2 June 2023 by Keegan Williamson

Look before you leap: Section 106 agreements

Section 106 agreements, often referred to as planning obligations, are agreements that are entered into between the local planning authority and landowners or developers as part of the planning process. The agreement’s name is derived from section 106 of the Town and Country Planning Act 1990 (the “Act”).

These agreements are required where the development will have a significant impact on the local area. By imposing obligations on the landowner or developer, planning permission can be made possible for a development which would otherwise be considered unacceptable.

Section 106 agreements are a critical tool in shaping future urban development.  The intention is to minimize the impact of the development by requiring the developer or landowner to make improvements in the local area. These improvements most often include providing affordable housing, infrastructure improvements and community facility improvements.

The agreement must be entered into by all parties with an interest in the land.  Where the section 106 agreement has not been complied with, the local authority may take action against any of those parties. The local authority may apply for an injunction or enter the land (after providing twenty-one days’ notice of intention) to carry out operations and recover the expenses from the person against whom the obligation is enforceable.

The obligations that are imposed by section 106 agreements are variable and, in some instances, require the co-operation of third parties. When entering into agreements of this nature it is important to consider fully the impact of delays by a third party on the development, as the obligations are not easy to modify and this may cause the process to be costly. This is illustrated by the situation in which Redrow Homes (“Redrow”) found themselves, concerning a 168-home Lymington Shores development.

Redrow obtained planning permission in 2012 and promised New Forrest District Council (the “Council”), by way of a section 106 agreement, to provide a £1 million footbridge over a railway line before occupation of a number of residential properties. The construction of the bridge requires the co-operation of several third parties which has made it difficult for Redrow to comply with their obligation. It should be noted that it is possible to discharge or modify the agreement. This can be done by agreement between the local authority and the person against whom it is enforceable (Section 106A of the Act), appealing to the Planning Inspector (Section 106B of the Act) and, if you disagree with the decision of the Planning Inspectorate, you can challenge the decision in the High Court (Section 106C of the Act).

Redrow tried to minimize this obligation by asking the Council to replace the condition with an obligation to pay a cash sum to the Council or carry out alternative works. This was rejected by the Council and the Planning Inspectorate upheld this decision because the bridge was an integral part of the scheme. Redrow then challenged this at the High Court, which recently upheld the decision of the Planning Inspectorate.

This leaves Redrow in a situation that is difficult to navigate – unable to modify the obligations imposed by the section 106 agreement and unable to discharge the obligation required without co-operation from the Council, Network Rail and South Western Railway.

In conclusion, it is important to take advice before entering a section 106 agreement and to consider fully the risks involved.

If you have any queries regarding planning obligations, such as section 106 agreements, please contact our specialist Commercial Real Estate team.

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