2013 will be the year when CIL examinations become more meaningful but implementation issues dominate, says expert

Only a handful of local authorities have adopted Charging Schedules in 2012 and are charging CIL on new development. However, the number of local authorities in or approaching the examination process is growing at some pace, and a significant proportion of authorities have now formally published Preliminary and Draft Charging Schedules for public consultation. At this rate, 2013 will be a busy year for CIL examinations and the Planning Inspectorate.

On 14 December the Department for Communities and Local Government (CLG) published new statutory guidance about CIL. Interestingly, the new guidance bears no full title, unlike its predecessor, indicating that its scope is no longer limited to charge-setting. Indeed, CLG has acknowledged that one of the principal changes in the guidance is to provide a clear thread and steer on the appropriate interface between CIL and section 106 .

The new guidance includes a number of notable additions which should provide some comfort to concerned developers and ensure that CIL examinations have more teeth than they have done to date. However, developers of sites and schemes where CIL proposals are imminent should remain cautious and alive to the risks and drawbacks of the legal regime.

Examiners are not yet required to test or confirm the appropriateness of the balance which the authority has struck between the desirability of securing infrastructure funding and the potential effects of the proposed CIL rates on development viability. The key test remains a very high-level assessment of whether the evidence demonstrates that the proposed rates would threaten delivery of the relevant Local Plan as a whole, rather than looking at specific geographical areas, land uses or policies.

The biggest concerns, however, will relate to the application of CIL to live development projects once charging becomes more commonplace. At its very essence, the CIL regime is all about securing funding for infrastructure, but little has been done to set up the system actually to deliver that infrastructure at the right time, in the right place and to the right specification. The guidance is too often silent and the Regulations are still not fit-for-purpose in this respect.

The Government took the opportunity in 2012 to amend the Regulations to fix some technical matters, most notably to deal with the widely recognised double-charging risk for variations of planning permissions under section 73 of the Town and Country Planning Act 1990. However, this was more a case of putting a sticking plaster on a gaping wound than healing the problems completely.

Three key changes need to be made to address real impediments to successful implementation of CIL and timely delivery of the infrastructure needed to support economic growth and new development.

Firstly, the legal regime needs to provide more certainty about the delivery of infrastructure funded through CIL, particularly where it is necessary for scheme mitigation, for example for EIA purposes. This could be done by allowing CIL payments to be made through works in kind or by facilitating CIL revenue to be passed to developers.

Secondly, restrictions needs to be placed on authorities changing CIL spending commitments in order to encourage investment, without prejudicing consensual site-specific arrangements with developers. This should be done by specifying minimum consultation requirements at the national level. The inflexible guidance in paragraph 90 about the use of section 106 agreements urgently needs reconsideration.

Thirdly, the loophole for highway works needs to be closed to prevent abuse. Currently the same works can be charged for under CIL and section 278 of the Highways Act 1980 without protection against double-charging and with no clarity about how the two should interface when it comes to spending and delivery.

In 2013 the Government will hopefully engage with stakeholders and implement a root and branch reform of the CIL Regulations to address these issues. The number of things that CLG civil servants will have to address is significant. These include: specifying the 'meaningful proportion' of CIL to go to neighbourhood bodies; striking an appropriate balance when revising the cap on the recoverable administrative expenses of authorities; deciding whether affordable housing is in or out of CIL; protecting against the risks to affordable housing delivery through the use of non-policy compliant assumptions in CIL viability testing; remedying the double-charge risk for slot-in permissions; correcting some of the unworkable and unclear pre-conditions to claiming discretionary exceptional circumstances relief; establishing workable valuation principles for regulation 73 land payments; creating a bespoke charging and payment framework for large multi-phase schemes, and refining or ideally ditching the overly complicated rules for securing off-sets against CIL charges for existing floorspace.     

Marcus Bate is a planning law expert at Pinsent Masons, the law firm behind Out-Law.com