The government consults on a model form of S106 for medium sites

The Government has identified delays with the progression of Section 106 Agreements as being one way of speeding up planning decisions being issued. There have been numerous attempts by successive governments to address the system of developer contributions. In the noughties, the Law Society took steps to streamline the process through the publication of a Law Society model S106 obligation, which was developed in partnership with the Department for Communities and Local Government in 2006. Good practice guidance was issued alongside the template which reiterated the "conditions first" policy that was enshrined in Circular 05/2005 at the time. Measures to curtail the use of S106 obligations came in the form of the Community Infrastructure Levy Regulations 2010, which introduced a statutory test for the appropriateness of planning obligations (Regulation 122 which survives today) and standardised infrastructure charges for new development, and which restricted the ability of local planning authorities to secure pooled contributions towards infrastructure. However, the CIL regulations failed to cause a measurable reduction in the length of time it took to conclude S106 agreements, and the pooing restrictions have since been lifted. The fact is that obligations to pay financial contributions are simple obligations, that rarely result in significant back and forth between planning lawyers on each side. It is the more difficult subject matters of affordable housing delivery, viability review mechanism, and infrastructure delivery that add complexity and delay to the system. The planning white paper "Planning for the Future", published during the Boris Johnson Government in August 2020, proposed a radical overhaul of the plan led system, with the introduction of a US-style zonal planning system, with a new National Infrastructure Levy that would replace the system of S106 and CIL developer contributions entirely.

The Burnham Government has now published a model form S106 template for medium sites (meaning sites of between 10 and 49 dwellings or sites with an area of up to 2.5 hectares). This would be underpinned by the new NPPF Policy DM6, which provides that "where national model planning obligations are relevant to the development, they should be used unless there are strong reasons for using a different planning obligation". Therefore the new model S106 if adopted by the Government would become a material planning consideration in the determination of planning applications. Local authorities would find it difficult to justify planning obligations that depart from the model template, unless there are strong reasons for doing so.

Much of the model template that has been consulted on is uncontroversial. The front end of the model template (dealing with parties, statutory provisions, liability exclusions and dispute resolution and similar "boilerplate clauses) is for the most part typical of what local authorities will require or allow in any event. Planning lawyers spend little time working on the front end of S106 agreements. Therefore there is unlikely to be a significant gain in efficiency in relation to the front end of the document. There are however some aspects that the Government may encounter resistance to from local authorities, and we anticipate that some local authorities will be concerned about the way exclusions from liability set out the template are drafted. The exemptions proposed by the Government are similar to many that have built up through custom and practice. However, the plain text of Section 106 of the Town and Country Planning Act 1990 arguably does not permit general exemptions from liability beyond those expressly permitted by statute. Section 106(3) and (4) of the Town and Country Planning Act 1990 provides that planning obligations are enforceable against the person entering into the obligation and successors in title, subject only to provisions excluding liability once a person has parted with their interest in the land. The model template recommends exclusions that go beyond this statutory remit. If the Government is to recommend a model form of S106 agreement, the Government could be criticised for doing so in a manner that is inconsistent with the statutory scheme. If the Government wishes to proceed with wider exemptions than permitted by S106(4), it would be wise to amend S106(4) so as to widen the scope of permissible exemptions in order to avoid potential legal challenges.

The template S106 also seeks to introduce a mechanism for resolving disputes on S106 obligations. Where an approval is required under the terms of a S106 agreement (for example approval of affordable housing schemes) the template provides that approval shall not be unreasonably withheld, and then a disputes resolution clause enables that dispute to be referred to an independent expert. Whilst this will be welcomed by developers, local authorities may complain that it inserts a third party expert into the planning decision making matrix, where the proper arbiter for such disputes should be the planning inspectorate. The Government could instead introduce a provision into the Town and Country Planning Act 1990 to enable any such disputes to be determined by a planning inspector.

The part of the model template that may result in most debate sits within the affordable housing schedule. This seeks to simplify and standardise affordable housing obligations, including by setting out standard drafting for shared owners, affordable rent and social rented tenures. The draft omits other tenures such as discounted market sales units, first homes, and rent to buy. Those tenures would therefore be negotiated in the usual way. The affordable housing obligations within the template may be useful in some cases. However, the templates fail to appreciate the myriad of affordability and eligibility criteria that local authorities have enshrined in policy, which are driven by local housing need and incomes. It will be interesting to see if the Government allows local authorities to introduce their own bespoke approach to matters of eligibility and affordability.

What has been published may end up being useful in standardising some aspects of S106 negotiations. However, the extent to which the templates will speed up the system is unclear. Even where the model template is widely adopted (as expected), many such agreements will need to include bespoke drafting for other items of infrastructure such as open space, roads and similar. But there will be benefits to those operating in the housing sector, particular for SME builders who may find the S106 process shorter and cheaper to navigate. It will interesting to see how the Government moves forward with the initiative once it has considered representations received.