Section 106 agreements by Nick Horton and Roy Willis

The difficult economic conditions currently being faced by the property industry mean that many providers of social housing are considering how existing Section 106 agreements can be renegotiated to make a development viable. It may well be that the existing planning obligations on a distressed site which a housing association is seeking to acquire from a private developer are too costly - say in terms of contributions to infrastructure - to make it worthwhile implementing the planning permission. Alternatively it could be that on a site  already owned, the TCI's make the development uneconomic. What can be done in such circumstances to make it worthwhile proceeding with the development?

There are, of course, pressures on Local Planning Authorities to be flexible about the terms of existing s106 agreements. Kent County Council, for example, has stated publicly that it wishes to keep development going in Kent and that the LPA's in its region will be encouraged to have suitable discussions with developers. An appropriate "quid pro quo" that KCC has suggested may be that in exchange for the level of s106 contributions being reduced, the developer commits to building out the relevant project within an agreed timeframe.

We are aware  that some LPA's in the South East are being open minded about this, although the extent to which, and the manner in which, they are prepared to negotiate tends to be driven by the wider political agenda. One Local Planning Authority, for instance, has agreed to reduce the proportion of affordable housing presently required by the 106 agreement, in exchange for agreeing higher contributions towards offsite infrastructure.  At the other end of the spectrum, another LPA has agreed to give over an entire site  for affordable housing.

A neat way of forcing the reconsideration of s106 obligations is not to implement the existing planning permission, but to make a new planning application (albeit at some cost) and lodge a unilateral undertaking at the same time.  If this is rejected by the LPA, the Planning Inspector has power to consider the fresh obligations that are proposed in the context of an appeal, but it is recommended that these be supported by valuation evidence showing why the original obligations make the development uneconomic.

Unless you are reasonably sure that planning permission will be granted on a fresh application, care should be taken not to lose the benefit of the original permission during this process by letting it expire, but equally, care should be taken if it is decided to take steps to implement the original permission because implementation of the planning permission will start the obligations under the original s106 agreement running. If this happens, you will have to wait for 5 years from the date of the s106 to elapse before it can be challenged, regardless of the outcome of the new application / appeal.

Of course, these types of argument along with the necessary evidence - and the threat of other methods of challenge such as an application to discharge the original s106 (if 5 years are nearly up) or judicial review / statutory challenge in a limited number of cases - could first be deployed during your negotiations to try to modify the s106 agreement, to bolster your chances but avoid the risk and associated cost of more formal action.

Nick Horton is a partner in Thomson Snell & Passmore. He is Head of the firm's Dispute Resolution team and specialises in contentious planning cases. Roy Willis is a partner in the firm's Commercial Property team and specialises in residential development. Tel: 01892 510000