Varying a s106 obligation

June 12, 2020

In the first in a series of articles to be published by a group of Landmark barristers over the coming weeks, Kate Olley looks at the variation and enforcement of s106 obligations.

The series will cover ways to vary a s106 obligation, appeals in relation to variations, the relationship between s106 obligations and s73 of the Town and Country Planning Act 1990, and the enforcement of s106 obligations either by way of injunction or a money claim or other form of dispute resolution.

We will look first, then, at the mechanisms for varying a s106 obligation.

We note that within the Government’s Coronavirus (COVID-19): Community Infrastructure Levy guidance published on 13th May 2020 was included a section on s106 Agreements which states that there are “…greater flexibilities within section 106 planning obligations than CIL” and that where the delivery of a planning obligation, such as a financial contribution, is triggered “during this period”, local authorities “are encouraged to consider whether it would be appropriate to allow the developer to defer delivery”. The guidance goes on to say that deferral periods could be time-limited, or linked to the Government’s wider legislative approach and the lifting of CIL easements “…although in this case we would encourage the use of a back-stop date”. Local authorities are exhorted to “take a pragmatic and proportionate approach to the enforcement of section 106 planning obligations during this period” in order to “help remove barriers for developers and minimise the stalling of sites”.

It is notable that it is the deferral, rather than the quantum, of contributions to which the guidance refers, perhaps unsurprisingly given that the full impact of “this period” cannot possibly yet be known. However, it is likely that greater use may be made in the medium term of the standard means of discharging or varying a planning contribution.

So how can an application to modify or discharge a planning obligation be made, when can it be done, and what are the principles to be applied?

How:

The mechanism is provided by s106A of the Town and Country Planning Act 1990, which states that a planning obligation may not be modified or discharged except either by agreement between the “appropriate authority”, meaning the Mayor of London in the case of any planning obligation enforceable by them, the Secretary of State in the case of a DCO, or the LPA in the case of any other planning obligation, and the person(s) against whom the obligation is enforceable, or in accordance with either s106A or s106B (appeals in relation to s106A applications - which we will look at separately).

So as acknowledged in the statutory provision, there is always the possibility to renegotiate and agree a variation of a s106 Agreement, outside of the machinery provided by the Act. However, there isn’t any right of appeal in those cases.

It is expressly provided by s106A(10) that s84 of the Law of Property Act 1925, which provides the power to discharge or modify restrictive covenants affecting land, does not apply to a planning obligation.

Following the last financial crisis, ss106BA-C were enacted which allowed for the modification or discharge of affordable housing requirements, and appeals in relation to such applications. The sun set on those provisions in April 2016 and so far the Government has not signalled that it will introduce anything similar.

When:

An agreement to modify or discharge a planning obligation can be made at any time (and can only be entered into by deed, by virtue of s106A(2) of the 1990 Act).

However, after the expiry of the “relevant period”, as defined, an application can be made to the appropriate authority for the modification or discharge sought (see s106A(3)). This means 5 years beginning with the date that the obligation is entered into (s106A(4)(b)).

The first consideration, then, in seeking a variation of a planning obligation, is the age of the s106 Agreement. If less than 5 years has passed, agreement must be sought. If more than 5 years has passed, an application can be made.

The NPPG states at paragraph 23b-020 that a planning obligation “…can be renegotiated at any point, where the local planning authority and developer wish to do so” and then, curiously despite dating from 15th March 2019, that where there is no agreement to voluntarily renegotiate, an application can be made where “the planning obligation predates April 2010 or is over 5 years old” (emphasis added). This is an outdated reference to or recognition of the February 2013 amendments made to the Town and Country Planning (Modification and Discharge of Planning Obligations) Regulations 1992/2832 (“the Modification and Discharge Regulations 1992), which enabled applications to vary or discharge planning obligations in England entered into prior to 6th April 2010, such that the 5-year moratorium was at that point removed, but of course no longer makes any sense.

The application process, whilst reserved for s106 Agreements of at least 5 years of age, avoids the requirement for all parties to the agreement to sign a deed of variation, which may be a problem even where the developer and the LPA may agree the terms of a variation. The potential disadvantage of the application process, however, is that there won’t be any opportunity to place additional burdens on another party: s106A(5) specifically provides that an application under s106A(3) for the modification of a planning obligation may not specify a modification imposing an obligation on any other person against whom the s106 Agreement is enforceable.

Procedure and applicable principles:

The Modification and Discharge Regulations (provided for by section 106A(9)) made provision for the form and content of modification or discharge applications, the publication of notice of the application, the procedures for considering any representations made about the application, and the notice to be given to the applicant of the determination made.

The application is made on a form provided by the LPA, which will require (Regulation 3(1) and (2)):

the applicant’s name and address;
the address or location of the land to which the application relates and the nature of the applicant’s interest in it, together with a map;
sufficient information to identify the planning obligation which the applicant wants to have modified or discharged;
the reasons for applying for the modification or discharge;
other information that the authority considers necessary to enable them to determine the application.

The application has to be determined within 8 weeks of receipt of the application unless an extended period is agreed.

What are the principles to be applied where an application is made? They are contained within section 106A(6) of the 1990 Act. Essentially the authority may either determine:

That the planning obligation shall continue to have effect without modification;
That the obligation no longer serves a useful purpose and shall be discharged; or
That the obligation continues to serve a useful purpose, but as it would serve that purpose equally well if it had effect subject to the modifications specified in the application, it shall have effect subject to those modifications. In this case, the modified obligation is enforceable as if it had been entered into on the date on which notice of the determination was given to the applicant.

Garnham J in R (Mansfield DC) v Secretary of State for Housing, Communities and Local Government [2018] EWHC 1794 (Admin) referred to the correct approach to considering a s106A application as that articulated by Richards J (as he then was) in R (The Garden and Leisure Group Ltd) v North Somerset Council [2003] EWHC 1065 (Admin) at [28]:

“there are four essential questions to be considered: what is the current obligation? what purpose does it fulfil? is it a useful purpose? and if so, would the obligation serve that purpose equally well if it had effect subject to the proposed modifications? [Counsel] lays stress on the words ‘equally well’ and describes them as ordinary English words importing a principle of equivalence…”

Richards J went on to note that section 106A involves a precise and specific statutory test and does not bring in the full range of planning considerations involved, for example, in an ordinary decision on the grant or refusal of planning permission.

What about the meaning of the ‘useful purpose’ to be served by the planning obligation?

Section 106A does not, as Garnham J noted in Mansfield, delimit the characteristics of the purpose that might be ‘useful’. He observed that there is no express limitation to ‘planning purposes’ and that it was not immediately obvious why it should be so limited, and bore in mind Richards LJ’s own observation that the full range of planning considerations do not weigh in.

Garnham J chose between two differing opinions on the issue of what is meant by a useful purpose. Sullivan J in R (Batchelor Enterprises Ltd) v North Dorset DC [2003] EWHC 3006 (Admin) held that the relevant question was whether the obligation still served a useful planning purpose, whereas Ouseley J in R (Renaissance Habitat Ltd) v West Berkshire DC [2011] EWHC 242 (Admin) was reluctant to narrow the range of public interest purposes that an obligation may serve and suggested that no planning purpose was necessary to make good a claim of useful purpose.

Ouseley J did accept that the word ‘planning’ was implied given that the agreement could only be made in the first place for a planning purpose, and could only be enforced by a public body acting for a public purpose under the Planning Acts, not exercising some private power or purely contractual power. However, he thought that despite the breadth of the word ‘planning’, it could lead to a debate about what constitutes a planning consideration for relevant purposes “…as opposed to some other useful public purpose which could be pigeonholed under some other head, or even a private purpose such as the protection of private views, which may show the implied restriction to be unjustified”. He also noted that Sullivan J in Batchelor Enterprises had relied on Ministerial guidance which said that an agreement should ‘normally’ rather than always be discharged where there was no planning purpose to be served by its continuance.

Garnham J decided to prefer the approach in Renaissance Habitat, giving four reasons:

“37. …First, the statute itself contains no qualification to the expression of ‘useful purpose’. Second, the practitioner’s text, the Planning Encyclopaedia, suggested no such qualification. Third, as, Ouseley J noted, reading-in the word ‘planning’ invites debate about what constitutes a planning consideration in this context, and therefore leads to uncertainty.

38. Fourth, and perhaps most importantly, I see no reason why, as a matter of principle, the precise character of the useful purpose served by the obligation should determine whether or not the authority has the power to discharge it. The critical question is whether the obligation serves some useful function, the absence of which makes the maintenance of the obligation pointless. It follows, in my judgment, that the question for the Inspector here was whether the obligation served any useful purpose, not any useful planning purpose.”

This fairly longstanding question has therefore been resolved for the time being.

On the basis that an LPA simply has to credibly point to “a” useful subsisting purpose for an obligation, it would likely be very difficult to mount a successful challenge to a refusal (within the 5-year period) to vary that obligation.

Kate Olley is a barrister at Landmark Chambers.