The Enforcers
In the current climate, developers and landowners may be looking to renegotiate – or even get out of – their s.106 obligations. Caroline Bywater explains why correct drafting is key to enforceability.
In a climate where any number of developers are approaching local planning authorities with a view to negotiating deferrals of their section 106 requirements, it is interesting to consider where those authorities would stand if the developer defaulted on an obligation. Could you enforce this?
As those lawyers working in the planning field will be only too aware, section 106 obligations are creatures of statute and that statute is actually quite restrictive in what it permits. Since the section was rewritten in 1991, a section 106 obligation, to be enforceable, can only do four things: restrict the development or use of land; require specified operations or activities in, on, under or over the land; require the use of land in a specified way; or require the payment of money to the planning authority on a date(s) or periodically.
It is not uncommon, however, to come across obligations contained in agreements which purport to be made under section 106 but which do not fall within one of these four categories. For example, we frequently see requirements to submit a travel plan, to provide a bond as security for payments, or to offer to transfer land to an RSL.
They do not appear to fall within section 106 and indeed there are cases on land transfer and revocation of planning permissions which confirm that they do not. Of course, with appropriate drafting, these things or something similar can be achieved. From a developer’s perspective, drafting the same obligations so that they fit squarely within section 106 usually means making them sound much more weighty – a simple requirement to submit a travel plan becomes an obligation not to occupy more than [x] houses until the travel plan is submitted, for example.
If an obligation does not fall within section 106, there are serious enforceability restrictions for the planning authority, and the developer should not take that point lightly as it also means that his planning permission is at risk of a successful challenge, assuming the consent was granted only on the basis that the suite of section 106 requirements would be met.
Providing the obligation has been made by deed, or there is other consideration, the planning authority can still use the usual contractual enforcement regime to enforce against the original covenantor, save where that person no longer has an interest in the land and if the agreement specifically provides that he will no longer be liable once he has parted with all such interest.
In London, planning agreements can also be entered into pursuant to s16 Greater London Council (General Powers) Act 1974. This provides that agreements made under seal in connection with land can be enforced against successors in title to the covenantor, in much the same way as section 106 does, but without the restrictions on the type of obligations that it applies to.
The failure to comply with procedural requirements elsewhere in the section can also give rise to difficulties. Section 106(9) sets out a number of pitfalls that must be avoided in order to make an agreement a planning obligation. An interesting case was considered last year (Southampton City Council v Hallyard Ltd [2008] EWHC 916 (Ch)) in which the agreement identified the company entering into the obligations but did not specify what that company’s interest in the site was. The High Court held that the agreement did not comply with section 106(9)(c) and the obligations were therefore not planning obligations. The result was of course that the planning authority could not enforce the obligations against the person to whom the covenantor had, by then, transferred its interest.
More recently still, this summer Waltham Forest narrowly avoided being unable to enforce a section 106 agreement which did not properly identify the land. It was only the fact that the landowner had not taken the point earlier and had repeatedly undertaken to perform the obligation which saved the agreement at the High Court (Mayor and Burgess of Waltham Forest London Borough Council v (1) Oakmesh Ltd (2) Family Mosaic Housing [2009] EWHC 1688 (Ch)).
Landowners and developers who now want to renegotiate their section 106 agreements might be looking carefully to see if they are in fact enforceable. If not, they will have a significant bargaining tool. Planning authorities negotiating section 106 agreements at the moment will need to check that the drafting is firmly within section 106, and that procedural tests are met, to avoid losing out on important planning gain.
Caroline Bywater is a senior solicitor at Mills & Reeve. She can be contacted by email: This email address is being protected from spambots. You need JavaScript enabled to view it..
