At an appeal hearing in Llangollen Town Hall on September 4, Belgrave Homes (Llangollen) claimed that because the original development of 20 apartments in Abbey Road is set to make a financial loss, an agreement – or obligation - it signed with Denbighshire County Council in 2006 to make cash contributions towards affordable housing and public open space in the town no longer serves a useful purpose.
But the council argued that the sums covered by the Section 106 Agreement - £226,432 for affordable housing and £47, 526 for open space making a total of £273,958, indexed to £334,683 up until last April - should still be payable.
The hearing was presided over on behalf of the Welsh Government by inspector Emyr Jones and took evidence from both sides.
Mr Jones has now published his decision, which rules the obligation no longer serves a useful purpose.
In his official statement he says the development has incurred “substantial losses” in excess of £3 million, with apartments being sold at prices which “fall well short of recovering acquisition and construction costs”.
This, says the inspector, is predominantly as a result of the site being purchased at the height of the housing boom and the subsequent dramatic fall in property values.
He adds: “The appellants are a single purpose company who state that their only asset is the ground rent from the development which is valued at around £60-70,000.
“The council does not challenge the appellants’ financial information, but its hearing statement suggests that there is a reasonable prospect of obtaining the sums due if the obligation is not discharged.
“Nevertheless, the appellants are not in a position to pay these sums and the bank, which has to bear the bulk of the above loss, is not going to make any additional payments on its own volition.
“Neither is it likely to enter into possession of the site as a mortgagee given that the value of the asset would be significantly less than any legal charges running with the land.”
Allowing Belgrave Homes’ appeal, he said: “In the above circumstances, I am of the view that there is no real prospect of the council recovering the commuted sums and its principal solicitor accepted that the chances of so doing were slim.
“As a result, adopting a pragmatic approach, it can be concluded that the obligation no longer serves a useful purpose.”
* The Planning Inspectorate in encouraging people to complete a survey giving feedback on its administrative process and the inspector’s decision. It can be downloaded from https://www.surveymonkey.com/s/PostDecisionQ Quote Appeal Ref: APP/R6830/Q/12/2175832; Site address: Plas Derwen, Abbey Road, Llangollen