Housebuilder Tip of the Month: The problems of CIL Social Housing Relief in a ‘back to back’ Deal

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Housebuilder Tip of the Month: The problems of CIL Social Housing Relief in a ‘back to back’ Deal

Published 26 julio 2022

In order to apply for social housing relief, the CIL regulations require the applicant to be an owner of the land. The claim for relief will lapse if the development is commenced before the claim is determined. To further complicate matters, the claim for relief will also lapse if the claimant transfers liability to another person prior to commencement. If you’re in the middle and your buyer requires the social housing relief to be passed on to them - what do you do?

a) Your seller submits an assumption of liability form and applies for social housing relief. This is granted prior to the sale to you. Your seller remains liable to pay CIL, and this is taken into account in the purchase price and contract. In reality this is difficult to agree, as your seller is unlikely to want to retain liability after transfer without strong indemnity clauses and absent any contractual relationship with your buyer.

b) You abandon the ‘back to back’ structure, and take ownership of the land prior to assuming CIL liability and applying for social housing relief. You then obtain the relief, and either remain liable for CIL until your buyer commences development, or you commence development prior to transferring the site and the CIL liability to your buyer.  The need to first discharge all pre-commencement planning requirements make this route unappealing.

c) Your buyer completes on the transaction without social housing relief in place and then applies for social housing relief itself. Practically this is the most straightforward option, however it requires the end buyer taking on the risk of the social housing relief. This is not a risk taken on lightly, especially if the end buyer is a Registered Provider. The risk can be minimised by adjusting the purchase price, or a retention being held.

These scenarios are increasingly common and until CIL is replaced with a regime that is more in tune with commercial reality the DACB planning team are ready to advise you on the complexities.

Authors

Andrew Morgan

Andrew Morgan

London - Walbrook

+44 (0)20 7894 6193

Charlotte Coyle

Charlotte Coyle

London - Walbrook

+44 (0) 207 894 6095

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