Hard pressed developers have been urged to claw back cash paid to local authorities as part of the planning approval process.

Leading law firm McGrigors believe builders could recover significant sums of money which were paid to councils to off-set infrastructure, public facilities or socially affordable housing.

The practice of builders funding this type of work is known as a Section 75 Agreement in Scotland and was used to compensate for any planning disadvantage caused by proposed developments.

Developers would typically pay a cash contribution in return for the local authority undertaking infrastructure or other community works required by the agreement.

However, if the local authority did not implement the work, started it later than expected or constructed it for less than the developer paid, the developer may be due a refund of the whole or part of its contribution.

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With the housebuilding industry struggling to survive, McGrigors is advising developers to review all planning agreements with a view to recovering money from local authorities which have not implemented the agreed works.

Aberdeen-based John Curran, McGrigors Head of Housebuilding (UK), said: "As housebuilders and developers review current and future costs, they should look back and review historic planning contributions and question whether these contributions have been used either as intended by the local authority or within the timescales contemplated within the planning agreements."

Mr Curran said in one Central Belt development a builder had paid more than £240,000 in transport and educational contributions to the local authority and agreed the free transfer of land for 20 affordable houses.

In a planning application for an Aberdeen residential site, the developer paid £300,000 for affordable housing in advance of approval being granted, another £20,000 for traffic improvements and an unspecified amount for drainage work.

Mr Curran added: "The builders and developers need all the financial help they can get if a vitally important element of Scotland's economy is to have any hope of surviving.

"When the market was buoyant local authorities used their strong negotiating positions to extract commitments from developers way beyond what was justified as a result of the proposed development."

Mr Curran said the 'build now and pay later' initiative announced recently by the City of Edinburgh Council acknowledges this to a degree and is a "very welcome" step forward.

(GK/JM)