SECTION 106 – CASE LAW UPDATE Andrew Parkinson

Overview This talk will cover the following topics: –Formalities and requirements –Regulation 122 –Affordable Housing obligation appeal decisions under section 106BC TCPA –Enforcement

FORMALITIES AND REQUIREMENTS

Westminster City Council -v- SSCLG [2013] EWHC 690 (Admin) Unilateral Undertaking not to apply for a parking permit Held: UU did not meet the requirements of s.106(1)(a)-(d) (a) Restricting the development or use of the land in any specified way, (b) Requiring specified operations or activities to be carried out in, on, under or over the land’; (c) Requiring the land to be used in any specified way; or (d) Requiring a sum or sums to be paid to the authority... on a specified date or dates periodically. Therefore UU not capable of being registered as a local land charge, and did not run with the land. Only a personal undertaking and not enforceable against successors in title or as provided by ss.106(5)-(6).

Lessons Important to check that obligations actually fall within section 106, before going on to apply the tests in regulation 122 of the CIL Regulations 2010 etc. Wording that would comply? “The Owner hereby covenants that the Property shall not be occupied for so long as the Owner or occupier of the Property has made an application to X Authority for a parking permit which has not been decided or is in possession of such a parking permit“  Clearly not practical. Section 16 of the Greater London Council (General Powers) Act Other local acts?

Importance of complying with statutory formalities Southampton City Council v Hallyard Ltd [2008] EWHC 916 (Ch): Agreement failed to state interest of the person entering into it, as required by section 106(9)(c). Strict requirement – therefore not a planning obligation. However…. Does subsequent conduct show acceptance that obligation falls within section 106? See London Borough of Waltham Forest v Oakmesh [2010] J.P.L. 249

REGULATION 122

Regulation 122 Regulation 122 — Limitation on use of planning obligations (1) This regulation applies where a relevant determination is made which results in planning permission being granted for development. (2) A planning obligation may only constitute a reason for granting planning permission for the development if the obligation is— (a) necessary to make the development acceptable in planning terms; (b) directly related to the development; and (c) fairly and reasonably related in scale and kind to the development. (3) In this regulation— “planning obligation” means a planning obligation under section 106 of TCPA 1990 and includes a proposed planning obligation; and “relevant determination” means a determination made on or after 6th April 2010— (a) under section 70, 73, 76A or 77 of TCPA 1990 of an application for planning permission; or (b) under section 79 of TCPA 1990 of an appeal.”

Necessary to make acceptable in planning terms: Derwent Holdings v Trafford Borough Council & others [2011] EWCA Civ Concerned the validity of a planning permission granted in two parts, firstly a large superstore and secondly the redevelopment of the Old Trafford Cricket Ground. -Held: “Nothing objectionable in principle to a local authority and a developer entering into an agreement to secure desirable objectives, whether or not they are necessary to strengthen the planning case for a particular development.”

Necessary to make acceptable in planning terms: Persimmon Homes North Midlands v SSCLG [2011] EWHC 3931: -High Court upheld the decision of an Inspector who dismissed an application for planning permission for 200 dwellings on the basis that it was not possible to determine whether the section 106 obligations complied with the CIL Regulations. -“It seems to me that those requirements could properly be said to be directly attributable to, though not exclusively so, to amongst other factors the proposed development by this developer, and that some contribution to those requirements was therefore necessary to make the development acceptable in planning terms.”

Necessary to make acceptable in planning terms: R (Hampton Bishop PC) v Herefordshire Council [2013] EWHC 3947: -Concerned a permission for a new rugby ground and 250 houses. Section 106 agreement transferred old ground to the Council for £1. -Parish Council challenged on the basis that transfer did not meet legal test of necessity. -”what is “necessary” for the purposes of regulation 122 is defined in terms of what is required “to make the development acceptable in planning terms”; and, therefore, a simple “but for” test is inadequate…what is acceptable in planning terms is dependent upon a complex web of policies and other material considerations, and a series of planning judgments.”

Overall -Test is not whether planning permission would be refused for the development, “but for” the obligation in question. Instead, an obligation will be necessary to make the development acceptable in planning terms if it makes “some contribution” to a planning impact that is “directly attributable” to the development. -N.b. not possible for parties to override regulation 122 by agreement (see Telford & Wrekin Borough Council (and others) v Secretary of State for Communities and Local Government (and others) [2013] EWHC 1638 (Admin))

Telford & Wrekin BC -v- SSCLG [2013] EWHC 1638 (Admin) Application of reg. 122 to off-site highway works contribution. Costs pooled on the basis that all proposed developments would be completed. Condition in s.106 cancelling obligation if Inspector found non- compliance (now common). Held that whilst the method of apportioning pooled costs between proposed developments could in principle satisfy the requirements of Regulation 122(a), in this case the Inspector was entitled to find that pooled costs apportioned did not reflect the reality of future development. Upheld by COA: [2014] EWCA Civ 507

AFFORDABLE HOUSING OBLIGATIONS: APPEAL DECISIONS

THREE ROUTES TO VARIATION/DISCHARGE: s.106A(1)(a) – by agreement through deed. ss.106A(1)(b) - by expiry of relevant period (5 years). Right of appeal under s.106B (test is whether obligation still serves a “useful purpose” – difficult to meet). –N.b Amendment Regs: 5 year period removed for pre-6 th April 2010 developments until April New route for affordable housing obligations (section 106BA): obligation must be removed/modified to make development economically viable. Right of appeal under s. 106BC.

KEY LESSONS FROM CURRENT APPEAL DECISIONS – 1/4 Burden is on the developer to show that the scheme is not viable. –Land between Lydney Bypass and Highfield Road (known as Lydney A and Lydney B), Lydney, Gloucestershire. (appeal ref: ). –Uncertainty often resolved against developer. –Compare with Vannes KFT v. R B Kensington & Chelsea [2010] EWCA Civ 1466, where qualitative considerations can prevail where quantitative uncertainty.

KEY LESSONS FROM CURRENT APPEAL DECISIONS – 2/4 Starting point is the assumptions used during initial appraisal – including profit margin. -Former Holsworthy Showground, Trewyn Road, Holsworthy (appeal ref: ) -18% developer profit accepted, rather than 20% proposed by applicant. Inspector noted that lower rate of 18% used in initial appraisal submitted with planning application. -Inspector adopted this figure. -Lesson: adopting low developer profit margins at application stage and then making a s. 106BA application seeking a higher margin will not work.

KEY LESSONS FROM CURRENT APPEAL DECISIONS – 3/4 What happens if development is still unviable once contribution removed? -Land off Marsh Lane (appeal ref: ): development still unviable if no contribution. Purpose of s. 106BA to promote viability to enable development to come forward. Granting application would not allow this. Vs -Tamewater Court, Dobcross (appeal ref: ): AH requirement removed, “this scheme is not economically viable… the removal of the remaining contributions to affordable housing provision is necessary to move it towards viability.” and -Mast Pond Wharf (appeal ref: ): “there is therefore a prospect that the development, without the provision of affordable housing, could be viable and the discharge of the requirement would incentivise a start of development as sought by the guidance.”

KEY LESSONS FROM CURRENT APPEAL DECISIONS – 4/4 Not possible to increase developer profit after the event -Montague Close, Walton on Thames (appeal ref: ) -Inspector rejected an attempt to reduce an AH contribution after the development had actually been brought forward and sold. -Agreed that the profit achieved was 10.77% and reduced to approx. 8% upon payment of the commuted sum. -Retrospective attempt to increase margin rejected. 8% profit margin reasonable in any event.

ENFORCEMENT

Overall approach Stroude v Beazer Homes [2006] 2 E.G.L.R. 115: “... first and foremost, the section 106 Agreement is a contract between the parties to it which, in my judgment, falls to be construed according to ordinary principles of construction. The fact that the section 106 Agreement is made in the context of the statutory provisions is, no doubt, part of the factual matrix against which it has to be construed; accordingly, it should be construed, so far as possible, in a way which enables the statutory provisions to operate. But I do not consider that there are otherwise any special canons of construction which apply to a section 106/section 38 agreement.” Tesco v SSE [1995] 1 WLR 759: enforceability of a s. 106 agreement does not depend on its nexus to the development, but on the terms of the contract. Clear willingness of Courts to enforce section 106 obligations. Beyond statutory provisions for modification/discharge, scope for argument on enforceability limited.

R(Renaissance Habitat Ltd) v West Berkshire DC [2011] EWHC 242 (Admin) Section 106 agreement based on SPD – revised by time payment required. Quantum of contributions reduced under revised SPD. Not unlawful/unreasonable to enforce agreement. Parties could have agreed provisions which enabled obligations to be adjusted with changes to SPG or in specified circumstances, but did not do so. If agreement requires contributions to be paid in changed circumstances the developer is simply being held to his agreement. See also: Hertsmere BC v Brent Walker Group [1994] 1 PLR 1

R(Millgate Devs Ltd) v Wokingham BC [2011] EWCA Civ 1062 S. 78 appeal. UU submitted. Inspector found that unnecessary and gave it “little weight”. Developer sought declaration that s. 106 obligations unenforceable. Court of Appeal held that obligation enforceable. Developer could not challenge the agreement on the basis that it lacked sufficient nexus (see Tesco). Nevertheless, scope in future to argue that obligations not “reasonably required” given wording of the agreement.

Newham London Borough Council v Ali and others [2014] EWCA Civ 676 Enforcement of UU– required trust to submit policy compliant planning application within 12 months or carry out removal works. Failure to comply. LPA applied to the court for an injunction requiring the trust to carry out the removal works specified in the undertaking. High Court – granted injunction with immediate effect. COA: “In my judgement, where there has been a substantial breach of a planning obligation under section 106 of the 1990, an injunction will normally be granted unless the local planning authority has acted in a way which justifies withholding relief on ordinary equitable principles.” Contractual nature of a s106 agreement means enforcement different from proportionate approach required under s. 187B injunction application. However, COA suspended injunction.

Andrew Parkinson