“Complex and inflexible” rules that unintentionally and “unfairly penalise” homeowners with six-figure fines “for the apparent crime of building a home extension” will be reexamined, the housing minister has said.

The problem of Community Infrastructure Levy charges being unfairly or disproportionately applied to homeowners has inflicted pain on dozens of Waverley residents with the borough council saying it is tied by Government guidelines on how to enforce the charges.

The charges are supposed to help offset the impact of large scale developments in an area – and help fund the infrastructure to support it.

In Waverley, dozens of homeowners have found themselves inadvertently caught in the tangle of bureaucracy. One resident, Steve Dally was stung with a £70,000 ‘contribution’ with others threatened with imprisonment or having their homes repossessed.

The issue came to a head this week in Parliament with Godalming and Ash MP Sir Jeremy Hunt raising the matter to housing minister Matthew Pennycook.

Sir Jeremy said: “My constituent Steve Dally was charged £70,000 by Liberal Democrat-controlled Waverley borough council for the apparent crime of building a home extension. I met the housing minister earlier this year to talk about abuse of the community infrastructure levy. Could he update the House on his plans to stop it?”

Mr Pennycook told the commons that he agreed there had been a number of “unintended consequences of the 2010 CIL regulations—they have unfairly penalised some homeowners.

“I can only reiterate the commitments I gave him during that meeting. In principle, we are committed to finding a solution to this issue, and I am more than happy to meet him again and update him on the steps we have taken in the interim.”

The news has been welcomed by Waverley Borough Council, which has set up its own discretionary review panel to examine cases of wrongdoing – although uptake has been extremely slow with only two cases coming forward so far.

Councillor Liz Townsend, Waverley Borough Council portfolio holder for planning and economic development said: “We welcome the recent comments made in Parliament by the Housing Minister acknowledging the unintended consequences of the current Community Infrastructure Levy (CIL) regulations.

“The legislation is overly complex and inflexible, and like many residents we are frustrated by a system that can leave homeowners facing large bills for genuine mistakes. We have been pressing the Government for reform for some time, so it is encouraging to hear a clear commitment to finding a solution.

“While national legislation limits what councils can do, we are doing everything possible to support our residents. She added: “The case of Mr Dally, which was raised in Parliament, was one of the situations that highlighted the need for change.

“Following discussions with him, the council reviewed his case and concluded that his CIL charge should be withdrawn and refunded.

“His experience helped shape the introduction of our Discretionary Review Scheme, so that other residents would have a clear route to request a review.”

The council said it would continue to lobby Government for urgent reform to ensure the CIL system “is clearer, fairer and more proportionate for homeowners” and called for the collaborative work between themselves, Sir Jeremy and ministers “to help shape a fairer and more compassionate system that still supports local infrastructure.”