Guidance for Local Authorities On Producing a Model Charging Scheme

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1 INTRODUCTION The Building (Local Authority Charges) Regulations 2010 (SI 2010/404) (the charges regulations) make new provision authorising local authorities (LAs) in England and Wales to fix their own charges in a scheme, based on the full recovery of their costs, for carrying out their main building control functions relating to building regulations. They revoke and replace the Building (Local Authority Charges) Regulations 1998 (SI ) and provide local authorities with greater flexibility in establishing their charges with the aim of providing more accurate and fairer charges. They also introduce more transparency into the charge-setting process. The previous charges regulations had numerous limitations such as the method of charging for certain building work that was primarily based around the link to the estimated cost of the building work. In many cases because the charge was based on estimated cost of the work it had little relevance to the building control input. With increased powers to take into account additional flexibility a more accurate reflection of costs is now possible KEY PRINCIPLES The principles of the charges regulations require authorities to ensure that the price charged is an accurate reflection of the costs of carrying out the chargeable building control functions and for giving chargeable advice relating to building regulations (hereafter referred to as the building regulation functions/service or costs, as appropriate). Building Control managers should not increase their charges above the level of their building regulation costs. The principles in the charges regulations require authorities to achieve full cost recovery on their building regulation chargeable work and determine standard and individual charges that reflect the cost of the service on individual building projects in accordance with the user pays principle. Individual charges must be capable of being substantiated, authorities need to be mindful that if the level of a charge is questioned the method used to establish the charge should be capable of being clearly justified in a transparent manner. For example if the charge for the renovation of a thermal element, by the replacement of a new covering to a small roof was 300 and the total building regulation input was just one hour, the 300 charge would not be considered to be a reflection of the local authority building regulation costs. The charge is likely to be considered in breach of the charges regulations and open to challenge.

2 With additional flexibility to establish an equitable price there is responsibility to ensure that any new powers are used in the manner intended to provide a price to our customers for our building regulation service that is a direct reflection of our costs in providing the chargeable building regulation service. THE CALCULATION OF CHARGES Authorities have the ability to set standard charges and to individually determine charges. Standard charges relate to the type of building work that local authorities are able to set and publish fair and accurate charges for, in advance of a building regulation application. Individually determined charges are calculated on a scheme-by-scheme basis. The method of establishing the charges (both standard charges and individually determined charges) must be contained within your scheme of charges. Your attention is drawn to the need to stipulate the factors that you are taking into consideration in establishing the level of the charge and that the hourly rate used in the calculation must also be included in your scheme. In this model scheme common factors taken into account for the level of all charges are listed in the body of the text and factors that specifically only relate to individual types of building work (for example, the use of the building, floor area, and the effect of the charges when a competent person scheme is used) are contained within the tables. Authorities are required to state which of the factors they have taken into account when setting standard charges in their scheme and when confirming individually determined charges in writing. The use of standard charges should be limited to those types of building work where it is possible to estimate the amount of building control input (time) required for a particular type of building regulation application. Standard charges can be challenged, they need to be established by consideration and declaration of the factors taken into account and be calculated using the authority s hourly rate and input time Reversions The complexity of reversions and the lack of similarity between applications are such that all reversions should be considered as an individually determined charge, regardless of the size of the scheme

3 Refunds and Supplementary Charges LAs are required to refund a plans charge where they do not give notice of passing or rejection of the plans within the statutory period, unless the applicant does not provide relevant information requested by an LA within a reasonable period to enable them to consider the application within that period. LAs are also required to refund part of a charge, or may request a supplementary charge, where the amount of building control input required is less or more than was originally estimated and paid for, e.g. where there are substantial alterations to the building work. Provision has been made in the charges regulations for administrative costs incurred to be taken into account, i.e. LAs may disregard one hour of an officer s time in calculating the amount of the refund or supplementary charge. Any payment of a refund or request for a supplementary charge must be accompanied by a written statement setting out the basis for the refund/charge and, in the case of a supplementary charge; the statement should show how this was calculated. It is therefore particularly important that supplementary charges are fully justified in advance to avoid complaints and challenges. It is good practice that LAs state the circumstances when supplementary charges (and refunds) would apply in their charging scheme If LAs seek to determine their charges appropriately at the outset the provisions relating to refunds & supplementary charges will only need to be used sparingly. Payment by Instalment Local authorities may wish to stipulate a minimum charge above which the payment by instalment facility will be offered. The authority to accept payments by instalment is contained within Regulation 8(1)(i) of the charges regulations. Payment by instalment is by agreement, local authorities cannot require payment of any part of an inspection charge prior to an inspection being carried out. Where for any reason notice of passing or rejection of plans is not given within the period required by section 16 of the Act, the plan charge paid shall be refunded unless the person by whom or on whose behalf the plans were deposited failed to supply the authority with the information requested by the authority in a reasonable time. Except where otherwise stated the split between the plan and inspection charge will be 30%/70%. (insert your percentages). There is no entitlement to a complete refund of any regularisation charge paid, if the Council, after incurring costs, subsequently cannot determine what work is required to comply with the relevant requirements

4 Where an individual assessment of a plan charge or building notice charge has been made, any individually assessed plan charge or building notice charge shall not be payable until such plan charge or building notice charge has been specified by the Council and confirmed in writing if such confirmation is provided later than the deposit of the plan or (as the case may be) the giving of the building notice. OTHER MATTERS Guidance leaflets The authorities scheme of charges has to relate to all the different types of building regulation applications and contain legal phrases that may not be readily understood by persons unfamiliar with the legislative background. The scheme of charges has to be all encompassing and the legal nature of the document is such that it cannot be written in a manner that specifically targets the different types of service user. Authorities are, therefore, encouraged to continue to produce targeted user-friendly advice in promotional material that explains the charges in a user-friendly format suitable for homeowners, builders and others. Guidance should also clearly indicate the VAT element of the charge and for presentational purposes it is advised that where reductions are given for persons referred to in regulation 7(5) (g) or (h) of the charges regulations then this reduced charge is prominently displayed. Making charges user-friendly The new proposals could result in individual authorities using different methods to establish charges within the overall principles of the regulations. The actual level of the charge may vary between authorities; in the same manner that it does now, but authorities should, within the legislative framework of the charges regulations work together to achieve consistency in respect of the classification of standard charges. Unnecessary inconsistencies will frustrate our clients. It is also important that we do not over complicate our set charges, in many cases advice on the correct charge will be provided by administrative members of staff or via web based guidance and simplification will be to anyone s benefit.

5 It is recommended that when VAT is added to your charge that the final figure (inclusive of VAT) results in a whole number, for example, a charge of with VAT will result in a figure inclusive of VAT of If it takes the same amount of time to check plans for a number of categories of work then the plan fee should be consistent and these categories of work could be grouped together in advice leaflets to present the information in a userfriendly manner for the public and their agents. Individual charging schemes can be revised after implementation, subject to the publicity requirements in regulation 12 of the charges regulations (ie 7 days notice), but it is for everyone s benefit to provide a workable solution from day one. Loft conversions A number of authorities fix their charges for loft conversions based on floor area in the same manner as other domestic extensions. If authorities wish to adopt this approach they need to make clear in their scheme how they differentiate between an application that consists of an extension to create a loft conversion and an application that creates a loft conversion without extending the dwelling, e.g. alterations contained within an existing roof space. Cavity wall insulation LABC do not expect there to be any change in the manner in which these applications are considered. LABC are in agreement with advice provided by CLG (see paragraph of CLG s Circular letter) that authorities should not start charging and inspecting this type of work following the introduction of the new charges regulations. The Government s climate agenda is fully supported and the introduction of charges at the current time will only frustrate ambitions for carbon reductions and create unnecessary criticism against local authority building control. The use of competent persons schemes to assist with the regulatory controls for this category of work is under consideration. CLG currently intend to have a scheme in place by 1 October It is recommended that only in exceptional cases where work has been carried out by persons who are not members of the British Board of Agrément or the Cavity Wall Insulation Guarantee Agency should the introduction of charges be considered and they would then have to be substantiated by inspection in the same manner as other charges.

6 Reductions The effect of reductions must be included in your scheme. Authorities can continue to provide reductions for standard charges providing these reductions are included in the scheme. For example, reductions for repetitive work can be included. Multiple building works Authorities should make it clear in their schemes that building work that relates to multiple buildings will either be assessed as an individually determined charge, or alternatively that their schemes will make use of reductions in set conditions to determine a standard charge as illustrated in the example below Example A housing association submits a plan, which indicates extensions to 16 houses. The extensions to 12 houses are all substantially the same as extensions that the owner has previously had approved by the same local authority. The remaining extensions to 4 houses are all different and have not been previously approved. The authority has a standard charge for extensions that exceed 40m2 but do not exceed 60m2. The extensions on this proposal are within the standard charge criteria for extensions that exceed 40m2 but do not exceed 60m2 The authority has included in its charging scheme a discount for this type of work of 30% from the plan charge as it estimates a time saving of this proportion when checking repetitive schemes Standard Plan Charge Standard Inspection Charge Charge for 16 extensions = 16 x 103 = 1, x 309 = 4,944 Reduction is 30% of the plan Charge for 12 extensions = (12 x 103 = 1,236) = 30% of 1,236 = Reduced Plan Charge is 1, = 1,275.20

7 Certain other domestic alteration building work carried out at the same time as a domestic extension If it is intended to carry out certain minor additional building work on a dwelling at the same time as carrying out an extension, the resultant total charge may be excessive. When an extension to a dwelling is constructed the owner of the property will often carry out other non-ancillary works e.g. removal of a chimney breast, installation of a toilet in another part of the house, or other structural alterations etc, at the same time. To accurately reflect the costs of carrying out the building regulation functions, authorities should either reduce the charge for this additional building work with a fixed reduction in the standard charge or include this ancillary work at no extra charge. This is to ensure that the total charge more accurately reflects the costs of the authority. Alternatively this type of building work could be individually determined. Partnership Schemes In order to assist with the operation of the LABC national partnership scheme: Charges are the responsibility of the inspecting authority as it is to them that the application is made and they have the statutory duty to provide the building control function. They should therefore determine all charges. The plan-checking authority is in effect acting as a consultant to the inspecting authority and charges paid to the plan-checking authority is a matter between the authorities concerned within the guidelines of the partnership scheme. However, it is recommended that if a charge has been agreed with a client by a business development director working on behalf of local authority building control then the relevant inspecting authority should give consideration to adopting this charge, provided of course that this reflects their building regulation costs. Guidance on full cost recovery and the use of surpluses Your attention is drawn to the overriding objective in the Charges Regulations requiring LAs to achieve full cost recovery in the setting of their charges in paragraphs 31 to 38 of the CLG Circular letter. The fundamental principle of regulation 6 is that the authority must ensure that, taking one financial year with another, the income derived by the authority from performing chargeable functions and proving chargeable advice as nearly as possible equates to the costs incurred by the

8 authority in performing chargeable functions and proving chargeable advice Details of all relevant costs used to establish the building regulation account is contained within the publication from CIPFA entitled CIPFA Guidance For Local Authority Building Control Accounting. CLG has made it clear in the past, that apart from being self-defeating for LAs in competition with approved inspectors, unjustified high charges could be regarded as an indirect local taxation for which LAs have no statutory authority and could also have the undesired effect of deterring people from seeking building regulations approval. LAs are not empowered to levy higher than necessary building control charges for the purposes of accruing a surplus (i.e. a profit) to cross-subsidise other services or activities that should otherwise fall to be funded by local taxation. CLG takes the view that authorities should carry forward any surplus (or deficit) arising in an appropriate building regulations charging account and offset this against projected future costs when carrying out reviews of a Scheme s charges. In some instances, authorities may take the view that there is justification in reinvesting some surplus into improving the quality/performance of the building control service, particularly if that is likely to lead ultimately to cost savings and lower charges. If LAs assign surpluses this should be within the accepted principles of accounting applicable to, and therefore reflected in, their building regulations charging account. Complaints If authorities provide a level of service for their chargeable building regulation work that is in line with the establishment of individual charges then the level of complaints should be low Authorities are required to make provision in their scheme about how they intend to handle complaints about the determination of their charges Important CLG guidance references The Department for Communities and Local Government (CLG) has issued guidance to accompany the new Charges Regulations in CLG Circular 01/2010 and in a Circular letter to Building Control Bodies dated 25 February 2010, which can be found on: