it will be inputted as a fixed cost in a viability appraisal. All other elements (anticipated sales values, build costs, ab- normal development costs, finance costs, profit margins etc.) will be argued at a site specific level and the only thing that can ‘flex’ to accommodate viability at a site specific level is the s106 Agreement – and that really means affordable housing.


A viability assessment undertaken at the site specific level is absolutely bound to yield a different conclusion from one carried out at the strategic level. The strategic assessment that justified the CIL charge has to make assumptions and work on ‘average’ scenarios – so average values, average build costs, average abnormal costs and average site specific costs. This yields a level of CIL charge that is then a fixed cost to any devel- opment and so every time the actual development characteristics differ from the ‘average’ characteristics assumed for CIL purposes, a difference will arise.


Thus it seems to me almost inevitable that affordable housing and other site specific requirements will have to be squeezed to justify the CIL payment. This is bound to be strongly resisted by charging authorities, but I can foresee much dispute here in the future.


Others have identified this as a potential problem and I do not think there is any doubt about it – it will be an issue.


That’s a relief


Assuming now that planning permis- sion has been granted, there is a limited opportunity for landowners/developers to come back and seek to reduce their CIL liability, think of it as the 2012 CIL equivalent of re-negotiating a 2007 s106 Agreement.


The section on Exceptional Circum- stances Relief (ECR) within the DCLG publication “Community Infrastructure Relief : Information Document” is bound to become well read by landowners and developers across the country. It accepts that there may be circumstances in which a specific scheme cannot make CIL payments and remain viable, so charging authorities can, in certain strict circumstances, offer relief from payment. For example, relief cannot be granted


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unless a s106 Agreement has been entered into in respect of the planning permission, which permits the charge- able development, and the charging au- thority thinks that the cost of complying with the s106 Agreement is greater than the charge from the levy payable on the chargeable development.


It raises some interesting questions about how one assesses the ‘cost’ of complying with, say, affordable housing within the s106 Agreement. Presumably, the relevance of the s106 costs as a threshold is related to the assumptions made in the strategic CIL viability as- sessment, i.e. an acknowledgement that when assessing CIL at a strategic level an assumption of high site specific s106 compliance was not made.


Nonetheless, assuming the criteria are somehow met, an ‘independent person’ undertakes an assessment to determine whether the payment of CIL has an unacceptable impact on the economic viability of the scheme. If it does, relief can be granted against the liability to make CIL payments.


This, of course, takes us back to the gen- eral problem with viability assessments whether at the strategic or site specific level – there is no statutory definition of what constitutes the economic viabil- ity of a scheme. But if the same basic criteria that the CIL strategic viability study used are not replicated in the site specific viability assessment it seems to me that problems will arise again – and it seems likely that relief could be justi- fied in a large number of cases – making budgeting for infrastructure delivery even more hit and miss.


Interestingly, if the owner of a material interest in the land disposes of the land prior to commencement of develop- ment then any relief ceases to apply. The same applies if the development is not commenced within one year from the grant of the relief. This is likely to add further complexity to development land transactions which have already become arcane in their construction in recent years.


Where next? Framed by the previous administration


THE TERRIER - Summer 2012


and in a completely different market, CIL was intended to save both the time and costs associated with negotiating complex s106 planning obligations. Developers and landowners, naturally seeking to improve their position, are bound to seek to negotiate individual applications, either in the context of s106 obligations or relief from CIL. In many instances, planning negotiations will look very similar to the current regime, although the real nub of the ne- gotiation may come later in the process and lack the flexibility which has been at the heart of planning agreements in recent years and which has enabled effective development to take place.


Anxiety for transparency as much as ef- ficiency was at the core of the planning gain supplement, which morphed into CIL. Whatever the merit of that ambi- tion, no one could have predicted quite how markets would change. Sadly, the greatest clarity CIL may afford us is how effective the previous regime was and how much we may wish to return to the tried and tested s106 approach.


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