In order to help mitigate the impact of a development on an area, local authorities have the right to request financial contributions from the developer. The two main components of these developer contributions are planning obligations (otherwise known as Section 106 agreements or S106 obligations) and the Community Infrastructure Levy (CIL).

What exactly are planning obligations?

The term ‘planning obligations’ has sometimes been used as a broad reference to all developer contributions—which may have led to some believing S106 agreements and the CIL were the same thing (see below).

However, the more traditional use has been to refer specifically to Section 106 of the Town and Country Planning Act 1990 (as amended). Here the planning obligation takes the form of a private agreement between the local planning authority and the developers or landowners, setting out:

  • the nature of the development
  • details of payments from the developer to provide proportionate additional infrastructure
  • contributions to compensate for loss or damage created by development.

The developer can either provide any new facilities directly or pay the council for them to be provided. Any contributions could also be required before the local planning authority grants planning permission.

How do planning obligations benefit the community?

Planning obligations have been designed to cover the cost of impact of a specific development on the local area.

Most commonly, they have been used to secure affordable housing (and the funding for affordable housing). But they can also include securing financial contributions to compensate for the additional strain put onto local infrastructure, such as loss of open space, or contributions for extra school places and the necessary highway improvement works any new dwellings might require.

How developers might be affected

S106 agreements are used as a mechanism to help make development proposals acceptable in planning terms when they might not have otherwise received approval. But they can throw up multiple challenges for developers.

Specifically these obligations can:

  • restrict the development or use of the land in any specified way;
  • require specified operations or activities to be carried out in, on, under or over the land;
  • require the land to be used in any specified way; or
  • require a sum or sums to be paid to the authority (or, to the Greater London Authority) on a specified date or dates or periodically.

They can also be subject to conditions and specify any restrictions definitely or indefinitely. So with regard to what you can expect, planning obligations can vary from site to site depending on the nature of the development and the perceived impacts.

It is important to note that non-compliance with the planning obligation puts both the person that entered into the obligation and any subsequent owner at risk. In the case of a breach of obligation, the local authority is entitled to take direct action and recover expenses.

Planning obligations vs Community Infrastructure Levy

As mentioned, there can sometimes be confusion between S106 planning obligations and the CIL. Yet while both fall under the definition of developer contributions, they are different policies.

The CIL was introduced as a separate charge under the Planning Act (2008) for England, as the government did not consider the S106 to be adequately capturing funding contributions for infrastructure. It was not designed as a replacement, but rather to complement the existing legislation and tighten the tests for when S106 was relevant (see regulations 122 and 123 of the CIL Regulations 2010).

Another difference is that while planning obligations under S106 are targeted at site-specific impact mitigation, the CIL looks to cover the costs of broader impact across the local infrastructure. (There is also a self-build exemption for the latter.)

This difference means that developers could be liable for contributions under S106 for things like education, affordable housing, public space (where each additional dwelling on the site is considered to have an impact on the local infrastructure), while also making payments under the CIL for broader local needs like hospitals, transport, and healthcare.

However, at no point should developers be paying both S106 and CIL contributions for the same infrastructure under the same development.