There has been an interesting case decided this week on a point relating to the kind of "s 106 obligations" which satisfy the terms of s 106 itself and therefore run with the land. The case is Westminster City Council v SSCLG and Anr - judgment 27 March 2013.
In this case, on appeal, the Inspector had granted permission for a development which would lead to the loss of off site parking and there was an issue around the potential for the development to give rise to parking problems on street. The Inspector took into account a unilateral undertaking containing an obligation a) not to apply for a parking permit in relation to the property (and to surrender any if granted) and b) in future disposals of the property to include a covenant by the new owner or tenant to observe the obligation.
One of the points before the Court was whether, given the terms of s 106, this was a valid s 106 obligation which could run with the land.
The Court found it was not. To meet the "tests" in s 106, an obligation must restrict the development or use of land; require operations or activities to be carried out on the land; require a use to be carried on or require a sum or sums of money to be paid to the local planning authority. In this case the obligation had none of those characteristics and so was not enforceable beyond the original covenanting party.
On that basis, the Inspector had fallen into error in taking it into account so the decision was quashed.
An alternative formulation of the obligation was aired - this time in the form of a "not to occupy" if a parking permit was applied for. This would appear to meet the requirements of the section. The judge's comments on that are interesting (although obiter since this form was not agreed by the parties in any event) and she expressed the view that if there ever was any attempt to enforce such an obligation, by "putting out onto the street... a family... because one of them had applied for a parking permit" there should be no expectation of assistance from the Court.
So it should not be assumed that calling a covenant a s 106 obligation and putting it in a deed called a s 106 agreement makes that covenant one which attracts the force of the section. This is a point we have often made in negotiations - not always welcomed by others! Other ways must be found of mitigating the potential harm.