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It’s all about the money

Riddle me this – what type of real estate asset cannot be bought or sold when it is created but has market value afterwards? Or to put it another way, what type of asset can be traded by everyone except the person creating it?

The Supreme Court brings common sense back to planning, finally ruling after years of doubt that planning permission is a valuable commodity which cannot be taken away by administrative diktat wihout regard to the compensation payable as a result. 

The question arose in the context of the Council’s exercise of its powers to revoke planning permission.  The case involved action by the Health & Safety Executive to persuade Wolverhampton Council to do just that in respect of a consented residential scheme in close proximity to a site used for the storage of liquefied petroleum gas.  The issue for the Council was whether the compensation payable to the developers reflecting the consented value of that part of the scheme which had not yet been implemented was relevant to its decision to revoke.  The Supreme Court decided that it was.

Developers may find it difficult to understand why a case of this sort required a ruling from the highest court in the land, it seems eminently sensible that when deciding whether to exercise a discretionary power to achieve a public objective, a local authority should be entitled to take into account the cost to the public of doing so.  All businesses work on the principles of cost/benefit and risk/reward and it seems strange that local authorities, as guardians of public monies, should be any different.

Case law has, however, been ambivalent on the subject, with contradictory court rulings in the last 10 years on the question of what amounts to a “material consideration” in planning decision-making. 

It is well known that “planning permission cannot be bought or sold”, the decision to grant planning permission should turn only on material considerations which are based on the use or development of land.  HSE argued that the same principle should apply when a local authority decides to revoke a planning permission so that only factors relevant to the use and development of land should be relevant and specifically not financial considerations such as compensation.

The Supreme Court decided that the term “material consideration” means “relevant consideration” and that what might be relevant in any given case depends upon the statutory context for the decision – which is different where a decision is being made to grant and a decision is being made to revoke a planning permission.

The Court did not disturb the longstanding principle that when deciding planning applications, a “material” consideration should be planning related. Its ruling distinguished that process from the decision-making process involved in the revocation of permissions as revocation turns not only on material considerations but also upon the notion of what is “expedient” for the local authority.  The Court decided that the concept of expediency is wide enough to permit financial considerations to be taken into account, meaning in effect that whilst a local authority cannot sell a planning permission, it can “buy back” a permission through the exercise of its revocation powers.

The Court’s decision will be welcomed by developers as good sense. If the decision had gone the other way, it might well have set a precedent for NIMBYs and other lobby groups to pressurise councils to overturn planning permissions through revocation as a cheap alternative to the judicial review process.

To that extent, the ruling recognises and preserves the value of a planning permission once granted. A permission’s value cannot be taken away by administrative diktat, it remains alive unless and until overturned through the court process.

For Court’s press summary, please download: Court’s Press Summary 

For judgment, please download: [2012] UKSC 33

For a non-PDF version of the judgment, please visit: BAILII

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