CIL deductions for retained or demolished buildings

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A clarification of the rules

You should read this to help you understand how certain CIL deductions can apply to your scheme and/or if you are grappling with the meaning of ‘in lawful use’.

Judgment was handed down in the case of R(Hourhope Ltd) v Shropshire Council [2015] EWHC 818 Admin on 2 March 2015.  The case relates to a disputed CIL liability due on a planning permission to demolish a pub and erect residential units and the application of the demolition deductions that are set out in the Community Infrastructure Levy Regulations 2010 (as amended).

The case provides a useful clarification of the terms ‘in lawful use’ and ‘in-use buildings’ in relation to regulation 40(7) of the CIL Regulations 2010, as there is no legislative definition of these terms.  It also provides some useful comments on other circumstances the deductions should apply.

Calculating CIL

CIL is calculated by multiplying the net increase in the floorspace of a development by the CIL rate set out in the charging schedule (plus indexation) with a credit given for existing buildings so as to reduce the overall liability. The credit applies to the areas of ‘in-use buildings’ that are to be demolished or retained.  An ‘In use building’ is defined as a building which contains a part of an existing building that has been in lawful use for a continuous period of 6 months within the past three years before the grant of the planning permission.  This means the area of development chargeable to CIL may be reduced by the gross internal area of the existing building.

Facts of the case

A pub stopped trading in May 2011.  A director of the pub continued to live there for three months after it closed in anticipation of it reopening and the pub furniture, fixtures and fittings remained.  However, the pub was sold in August 2013 and planning permission granted in March 2014 for its demolition and redevelopment as residential units.

The developer claimed that it was entitled to a reduction in CIL because the pub had been ‘in lawful use’ for a six month period in the three years before March 2014.  Even though the pub had stopped trading the developer claimed the building had a lawful use to which it could be put and that use had not been abandoned.   The existence of the furniture, fixtures, fittings and the director living at the pub for a short period, meant that the building continued to be in lawful use. It was also argued that the continued presence of the furniture, fixtures and fittings amounted to storage, which was a lawful ancillary use and which of itself continued the lawful use.

The Court rejected the developer’s argument and held that for a building to be ‘in lawful use’ and an ‘in-use building’, in order to apply the CIL credit, requires the building to actually be used for its lawful purpose.  It is not sufficient that the building has a lawful use to which it could be put.

When is a building ‘in use’?

Whether a property is ‘in use’ at any time requires an assessment of all the circumstances and evidence as to what activities take place on it and what the intentions of the persons using the building are.  The degree of activity that must be demonstrated will vary according to the type of use.

In this case it was found that the pub use ended when the pub closed for business with no fixed date for reopening and, as nothing indicated the closure was temporary, the fact that the pub was not open to the public for the sale of food and drink meant that it was not ‘in lawful use’. There was no evidence that the director’s hope that the pub would reopen had substance or would become reality and the presence of items at the property that could be used if the pub re-opened did not amount to a continuation of the pub use.

The Court also rejected the developer’s argument that leaving items at the pub constituted ancillary storage to the pub use and continued the lawful use of the pub.  A degree of ancillary storage would be lawful as long as the main activity is permitted.  However, the permitted storage was not itself a lawful use for planning purposes and the lawful use of such areas was as a pub not as storage.  The Court also found that leaving items behind at the premises with no evidence of any intention to remove them was abandonment of those items rather than demonstration of a storage use, and their presence was not a continued lawful use.

Other comments

The Judge made some useful comments about the continuation of other uses, giving the example more active uses, such a factory, office or shop where that use is interrupted for a period. Whether the building ceased to be ‘in use’ would depend on the length of and reasons for the interruption and the intentions of the previous and future property users.  Closure on a non-working day or for a holiday would not result in the use ceasing.  The stock, furniture and machinery would remain in situ in this example so that the activity could resume, but this would not be needed in all circumstances. The lawful use as shop could continue even if the contents were removed if, for example, refurbishment works were carried out provided the owner intended to resume the shop use on completion of the work.  However, the situation might be different if the shop was closed, emptied for refitting with the intention of sale when empty, or a change to some other use.

Commercial application

This judgement will be helpful to developers hoping to achieve a reduction in CIL where buildings are to be demolished or retained as it clarifies that evidence must be provided to show that the building is in actual use for its lawful purpose and that it is not sufficient that the building has a lawful use to which it could be put.  It will also help developers to compile persuasive evidence to support applications for CIL deductions and avoid future disputes.

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