The below questions cover the common basic questions we receive on Section 106.
Section 106 contributions (also known as Unilateral Obligations) are required by law to mitigate the impact of your development on a local community and infrastructure. These are sought by local planning authorities (LPAs) during the process of securing planning permission and secured by a legal agreement governed by S106 of the Town & Country Planning Act 1990.
Agreements commonly require the provision of affordable housing in kind, or as a commuted payment along with other infrastructure requirements (education, open space, wider community benefits), in order to secure the grant of planning permission. All these requests have to comply with Rule 122 of the CIL (Community Infrastructure Levy) Regulations. See:
S106 Management is experienced in auditing compliance. If you are unsure if these requests are legally due, please contact us.
There are a wide variety of types of affordable housing, these are defined by Annex 2 of the 2019 NPPF:
Affordable Housing for rent: most commonly let at a rent equal to 80% of open market rent, including service charges (but limited to the Local Area Housing Allowance which is the maximum rent level for Housing Benefit).
Starter Homes: as specified in Sections 2 and 3 of the Housing and Planning Act 2016.
Discounted Market Sales Housing: sold at a discount of at least 20% below local market value.
Other Affordable Routes to Home Ownership: housing provided for sale that provides a route to ownership for those who could not achieve home ownership through the market. It includes shared ownership, relevant equity loans, other low-cost homes for sale (at a price equivalent to at least 20% below local market value) and rent to buy (which includes a period of intermediate rent). Each of these tenures have different capital values, therefore scheme viability maybe enhanced by changing the ratio between typographies as well as total numeric delivery.
CIL (Community Infrastructure Levy) is a charge set on new development by a local authority which sits alongside Section 106 affordable housing contributions to support infrastructure delivery in the development area. Not all LPAs have adopted CIL charging schedules, and therefore S106 and CIL are sometimes referenced in the same way. For further information, see:
This is where you pay a cash sum, calculated by planning policy, to pay for Section 106 Affordable Housing or other Infrastructure requirements away from your own site.
The government’s 2018 Planning Policy Guidance gives a succinct answer to this question: Viability assessment is a process of assessing whether a site is financially viable, by looking at whether the value generated by a development is more than the cost of developing it. This includes looking at the key elements of gross development value, costs, land value, landowner premium, and developer return. S106 Management’s viability reports utilise industry standard specialist toolkits, such as the Housing Corporation Economic Appraisal Tool (HCEAT), the Three Dragons Development Appraisal Tool Kit, and the Greater London Authority Affordable Housing Toolkit (GLA Toolkit) to accurately represent a scheme’s viability and assess whether S106 contributions reduce profit margin below the universally accepted 15-20%. Our reports will be welcomed by planning officers at any stage of a planning application and speed up the planning process. In many cases, a viability report will be required to accompany your planning application before it will even be validated and registered.
The earlier the better (although it is never too late). All planning policies requiring Section 106 Affordable Housing are subject to viability assessment, so it’s best to raise viability concerns at the first opportunity. Viability information can be used to justify higher densities where the economics of the scheme are challenging. We recommend including a Section 106 viability report with your planning application; however, a Section 106 viability report can be submitted at any time before the application is determined.
The common perception is to see this as a purely accountancy-based exercise; many people make this mistake, and prejudice their case by doing so. The creation of the report is only one part of the negotiation process, and getting it wrong can lead to suboptimal outcomes, long delays in the planning process, and close further avenues of negotiation. The structure of S106 Management’s viability reports include many costs omitted from a simplistic examination, and so accordingly give a more realistic view of profitability. It is essential to also understand the legislative and non-statutory framework within which viability negotiations are conducted by LPAs. Whilst some LPAs ‘vet’ viability studies in-house, most refer viability reporting to external consultants at the applicant’s expense. S106 Management have successfully concluded viability negotiations with all the major consultants employed by LPAs throughout the UK. You can therefore take advantage of our unique expertise in this area, and thus avoid a steep learning curve. Our Section 106 viability reports are welcomed by Planning Departments because they are independent and properly documented. A useful analogy might be: Would I fix my own car? Could I do a thorough job? Would it take me longer than an experienced professional?
This may be the case, but always check they have the necessary experience and track record and compare pricing. We are always happy to work with your existing team. Our rates for provision of expert viability assessment and negotiation are highly competitive.
The below questions are specific to our services.
There are very few consultancies in the UK dealing specifically with viability that work only with developers, so you can be assured that there will be no conflict of interest. Furthermore, we are one of the longest running consultancies of this type, with a large network of planning, surveying and legal professionals of whom you can take advantage in your negotiation. Finally, our success rate it excellent, and we’ll only agree to work on your behalf if we feel confident that we can reduce your Section 106 contributions, following your initial free consultation.
We need to know the address of your scheme, the name of the Local Planning Authority, how much you paid for the site, and the gross and net areas of the proposed development. Armed with that information we can quickly discover the extent of the policy requirement for affordable housing and give you a scoping opinion on Section 106 scheme viability. Further, if a S106 contribution has already been sought, it will be valuable to know details of this.
We can give you a scoping opinion (for free) over the phone. We aim to turn a full Section 106 viability report around in 10 working days.
Unlike many professionals, we will provide an initial free no obligation full consultation to evaluate your unique situation and advise on next steps. Once instructed, our rates are highly competitive. Every job is unique, and has individual requirements, we will detail the full costs up front. Please contact us for a no obligation, free quotation. We only adopt cases where we believe we can save you more than our fee. A free preliminary chat will normally establish if we can help you, so why not give us a call? As a general guide, the vast majority of our Section 106 Affordable Housing Viability Reports cost between £2,500 – £10,000, dependant on complexity.
Many LPAs now ask for an Affordable Housing Statement to be submitted with a planning application. This is not the same as a Viability Report. It is simply a calculation of the greatest contribution towards affordable housing that can be required by adopted planning policies. We can prepare a Statement at low cost, whilst at the same time advising if it’s worth preparing a Viability Report to reduce or eliminate the amount of affordable housing you have to provide.
We quite often help clients who find themselves in this position; please call us and we will discuss how we can assist.
Yes, we can produce a Section 106 viability report and ask the Planning Department to reconsider the obligations. See our S106 Renegotiation service page for further information.
There are a number of reliefs and abatements that can be used to mitigate the cost of CIL. The most important relief being for existing buildings, this is conditional upon the existing building having been in use for at least 6 months in the 3 years prior to the date of the planning approval. There are further reliefs for self-builders, charities, and social housing. Abatements are allowed where CIL has already been paid for development A, and you propose to switch to development B. It is important to complete the CIL forms, including those claiming relief correctly and to inform the Planning Authority 14 days before any type of work is commenced on site, in order to avoid losing rights to pay by instalments and incurring penalty interest. S106 Management offer a fixed fee service for completing your CIL forms; please telephone to discuss our service in this regard. The cost of CIL is treated as an allowable expense in the overall viability of the project and so its impact may reduce the extent of your Affordable Housing Obligations.
The below questions deal primarily with local authorities.
Each Local Planning Authority has its own Affordable Housing Threshold and policy, and the majority seek affordable housing from ‘major’ developments (defined as 10 dwellings or more). The 2019 version of the NPPF provides at paragraph 63:
Provision of affordable housing should not be sought for residential developments that are not major developments, other than in designated rural areas (where policies may set out a lower threshold of 5 units or fewer). To support the re-use of brownfield land, where vacant buildings are being reused or redeveloped, any affordable housing contribution due should be reduced by a proportionate amount.
Not all LPAs observe this guidance because they are able to ignore the NPPF where their local plan is up-to-date and where there are special local circumstances (see case: Secretary of State for Communities and Government v West Berkshire District Council and Reading Borough Council:  EWCA Civ 441). If you find yourself in this position, we can research the local plan policies and advise accordingly. Whatever Affordable Housing Threshold your LPA has adopted, we will endeavour to help by sharing our expertise and producing a Viability Report to support your planning application or appeal.
There is no reason to think this; all Affordable Housing policies are dependent on viability, so submitting a Section 106 viability report is expected and increasingly compulsory. It is no different from submitting an ecological or archaeological report; it’s just ticking another box.
Not unless the net profit after interest, fees and all other costs is above 20%. If it is below 20% then you should work with us to tailor the scheme to profit rather than a specific number of units.
Most LPAs take time to deal with Section 106 viability reports; the vetting and negotiation process is unlikely to be complete in less than 8 weeks.
The practice varies rather; most LPAs refer our Viability Reports to third party consultants, while a few deal with viability in house.
Unilateral Undertakings are almost identical to Section 106 Agreements, so our answers apply to both. We can help you review the obligations and agree the wording of the S106 agreement or Unilateral Undertaking, even if you don’t need a viability report.
There is always the opportunity to negotiate with planners; by offering to provide different types, blends and quantities of Affordable Housing and/or Commuted Payments in order to both create the most value for you, and satisfy the LPA. If an LPA is refusing to negotiate you can always accept the best Section 106 agreement available, and later submit a new application and appeal if need be.
Yes, these can be resisted on the grounds of viability and may be demonstrated to be unnecessary, by reference to CIL Regulations 122. These rules require that the contributions must be necessary, directly related and proportionate to the development. We will be pleased to assist if you are in doubt regarding the legitimacy of the requests made by your LPA.
The following notes outline the possibilities provided by legislation:
It is possible to replace an existing S106 Agreement or Unilateral Undertaking by an application to develop land without compliance with conditions previously imposed by making a planning application under S73 of the Act. This route will not change or impose additional CIL obligations. A S73 application creates a new planning permission which requires a new S106 agreement or UU. Any existing agreement falls away as explained above. See:
A S73 application is typically supported by some slightly varied plans and a S106 Viability Report. The application incurs a fee, and offers a cost-effective means of replacing any existing S106 agreement or UU. A S73 planning application, once granted, creates a new planning permission that sits alongside your existing consent, and requires a new S106 agreement, or a deed of amendment to your existing S106 agreement. This process involves replacing one obligation for another, rather than of appeal. Your existing S106 agreement may include words that extend the agreement to future S73 applications, in these circumstances we recommend a fresh planning application as the only realistic way forward, because LPAs are often very reluctant to release existing obligations.
The further scenario is to make a fresh planning application for an identical development to that already permitted, but with a different S106 agreement or UU. A new planning permission necessarily requires a new S106 Agreement or UU which will supersede the existing agreement. There is no planning fee to pay if the new application is made within 12 months of the last planning decision. An outline application can be a cost-effective alternative to a detailed application. Before doing this, you need to consider what other changes might have occurred in planning policy; for instance, CIL may have been introduced.
An appeal against a condition imposed in a planning permission creates a new planning consent, which will require a fresh planning obligation. This route involves similar considerations to those concerning S73 applications listed above. If it is not possible to move to a new planning application because the original consent is substantially complete, a S106A application may be appropriate.
Planning obligations can be renegotiated at any point where the local planning authority and developer agree to do so, however, informal negotiations often get bogged down and lead nowhere. S106A provides a more formal timetable requiring a decision in 8 weeks. Agreements of any vintage may be subject to an application for variation, and will succeed where either they no longer serve a useful purpose, or the revised proposed terms would serve the original purpose just as effectively as the original deed. If the planning obligation is over 5 years old, the application may be subject to an appeal to the planning inspectorate in the usual way. Younger agreements can only be appealed by the process of Judicial Review, which is only a realistic option in the most valuable of cases. The test of ‘no longer serving a useful planning purpose’ is, in practice, interpreted in a liberal way, which makes these applications very unreliable. The legislation can be found on this link:
This legislation for reviewing planning agreements that are non-viable has now expired, therefore one of the options above must now be used.
See below for some useful links to planning guidance for further information.