England & Wales Finance

Avoiding Community Infrastructure Levy-induced legal headaches

Cash-strapped local government has been eyeing the Community Infrastructure Levy with considerable interest.  Put simply, CIL will allow local authorities to impose a levy on developers to fund infrastructure projects around the local area.  It is an additional revenue stream to Section 106.

One of the main attractions of CIL is that, unlike Section 106, the infrastructure funded does not need to relate directly to a particular development.  CIL from a development in the north of a local authority area could, for instance, be used to fund a link road in the south.

So far, so good.  There are, however, a number of stumbling blocks as Marcus Bate, an expert in planning law at the law firm Pinsent Masons which runs the planning website Out-Law, made clear at a recent LGiU seminar on the planning reforms.

One especially tricky issue for local government is determining the level at which CIL rates should be set.  Local authorities will, naturally, want to vary CIL rates to promote certain kinds of development.  A local authority may, for instance, want to set low CIL rates for developments in areas that have been targeted as priorities for regeneration.  

Such policy objectives can lawfully be taken into account when a local authority decides how much development it is willing to put at risk by imposing CIL at a particular rate to fund critical infrastructure.

However, the legal rules require local authorities to fix rates primarily by reference to local viability and not planning priorities.  Over-reliance on policy justifications can leave CIL proposals vulnerable to challenge.  Balancing viability and infrastructure needs is not easy.

It gets even trickier when local authorities seek to differentiate CIL rates to realise larger contributions from certain types of development or kinds of businesses.  A local authority may, with some common-sense justification, believe that a major multi-nation operation such as supermarket should face a different rate to that of a medium-sized local enterprise.  

Speaking at the seminar, however, Marcus was very clear that local authorities are running the risk of legal challenges and difficult-to-resolve objections, particularly where multiple rates are proposed for different sizes of development (eg retail).  In a blog published recently, Marcus argues that:

“Choosing a single rate for each use (eg retail) will mean that councils can implement CIL and start securing additional infrastructure funding quickly, giving developers the certainty they need to bring forward new development”.

You can read the full blog here on the Out-Law website which provides daily news updates on high-profile developments, legal developments and changes to legislation, as well as expert opinions on topical subjects.  You can also sign up to receive these free daily news updates directly.