The amended scope of section 106 renegotiation procedures

The government has overhauled the framework for the renegotiation of s. 106 agreements. Chris Slater and James Garbett consider the changes.

On 28 February 2013 new regulations came into force which altered the scope of section 106A(3) of the Town and County Planning Act 1990 – which allows a landowner/developer to apply to the local planning authority for the modification or discharge of an existing section 106 agreement where it meets certain criteria.

Background

Once completed, planning obligations (commonly known as section 106 agreements) can be very difficult to renegotiate or modify. Historically, two potential means of renegotiating or discharging section 106 agreements have been available to landowners/developers against whom the obligations are enforceable.

The first method requires the voluntary cooperation and consent of the local planning authority, together with any other party against whom the agreement is enforceable. Agreed amendments to section 106 obligations can be negotiated at any time, and are normally effected by way of a deed of variation made between the parties currently holding the benefit and the burden of the contract.

Secondly, section 106 agreements over five years old are eligible for a specific statutory process under section 106A(3) – which allows an application to be submitted to the local planning authority requesting that it be modified or discharged. Upon receipt of a valid application, the local planning authority must consider whether the obligation(s) contained in the section 106 agreement still serves a "useful purpose". In making such a determination, the local planning authority can reach one of three conclusions:

• that the planning obligation shall continue to have effect without modification;
• that the obligation no longer serves a useful purpose, in which case the local planning authority shall discharge it; or
• that the obligation continues to serve a useful purpose, but would serve that purpose equally well if it had effect subject to the modifications specified in the application, in which case it shall have effect subject to those modifications.

Guidance from the Secretary of State (in the now-cancelled circular 05/2005) previously stated that the phrase "useful purpose" should only be considered within the context of land-use planning. In the absence of any replacement guidance to the contrary, Walker Morris advises that this context is likely to still be relevant; which today would include relevant local plan policies, the National Planning Policy Framework (NPPF), and any other material planning considerations.

A right of appeal exists to the Secretary of State against the determination of the local planning authority.

Changes

The new regulations amend the criteria which section 106 agreements must meet in order to be eligible for an application under section 106A(3).

From 28 February 2013 onwards, all section 106 agreements made on or prior to 6 April 2010 will be eligible to be considered by the local planning authority under the statutory application procedure.

Agreements made after 6 April 2010 will continue to be subject to the historic five-year timeframe, meaning that (pending any further legislation) the earliest that any such agreement could be eligible for a section 106A(3) application will be April 2015.

The Government's amendments to the section 106A regime are clearly designed to encourage both local authorities and developers to renegotiate section 106 agreements which have either led to stalled developments or have rendered schemes unviable. As of this month, the changes will allow agreements dated between 28 February 2008 and 6 April 2010 to undergo the statutory reconsideration process immediately, and which would otherwise have been subject to a five-year wait before the procedures became available.

The cut-off date of 6 April 2010 reflects the date on which the Community Infrastructure Levy Regulations 2010 came into force, in which Regulation 122 placed on statutory footing the requirement that (from that date onwards) any planning obligations sought by a local planning authority in consideration of the grant of planning permission must be:

• necessary to make the development acceptable in planning terms;
• directly related to the development;
• fairly and reasonably related in scale and kind to the development.

Analysis

The amended regulations follow in the footsteps of a written ministerial statement made as long ago as 23 March 2011 (Mr Greg Clark MP), which first encouraged local planning authorities to voluntarily agree to reconsider existing section 106 agreements which jeopardised the viability of development schemes – a policy now enshrined in paragraph 205 of the NPPF. However, in our experience, developer take-up and local authority responses have been mixed across the country.

According to an August 2012 DCLG consultation document, published prior to the new regulations (the results of which are yet to be published), the Government's intention behind the changes is to assist in bringing forward currently stalled developments, a high proportion of which were approved prior to 6 April 2010 in different market conditions.

However, the consultation document also made clear that this intention should not constitute a reason to permit unsustainable development, and that any modification or discharge should be tested against local plan policies and national guidance.  In other words, a strong justification ought to be made in support of any proposed change.

Chris Slater is a partner and James Garbett is an assistant solicitor at Walker Morris.