The use of so-called “back-to-back” agreements by local planning authorities seeking to enter into legally binding arrangements with development partners, has been given the all clear by a recent decision of the House of Lords.

Although the arguments in Standard Commercial Property Securities Limited and Others v Glasgow City Council (2006) related to the interpretation of Section 191 of the Town and Country Planning (Scotland) Act 1997, those provisions are for the most part mirrored in English law in Section 233 of the Town and Country Planning Act 1990.

In essence, this states that where a Council dispose of land that has been acquired or appropriated for planning purposes, the Council must secure the best use of the land for the “proper planning” of the area“ and ensure that the consideration for any disposal is not “….less than the best that can reasonably be obtained…”. In addition, Section 191 states that the land should be disposed of at the “best price” or “best terms” available.

The Lords were asked to consider whether a back-to-back arrangement whereby the Council agreed to secure certain land by use of compulsory purchase powers and then dispose of that to a preferred developer in exchange for costs indemnities, fell within the strict wording of Section 191.

Having considered the facts, the Lords took the view that in principle a back-to-back arrangement was acceptable and could fall within Section 191 and that the expression “best terms” permitted disposal for a consideration that was not the “best price” so that terms that would produce planning benefits and gains of value to the authority could be taken into account as well as terms resulting in financial benefits.

As regards that test, the Lords found that the background documents and facts of the case supported the Council’s conclusions that it had obtained “best terms” and importantly the Lords confirmed that there was no need for the Council to carry out a full marketing exercise or seek the determination of planning permission before it could enter into a back-to-back arrangement.

Obviously, this decision will be welcomed by developers and local authorities alike for its support of the principle of back-to-back arrangements. There is, however, a note of caution to be raised in the application of this case to English law.

The reason for this is that while Section 191 refers to both a “best price” or a “best terms” test (and much of the argument in the above case revolved around the meaning of “best terms” and whether this could include planning benefits as well as financial benefits) the wording of Section 233 in the 1990 Act is much narrower in that it refers only to the disposal of land not being for “…a consideration less than the best that can reasonably be obtained…”.

This strictly only equates to the “best price” test in Section 191 and there is a potential argument that Section 233 can be distinguished on that point. In practice, however, there has been a move in recent years to include social, economic and planning benefits in the Section 233 test, particularly as this distinguishes that Section from the more stringent financial test arising from Section 123 of the Local Government Act 1972.

The Courts may therefore be less likely to interfere in decisions that are supported by robust evidence of regeneration benefits.