Section 106 Agreements
Section 106 agreements, also known as planning obligation documents, usually occur if a planning authority will only grant permission for development if certain guarantees are made by the person making the application. It provides an assurance for the local authority, but also helps facilitate a positive answer for the applicant.
Our planning solicitors are highly experienced in the drafting and negotiation of section 106 agreements. We advise clients on whether it is appropriate for them to enter into section 106 agreements, what their responsibilities will then be under the agreement, and whether or not the obligations required by the local authority are reasonable.
We have included a basic guide to some of the issues involved in a section 106 agreement. It is by no means comprehensive, but should assist you in understanding what type of issues an experienced lawyer will raise.
The Government Guidance
Government guidance states that a Section 106 agreement must meet the following tests:
- It must be relevant to planning,
- It must be necessary to make the proposed development acceptable in planning terms,
- It must be directly related to the proposed development,
- It must be fairly and reasonably related in scale and kind to the proposed development; and
- It must be reasonable in all other aspects.
Assessing the requirements being asked for
Our planning lawyers look at relevant planning policies and the client’s planning application, and then advise and discuss with the client whether the requirements being asked for are both necessary and acceptable.
We then negotiate and draft the section 106 agreement to ensure that the obligations the client is required to enter into meet all the tests and that he or she is not being asked to give more than is required. We also make sure that the agreement does not contain any obligations which will provide serious problems for the client in the future.
We understand the business needs of our client and recognise that delay in completing a section 106 agreement can hold up development, in situations where time is usually money. Our solicitors have up to date knowledge of the attitudes of different local authorities and we use this to help our clients meet their development goals speedily and cost effectively.
How is a section 106 agreement arrived at?
When assessing planning policy for a client’s application or during consultation with the planning officers it often becomes apparent that a planning obligation (section 106 Agreement) document will be required. Once it is known that the planning authority requires a Section 106 agreement, the first step is to decide whether their requirements are in line with government guidelines.
Often planning departments will ask for far more than is appropriate which can lead to the development no longer being viable, or incur large unnecessary expense. We work with surveyors and other experts to assess the evidence and if necessary negotiate with the planning department if its expectations are unreasonable, persuading it to reduce the requirement.
What type of conditions does the section 106 agreement contain?
Examples of planning obligations for a housing development may be that some of the houses would need to be sold at a reduced price so that they are affordable or that contribution would have to be made to local infrastructure.
For a business park or a supermarket, it may be that a new road needs to be built or improvements need to be made to the highway. At this point a transaction can become unviable if the developer would no longer be able to make a reasonable profit from the development.
Reducing or eliminating onerous planning obligations
In some situations we will work closely with viability experts to assess all the evidence and present why we think the planning authority’s requirements are unreasonable. When we have gathered and evaluated all of the evidence we begin negotiation with the planning department.
The goal must be to reduce the planning obligation, or ideally argue that a planning obligation is altogether not appropriate. As a last resort, if the planning department is unwilling to reduce their requirements, we may advise the client that rather than accepting an unacceptably onerous planning obligation to appeal to the Planning Inspectorate, and call the bluff of the local authority.
If we do agree that a planning obligation is appropriate, and it doesn’t make the development unviable, we then proactively work with the planning authority’s legal department to come to a sensible compromise on what the agreement should contain. Amendments can usually be achieved. Some amendments actually unnecessary delay matters but don’t actually improve the client’s position.
Making sensible amendments
Our ethos is to make sensible amendments rather than taking the type of scattergun approach where the lawyer makes a lot of amendments hoping some would be agreed. We focus on the amendments that are important to the client and in the best interest of the client. We have found that this approach is more constructive. It allows us to focus on what is important. This means that we are more successful in changing the document where it matters.
The focus must be on making the negotiation process constructive rather than unnecessarily adversarial. This nearly always guarantees a more favourable outcome for the client. It also allows us to have a fairly quick turnaround for section 106 agreements, avoiding delay to development.
Once we have agreed the planning obligation we prepare a comprehensive report for the client on the new obligations under the agreement and how these affect the land. As part of this service we also provide the client with advice on the planning conditions and what is required to commence the planning permission. This also includes ongoing responsibilities.