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Last edited 07 Sep 2020
The National Planning Policy Framework (NPPF) suggests that a planning obligation is, 'a legally enforceable obligation entered into under section 106 of the Town and Country Planning Act 1990 to mitigate the impacts of a development proposal.'
Planning obligations (also known as Section 106 Agreements or 'planning gain') are obligations attached to land that is the subject of a planning permission. They are used to mitigate or compensate for the negative impacts of a development or to prescribe the nature of a development.
They are intended to make acceptable developments which would otherwise be unacceptable by offsetting the impact by making local improvements. Because they apply to the land not the applicant, planning obligations transfer with the land to future owners of the site.
Planning obligations must be:
- Directly relevant to planning.
- Necessary to make the proposed development acceptable.
- Directly related to the proposed development.
- Reasonable and in proportion to the development.
Examples of planning obligations could include:
- Requiring that the development includes affordable housing.
- Requiring compensation (or substitute provision) for the loss of open space.
- Making a contribution to the provision of additional infrastructure to serve the development (such as a new classroom at a school) or increasing the provision of public transport.
Obligations can be direct monetary compensation, payment for other expenses or payment directly by the developer for the provision of something required by the obligation. They may also include ongoing maintenance payments.
Early discussions with the local planning authority will allow for negotiation about the imposition of planning obligations. Negotiations are usually based on viability statements and financial assessments - in which the developer my attempt to demonstrate that the required contribution is unaffordable and would make the project financially unviable. The applicant can appeal against obligations which they consider to be unreasonable.
 Relationship with community infrastructure levy
In 2010, measures within the Community Infrastructure Levy Regulations came into force clarifying the relationship between planning obligations and the community infrastructure levy and restricting the use of planning obligations.
The community infrastructure levy is a charge that local authorities can choose to impose on new developments to fund infrastructure. The introduction of the community infrastructure levy should result in a scaling back in the imposition of planning obligations.
- Planning obligations must; be necessary to make the development acceptable, be directly related to the development; and they must be in scale to the development.
- Planning obligations cannot be used to double charge developers for infrastructure. Once an authority has introduced the levy in its local area, it must not use obligations to fund infrastructure they intend to fund via the levy.
- Planning obligations will no longer be the basis for a tariff. Once an authority introduces the levy in their area, or if sooner, after April 2014, it can no longer pool more than five contributions for infrastructure capable of being funded by the levy.
In December 2012, CLG published Community Infrastructure Levy guidance. Paragraphs 84 – 91 set out the relationship between the levy and planning obligations. They suggest that when the levy is introduced, charging authorities should scale back Section 106 requirements ‘to those matters that are directly related to a specific site, and are not set out in a regulation 123 list'. The regulation 123 list sets out those projects or types of infrastructure that it intends to fund through they levy.
The guidance is intended to ensure that there is transparency on what the charging authority intends to fund through the levy and those where section 106 contributions may continue to be sought. This should ensure that there is no ‘double dipping’, where developers are asked to pay twice for the infrastructure.
The Growth and Infrastructure Act 2013 includes provisions for planning obligations on stalled residential developments to be re-negotiated. This is intended to allow developers to re-negotiate requirements for social housing, which some claim cause marginal developments to become unviable (ref. Gov.uk Section 106 affordable housing requirements: review and appeal 26 April 2013).
On 4 December 2014, the Chancellor announced in the Autumn Statement that the government would be; '...taking steps to speed up section 106 negotiations, including revised guidance, consulting on a faster process for reaching agreement, considering how timescales for agreement could be introduced, and improving transparency on the use of section 106 funds.'
A consultation was launched in February 2015 seeking views on proposals to speed up section 106 agreements. The consultation closed on 19 March 2015 and the government response was published a week later on 25 March.
- Section 106 negotiations should be completed within the 8-13 week time limit for determining applications, unless agreed by the parties.
- Planning authorities should use standard forms and templates.
- Discussions should take place as early as possible, including the pre-application stage.
From 6 April 2015, local authorities can no longer pool more than five section 106 obligation contributions to pay for a single infrastructure project or type of infrastructure if it is a type of infrastructure that is capable of being funded by the community infrastructure levy. Provisions that are not capable of being funded by the levy, such as affordable housing, are not restricted.
In November 2015, then Planning Minister Brandon Lewis wrote to local authorities reminding them that they should be flexible in their requirements for section 106 agreements, taking into account specific site circumstances and changing circumstances. (Ref. Impact of social rent changes on the delivery of affordable housing, 9 November 2015.)
On 23 March 2014, the government launched a consultation to consider scrapping Section 106 charges for self-builders, homeowners, developers wanting to bring redundant buildings back into use and builders on small sites (10 units or 1,000 sqm gross floor area). It was claimed that these charges can make such developments economically unviable. Rural Exception Sites, often only permitted on the basis that affordable housing will be made available, would not be affected (ref. Gov.uk Charges adding thousands of pounds to building costs to be axed 23 March 2014).
On 28 November 2014, Eric Pickles MP, then Secretary of State for Communities and Local Government announced plans to make clear that Section 106 agreements should generally not be sought from the smallest housebuilders on sites of 10 homes or fewer, including self-build, extensions and annexes. In very rural areas, sites of 5 homes or fewer should not face the charge. See Section 106 exemption for more information.
However, in a landmark case at the High Court in July 2015, Justice Holgate quashed government policy on affordable housing exemption thresholds, as a result of the which, planning guidance on planning obligations was amended to remove paragraphs 012-023. In addition, the vacant building credit policy was quashed.
West Berkshire Council and Reading Borough Council challenged the changes arguing that the consultation process had been unlawful. Justice Holgate accepted that the government had failed to take into account "obviously material" considerations.
A spokesman for the Department for Communities and Local Government said that they would be seeking permission to appeal against the judge’s decision. See R (on the application of West Berkshire District Council and Reading Borough Council) v Secretary of State for Communities and Local Government for more information.
On 6 August 2020, the government published a white paper, Planning for the future, proposing that the system of charging a Community Infrastructure Levy on developments and imposing planning obligations (Section 106 agreements) should be reformed, to create a nationally set, value-based flat rate charge referred to as the ‘Infrastructure Levy’. For more information see: Infrastructure levy.
 Related articles on Designing Buildings Wiki
- Affordable housing.
- Community infrastructure levy.
- Consultation process.
- Contingent obligation.
- Deemed discharge of planning conditions.
- Delegated powers.
- Developer contributions.
- Planning conditions.
- Planning fees.
- Planning performance agreement.
- Planning permission.
- R (on the application of West Berkshire District Council and Reading Borough Council) v Secretary of State for Communities and Local Government.
- Section 106 consultation.
- Section 106 exemption.
- Viability test.
 External references
- Adam Roberts Consultancy, Do I Need to Pay Section 106 Contributions?
- Gov.uk Charges adding thousands of pounds to building costs to be axed 23 March 2014.
- Gov.uk Section 106 affordable housing requirements: review and appeal 26 April 2013.
- CLG: Community Infrastructure Levy guidance. December 2012
- Government policy on the use of planning obligations: Circular 05/05.
- Department for communities and local government guidance on the relationship between the levy and planning obligations.
- R (on the application of West Berkshire District Council and Reading Borough Council) v Secretary of State for Communities and Local Government  EWHC 2222 (Admin).
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