Section 106 Agreements

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What are Section 106 Agreements?

Section 106 Agreements are a form of planning obligation that enable a planning authority to set out limitations on the use of the land being sold for development or requiring a developer to make a financial or other contribution to the infrastructure and facilities in the area.  This can include providing drainage, lighting or other services, road, community facilities, education facilities or social housing. The Agreements are sanctioned in law by section 106 of the Town & Country Planning Act 1990 and are generally simply referred to as section 106 agreements.

These agreements are built into the planning application process and are effectively a way for the local authority to secure investment in return for granting appropriate planning permission.  They are fairly common, even for small developments and it is important to have an experienced and savvy property lawyer on your side to negotiate and who will be able to advise you on whether the requirements of the Local authority seem reasonable based on his or her experience and legal knowledge and regarding possible legal implications which are not immediately apparent.

Example

You are a developer seeking to develop a plot of land that was formerly an industrial estate into a residential development.  The infrastructure in the area is poor. 

This application for planning permission may well be declined on the basis that the infrastructure in the area is inadequate for the proposed development.

However, using a Section 106 Agreement, the local planning authority can stipulate the planning obligations that the developer will have to comply with in order for the planning authority to approve the planning application.

By way of illustration, when Tottenham Hotspur Football Club sought planning permission to relocate their football ground from White Hart Lane to a new site at Northumberland Park, Haringey Council prepared a Section 106 Agreement.  The Section 106 Agreement required the developer to contribute around £15 million to offset the impact of the development on the local community.  This included works to improve access roads in the area and building new affordable housing.  The requirement to provide affordable housing was subsequently removed to make the scheme more financially viable.

Possible stipulations in a Section 106 Agreement

The planning obligations imposed by the local planning authority on the developer can be positive or negative in nature.

Planning obligations can:

  • Stipulate that the land must be used in particular way.
  • Require certain activities to be carried out in, on or under the land.
  • Require the developer to grant rights to third parties over the site.
  • State that the land must not be used for specified purposes.
  • Require that money should be paid to the local planning authority by the developer either in a lump sum or over a period.
  • Set out time frames within which the planning obligations must be complied with.

What are the requirements for a valid Section 106 Agreement?

Planning obligations have to be entered into by deed.  Any such deed has to:

  • Clearly identify the land in question.
  • State that the obligations set out are planning obligations.
  • Provide details of the party entering into the planning obligations.
  • Provide details of the local planning authority that has the power to enforce the planning obligations.

Non-compliance and Enforcement

If a developer does not comply with its obligations under the Section 106 Agreement, the local planning authority can apply for a mandatory injunction requiring the developer to carry out the works set out in the Section 106 Agreement.  Alternatively, the local planning authority is able to enter onto the land in question and carry out the works themselves with the reasonable costs of doing so being recoverable from the developer.

Courts generally take a strict stance when considering the non-compliance of a developer with the obligations set out in a Section 106 Agreement.

Can the terms of Section 106 Agreements be negotiated?

Yes.  If you are intending to develop and the local planning authority has stated that approval will only be granted if a stringent Section 106 Agreement is entered into there may well be room for negotiation, even if the planning authority has stated that their position is non-negotiable.

If you would like advice on a Section 106 Agreement or assistance with negotiations surrounding a Section 106 Agreement, please contact us and we will be happy to assist.

James Swede
Senior Partner
0208 951 6661