Planning Law – Section 106 agreements – how to minimise their cost and impact on your development

Written By Samuel Okoronkwo

29 Apr 2020

The use of Section 106 agreements is designed to make a development proposal that may otherwise not work in planning terms more acceptable. For property developers, non-compliance with these agreements is not an option. They are effectively a formal planning obligation and a condition of planning permission being granted and, as a result, there may be consequences for ignoring, or failing to fulfil the terms of a Section 106 agreement. This includes the potential for a local authority to carry out the works themselves and then send a developer the bill. However, Section 106 agreements are not a completely immovable force – if your development is subject to planning obligations like this there are often opportunities to minimise their cost and impact.

Section 106 agreements, in brief

The reasoning these planning obligation exist stems from the benefit to a developer of planning permission being granted. Local planning authorities know that when planning permission is received – if the land is made good use of – a developer can significantly increase its value in comparison to a plot without planning consent. As a result of this uplift, the local authority is essentially looking for a developer to give something back to the community and that’s where the Section 106 agreement comes in.

Minimising the costs and impact on your development

  • Can the Section 106 agreement be discharged? Under certain circumstances it’s possible to apply to a local authority to have a Section 106 agreement discharged. This would lift the planning obligations from the development and remove the need to adhere to the original terms. A local authority is only likely to agree to this where the original obligation no longer serves a useful purpose, for example where circumstances have changed significantly since the agreement was first made.
  • Options to modify the obligations. It’s also possible to minimise the impact of a Section 106 agreement by making an application to modify. This can be done five years after the date of the original agreement or within five years if the local authority agrees. An application to modify is most likely to be successful where it ensures that the original intended purpose will still be achieved. Identifying a solution that allows for this but makes less impact on the development is the ideal approach.
  • Making a fresh planning application. Sometimes it may be preferable to make a new planning application, particularly if there were issues with the initial documentation. Usually, this will only be appropriate where the obligations in the current agreement have not yet been triggered. Where that is the case, a new planning permission with a fresh Section 106 agreement will supersede the previous paperwork. In some circumstances this can provide an opportunity to obtain planning permission in a way that is less onerous and expensive for the developer.

A Section 106 agreement is an inescapable reality for most developers but doesn’t have to create a serious obstacle to progress if it can be effectively managed.

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