Section 106 Planning Obligations

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Section 106 of the Town & Country Planning Act 1990 allows for any person with an interest in land to enter into a ‘planning obligation’ with the relevant local planning authority (LPA) that mitigates any impact of a development proposal on local community and infrastructure.

Planning obligations are variously referred to as ‘S106 Agreements’, ‘unilateral undertakings’, ‘developer contributions’, ‘section 106’, or ‘affordable housing contributions’, and may be required in addition to or to substitute the Community Infrastructure Levy (CIL).

These ‘planning obligations’ in practice often entail provision of certain types of affordable housing on site as a part of the new development; a financial contribution to the LPA to support provision offsite; and/or a payment towards other infrastructure costs such as education, transport etc.

These obligations are secured via a legally binding Section 106 agreement between both parties, or a unilateral undertaking made by the applicant and landowner without the local planning authority. A unilateral undertaking only binds the interested person and not the local planning authority as they are not party to it.

By committing to a Section 106 agreement, an otherwise ‘unacceptable’ development may be rendered acceptable to planning officers and achieve planning permission. Obligations cannot be considered a reason to grant planning permission unless they meet the tests laid out in Rule 122 of the Community Infrastructure Regulations 2010, that they are:

a)     Necessary to make the development acceptable in planning terms;

b)     Directly related to the development; and

c)     Fairly and reasonably related in scale and kind to the development.

The National Planning Policy Framework (2019) states that affordable housing should only be sought on ‘major’ residential developments, defined as a development where 10+ homes will be built, or where the site has a total area above 0.5 hectares. In rural areas the threshold is reduced to 5 homes. Non-residential development thresholds are defined as over 1,000 m2 additional floorspace or 1 hectare sites. No contributions should be required for minor developments such as annexes or extensions to existing homes.

However, LPAs (particularly in rural or high-density areas) are permitted to set a lower unit threshold at which Section 106 contributions are required. They may also set the amount of financial contribution or number of units of affordable housing required from developers to render a development acceptable in planning terms. Policies therefore vary between local authorities, and can change depending on the adoption or revision of local plans.

Developers should discuss planning obligations with either a planning or viability consultant or the relevant local authority as early as possible in the planning process. To avoid delays to the granting of planning application, or rejected applications, pre-application discussions can be useful and informative.

While contributions towards infrastructure and affordable housing are defined by local plans, all planning obligations are negotiable. For example, affordable housing provision may be reduced if a financial viability assessment (FVA) demonstrates a reduction is necessary to make the development viable.

NPGV Paragraph 002 notes that viability assessment can be used to ensure that policy requirements are realistic in individual cases, and the total cumulative cost of all relevant policies should not undermine deliverability of the plan. However, it is the responsibility of the applicant to demonstrate that circumstances justify the need for viability assessment, and the weight given to this evidence is down to the decision maker.

All viability assessment should follow the approach in the government’s viability guidance, use standard inputs, and be made publicly available. While it is possible to perform a viability assessment yourself, it is recommended that you engage a planning or viability consultant who will have access to the standard tools, inputs and format required for the submitted assessment to be considered acceptable by local authorities.

More information on Section 106 planning obligations and help with viability assessment can be found at www.s106management.co.uk.

Detailed Planning Obligations guidance is available from the Ministry of Housing, Communities and Local Government on the Gov.uk website.

Contact Information

If you have any legislation or policy questions about Section 106 Planning Obligations you can contact the Ministry of Housing, Communities and Local Government.