Section 106 Agreements: A Short Guide

This article summarises some of the main powers and practices relating to the use of section 106 agreements. There are two facets to section 106 agreements - firstly the statutory power in section 106 of the 1990 Act itself and "related legislation" that govern the powers of local planning authorities to enter into these agreements, and secondly what obligations may be lawfully sought.

Section 106 of the Town and Country Planning Act 1990 itself sets out the statutory scheme for what may be secured as "planning obligations", providing that persons interested in land may enter into such obligations (albeit section 106 agreements are also contracts in their own right, as well as being statutory) and they are entered into as deeds. Much of the "boilerplate" in section 106 agreements arises from the section itself, as discussed below. The section does not require that all persons interested in the land are required to enter into the obligation. However, clearly it is best practice to ensure, if possible, that all do in order that no part of the development can come forward without triggering the section 106 agreement.  In some circumstances some parcels of land may not need to be bound (if there is little or no development on the land, and/or the owners either cannot be found or will not sign). That must be judged carefully on a case by case basis.

Section 106 (1)(a) - (d) set out limitations on what kinds of obligations can be entered into. These are well known parameters but can be overlooked where both parties (developer and planning authority) are in agreement at heads of terms stage.   For example there is case law concerning imposing obligations preventing residents from applying for parking permits as a relatively recent example of obligations commonly entered into, but held by the Court to fall outside the powers.

Sections 106(3), (4) and (9) often lead to "boilerplate" clauses in agreements, setting out enforcement provisions, how persons may be released from liability once parting with their interest, and also in the case of s106(9) the formalities required in such instruments.

The method of enforcing a section 106 agreement is also contained in the section itself  which allows for injunctions and also the authority entering onto the land to carry out operations itself, and charge the cost back to the person against whom the Agreement is enforceable.

Modification and discharge of section 106 obligations is governed by section 106A, which allows for variations:  by agreement at any time between the authority and the persons against whom the obligations are enforceable. Once an application is made, section 106A(6) then governs what decisions the authority may take.  An appeal mechanism is contained in section 106B - the procedure for which is governed by the Town and Country Planning (Modification and Discharge of Planning Obligations) Regulations 1992.

Where modifications to planning permissions are made under section 73 of the Town and Country Planning Act 1990, the result is a new standalone planning permission which must be tied to the 'original' section 106 agreement by way of a supplemental agreement. Otherwise, unless the original agreement is drafted so as to capture future variations/amendments to the scheme, the applicant would be able to implement its section 73 consent free from any section 106 obligations.

Further limitations on what may be secured by section 106 obligations arrived in 2010 in the form of the Community Infrastructure Levy Regulations 2010 ("the CIL Regs"). Generally speaking, infrastructure to be funded by CIL should not also be secured through section 106 obligations. It was thought therefore that the introduction of CIL would greatly reduce the length and complexity of obligations. The CIL Regs: put into legislation the tests previously set out in guidance as to what constitutes a lawful obligation (Regulation 122); and  limit the type and number of section contributions which can be secured towards infrastructure (the pooling restriction in Regulation 123).    Regulation 122 provides that an obligation may only be taken into account as a reason for granting planning permission where it is:

  • 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 is now commonly reflected in the wording of the relevant committee report to members, in which the planning officer both confirms that these tests have been considered and sets out the justification for the obligations. In some cases applicants may wish to offer obligations that do not pass these tests. This can be a risky approach, unless there is clear evidence that members were directed not to take the obligation into account, and indeed did not do so when approving the application. Even in those circumstances, the non-compliant obligation can attract threats of judicial review.

Regulation 123 of the CIL Regs encourages authorities to introduce their Community Infrastructure Levy ('CIL') as soon as possible, by limiting the use of section 106 obligations. It also aims to prevent double dipping through monies being secured through section 106 and CIL for the same infrastructure. It provides that an obligation which provides for funding or provision of infrastructure (meaning infrastructure either that will be funded by the authority's CIL or any infrastructure where there is no CIL infrastructure list) may not constitute a reason for approval; and a planning obligation may not constitute a reason for approval if that obligation relates to the funding or provision of a type of infrastructure and five or more separate obligations have been entered into in relation to that type of infrastructure since 6 April 2010.

Where agreements include obligations relating to highways, whether works to the adopted highway or the adoption/dedication of land as new highway, sections 38 and 278 of the Highways Act 1980 may apply. These sections govern how land can be adopted by the Local Highway Authority as public highway maintainable at the public expense (s38), or secure monies for works to the existing highway or allow the developer to procure such works itself. Such provisions are commonly under separate agreement, but it is not unknown for section 106 agreements to also serve as highways agreements.

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