Following on from the Government’s recent introduction of a new-build indemnity scheme to help purchasers of new-build properties who are struggling to obtain a mortgage, the Council of Mortgage Lenders has said that over the past few months it has received a “steady trickle” of enquiries from local councils who want to be able to offer mortgages to local residents.

But are local councils really able to offer mortgages?

Well, actually yes. Despite what most people may think, local councils are able to offer mortgages without having to register with the Financial Services Authority, which regulates mortgage lending.

And they used to be popular.

During the 1960s, 1970s and early 1980s, thousands of homeowners had mortgages with their local councils. Local councils were able to offer cheap mortgages, mainly because they could borrow money at rates that were only slightly higher than those available to the UK Government; however, by the mid-1980s these loans became less attractive when mortgage finance became more readily available from banks and building societies.

And it also appears that established lenders are prepared to work with local councils in offering mortgages.

In March this year, fifteen local authorities across the UK agreed to put money into a Lloyds TSB scheme – entitled Local Lend a Hand – to increase the deposits of first-time buyers trying to buy a home in their areas; in some cases, first-timers have been able to buy a home with a deposit of as little as 5 per cent.

Borrowers can be rest assured that if they take out a mortgage with their local council and fall into arrears, the local council must uphold the FSA’s Treating Customers Fairly requirements (as any bank or building society would have to.)

Whether the local council mortgage makes a full national comeback remains to be seen, but for homebuyers in certain parts of the country it could be a viable option.

In the consultation paper, entitled Technical reforms of council tax, the Government sets out a number of practical proposals which it believes will help local councils keep overall council tax levels down for ordinary people. One of these proposals suggests giving local councils the flexibility to remove council tax relief on second homes and empty homes.

At present, council tax discounts on second homes range from 10 to 50 per cent, depending on where the property is situated. There are a range of discounts of up to 100 per cent for empty homes. However, the Government has made it clear that it has no plans to change the rules on council tax relief for homes that are left empty due to “special circumstances” (e.g. because a person has moved into a hospital or care home, has died, or has moved out to provide care to another person.)

The consultation also includes proposals to review the “double taxation” of self-contained annexes to family homes (e.g. ‘granny annexes’.) Currently, council tax inspectors treat such annexes as a separate property, meaning families get charged twice for the same single property they occupy.

The consultation closes on 29 December 2011.

Well, the county of Cornwall will shortly launch a scheme of its own.

Their scheme is similar to FirstBuy, but is tailored to Cornwall only. Rather than seeking contributions from developers through section 106 agreements, Cornwall Council will offer the developer the option to sell homes at a discount of up to 40 per cent. This discount will then be passed over to the Council as an equity loan to the purchaser. (First-time buyers would have to take out a mortgage to cover the rest of the cost.) When the home is eventually sold, the Council would be repaid this percentage of the market value by the homeowner. This money will then be used to help other purchasers in the county.

The Council has said that the new scheme will also enable small and local developers to get involved (rather than just volume housebuilders, who are predominantly used in the FirstBuy scheme.)

Any scheme to help first-time buyers and housebuilders should be supported, and Cornwall Council is showing that local authorities can get involved in helping local people.

The guidance lists a number of questions an organisation must ask before it shares personal data, such as:

• whether an individual is likely to be damaged by the data being shared;
• whether an individual is likely to object to the data being shared;
• whether the organisation’s objective can be achieved without sharing the data or some of it; and
• whether the organisation has the legal power to share the data.

Under the guidance, the organisations sharing data also need to perform their own analysis as to whether they need to inform the relevant individuals that the data has been shared. The Act requires organisations to give and update users with privacy statements of what data is collected about them and how it is used, including the type of organisation which it is disclosed to and for what purpose. Similarly, the ICO said that organisations should assess whether they need to update their notifications (which are commonly called registrations) with the ICO when they share data, as failure to keep up-to-date the notification is a criminal offence.

The ICO said that the guidance should be relevant to the sharing of personal data between data controllers. Sharing data between a data controller and a data processor is permitted under the Act provided that the data controller has certain safeguards stipulated in the Act when using a processor to process data on its behalf (such as having a written contract under which the processor agrees only to process the data in accordance with the controller’s instructions).

The guidance is likely to be most relevant to public bodies, such as local authorities sharing data with charities to which they have outsourced welfare work in the local community. The guidance also gives details of:

• how to respond to freedom of information requests if the organisation is in a data sharing agreement; and
• how and when to keep records of data sharing.

Four years (from the date of substantial completion) in respect of unauthorised building, engineering, mining or other operations in, on, over or under land (section 171B(1), Town and Country Planning Act 1990 (TCPA 1990));

Four years (from the date of the breach) in respect of the unauthorised change of use of any building to use as a single dwelling house (section 171B(2), TCPA 1990); and

Ten years (from the date of the breach) for any other breach of planning control (section 171B(3), TCPA 1990). This includes:

1. A material change of use (other than a change of use to a single dwelling house); and

2. A breach of a planning condition (except a condition relating to use as a single dwelling house

In this case, a landowner (L) obtained planning permission to erect a barn on green belt land subject to a condition that the barn be used only for the storage of hay, straw or other agricultural products. The building was constructed between January and July 2002 and looked like a barn externally, although internally was fitted out as a house. L moved into the building on 9 August 2002 and applied for a Certificate of Lawfulness of Existing Use or Development (CLUED). A CLUED would be conclusive as to the existing use and any works that have been carried out on the land being lawful. The council refused on the basis that the building was not a house and L had not lived there for 4 years.

L confirmed to the planning inspector that he had deliberately deceived the council when applying for planning permission and he had always intended to use the building as a house. The planning inspector granted the CLUED.

The council appealed and the High Court overturned the planning inspector’s decision.

L appealed to the Court of Appeal who allowed L’s appeal.

The council appealed to the Supreme Court.

Decision

The Supreme Court allowed the council’s appeal on the basis of the following:

1. There had been no change of use because the building was not constructed as a barn but as a house. The court doubted whether there could be a change of use under section 171B(2) where there was a departure from the permitted use without there being any actual prior use.

The court also rejected the idea that there was a change of use from ‘no use’ to ‘residential use’. The building had been built to live in and L was about to move in. The court had to consider how a building was used long term in order to establish if  a building was in use;

2. L could not rely on section 171B(2) because of his dishonest conduct. The court looked at the principle that statutes are construed to the effect that no one should be allowed to profit from his own wrongdoing, unless there is a contrary intention in the statute. The court considered that it would frustrate the policy of section 171B(2) if the time limits for enforcement were to apply, where the owner has made a deliberate misleading statement. Parliament would not have intended such outcome; and

3. L’s deception did not at the time constitute a criminal offence; however, it would now be an offence under the Fraud Act 2006. L’s deception undermined the planning process and the council could seek to enforce not only on the basis of section 171B(2), but also 171B(1) by invoking the public policy argument.

Comment

The court found that there was no relevant change of use; however, the case also highlights the principle that statutes should be construed to the effect that no one should be allowed to profit from his own wrongdoing. The Localism Bill proposes a new section 171B to deal with issues of concealment such as in this case.

A developer, Millgate Homes (M), had applied for planning permission from Wokingham Borough Council (W) to build 14 homes. W refused the planning permission after an Officer’s Committee Report concluded that the proposed development was inappropriate to the character of the surrounding area and would attract financial contributions to local infrastructure.

M entered into a unilateral undertaking, pursuant to s.106 of the Town and Country Planning Act 1990, agreeing to make the necessary financial contributions. It then appealed the decision to the planning inspectorate.  

M’s appeal was successful and conditional planning permission was granted. However, the planning inspectorate noted that W had failed to show that financial contributions were necessary in order to satisfy planning policy. Consequently, M requested that W discharge the unilateral undertaking, but W refused, stating that the opinion of the inspectorate did not affect the enforceability of the undertakings. M sought a judicial review of W’s refusal to discharge.

The High Court, ruling in W’s favour, stated that M’s universal undertaking was legally enforceable: it had been entered into voluntarily, without any condition that the obligations should only take effect if a planning inspector indicated that the financial contributions were necessary to make the development acceptable.

Comment

It is common for a developer to submit a s.106 unilateral undertaking to the local authority as part of a planning application. This case shows that there can be some unintended consequences. Here the application was appealed. The Inspector was of the view that the s.106 undertaking was not needed and granted planning permission. The developer was still held to be liable to comply with the s.106 undertaking. 

This could lead to a Catch 22 situation: if the developer submits a s.106 unilateral undertaking before an appeal, then it may help in the grant of planning permission. However, if they do not submit one, they may still get planning permission without it and therefore be in a better position. Developers should satisfy themselves that what a council suggests should go in a s.106 undertaking is lawful; if in doubt, then they may like to consider having a s.106 unilateral undertaking prepared and signed, but not to actually submit it until the views of the Inspector are known.

Clauses 94 and 95 of the Localism Bill deal with the proposed changes to the CIL, which allows local authorities in England and Wales to raise funds from developers undertaking new building projects in their area. The Bill proposes that:

1. Some of the CIL funds should be given back to the neighbourhood where the development is located;

2. CIL funds can be put towards the ongoing costs of infrastructure, as well as the provision of new infrastructure; and

3. Local authorities should be given more control over the setting of their own charging levels. However, Independent examiners will still decide whether the charging schedule is unreasonable, though the local authority in question will be able to decide how to make it reasonable.

In order to be selected for the CIL project (dubbed the ‘Front Runners Project’), the DCLG has said that interested local authorities should ideally:

1. Intend to submit their charging schedule for examination no later than Autumn 2011;

2. Have a proven track record of planning policy competence; and  

3. Have secured the necessary buy-in from corporate, finance and planning functions within the council.

The local authorities that are selected to take part will become some of the first to implement the revised CIL and will be expected to do it as soon as possible, though they will receive support from the Planning Inspectorate. These local authorities will then be encouraged to share learning and good practice across the local government sector.

The deadline for applications is 14 January 2011, with the Project expected to run until March 2011 (although the DCLG has suggested that this may be extended.)

The Bill, which aims to transfer more central government powers to local level, includes proposals to significantly reform planning law (see Part 5 of the Bill.)

This article looks at the Bill’s key proposals to shake-up planning law. Of course, the Bill is subject to parliamentary scrutiny, so these proposals may change.

The main proposals are:

1. Abolishing the Regional Strategies. There has been a lot of confusion and contention surrounding this issue. Click here and here for further details;

2. Amending the Community Infrastructure Levy (CIL). Local authorities will have more control over the setting of the CIL. They will have to allocate a proportion of the CIL revenues they receive from developers back to the local neighbourhoods where the development(s) have taken place. This will allow those most directly affected by development to benefit from it. For a related story on the CIL, please click here;

3. Restricting the role of the Planning Inspectorate. The Planning Inspectorate will be unable to re-write local plans, which guide development in local areas. Instead, the Inspectorate will be allowed to assess plans at a public examination, and will have to rule them “sound” before they can be adopted. Amendments will only be suggested at the request of the local authority. Local authorities will be able to suggest changes during the public examination, and will be forced to publish up-to-date information, so that local people can see what planning documents they are preparing;

4. Introduction of “neighbourhood plans.” The Town and Country Planning Act 1990 will be amended to introduce neighbourhood planning rights (“neighbourhood development orders”) that allow local communities to permit certain types of development without the need for planning permission. The idea is that parish councils and “neighbourhood forums” can come together to decide where new shops, offices or homes should be built in their area and what green spaces should be protected. All such developments will be voted on by local people in local referendums (more than 50 per cent of the vote is required to approve a development);

5. Abolish the Infrastructure Planning Commission (IPC). This will mean that government ministers will take decisions on nationally significant infrastructure projects, such as airports and wind farms;

6. Duty to co-operate. The Planning and Compulsory Purchase Act 2004 will be amended, so that local authorities and public bodies have to co-operate with each other in relation to the planning of sustainable development. This includes the preparation of development plan documents;

7. Pre-application consultation. Developers will be required to consult the local community before submitting a planning application for a large development – the Government has suggested that this could be, for example, a residential development of more than 200 units. Developers will have to take into account any opinions raised during this consultation before submitting their planning applications; and

8. Enforcement. Local authority planning enforcement powers will be improved. The Bill will tackle abuses such as making misleading planning applications, and running retrospective planning applications and enforcement appeals simultaneously. Other enforcement measures include increased financial penalties for planning-related offences, and the extension of time limits for taking action against people who conceal unauthorised development. 

The Bill raises a huge number of issues (and questions) and will have significant implications for local authorities and developers.

Although the Government says that the Bill is not a “Nimbys’ charter”, developers will need to get local people to embrace development in their areas.

In light of the proposed new local referendums and pre-application consultations, developers will need to be able to influence local residents, persuading them of the merits of their schemes and proposals. Developers may also find themselves having to collaborate with third parties on the design of a development.

It will be interesting to see how the definition of “neighbourhood” in the Bill develops, as it could constitute a small or large number of people, meaning that a vote on a potential development may be decided by only a few local people.

The Second reading of the Bill is scheduled to take place in the House of Commons on 13 January 2011. We will update you with any significant developments during the Bill’s parliamentary progress.

The New Homes Bonus scheme, which I touched upon in my summary of last month’s Spending Review, is aimed at encouraging local authorities to approve more new homes, and will see the Government match the council tax revenue raised on each new property for six years. The local authorities (with input from local residents) can then decide how to spend the extra funding – this could be, for example, council tax discounts for local residents, extra rubbish collections, or more local facilities such as swimming pools, playgrounds and leisure centres.

The proposals have been broadly welcomed by the housing sector, particularly as the scheme may be extended to financially reward local authorities for bringing empty properties back into use. However, there are some concerns that local authorities could be rewarded for building low quality homes or for giving planning permission to poorly-designed housing schemes. No doubt these concerns will be raised (and considered by the Government) during the consultation period.

Responses to the consultation must be received by 24 December 2010. The Government will then consider the responses and announce the final design of the scheme, probably in early 2011.

Following the introduction of the Planning Act 2008, the Government ordered an independent review in May 2009 to establish the extent of development on back gardens. Although the findings revealed that “inappropriate building” on back gardens is not a widespread problem in England, over one third of councils considered it to be an issue, particularly those in the London suburbs, Home Counties and parts of the West Midlands. However, of those who reported it to be an issue, only 5 per cent had local policies in place to stop inappropriate development on garden land.

Mr Healey has now (1) changed the official guidance for planners “to make it crystal clear that previously developed or former garden land is not necessarily suitable for development, and that the impact on the surrounding area should be considered.”, and (2) instructed the Chief Planning Officer to write to planners across the country, outlining how local authorities can refuse inappropriate development by including measures on “garden grabbing” in their annual local plan.

This could be of concern to many developers, as a lot of the land that is used for housing is built on previously used land, much of which was previously garden land.  The key word in the Minister’s statement is that “inappropriate development” will be discouraged. This has always been the case, so developers who propose sympathetic schemes should be okay. There is still a great need for new homes in the South East, especially family homes, so by discouraging “garden grabbing”, the Government could be adding even more pressure to release green belt land for development.

Jay Das, our planning law specialist, advises that the timescales for implementing this into their local plans will vary from local authority to local authority. Local Development Frameworks (LDFs) are being prepared, but many authorities do not have any in place. It could take between two and five years to change LDF policies (although the Planning Act anticipated it could be done much more speedily.) The Planning Policy Statements and Guidance will be effective immediately, and some authorities may pass supplementary planning guidance where local plan policies do not conflict and these could be effected in three to four months. Developers need to be vigilant on all policy documents being consulted upon by planning authorities. They will need to take part and respond to consultations if it affects or is likely to affect them.