Published On: Fri, Feb 2nd, 2018

The rise and rise of Section 106 agreements

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By Salvatore Amico, Head of Town and Country Planning at Attwaters Jameson Hill

Hundreds of Section 106 agreements are made each year between developers and local authorities. While no accurate figures exist on how many Section 106 agreements were made between developers and local authorities in 2017, it is likely that it was in the order of hundreds if not thousands. These important planning obligations have been with us for nearly three decades now and have become an integral part of the planning process.

The scope of these agreements has grown significantly during their life as both developers and local authorities seek new and ingenious ways of making use of Section 106, to respectively maximise profits or further local planning goals. But while the agreements are synonymous with the industry it is worth going back to basics to explore what they are and how they can continue to play an important role in planning future projects.

In layman’s terms, a Section 106 agreement is a legal agreement between a local authority and a developer that creates new planning obligations on a developer that are intended to relieve pressure on local areas from a development or provide some public good.

Most commonly we see this in the form of the financing of works to existing roadways to relieve issues with traffic flow affected by a new development or the creation of affordable housing or even social housing within a scheme.

But the spectrum can go much further, extending to financial support for an extension or creation of a local school to help with additional pupils or even the creation of parkland to improve amenities.

However, these are not the only uses for a Section 106 obligation. A Section 106 obligation can:

    restrict the development or use of the land in any specified way

    require specified operations or activities to be carried out in, on, under or over the land

    require the land to be used in any specified way; or

    require a sum or sums to be paid to the authority on a specified date or dates or periodically.

While the balance of power seems very much in the local authorities favour, developers can often get the go-ahead where once they would have had a plan rejected. It’s the most official form of the famous phrase, “you scratch my back and I’ll scratch yours”.

The content of a Section 106 agreement is agreed through a consultation process during a planning application and will often include negotiations between planning offices and interested parties. The interested partners will include the developers, but could also include other local pressure groups or residents.

With the obligations agreed in principle the council’s solicitors will draw up the final agreement.

A planning obligation can be subject to conditions and restrictions. If at any point obligations are not complied with, it is enforceable via an injunction against the person that entered into the obligation and any subsequent owner. In the case of a breach of the obligation, the authority can take direct action and recover expenses.

Despite their common use, Section 106 agreements are not a blank cheque and the local authority must follow the National Planning Policy Framework and the Community Infrastructure Levy Regulations 2010.

These set out a test which ensures that the obligations are necessary to make the development acceptable in planning terms, directly related to the development and fairly and reasonably related in scale and kind to the development.

This not only protects the council for recourse from other parties but also protects developers from being overexploited.

A Section 106 agreement isn’t suited to all developments though and smaller developments may benefit instead from a Unilateral Undertaking, which instead of making key commitments ensures that developers make planning contributions (financial payments) to the local authority.

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