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London councils to lose out?

26th March 2013

London councils to lose out?

We have reported recently on the proposed government plans to allow building owners to convert their properties from commercial to residential use without requiring permission from the relevant planning authority. Many councils have applied for an exemption through fear that too much office space will be lost in their borough as a result of the plans, driving up the cost of what space does remain. 

Another less obvious consequence of the government’s plans is the revenue that London councils would forfeit if the legislation is implemented in their borough. Some of the revenue lost would simply be from a reduction in planning fees: fewer applications will need to  be processed. 

In addition to the basic administrative fees, however, councils have wide scope to charge developers a levy in return for granting planning permission. Most planning consents are granted with specific conditions attached, which are laid out in a legally binding ‘Section 106 Agreement’. The conditions can range from payments that the developer is obliged to make as a contribution towards local infrastructure, affordable housing, recreational facilities or landscaping. Conditions can also be as wide-ranging as to enforce an obligation to provide bus passes for residents in an attempt to reduce local traffic issues. 

Without the means to enforce such payments or obligations – through the planning process itself – the councils would have to either fund projects themselves or do without. 

Westminster council has estimated that it will lose “tens of millions of pounds per year” if it is subject to the new laws. 

In some areas of the country the payments required under planning conditions can be relatively modest. However, in exclusive areas such as Mayfair the payments can amount to millions of pounds for the council.

Tom Lax, surveyor at Morgan Pryce, says, “The loss of this kind of revenue may be one of the reasons so many councils have applied for the exemption. On the other hand, the cost-savings to the bottom line for developers may see an upturn in building projects, and ultimately the economy, in areas where the legislation applies.”

Morgan Pryce is a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.

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