Selfbuild Cil exemption for conversion

[Sue cutler]

hi I am sue. My sister and I are planning to convert her large house into 3 flats so as to sell two, pay off her mortgage and for her to live in the third. She has claimed and received a self build exemption for one flat but my research suggests she will not be able to supply any of the 3 forms of evidence required at the end of the self build ( vat letter, self build warranty or self build mortgage) as none of those seem to be available for conversion of a house into 3 flats...

has anyone had any experience with this? The Cil is about £20,000 and is making us think twice about whether the project is viable....

love to hear from anyone as this self build exemption looks like a nightmare.

thanks

sue

[newhome]

1 hour ago, Sue cutler said:

My sister and I are planning to convert her large house into 3 flats so as to sell two, pay off her mortgage and for her to live in the third. 

 

Welcome.

 

Are you sure that you have applied for the right exemption? Grabbing a CIL document from a local authority at random this is what that document notes for a conversion? 

 

Is CIL payable on conversion of a residential dwelling or other building into 2 or more flats?

CIL will not be charged if there is no increase in floor area and the building has been in continuous lawful use for 6 months out of the 3 years before development is permitted. However, if there is an extension to the building, CIL is charged on the increase in floor area. If the building has not been in continuous lawful use for 6 months out of the last 3 years then CIL will also be charged on the existing floor area.

 

[Sue cutler]

Yes that’s correct. There is an increase in floor area because in order to get planning permission to divide into 3 flats we had to create 1x1 bed, 1x 2 bed and 1x 3 bed. To do that we needed to dig out basement which increased floor area.

sue

[Temp]

There is also an issue of how you can live in all three flats at once for three years (another requirement for claiming the exemption).

 

Sorry but I think you will have to pay the CIL on the increase in floor area.

[Temp]

2 hours ago, Sue cutler said:

hi I am sue. My sister and I are planning to convert her large house into 3 flats so as to sell two, pay off her mortgage and for her to live in the third. She has claimed and received a self build exemption for one flat...

That needs to be the one she will live in afterwards.

[Ferdinand]

21 minutes ago, Temp said:

There is also an issue of how you can live in all three flats at once for three years (another requirement for claiming the exemption).

 

Sorry but I think you will have to pay the CIL on the increase in floor area.

 

Could the “modified After Henry” gambit apply? (*)

 

https://www.youtube.com/watch?v=rzQ8YazBG9Y

 

I am am not clear how the nitty gritty of ownership, transfer, and expenses division would work. Although presumably the freehold or leasehold Is being split.

 

Usually the best solution is to keep it simple, which might be targeting the most expensive conversion for CiL, or some other obvious option. Contriving things usually costs more in the contrivance and buggeration.

 

And welcome.

 

Ferdinand

 

* ie Grandmother, Mother and Daughter living in the 3 flats, modified as required for 2x sisters etc, and sell after y years?

Edited May 1, 2019 by Ferdinand

[Sue cutler]

We have been granted the exemption for the one which is increasing in size and which is also the one she will live in. The other 2 are not increasing in size. So she only needs to live in the Cil liable one for 3 years not the others?

That is what the council have agreed

but the problem is that the paperwork they require on completion does not seem to be possible to comply with in these circs even tho the project seems to qualify in theory

[Temp]

Perhaps she could use the exemption for residential extensions for her flat? They can't expect people to have the same evidence for those?

 

[newhome]

37 minutes ago, Sue cutler said:

Yes that’s correct. There is an increase in floor area because in order to get planning permission to divide into 3 flats we had to create 1x1 bed, 1x 2 bed and 1x 3 bed. To do that we needed to dig out basement which increased floor area.

 

Have you claimed the exemption on the entire increase in floor area using the justification that your sister will live in the flat that utilises the increased floor area? If so she really will need to live in the basement space and use it as her primary residence for 3 years. Even so I think the basis on which you have applied for an exemption may be a bit tenuous. It’s surely an extension rather than a self build (so the self build documents / evidence won’t apply) but complicated by the division of the property. I think the only thing to do is to face into this now and ask the LA for advice. Something as specific as this really needs a specific conversation / agreement. Whatever happens get it in writing. 

 

[Sue cutler]

1 hour ago, Temp said:

Perhaps she could use the exemption for residential extensions for her flat? They can't expect people to have the same evidence for those?

 

I think that doesn’t apply because the one planning application also created The 2 new flats. In fact we applied just to extend house first so as to use that exemption and then submitted an application to divide into flats but they then say it is not just a residential extension. 

We seem to be caught between 2 stools. 

If we look just at the flat my sister will live in it is currently just the sitting area of the house so we are creating a new dwelling hence I thought self build. 

But yes I guess I should ask la as it really does seem not to be one thing or another

thanks all

 

 

[Sue cutler]

53 minutes ago, newhome said:

 

Have you claimed the exemption on the entire increase in floor area using the justification that your sister will live in the flat that utilises the increased floor area? If so she really will need to live in the basement space and use it as her primary residence for 3 years. Even so I think the basis on which you have applied for an exemption may be a bit tenuous. It’s surely an extension rather than a self build (so the self build documents / evidence won’t apply) but complicated by the division of the property. I think the only thing to do is to face into this now and ask the LA for advice. Something as specific as this really needs a specific conversation / agreement. Whatever happens get it in writing. 

 

Good plan. I think you are right. Will try that and see how we get on..

thanks

[Sue cutler]

Yes by the way the whole idea is for her to live in the flat for ever...

[Adam2]

Have you considered VAT aspects of this? I mention this as you may be able to justify 5% VAT due to a change in the number of dwellings. Strangely this seems to apply if you are either increasing or decreasing the number. Good luck

[Temp]

+1

 

A builder should only charge you 5% on materials and labor. Unfortunately I don't think it helps with the CIL because I don't think you can use the self build reclaim to get 15% back on any materials you have purchased (The self build reclaim appears to apply only to conversions of non-residential property).

 

 

[Temp]

2 hours ago, Sue cutler said:

think that doesn’t apply because the one planning application also created The 2 new flats. In fact we applied just to extend house first so as to use that exemption and then submitted an application to divide into flats but they then say it is not just a residential extension. 

 

Ok why did they say you can't do that?

 

 

 

Edited May 1, 2019 by Temp

[Sue cutler]

13 minutes ago, Temp said:

 

Ok why did they say you can't do that?

 

 

 

In fact it never occurred to me to challenge that as at that point I thought We would be able to get the self build exemption so maybe I will pursue that one... thanks. A good idea. 

 

1 hour ago, Adam2 said:

Have you considered VAT aspects of this? I mention this as you may be able to justify 5% VAT due to a change in the number of dwellings. Strangely this seems to apply if you are either increasing or decreasing the number. Good luck

Yes. That is actually a great help without which the project would definitely not be do able. Doesn’t help with cil but does reduce cost a lot....

[Sue cutler]

1 hour ago, Temp said:

 

Ok why did they say you can't do that?

 

 

 

Just looked at the regs. It seems it only qualifies as a residential extension if it “does not comprise a new dwelling”

so the fact that we are doing the extension as part of the development of 3 flats disqualifies it. But we cannot do the 2 flats first then apply separately for an extension to my sisters flat as we would only get permission for the 2 flats by extending the third.....

 

so it seems we cannot get the extension exemption because we are doing the other flats as part of the same permission, they force us to do the other flats as part of the same permission,  and we cannot get the self build exemption because although we are creating a new dwelling none of the self build products which they require us to have are available because those products regard this as more of an extension than a self build.....

frustrating

Will see if the local authority has anything to say.

thanks all

 

 

[Temp]

One approach would be to do it in two stages...

 

1) Create the basement as a "games room & storage". With care it appears you don't or may not need planning permission for this.. 

 

https://www.planningportal.co.uk/info/200130/common_projects/5/basements

 

Even if you did need permission I'm pretty sure this would qualify as a residential extension exempt from the CIL. You would have to pay VAT at 20% on this work.

 

When that work is done..

 

2) Submit an application to convert the now extended house into flats. The floor area would stay the same so although not exempt from the CIL the bill should be zero. The work for this should qualify for 5% VAT.

 

It would need some planning to ensure the work done for 1) can be reused for 2). Eg plan ahead so the work would meet Buildings Regs for 2). Perhaps  think about the electrics,  water heating etc. The planners do not need to know all the details. 

Edited May 1, 2019 by Temp

[Temp]

Do let us know if the planners waive the need to provide evidence as that would be a lot simpler!

[Sue cutler]

Thanks temp. Yes looking back it seems our mistake was once we had permission to do the basement extension we should have actually done that before applying for permission to convert into flats. Then there would have been no cil. And in fact I imagine we could still do that. We actually have 2 planning permissions - 1 is cil free for an extension and the other is for the creation of all 3 flats where they plan to charge cil on the extension. I guess we could just ignore the second permission, proceed with the extension using the first permission then apply again for creation of the flats. At that point there would be no extension so no cil

However, in practice we don’t have enough money to do that. We need to sell 2 flats in order to pay off the mortgage and fund the extension......

so I suspect we will just have to accept cil. You also make a good point that of course that way we would pay full vat on the extension work so what we gain on the cil swings we lose on the vat roundabouts. 

Just seems unreasonable to say a self build exemption applies to this sort of thing and then in practice make it not achievable. But from my research it seems there are lots of things about cil which are wholly unreasonable

will see what the council says

thanks for the thoughts

sue