A ‘Section 106 Agreement’ relates to a small but very significant part of the Town and Country Planning Act 1990.  It is an extremely important part of planning law and if a developer wishes to establish planning consent on a property, it is likely that he/she will become very familiar with it.

A definition of a s.106 agreement could be:

An obligation to contribute something for the good of the local area, in connection with the grant of planning consent.

A section 106 agreement is also often known as a ‘Planning Obligation’.  Land or property that has the benefit of planning permission to construct/convert a property representing shrewd use of the land, is worth between 3 and 10 times the value of similar property that doesn’t.  The Local Planning Authorities (LPA) therefore feel that as the developer is benefiting to such a degree, he should contribute something as a ‘price’ to pay.  Incidentally, section 106 agreements can be applied to both Residential and Commercial developments.

A great deal of case law exists on the subject of this.  For many years, developers were refused planning permission if they did not accept exactly what the Local Authority wanted them to contribute.  There were even 1 or 2 cases of local authorities requiring work to be carried out as a condition of planning consent that had doubtful connection with the actual development, raising concerns of blackmail.  However generally, developers were happy with the situation that obliged them to provide something for the community in return for their planning consent.

The moral problem with making planning obligations inextricably linked to planning consent is that authorities should not be introducing a financial aspect to planning matters.  If the development benefits the area, then it should be permitted; if it does not, then permission should be refused.  Money should not provide the decision.  For this reason, in more recent years planning obligations have been negotiable, and therefore more flexible.

In Circular 1/97, guidance for LPAs was offered to provide certain criteria for planning obligations:

1. The obligation should be relevant to planning.
2. It should be directly related to the proposed development.
3. It should be ‘fairly & reasonably related’ in scale and kind to the intended development.
4. Reasonable in all other respects.

Examples of planning obligations are:

1. To carry out a land clean-up on an area of contaminated land.
2. To provide ‘affordable housing’ as part of a substantial residential development.
3. To contribute to the widening/improvement of a road that provides access to the development.
4. Providing flood defences for the development where appropriate.
5. The provision of housing for people over 60.

A developer is not legally obliged to accept the undertaking of a s.106 agreement.  However this will result in the refusal of planning consent.  The developer is entitled to apply to the Secretary of State (SoS) for the grant of planning permission.  If the SoS subsequently grants permission to the developer, the LPA does not have input to any planning obligation agreement.

Section 106 obligations are a condition of the planning consent.  This means that they must be carried out as part of the agreement.  If planning permission is acted upon and the planning obligations are not adhered to, the Local Authority has the right to enter the land/property and carry out whatever work forms the planning obligations.  The associated costs will then be recouped from the developer.

The novice developer is also quite unlikely to be expected to contribute a great deal in the way of planning obligation.  It is also possible to negotiate with the LPA and agree to a mutually beneficial way approach.  This obligation should not deter you from seeking planning consent.  However, do be aware that any development finance lender will be interested not only in the details of your planning permission, but if there is any s.106 agreements to be considered.