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Property Investment Tips.....What are Infrastructure Charges?



Water and Sewerage Infrastructure Charges


When an investor or developer applies for a quotation to connect water services or drainage services to the existing network infrastructure, they incur a one-off charge in addition to the installation costs and these are named ‘Infrastructure Charges’.


Infrastructure Charges were introduced into the Water Industry Act (1991) and in line with Ofwat’s charging scheme rules, water companies are able to recover costs from developers for work that adds additional demand to their network. The charges ensure the upkeep and maintenance of their network infrastructure.


Domestic infrastructure charges are published on each of the network owners websites for transparency.


Note that if there has been a previous supply to the site which will not be retained then infrastructure charges may not apply or they may be discounted at the point of quotation.


Infrastructure charges for commercial buildings are calculated slightly differently, generally because pipe sizes are often larger and place a more significant demand on the network. A calculation is applied which take into account loading units and demand. These are bespoke to each commercial development.


Note that VAT does not apply to infrastructure charges.


Why is it important to understand infrastructure charges?


As an example, if you were to build a new house in the Yorkshire Water area, you would potentially incur the following costs:


  • Water infrastructure charge - £75

  • Foul infrastructure charge - £55

  • Surface Water infrastructure charge - £150

  • Total value of the infrastructure charge payable - £280


If you were to convert an office block into 30 flats, there would be a small discount relating to the existing water supply but you would have to budget as follows:


If the total value of the infrastructure charges is £280 per plot and this is multiplied by the number of new properties (in this case 30) the total infrastructure charge would be £8,400.


Understanding this information provides you with an understanding of why your quotation may seem expensive but more importantly, it enables an investor to budget effectively!


We hope that this information is useful and feel free to contact us for further guidance!