Planning Agreements and CIL

Head of Planning Amanda Beresford tells us more about this subject.

What are planning agreements?

The term planning agreements usually refers to agreements between a landowner and developer and the Local Planning Authority (LPA) under Section 106 of the Town and Country Planning Act 1990. They are a mechanism which make a development proposal acceptable by securing obligations from or on behalf of the landowner/developer. Typically, they are used to ensure the provision of a proportion of affordable housing on a proposed residential development or financial contributions for matters such as education or public open space. These obligations are known as Section 106 Obligations.

Do I have to have an agreement in place?

No, not all planning applications need to be supported by planning obligations. Also, it is possible to offer obligations unilaterally, in which case it is not necessary for the Local Planning Authority to complete the document.

Are there any restrictions on what can be contained in a Section 106 planning agreement or unilateral undertaking?

Yes. Regulation 122 and 123 of the Community Infrastructure Levy Regulations 2010 (as amended) provide three tests for planning obligations to be lawful as follows:

  1. The obligation must be necessary to make the development acceptable in planning terms;
  2. The obligation must be directly related to the development; and
  3. The obligation must fairly and reasonably relate in scale and kind to the development proposed.

Can I amend or modify a planning agreement?

All planning agreements can be varied or modified by agreement between all the original parties at any time.

Section 106 of the Planning Act also provides that a person bound by an obligation can seek to have the obligation modified or discharged after 5 years. The procedure is set out in regulations and the principle for modifying an obligation is that it “no longer serves a useful purpose”. An amendment to the legislation in February 2013 provides that it is also now possible to apply to amend any planning obligations entered into on or before 6 April 2010, after three years.

In addition, clause 7 of the Growth and Infrastructure Act introduces a new application and appeal procedure for the review of planning obligations which relate to the provision of affordable housing which can be used at any time. This procedure allows the reassessment of the viability of affordable housing requirements only. It will not reopen any other planning policy considerations or review the merits of the permitted scheme.

Are Section 106 Agreements the only type of planning agreements?

No. Often in order to implement a planning permission which requires off site highway improvement works there will be a need to enter into a Planning Agreement under Section 278 of the Highways Act 1980. Typically, there will be a condition attached to a planning permission requiring such off site highway works to be done before commencement, or occupation, or completion of the development. If the works required to be carried out are within the public highway then only the Highway Authority has the power to do those works. The Section 278 Agreement is an agreement with the Highway Authority effectively setting out arrangements for doing the works. If the works require land outside of the adopted highway it is essential to ensure such land is within the control of the developer otherwise the third party owner may have a “ransom” over the development.

I have heard a lot of people talking about CIL. What is it?

Community Infrastructure Levy, known as CIL, is a new planning charge introduced by legislation that local authorities can choose to charge on new development. It must by law be paid to the charging authority (usually the local authority) where there is a charging schedule in force on the day planning permission is granted and the planning permission is for a type of development covered by the charging schedule. If there is no charging schedule in force on the day planning permission is granted then there is no liability for CIL.

So does CIL replace Section 106 Agreements?

No. Generally, where a local authority has a CIL schedule in place a Section 106 Obligation cannot be used to deal with any of the matters covered by CIL. Since CIL cannot deal with affordable housing, this will continue to be covered by planning obligations. In addition, from 6 April 2015 legislation is in force which restricts the “pooling” together of Section 106 Obligations to fund infrastructure even where the Local Planning Authority has no CIL provisions in place. This means that a Section 106 Obligation cannot be taken into account as a reason for granting planning permission if five or more obligations for the same type of infrastructure have been entered into on or after 6 April 2010.

How do I know if a CIL charging schedule is in force?

The information should be on the local authority’s website. If a CIL charging schedule has been adopted it is in force and a copy of it should be available together with a list (known as a Regulation 123 List) which identifies what the CIL money will be collected for.

How much CIL will I have to pay?

The amount payable is fixed at the time planning permission first permits development by reference to the CIL charging schedule in force at that time. Local authorities are not obliged to adopt a CIL charging schedule, however if they do, it will set out the CIL rate which will be expressed as pounds per square metre of development, levied on the net internal area of development. Different authorities can set different rates and different rates can be set by reference to geography, type of development, size of development or intended number of dwellings or units.

Can I negotiate with the Local Planning Authority regarding how much CIL is payable?

No. Unlike planning obligations, the rate of CIL payable is non-negotiable, there are however complex calculation rules which include some exemptions and reliefs. For example, existing buildings can be deducted provided that the building to be set off has been in continuous use for 6 months during the last 3 years.

When does CIL become payable?

Liability to pay CIL arises on first commencement of development, which is the earliest date on which any material operation (such as digging a foundation trench) begins. So, CIL could be due even though construction of buildings on site may not have started and the implementation of a planning permission to keep it alive could trigger a CIL payment.

Who pays CIL?

Primary liability to pay rests with the person who assumes liability by submitting an assumption of liability notice. The regulations contain numerous obligations and penalties for noncompliance. If no liability is assumed then CIL is apportioned between those persons having an interest in land at the commencement of development (interest in this context is a freeholder and leaseholder of a lease which expires more than 7 years following the day on which planning permission is granted). So in the absence of an assumption of liability notice CIL liability runs with the ownership of land. This is an important point for drafting various contractual arrangements relating to land as it is essential to be clear in the contracts where liability should lay.

Is there an opportunity to give my opinion on the content of a charging schedule?

Yes. A charging schedule cannot be adopted until the completion of a consultation exercise and an examination by an independent examiner so there is an opportunity to influence its content both at the consultation stage and at examination.

What can I do if a decision is made in respect of CIL which I disagree with?

The legislation provides numerous opportunities for appealing decisions made in respect of CIL, for example all of the following can be the subject of an appeal:

  • Calculation of the chargeable amount;
  • Apportionment of liability;
  • The application of certain relief and exemptions;
  • The determination of the deemed commencement date.

Our team

Amanda Beresford

Partner

Head of Planning

Direct Line +44 (0)113 297 8070

Lyn Dario

Partner

Head of Environmental & Regulatory

Direct Line +44 (0)113 297 3779

Stuart Lumb

Solicitor

Planning

Direct Line +44 (0)113 297 3781