s 106 Agreements and Local Planing Authorities
S.106 Agreements
When granting planning permission for development, local planning authorities (“LPAs”) often impose planning obligations. These obligations are usually contained in what are known as Section 106 Agreements to which anyone with a freehold or leasehold interest in the development site (and all of their respective mortgagees) will normally be a party – although this will depend on the precise circumstances of the case.
An alternative to a S.106 Agreement sometimes used is a unilateral undertaking. In this the developer, on its own, commits to planning obligations – effectively in a series of one way promises to the LPA. Such undertakings are usually offered by developers where they are appealing a planning refusal by the LPA. They enable developers to deal what they see as the LPA’s valid objections to the development – but do not need the cooperation of the LPA to finalise.
Frequently encountered obligations include financial contributions towards social, education or recreational facilities (the LPA will often require these contributions to be index linked to account for payment not being made at the date of the s106 Agreement) and, with larger developments, the construction of recreational facilities (such as a playground) and the provision of affordable housing.
If there are obligations which are required to be complied with, developers should check which obligations take effect from the date of the s106 Agreement (such as payment of the LPA’s legal fees and perhaps monitoring and/or administration costs) and which take effect at a later date (for example on implementation of the planning permission, commencement of works on site or occupation of the units on site) to ensure that these will not cause a problem for them. Any definition of “implementation” or carrying out of a “material operation”, should try to exclude all necessary preliminary works and activities which developers would want to have carried out on the site without triggering relevant obligations under the s106 Agreement.
Developers also should obtain a copy of the draft planning permission that is proposed to be issued as soon as possible, and planning consultants should check the draft planning permission and any conditions attached to the planning permission: it is not unheard of for a condition in a planning permission to be unclear or impose a requirement that, if adhered to, will make the development unviable. Developers will also want to ensure that the terms of the s106 Agreement do not continue to bind them after they have disposed of the whole of their interest in the site to a successor.
Finally, when entering into a s106 Agreement, developers should be aware that there is a possibility that a building that is built in breach of s106 obligations could be demolished/taken down as part of the LPA’s enforcement action.
This information is for guidance and should not be regarded as a substitute for taking full legal advice.
Lindsay Holland
Commercial Property Department
Direct Dial: 0118 9516622
