Section 106 Disagreements

If CIL is to beat a retreat in relation to major developments as rumoured (June 2016 blog post  – although we’ll now need to wait for Parliament to resume in the Autumn before we learn any more of the CIL working group’s thinking) it’s more important than ever that the section 106 process works as well as it can. Used well, it is a powerful and effective mechanism and there is no need at all for negotiations to become protracted.
Unfortunately the Government continues to snatch at the issues. Section 106 agreements come in all shapes and sizes, from the simplest agreement to secure a specific contribution tocomplex agreements in connection with urban extensions and large mixed use projects, amounting to public/private sector agreements to govern the delivery, over decades hand in hand with development phases, of many hundreds of millions of pounds of social and physical infrastructure – and where issues such as the appropriate ring-fencing of obligations to appropriate parts of the site, enforcement protocols, reasonable future-proofing, interaction with CIL, viability review mechanisms and long-term maintenance arrangements can come to the fore in a variety of permutations.  
Legislative changes

Regulations 122 and 123 of the CIL Regulations 2010 have set trip hazards for LPAs and developers: section 106 agreements that do not comply with those regulations which are relied upon by LPAs in granting planning permission render the LPA’s decision liable to judicial review by third parties. 

Regulation 122 placed in statutory form the previous policy test that a planning obligation must be necessary to make the development acceptable in planning terms, directly related to the development and fairly and reasonably related in scale and kind to the development. Examples of Regulation 122 leading to permissions being quashed include Borough of Telford and Wrekin v Secretary of State  (Court of Appeal, 2 April 2014), Oxfordshire County Council v Secretary of State  (Lang J, 3 February 2015 – monitoring obligations) and R (Mid-Counties Co-operative Limited v Forest of Dean DC  (Singh J, 6 April 2015). 

Regulation 123(2) bites against planning obligations in relation to the funding or provision of infrastructure on the LPA’s Regulation 123 list. Regulation 123(3) introduced the “pooling” restriction, where five or more planning obligations have been entered into within an LPA’s area since 6 April 2010 that provide for contributions to the same infrastructure project or type of infrastructure.

It is often difficult to get to the bottom of whether these restrictions would be, or have been, breached as well as how “infrastructure project” or “type of infrastructure” is to be interpreted. It is difficult enough negotiating a satisfactory mechanism to overcome legitimate planning concerns without having to guard against the risk of a judicial review based on alleged non-compliance with these broadly stated requirements. 

These are not the only trip hazards of course – for example there is the often-overlooked requirement in Article 40(3)(b) of the Development Management Procedure Order 2015 for the LPA to put “proposed” planning obligations on the planning register (although not every travelling draft amounts to a planning obligation that is “proposed” eg see R (Police and Crime Commissioner for Leicestershire) v Blaby District Council  (Foskett J, 27 May 2014)). 

Further constraints are still to come, via section 5 of the Housing and Planning Act 2016 (the “starter homes requirement” to be delivered in a specified form by way of section 106 agreement) and via section 159 (which enables the Secretary of State to render unenforceable specified planning obligations in relation to affordable housing). Following the Government’s victory in Secretary of State v West Berkshire Council  (Court of Appeal, 11 May 2016) the Planning Practice Guidance now again has the exemption introduced in 2014 for developments of 10 units or fewer and developments with less than 1,000 square metres of floor space from the requirement to contribute towards affordable housing.

We also now have (albeit awaiting draft regulations) the dispute resolution mechanism introduced by section 158 and Schedule 13 of the Housing and Planning Act 2016. 

The explanatory notes to the Act explain the mechanism as follows:

“Appointment of a person to help resolve disputes

This Schedule requires the Secretary of State to appoint someone to resolve issues that are holding up the completion of planning obligations. 

The duty to make an appointment arises where certain conditions are met. There must be an existing planning application. The local planning authority must be likely to grant planning permission if satisfactory planning obligations are entered into. There must usually be a request from the local planning authority or from the applicant. 

The Secretary of State can also make regulations setting out:

who, other than the local planning authority and applicant, could make a request for the appointment of a person;

the timing and form of requests;

that a person can be appointed if outstanding issues have not been resolved within set timeframes (regardless of whether there is a request); 

further detail about appointments, including about when a request cannot be made and about when a request could be refused; 

what qualifications or experience the appointed person must have; and

any fees payable.

There are temporary restrictions on the steps that can be taken in relation to the application until the dispute resolution process concludes.

The appointed person 

The local planning authority and the applicant must co-operate with the appointed person and comply with any reasonable requests. Regulations can also enable the appointed person to award costs if one of those parties fails to comply or behaves unreasonably.

The appointed person must produce a report that sets out:

the unresolved issues and the steps taken to resolve them; and

the terms agreed, or where the terms have not been agreed, recommendations as to what terms would be appropriate.

The appointed person must take into account any template or model terms published by the Secretary of State. Regulations can also set out other details about what the appointed person must and must not take account of.

The local planning authority must publish the report in line with any requirements set out in regulations. Regulations may also provide a process for making revisions to a report.

An appointed person may be appointed to consider two or more planning applications at the same time if the same or similar issues arise under them. In such circumstances a single report may be produced.

After the appointed person’s report

After the appointed person issues a report, a local planning authority must comply with the obligations in this Schedule.

Where planning obligations are entered into in line with the report, then the local planning authority must not refuse permission for reasons relating to the appropriateness of the planning obligations.

The parties may agree different terms, but they will only have a limited period to do so, which will be set out in regulations.

Where no obligations are entered into within a set period, the application must be refused. This is to ensure that the matters come to a conclusion quickly.

Regulations can also set out restrictions on the local planning authority’s ability to ask for additional obligations at this time. Any such restrictions would be designed to ensure that the report is given proper effect by the local planning authority. Regulations can also set out:

periods for determining planning applications after a report is issued; 

circumstances or cases where the consequences in this Schedule don’t apply; and

any further steps required to be taken by the appointed person, the local planning authority or the applicant in connection with the report. 

Where an appeal is lodged, the person determining the appeal must have regard to the report but is not bound by it.”

Will this complicated process be much used or lead to quicker, better, negotiations? My reading of a number of the responses to its February 2015 technical consultation  was that it had less than whole-hearted support from even the private sector. You may remember that due to the impending General Election we then had the Government’s response  in record time the following month, with its proposed way forward in section 4.

In reality, an impasse in section 106 agreement negotiations is rarely down to one defined issue capable of resolution but can relate to a whole host of inter-linking factors, potentially involving parties beyond the LPA and applicant for example other authorities (county and district not seeing eye to eye on “county” issues is a growing concern), land owners and/or funders. 

Other legislative changes come and go, for example the time-limited section 106BA ability (until 30 April 2016) to apply to amend affordable housing provisions in section 106 agreements where necessary to render development viable, introduced in the Growth and Infrastructure Act 2013, announced in the Government’s 2015 Autumn Statement as to be extended and then abruptly left to expire.

Policy changes

The NPPF has only brief references to the section 106 agreement process (with nothing on timescales for their completion):

“203. Local planning authorities should consider whether otherwise unacceptable development could be made acceptable through the use of conditions or planning obligations. Planning obligations should only be used where it is not possible to address unacceptable impacts through a planning condition.

204. Planning obligations should only be sought where they meet all of the following tests:

● necessary to make the development acceptable in planning terms;

● directly related to the development; and

● fairly and reasonably related in scale and kind to the development.

205. Where obligations are being sought or revised, local planning authorities should take account of changes in market conditions over time and, wherever appropriate, be sufficiently flexible to prevent planned development being stalled. “
At the same time as the March 2015 Government technical consultation response we had a very minor beefing up of the planning obligations section of the Planning Practice Guidance  :

“When should discussions on planning obligations take place?

“Discussions about planning obligations should take place as early as possible in the planning process, including at the pre-application stage. This will prevent delays in finalising those planning applications which are granted subject to the completion of planning obligation agreements.

Can planning obligations or heads of terms be on a local list? [answer: information about proposed planning obligations should not normally be made a validation requirement].

Local planning authorities are encouraged to inform and involve all parties with an interest in the land and relevant infrastructure providers, including county councils where appropriate, at an early stage to prevent delays to the process.”

Practical steps

An updated version of the Law Society’s model form of section 106 agreement, endorsed by DCLG (but openly consulted upon first please) would be helpful. The current version dates from June 2010 (predating all of the law and policy referred to in this blog post!). LPAs and developers alike could be advised more strongly that its terms should not be departed from without good reason – there is still far too much reinventing of the wheel and inconsistency of approach between LPAs and indeed between individual lawyers. The reference to a template or model terms in the passage above is encouraging. We need to move away from a bespoke tailored approach towards the “off the peg” department wherever we can…
Particular complexities arise in relation to negotiating viability review mechanisms. Again greater standardisation (which first needs greater standardisation of the approach taken by valuers to viability appraisal for section 106 purposes) would reduce a huge amount of detailed drafting and negotiation. 

There can be a bottleneck when it comes to the LPA’s internal legal and other officer resources, often despite the fact that the applicant is willing to pay for the LPA to outsource its legal work (not that outsourcing is in any way a universal panacea and on a complicated scheme a range of officer input is required). Proper discussions on the section 106 agreement still usually start far too late, with the difficult issues not grappled with until the lawyers have been instructed and start probing as to what the heads of terms actually mean…

The Local Government Ombudsman could usefully take a less hands-off approach than at present to complaints about undue delay. Its present stance (illustrated by this September 2014 ruling )  appears to be that the applicant’s remedy is simply to appeal to the Planning Inspectorate on the basis of non-determination of the application within the statutory period. 

Most usefully however, we could all re-double our efforts to ensure that we only include within section 106 agreements that which is absolutely necessary. If something can be addressed by planning condition, use a condition! 

Simon Ricketts, 20.8.16

Personal views, et cetera