Repeal did not extinguish right to modify s106 payment obligation: judge

A residential building is not 'economically viable' simply because it has been completed, the High Court has ruled.

In City of York Council v the Secretary of State for Housing, Communities and Local Government and Trinity One (Leeds) [2018] EWHC 2699 Mr Justice Kerr said Trinity One had applied to York in April 2016 to change the commuted sum it had to pay in lieu of an affordable housing obligation under a section 106 agreement.

It applied the day before the repeal of statutory provisions that allowed it to do this.

After the repeal took effect, York refused the application and Trinity successfully appealed to the Secretary of State, who lowered the amount it had to pay.

York argued that the repeal extinguished Trinity's right to apply to modify its payment obligation under the section 106 agreement and its right to appeal against the council's refusal to modify it and that its determination of the application and the subsequent appeal were both invalid.

Kerr J concluded: “It is artificial and wrong to characterise the pre-repeal ‘right' of the developer under the repealed provisions as merely a hope of persuading a decision maker to exercise discretion in its favour.

“That is not what section 106BA(3)(a) says. It mandates an outcome in favour of the developer if the exercise of economic judgment leads to the conclusion that the development is not economically viable as it stands.”

He then turned to York’s contention that a development cannot be economically unviable once completed.

“I cannot accept [York’s proposition] that economic viability is necessarily established by successful completion of the physical works,” he said.

“No express words in the statute so provide. Nor does the scheme of the provisions require that proposition to be read into them. I think the words ‘not economically viable’ should be given their ordinary meaning.”

The judge gave as an example that he would have “great difficulty with the proposition that a completed development is economically viable even though it be a white elephant doomed to decay because of a crash in the property market a week after completion of the building works”.

Mark Smulian