The LPA as landowner and how to tackle s106s

Caroline Bywater discusses the quagmire that surrounds securing s. 106 obligations where the local planning authority is the landowner.

Working on a recent matter has highlighted the confusing and conflicting thoughts on how best to deal with s. 106 obligations where the local planning authority (“LPA”) is also the freehold landowner.

This is an important issue for all parties involved, as it is crucial to know that the decision to grant planning consent on the back of having secured s. 106 obligations is a justifiable one – ie that the obligations have been secured which are properly enforceable against not only the original covenantor, but also those who subsequently derive title from them. If not, the decision is open to successful challenge.

It is clear that a party, such as an LPA, cannot covenant with itself (and remember that s. 106s obligations must be entered into as a deed - s. 106(9) TCPA 1990).This is even the case where a party has two separate functions, such as both a planning arm and a landowning arm, because in the event of a breach of covenant, the LPA would not be able to enforce against itself: there are no party vs. party enforcement routes available for this to occur. This applies equally to the possibility of a landowning LPA giving a unilateral undertaking, rather than an agreement, to bind the freehold: the enforcement issues are the same.

Who then can give the covenants, in a way which will successfully bind successors in title?

The problem can often be solved fairly simply where the relevant land is in an area with two-tiers of planning authority. Where this occurs, it is possible for a landowning LPA to enter into an agreement which identifies the other tier authority as the LPA by whom its obligations are enforceable. This issue was addressed in Re Abbey Homesteads (Developments) Application (1986) 53 PC&R, where the Court of Appeal held that where the county council acquired land that was subject to a planning agreement, it was possible for the district planning authority to be the party enforcing those obligations.

In unitary areas however, it would seem to be impossible to bind the freehold title interest in s.106 context.

That said, an acceptable solution could be found, in some cases, where there is, at the application stage, a developer with a significant leasehold interest in the land. Here it may be acceptable for that party to give the obligations and bind its long leasehold interest, even if it cannot bind the freehold. Before accepting a proposal along these lines, the planning authority will need to consider the extent of the obligations being given, and may wish to consider the terms of the lease and the risks of the leasehold interest being terminated before all obligations have been satisfied, in order to satisfy itself that there is some security of provision.

Where a developer is on board at the application stage and the landowning LPA intends to dispose of its interest prior to the commencement of development, it may be possible to negotiate the terms of the s. 106 and then grant consent subject to a Grampian condition restricting development until a non-LPA freeholder has entered into a s. 106 agreement in the agreed form (which can be appended to the decision notice), in order to bind the freehold at that later stage. This allows for certainty over what the obligations will be, because the document will already be drafted, and allows for the comfort (the risk of breaches of condition aside) of having the freehold interest bound prior to the commencement of development.

This route has its supporters, but is not always accepted. As recently as December last year, the Secretary of State dismissed an appeal against a refusal of consent for a strategic rail freight interchange in Hertfordshire and this was an issue. In his decision letter, the Secretary of State raised concerns (contrary to the Inspector’s view) over the use of conditions preventing development until a s. 106 agreement had been entered into, on the basis that this would be contrary to paragraph 13 of circular 11/95. In his view, such conditions were unlawful.

Another option we have seen used in practice is that a s. 106 is entered into with a non-freeholder developer giving the covenants, but with agreement being subject to a clause restricting the commencement of development until the developer has acquired the freehold and has entered into a further s. 106 on the same terms to bind that superior interest. As that restriction can still only bind the leasehold interest, this can, and should, be backed up with a resolution from the relevant freeholder authority’s estates committee not to allow implementation except after completion of that further s. 106.

Whilst a s. 106 agreement is of course the usual way to secure mitigation in connection with a proposed development, there may also be other documentation which could contain the obligations (a development agreement, perhaps), but that will be specific in each case.

This may be one situation in which CIL can provide the answer, or part of it at least.

Caroline Bywater is a Senior Solicitor at Mills & Reeve. She can be contacted on 01223 222365 or by This email address is being protected from spambots. You need JavaScript enabled to view it..