S106 Agreements – Issues For Landowners To Consider

By Oliver Bussell, Partner, Planning

On the Monday after Labour’s general election victory the Chancellor, Rachel Reeves, made clear planning reform would be at the heart of the new Government’s agenda with the restoration of mandatory housing targets as well as an immediate re-evaluation of the green belt. We have stood at the threshold of increased development many times over the years – perhaps this time we will see change.

What often goes unremarked in the planning debate is the importance of s106 agreements and the opportunity they give to foster development.

A s106 agreement is a contract between a landowner and a council which guarantees the provision of infrastructure or the payment of money in exchange for planning permission. They’re necessary for a number of reasons – to avoid corruption (or just the suggestion that planning permission is being bought). But, most importantly, they exist to make sure that the disbenefits of development are paid for by the person who caused them, rather than out of general taxation.

There are risks for both parties here. The council risks not securing full mitigation and being seen to let the developer get away with an unnecessarily low contribution. The landowner risks contributions which are justifiable perhaps but which make the development unviable.

Deciding what is justifiable to put in a s106 agreement is a matter for negotiation. Councils have standard requirements which come from local plan policy documents and the national planning policy framework. These relate to everything from affordable housing to provision of green space and payment of substantial amounts of money through to installation of an underground dredger to move sand and gravel out of a quarry and over a busy road!

On most developments there is usually some room for negotiation, depending on the form of development and the policy being discussed, as well as how important the proposed development is to the council. Fortunately for landowners there are also legal tests which circumscribe what councils can seek – to avoid unnecessary or onerous requirements from being pressed.

That’s why my landowner and developer clients often ask for our help in the pre-contract stage when the quantum of the obligations is being negotiated. More thought given to the defensibility of a s106 contribution can avoid excessive contributions being sought – focusing minds on whether it would be reasonable to refuse permission over a dispute about a single contribution.

Apart from the technical issues around drafting s106 agreements, most developers complain of the interminable delays that accompany their negotiation. This can occur because of uncertainty about exactly what should be covered by the agreement – see above. More often though it has to do with the number of parties to the agreement – landowner, mortgagee, developer, district council, county council, each with their own lawyer!  Increasingly the district council will take a lead on the s106 negotiation even leaving the county council out as a covenanting party under the s106 agreement – and that kind of pragmatism is very helpful to developers.

My advice to developers would be:

• Involve your solicitor early on in scrutinising the council’s s106 requirements and pushing back on anything that is material and not justifiable.
• Accept that some form of s106 (post-negotiation) is probably due albeit this increases the costs of the project, and that it is best to resolve the contract around that swiftly – a bit of goodwill goes a long way.
• Ensure your planning consultant keeps in touch with the planning officer and with your solicitor – so that you are speaking with one voice to the council at all times during the negotiation.
• If there are lots of different landowning parties to the agreement, ensure that you or your solicitor is communicating effectively with them, so that everybody understands the need to contract and can deal with obtaining consents and executing documents at the appropriate time.

If you would like to discuss this further, please do not hesitate to contact Construction Partner, Oliver Bussell, email: opb@cooperburnett.com or tel: 01892 515022.

This blog is not intended as legal advice that can be relied upon and CooperBurnett LLP does not accept any responsibility for the accuracy of its contents.