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HOMEOWNERS THREATENED WITH LEGAL PROCEEDINGS FOR DEVELOPER’S FAILURE TO PAY FINANCIAL CONTRIBUTIONS

Wicklow County Council (WCC) is pursuing 24 homeowners at Meadow Brook estate in Avoca for unpaid financial contributions required by the planning permission that approved the estate development. A financial contribution is a condition in a planning permission that requires the payment of a sum calculated pursuant to that local authority’s Development Contribution Scheme.  The payment is designed to compensate the local authority for the benefit that a proposed development would gain from using the roads, services and sewerage facilities within that local authority area.

Financial contributions imposed as a condition of a planning permission are generally required to be paid prior to the commencement of construction work.  However agreements can be reached between the developer and the planning authorities for phased payment of the financial contributions but they generally include a considerable upfront payment. In the past such agreements had the effect of enabling the developer to sell properties without having to discharge the full amount of the financial contributions. Serious problems have now arisen for local authorities where developers have become insolvent leaving the issue of unpaid financial contributions outstanding.

Failure to pay a financial contribution means that the planning permission has not been complied with.  Failure to comply with a condition in a planning permission affords a local authority grounds to serve an enforcement notice which in some cases could lead to the demolition of a property.  However there is no express legal provision which would entitle a local authority to recover unpaid financial contributions from the developer’s successor in title.  Planning legislation is unclear as to where the ultimate liability lies: is it on the property or on the developer to whom the planning permission was granted?

WCC is of the opinion that unpaid planning contributions are a charge on the property itself and not on the developer and has issued letters of demand to a number of the homeowners of the Meadow Brook estate for a portion of the unpaid financial contribution. The total amount claimed by WCC is just over €65,000.00 in total.

The issue of unpaid financial contributions is a matter for each local authority. Financial contributions are a source of significant funding for local authorities and given that there are reportedly €300 million in unpaid financial contributions in respect of planning permissions nationwide it is likely that WCC will not be the only local authority adopting this approach in such circumstances.

Dublin City Council has however recently stated that its policy is not to pursue householders.  Both Dun Laoghaire Rathdown and Fingal County Council are reported to have stated that they were unable to be definitive about their approaches to the issue. However whether or not local authorities adopt a policy of pursuing home and property owners the problem is likely to rear its head on a sale or remortgage when a purchaser or his solicitor will immediately seek clarity from the local authority concerned.

Given the history of insolvent developers in the Sandyford and surrounding areas local home and property owners may not be immune to this problem.

The precise legal basis for the actions of WCC in issuing these letters of demand to the homeowners of the Meadow Brook estate is unclear and may soon become the subject of a test case.  The matter may well have broader implications for all property owners both residential and commercial in circumstances where financial contributions remain unpaid.

The outcome of this move by WCC will be awaited with great interest by property owners, investors, lawyers, banks and insolvency practitioners.

 

12/02/13

Deirdre Farrell, Solicitor and AITI Chartered Tax Adviser, Amorys Solicitors, Suite 10, The Mall, Beacon Court, Sandyford, Dublin 18. Tel: 01- 213 59 40