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Quick guide to section 106 contributions and CIL funding

on Tuesday, 09 April 2024.

A brief overview of how the section 106 and CIL regimes operate, along with some important things to watch out for if development is proposed nearby.

What is Section 106 and why is it important?

The phrase 'section 106', often shortened to "s106", refers to section 106 of the Town and Country Planning Act 1990, a key piece of legislation governing planning and development. This section means that an owner can enter an agreement with the local planning authority to secure planning obligations against the land.

The planning obligations are intended to make a proposed development acceptable from a planning perspective - where it otherwise would not be, due to its impact on local services and infrastructure.

Planning obligations found in s106 agreements often include:

  • The payment of financial contributions
  • The submission of plans
  • Schemes or details to local authorities
  • The delivery of certain types of housing
  • The provision of on-site or offsite green space and biodiversity improvements.

Certain requirements may need to be met before the development can be started and occupied.

How does CIL fit in?

Community Infrastructure Levy, often shortened to 'CIL', is a regime of standard charges for development which only some councils have adopted. CIL is designed to do the same job as financial contributions payable under a s106 agreement, requiring developers to fund measures that will mitigate the impact of the development on local services and infrastructure. If CIL has been adopted in the area of a proposed development of residential or substantial commercial development, it will be charged by the council at a set rate per square metre of new floorspace created.

Local authorities may use CIL instead of, or in addition to, a s106 agreement.

What to consider if you are applying for planning permission or selling land for redevelopment

Factor in s106 and CIL costs - if you are applying for planning permission to develop new premises, you may need to enter a s106 agreement and/or pay CIL, which could involve the payment of substantial sums. Before embarking on a new development, check whether CIL is chargeable in your area and seek advice from a local planning consultant and the Council on the s106 contributions that are likely to be payable.

Complying with CIL procedure - if you are carrying out development in an area that has adopted CIL, ensure you seek advice on and comply with its strict procedure. Notices must be served and payment made at the appropriate times or fines will be payable. Generally speaking, CIL is payable before the development begins.

Ensure you are protected if selling land for redevelopment - if you are selling land to a developer, you may still be required to enter into a s106 agreement. This is because it is the owner(s) that need to enter a s106 agreement, not necessarily the developer who is applying for planning permission. It is important that there is an agreement in place to ensure that the developer will indemnify you against any liability under the s106 agreement. You should also ensure that you have an agreement in place for the developer to pay your legal fees as well as the council's.

What to consider if a development is proposed locally

Respond to consultations - you may be invited by the local council to respond to a consultation on an application for planning permission. If so, it is important to clearly outline any additional strain or issues that the development may cause for local services.

Monitor funding due - S106 contributions and CIL may include the provision of funding to expand and improve local medical services, to reduce the strain on existing services that may be caused by people moving into the area to live in new developments. The local council and/or health board should have standard calculations to work out how much funding is required. These sums should be index-linked to ensure the contribution does not lose value due to the passage of time between calculation and payment.

Remember, the s106 agreement may specify that the contribution(s) need to be returned to the developer if unspent after a period of time; it is normally ten years, but may be five or even less. Therefore, it is important to apply to the local council and/or health board to distribute any funding that you are expecting.

If you are looking for a legal expert to act on your behalf in s106 agreements, please contact Bethan Sykes in our Planning and Infrastructure team on 07468 698 941, or complete the form below.

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