What is a Section 106 agreement?

A Section 106 agreement (S106) is a legal contract between a developer (and often the landowner) and the local planning authority (LPA), made under Section 106 of the Town and Country Planning Act 1990. It requires the developer to provide or fund specific things as a condition of receiving planning permission - such as a proportion of affordable housing within a development, contributions to local schools or highways, public open space, or other infrastructure improvements made necessary by the development. S106 obligations run with the land and are binding on future owners.

What does a Section 106 agreement typically cover?

Common S106 obligations include: affordable housing (requiring a percentage - typically 20-40% depending on the LPA policy - of new homes to be provided at social rent or shared ownership); education contributions (payments to fund additional school places generated by new housing); transport and highway improvements (junction upgrades, bus stops, crossing improvements); public open space (provision of parks or play areas, or contributions to improvements elsewhere); ecological mitigation (habitat creation or management); and healthcare contributions (GP surgery capacity). The precise requirements depend on local planning policies and the size and nature of the development.

What is the difference between Section 106 and CIL?

Community Infrastructure Levy (CIL) is a fixed-rate charge per square metre of new development set by the LPA - it applies automatically to most new development and the money goes into a general infrastructure fund. Section 106 obligations are negotiated site-by-site and are project-specific - they secure particular things from a particular development (like affordable housing on that site, or a junction improvement near that site). Both may apply to the same development. Where an LPA has adopted CIL, they are more restricted in what they can require through S106 obligations to avoid 'double-dipping'.

Can a Section 106 obligation be renegotiated?

Yes - under Section 106A of the TCPA 1990, a developer can apply to the LPA to modify or discharge a S106 obligation after 5 years. The LPA must agree unless the obligation still meets the tests for planning obligations (necessary to make the development acceptable in planning terms, directly related to the development, and proportionate to its impact). Where a development has become unviable due to changes in market conditions, developers can apply to have S106 obligations renegotiated - a process that gained significant prominence during the post-2008 financial crisis when many developments became financially unviable with their original S106 obligations.

Planning noun

Section 106

/ ˈsɛkʃ(ə)n wʌn ɒ sɪks /

Also known as: S106, planning obligation, planning gain, developer contribution

Definition

A Section 106 agreement (S106) is a legal contract between a developer and the local planning authority made under Section 106 of the Town and Country Planning Act 1990, requiring the developer to provide or fund specified infrastructure, affordable housing, or community benefits as a condition of planning permission. S106 obligations are negotiated case by case for larger developments - they run with the land and bind future owners. Common requirements include affordable housing, education contributions, transport improvements, and public open space.

In practice

S106 agreements are primarily relevant to residential and commercial development of more than a handful of units, and are rarely encountered by individual self-builders or small extension projects. For a typical 50-home development, an S106 might require: 30% of homes to be affordable (provided to a registered housing association); a financial contribution per dwelling towards local school expansion; a financial contribution towards a bus stop and pavement on the adjacent road; and provision and adoption of a public open space on the site.

Obligations must satisfy three statutory tests: they must be necessary to make the development acceptable in planning terms; must be directly related to the development; and must be fairly and reasonably related in scale to the development. S106 obligations cannot be used to collect general revenue for the council - they must be tied to the specific impacts of the development. They are negotiated by planning solicitors and can significantly affect development viability - the S106 burden is a key cost in any development appraisal.

Building Regulations

Legal basisSection 106, Town and Country Planning Act 1990

Three testsNecessary, directly related, proportionate to impact

RenegotiationModifiable after 5 years under s106A TCPA 1990

CIL interactionWhere CIL adopted, s106 scope is more restricted

Section 106 obligations are a planning tool with no direct Building Regulations equivalent. However, some S106 requirements (such as building a highway junction or constructing a public park) will themselves require Building Regulations approval for their construction. Where affordable housing is required by S106, it must meet all the same Building Regulations standards as market-rate housing. S106 obligations are disclosed in local authority searches and must be checked when purchasing land or a property subject to development obligations.

Full Building Regulations guidance

Section 106

Just so you know...