News | March 20, 2023


A local planning authority (“LPA”) can mitigate a development’s impact by making the grant of planning permission conditional on the completion of an agreement with, or a unilateral undertaking from, the landowner and/or developer. These agreements / undertakings (collectively known as ‘planning obligations’) are made under section 106 of the Town and Country Planning Act 1990 (“TCPA”), and hence commonly referred to as ‘section 106 agreements’.

So what  can a planning obligation secure?

Planning obligations are used by LPAs for various purposes, from securing affordable housing to generating financial contributions for infrastructure and the local community like schools and public open space. The legislation allows their use specifically for the purposes of:

“(a) restricting the development or use of the land in any specified way;

(b) requiring specified operations or activities to be carried out in, on, under or over the land;

(c) requiring the land to be used in any specified way; or

(d) requiring a sum or sums to be paid to the authority”

The scope of their use is however restricted by the Community Infrastructure Levy Regulations 2010, which require them to 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.

These requirements are repeated by the National Planning Policy Framework, and LPAs must consider whether otherwise unacceptable development could be made acceptable through the use of planning obligations, in line with the three tests. Planning obligations that do not meet these legal and policy requirements cannot be taken into account by an LPA (or by a planning inspector on appeal) in deciding whether planning permission should be granted, and could place the planning permission at risk of judicial review.

In appeal situations, it is important to include a clause that allows the planning inspector to decide if the obligations meet the tests so that any of them can be held to be ineffective if they do not – this enables an inspector to grant planning permission where they may otherwise have been unable to due to an offending obligation.

The recent case (The University Hospitals of Leicester NHS Trust, R (On the Application Of) v Harborough District Council [2023] EWHC 263 (Admin)) emphasises the constraints on the use of planning obligations. The LPA had rejected the NHS Trust’s request for a s.106 contribution of ‘about £914,000’ to meet a ‘funding gap’ that it argued the new development would precipitate. The court agreed with the LPA that the development would not create a localised funding shortfall, so the requested contribution would not meet the tests. The case clarifies that planning obligations cannot be used to address wider systemic problems that are not created by a proposed development.

Who makes the obligations to the LPA?

Whilst the TCPA does not require all those with an interest in the land to be a party to a planning obligation, in most cases LPAs do insist that they are, including mortgagees. It is sometimes possible to persuade LPAs to relax this requirement, for example in the case of owners of short leases, if the LPA can be satisfied that sufficient interests are otherwise bound and the obligations are capable of being enforced. The case of R (McLaren) v Woking Borough Council [2021] EWHC 698 (Admin) is a useful reminder of that. It involved a claim for judicial review of a planning permission, one of the claimant’s grounds being that they should have been included as a party to the associated planning obligation due to their interest in the land. That argument failed as the court held that there is no legal requirement for all interests in a site to be bound by a planning obligation.

Since planning obligations automatically bind any successor in title to the covenanting parties’ interests in the development land, the responsibility to comply with any undischarged obligations, as well as the liability for any breaches, will pass to future owners and occupiers, and potentially also mortgagees. For this reason, planning obligations often exclude liability for owners/occupiers of individual homes, mortgagees and statutory undertakers.

It is essential that all parties acquiring an interest in a property that is bound by a planning obligation check that it has been complied with and are fully aware of their potential future liabilities.

Can planning obligations be varied?

Planning obligations made under s.106 of the TCPA can only be varied or discharged by deed using the provisions of s106A of the TCPA. Again, LPAs usually require all those with an interest in the development land to be parties to the deed, which can be problematic where various parts of the land have been sold. There is no similar power to vary or discharge old ‘section 52 agreements’ – an application may need to be made to the Upper Tribunal (Lands Chamber) for a discharge or modification of a restrictive covenant to achieve that.

The TCPA is silent on the period in which undischarged
obligations remain enforceable, so it is unclear if the 12-year
time limit imposed by the Limitation Act 1980 applies to
breaches of planning obligations, or if LPAs may enforce
breaches beyond that limit.

Future changes

The government intends to overhaul the existing regimes for planning obligations and the Community Infrastructure Levy in favour of a new ‘Infrastructure Levy’ to be introduced by the Levelling-up and Regeneration Bill. It is anticipated that planning obligations will remain necessary, but with a reduced scope.

Provisions in the Environment Act 2021 come into force in November 2023 which will require all development to deliver a net gain of at least 10% in biodiversity value generating obligations that may be secured by a planning obligation, particularly where off-site provision is proposed.

Key points

  • The scope of planning obligations is strictly controlled by legislation.
  • Proposed obligations should be checked against the three ‘tests’ to reduce the risk of a challenge to the planning permission.
  • Planning obligations run with the land, meaning any undischarged obligation could pass to a future owner, occupier or bank.
  • Any variation to a planning obligation must comply with strict formalities.
  • If enacted the Levelling-up and Regeneration Bill could change the existing regime significantly.