CIL Commencement Notices and the Consequences of Failure - but is Relief in Sight?
A recent High Court case serves as a useful reminder to developers of the strict procedural requirements of the Community Infrastructure Levy (CIL) and the potentially severe consequences if they fail to comply.
Regulation 67 of the Community Infrastructure Levy Regulations 2010 (the "CIL Regs") requires that a commencement notice must be submitted to the collecting authority no later than one day before the development is commenced. Failure to do so results in the loss of any exemption or relief that has been granted (e.g. self build exemption or social housing relief) and the loss of any ability to pay by instalments. The collecting authority also has the option of imposing a surcharge.
In R (on the application of Shropshire Council) v Secretary of State for Communities and Local Government & Lee Jones  EWHC 16 (Admin): Mr Jones, a self builder who had obtained the self build exemption from CIL emailed the local authority stating that works would begin the next day. The authority acknowledged receipt of the email, but subsequently issued a demand notice for the full CIL amount on the basis that a valid commencement notice had not been submitted.
Mr Jones appealed, but the Court confirmed that to be a commencement notice under the CIL Regs the notice must comply with the requirements of regulation 67 in terms of content and timing. Simple notification to the authority informing them of the proposed commencement date is not sufficient.
This case follows a string of Planning Inspectorate appeal decisions involving a failure to submit a valid commencement notice in time. These cases show that even where innocent mistakes and simple errors have been made, any appeal against surcharges and penalties is unlikely to succeed. Strict compliance with the procedure is required. Examples of failed appeals include:
- The appellant notified the Council on the same day that the planning permission was issued to notify them that work had commenced that day. The Council had no record of any contact with the appellant that day and did not receive the commencement notice until 2 weeks later. The Inspector held that not only would notifying the Council on the same day that works had commenced not comply with requirement to submit the notice at least one day before the commencement of the development, but that the commencement notice that was eventually received was evidently submitted after the works had begun (APP/B1225/L/15/1200022 June 2015).
- The appellant submitted a commencement notice on 3 February 2018, stating a commencement date of 1 November 2017. The appellant contended that he did not receive the CIL forms when he requested them. The Inspector held that it was the appellant's responsibility to submit the necessary commencement notice. If the appellant did not receive a blank copy of the form after requesting it, the onus was on him to contact the Council to chase it up. To "go ahead and commence works on the development without having done so was a risky strategy for the appellant to take" (APP/L5240/L/18/1200174 19 September 2018).
- The appellant contended that he had submitted a commencement notice by post but had no evidence (i.e. proof of postage) to demonstrate that the notice had been sent. The Council insisted it had no record of having received one. The Inspector found that given the importance of the notice it was "not unreasonable" to expect the appellant to contact the Council before starting work to check with the Council and obtain written confirmation that it had been received (APP/W5780/L/17/1200106 20 October 2017).
- The appellant thought he had submitted a commencement notice by email and provided a screenshot as evidence. However, the email had been sent to an incorrect address and the Council did not receive it. Whilst this was an "unfortunate mistake" it meant that a commencement notice had not been submitted before commencing works (APP/U5360/L/17/1200150 16 May 2018).
- The appellant did not refute that they failed to submit a commencement notice before works commenced. Instead, they argued that they had been let down by their architects who were conducting matters on their behalf. Whilst the Inspector had every sympathy with the appellant it was an "inescapable fact" that the commencement notice had not been submitted before commencing works (APP/W0340/L18/1200177 19 September 2018).
- The appellant did not dispute that he failed to submit a commencement notice before starting works. He submitted that he had found the CIL process to be confusing and difficult to understand. Whilst the Inspector had sympathy for the appellant, the commencement notice had not been submitted before works began and so the appeal had to fail (APP/M0933/L/17/1200112 22 November 2017).
The Government has accepted that the loss of exemptions and relief following a failure to submit a Commencement Notice is "disproportionate", which particularly impacts smaller developers and self-builders.
Shortly before judgment was given in this case the Government published draft regulations seeking to reform the system of developer contributions that are obtained through CIL and section 106 planning obligations. The proposed reforms are intended to reduce complexity, increase certainty and transparency and improve the delivery of development.
Some of the proposed amendments to the CIL Regs (which will only apply to England) include:
- Removing the 'pooling restriction' that prevents local authorities from using more than five section 106 planning obligations to fund a single infrastructure project;
- The introduction of annual 'Infrastructure Funding Statements' requiring charging authorities to report on how they propose to use developer contributions;
- Permitting authorities to seek monitoring fees through section 106 planning obligations;
- Starter homes being exempt from CIL;
- Amending the consultation process by charging authorities when preparing charging schedules;
- Applying indexation where a planning permission is amended under a section 73 application; and
- The introduction of a smaller penalty for failing to submit a commencement notice instead of the loss of any exemption or relief.
One of the most significant proposals for developers would be the introduction of smaller penalties for failing to submit a commencement notice before starting work on a development. It is proposed that a surcharge of up to 20% of the CIL figure or £2,500 (whichever is the lower amount) would be imposed in all cases instead of the loss of any exemptions or relief. The impact on a developer of failing to submit a commencement notice would therefore not be as severe as they would still be entitled to the relief or exemption that had been granted.
As Mr Jones' case demonstrates, until any proposed legislative amendments are implemented developers should continue to comply with the strict requirements and ensure that the charging authority receive a valid commencement notice at least one day before starting work on a development or risk losing any relief or exemptions. It is advisable that this is done as early possible and to obtain confirmation that the authority has received the commencement notice and allow sufficient time to resubmit the commencement notice if necessary.
Nevertheless, relief from the loss of relief and exemptions is potentially in sight.