Section 106 agreement and Council Tax

Medway

Hi, I have just moved into new build property with a section 106 agreement on it. The agreement, among other things, restricts the resale of the property to 70% of the the open market value. I believe that on this basis the County Council should give a 30% reduction on the Council tax. Talking to them they say it is up to the Valuation Office to reduce the banding. Has anyone any experience of this situation please?

Gwhiz

No.

Section 106 agreements are between developers and local planning authorities which is all part of the conditions of planning consent.

pmlindyloo

Medway wrote: »

Hi, I have just moved into new build property with a section 106 agreement on it. The agreement, among other things, restricts the resale of the property to 70% of the the open market value. I believe that on this basis the County Council should give a 30% reduction on the Council tax. Talking to them they say it is up to the Valuation Office to reduce the banding. Has anyone any experience of this situation please?

I can understand that you believe the value of the house is less than you paid for it because the current resale price is only 70% of the original price.

However, I do not understand your belief that you should have a 30% reduction in council tax - forgive me, but that makes no sense.

Also the bands for each house do go from £**** to £**** so even with a 30%discount you could still be in the same band.

Have a look at this link and check your buying price and then the price with 30% discount.

http://www.adviceguide.org.uk/england/tax_e/tax_council_tax_ew/council_tax.htm

On the link there is also a part which shows you how to appeal your band.

lincroft1710

CT legislation says all dwellings have to be valued on an open market value basis, so S106 agreement will be ignored for CT purposes.

pmlindyloo

lincroft1710 wrote: »

CT legislation says all dwellings have to be valued on an open market value basis, so S106 agreement will be ignored for CT purposes.

Out of interest I have just goggled about this.

You are right but this has never been tested in the High Court.

4.11 Restrictive Covenants
Restrictive covenants in a freehold or long leasehold interest which would have an effect on the sale price of that interest, should be disregarded for Council Tax purposes on the grounds that the dwelling must be valued on the assumption of a hypothetical sale of the freehold, or 99 year lease in the case of a flat, not on the basis of the particular estate or interest which is held by the actual tax payers. This is reinforced by Regulation 6(2)(b).

It can also be argued that a restrictive covenant is an 'incumbrance' within Regulation 6(2)(c) using the dictionary definition, but there is differing legal advice on that issue (see paragraph 4.9 above). The point has not yet been tested in litigation above Valuation Tribunal.

An appeal to the High Court was made by the List Officer in 1994 against the decision of the Birmingham Valuation Tribunal that dwellings in a sheltered housing development in Selly Park Birmingham, owned by the Sanctuary Housing Association, should be valued by reference to the restricted resale value of the leasehold interest ie. 70% of the value at the date of disposal. This restriction was imposed because of the original funding of the development by way of 30% grant aid. The case was settled without a High Court hearing when Sanctuary Housing withdrew from the proceedings, leaving the issue unresolved by the Courts.

CIS

I believe that on this basis the County Council should give a 30% reduction on the Council tax. Talking to them they say it is up to the Valuation Office to reduce the banding.

If any reduction was due it wouldn't be 30% of the council tax - you maybe able to get the property valuation reduced which could then affect the band but that would be the best you'd get.

gazter

lincroft1710 wrote: »

CT legislation says all dwellings have to be valued on an open market value basis, so S106 agreement will be ignored for CT purposes.

Estimated open market value in 1992.

lincroft1710

gazter wrote: »

Estimated open market value in 1992.

1991 not 1992 (1 April 1991 to be precise)

lincroft1710

pmlindyloo wrote: »

Out of interest I have just goggled about this.

You are right but this has never been tested in the High Court.

4.11 Restrictive Covenants
Restrictive covenants in a freehold or long leasehold interest which would have an effect on the sale price of that interest, should be disregarded for Council Tax purposes on the grounds that the dwelling must be valued on the assumption of a hypothetical sale of the freehold, or 99 year lease in the case of a flat, not on the basis of the particular estate or interest which is held by the actual tax payers. This is reinforced by Regulation 6(2)(b).

It can also be argued that a restrictive covenant is an 'incumbrance' within Regulation 6(2)(c) using the dictionary definition, but there is differing legal advice on that issue (see paragraph 4.9 above). The point has not yet been tested in litigation above Valuation Tribunal.

An appeal to the High Court was made by the List Officer in 1994 against the decision of the Birmingham Valuation Tribunal that dwellings in a sheltered housing development in Selly Park Birmingham, owned by the Sanctuary Housing Association, should be valued by reference to the restricted resale value of the leasehold interest ie. 70% of the value at the date of disposal. This restriction was imposed because of the original funding of the development by way of 30% grant aid. The case was settled without a High Court hearing when Sanctuary Housing withdrew from the proceedings, leaving the issue unresolved by the Courts.

As Sanctuary withdrew, this case would possibly set a precedent in that the VOA won by default. This one case of which I have no real recollection from when I was settling CT appeals at the VOA. Possibly because it didn't have a HC hearing.

LisaLou1982

You dont happen to live in the Peak Park do you? There is a reason for s.106s

Chances of getting a 30% discount wont happen im afraid. You havent lost 30% of the value of your property - you purchased it at the rate it was available at. There is a reason for those restrictions - they enable people who live within the parishes to be able to purchase property. You have had the benefit of it when purchasing, so why do you want to now dispute it against your council tax bill?