What are planning obligations?

Kriti Sherchan talks about planning obligations, S106 agreements and the Community Infrastructure Levy (CIL)

A planning agreement made under S106 Town & Country Planning Act 1990 is a legal obligation entered into by a land owner designed to mitigate the impact of a particular development proposal, not just on the development site, but, on the surrounding area.

If a land owner has already entered into an option or a conditional contract, the developer will also need to be a party to the agreement.

The planning agreement runs with the land; it is legally binding on subsequent owners as well as the Council and registered on the local land charges register. It will be revealed to any party interested in buying the site later whether it is to a developer or to a private individual buying a home to live in.

Section 106 Agreements are negotiated and entered into with the relevant local Planning Authority and (depending on the nature of the obligations) with the County Council/relevant Highways Authority. These bodies will use their in-house legal department or external lawyers to act for them. 

In some cases, and usually when a developer has made an appeal against a refusal to grant planning permission, a unilateral undertaking will be signed. This is signed solely by the land owner/developer and is not binding on the Council as the Council has not entered into it and given covenants or promises to do or not do any particular thing.

For planning obligations to be entered into, the obligations have to be relevant and proportionate to make the development acceptable for planning purposes.  This means they must be:

1. Necessary;
2. Directly related to the development; and
3. Fair and reasonable relating to the scale and type of development.

A Section 278 Agreement is a type of planning obligation that is used where a developer will be required to carry out improvement works to existing highways land, for example, to put in a new roundabout for access.

Community Infrastructure Levy

The Community Infrastructure Levy (CIL) is a planning charge originally introduced by the Planning Act 2008; and governed initially by the Community Infrastructure Levy Regulations 2010.  There have been several revisions of CIL since then and not all the elements require CIL. There are certain reliefs or exemptions available. 

CIL relates generally to wider infrastructure projects and Councils can raise money on a number of smaller schemes to achieve a level of financing which will be sufficient, for example, to put in a new bypass.

CIL has not yet been adopted by all Councils and has not given land owners or developers the clarity and certainty that it was originally hoped it would provide. CIL is often used in tandem with Section 106 Agreements to provide Councils with funding to carry out certain projects.

A further consultation on CIL is currently taking place.  The proposals are that an Infrastructure Levy (IL) system be introduced.  The current consultation period runs until 9 June 2023.

The levelling up and regeneration bill is proposing to:

1. Replace the Section 106 contributions with a new infrastructure levy;
2. Set the thresholds and rates for the new infrastructure levy which will then be used by the local planning authorities;
3. A levy is being proposed to be charged on a property’s value when sold and applied above a minimum threshold;
4. Rates shall be set as a percentage of gross development value.

Section 106 planning obligation agreements will be the method by which Councils enforce biodiversity net gain (BNG) requirements on new developments from November 2023.  (Note:  for an article on BNG see here).

It remains to be seen how the use of conservation covenants and Section 106 Agreements will interact.  It is likely that Section 106 Agreements will impose the obligation for the BNG, and the conservation covenant will be used as one method of a developer delivering that.

It was originally hoped when CIL proposals were initially suggested that these might eventually replace Section 106 Agreements.  Section 106 Agreements can be expensive and can take a long time to negotiate as they tend to be unique to the specific site.   

However Section 106 Agreements are still being used on most sites and it is quite possible that the new IL proposals will still require Section 106 Agreements to be negotiated, particularly for very site specific requirements which will not currently be covered under the existing CIL arrangements.