Changes to section 106 agreements and the Community Infrastructure Levy


Author: Mark Harnett


The Government has been working up proposals for a new levy (the Community Infrastructure Levy or CIL), to sit alongside section 106 agreements, for several years. The Community Infrastructure Levy Regulations 2010 have now finally been adopted and came into effect on 6 April 2010.

The regulations confirm that local authorities have the power to introduce a levy but are not obliged to do so. The process which local authorities will have to go through before a levy can be adopted is both complex and time consuming. The principle of the introduction of a levy must first be enshrined in an authority’s planning policy documentation and the authority must then also introduce a charging schedule.

This will set out the amount of the charge, based upon an analysis of the likely costs of infrastructure requirements, coupled with an assessment of the amount of development that is likely to come forward. In practice it is likely to be at least a couple of years before any local authorities introduce the levy and even then adoption is likely to be extremely patchy. A further more detailed note setting out how the levy will operate will be issued at a later date assuming that the legislation survives any change of government (the Tories have indicated that they will abandon the levy).

The main purpose of this note, however, is to alert you to the fact that the regulations have also changed the rules on what can be required under a section 106 agreement/undertaking.

From time to time the Government issues a circular setting out its policy on when section 106 obligations should be sought by local authorities and what types of obligation can be included. Local authorities are required to have regard to Government policy in deciding whether or not to seek a section 106 agreement and also when deciding what it ought to cover. They can, however, ignore the advice and frequently do so. Whilst this has often been a source of intense frustration to developers, the failure of local authorities to follow Government guidance did not render the agreement unlawful. An agreement is a legally binding and enforceable obligation even if it contains provisions which are contrary to Government advice.

The new regulations make it much less likely that an authority will demand that an agreement is entered into where this would be in conflict with Government guidance. They also, however, make it much more dangerous for a developer to agree to enter into such an agreement anyway, just to obtain a consent.

The regulations state that from 6 April a section 106 agreement or undertaking may only constitute a reason for granting planning permission if it 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.

Where, as is usually the case, an agreement or undertaking is entered into in support of a planning application it is going to be very difficult to argue that it was not taken into account by a local authority when the decision to grant planning permission was made.

In practice, therefore, if an agreement is entered which does not satisfy each of these criteria (which broadly equate to the principles set out in the circular advice), there is considerable danger that the planning permission to which it relates would be held to be unlawful if it were to be challenged in the courts.

While, therefore, developers are likely to welcome the fact that the regulations should help to reduce the demands that local authorities make when applications are being considered, they should be very wary of the increased risks of agreements presenting an opportunity for those opposed to schemes seeking to quash consents by an application for judicial review.

Mark Harnett, Partner, Fladgate LLP (mharnett@fladgate.com)

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