Top Tips for negotiating Section 106 Agreements
Depending upon the type and size of your development scheme the Local Planning Authority may require you to enter into a Section 106 Agreement in order to provide contributions and/or works, which cannot be secured by condition, to mitigate the impacts of the proposed development.
In its most basic form a Section 106 Agreement is just a contract between the parties to secure the delivery of the agreed mitigation measures. However, Section 106 of the Town and Country Planning Act 1990, and Regulation 122 of the Community Infrastructure Levy Regulations 2010 (as amended), prescribe certain requirements with which the obligations must comply in order to constitute a reason for granting planning permission. In addition, and unlike a standard contract, Section 106 Agreements bind the land against which they are entered into, meaning that upon the sale of the site the obligations will pass onto the successive owners unless or until discharged.
The negotiation and drafting of the Section 106 Agreement is not just important for the current owners of a development scheme, it is important to try and secure flexibility in the terms of the obligations so as to try and satisfy the requirements of future developers and/or lenders. This is particularly true if you are an individual looking to sell a site with the benefit of planning permission. It is important not to fall into the trap of simply accepting the terms of the Section 106 Agreement as standard, a position in our experience that most Local Authorities seem to advocate. Whilst there is the possibility of being able to secure a variation of the terms of the Section 106 Agreement at a later date, this is not always a quick or easy solution.
Some of our top tips for reviewing and negotiating planning obligations include:
Start the discussions regarding the obligations required with the planning officer early, all too often we see the issue of a planning permission delayed due to delays with the negotiation of the Section 106 Agreement.
Consider the triggers for performance of any of the obligations carefully, the majority of Section 106 Agreements are conditional upon the grant of the planning permission and the commencement of the development on the land. However, the definition of 'commencement' can be drafted so as to permit site preparation works, including the construction of access roads, without the obligations being triggered.
Review the triggers for any payments and consider if it will work with the scheme, we regularly see obligations drafted which require payments prior to commencement of development, which can cause cash flow problems at a later date. Consider whether the specific payments are required upfront and try negotiating phased payments.
Check that suitable exclusions and exemptions have been secured to try and ensure that future occupiers of the dwellings, lenders and statutory undertakers are not bound by the obligations. This will hopefully avoid issues arising at a later stage.
Note that where schemes are being submitted to local authorities who have adopted a Community Infrastructure Levy, planning obligations may be payable in addition to the Community Infrastructure Levy charge. It is important to ensure that there is no duplication between the obligations in the Agreement and the Community Infrastructure Levy.
It should be considered whether the obligations can be secured by a condition in preference to an obligation under the Agreement. Planning obligations, in the form of Section 106 Agreements, should only be used where it is not possible to address unacceptable impacts through a planning condition.
Where affordable housing is being secured seek advice on the desirability and need of the tenures required. It is also important to ensure that a carefully worded mortgagee exemption clause is included, which reflects the wording required by the lender of any proposed Affordable Housing Provider who will acquire those units.