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What is a Section 106 planning obligation?

Planning obligations are legal contracts made under Section 106 of the 1990 Town and Country Planning Act. They are generally entered into by agreement between councils and landowners, although a landowner may also offer a unilateral, "one-sided", Section 106 obligation.

Planning obligations are linked to a planning application decision, made either by the local planning authority or by the Planning Inspectorate in the case of an appeal against a refusal of planning permission. The planning obligation relates to the land within the planning application, rather than the person or organisation that develops the land. It is, therefore, recorded as a land charge, and the obligations under it run with the land ownership until they are fully complied with, often indefinitely.

Planning obligations are used for three purposes to:

  • prescribe the nature of development to comply with policy (for example, requiring a given portion of housing to be affordable).
  • compensate for loss or damage created by a development (for example, loss of open space).
  • mitigate a development's impact (for example, through contributions to mitigate against harm to the Special Protection Area).

The Community Infrastructure Levy (CIL) was introduced nationally in 2010. Councils can choose to charge landowners and developers the CIL for new developments in their area. These CIL funds can be collected together to fund infrastructure to support development in the area.

New legislation introduced in April 2010, introduced a number of measures affecting planning obligations. These reforms ensure that planning obligations and the CIL operate in a complementary way.

The new regulations limit the use of planning obligations in three ways:

1. Planning obligations entered into from 6 April 2010 must meet three new legal tests. For developments that are capable of being charged the CIL, planning obligations must be:

  • necessary to make the development acceptable in planning terms
  • directly related to the development
  • fairly and reasonably related in scale and kind to the development

These are also set out as policy tests in paragraph 204 of the National Planning Policy Framework (NPPF).

2. to ensure that the use of planning obligations and the CIL does not overlap. Planning obligations cannot be used to fund infrastructure that the Council has included in its CIL infrastructure funding list (known as the 123 list). Developers cannot therefore be asked to pay twice for the same item of infrastructure.

3. From 6 April 2015, or sooner if a council introduces the CIL in their area before this date, councils may not use planning obligations as a tariff. This is because from that date councils cannot pool more than five planning obligation contributions (counted back from April 2010) for infrastructure that is capable of being funded by the CIL.

Planning obligations will continue to play an important role in making individual developments acceptable through site-specific infrastructure such as highways improvements. Affordable housing will also continue to be delivered through planning obligations rather than the CIL. Councils can also continue to pool contributions for measures that cannot be funded through the CIL.

For more information, please see the pdf icon Planning Contributions Supplementary Planning Document. [2Mb]

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Last updated: 1 October 2014 09:52 AM