A recent High Court challenge of a refusal to grant planning permission for a wind farm in North Cornwall has highlighted the limitations on what may lawfully be provided by way of a planning obligation under s106 of the Town and Country Planning Act 1990.

Regulation 122 of the Community Infrastructure Levy Regulations 2010 specifies that a s106 planning obligation can only be a reason for granting a planning permission if the obligation is:

(a) necessary to make the development acceptable in planning term terms;

(b) directly related to the development; and

(c) fairly and reasonably related in scale and kind to the development.

In this case the development, which was promoted by renewable energy electricity company Good Energy, proposed 11 turbines near an area of outstanding natural beauty and heritage coast and other heritage assets. Good Energy proposed, by way of a section 106 obligation, a package of measures involving the creation of a Community Benefit Fund and subsidised electricity scheme which would provide a discount of at least 20% on electricity bills payable by local eligible persons and a community investment scheme to allow local residents to become part owners of the project.

The local planning authority, the Inspector and the Secretary of State who has recovered the appeal due to its significance for renewable energy schemes had all decided that the arrangements for the Community Benefit Fund and the provision of discounts on electricity bills and the investment scheme for local residents were too divorced from the planning issues associated with the proposed development to justify taking them into account as a legitimate planning obligation.

These arrangements were, in effect, a financial compensation package/inducement offered to the local community as part of the “price” for having the wind farm development constructed nearby. At its best it could be interpreted as proper reward for the local population acquiescing in a project to deliver renewable energy even though there may be some adverse landscape impacts but at its worst it could be seen as an attempt to buy off the opposition with promises of cheap energy and other community benefits. The Inspector and Secretary of State had considered that the package or benefits did not address any particular planning issues associated with the development and so could not to be considered directly related to the development.

In addition the detail of the commitments being made in the unilateral planning obligations entered into was considered to be too vague and also capable of being withdrawn in the future and so lacked a sufficient degree of credibility to be given any weight even if the proposals were capable of being considered.

The part of the challenge over the Community Benefit Fund was dropped following a decision of the Court of Appeal, in the Forest of Dean case, to refuse to recognise as appropriate a financial contribution to create a community donation.

The High Court agreed with the appeal decision rejecting the claim that the remaining elements, namely the discount scheme and community investment proposals were proper obligations to be taken into account. As a result, the refusal of planning permission has been upheld despite the significant merits of the project in relation to sustainability being recognised.

Although this decision relates to a wind farm development, the principles outlined in this decision apply equally to other forms of development.

The constraints imposed by Regulation 122 need to be carefully taken into account in negotiations over proposed planning obligations relating to development. The local planning authority should not seek or encourage planning obligations other than those which fall within the scope of Regulation 122. If it refuses permission on account of the absence of such obligations it could find itself losing an appeal and suffering costs penalties.

Developers and promoters of developments should not offer such obligations and, if they do, they have to be aware that any commitments falling outside the scope of Regulation 122 may be entirely disregarded either by the planning authority or by an Inspector on appeal.

Ironically, a developer may sign up to a specific unilateral undertaking which is rejected under Regulation 122 by an Inspector on appeal, but if permission is nevertheless granted, unless the terms of the obligation say otherwise, the obligations will remain binding contractually.