CIL and Hillside

April 19, 2024

Christopher Cant and Ben Garbett address an undiscussed issue relating to the Community Infrastructure Levy in light of the Supreme Court ruling in Hillside.

The Supreme Court decision in Hillside Parks Limited v Snowdonia National Park Authority [2022] UKSC 30 has generated considerable discussion in the planning world. It concerned the issue whether a planning permission authorising a large residential development (“the Original Planning Permission”) continued to be capable of being carried into effect when there had been subsequent development on the site authorised by subsequent permissions which did not conform with the terms of the Original Planning Permission. However, one important aspect of the problem was not discussed in the joint judgment and has not been generally discussed. It is the Community Infrastructure Levy (“CIL”) consequences of any attempts to tackle the planning problem discussed in Hillside.

1. Hillside problem – the Original Planning Permission was granted in 1947 authorising the construction of 410 dwellings on Balkan Hill in accordance with a Master Plan which showed the location of each house and the road layout (“the Original Development”). Subsequently there were developments on parts of the site but which were not fully in accordance with the Master Plan. By 1987 only 19 houses had been built and there was then litigation as to whether the Original Planning Permission had lawfully begun within the time limit of April 1974 and whether it could be lawfully continued. Drake J. made a declaration that the development had been begun lawfully and could be “lawfully completed at any time in the future”.

The issue in the recent dispute was whether developments pursuant to eight planning permissions subsequent to that decision meant that it is no longer possible to continue the Original Development authorised by the Original Planning Permission. Houses and garages have been built which do not comply with the positions, configurations or size of the Master Plan. In addition houses have been built over part of the route of the original proposed road whilst a road had been built over the proposed locations of houses.

The current owner of the site put forward three arguments to counter the Authority’s argument that it is no longer possible lawfully to continue with the Original Development. The Authority’s stance was that the developments subsequent to 1987 rendered the Original Development incapable of further implementation relying on Pilkington v Secretary of State for the Environment [1973] 1 WLR 1527. None of the owner’s arguments found favour with the Supreme Court. These were:

(i) the facts of Hillside were distinguishable from the Pilkington case because that case relied on the principle of abandonment. However, the concept of a planning permission being capable of abandonment was firmly rejected by the Supreme Court (para. 35). The issue in the Pilkington case was whether it is physically impossible to carry out what is authorised by the relevant development. It was emphasised that this issue arises in the context of the whole site and not just the part that a developer wishes to develop at this point (para.41).

(ii) a planning permission for multiple buildings allows any sub-set of them which can be combined with different authorised developments of parts of the site. For this argument to have succeeded it has been stated by Holgate J. in R (oao Aysen Dennis) v Southwark LBC [2024] EWHC 57 (Admin) that “nothing less than severance into discrete permissions would have sufficed for the developer’s argument to succeed in the Supreme Court” (para. 99). It was held in Hillside that whether the development authorised is a single scheme or can be severed into a number of independent developments is a question of construction of the planning permission. It was stated that it is unlikely that a permission authorising the development of a residential estate will be severable (para. 71). The Master Plan referred to in the Original Planning Permission was described as “a paradigm instance of such an integrated scheme which cannot be severed into component parts” (para. 72). A development on the site departing in a material way from that scheme “would make it physically impossible and hence unlawful to carry out any further development under” the Original Planning Permission.

(iii) the developments subsequent to 1987 were not carried out under independent planning permissions but were intended to operate along with the Original Planning Permission by authorising local variations on particular parts of the site whilst leaving the Original Planning Permission otherwise unaffected (para. 73). On behalf of the owner it was argued that this could be the outcome if the original planning permission is expressly referred to or incorporated in the subsequent planning permission or permissions. Again this argument was firmly rejected. The planning legislation allows for variations under either section 96A or section 73 of the 1990 Act and a local planning authority does not have power to vary an existing planning permission outside of those limited statutory powers (para. 74).

2. Planning problem highlighted by Hillside decision – the rejection of the three arguments outlined in section 1 above means that if a planning permission for the development of a large estate needs to be amended as regards a small area of the estate then unless either section 96A or section 73 can be invoked any material departure from the original authorised development will prevent any further carrying out of that development. In cases in which this has already happened the original planning permission can no longer be relied on to justify further work and whatever development there is to be will need fresh planning permision.

3. Planning solution proposed in Hillside judgment - it was considered by the Supreme Court that if a material departure from the original development is wanted there is only one all-embracing solution when the original planning permission cannot be varied under either section 96A or section 73. In such circumstances an application needs to be made for a fresh independent planning permission in respect of the same site and in the same terms as the first but including the necessary modification (para. 74). The alternative would be to accept that no further development can be carried out under the original planning permission and then having to rely on fresh planning permissions relating to parts only of the estate.

4. Section 73 planning permissions – in such circumstances the possibility of obtaining the grant of a section 73 planning permission to vary the original permission authorising the development of an estate will be very attractive. It is unfortunate that there is considerable uncertainty around the scope of the statutory power albeit that this subject is beyond the scope of this article. Such uncertainty has been highlighted by two recent decisions in Armstrong v Secretary of State for Levelling Up, Housing and Communities [2023] EWHC 176 (Admin) and R (oao Mrs Fiske) v Test Valley BC [2023] EWHC 2221 (Admin).

The Armstrong case was concerned with the question whether the implied statement in the Government’s Planning Practice Guidance that amendments to an existing planning permission can only be made if “non-material” or “minor material” is correct. It has been clearly established in Finney v Welsh Ministers [2019] EWCA Civ 1868 that a variation in a section 73 permission cannot be in conflict or inconsistent with the operative part of the description of the development in the planning permission being varied. Mr. James Strachan KC sitting as a Deputy High Court judge in the Armstrong case rejected the argument that there is an additional limitation that the variation cannot be a fundamental variation. In contrast Morris J. in the later Fiske case proceeded in his judgment on the basis that there is a second limitation that there cannot be a fundamental alteration even if there is no conflict with the operative part of the permission being varied. This was despite the doubts cast by the Armstrong decision (para. 126).

5. Section 96A consents – in this context it would be expected that there is even less scope for invoking section 96A but an attempt was made in the Dennis case supra. The case concerned the Aylesbury Estate in Southwark which it was planned to refurbish. The Aylesbury Area Action Plan was drawn up and the first phase implemented. An outline planning permission was granted in August 2015 for the regeneration of the remainder of the Aylesbury Estate divided into three phases. The Action Plan was superseded in February 2022 and a detailed planning permission sought to carry out phase 2B. It was not possible to seek the same outcome by an application for approval of reserved matters under the outline planning permission so a “drop in” planning application was adopted as the way forward. The detailed planning permission was granted in January 2023 but subject to the grant of a non-minor amendment under section 96A “to protect the validity of the outline planning permission”.

The concern was that if granted and implemented then it would mean that it would cease to be possible to carry out any further work in accordance with the outline planning permission applying the Hillside decision. To avoid this outcome a non-material consent was obtained inserting the word “severable” in the description of the development in the outline planning permission. As mentioned above Holgate J. considered that to avoid the consequences of the Hillside decision severable had to mean that each phase of a development was a separate authorisation. It was argued that the outline planning permission was as a matter of construction severable and that the section 96A consent merely confirmed this. That was rejected by the learned judge as the proper construction of the outline planning permission. The learned judge then went on to hold that introducing severability into the bundle of rights granted by the outline planning permission “significantly enlarged” those rights and so was a material amendment with the result that the Non-Material Consent had to be quashed (para. 119).

7. Phased developments - the Dennis case makes clear that having a phased planning permission will not be sufficient to avoid the consequences of the Hillside decision. To achieve that outcome the permission would need to comprise a number of free-standing permissions which as Holgate J. pointed out could give rise to a number of wholly unexpected consequences such as how the statutory time limits for the implementation of each permission is applied (para. 104). To have such a character the grant would need to “be expressed unequivocally” (para. 105).

8. Retrospective planning permissions – oddly no mention was made in the Hillside judgment of planning permissions granted under section 73A retrospectively authorising works which are otherwise unlawful under planning law. Subsequent developments of part of an estate which are inconsistent with the terms of the original planning permission may not always have been authorised by a planning permission but may be unlawful. This is obviously an unwelcome additional difficulty. Can such a development be dealt with by a section 73 permission or does it have to be a section 73A permission bearing in mind that the overall development has not been completed? A retrospective planning permission has CIL drawbacks. The development authorised by it is treated as commenced on the day it is granted. This means the full CIL liability is payable immediately; no valid commencement notice can be served; the CIL liability cannot be abated by the earlier CIL payments; no statutory review can be requested or statutory appeal made; and no deduction E can be claimed under regulation 74B(12) and (13) in respect of buildings demolished prior to grant.

9. CIL problem – there will be difficult CIL consequences flowing when a planning permission for a large estate needs to be varied. Very careful thought will have to be given to the CIL planning before the owner/developer commits to a particular route going forward. It is likely that a CIL bill will have arisen in relation to the first planning permission calculated by reference to all the buildings authorised by that planning permission. To carry on the varied development under a new planning permission covering the whole estate risks duplicating at least part of that CIL bill.

(i) original planning permission - unless the original planning permission was granted before the introduction of CIL into the area in which the estate is situated a charge to CIL will have arisen in respect of that planning permission and that CIL liability will have been triggered by the commencement of the development. If the development is to be carried out on an open site the chargeable amount of CIL will be determined by the aggregate gross internal area (“GIA”) of all the new authorised buildings. There is no provision in the CIL regime that reduces the CIL bill once the development is started because it is not fully built out.

(ii) fresh grant of independent planning permission covering the whole estate –

(a) chargeable amount - if the solution suggested by the Supreme Court is adopted a fresh independent planning permission will be granted in the same terms as the original permission save for the modification. This fresh permission will be subject to a wholly new CIL charge with the amount of the CIL liability being calculated in the normal manner without any account being taken of the CIL charge arising on the previous permission. On the face of it this would mean that there will be a full CIL charge determined by reference not just to buildings yet to be constructed but by reference to all the buildings authorised even if already constructed.

(b) deductions of GIA of retained buildings - there may, however, be a deduction from the GIA of the overall development in relation to the buildings existing at the date of the grant of the fresh independent permission. This deduction will be either a KR(i) deduction or a KR(ii) deduction. The former will apply in respect of any building qualifying as an “in-use” building by having been in continuous actual lawful use for a period of six months in the three years preceding when the new development is first permitted (normally the date of the grant of the permission authorising it) (see article by Christopher Cant published on 18^th August 2023 by Local Government Lawyer on CIL and “in-use buildings”). If the building does not qualify as an “in-use” building then a KR(ii) deduction will apply if the lawful planning use of the building immediately prior to the grant of the fresh planning permission is the same as at the completion of the development under that fresh permission. Buildings constructed in accordance with the original planning permission and attached planning conditions will be lawful even if the development does not complete (para. 56 of Hillside judgment). In consequence the GIA of such buildings will be available as a KR(ii) or KR(ii) deduction.

However, such deductions will not be available if any of the existing buildings have been constructed contrary to the terms of the original planning permission and attached planning conditions so that their use is not lawful. Any use of such a building will have been unlawful and it will not have acquired a lawful planning use unless and until the period for enforcement expires. No GIA deduction will be available in respect of such a building so that if authorised by the fresh planning permission its GIA will be included in the GIA of the development to be multiplied by the appropriate CIL rate so as to arrive at the chargeable amount of CIL.

(c) roll over of demolition deduction – regulation 74B(12) and (13) of the 2010 Regulations make special provision when a building was demolished during the course of the earlier chargeable development and an E demolition deduction was allowed when calculating the chargeable amount arising from that development. An E Deduction is available in relation to an ”in-use building” which is demolished during the course of the development. In those circumstances if the demolished building would have been taken into account in reducing the chargeable amount in relation to the different planning permission (whether granted before or after the permission authorising the earlier development) had it not been demolished then a E deduction can be claimed in that calculation as if it is to be demolished during the course of the development under the different planning permission. This applies only if a valid request for abatement under regulation 74B(2) (see section (d) immediately following) is made within three years of the grant of the first planning permission.

(d) Abatement – although no account is taken of the earlier CIL charge when determining the chargeable amount arising from the fresh planning permission there is the possibility that CIL payments in respect of the earlier planning permission can be set against the fresh CIL liability. Abatement is available under regulation 74B of the 2010 Regulations when a chargeable development has commenced and a different planning permission has been granted for the development of all or part of the land subject to the earlier chargeable development which is not a section 73 permission. A person who has assumed liability to pay the CIL in relation to that different planning permission may give notice to the charging authority that the earlier chargeable development will cease to be carried out and that the chargeable development under the different planning permission will commence.

In such circumstances that person can then request that the charging authority credits CIL paid in relation to the earlier chargeable development against the CIL arising from the different planning permission. The earlier CIL payment can only be credited to the extent that it relates to buildings that (a) have not been completed by the time of the request to abate; and (b) were not taken into account in reducing the CIL liability arising from the different planning permission under regulation 40 and Schedule 1 of the 2010 Regulations.

To be valid such a request for abatement must be given before the commencement of the development under the different planning permission and be accompanied by proof of the CIL already paid. This requirement means that abatement will not be available if the different planning permission is a retrospective permission.

This will only assist to the extent that CIL has been paid already in relation to the earlier chargeable development. It does not extinguish the liability to pay outstanding CIL arising from that earlier chargeable development. CIL may still to be paid because there are remaining instalments yet to fall due or the owner/developer is unable to make the payment. There may be additional complications if the person who has assumed liability for the CIL in relation to the different planning permission is not the same person who paid the CIL in relation to the earlier chargeable development.

As always with CIL the prescribed pre-conditions must be strictly complied with otherwise abatement will not be possible. This means in particular that the development authorised by the different planning permission must not be commenced until notice of the switching of developments is given and the request for abatement made.

Abatement is not a simple straightforward answer to the CIL difficulties which arise with the Supreme Court solution. It will require careful thought and may not fully mitigate the new CIL bill.

(iii) section 73 permission – as discussed briefly above there are limitations on a local planning authority’s power to grant a section 73 planning permission. If such a planning permission can be obtained it will pose fewer CIL difficulties for the owner/developer. There will be a single chargeable development rather than two separate chargeable developments as discussed in section (ii) immediately above. The earlier chargeable development will morph into the development under the different planning permission. In consequence additional CIL will only be chargeable if the GIA of the development under the different planning permission is greater than that of the earlier chargeable development. The deductions in relation to “in-use” buildings will be the same for both developments. The abatement provision in regulation 74A for section 73 permissions will operate in a much more straightforward manner. Any CIL paid in relation to the earlier chargeable development may be credited against the CIL liability set out in the new or revised liability notice relating to the section 73 permission. This credit can be requested by the person liable to pay the CIL for the earlier chargeable development. There may be a practical difficulty if there has been a change in the person liable for the CIL arising from the developments. The only requirement in relation to such a request is that it is accompanied by proof of payment.

(iv) phased development – the use of phased planning permissions for large estates could provide some mitigation in the context of CIL. In the event that there is a need to change the development then such a step can be undertaken without incurring the CIL liability attributable to the phases of the original development which had not by then been commenced. It would limit the CIL liability in respect of that original development to that triggered by the commenced phases of the development. As discussed in section 7 above an ordinary phased planning permission would not avoid the consequences of the Hillside decision.

Although the CIL regime has been in force since 6^th April 2010 it is still necessary to warn that it is essential that the CIL consequences are carefully thought through before any fresh planning permission is obtained. This is particularly the case when there are planning issues of the type discussed in this article.

Christopher Cant is a barrister at The Barrister Group and Ben Garbett is a Consultant Solicitor at Keystone Law.