Conditional contracts

Can a council as landowner enter into a s106 agreement with itself, in its capacity as LPA? Isham Souffi looks at the issues involved.

In some instances, a developer may wish to make a contract conditional on completion of a s106 agreement whereby the council is also the landowner. 

This poses a few practical issues as the council is both the planning decision-maker and landowner which are required to perform separate functions. 

Ultimately, the literature and legislation are clear. A party cannot covenant with itself (this is required as s106 obligations are entered into as a deed per s106(9) LPA 1990). Therefore, other avenues must be explored to see who can give said covenants to bind successors in title. 

What are your options?

1. The two-tier local authority approach

The simplest way around this issue is to explore the two-tier local authority approach. It is possible in this instance for a landowning LPA (such as a district council) to enter into an agreement with another tier authority (county council) to make their s.106 obligations enforceable (see Re Abbey Homesteads (Developments) Application). 

The main issue here is where a council is in a unitary authority area, this avenue just isn’t possible. So, we must explore other strategies. 

2. At the application stage, a developer with a significant leasehold interest in the land

In this instance, it may be acceptable for that developer to give the obligations and bind its long leasehold interest (via an agreement for lease or lease), even if it cannot bind the freehold. This can be done through a ‘development company Ltd’, which is related to the developer, or an entity specifically set up by the council for the s106 agreement. 

This ultimately removes any sticking points in relation to the ability of the local planning authority to enforce any breaches within the s.106 agreement. 

3. Enter into a s111 agreement 

If a developer is already in the picture, another option could be to enter into a s111 agreement before the grant of permission, which would provide that the developer enters into the s106 (a draft copy of which will be appended to the s.111 agreement) once it acquires an interest in the application site, following the grant of permission.

4. Involve a Grampian condition to the planning permission

Finally, a Grampian condition can in exceptional cases be used to secure a s106 agreement. The condition would prohibit development until a s106 agreement has been completed. 

The planning practice guidance (PPG) provides that ‘in exceptional circumstances, a negatively worded condition requiring a planning obligation or other agreement to be entered into before certain development can commence may be appropriate, where there is clear evidence that the delivery of the development would otherwise be at serious risk (this may apply in the case of particularly complex development schemes)’.

Please see the guidance in the PPG for the use of Grampian conditions.

Which solution?

Clearly, there is no real blanket option. An assessment is required and a few options are available to explore to find the most appropriate action. 

Isham Souffi is a Legal Assistant in the Property Team at Anthony Collins.