Insufficient link between housing project and developer contributions, Scottish Court rules

The funding plans drawn up by Aberdeenshire's strategic development planning authority (SDPA) went against "a fundamental principle of planning law", which requires conditions attached to planning permission to "fairly and reasonably relate to the permitted development", according to the Inner House of the Court of Session's judgment in favour of the Elsick Development Company. The company has been granted planning permission for the first phase of a 'new community' of up to 4,000 homes in Aberdeenshire.

"The [strategic transport fund], and the requirement in the statutory supplementary guidance to contribute to it, may be regarded as a sound idea in political or general planning terms," said Lord Carloway the Lord President, giving the judgment of the court. "It may be seen as an imaginative idea which allows advanced strategic planning objectives to be achieved in a structured manner, financed by new development."

"That does not, however, permit the imposition of an obligation on a developer to contribute to an intervention which is simply not related to the proposed development … It may be that legislation could authorise the type of contribution envisaged by the [SDPA], but it has not yet done so in Scotland," he said.

In his judgment, Lord Carloway referred to the introduction in England and Wales of the community infrastructure levy (CIL), by section 205 of the 2008 Planning Act. Local authorities in England and Wales are permitted to introduce a CIL to help pay for the delivery of general infrastructure improvements in the local authority area, funded by a levy on qualifying developments. However, no such power currently exists in Scotland.

Planning litigation expert Craig Connal [link] QC of Pinsent Masons, the law firm behind Out-Law.com, described the judgment as "a major decision quashing a region-wide transport policy", although pointed out that the nature of the dispute was not new.

"Attempts to link development and infrastructure have always been controversial and the CIL in England and Wales – which attempts to avoid the issues in this case – has itself spawned a raft of appeals and litigation," he said.

"The decision illustrates the tensions in an era where the old certainties of infrastructure funded by public money have long gone. It focusses on the question of how far, in law, it is legitimate to fund what the reporter for the Scottish Government described as a 'basket' of improvements from a wide range of developments and some or all of the items in the basket was slim or non-existent. The court held that it was not," he said.

At issue in this case was a strategic transport fund (STF), first published in draft form by the SDPA in July 2011 and based on Aberdeenshire's anticipated transport infrastructure needs by 2030. The court heard that various development zones planned in the local authority area would lead to "more car and public transport movements", and increased congestion, without investment in certain strategic public transport 'interventions' to be funded by the money raised from the STF.

The idea behind the fund was that all new housing, business, industrial, retail and leisure developments would be expected to contribute to the fund on a "tabulated" basis, with the funds to be placed into a ring-fenced account and be made available only for the specified interventions. The plans as drafted would have cost the Elsick Development Company up to £8 million, instead of the £287,000 required to fund the projects related to the company's planned developments, according to local press reports.

Lord Carloway said that Scottish planning law specifically prevented the use of planning obligations to "extract 'payments … which are not directly related to the proposed development'".

"Although account may be taken of 'the cumulative impact of a number of proposed developments' and costs may be shared 'proportionately', the contributions have to be proportionate to the development," he said.

"Obligations cannot be used to 'secure contributions to the achievement of wider planning objectives which are not strictly necessary to allow permission … for the particular development'. They cannot be used where the need to improve infrastructure 'does not arise directly' from the development. Financial payments cannot be demanded if they do not contribute to 'necessary facilities' required in connection with the development," he said.

He added that a statement that contributions would "not be used to support projects not affected by the contributing development" set out in the SDPA's guidance on the use of the fund had "little meaning where the contributions are all pooled".