Beware the APC Notice!

If you are the owner or developer of land where plans have been deposited with the local authority in accordance with building regulations, and the building(s) will have a frontage on a private street, then you may receive an Advance Payment Code (APC) notice.

This situation will apply to the majority of residential developments and yet the effect that APC notices can have on these developments can be overlooked. This blog will set out the purpose of an APC notice, how they can be challenged or complied with and the issues arising out of non-compliance.

The highway authority can serve an APC notice under s220 of the Highways Act 1980 within six weeks following either approval (Full Plans) or acceptance (Initial Notice, Building Notice) of a building regulations application. The APC notice is served on the person on whose behalf the plans were deposited, which could be the owner or developer of the land.

The notice is registrable as a local land charge, so should also be revealed in the result of a local authority search. The notice requires the owner or developer to pay or secure a sum of money to cover the cost of constructing private streets associated with the new development. The purpose of an APC notice is:

1. To ensure that the road constructed is built to a suitable standard for adoption;
2. to ensure that the local highway authority is not unexpectedly required to meet the cost of new roads; and
3. to protect residents on a new estate from the cost of constructing the road fronting their building in the event that the developer fails to complete the works.

Under the APC notice, the owner or developer of new buildings that are adjacent to, or front on to, a private street must provide a deposit or security to the highway authority, equivalent to the cost of making up that street, before building work commences. Until payment is made or security is given it is a criminal offence to start construction of any building and an owner of the development site is liable to a Level 3 Fine which equates to £1,000 per plot per day. A sizeable sum on a large development.

So what can you do if you are served with an APC notice?  First consider whether you can challenge or appeal the notice:

1. Has it been validly served? Are all the details in the notice correct (including the plan attached) and has it been served within the correct timeframe? If not, then the notice may be void. A challenge to the legal validity of the APC notice is made by way of judicial review proceedings and these must be commenced within 3 months of the date of the notice.
2. Is the specified sum correct? You can appeal to the Secretary of State who has the power to substitute a smaller sum payable in the APC notice (but this will not dispose of the notice altogether). Such appeals must be made within a month of receipt of the APC notice.
3. Are the private street works exempt? The exemptions are listed under s219(4) of the Highways Act 1980 and include where a section 38 agreement has been entered into in respect of the street works where they will become a highway maintainable at the public expense.

If there is no route to challenge or appeal the notice, what are your options? You can either deposit or bond the sum specified in the APC notice or enter into a section 38 agreement with the highway authority which would also procure adoption of the street works. Often we are asked to transact on a development where an APC notice has been served and building has commenced without compliance. The main issues that arise out of this situation include:

1. Significant levels of liability. The liability under an APC notice is joint and several so every owner of land bound by the APC notice is liable for the whole of the specified sum. This can run into millions of pounds on a multi-developer site where the APC notice binds each and every developer parcel and will bind any onwards purchaser (including housing associations and plot purchasers)
2. You cannot indemnify against criminal liability. We are often asked if the developer can offer an indemnity in favour of a buyer for all liability arising out of the breach of an APC notice. Whilst you could indemnify that party in respect of any financial penalty they might receive, you cannot indemnify them against committing a criminal offence
3. Contractual conditionality. As a buyer of land or houses affected by an outstanding APC notice, the starting position is not to take on that criminal liability. Making completion of the purchase conditional upon the developer either paying or securing the specified amount is a way of securing this position. 4. Service of an enforcement notice or proceedings. If you receive any intimation of enforcement of an APC notice or service of proceedings please seek legal advice immediately

An APC notice should never be ignored by any party with a land interest in a residential development. If you require any advice of the impact and effect of APC notices, then please contact one of the Housebuilding & Strategic Land team.