Purchasing property with outstanding Community Infrastructure Levies (CILs)

Melmoth71

I am in the process of purchasing a leasehold flat in South London and my solicitors have flagged an issue with unpaid Community Infrastructure Levies (CILs). These arose when the council granted planning permission to convert different bits of an office building into residential flats and build additional flats on the roof.

The CILs should have been paid by the developers when the works began (a few years ago) but weren’t. Legally, if the developers don’t pay the CILs the parties with a ‘material interest in the land’ (freeholders and leaseholders) become liable. Because it’s been so long since planning permission was granted, my solicitors say the developers are unlikely to assume liability and it’s only a matter of time until the council passes on the liability to the leaseholders (including me if I go ahead with the purchase).

The problem is that the exact liability is only known for one of the four outstanding CILs that affect the building. For the other three, the council is refusing to provide copies of the CIL demand notices, so I have no way to know what sort of risk I’d be getting into if I go ahead with the buy.

To clarify, these are the outstanding CILs:

• 16/02678/P - Construction of fourth floor to provide an additional 2 one bedroom flats

• 18/03893/FUL - Erection of new part third floor to form 4 x two-bed, 2 x one-bed and 2 x studio flats

• 16/00915/P - Use of first, second and third floors as 6 one bedroom flats

• 19/03017/FUL – Erection of roof extension to form additional storey and formation of 1 x 1 bedroom flat and 1 x 2 bedroom flat

The amount due for the first CIL is £5,151.41. The other amounts are unknown.

I will contact the council myself, but, if they keep refusing to provide copies of the demand notices, is there any way to know (or estimate) the liability for the three other CILs?

The sellers have now offered an allowance to cover this, which I think would essentially be a discount on the purchase price, but I don’t know what allowance to request if I don’t know the size of the outstanding CILs. I assume the liability would be spread out equally among the leaseholders in the building (maybe 16 leasehold flats in totals?) but I’m not sure about this either.

I don’t want to pull out of the buy as it’s a beautiful property but I don’t see how I can just take on an unknown liability that’s sure to hit me in the future.

Any input welcome.

theartfullodger

When you asked your solicitor what did they advise, please?

Melmoth71

To clarify, my solicitors advised:

• The developers are unlikely to assume liability for the CILs so it’s only a matter of time until the council passes on the liability to the leaseholders.
• Only one liability is known (see above). For the other three CILs, the council is refusing to provide copies of the CIL demand notices so liabilities are unknown.
• The sellers have offered an allowance, but since we don't know the outstanding liabilities it's very hard to establish what allowance would be appropriate.
• In addition, if I did go ahead with the purpose and the CILs remain unpaid I will encounter difficulties if I try to sell or remortgage later because of the unknown liabilities. Banks may refuse to lend to a buyer with a mortgage.
• In view of the situation, they are asking me how I wish to proceed. That's why I'm trying to find out if there is any way of finding out what the outstanding liabilities are so I can make an informed decision.

user1977

Have you asked your solicitor?

Melmoth71

Pls read the above

fluffymuffy

Where I live my local authority and those in adjacent areas all calculate CIL on a basis of £x per square metre. E.g. £80/m²

From your list, 2 x 1 bedroom flats = about 50 x 2 = 100 m²
£5151 / 100 = about £50/m²

The total development is about 770m² (based on 40m² for a studio, 50m² for a 1 bed, 70m² for a 2 bed) x £50 = £42,350

That's just a guess based on average flat sizes. There's probably interest and admin fees on top. Sounds like £50k+ might be needed. 

There's no telling what the upper limit might be. I wouldn't buy an unknown debt.

BonaDea

Out of interest, who is the developer?  Have you tried scouring the planning portal to see if there's any information there on what CIL was originally levied?  

Rates vary. I know of a development in the SW where the CIL is £119 per sq metre.  

For non- or late payment of CIL surcharges apply, and these can be hefty.    

You might find info here:  https://www.gov.uk/guidance/community-infrastructure-levy#collecting-the-levy

EssexHebridean

Before you contact the council, have you asked your solicitor about whether an indemnity policy might be an option? (It sounds as though it may not be in any event, as for what you have said, someone has already been in contact with the council?)

I take it that you are a cash buyer?

I have to say that I think I would be walking away from this one - that would be too big a risk for me. 

fourmarks

Might the original charges be found somewhere within the documentation surrounding the original planning application? 

diggingdude

Councils are skint. You can be sure if they identify some potential money they will chase it. Personally I wouldn't purchase any property without having a good idea what I might have to pay. If the owners are prepared to offer a discount, do they know something you don't about an upcoming bill? 

Melmoth71

@fluffymuffy Thanks  I did a similar calculation. Yes CILs are calculated the same everywhere, as gross internal area of the new development x a levy rate which depends on location (zoning), use of the development, and size of the development (Community Infrastructure Levy - GOV.UK). So you could estimate the size of the total liability from the known CIL the way you did. The problem is that my local council’s levy rate at the time the development was completed (2019) was around £200 p sqm for residential property. So I don’t understand how the known CIL can be £5K for two one-bedroom flats (minimum 80-100 sqm). The development is in my borough’s so-called ‘metropolitan area’ so it may have been charged a reduced rate or something (the council’s website doesn’t mention this). However, as you say, the main point is that it doesn’t make sense to take on au unknown liability, and of course there are the surcharges, interest etc.

@BonaDea Good idea, will do. Yes that’s the link I’ve been looking at.

@EssexHebridean Yes I am a cash buyer. My solicitors haven’t suggested an indemnity policy but will look into it for sure

@fourmarks Maybe- Will look at the council’s planning application portal as @BonaDea suggested. My and the sellers’ solicitors have been going back and forth about this literally for months so I’m not optimistic.

@diggingdude I want to think that the sellers didn’t know beforehand / are not hiding information, but yeah, as you say it doesn't make sense to proceed until I know what I’m getting into.

Thanks so much for all the input, much appreciated!  Pls throw any more thoughts my way.