CIL Liability in Property Transactions: Key Points Explained

Liability for the Community Infrastructure Levy (CIL) in Property Transactions: What Buyers and Sellers Need to Know

CIL is an established feature of the planning system and is a financial charge imposed by local planning authorities (LPAs) on certain types of development to help fund local infrastructure such as roads, schools and community facilities.

CIL can only be charged by LPAs that have consulted on and approved a charging schedule, and the rate of CIL will vary depending on the area and nature of the development.

If CIL affects land, then it can impact value and marketability and can result in financial liability for an unsuspecting buyer (and, in some cases, leaseholder with a term of more than 7 years unexpired).

The Current Position on CIL Liability

Where the LPA has adopted a charging schedule for that area, any planning permission for a new development which creates net additional floor space of 100 square metres or more, or creates a new dwelling, is potentially liable for CIL.

There are certain reliefs and exemptions available (for example, those for self‑build, social housing or charitable development) and (though not explored in detail here) these should be considered before development is commenced. Such reliefs and exemptions are strictly regulated and can be withdrawn if conditions are breached or if a property is sold within a designated clawback period.

Liability typically rests with the property owner and passes with the land unless another party has submitted an assumption of liability notice to the LPA before development commences. A buyer or tenant can therefore be liable for unpaid CIL unless the parties have taken proper steps to allocate responsibility.

CIL liability becomes payable when development is "commenced", which is a term interpreted broadly under the CIL Regulations. Works such as digging foundations, installing pipes, or demolition can all trigger commencement. Once these operations are undertaken, the CIL charge crystallises and becomes due. Even minimal site preparation may be enough to trigger liability.

Transferring or Managing CIL Liability

A party who has assumed liability can transfer it to another before the final payment of CIL becomes due or withdraw it before commencement of the development, subject to submission of requisite notices to the LPA . However, parties must ensure strict compliance with procedural requirements to avoid liability remaining with the wrong party and to avoid penalties or withdrawal of reliefs (if any).

Why CIL Can Impact a Deal

CIL can affect both the viability and timing of a transaction. For sellers, undisclosed liabilities can lead to disputes or claims after completion, especially if development has already commenced and liability has crystallised and the seller can find themselves liable for CIL, notwithstanding that it is the buyer who commenced the development. Buyers and tenants, on the other hand, are exposed to financial liability with limited recourse against the seller or landlord and possible adverse effects on the value and marketability of the property in future.

Penalties and surcharges can also arise where procedural requirements are not properly complied with, such as failing to serve commencement notices or assumption forms correctly and stop notices can be served to halt works where payments are outstanding.

Given the potential scale of CIL liabilities and the risk of surcharges, both parties of a transaction should ensure that they have a clear understanding of the CIL position at the early stages.

Looking Ahead

CIL can have a significant implications for anyone dealing with property with development potential and therefore early investigation, careful disclosure and compliance with the procedural requirements are the most effective ways to ensure CIL liability ends up where intended and to avoid expensive surprises down the line.

Key Steps for Buyers

• Check the local land charges register to see if the LPA has adopted a charging schedule.
• Review the planning permissions affecting the property to assess whether the development is liable to CIL.
• Check what notices (if any) in respect of CIL have been issued and obtain copies of them.
• Confirm if development has commenced.
• Identify any reliefs and exemptions and check if they remain valid.
• Negotiate protections if development has already commenced: consider warranties, indemnities, or retention of part of the purchase price to cover potential liabilities.
• If undertaking further development, assume liability correctly and serve notices in order before starting works. This is especially important where commencement could trigger immediate payment or the loss of instalment rights (if the LPA has agreed to CIL being payable by instalments).

Key Steps for Sellers

• Disclose any potential or actual CIL liability early by providing copies of all CIL notices, exemption or assumption of liability paperwork, and receipts for any payments made.
• Disclose any claimed exemptions, confirm clawback periods and evidence compliance with conditions.
• Detail any works that could count as commencement to avoid post‑completion issues.
• If the buyer is to take over liability, ensure transfer or withdrawal forms are completed and acknowledged before or at completion.

How We Can Help

At Neves Solicitors, our commercial property team regularly advises developers, landowners and investors. If you would like advice on your property transaction, please get in touch with our team on 0330 0945 500, email info@neves.co.uk or use our Contact Form and we will be happy to assist.