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Section 106 - They Dont Want Us Building

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Ive been interested in a plot of land in that has outline planning permission for a 2 Bedroom house, around 70m2.

Now ive got all the documentation off the vendors solicitor and the Section 106 fees are £24,800 for a 2 bed, and if i was to alter the plans and build a 3 bed it costs £33,310.

And there was someone on here yesterday telling me planning departments and councils are not parasites.

A 2 bed in this street was selling for 150K only 2 years ago.

i am truly stunned that they can get away with charging this.

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Ive been interested in a plot of land in that has outline planning permission for a 2 Bedroom house, around 70m2.

Now ive got all the documentation off the vendors solicitor and the Section 106 fees are £24,800 for a 2 bed, and if i was to alter the plans and build a 3 bed it costs £33,310.

And there was someone on here yesterday telling me planning departments and councils are not parasites.

A 2 bed in this street was selling for 150K only 2 years ago.

i am truly stunned that they can get away with charging this.

No, planning departments are required. Planning law is stupid in this country.

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I thought Section 106 (now something else) was a charge for developers (bigger sites) used to help improve local amenities.

Of course, as is the way, this money ( a ) is actually paid by the house buyer but ( b ) this money tends to go into a big council pot where it disappears and those promised amenities often never appear. All part of the bluster and BS of the planning application.

Absolutely staggering that they can charge and individual that kind of money - doesn't seem right to me.

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No doubt if you were a big company the fees would be waived...

The authorities in the UK despise self-build unless you are mega-rich...

Its being sold by a housing association thus a big company with access to professionals who could surely argue the toss.

Im stunned by this, all i was looking for is to build a house for me and my kid who is due to start school in September.

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I thought they were supposed to do away with section 106 for self-builders.

https://www.gov.uk/government/news/levy-cuts-to-help-hard-working-people-build-their-own-home

but no doubt the blood-sucking councils have found a way round it.

I really don't see any justification for it because once built, they'll be getting additional council tax every year which they wouldn't have been getting otherwise.

Edited by Solitaire

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I thought they were supposed to do away with section 106 for self-builders.

https://www.gov.uk/government/news/levy-cuts-to-help-hard-working-people-build-their-own-home

but no doubt the blood-sucking councils have found a way round it.

I really don't see any justification for it because once built, they'll be getting additional council tax every year which they wouldn't have been getting otherwise.

I dont see any justification as i work in a job earn top money so will put money in the economy, id potentially but her in a private school in this area thus putting 8K a year into the local economy and creating a decent job.

My kid at 4 also has the potential to do good in society and maybe even help NIMBYs and parasitic councillors in the future.

But now none of this will happen and i will quit working!

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I thought they were supposed to do away with section 106 for self-builders.

https://www.gov.uk/government/news/levy-cuts-to-help-hard-working-people-build-their-own-home

but no doubt the blood-sucking councils have found a way round it.

I really don't see any justification for it because once built, they'll be getting additional council tax every year which they wouldn't have been getting otherwise.

Its only for extentions that theyve done away with it.

"Extensions and family annexes over a certain size will now be exempt from the levy and the government also intends to consult on removing Section 106 tariff charges from self-build properties too. In addition from April there will no longer be a Council Tax surcharge on family annexes."

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I really don't see any justification for it because once built, they'll be getting additional council tax every year which they wouldn't have been getting otherwise.

Why would there need to be a justification for it? The council has a monopoly on granting planning permission, therefore it uses this monopoly to extract rent in the form of s106 payments. The council does it because it can, not because it should.

If central government was serious about getting housebuilding up they could abolish s106 payments next week. Instead they will keep promising that hundreds of thousands of houses will be built by 2020 without ever saying how, after the election no serious reforms will be made, and then 5 years later everybody will act surprised when the unreformed housing system is still producing the same result.

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Why would there need to be a justification for it? The council has a monopoly on granting planning permission, therefore it uses this monopoly to extract rent in the form of s106 payments. The council does it because it can, not because it should.

If central government was serious about getting housebuilding up they could abolish s106 payments next week. Instead they will keep promising that hundreds of thousands of houses will be built by 2020 without ever saying how, after the election no serious reforms will be made, and then 5 years later everybody will act surprised when the unreformed housing system is still producing the same result.

Sad thing is youre more then likely right.

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Im stunned by this, all i was looking for is to build a house for me and my kid who is due to start school in September.

Dunno why you'd think that, 90% of the time government is an obstruction to enjoying the good life, not complementary to it.

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Dunno why you'd think that, 90% of the time government is an obstruction to enjoying the good life, not complementary to it.

If i was 10K it'd be an obstruction i could overcome, but potentially 33K for a small 3 bed house is just deluded.

But people on this website like fluffy666 support this kind of public sector parasite.

http://www.housepricecrash.co.uk/forum/index.php?showtopic=199584&page=3

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Now ive got all the documentation off the vendors solicitor and the Section 106 fees are £24,800 for a 2 bed, and if i was to alter the plans and build a 3 bed it costs £33,310.

Two things:

2, Section 106 no longer applies to self build: https://www.gov.uk/government/news/levy-cuts-to-help-hard-working-people-build-their-own-home

This is because Dave classes you as hardworking if you build your own home. If'y you don't build on then you're not hardworking.

1, The government and bakers would like you to borrow £33k then pay back £66k over the next 25 years.

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Two things:

2, Section 106 no longer applies to self build: https://www.gov.uk/government/news/levy-cuts-to-help-hard-working-people-build-their-own-home

This is because Dave classes you as hardworking if you build your own home. If'y you don't build on then you're not hardworking.

1, The government and bakers would like you to borrow £33k then pay back £66k over the next 25 years.

Ive got the agreement in front of me right now, and at the top it states "Pursuant of section 106 of the town and country act 1990"

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Ive got the agreement in front of me right now, and at the top it states "Pursuant of section 106 of the town and country act 1990"

when was that agreement written up? Was it before 24 February 2014?

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http://planningguidance.planningportal.gov.uk/blog/guidance/community-infrastructure-levy/relief/self-build-exemption/

Self build exemption

Guidance on the Community Infrastructure Levy was added to this website on 12 June 2014. This replaced the standalone guidance that was published in February 2014. Read more about the changes to the guidance.

Paragraph: 135 Reference ID: 25-135-20140612

How does the self build exemption work (for a whole new home)?

The Government is keen to support and encourage individuals and communities who want to build their own homes, and is taking proactive steps to stimulate the growth of the self build market. One measure to help self builders has been to grant them an exemption from the Community Infrastructure Levy.

The exemption will apply to anybody who is building their own home or has commissioned a home from a contractor, house builder or sub-contractor. Individuals claiming the exemption must own the property and occupy it as their principal residence for a minimum of three years after the work is completed.

Revision date: 12 06 2014

Paragraph: 136 Reference ID: 25-136-20140612

Who can claim a self build exemption?

The exemption is applicable to homes built or commissioned by individuals for their own use. Community group self build projects also qualify for the exemption where they meet the required criteria.

There is also an exemption for people who extend their homes or build residential annexes.

Revision date: 12 06 2014

Paragraph: 137 Reference ID: 25-137-20140612

When can a self build exemption be claimed?

Applicants can apply for a self build exemption at any time, as long as their development has not commenced (see Regulation 7, and section 56(4) of the Town and Country Planning Act 1990, for the definition of ‘commencement of development’).

The self build exemption does not apply retrospectively: if a levy payment has already been made before the 2014 regulations come into force, no refund will be given.

Revision date: 12 06 2014

Paragraph: 138 Reference ID: 25-138-20140612

What are the specific requirements to qualify for a self build exemption?

A self build exemption is available to anyone who builds or commissions their own home for their own occupation. On completion, they must provide the requested supporting evidence, and the property must remain their principal residence for a minimum of three years.

If personal circumstances change and the applicant wants to dispose of the property before the three year occupancy limit expires, they can do so, but they must notify the charging authority and the levy then becomes payable in full. Failure to notify the charging authority will result in enforcement action against the applicant and surcharges will become payable. View more information on disqualifying events.

Full details are set out in Regulations 54A, 54B, 54C and 54D as inserted by the 2014 Regulations.

Revision date: 12 06 2014

Paragraph: 139 Reference ID: 25-139-20140612

What is the procedure for claiming a self build exemption?

Applicants wishing to claim must take two steps before commencing their development.

Firstly, the applicant must assume the liability to pay levy in relation to the development. This is done by completing an Assumption of Liability form. If the original levy liability was in the name of a developer, the self build applicant must complete a Transfer of Assumed Liability form and submit this to the collecting authority.

Secondly, the applicant must certify that the scheme will meet the criteria to qualify as a ‘self build’ development. He or she must submit a Self Build Exemption Claim Form – Part 1 to the collecting authority (available on the Planning Portal website). At this stage, the applicant must self certify:

  • the name and address of the person(s) claiming liability
  • that the project is a “self build project” for purposes of the exemption set out within the regulations
  • that the applicant will occupy the premises as their principal residence for a period of 3 years from completion
  • that the applicant will provide the required supporting documentation on project completion to confirm their development qualifies for relief; and
  • the amount of de minimis State aid received by the applicant in the last three years prior to the submission of the application for relief (View more information on state aid).

On receipt of the form, the charging authority must notify the applicant in writing as soon as practicable, confirming the amount of exemption granted.

If the development commences before the collecting authority has notified the claimant of its decision on the claim, the levy charge must be paid in full within the time period specified by the charging authority. See Regulation 7, and section 56(4) of the Town and Country Planning Act 1990, for the definition of ‘commencement of development’.

Further information must also be provided by the applicant once their self build home is complete.

Revision date: 12 06 2014

Paragraph: 140 Reference ID: 25-140-20140612

If a self build exemption is granted, what happens next?

The chargeable amount (i.e. the levy that would have been payable if the exemption had not been granted) will be registered as a ‘local land charge’ on the property for three years from completion.

Before commencing the development, the applicant must submit a Commencement Notice to the charging authority. This must state the date on which the development will commence, and the collecting authority must receive it on or before that date. An applicant who fails to submit the commencement notice in time will immediately become liable for the full levy charge.

Revision date: 12 06 2014

Paragraph: 141 Reference ID: 25-141-20140612

What evidence does the applicant need to provide on completing the building?

Within six months of completing the home, the applicant must submit additional supporting evidence to confirm that the project is self build. Completion for the purposes of the self build exemption is defined as the issuing of a compliance certificate for this development under either Regulation 17 of the Building Regulations 2010 or Section 51 of the Building Act 1984. If the evidence is not submitted to the collecting authority within the 6 month time period, the full levy charge becomes payable.

The applicant must provide further supporting evidence that the levy exemption granted prior to commencement should be upheld, along with a Self Build Exemption Claim Form – Part 2 (available on the Planning Portal website).

This evidence must comprise:

  • Proof of the date of completion – a copy of the building completion or compliance certificate for the home issued by Building Control
  • Proof of ownership – a copy of the title deeds (freehold or leasehold)
  • Proof of occupation of the dwelling as the applicant’s principal residence – a Council Tax certificate – and two further proofs of occupation of the home as a principal residence (a utility bill or bank statement or confirmation that the applicant is on the local electoral roll)

In addition to the above, applicants must also provide a copy of one of the following:

  • An approved claim from HM Revenue and Customs under ‘VAT431NB: VAT refunds for DIY housebuilders’; or
  • A Specialist Self Build Warranty; or
  • An approved Self Build Mortgage from a bank or building society.
Revision date: 12 06 2014

Paragraph: 142 Reference ID: 25-142-20140612

What is a self build warranty?

A Self Build Warranty is warranty and Certificate of Approval issued by a Warranty provider which provides a ‘latent defects insurance’ policy and which is accompanied by certified Stage Completion Certificates issued to the owner/occupier of the home.

Revision date: 12 06 2014

Paragraph: 143 Reference ID: 25-143-20140612

What is a self build mortgage?

A Self Build Mortgage is an approved mortgage arranged to purchase land and/or fund the cost of erecting a house where the loan funds are paid out to the owner/occupier in stages as the building works progress to completion.

Revision date: 12 06 2014

Paragraph: 144 Reference ID: 25-144-20140612

How does the self build exemption work for multi-unit schemes?

For multi-unit schemes (for example, where a builder sells serviced plots or a community group works with a developer), applicants should consider applying for a phased planning permission, to allow each plot to be a separate chargeable development. This will prevent the charge being triggered for all plots within the wider development as soon as development commences on the first dwelling. This will also ensure that if a disqualifying event occurs affecting one unit, it does not trigger a requirement for all to repay the exemption. Under the 2014 Regulations, schemes can be ‘phased’ for levy purposes even if they do not benefit from ‘outline’ planning permission. See more about phased payments.

Revision date: 12 06 2014

Paragraph: 145 Reference ID: 25-145-20140612

Is self build communal development covered by this exemption?

Self build communal development benefits from the levy exemption if it is for the use of the occupants of more than one self build home. Such development may include, for example, shared facilities or guest accommodation. An exemption from the levy will not be granted to communal development for the use of the general public or for commercial development such as a retail unit.

How is the amount of exemption for self build communal development calculated?

The self build communal development exemption is calculated using the formula in Regulation 54A. The gross internal area of the communal development is apportioned to the individual self build units on the site, based on the gross internal floor space of the self build dwellings.

Revision date: 12 06 2014

Paragraph: 146 Reference ID: 25-146-20140612

What happens in the case of a disqualifying event?

A self build exemption is revoked if a disqualifying event occurs during the three year occupancy period.

A disqualifying event for self build exemption is:

  • any change in relation to the self build housing or self build communal development such that it ceases to meet the criteria set out in regulations;
  • failure to comply with the evidence requirements on completion;
  • the letting out of a whole dwelling or building that is self build housing or self build communal development; or
  • the sale of the self build housing or self build communal development

If a disqualifying event occurs, the claimant of the self build exemption must notify the charging authority in writing within 14 days. Where this is not done, a surcharge equal to 20 per cent of the chargeable amount or £2,500, whichever is the lesser, may be applied to the claimant in addition to the chargeable levy amount. A copy of the notification must be sent to all owners of material interests in the relevant land. When it receives this notification, the charging authority must copy it to the collecting authority, if this is not the charging authority.

The only exception is where the claimant of the exemption fails to comply with the evidence requirements on completion. In such cases, the collecting authority must give the claimant at least 28 days to submit the necessary form and evidence before taking any further action.

Revision date: 12 06 2014

Paragraph: 147 Reference ID: 25-147-20140612

Is there a right of appeal?

Applicants have a right to appeal against the amount of levy exemption granted, under Regulation 116B. Appeals should be lodged with the Valuation Office Agency.

View more information on appeals.

Revision date: 12 06 2014

Paragraph: 148 Reference ID: 25-148-20140612

Are there any State aid considerations?

A self build exemption cannot be granted if it would constitute a notifiable state aid.

Revision date: 12 06 2014

Paragraph: 149 Reference ID: 25-149-20140612

How does the self build exemption work (for extensions and residential annexes)?

People who extend their own homes or erect residential annexes within the grounds of their own homes are exempt from the levy, provided that they meet the criteria laid down in Regulations 42A and 42B (inserted by the 2014 Regulations):

  • the main dwelling must be the self builder’s principal residence, and they must have a material interest in it (as defined in Regulation 4(2));
  • residential annexes are exempt from the levy if they are built within the curtilage of the principal residence and comprise one new dwelling; and
  • residential extensions are exempt from the levy if they enlarge the principal residence and do not comprise an additional dwelling

There is no requirement for the occupier of the annex to be related to the owner of the main dwelling, or to commit to staying there for a specified period.

Residential extensions under 100 square metres are already exempt from the levy under the minor development exemption.

Revision date: 12 06 2014

Paragraph: 150 Reference ID: 25-150-20140612

What evidence is required?

The applicant must submit a claim for the exemption to the charging authority before development commences (see Regulation 7, and section 56(4) of the Town and Country Planning Act 1990, for the definition of ‘commencement of development’). This claim must be submitted on the Self Build Annex or Extension Claim Form (available on the Planning Portal website). Upon receipt of a valid application, the collecting authority must notify the applicant of the amount of exemption that is granted, as soon as practicable.

In order to benefit from the exemption, the applicant must submit a commencement notice to the authority before starting work on site.

Revision date: 12 06 2014

Paragraph: 151 Reference ID: 25-151-20140612

Under what circumstances can the exemption be withdrawn?

Someone who is granted an exemption for a residential extension or annex will cease to be eligible if a commencement notice is not submitted to the collecting authority at least one day before work begins on site.

A residential annex ceases to qualify for a self build exemption if any of the following disqualifying events occur within three years of completion:

  • the main house is used for any purpose other than as a single dwelling,
  • the annex is let, or
  • either the main residence, or the annex, is sold separately from the other

Completion for the purposes of this exemption is defined as the issuing of a compliance certificate for the annex under either Regulation 17 of the Building Regulations 2010 or Section 51 of the Building Act 1984.

If there is a disqualifying event, the person benefitting from the exemption must notify the charging authority in writing within 14 days. The exemption will be withdrawn and that person is then liable for the levy charge specified by the charging authority that would have been payable at the time when the exemption was first claimed (or the amount of relief granted, if lower).

Revision date: 12 06 2014

Paragraph: 152 Reference ID: 25-152-20140612

Is there a right of appeal?

An interested party may appeal against the grant of self build relief for a residential annex under Regulation 116A. Such appeals are submitted to the Valuation Office Agency (view more information on appeals). There is no right of appeal in relation to extensions.

Revision date: 12 06 2014

Paragraph: 153 Reference ID: 25-153-20140612

Further details

Regulations 42A, 42B and 42C (inserted by the 2014 Regulations) set out the legislative provisions for residential extensions and annexes.

Revision date: 12 06 2014

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Well that seems pretty clear. The council may get few self build applications and so be unaware that the changes have come in. Even so, the proposed 106 charge is disproportionate. A development for 30 flats was approved near me recently and the 106 was £120k.

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Ive got the agreement in front of me right now, and at the top it states "Pursuant of section 106 of the town and country act 1990"

If you decide to challenge your Council about the 106 would you let us know how it goes please?

My son also wants to self-build so it would be of interest.

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If you decide to challenge your Council about the 106 would you let us know how it goes please?

My son also wants to self-build so it would be of interest.

Ive done some research and got a little advice it would seem if your son is building under 100m2 and his council have already implemented the new CIL regulation he may not have to pay a penny .. i believe its £80per m2 above 100m2.

The place im looking to buy is in an area where they are not implementing CIL until April 2015 thus the fees for the 106 apply .... and if i was to buy the land with the document stating theyre to get 25K then i wouldnt be in a position to plead poverty.

Edited by Corruption

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Well that seems pretty clear. The council may get few self build applications and so be unaware that the changes have come in. Even so, the proposed 106 charge is disproportionate. A development for 30 flats was approved near me recently and the 106 was £120k.

They are implementing the new regulations in April 2015, and im being told 25K for a 2 bedroom house is the norm!

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They are implementing the new regulations in April 2015, and im being told 25K for a 2 bedroom house is the norm!

Shocking to charge so much. I guess it is best to wait until next year.

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Ive done some research and got a little advice it would seem if your son is building under 100m2 and his council have already implemented the new CIL regulation he may not have to pay a penny .. i believe its £80per m2 above 100m2.

The place im looking to buy is in an area where they are not implementing CIL until April 2015 thus the fees for the 106 apply .... and if i was to buy the land with the document stating theyre to get 25K then i wouldnt be in a position to plead poverty.

That's helpful info - thanks. I'll get him to phone our local council when he's got time and find out what their position is at the moment.

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There are three issues raised by the OP and subsequent discussion:

1. What's the point of S106 agreements?

2. Is the scale of this particular charge sensible?

3. Why do we have planning at all?

1. Two reasons. Firstly, to cover the externalities of development. New houses need streets, street lighting, school places etc etc. The financial S106 payments are a contribution to these external costs. If these costs got whacked on the council tax of the resident population there'd be even greater NIMBY-ism than there is now (if that's possible). Secondly, there's a more philosophical reason. The payment is an attempt to extract the "planning gain" from the pocket of the lucky landowner to the community purse. ("Planning gain" being the difference between the price of land without planning consent and the price of that same land with consent.

2. Seems high. But I know a lot of councils realised they were seriously undercharging a few years back and not coming close to meeting costs of required infrastructure - maybe they've overcompensated! However, worth checking what they're using it for - it must only be used for items directly related to the development and necessary. There's a planning circular that specifies the detail (I forget the number). Good councils will be able to give you a list of the uses for the money. Uses can be specific (the new road) or more general (contribution to a planned new school). Not sure if it's still the case but in the past, I think unspent money could be reclaimed.

3. As a bit (or quite a lot, actually) of an anarchist[1], I'd have to say philosophically "no". But, a bit like the "property is theft" communist who won't let you steal his biro, the real world as we have it is different.

[1] Actually, I'm fairly confident that in a philosophically pure minarchy, you wouldn't need planning regs to prevent externalities as the builders would be held accountable for damage caused to others and the environment.

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Just in relation to point 1.

I'd be paying council tax, VAT, income tax, fuel tax, alcohol tax, road tax all which cost over 55% of ones salary. This money is more then enough to cover infrastructure and school places, the land is in a street of houses that have been their for sometime so no extra roads or lights are needed.

If the council are allowed to tax excessively they will, and then they will eventually find some out there projects to waste it on to justify this legalised theft, even if it means employing some non entity whose salary would just about be covered with this 25K-33K.

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