Summary and implications

In the largely un-litigated area of law relating to section 106 Agreements, one case is worth highlighting (Waltham Forest LBC v Oakmesh Limited and Family Mosaic Housing [2009]), mainly for the hard line taken by the court but also because of some of the other issues raised relating to enforceability.

This case is interesting because it:

  • demonstrates that courts are willing to take a firm stance against owners and developers who default on their obligations under section 106 Agreements – in this case the court ordered a mandatory injunction requiring the owner to perform the obligation;
  • highlights (without going so far as to make a ruling) the importance of clearly identifying both the land in which the person making the obligation has an interest and the land upon which the obligation is to be carried out, so as not to compromise the validity of the obligation; and
  • confirms that a section 106 Agreement cannot be enforced by a Council in its capacity as planning authority against itself, if it has a legal interest in the land upon which the obligation is to be carried out – although this does not mean that a Council cannot be bound by a section 106 Agreement in its capacity as landowner.

Background

Planning permission was granted in 1996 for a residential development upon completion of a section 106 Agreement. The section 106 Agreement required the owner to construct a footbridge link between the residential development and the nearby railway station on a strip of land at no cost to the Council.

This strip of land upon which the footbridge was to be constructed was not identified in the section 106 Agreement although it was identified in other agreements completed on the same day. The residential land was transferred to a housing association, Family Mosaic Housing. However, the strip of land was retained by the original owner, Oakmesh, who covenanted to carry out this obligation itself and provided a licence to Family if it failed to do so. Both Oakmesh and Family failed to carry out the obligation to construct the footbridge on the strip of land. During this time, this strip was adopted by the Council as a public highway by virtue of a section 38 Agreement.

Later, Family made an application under section 106A Town and Country Planning Act 1990 to discharge the obligation to construct the footbridge as it no longer served a useful purpose. This application was refused and the Council later commenced proceedings to enforce this obligation by way of a mandatory injunction and succeeded.

Is a section 106 Agreement valid if it fails to identify the land bound?

Planning obligations should contain the component parts set out in section 106(9) Town and Country Planning Act 1990. They must:

  • be entered into by deed which states that the obligation is a planning obligation for the purpose of this section;
  • identify the land in which the person entering into the obligation is interested; and
  • identify the person entering into the obligation and state what his interest in the land is and identify the planning authority.

The section 106 Agreement did not properly identify the land upon which the person making the obligation had an interest or the land upon which the obligation was to be carried out. The defendant argued that because the agreement did not contain the formalities required by section 106(9), it had no effect. The judge did not have to make a ruling on these arguments because he refused to allow this defence. However, he clearly thought there was merit in this argument and that the validity of agreements that do not clearly identify the land could be challenged.

One of the reasons this defence was not allowed was because the defendant had previously applied under section 106A for the obligation to be discharged. Such an application presumes that the obligation is valid. It is not clear whether the judge would have reached a different decision on this point had the section 106A application not previously been made. There may be merit in challenging the validity if the land bound is not properly identified

Can a section 106 Agreement be enforced by a Council against itself if it has a legal interest in the land bound by the Agreement?

The defendants argued that since the title in the land upon which the footbridge was to be constructed now vested in the Council by virtue of the section 38 Agreement, the obligation was effectively enforceable against the Council. The judge did not accept this argument on the basis that title vested in the Council for the purposes of the performance of its functions as highway authority. The vesting of title under the Highways Act 1980 was not the same as 'deriving' title under the previous owner (Oakmesh), within the meaning of section 106 of the Act.

The section 38 Agreement contained no words of transfer of title from the defendant to the Council and nothing other than the surface vested in the Council. The judge also said that it would be a nonsense for the Council to take enforcement proceedings against itself. In addition on construction of the agreement, the obligation was to be performed at 'nil cost to the Council'. Note however that the judge did not say that Council owned land cannot be bound by section 106 Agreements.

For these reasons the judge ordered the obligation to be performed by way of a mandatory injunction, a remedy the courts do not grant lightly.