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Section 106 Agreements Explained UK
Section 106 agreements, commonly referred to as “S106 agreements,” play a central role in the UK planning system. Introduced by the Town and Country Planning Act 1990, these agreements allow local planning authorities to enter into legally binding arrangements with landowners or developers to mitigate the impact of a new development. In this comprehensive guide, we will explore the essence of section 106 agreements in the UK, how they work, their significance in the planning process, and some important considerations for developers, councils, and communities.
Understanding the Foundations of Section 106 Agreements in the UK
Section 106 agreements in the UK are legal contracts made between a local authority and a landowner, developer, or applicant. Their primary purpose is to ensure that development proposals contribute positively to the local area and counterbalance any potential negative effects. Without section 106 agreements, developments could impose strain on public services, local infrastructure, or the environment, leaving communities worse off.
These agreements take their name from Section 106 of the Town and Country Planning Act 1990. They are also referred to as “planning obligations” and are commonly employed across all regions of the United Kingdom: England, Scotland, Wales, and Northern Ireland. However, the terminology and implementation may vary slightly depending on the devolved administration.
What Is the Purpose of Section 106 Agreements UK?
The main purpose of section 106 agreements UK is to make a development acceptable in planning terms, which would otherwise be deemed unacceptable. The obligations within these agreements are intended to address specific needs resulting directly from a proposed development. Typical examples include:
- Delivering a proportion of affordable housing within a new residential scheme.
- Improving public transport links and local infrastructure such as roads and cycling paths.
- Providing financial contributions for schools, health facilities, or community centres.
- Ensuring the creation, maintenance, or improvement of green spaces and playgrounds.
- Protecting wildlife habitats and enhancing biodiversity on and around the development site.
How Are Section 106 Agreements Negotiated?
Section 106 agreements UK are typically negotiated during the planning application process. The planning authority, which is usually the local council, will identify requirements that can make the development more acceptable. Negotiations then take place between the developer and the council, often involving specialist planning consultants, legal professionals, infrastructure providers, and community groups.
The negotiation stage is crucial because the scope, scale, and content of the section 106 agreements can significantly affect the viability and success of a proposed development. Local planning authorities must ensure that the obligations meet legal tests set out in Regulation 122 of the Community Infrastructure Levy (CIL) Regulations 2010. These are that any planning obligation must be:
- Necessary to make the development acceptable in planning terms.
- Directly related to the development.
- Fairly and reasonably related in scale and kind to the development.
Only obligations that pass these tests can lawfully be imposed on developers. If the negotiations are successful and both parties agree, the section 106 agreement is formally signed, usually alongside the granting of planning permission.
What Can Section 106 Agreements UK Include?
Section 106 agreements can vary widely depending on the size, location, and type of proposed development. There is no universal template, although standard clause frameworks exist. Some of the most common inclusions in section 106 agreements UK are:
- Affordable Housing: Securing a specified percentage or number of affordable homes within a new housing scheme or a financial contribution towards affordable housing elsewhere.
- Education Contributions: Financial commitments towards creating or expanding local schools to accommodate increased pupil numbers generated by the development.
- Transport and Highways Works: Obligations for the developer to carry out road improvements or provide funding for transportation enhancements, such as bus routes, cycle lanes, or footpaths.
- Open Spaces and Recreation: Provision of new parks, sports facilities, community gardens, or children’s play areas, or the maintenance and improvement of existing green spaces.
- Environmental Measures: Funding the creation and management of wildlife corridors, investment in local biodiversity, or other environmentally beneficial projects.
- Healthcare Facilities: Contributions to ensure that new or extended local GP surgeries, clinics, or hospitals can cope with increased demand.
How Are Section 106 Agreements Enforced?
Because section 106 agreements are legal documents, the obligations they contain are legally enforceable. If a developer fails to carry out obligations or make agreed payments as set out in the section 106 agreements UK, the local authority can take enforcement action, including through the courts if necessary. The obligations are also “land charges,” which means they are binding on successive owners of the land.
Differences Between Section 106 Agreements and Community Infrastructure Levy (CIL)
Since 2010, the Community Infrastructure Levy (CIL) has operated alongside section 106 agreements UK, leading to some confusion about their respective roles. Both mechanisms aim to ensure that development pays for the impact it causes but work differently:
- CIL: A fixed, non-negotiable charge per square metre of development, applied to most new buildings. Money raised funds general infrastructure such as roads, schools, and parks. It does not relate to specific on-site requirements.
- Section 106: Flexible, negotiated agreements focused on the specific impacts and needs caused by a particular development, often including affordable housing, direct local infrastructure, and site-specific works that would not be addressed by CIL alone.
In many cases, a development may be subject to both CIL and section 106 agreements, but the use of section 106 has gradually narrowed as CIL coverage has grown.
The Legal Nature of Section 106 Agreements UK
Section 106 agreements must be in writing and are normally signed as “deeds” by all parties, giving them significant legal standing. These agreements “run with the land,” meaning if the site is sold or passed on, the obligations still apply to subsequent owners unless the agreement is formally varied or discharged with the local planning authority’s consent.
The terms of the section 106 agreement will specify:
- The scope of obligations.
- Triggers for the obligations (for example, before development starts, or after a certain proportion of homes are completed).
- Monitoring and reporting arrangements.
- Consequences of non-compliance (including financial penalties or legal proceedings).
Amending or Discharging Section 106 Agreements
Sometimes, developers encounter financial or practical difficulties fulfilling their section 106 obligations. Alternatively, circumstances related to the development or local area may change. Section 106 agreements can be amended or discharged, but the process is strictly regulated.
- If both the developer and the local authority consent, amendments can be made at any point through a formal variation.
- Once five years have passed since the agreement was first made, a formal application may be submitted to the planning authority to modify or discharge the section 106 agreement.
- If the authority refuses the modification or discharge, the applicant may appeal to the Planning Inspectorate or the relevant body (such as the Scottish Ministers in Scotland).
It is common for local authorities to undertake viability assessments to determine whether section 106 obligations are reasonable and affordable, especially on larger or marginal projects. This helps ensure that developments are not unduly stalled or rendered unviable by excessive or unanticipated section 106 costs.
The Role of Section 106 Agreements in Affordable Housing Provision
Affordable housing provision has become perhaps the most prominent use of section 106 agreements UK. As house prices have outstripped average incomes in many areas, local authorities set “affordable housing” targets for new developments, usually between 20% and 40% of the total dwellings to be delivered as affordable housing. Section 106 agreements are the main legal mechanism used to secure these commitments.
- Obligations may specify the tenure mix, including social rented, affordable rented, and shared-ownership homes.
- Conditions often require that affordable housing is kept affordable in perpetuity and allocated to eligible households on council waiting lists.
- Some agreements allow for financial payments (“commuted sums”) to fund affordable housing delivery elsewhere if it cannot be achieved on site.
The system is not without challenges: property market conditions, land values, and viability issues can limit the percentage or quality of affordable homes delivered via section 106 agreements. Nevertheless, these agreements contribute tens of thousands of affordable homes annually across the UK.
Challenges, Criticisms, and Recent Changes
Over the years, section 106 agreements UK have faced criticism for several reasons: