A Section 106 agreement is an agreement entered into between landowners or developers and local planning authorities (“LPAs”) as part of the planning process.

A Section 106 agreement is the most common form of planning agreement and is made under Section 106 of the Town and Country Planning Act 1990, also known as a “planning obligation.”

This article focuses on planning obligations, but please note there are other forms of planning agreement, such as Section 278 and Section 38 Agreements, which relate to highway works.

What is a planning obligation?

Section 106 agreements are used to balance a development’s impact on the local area. They are used when the impact is significant enough to warrant the fact that it cannot be moderated by means of conditions attached to a planning decision.

For example, a new residential development can place extra pressure on the social, physical and economic infrastructure which already exists in a certain area. A planning obligation will aim to balance the pressure created by the new development with improvements to the surrounding area ensuring that where possible the development would make a positive contribution to the local area and community.

Planning obligations can be a pre-requisite to the grant of a planning permission, although not all planning permissions will require planning obligations to be entered into.

Some planning obligations are entered into by the landowner/developer as well as the LPA, and in this instance the planning obligation will contain requirement on both the landowner/developer and the LPA. In certain circumstances it is also possible for the landowner/developer to provide a unilateral undertaking to the LPA. A unilateral undertaking will contain various obligations on the landowner/developer, however, as the LPA is not a party to a unilateral undertaking, there will be no obligations binding on the LPA. It is therefore important to consider who should be a party to the planning obligation to ensure that the correct form of planning obligation is used.

What will a Section 106 Agreement Contain?

The requirements that may be imposed on a landowner/developer in a planning obligation include:

  • payments for the additional load on local authority services,
  • contributions towards education or transport in the local area,
  • contributions towards provision of on- or off-site affordable housing.

In addition, there may be restrictions on the use or development of land, or a requirement to use the land in a certain way, for example, for the provision of a wildlife buffer.

Who Needs to be a Party to the Section 106 Agreement?

Anyone with an interest in the development land must enter into the Section 106 Agreement. This means that the landowner as well as their lender (if there is a mortgage secured against the property) must be a party to the Section 106 Agreement. When a developer is not the landowner, but has the benefit of an option or a conditional contract to purchase land, the developer is often also a party (as well as the current landowner).

The obligations set out in a Section 106 Agreement are given by the landowner (and developer, where appropriate), and if they are not complied with, the LPA may take action against the landowner. It is therefore important to obtain legal advice before signing a Section 106 Agreement.

Who is bound by the terms of a planning obligation?

It is important to note that a Section 106 Agreement binds the land itself, rather than the developer or owner of the land. This means that future owners of the property will be bound by its terms. When purchasing a property subject to a Section 106 Agreement, the terms of such an obligation must be carefully scrutinised to ensure that the buyer is comfortable with the obligations that they will be taking on.