Section 106s and all that
While the case law on s.106 issues should now be settled, two recent decisions, like London red buses, come along as useful additions to the planning practitioner’s e-library, writes John Pugh-Smith.
The first, in terms of time, is the judgment of Mrs Justice Lieven in Redrow Homes Ltd v Secretary of State for Levelling Up, Housing and Communities & New Forest District Council [2023] EWHC 879 (Admin). It raises some issues worthy of note, again, on s.73 variations.
This was a highly fact-specific case and the judgment necessariy deals with the language of the Inspector’s Decision Letter and the specific unilateral undertakings offered by the Claimant at appeal stage. Nevertheless, its s.73 context, and, the Judge’s consideration of the case of Norfolk Homes Ltd v North Norfolk District Council [2020] EWHC 2265 (Admin), about which I wrote two articles at the time, due to my particular geographical as well as professional interest in the differing approaches taken by the two involved judges at the time.[1]
The second is the judgment of Mr Justice Waksman in Link Park Heathrow LLP v Secretary of State for Levelling Up, Housing and Communities, Buckinghamshire Council & Hillingdon Borough Council [2023] EWHC 1356 (Admin). This included consideration of the use of an “Arsenal” type condition[2] where there were difficulties with the relevant s.106 undertakings, as there were two local planning authorities. To remind, this is a negative condition, whereby a permitted development cannot commence until a planning obligation or other agreement has been entered into. Such conditions are permissible, in exceptional circumstances, as explained in para.010 of the Planning Practice Guidance’s section on the Use of Planning Conditions.[3]
The Redrow case
Redrow had originally granted planning permission in 2012 for a mixed use development at Lymington Shores that comprised “168 dwellings, a restaurant, retail/commercial space, boat club, art gallery, jetty with pontoon, access alterations, pedestrian bridge over railway [necessary emphasis added], riverside walkway, car parking, landscape and drainage. The s.106 agreement which accompanied the 2012 permission included a restriction which required the “construction and substantial completion” of the pedestrian bridge over railway (“the Footbridge”) prior to occupation of the 75th open market dwelling. This restriction was later varied by a deed of variation in 2017, to occupation of the 125th open market dwelling. The restriction, as varied, required that the final 17 open market units forming part of the development could not be occupied until the Footbridge had been delivered. Having virtually completed the development Redrow applied for a s.73 variation to remove Condition 19 from the 2012 permission. The Council accepted that it was appropriate for Condition 19 to be removed. However, it refused the application, not because it thought that Condition 19 should not be removed, but because it did not want to risk undermining the s.106 obligation that required the construction of the Footbridge. The Council’s reason for refusal was that if it were to grant the s.73 variation it would mean that a new planning permission would be granted for the development, without the necessary new s.106 agreement being entered into to secure the delivery of the Footbridge, amongst other obligations.
Redrow appealed against this refusal making a number of written representations both before and after the hearing. Their statement of case confirmed that they were prepared to enter into a new s.106 agreement but that they did not consider it necessary to require the last 17 open market dwellings to remain vacant until such time as the Footbridge was delivered. They did not suggest that the s.106 delete reference to it but rather stated that it should provide for a period of 2 years for the Footbridge to be delivered, failing which they would have to offer the Council the sum of at least £1 million which could be used to deliver the Footbridge. Upon being granted further time by the Inspector at the hearing to submit any s.106 agreement or unilateral undertakings, Redrow submitted two unilateral undertakings on an alternative basis: (1) to remove the requirement for 17 open market dwellings to be left unoccupied unless or until the bridge is delivered and replace this with a positive requirement to deliver the bridge within 2 years but with no restriction on the unoccupied homes (in the absence of any evidence of any planning harm); or (2) to remove the requirement for 17 open market dwellings to be left unoccupied unless or until the Footbridge is delivered and replace it with 5 open market dwellings. The Council submitted that the Inspector should disregard the two undertakings on the basis that there are only two recognised methods for varying a s.106 agreement: (1) by agreement between the LPA and the person against whom the obligation is enforceable or (2) by an application under s.106B TCPA 1990. The Council argued that the Claimant was trying to instead vary a s.106 obligation through a third method (i.e. via a s.73 application). The Inspector dismissed the appeal and the reasoning provided by the Inspector was challenged by the Claimant on two grounds, both of which were dismissed by the Judge.
Ground (1) had been argued on the basis that the Inspector had erred in law as she had misdirected herself in concluding that she had no power to allow the appeal and impose a fresh s.106 obligation. This argument was put forward by the Claimant on the basis that the Inspector used the following phrase at paragraph 17 of the Decision Letter: “Notwithstanding my finding in relation to the removal of condition 19, were I to allow the appeal, the submission of UUs [unilateral undertakings] seeking to modify the terms of the planning obligation agreed under the original planning permission fall outside the scope of an application made under Section 73 of the Act”. This phrase, Redrow argued, indicated that the Inspector had restricted herself from taking into account the undertakings offered and concluded that she could not allow the appeal on that basis. The Court rejected this ground, holding that although the Inspector’s use of the abovementioned phrase was “infelicitous”, reading the Decision Letter as a whole it was apparent that the Inspector knew and understood that she had the power to allow the appeal upon a satisfactory s.106 agreement being achieved. This was evident since the Inspector, in earlier paragraphs of the Decision Letter, had discussed why the undertakings offered were not satisfactory in the circumstances of the case. The Court held that if, as the Claimant submitted, the Inspector had erred in law and concluded that she did not have the power to allow the appeal, then there would have been no need for the earlier paragraphs.
On Ground (2) Redrow had argued that, notwithstanding Ground (1), and the quality of the Inspector’s reasons the Judge found that they were sufficiently clear as to the basis on which she was dismissing the appeal.
The judgment then records the following:
49. Finally, an important issue arose during the course of the hearing about the degree to which the principles set out by Holgate J in Norfolk Homes apply to the situation that arose in the current case. The Claimant placed great reliance, both in its written representations and before this court, on Norfolk Homes, and in particular the principle that the s.106 agreement ceased to have effect if it was not expressly tied into the subsequent s.73 grant, see [127] of that case.
50. However, there is at least one important distinction between the current case and Norfolk Homes. In that case the original planning permission had not been implemented and the obligations in the s.106 had therefore not yet arisen. However, the present case is completely different. Not merely had the 2012 permission been implemented, it had in all material respects been completed. The obligation to construct the footbridge had already arisen under clause 4.4, albeit it did not bite until the occupation of originally the 75th and then the 125th dwelling.
51 It cannot be the case that the effect of the s.73 fresh permission wipes out obligations which have already arisen. It is in my view open to debate the degree to which a s.73 consent would remove an obligation which had arisen but had not yet become enforceable. Powergen makes clear that a developer can elect whether to implement the s.73 consent or the original consent. However, where the original consent has been implemented (here virtually completed), I cannot see how the developer can rely upon s.73 to change the effect of the extant s.106. That is a matter for another case, but I note that it is a material distinction between the two cases, and one that the Claimant did not acknowledge in their representations. It was the distinction between a case where the original permission had been implemented and one where it had not, which the LPA was raising in its post-hearing representations. Therefore I do not think the position is as clear cut as Mr Garvey and his clients had suggested. However, so far as the Inspector's decision is concerned, she was deciding the matter on the merits of the undertakings that had been offered and therefore this legal complication was not in issue.
Comment
Reflecting on the foregoing, lead to the following reminders:
- That developers should not over-promise in s.106 agreements when seeking to get permissions over the line, thinking they may be able to wriggle out of obligations later on;
- That where developers find themselves being pressured to accept obligations they are not convinced can be complied with, they need to remember that no easy or available solution legally exists, without the LPA’s co-operation, which will be permitted by the Courts, before they sign up to that planning obligation.[4]
Nonetheless, with such a slow and unresponsive planning appeal system, it is unsurprising that these types of situation continue to occur, and, all too often at local level.
The Link Park case
This challenge concerned an Inspector’s refusal to grant permission for the construction of a new data centre in a location where there had already been a significant amount of development. While the whole of the Site was in the Green Belt, it was in or on previously developed land. Moreover, the majority of the Site lay in an area of what has been designated as "settlement" being one of the landscape character types defined in the South Buckinghamshire Landscape Character Assessment as opposed to, for example, "rural landscape". In that sense, the Judge noted, it was not immediately within the "countryside" element of the Green Belt.
Link Park Heathrow (“LPH”) was the freeholder of the Site but parts of it, including parts which would be involved in the proposed development, were the subject of leases granted by LP. The two Councils were the relevant local planning authorities (“LPAs”) as the Site lay partly within the jurisdiction of each. Prior to and after the appeal hearing, drafts of a s.106 unilateral undertaking (“the Undertaking”) given by LPH to each of the Councils, along with a proposed planning condition (“the Condition”) were provided to the Inspector. Indeed, ultimately, he was sent a signed Undertaking.
Of the three grounds of challenge, Ground 2 is of particular relevance to this article. It argued that the Inspector erred in law as to the effect of the proffered “Arsenal” condition and/or he did not take it into account, although it was a material consideration. This issue arose in connection with the Inspector’s conclusion that the Undertaking was, itself, unenforceable and he then accorded it negative weight. It further affected, adversely, his consideration of employment opportunities, the subject of Ground (1).
The issue over the enforceability or otherwise of the offered Undertaking arose in this way. There was before the Inspector at the hearing a draft s106 Undertaking. Relevant also to Ground (1), the Undertaking offered to the Councils two elements relating to employment opportunities. Taking the one proffered to Buckinghamshire Council by way of an example, one of the elements was the employment and skills contribution which was a sum of money to be paid to Buckinghamshire and calculated in accordance with a formula to be found in a schedule to the Undertaking and to be used by the Council towards training skills and business development and economic activity in the local area. The second element was the local labour, skills and employment strategy and management plan, which was a plan for the construction and operational phases to be submitted to set out how the owner (that is the developer) and its contractors and others would make arrangements for regular reporting and methodology for sharing job vacancies for the purpose of recruiting local residents and an approach to the forecasting of future job opportunities and skills to ensure an adequate pipeline of candidates.
Towards the end of the hearing, and after the substantive matters had been dealt with, one of the LPAs had raised a query as to whether the Undertaking was enforceable, given that some of the Site consisted of leasehold land pursuant to leases granted by LPH or in respect of which it was now lessor but where the lessees themselves were not party to the Undertaking. There was then a discussion about amending the Undertaking or, in any event, having an “Arsenal” planning condition. In the event, Buckinghamshire Council did not oppose the condition, but proposed some additional wording. Hillingdon, ultimately, agreed it. All such agreement, of course, being subject to the substantive points against permission which were being taken before the Inspector.
Giving short shrift to the contrary argument being made on behalf of the Secretary of State, the Judge states the following (@ para. 25):
“ … either the Inspector misunderstood the effect of this condition, which was an error of law, or if he did understand it he did not take it into account in reaching his conclusion, which was that he was not prepared to remedy the problem of the unenforceable Undertaking before him while it was a material consideration in that regard. Either way, this rendered his decision unlawful. “
Despite finding the decision unlawful on Ground (2), the Judge went on to deal with Grounds (1) and (3). Finding in favour of LPH on both, he concluded on Ground (1) that it had been irrational for the Inspector to give specific weight to the supposed harm caused by the removal of the financial contribution, given the way in which the Undertaking had dealt with “employment opportunities”.
On Ground (3), the Judge had remarked (@ para. 41) that LPH had taken “the deceptively short point” that "encroachment" means physical incursion into the countryside but that there was no such incursion here. Rather, there was a change to and building up of the existing development, not itself situated in the countryside part of the Green Belt area. The Inspector had, therefore, erred in law as treating the "more urbanised appearance" of the Development as an encroachment into the countryside because it would erode the rural character of the surrounding area. He goes on to note that as it was common ground that the Site was outside the relevant countryside he failed to see “how it is even capable of intruding upon the relevant countryside”. He therefore concluded that the Inspector had made an error of law in his interpretation of "encroachment" in the context of para.138(c) of the NPPF.[5]
Comment
The essence of this judgment is, I would suggest, that inspectors can take a far more pragmatic as well as common sense approach to resolving development management issues where there is a genuine legal hurdle to be overcome concerning planning obligations, and, a recognised solution. Indeed, that was why the permissibility of “Arsenal” type conditions was welcomed by practitioners into Government guidance, when the national Planning Practice Guidance was first published in March 2014.[6]
Here, LPH had submitted to the Inspector, and the Judge had recorded (@ para.17) that such a remedy was appropriate because the Development was a complex scheme (as referred to in the PPG), and, would avoid any problem of unenforceability. This was because whether the leaseholders were parties or not, there could be no development anyway under such a condition until the leaseholders had entered into the Undertaking as well. If they attempted to commence any part of the Development beforehand, it would be a breach of planning and control and the LPAs could take enforcement action against them directly because of that breach pursuant to their normal enforcement powers. However, it was manifest in the Decision Letter, that the Inspector had misunderstood the purpose of such a condition; for the Condition would form part of the permission and the result would be that the grant of planning permission would be conditional; so if a leaseholder attempted to commence a development for any reason prior to entering into the Undertaking then it would be a breach of planning control and the LPAs could enforce directly against them. Indeed, the error was all the more manifest, here, as the LPAs had not suggested otherwise to the Inspector (nor had the Secretary of State suggested otherwise in the High Court).
Finally, with continuing appeal delays,[7] it is unfortunate when field inspectors do not endorse the obvious as well as permissible solution.
Concluding remarks
It is, perhaps, a sad reflection of the state of the planning system that legalism too frequently trumps pragmatism and common-sense. Indeed, because High Court challenges can only succeed if a genuine error of law is found, and, one sufficient to justify quashing the decision letter, the ability of the judiciary even to attempt to correct the obvious is that much more constrained. Here, in two (clearly frustrating) scenarios, legitimate solutions were put forward of which one failed to receive judicial endorsement and the other succeeded. Whether that was down to the particular choice of judge, though both familiar with the planning system, is a matter of speculation. Nonetheless, if growth is to be delivered in our current economic climate then, I suggest, LPAs need to be a lot more supportive of these types of s.106 solutions, and, the Inspectorate more willing to endorse them. Accordingly, as part of the next round of NPPF changes promised for later this year,[8] some rapid and focussed consideration could be given to helping resolve these types of situation in the related PPG amendments.
John Pugh-Smith FSA FCIArb of 39 Essex Chambers is a recognised specialist in the field of planning law with related disciplines acting for both the private and public sectors. He is also an experienced mediator, arbitrator and dispute ‘neutral’ dealing with section 106 obligations and their outworkings along with other development related disputes .
[1] Section 106s and the ‘technical traps’ submission – The final chapter? and Section 106s and the 'technical traps' submission, Local Government Lawyer
[2] Such a negative condition has been called an "Arsenal" condition, following its successful inclusion within the Secretary of State’s permission for the redevelopment of Arsenal Football Club’s Highbury ground.
[3] https://www.gov.uk/guidance/use-of-planning-conditions
[4] See e.g. R (Millgate Developments Ltd) v Wokingham District Council [2011] EWCA Civ 1062
[5] National Planning Policy Framework (publishing.service.gov.uk)
Para. 138: “ Green Belt serves five purposes: …… (c) to assist in safeguarding the countryside from encroachment “
[6] https://www.planningresource.co.uk/article/1302803/legal-viewpoint-meeting-obligations-large-scale-sites
[7] See my recent article (30.06.23): https://localgovernmentlawyer.co.uk/planning/318-planning-features/54280-half-time-realities
[8] NPPF revisions will be delayed until at least September, DLUHC confirms | Planning Resource
