Banks refusing to accept phased development levy payments

Z4bimmer

Hi everyone,

wondering if anyone else has had this problem before and if anyone has ideas on how to solve it.

I'm building a new house and had negotiated with the local authority to pay the contribution over 36 months starting when the house is finished. Good news I thought until I made my first drawdown on the mortgage and my solicitor was told that the phased development levy was not supported by them and they would only permit the final drawdown upon receipt of a letter from the Council confirming full payment of the levy.

I've argued with the bank that if I have to pay the Council up front it will affect my ability to finish the house and thus if unfinished it cannot be properly valued. But no joy. They are completely unwilling to move on this.

Any thoughts on what I can do?

archtech

Banks normally only issue the final payment the issuing of an opinion of compliance with planning. Gernerally opinions of compliance in the past haven't covered the financial elements of the planning conditions . non payment of same or not having fully paid same can be in conflict with the wording on the grant of permission and one could be open to enforcement procedures from the local authority and the registering of a charge on the property. The bank is basically looking after its interest in ensuring you have your planning fully in order prior to them releasing you all the funds.
It is harsh and to some extent you are now suffering the backlash of very lax lending procedures in the past. I expect things will even become tighter with banks in the coming months

sydthebeat

this is an example of the problems inherent in the 'compliance' system.

Unless specifically referred to, you have 5 years to comply with the conditions of planning. Obviously, the certifier of the build isnt going to wait until the end of the five years to certify, its not practical. Therefore these certs usually contain a wording such as "in so far as site works are complete".

Banks are now getting very worried that should they have to repossess a dwelling, and if the planning contributions are still out standing it could make the resale of these houses extremely difficult.

I think its reasonable that they would insist in the contributions are paid prior to final draw down.
I dont accept that it means that the build will be let unfinished.
The whole point of a budget is to know how much you have to spend and what every cost will be. You deduct all external costs from your budget in order to know what your build budget is. You then planing a build that will suit that budget.

of course obvious answer to this dilema is to fund the councils centrally, by way of taxation (property tax) and therefore omit "development contributions" ... it is nothing but a tax anyway.
But the bigger problem with a 'development contribution' is that is is generally paid out of a mortgage and therefore basically paid "twice" through interest.