We have now raised all of the required funds to bring a Judicial Review should Cyngor Gwynedd vote to approve Article 4 on 11th June 2024. Thank you to everyone who has donated in support of the cause.

Background to the Challenge

To recap, we are a group of residents based in Gwynedd lobbying against the anticipated introduction of the Article 4 Direction in Gwynedd (“A4”).

We are raising funds to support a Claimant who will be selected from an already identified group of people to bring a legal challenge against A4 if it is approved by Cyngor Gwynedd (“CG”).

If approved by CG, A4 will limit the use of privately owned residences by removing the current permitted development rights which allows property owners to use their property as a second home or a short-term rental. If A4 is approved, planning permission will be required to use the property as a second home or short-term holiday rental.

On the basis of the Justification Paper released by CG in support of A4 they intimate that if any area in Gwynedd already has 15% or more properties which are second homes or short-term holiday lets, planning permission will not be granted. In essence, that means that no homeowners in Abersoch, Aberdyfi, Llanengan, Aberdaron, Porthmadog (West), Morfa Nefyn, Llanbedrog, Llanbedr, Porthmadog-Tremadog, Llangelynin, Harlech, Criccieth, Barmouth, Nefyn, Tudweiliog, Brithdir, Llanfachreth, Ganllwyd, Llanelltyd, Bryn-crug or Llanfihangel will be granted planning permission as those areas already exceed 15% (“the Affected Areas”).

It is the opinion of this group that homeowners within the Affected Areas will suffer significant economic detriment as a result of A4, with homeowners in other areas in Gwynedd suffering similar issues (but perhaps to a lesser degree).

Examples of the potential economic consequences of A4 are as follows:

(a) Reduction in Property Values

The main aim of A4 is to increase the number of “affordable properties” in Gwynedd. Numerous stats are provided within CG’s Justification paper, but taking Abersoch as an example, CG states that the average house price in Abersoch is £482,500 with the average household income of residents being £36,086. Based on that level of household income, the approximate mortgage which could be obtained (assuming a £12,000 deposit had been saved) would be £149,975 (notwithstanding the issues referred to below regarding mortgages), which would mean that the average house price would have to reduce from £482,500 to £161,975 to be classed as “affordable), that is a reduction of 66% in the value of the average property.

In order for A4 to have the effect CG requires, CG must be expecting a reduction of at least 66% in average property prices in order to bring the average house price in line with what an average household earns. That % reduction will be significantly higher for properties worth more than the average. If this was the outcome of A4, a significant percentage of homeowners would be plunged overnight into negative equity at a time where mortgage rates and monthly repayments are soaring.

(b) Stagnation of the Market

In our view, A4 will make it extremely difficult for local residents to sell their properties which will stagnate the property market and will actually reduce the number of affordable homes at the bottom of the property ladder as local residents will be unable to move up the ladder and will remain in the first properties.

A good example of this are the current issues which residents experience when selling properties which are subject to S.106 notices. Several locals have shared with us harrowing stories of the difficulties they experienced in selling a property with a S.106 notice, including one local couple who after 11 years of trying to sell their property were finally able to do so after 11 years of being on the market, but for £10,000 less than they had bought it for 13 years previously.

Another local resident shared a story of being so desperate to sell their property after being unable to do so on the open market that they placed their property in an auction, making a £5,000 loss. They were however very thankful to the buyer who wanted the property as a second home as no locals had wanted to buy it and they feared never being able to move up the property ladder into more suitably sized property for their growing family.

These two accounts perfectly illustrate the issues which will be experienced by any residents seeking to get onto or move up the property ladder in Gwynedd should A4 be approved. People do not like losing money on their properties and are therefore more likely to stay put than move up the ladder. As a result, A4 will have the opposite effect and will reduce the level of affordable housing.

(c) Reduction in Available Mortgages

A serious concern is the fact that locals may struggle to find a mortgage lender who will lend on properties subject to an Article 4 Direction, or if they do, the products will not be competitive on the basis that the LTV will be very low, and the mortgage company would not be able to sell the property on the open market, should it be repossessed.

When discussing the issue of A4, the Welsh Government expressed the view that they would:

Despite this, there is no mention within CG’s Justification Paper regarding the mortgage lenders position or what investigations were undertaken. This tends to suggest that either CG have failed to make enquiries of mortgage lenders for their views as part of the decision-making process, or they have, and the responses have been unfavorable and therefore were not included within the JP. In our view, the positions of the mortgage lenders must be canvassed, published and taken into account by CG before any final decision can be reached by CG on whether or not to approve A4.

It therefore seems the case that A4 will make life more difficult for residents trying to get onto the property market than it already is and will cause issues for existing homeowners when re-mortgaging and trying to obtain a mortgage with competitive rates.

(d) Effect on pension plans/equity release which indirectly discriminates against older members of the community

Those who wish to release equity in their properties will be significantly affected if property prices were to reduce. Whilst this is not limited to the older residents, there is a significant concern that on the basis of the statistics relied upon by CG there will be a pool of older residents of Gwynedd who will be disadvantaged by the Proposal, which will amount to unlawful discrimination under S.19 of the Equality Act 2010.

Older residents will generally have a lower or no mortgage and may have been planning to release equity later in their life to live on or fund their care at home or in a residential care home. If property prices are significantly reduced as a result of A4, their retirement plan and nest egg to fund their retirement will have disappeared.

Within the paperwork supporting A4, CG do recognise this potential indirect discrimination, but have failed to properly consider the effects and consequences as part of the decision-making process. CG’s comment within the A4 paperwork is as follows:

(e) Inheritance complications

For the majority of people, their property is their main asset and is something which they want their children or other loved ones to benefit from after their death. If A4 is approved, an unusual issue will arise upon the death of a resident if the beneficiaries of their estate already own their own property, as the beneficiaries will essentially be forced to sell the property they have inherited (at a lower value than it would have been worth before A4).

Many young people from the area leave in search of better education and career opportunities and as a result there will be many people in the area whose children do not live locally. Upon their death, their children will be unable to utilise the family home as a holiday home where they can return to the area of their birth on holiday and will be unable to use the property to generate an income as a holiday let. The only option will be to force the child(ren) to sell their family home, and at a reduced rate or to rent the property on a long-term basis (which brings with it a whole host of other difficulties and costs associated with complying with the new Renting Homes Act).

This is an even bigger issue for those who have retired to the area and have invested significant sums in their properties (to purchase, renovate and/or build) on the basis that their children will inherit the property one day.

Whilst we appreciate that A4 does not prevent holiday homes and second homes, it simply requires planning permission to be applied for, as set out above, no planning permission will be granted in the Affected Areas.

(f) The Impact on Tourism

Without question, tourism is the largest industry in Gwynedd, particularly Dwyfor. For over a century the area has welcomed tourists from Wales, England, the rest of the UK and the World. In the not-so-distant past, the local authority was engaged in an active campaign to entice tourists to the area as it recognised that it was essential to ensure thriving communities in the area.

In the 1950’s/1960’s numerous farms were given authority to convert to caravan sites (such as Fach Farm and the Warren in Abersoch) and large estates of properties were purpose built as holiday homes in Abersoch and Llanbedrog. The local authority was successful in boosting the tourism trade to the benefit of everyone in the area.

Despite what the LPA now thinks of the tourist industry, it brings in a significant amount of money for local businesses, which they need and rely upon. There are also numerous other trades which rely on the second home/tourism industry such as builders, electricians, plumbers, joiners and countless others who all run successful businesses and employ many, many locals.

If the tourist industry is interfered with, it will have a devastating effect on local businesses and jobs, which in turn will only negatively affect their ability to purchase a property in their local area.

From the residents who were surveyed by this group during CG’s consultation period, 52% were directly employed in the tourism industry and 99% were concerned of the affect that A4 would have on tourism.

Despite this enormously important aspect of the decision-making process, the LPA have given very little thought to it. Reference is only made to the impact on tourism in Part 7, the conclusions section, which simply states:

That is the full extent of the consideration of the impact on tourism, which is quite frankly shocking. The inclusion of an off the cuff reference to an industry which supports the livelihoods of a significant number of residents of Gwynedd is not only disrespectful but amounts to breach of the fiduciary duty and responsibility which the local authority owes to its residents and voters.

(g) Loss of revenue for locals

Our understanding is that a respectable proportion of short-term holiday lets are owned by Gwynedd residents. Whether that be renting out their property for peak periods or owning a second property which is rented out.

Any impact on tourism will have a significant and detrimental impact on these residents, many of whom rely on the rental income generated to live on.

Owning holiday rental properties can result in an income for locals, well in excess of what they could earn from local employment and by preventing any further residents from purchasing another property for this purpose or inheriting a property and utilising it as a holiday let, will significantly and unfairly disadvantage local people.

With a new influx of visitors every week, those who stay in short-term holiday rentals are a very important part of the economy and losing them would be extremely detrimental for the local economy and the income of residents.

(h) The proposal will create a class system between properties

Another issue which CG does not appear to have considered is that the restriction on second homes and holiday lets will actually increase the value of existing second homes and short-term holiday lets, whilst at the same time reducing the value of the properties owned by full time residents. It therefore seems that instead of making properties more affordable for locals, it will be increasing the value of second and holiday homes.

This will again stagnate the market as if a local is in a position to move up the property ladder and wishes to buy a property on the market which has previously been a second home, their own property will have reduced in value but the second home will have increased in value, thereby making the gap to the next property insurmountable and larger than ever.

Donations FAQ’s

1. Q - What terms and conditions apply to my donation?

A – The terms and conditions which apply to your donation can be accessed here .

2. Q – Do I have to pay any fees to JustGiving?

A – No. A processing fee is deducted by JustGiving from your donation and if monies are drawn down from a fund.

3. Q – Do I have to pay the JustGiving tip?

A – No. When donating, JustGiving will try and add a tip onto your donation. To avoid paying this you need to select “Enter Custom Amount” or “other”. You can then change the amount to £0 and click continue.

4. Q – Can I receive a refund?

A – Refunds can only be made if the fund for a particular stage is not drawn down/accessed. Once monies from a fund have been accessed, no refunds can be made, and any unused funds will be donated to charity. The funds from each of the three stages will be accessed as follows:

Stage 1 - will be accessed before the decision is made by CG. Any donations to this fund will not be available for any refunds.

Stage 2 – this fund will not be accessed until after the final decision on whether to confirm A4 has been made by CG. If CG votes against A4 then the stage 2 fund will be refunded (less any charges applied by JustGiving). If CG votes to approve A4, the Stage 2 fund will immediately be drawn down and will not be refundable.

Stage 3 – this fund will not be accessed until after the court has determined whether or not permission will be given to bring the Judicial Review, and whether the application for the adverse costs cap has been successful. If GC votes against A4, permission to bring the Judicial Review is refused or the application for the cost cap is refused (which we believe would make the position of the Claimant untenable as it would put them at risk of a potential adverse cost order if the claim ultimately failed), the Stage 3 fund will be refunded (less any charges applied by JustGiving). If permission to bring the Judicial Review and the application for the cost cap is approved by the court, the Stage 3 fund will immediately be drawn down and will not be refundable.

5. Q – what if I donate now and CG do not vote to approve A4?

A – any funds donated to the Stage 2 and Stage 3 funds will be refunded (less any charges applied by JustGiving). Any funds remain in the Stage 1 fund will be donated to charity.

6. Q – What if the court refuses permission to bring the Judicial Review?

A – any funds donated to stage 3 will be refunded (less any charges applied by JustGiving). The Stage 1 funds will have been spent and any remaining in the Stage 2 Fund will be donated to charity. However, any funds which remain in the Stage 1 or Stage 2 fund will be donated to charity.

7. Q – What happens if the case is settled with CG?

A – if CG settles the claim with the Claimant the issue of whether a refund will be made to any donors will depend upon what stage the settlement is reached. If it is reached during Stage 2 then the Stage 3 fund will be refunded (less any applicable JustGiving fees), however if it is settled after the drawdown of the stage 3 fund, no refunds would be made.

8. Q – Will the Claimant be ordered to pay CG’s costs if the Judicial Review is unsuccessful?

A – costs are always at the discretion of the court but generally, the loser of a claim will pay the winners costs (which would be assessed by the court in the absence of an agreement). That being said, at the same time as applying for a permission to bring the Judicial Review, the Claimant will also apply for on order that should they lose, their costs be capped at £5,000. This £5,000 has been budgeted for within the Stage 3 fund. Should the application for the cost cap be refused by the court, then unless further funds can be raised quickly to cover any adverse costs order, the Judicial review will not proceed to Stage 3, and the Stage 3 funds will be refunded back to the donors (less any charges applied by JustGiving).

9. Q – By donating, will I have any control over the claim, or any say regarding how it is run or managed?

A – No. By donating you acknowledge and agree that you do not have, and your contribution (whether financial or otherwise) does not entitle you to have, any rights in or to any Case, including any ownership, control or rights to advise on the conduct or legal strategy of a Case.

10. Q – By donating, do I have any rights to any damages awarded or adverse costs paid by CG?

A – No. You are making a true donation. You are not investing and do not have any interests in the outcome of the litigation.

11. Q – What is the position if I donate more than £3,000?

A – By law the Claimant will be required to provide to the Court a list of names and addresses of any donors who donated a sum of more than £3,000. On the basis that the Claimant will be seeking a cost cap and won’t proceed without it (or a suitable fund to cover adverse costs), donors over £3,000 will not be personally liable for adverse costs. We would however want to speak with you before your make any donation of more than £3,000 (across all of the funds), so please email us at stoparticle4@gmail.com if you are considering a donation of more than £3,000 so that we can discuss it with you.

12. Q – What happens if the Judicial Review is successful, and CG are ordered to pay the Claimant’s costs?

A – Before any monies are released to the Claimant, the Claimant must give irrevocable instructions to their solicitor to pay any costs paid by CG to charity.

13. Q – which charities will receive any unused funds or costs received from CG?

A – the wider community group which is helping with the fundraising effort has selected the following five charities between which the funds will be equally split:

- Wallich

- The British Royal Legion

- RSPCA

- The Lucy Faithful foundation

- RNLI