Planning contributions supplementary planning document

Planning contributions (also called planning obligations) are private agreements negotiated, usually in the context of planning applications, between the local planning authority (LPA) and persons with an interest in a piece of land, and its purpose is to make acceptable development which would otherwise be unacceptable in planning terms.

Planning contributions are used by the Council to mitigate the adverse impacts of development by securing contributions. LPAs negotiate two types of planning obligations to facilitate a proposed development:

• in-kind contributions – these are non-monetary contributions, for example, affordable housing, apprenticeships, and local labour
• monetary contributions – these are financial contributions which fund interventions necessary to mitigate the impact of the development, for example, environmental improvements in the vicinity of the site, tree planting, new child play facilities, estate enhancements, or educational facilities

The framework for the current system of planning contributions in England is set out in section 106 (s106) of the Town and Country Planning Act 1990 (as amended) (“the Act”). Other powers that also enable the LPA to agree planning contributions include  Section 16 of the Greater London General Powers Act 1974; and, sometimes planning contributions will contain provisions for the improvement of existing highways – the legal basis for these provisions are after Section 278 of the Highways Act 1980 (as amended).

A planning contribution made under s106 of the Act, can only be used to:
(a) restrict the development or require the use of the land in a specified way;
(b) require specified operations or activities to be carried out on the land; or,
(c) require a sum or sums to be paid to the authority on a specified date or dates or periodically.

The key requirements for seeking s106 planning contributions are also defined in the National Planning Policy Framework (NPPF) and under Regulation 122 of the CIL Regulations 2010 (as amended), which state that planning contributions under s106 should only be required where they meet all of the following tests:

• necessary to make the proposed development acceptable in planning terms
• directly related to the proposed development; and
• fair and reasonable in scale and kind to the proposed development

When assessing a planning application, local planning authorities (LPAs) can take into account planning contributions which make the proposal acceptable, when the only other alternative would be to refuse the application.

Planning contributions secured by s106 should be by way of “agreement or otherwise” and must be entered into by an instrument executed as a deed. The most common forms are:

• legal agreement – this is a legally binding agreement pursuant to s106 of the Act, made between the applicant, all other parties with an interest in the land and the LPA. The agreement may include contributions from both parties such as the applicant providing a certain portion of affordable housing, or a financial contribution which the LPA agrees to spend on a specific project
• unilateral undertaking – this is a legally binding undertaking prepared and entered into solely by the applicant (and any other parties with an interest in the land) without the LPA being a party, to make contributions in relation to a development. These are usually conditional on planning permission being granted for the development

Yes. Section 106(11) requires planning contributions to be registered as a local land charge, regardless of the form they take

Planning permission cannot be bought or sold simply because a developer promises benefits or inducements which are not necessary to make the development acceptable in planning terms, however much these are valued by the authority.

Planning contributions are taken in the context of the entire proposal and should result in the proposed development being made acceptable in planning terms and accord with planning policies.

Similarly, planning contributions cannot be used as a means of securing for the local community a share in the profits of development (a ‘betterment levy’).

If an LPA is not prepared to enter into an agreement, a developer can still offer a unilateral undertaking as part of their planning application. This must be taken into account by the LPA when considering the application.

Planning contributions are enforceable by the LPA. Under the Act, the LPA has two avenues for enforcement:

(a) by applying for an injunction from the courts; or
(b) by entering the subject land, carrying out the work and recovering any costs incurred in doing so

Yes, by a deed of variation to the original legal agreement. Planning contributions made under the Act may be modified or discharged in the following circumstances:

(a) at any time by written agreement between the LPA and all parties to the agreement; or
(b) any time after five years from either when the agreement was entered into or if the agreement was entered into  on or  before 6 April 2010, by application to the LPA

Where an application is made to modify or discharge a planning contribution made under the Act, the LPA may decide to either:

(a) continue the planning contribution without modification
(b) discharge it, if it no longer serves a useful purpose; or
(c) if it continues to serve a useful purpose, but would serve that purpose equally well if it had effect subject to the modifications applied for, then allow the modifications, provided it does not place any burden on a third party

Where the LPA decides not to allow a modification or change, the applicant may appeal the determination to the Secretary of State, pursuant to s106B.

There is also a procedure for varying affordable housing requirements under Section 106 BA of the act.

If a deed of variation is requested, the development manager will need to authorise the variation, determining whether or not the change is justified. In certain cases, the variation may need to be authorised by planning sub-committee.

A development management officer will then instruct the Council’s legal services team to draft the variation. Once the deed of variation is agreed it will be signed by all relevant parties.

Hackney’s deed of variation form should be completed and submitted to planning@hackney.gov.uk.

• deed of variation form

Legal costs will be incurred by the applicant, and there will also be a monitoring charge of £350 incurred by the applicant.

The issues on which planning contributions are based are called the heads of terms. Each of these terms will involve a specific contribution such as a financial contribution or undertaking. There must be agreement on what the heads of terms are before their specifics can be negotiated.

In Hackney, there are a large range of possible heads of terms for planning contributions. The following is a list of common matters we may seek contributions for. Please note that not all are applicable to every development.

• affordable housing
• children’s play areas and recreation facilities
• education, training and libraries
• employment and job creation (including local labour and removing barriers to work)
• health facilities
• community facilities
• training and employment land provision
• transport impacts associated with all development
• strategic transport impacts associated with major development
• public art
• town centre management
• open space and nature conservation
• sustainable design and development

In addition, it may be necessary to add other heads of terms to cover planning contributions unique to the proposed development.

Through the pre-application process, the likely heads of terms can be identified early. This allows both the applicant and the LPA to commence negotiations (and possibly even reach agreement) before a planning application is formally submitted.

Pre-application discussions on planning contributions can drastically decrease the time spent on the legal agreement once the planning application has been submitted. It may also avoid the possibility of an application being refused where the agreement cannot be completed within the 8 or 13 week timeframe (as applicable, or whatever timeframe was agreed).

Hackney’s local plan is the primary consideration in determining planning applications. Hackney’s core strategy states that planning contributions may be used along with other funding streams to support a range of social, green and physical infrastructure needs.

The planning contributions SPD (2015) which forms part of Hackney’s local plan, provides specific policy guidance on what and when contributions will be collected, and details the formulae used for working out the contributions owed. For example education contributions are based on a formula which generates a figure based on the child yield arising from a development.

• planning contributions SPD (2015)

The Mayor of London’s spatial development strategy, (“The London Plan”), published in 2011 is also a relevant planning document.

It is strongly advised you begin the process as soon as possible to avoid delays in your planning application. These delays can result in your application being refused if no agreement can be reached within time. Also, there can be significant delays in the issuing of permission if a decision to grant the application has been reached but a legal agreement has not been completed.

As part of the pre-application process, we will provide you with a list of potential heads of terms and possible contributions for each. You should indicate as soon as possible whether or not you are prepared to agree to these terms. Any negotiations should commence as soon as possible.

If you are happy with the proposed heads of terms and contributions then you should include written confirmation of this with your planning application. This will speed up the preparation of the planning contributions legal agreement and smooth the application process.

Step 1

We determine the planning contributions requirements and outline the heads of terms.

Step 2

• you provide your solicitor details and a current copy of the title
• we instruct our legal services department to prepare a draft legal agreement
• we both agree to the definitions of the heads of terms
• legal services will send a request to your solicitor to provide a costs undertaking (an agreement to cover the legal costs regardless of the outcome), and a cheque for half the anticipated costs (for example a costs undertaking of £3,000 is required with a cheque for £1,500)
  • costs undertaking

Step 3

Legal services prepare the first draft legal agreement and circulate it to all relevant parties for comment. Legal services will prepare and issue the agreement and should be contacted in the first instance.

• legal agreement template

Step 4

We receive comments from relevant parties on the draft agreement.

Step 5

Legal Services produce further drafts as a result of the feedback until agreement is reached.

Step 6

The final agreement is engrossed and completed subject to the Planning Sub-Committee meeting and approval or delegated officer approval (depending on timescales such approval may occur earlier in the process).

In addition to any amount specified as a planning contribution, you will be expected to cover the Council’s reasonable legal costs in preparing and completing the legal agreement.

In addition to the legal fees, there is a monitoring fee which enables the Council to recover the costs of administering, monitoring and implementing legal agreements and  is calculated on a per head of term basis which  under the emerging planning contributions SPD will be:

• £500 per non-financial obligation; and/or
• £500 or 5% of the financial contribution, (which ever value is greater but capped at £5,000 per head of term)

The monitoring cost attached to a deed of variation will be £500.

The monitoring costs are indicative and based on the Council’s emerging planning contributions SPD. For any questions about monitoring of planning contributions (including current costs) please call us on 020 8356 7720.

The definition for each head of term sets out the timeframe for payments of the financial contributions. As a generally rule, full payment is required prior to the development commencing. In the case of phased development, payments are normally required as the relevant phase is commenced.

As early as possible in the process (preferably upon submitting your application) the following information must be supplied in order to begin preparation of the legal agreement:

• property name
• property address and post code
• planning application reference number
• applicant name and contact details
• legal representative name and contact details
• current copy of title to property
• solicitor’s undertaking to meet the Council’s costs in preparing the agreement, and appropriate cheque

It should be noted that for any overseas company signatory to the agreement there will be a mandatory requirement for a legal opinion from a reputable legal firm from the same jurisdiction confirming that the company is authorised to enter, and has validly executed, the agreement.

Please be aware that:

• planning contributions can be entered into by either a legal agreement or a unilateral undertaking
• both legal agreements and unilateral undertakings must be in the form of an instrument executed as a deed
• all parties with an interest in the land must be a party to the legal agreement or unilateral undertaking. This includes mortgagees
• a planning application may be refused where agreement on the level of planning contributions cannot be reached
• a planning application may be refused where a legal agreement cannot be completed within the 8 or 13 week timeframe (or any other time period, as agreed) for reaching a decision.
• planning contributions are registered as a local land charge
• planning contributions can be modified or discharged

• Hackney Community infrastructure levy (CIL)

Monetary contributions will be paid upon the agreed ‘trigger point’ which will be set out in the planning contributions agreement. A common ‘trigger point’ for monetary contributions is implementation of the development. If the development is very large, however, phased payments may have been agreed over the course of the development.

For in-kind contributions such as local labour, developers will work with the Council prior to implementation of the development in order to ensure that the local labour agreed as part of the legal agreement for the demolition/construction phase of the development can be secured before the development starts on site. Similarly, developers will work with the Council prior to occupation of the development to ensure local people are employed in the end use of the development (for example, hotel, retail and hospitality uses).

Sometimes a developer may provide a facility in-kind, for example a school or health facility. The timing of the delivery of the facility will be agreed in the agreement.

The Section 106 monitoring officer undertakes site visits to assess and monitor the progress of each approved development with reference to the planning permission which has been granted. They also liaise with developers to ensure that all planning contributions are paid and that in-kind contributions are being delivered appropriately.

The S106 / CIL corporate board is responsible for ensuring that the use of planning contributions meet the legal conditions set out in the legal agreement, and address needs identified in Hackney, and related to the development.

The Board is chaired by the corporate director of finance and is made up of senior managers from finance, legal, planning, regeneration, and the chief executive’s directorate. The membership ensures that elected Members’ concerns are reflected in the process, subject to the provisions and conditions of the legal agreements.

Projects go through the Council’s usual approval to spend process which includes approval by legal and finance officers, as well as approval at corporate director and lead member level.  Projects are then discussed with and agreed by the Mayor before they receive final approval by cabinet.

The Council’s approval to spend process ensures that contributions are applied to projects which respond to needs identified in Hackney and deliver community benefits, including mitigating the effects experienced as a result of growth and development in the borough.

In line with planning contributions policy, planning contributions are often required to be spent on projects in the vicinity of the development site from which the funding was accrued, for example contributions towards improvements to local parks and child play facilities. However, some planning contributions seek to address strategic (borough-wide) needs such as: worklessness and access to local jobs; additional school places; and. promoting sustainable transport. Therefore, although the contribution may be accrued in a particular location, the funds may be spent outside the immediate vicinity of the particular development site, in order to address borough-wide need.

Once approval to spend is granted and the project or intervention begins, programme officers undertake monitoring to ensure the contributions are delivered in accordance with the terms of the legal agreement.

Programme officers undertake monitoring of headline project information, for example milestones, outputs, and spend. This monitoring takes place on quarterly basis and is reported to the S106/CIL corporate board.

Download highlight reports on community benefits achieved through planning contributions:

• planning contributions highlight report 2014/15
• planning contributions highlight report 2013/14
• planning contributions highlight report 2012/13

Community benefits and outputs are also reported publicly through:

• the local development framework’s (LDF) authority monitoring report (AMR)
• planning sub-committee and,
• regeneration steering group (through the S106/CIL corporate board)