Section 106 Agreements vs. Community Infrastructure Levy (CIL): Understanding the differences
In real estate development, navigating the web of legal obligations and financial contributions can be daunting. Developers need to be familiar with two pivotal concepts: Section 106 Agreements (s106) and the Community Infrastructure Levy (CIL). While both aim to ensure that new developments contribute to the infrastructure and community resources they rely upon, their approaches and implications differ.
The enigmatic nature of Section 106 Agreements
S106 is a legal contract between local authorities and developers. They are meticulously crafted to address the specific impacts a development may have on the surrounding infrastructure and community resources. Think of them as a bespoke solution tailored to each project's unique circumstances.
The scope of a s106 can encompass a diverse array of considerations, ranging from providing affordable housing units to enhancing highways, educational facilities, public open spaces, and even town centre improvements. These agreements are negotiated during the consultation period of the planning application process, with the council's solicitor playing a pivotal role in drafting the final document.
For smaller developments, a streamlined alternative exists as a Unilateral Undertaking, sidestepping the need for a comprehensive s106. However, it's crucial to note that these agreements are inherently uncertain, as their contents are subject to case-by-case negotiations, potentially leading to disparities in outcomes.
The democratising force of the Community Infrastructure Levy (CIL)
Introduced by the Planning Act 2008, the Community Infrastructure Levy (CIL) emerged as a revolutionary approach to ensuring that new developments contribute their fair share towards the cost of supporting infrastructure. Unlike the bespoke nature of s106, the CIL operates on a more egalitarian principle, levying charges based on a published tariff schedule applicable to a wide range of developments.
The CIL's primary objective is to spread the financial burden of funding infrastructure more equitably across developers, providing a level of certainty and transparency often lacking in the negotiated s106. By establishing a consistent and predictable framework, the CIL aims to simplify the process while ensuring that the costs associated with infrastructure development are distributed more evenly.
Determining liability: when does CIL apply?
While the CIL may seem like a solution for infrastructure funding, its applicability is not universal. Local authorities are empowered, but not obligated, to introduce a CIL within their jurisdictions. Each authority that opts in to implement the levy must publish a charging schedule outlining the specific CIL rates applicable to various development types and locations.
In areas where the CIL is in effect, most new developments that create net additional floor space of 100 square metres or more - or result in the creation of one or more dwellings - are potentially liable for the levy. However, certain types of development, such as residential extensions, houses, and flats built by self-builders, may be eligible for relief or exemption from CIL charges, provided they meet stringent criteria and follow prescribed procedures.
It's worth noting that the CIL is intended to fund infrastructure that supports development rather than serving to ensure a project's compliance with planning regulations. In cases where site-specific impact mitigation measures are necessary for planning permission to be granted, a s106 may still be imposed to address these unique considerations.
Striking a balance: the interplay between Section 106 and CIL
While the introduction of the CIL was initially heralded as a potential replacement for s106, the reality has proven to be a more nuanced coexistence between the two mechanisms. In areas where the CIL has been adopted, s106 has undergone a strategic scaling back, focusing primarily on site regulation and site-specific issues that cannot be addressed through the broader scope of the CIL.
To prevent developers from paying twice for the same infrastructure improvements, local authorities must publish a comprehensive list of projects and infrastructure types that will be funded through the CIL.
Practical considerations for developers
As a developer, understanding the interplay between s106 and the CIL is paramount to navigating the landscape of planning obligations and infrastructure contributions. Here are some practical considerations to keep in mind:
- Conduct thorough due diligence: Before embarking on a new development project, it's crucial to research the specific requirements and regulations in place within the local authority's jurisdiction. Determine whether a CIL is in effect and familiarise yourself with the charging schedule and any applicable exemptions or relief provisions.
- Engage early with local authorities: Establishing open lines of communication with local authorities from the outset can help streamline the process and ensure a clear understanding of the expectations and obligations surrounding both s106 and CIL payments.
- Seek professional guidance: The complexities of these legal and financial obligations can be daunting. Engaging the services of experienced professionals, such as legal advisors and planning consultants, can provide invaluable guidance and help mitigate potential risks.
- Factor in costs and timelines: Both s106 and CIL payments can have significant financial implications for your development project. It's essential to accurately factor these costs into your budgeting and forecasting processes and account for the potential time delays associated with negotiating and finalising these obligations.
- Stay informed and adaptable: The landscape of planning obligations and infrastructure contributions is ever-evolving. Staying abreast of legislative changes, judicial precedents, and best practices can help you navigate this intricate terrain confidently and quickly.
Conclusion
While the differences between s106 and the CIL may seem daunting, understanding their nuances is crucial for developers seeking to navigate the intricate world of planning obligations and infrastructure contributions. By embracing the complexities and adopting a proactive approach, developers can ensure compliance and contribute to the sustainable growth and development of communities.
Ultimately, the interplay between these two mechanisms underscores the delicate balance between facilitating development and mitigating its impacts on local infrastructure and resources. By engaging in constructive dialogue with local authorities, seeking professional guidance, and staying informed, developers can navigate with confidence, contributing to the creation of thriving, well-supported communities for generations to come.
For further information and trusted legal advice regarding property development, get in touch with us at Carlsons Solicitors.