What happens to housing development plans when a council goes ‘bankrupt’?


When a section 114 ‘bankruptcy’ notice is put in place, a council’s non-statutory services are restricted and housebuilding ’goes to the back of the queue’. Yet the growing number of councils in this situation are finding ways to carry on building.

What happens to a local authority when it gets into deep financial trouble and its income can no longer meet its expenditure commitments?

There comes a point when local authorities in this precarious position have to issue a dreaded section 114 (s114) notice. These notices, usually referred to in the media (not accurately technically) as “bankruptcy” notices, restrict investment in non-statutory projects until the council’s finances are on a firmer footing. 

And councils are issuing these notices in growing numbers. Since 2017, a spate of local authorities have issued s114s, including Northamptonshire, Croydon, Slough, Nottingham, Northumberland and Thurrock. In June this year, Woking Borough Council issued an s114 notice, while Birmingham City Council followed suit in September.

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