20 Aug 19 by Stephen Maycock

When Does Section 106 Apply?

Development usually comes at a cost to the wider community within which it sits. This can be at a greater demand and therefore cost for public services or damaging impact on the greater community good. Planning approvals always come with conditions controlling the development itself and where appropriate legal (s106) agreements that provide payments towards community costs. But, what is a Section 106 and when does Section 106 apply?

What Is A Section 106?

Section 106, Town and Country Planning Act 1990 (as amended) (the Act) makes provision for a legal agreement between the applicant, the landowner and the local planning authority.

The payments sought must have some authority, usually through the Local Development Plan policies, and relate to the actual impacts the development will have.

Section 106 Payments & Charges

Commonly payments are sought from residential developments towards the cost of education and health services, highway maintenance, public open space and provision of affordable housing. The latter can be a financial contribution but is more often a requirement to build affordable houses. This is known as a cross-subsidy as they cost more to construct than they are worth when complete. Out-of-town retail developments often pay towards improvements to town centres they effect.

S106 charges are based on the specific needs of the local community i.e. the cost relates directly to the scheme although these are often calculated for the wider community and applied uniformly across that community area i.e. education contribution in Cornwall is £2,736 per eligible dwelling.

It is separate to the Community Infrastructure Levy (CIL) which is effectively a development tax based on a universal tariff. The levy is paid to the local authority who use it to deliver the local infrastructure and services.

Neither S106 nor CIL charges are used to provide utility infrastructures such as water, drainage and electricity.

When Does Section 106 Apply?

S106 agreements are tied to the land and therefore pass to successors in tile until such time as they discharged. An S106 can be modified and/or discharged (S106A of the Act) by the agreement at any time between the authority and parties seeking planning. There is an appeal mechanism contained in S106B, governed by the Town and Country Planning Regulations 1992.

S106 agreements have a significant impact on the value of development land. There is a balance between making the appropriate contributions to community costs and the viability of the development. If the development is not viable, it will not be delivered and there will be no wider community benefit.

Any negotiations on S106 contributions should be accompanied by viability appraisals (assessments) to consider the likely impact of the development profitability and /or residual land value.