant and Castle Opportunity Area is not part of the Central London Charging Area for office, retail and hotel development; the second modification clarifies the definitions of hotel, office and retail uses. The GLA has also confirmed that MCIL2 will be used to fund both Crossrail 1 (the Elizabeth Line) and Crossrail 2, and that the MCIL2 Charging Schedule will supersede both the 2012 Mayoral CIL Charging Schedule (‘MCIL1’) and the 2016 Section 106 Crossrail Funding from Planning Obligations Supplementary Planning Guidance (referred to in our previous post as the ‘s106 Crossrail Charge’). Continue reading

In force soon – Mayoral Community Infrastructure Levy 2 (MCIL2)

The Mayoral Community Infrastructure Levy 2, or ‘MCIL2’, is a new charging schedule for the Mayor’s Community Infrastructure Levy (CIL) charge. It sets new (higher) rates for Mayoral CIL and is due to take effect on 1 April 2019. (It is technically possible that the Mayor may change his mind about MCIL2 before 1 April 2019, but it should be assumed that he will not.)

This post explains what MCIL2 is, what it means for developments in London and what action developers may wish to take before MCIL2 comes into force.

Continue reading

Real Estate EP5: The future of planning – Matthew White and Ghislaine Halpenny in conversation

British Property Federation (BPF) director of strategy and external affairs, Ghislaine Halpenny, sits down with Matthew White, partner and head of UK planning, to discuss planning, its ever-changing nature and the direction it is taking.

 

Also published on the BPF soundcloud for the BPF Futures network, a networking and development group for junior professionals working in all areas of UK real estate.

For further information please contact:

Matthew White
Matthew White
Partner and Head of UK planning, London
+44 20 7466 2461

Planning Update: office to residential conversion rights made permanent, Mayor’s advice to local authorities on avoiding these rights, Mayor’s viability disclosure requirements, and CIL and mezzanine floors

Authors: Matthew White, Partner and Head of Planning, and Lucy Morton, Professional Support Lawyer, Planning, London

Today's post is a planning update, summarising some of the recent and forthcoming changes to planning law and policy.

Please contact us for more information on any of these topics.

1.    Office to residential conversion rights made permanent

2.    Mayor's advice to London authorities on avoiding the office to residential conversion rights (new SPG for the Central Activities Zone)

3.    Mayor calls for more transparent viability information (new Housing SPG)

4.    Community Infrastructure Levy (CIL), mezzanine floors and multiple planning applications

5.    Coming soon…

 

Continue reading

What to look forward to in 2016: Planning changes on the horizon

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Herbert Smith Freehills' real estate development team are monitoring a number of areas of law likely to change during 2016.  Here is a summary of some key areas of change we expect in the field of planning (from a development perspective), highlighting some opportunities these changes may present. 

For more information please contact Matthew White or Lucy Morton at Herbert Smith Freehills.

1. Office-to-residential conversion rights to be made permanent

2. Housing and Planning Bill due to become law

3. CIL Review Panel to report on whether CIL is meeting its objectives

4. Government's response expected on the National Planning Policy Framework consultation (including changes to green belt and affordable housing policies)

5. Affordable housing renegotiation provisions to expire on 30 April 2016, unless extended

6. Government due to respond to the Airports Commission Final Report (which recommended Heathrow expansion)

7. International property measurement standards changing

8. Carbon offsetting requirements expected to be amended or abolished

9.  National Infrastructure Commission to report at Budget 2016

 

Continue reading

Indexation calculations for Community Infrastructure Levy (CIL)

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In areas where a Community Infrastructure Levy (CIL) charging schedule has been adopted,  the formula in the CIL Regulations must be used to calculate the CIL charge payable on a new property development.  Indexation is part of the formula used to calculate the CIL charge and the wording in the regulations has been causing concern to some local authorities and developers.

The concerns arise due to the definition of the "index figure" for a given year, which according to the CIL regulations is: "the figure for 1st November for the preceding year in the national All-in Tender Price Index published from time to time by the Building Cost Information Service of the Royal Institute of Chartered Surveyors".  Some local authorities are taking the start of the 'preceding year' to be 1 January, while others are taking it to be 1 November. This affects the indexation calculation for those permissions granted between 1 November and 31 December of a given year.

 

Continue reading

Community Infrastructure Levy (CIL) credits and offsets

Amendments made to the CIL regulations in 2014 changed the qualifying test for offsetting the floorspace of existing buildings against CIL liabilities for new development. During the three years before the time that the planning permission first permits development (the "start date"), part of the existing building must have been in lawful use for a continuous six month period to qualify. Uses under a temporary planning permission will not count.

The "start date" for a simple detailed planning permission is the date the planning permission is granted; and for a simple outline permission it is the date of the final approval of reserved matters. The position is more complex in relation to phased permissions, where:

• the start date for any outline phase is the date of final approval of the last reserved matter associated with that phase or, if agreed with the collecting authority before development commences, the date final approval is given under any pre-commencement condition; and

• the start date for any other phase is the date final approval is given under any pre-commencement condition associated with that phase or, where there are no such pre-commencement conditions, the date planning permission is granted.

Note that a building must still be situated on the land on the start date in order for any floorspace to be offset. This means that demolition works in advance of the start date could have serious financial consequences and should not be carried out before considering the potential impact on CIL liability.

For more information please contact Ben Hazenberg, Lucy Morton or Matthew White at Herbert Smith Freehills.

Ben Hazenberg
Ben Hazenberg
Senior Associate, Planning, London
+44 20 7466 7581
Lucy Morton
Lucy Morton
Professional support lawyer, Planning, London
+44 20 7466 2626
Matthew White
Matthew White
Partner and Head of Planning, London
+44 20 7466 2461