We have commented on the initial impact of the changes to the Section 106 regime made by the Growth and Infrastructure Act 2013 to allow developers to challenge affordable housing obligations on viability grounds.  The new Section 106BA gave developers a right to ask councils to review housing obligations.  Section 106BC gave a right to appeal against review outcomes.  Both came into force on 25 April 2013, subject to a ‘sunset clause’ killing off the changes after 30 April 2016 unless otherwise extended.  They will now die on 30 April but uncertainties remain about the transitional picture.

Government About Turn

The Spending Review and Autumn Statement 2015 committed to extending the sunset clause. The anticipated Order has not materialised and we understand that the Government has now decided not to do so.  This may simply be a reflection of the fact that we are no longer in recession and stalled schemes should be seen as bad planning rather than bad luck. It may also reflect the odd outcomes that have crept into the process.

Odd Outcomes

The appeal route has been widely used for schemes granted consent in the current market, on the basis of a policy compliant affordable offer or viability assumptions that have then been changed on appeal.  The ability to use the appeal route for schemes that are complete has also begun to be tested.   The recent Chatham Quays case concerned a large multi-phase mixed use scheme approved in 2007 and subject to S106 variations to push back affordable housing contributions to better times. The housing element of the scheme came forward and the commercial phase remained, as accepted by the Council, ‘largely complete’ but not fully complete.  The developer successfully stripped out the remaining payments on appeal and the Inspector’s approach was upheld in the High Court.

The judgment confirms that:

  • developments which are largely complete can take advantage of the S106BA/BC process to eliminate affordable housing requirements even though the time for delivery or payment has long passed and there is no real relationship between the obligation and whether the scheme would be completed;
  • completion should be judged by looking at the whole of a mixed use scheme, not just the housing part. The Inspector failed to consider the Council’s argument that only the housing part should be considered in a mixed use scheme, not the whole. The Judge simply held that the argument was so poor that he could never have properly accepted it if he had considered it though.  It should also be considered on the basis of whether the development is in a state which could generate receipts or return, from the point of view of the developer. Wider claims about its significance should be taken with a pinch of salt;
  • the correct route of challenge to an Inspector’s S106BC decision is by Judicial Review, not S288 statutory challenge.   This point is less novel than assumed in the judgment – it arose in 2014 in the failed Mast Pond Wharf challenge.

The judgment leaves open the question of whether a viability appeal can be entertained after a scheme has been fully completed.  Common sense would suggest not, but the judgment notes that the Act is silent on the point.

Eye of the Needle for New Challenges

We understand that the Government will allow S106BC appeals made before the sun sets on 30 April to proceed. It is hard to see how there would be any jurisdiction to deal with ongoing applications or appeals without express transitional provisions in an order (which the Act allows for).  They are needed either way, not least to be clear about the effect of the sunset clause on modified obligations where the development as a whole has not yet been fully completed, to avoid  successes like Chatham becoming pyrrhic.

It will be interesting to see whether the Government’s viability test for Starter Homes, trailing in the consultation, sets a more rigorous test than that which local authorities have faced under the Sunshine Regime.

Authorities are increasingly using planning conditions as a work around, which are outside the S106BA regime. It would be nice if this willingness to slim down bloated planning agreements survived the sunset.