We have noticed recently some confusion and conflicting thoughts on how to deal with s106 obligations where the local planning authority is the landowner.
It seems fairly clear that a party cannot effectively covenant with itself, even if that party has two separate functions (eg a planning arm and a landowning arm). Unless the site is in an area with two-tiers of planning authority (in which case the county council can take on the planning authority role), this rules out the possibility of the freehold interest being bound in a s106 agreement.
It also, in our opinion, rules out the possibility of the planning authority giving a unilateral undertaking to bind the freehold. The issues are the same.
In some cases, there may already be a developer with a significant interest in the land and it may be acceptable to that party to give the obligations and bind its interest, even if it cannot bind the freehold.
Where this is not possible, we are of the view that in certain case it is possible in law to grant consent subject to a Grampian condition restricting development until a non-LPA freeholder has entered into a s106 agreement in a form which has been agreed and appended to the decision notice. This allows for certainty over what the obligations will be (because the document will already be drafted) and allows for the comfort of having the freehold interest bound.
The risk of granting consent subject to a s106 that only binds a minor interest is that superior interest will not be subject to the obligations, and therefore it is questionable to what extent the obligations can be adequately secured. Would it be right, therefore, for the planning authority to rely on the obligations in its determination of the application? In our view, this could leave the decision open to a successful challenge.
There may be other documentation which could contain the obligations (a development agreement, perhaps), but that will be specific in each case.