During the coronavirus pandemic, many planning processes have been delayed; putting section 106 agreements into place has also been more difficult. As the country emerges from lockdown it is a good time to review how businesses approach “planning obligations” to achieve timely and cost-effective outcomes.
Do we really need a section 106 Agreement?
Although they are routinely required for residential developments, it is worth asking this question. Where there is a need to get planning processes going and deliver consents quickly as lockdown restrictions ease, housebuilders under time and cost pressures may want to look for alternative solutions where they can.
The National Planning Practice Guidance (NPPG)
The NPPG confirms:
“Planning obligations, in the form of section 106 agreements and section 278 agreements, should only be used where it is not possible to address unacceptable impacts through a planning condition”.
If items of infrastructure requiring upgrade/delivery to deal with the impact of the development can be secured through planning conditions restricting the amount of development which can take place before the necessary upgrading/delivery has taken place, a planning obligation under section 106 may not be essential.
Depending upon such factors as:
- the scale and layout of the scheme;
- whether appropriate phasing can be built into it, and
- whether or not the business owns the site or only has an option or conditional contract rights to acquire it;
It may be worth considering an approach to the local planning authority which focusses on agreement of a fuller package of conditions if the need for a section 106 agreement can be thereby avoided.
What about affordable housing?
Provided that the affordable housing is necessary, and the requirement for it fairly and reasonably relates to the development and is reasonable in all other respects, there is no reason why a planning condition cannot be used to secure its delivery.
Particularly where outline planning permission is being sought and tenure types, sizes, locations and other features of the affordable units are not yet known, it is worth considering whether a planning condition requiring the submission of a scheme for the LPA to approve later may be a more efficient way of documenting the position at outline stage. Planning Inspectors have also accepted the use of planning conditions to govern the delivery of affordable housing when approving some schemes at appeal on a number of occasions.
What about financial contributions to the local planning authority?
Planning conditions cannot be used to lawfully secure payments of money to the local planning authority. Section 106(1) specifically provides for “…a sum or sums to be paid to the authority…” and the pandemic has not caused any change in the law in that respect, even for a temporary period.
Whilst this is likely to continue to generate the need for a section 106 agreement for the majority of housing schemes, the question is nonetheless always worth considering, particularly if community infrastructure levy is payable in the area and is the principal vehicle by which financial contributions towards local infrastructure are being secured.
Unless there are financial contributions/payments to the LPA which are necessary to make the development acceptable in planning terms (outside the community infrastructure levy regime) planning conditions can usually be drafted to address all other types of lawful planning requirement.
Can a planning condition be used to secure a section 106 agreement or undertaking being entered into later?
The NPPG confirms that although “…A negatively worded condition limiting the development that can take place until a planning obligation or other agreement has been entered into is unlikely to be appropriate in the majority of cases….” there may nonetheless be “...exceptional circumstances…” in which “… a negatively worded condition requiring a planning obligation or other agreement to be entered into before certain development can commence may be appropriate…”
The NPPG goes on to suggest that exceptional circumstances might be considered to arise “… where there is clear evidence that the delivery of the development would otherwise be at serious risk (this may apply in the case of particularly complex development schemes)”.
The use of such a condition is legally possible, and has been used in respect of the high profile redevelopment of the Highbury stadium (which has caused a particular version of this type of condition to be called an “Arsenal Condition”) but it is not likely to be appropriate in respect of most housing schemes needing planning permission over the weeks and months following the pandemic.
Instead, a much simpler form of negatively worded condition might be considered. Where a planning condition restricts a development unless and until a scheme or other details are submitted to and approved by the local planning authority to address an impact of the development, the Courts have recognised that a legally-binding commitment - such as a planning obligation under section 106 - could be used to discharge that type of condition in certain circumstances.
If the need to obtain the grant of the planning permission quickly outweighs the commercial disadvantages of deferring the resolution of the precise terms of such a planning obligation until later, this type of condition could therefore be considered for residential schemes needing consent urgently.
Since it is unlawful to use a planning condition to require a payment to the local planning authority that will usually mean that a planning obligation under section 106 will be necessary for a residential development.
If the “need for speed” is paramount, some time and cost can still be saved however by using a “unilateral” form of planning obligation which does not have to be executed by the LPA but which it can nonetheless enforce and rely on.
It will however still have to be executed by the landowners, mortgagees and anyone else with a significant interest in the land, and the developer would not have the benefit of any counterparty covenants from the local planning authority, or the right to seek expert determination if there were a dispute with the Council.
In the unusual situation that the only non-CIL payments are for very small amounts it can be worth considering depositing the sums in question with the local planning authority, and entering into a much shorter agreement under other powers (not section 106) or even obtaining a ‘reverse’ undertaking from the Council in order to facilitate the early grant of planning permission.
Execution of Section 106 Agreements: Counterparts
During the Pandemic a number of Councils have been pragmatic and willing to accept forms of lawful execution of section 106 agreement or undertakings which they would not normally do. As the Country emerges from the pandemic however, it is uncertain whether any of these methods will remain acceptable or become part of regular practice.
It was nonetheless always open to a local planning authority to speed up the process of execution of a section 106 agreement, by allowing the parties to execute a number of seperate “counterparts” of the deed.
This enabled them to each seal/sign their own copy of the deed, rather than requiring all of them to have signed the same physical copies. Days or even weeks can be saved by this method, especially if there are a lot of landowner and mortgagee signatories.
The objection that local planning authorities sometimes make to this practice is that the Planning Inspectorate in its guidance is opposed to the use of counterparts – but it is important to note that the Inspectorate does not claim that counterparts are invalid or non-enforceable.
It only considers the use of counterparts to be inappropriate for a planning obligation because as a public document it is going to be registered on the register of local land charges and will potentially be read by members of the public.
The current guidance from the Inspectorate (as at 08.05.2020) is at paragraphs N.5.4 and N.5.5 of the Procedural Guide “Planning Appeals – England” of March 2020 - it is not a statement of law and there is no legal reason why use of counterparts should not be regularly used when this would save significant time and enable earlier planning permission.
The “new normal”?
How far this will resemble the “old normal” remains to be seen – but it seems certain that – as the lockdown unwinds - Land and Planning Managers across the industry will be under more pressure than ever to conserve cash and to deliver consents as cost-effectively as possible.
A streamlined approach towards planning conditions and obligations should have a significant part to play.