A recent High Court case held that a council could not demand payments from a developer to monitor section 106 payments. Whether this will have an impact in practice remains to be seen as costs of appealing are likely to dwarf the monitoring fee itself.
Most section 106 agreements include fixed monitoring fees as a separate planning obligation. Monitoring fees are the administration costs charged by the local planning authority to ensure that planning obligations set out in a section 106 agreement are complied with. Planning obligations are used where it is not possible to address unacceptable impacts through a planning condition. The Community Infrastructure Levy Regulations 2010 (SI 2010/948) ("CIL Regulations 2010") set out limitations on the use of planning obligations. Regulation 122 of the CIL Regulations 2010 provides that a planning obligation must be "necessary to make the development acceptable in planning terms". This test of "necessity" was the focus in the High Court case of Oxfordshire County Council v Secretary of State for Communities and Local Government and Others  EWHC 186 (Admin).
Oxfordshire County Council challenged an Inspector's decision that payment of monitoring fees did not accord with Regulation 122 of the CIL Regulations 2010 and therefore could not be enforced. In this case the planning obligations that were deemed to be lawful were one off payments due before commencement of the development. The Inspector held that there was therefore no justification for an additional monitoring fee. The court agreed with the Inspector and dismissed the claim. The court also noted the enforcement powers available to local planning authorities in the event that obligations are not carried out.
It will be interesting to see the impact of this case. The court did not suggest that all administrative and monitoring functions could not be the subject of a planning obligation and so each case will need to be reviewed on its own merits. Notwithstanding the ruling, a spokesman for Oxfordshire County Council said "the Council sees monitoring charges as entirely appropriate and reasonable and will continue to seek fees in association with obligations". Councils are often heavily reliant on such monitoring payments and so are likely to try to insist on them. Monitoring fees are likely to be dwarfed by the costs of any potential appeal and so developers may accept any proposed monitoring charges unless they are going to appeal anyway. A pragmatic approach on behalf of the developers may result in the continuance of this widespread practice of charging monitoring costs as an obligation. A further response to this ruling may be that local planning authorities choose the CIL route instead of using section 106 agreements.