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A Section 106 planning agreement, also known as a planning obligation, is a legal agreement between local authorities and developers. A Section 106 is used to mitigate the impact of a new building/s on the local community and its infrastructure.
Section 106 agreements will usually require financial contributions payable on trigger dates negotiated with the local authority planning team. These trigger dates can be pre-commencement of any work on site, or are linked to the number of houses constructed or occupied. From a cashflow perspective, developers will be keen to push these trigger dates back to allow the sale of a number of houses prior to financial payments becoming due.
The charges are based on the needs of the local community, for example, a residential development can place extra strain on social, physical and the economic infrastructure of a locality, therefore a section 106 will aim to balance the pressure with improvements in the surrounding area.
When a planning application is submitted, the local authority will consider the development’s likely impact on the local community, taking into account the following:
Section 106 agreements can indeed be negotiated within the constraints of the local authority planning policies. Early pre-application discussions will prevent delays in the planning application, ensuring that all planning obligations are discussed, agreed and complied with, thus allowing the planning application to move forward in accordance with a developer’s proposed timeframe.
Planning applications need to be made within statutory time limits, therefore, planning obligations should be negotiated to enable those time limits to be complied with. A longer time limit may be applied for, this must be made in writing to the local planning authority.
Developers quite often encounter s106 agreements in the context of conditional contracts, which only oblige the developer to complete a purchase where a satisfactory planning permission has been obtained. As a result, the negotiation of the s106 agreements often takes place prior to the developer becoming owner of the property.
As s106 agreements are local land charges which bind the land, it is important to recognise that the landowner must enter into the agreement with the local authority, notwithstanding the fact that it will shortly be selling the land and not carrying out the development itself. Landowners are usually content to do so provided that any liabilities under the agreement only commence once a planning permission is implemented and where they receive an adequate indemnity from a developer.
If you need any advice on Section 106 Planning Agreements, please contact a member of our commercial property law team in confidence here or on 02920 829 100 for a free initial call to see how they can help.
To speak to one of our experts today, please contact us on 02920 829 100 or by using our Contact Us form for a free initial chat to see how we can help.
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