Don't get caught out by this when building your dream home
If you dream of building your own home, your very own 'Grand Design', this article is for you. Particularly when budgets are squeezed and costs spiral. Here, we explore the unexpected costs that most self-builders overlook, which can greatly affect the budget.
Many of us share the dream of building our own perfect home. A unique design tailored to our exacting standards and lifestyle. A property that's truly ours, where every detail has been carefully considered and every feature has been chosen or custom-made for our home.
You might've found a perfect plot with fabulous views and an idyllic setting. You have a budget, and now, you need to obtain planning permission. This involves submitting your design to the local planning authority, who will review it for compliance with local regulations and potential impact on the community. Once you have the planning permission, the design starts to take shape until you are thrown a curve ball.
It can often be cost-effective to buy a plot of land and build your perfect home rather than wait for this perfect home to come onto the market. But there is a cost - it can be very stressful to build a property, and whilst the best budgets can give you a clear indication of the cost of the building, there is almost always a hidden expense somewhere that can scupper your plans.
For many self-builders, the Section 106 planning obligation is just that hidden cost that can be the cause of much stress. Budgets suddenly go out of the window, and there might need to be some clever value engineering from your original plans and designs to meet this obligation. This could involve using more cost-effective materials, simplifying the design, or reducing the size of the property.
But what exactly is the Section 106 agreement?
According to homebuilding.co.uk, "Section 106 is a legal agreement between an applicant seeking planning permission and the local planning authority, which is used to mitigate the impact of your new home on the local community and infrastructure. In other words, a new house will mean another car(s) on the roads and perhaps your children will attend nearby schools, putting a little more strain on local services."
The local authority requires developers to offer a certain quota of discounted, affordable homes. If you are building a single property, and can therefore not provide any affordable homes for the community, you will have a fee to pay to the local authority for the impact that your property will make on the area.
Section 106 Agreements often require a financial contribution and are charged based on the specific needs of the local community. This means that the fees vary widely from place to place, and some self-builders faced Section 106 charges that made up a large proportion of their overall project cost.
So, what can you do about it?
The short answer is very little. Unless you can provide social or affordable housing for the local area, there will likely be a cost for your Section 106 contribution. The issue is that it is assessed for each build based on the impact it will have on the local area and community, so it is tricky to know the amount in advance.
The best option is to have a fund for this and include the Section 106 contribution in your budget so that you will not have to compromise your design or finish later down the line when the budget is being squeezed, and you have to pay this bill.
Often, local authorities will allow you to delay payment, but a charge will likely be added to the property when it is signed off, so the payment must be made when the property is sold in the future. However, there is also a chance that a delay in payment may incur interest, meaning that the amount is increasing with every year that it is not paid.
Forewarned is forearmed, as they say, and it's better to be prepared for this cost in advance so that you can factor it into your budget and not derail your plans.
If you have plans to build your dream home and are interested in building plots or developments, get in touch with our team to be informed of opportunities as soon as they become available.