A growing number of property developers are being required to donate huge sums of money to local government or face refusal of planning permission, under powers in Section 106 of the Town and Country Planning Act 1990.
Under this section, Local Planning Authorities can refuse planning permission unless the developer signs a ‘Section 106 Agreement’, a deed placing onerous obligations on the developer. These obligations are increasingly in the form of ‘affordable housing contributions’ which the developer must pay to the Authority, and which can amount to six-figure sums.
Section 106 was originally designed to ensure that developers of large-scale projects, such as new housing estates, provide contributions, facilities and infrastructure to cope with the influx of new residents. However, Authorities are increasingly using Section 106 agreements to ‘tax’ developments as small as basic loft conversions.
Abacus Solicitors have experience in overturning these type of agreements, not only saving the developer huge sums of money, but also benefiting the Local Authority and local community.
In one particular case, Fylde Borough Council would not approve planning permission on a £1m conversion of derelict houses into flats unless the developer signed a s.106 agreement to pay contributions towards affordable housing, open space and public space, to the tune of £150,800. The 15% uplift in cost to the developer rendered the whole development financially unworkable.
Abacus successfully negotiated the removal of the s.106 agreement and the approval of the planning permission. The developer was able to complete the renovation unhindered, enabling local government to receive Council Tax contributions on 12 properties which were previously unused. Members of the local community now have affordable flats to rent, and no longer have the eyesore of derelict houses on their doorstep.
Reform of the use of s.106 agreements has been promised by Communities Secretary Eric Pickles. Whether this has any effect remains to be seen, however even if reform is successful, recent legislation has given Authorities alternative means to tax property development, through the use of the Community Infrastructure Levy (CIL).
The CIL is intended to provide funding for regional infrastructure projects, at the expense of property developers. Introduced by the Planning Act 2008, and initially scheduled to be abolished by the government in 2010, the CIL has instead been reinforced into law by the Localism Act 2011.
The Localism Act devolves power from central Government to Borough and District councils for many areas, particularly planning. Neighbourhood groups will have input into planning applications, and the Department for Communities and Local Government plans to further reform the use of the CIL to provide strong incentives for local authorities and neighbourhoods to ‘go for growth’. We therefore anticipate that, whatever happens with s.106 reform, the CIL will become an increasingly common problem for property developers as regional council and local neighbourhood groups become more aware of their new powers.
If you have been asked to sign a Section 106 agreement or to pay under a Community Infrastructure Levy, or you are simply considering property development, get advice from our team on 0161 833 0044 or email email@example.com.