Section 106 Agreements
Understanding Section 106 Agreements: Ten Essential Insights For Property Developers
1. What is a Section 106 agreement?
A Section 106 (S106) agreement is a document that a developer may be asked to provide when applying for planning permission.
It’s often drawn up between a developer and a local planning authority (LPA). It regulates how the land is used and is a document that, in procedural terms, is signed and sealed as a deed.
It contains planning obligations, which could include asking the developer for a financial contribution and/or to provide services to support the community. Typical obligations could include the provision of affordable housing, roads, or schools to ensure developments benefit the local area.
A S106 agreement can also address Biodiversity Net Gain (BNG) issues.Not all development will require an S106 agreement, but it is quite common for an agreement to be required for larger developments.
Where necessary, developers must enter into S106 agreements to comply with local policy. The LPA’s plan will set out what contributions are needed to mitigate the impact of development in their area.
2. Why do developers need to enter into a Section 106 agreement?
Not all developments will require an S106 agreement, but it is quite common for an agreement to be required for larger developments. Where necessary, developers must enter into S106 agreements to comply with local policy. The LPA’s plan will set out what contributions are needed to mitigate the impact of development in their area.
3. How are Section 106 contributions used?
The contributions from S106 agreements fund local infrastructure, such as improving transport, building affordable housing, and enhancing green spaces.
4. Are Section 106 contributions mandatory for all developments?
The requirement depends on the scale of the development and its potential impact on the local area. Smaller projects might not need to contribute, but larger developments that impact local infrastructure usually will. The LPA will advise developers when an S106 is required.
5. How is the amount of the Section 106 contribution determined?
The amount a developer is required to pay is usually specified by the LPA based on the policy governing the area. This is based on factors like the size of the development, its impact on local services, and the community’s needs. There may be some room for negotiation, but this depends very much on the context and may be limited.
6. Can Section 106 agreements be renegotiated?
The requirement depends on the scale of the development and its potential impact on the local area. Smaller projects might not need to contribute, but larger developments that impact local infrastructure usually will. The LPA will advise developers when an S106 is required.
7. What happens to a Section 106 agreement if the property is sold?
When a property with an S106 agreement is sold, the obligations under the agreement transfer to the new owner. This is because S106 agreements are legally binding on the land and bind the successor in title, i.e., the new owner, not just the developer who originally signed the agreement.
This is one reason why prospective buyers must conduct thorough due diligence when purchasing a property with an S106 agreement to ensure they understand the obligations they are taking on.
8. Can a developer be refunded their Section 106 contributions?
In some cases, developers can claim refunds if the local authority has yet to use the contributions within a specified time or if the development project does not proceed as planned.
9. What is the difference between a Section 106 agreement and the Community Infrastructure Levy (CIL)?
While both S106 and CIL are used to fund local infrastructure, CIL is a fixed charge based on the development’s floor space, whereas S106 agreements are connected to the land’s use and tailored to specific projects.
Another difference is that CIL payments are required at fixed times during the development’s lifetime, while payment for S106 contributions will fall due as set out in the S106 document itself.
10. Are Section 106 agreements public?
Yes, S106 agreements are public documents although the public may only find a redacted version online. However, they must be registered as local land charges, which allows prospective purchasers to find out about them. In addition, local residents can often look them up on the LPA’s website, to see what obligations developers have agreed to as part of the planning permission.
If you are asked to provide a S106 agreement, Fortune Green Legal Practice can help
I have just bought a new property, and there is a planning obligation/ section 106 agreement. Am I bound by the agreement?
In short, an s.106 agreement is named after section 106 of the Town and Country Planning Act 1990 as amended. It is a document that the local planning authority may ask a property owner or developer to draw up in order to give certain covenants for the purpose of overcoming obstacles that might otherwise prevent the grant of planning permission. Sometimes a property owner will submit an s.106 planning obligation to the local planning authority without being asked to do so if it helps to obtain planning permission.
This question arises if a person has bought a property from a previous owner, or they have inherited a property, which is subject to an s.106 planning obligation. The answer is that generally, the s.106 document will state that “successors in title” are also bound by all the covenants. This means that the requirement to comply with the covenants will be taken over by the new owner.
What can I do if I don't want the use of the property to be restricted?
Whilst this is a question that is often raised by new owners, the original owners of the property also sometimes want to revisit a planning obligation that doesn’t seem fit for purpose any longer.
Fortunately, there are options to deal with this situation. It is sometimes possible to vary the planning obligation to make it more suitable for the circumstances. Another alternative is to discharge it all together. It can be helpful if the local planning authority agrees with your proposals for change, but there may also be steps you can take to achieve this outcome even without their initial support.
To sum up: new owners are bound because they are the “successors in title,” however, just like the original owners, they can apply to vary the covenants they are bound by, or to discharge the agreement so that it no longer has an effect.
For further advice on s.106 agreements, contact FGLP now on 0203 983 0595 or email at .
What sort of covenants are included in a section 106 planning obligation?
Although many s.106 planning obligations are concerned with financial contributions towards local services, or with the provision of affordable housing, they may also be used to restrict the use of the property in some way. For example, there might be a covenant in the s.106 to limit the use of accommodation so that it can only be lived in by an agricultural worker. Another frequent example is a restriction on the use of a property as a holiday let only, as opposed to permanent living accommodation. While it may be the case that the previous owner has already made a one-off payment, which will not be raised again, covenants restricting the use of a property will persist, and will still affect the property. Clearly, if you buy a property with this type of restriction, this will have an effect on its market value.
