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by the solicitors regulation authority. The information contained in this article is for PLANNING OBLIGATIONS information only and should not be relied uponENFORCEMENT cular circumstances. - CHALLENGES AND without detailed advice on your parti 2008 Steeles Law First presentedLLP behalf of Central Law Training 13 May 2008 on David Merson Associate Steeles Law LLP

1.

Introduction Planning obligations entered into under s106 of the Town and Country Planning Act 1990 (as amended) provide an effective means of addressing deficiencies in some application proposals, allowing development that would otherwise not be acceptable to go ahead. They also give rise to enforcement issues and create suspicion in the minds of those not party to the negotiations, giving rise to the potential for challenge. Indeed challenge can come from the most unlikely of sources. This paper does not attempt to deal with the law of planning obligations in any comprehensive way. The intention is rather to consider the way in which planning obligations can be used and, equally importantly, to consider how they might be challenged and enforced. Consideration is also given to some associated drafting issues. We will consider how the correct obligations can be determined and how obligations might be changed after they have been concluded. I will attempt to consider this from all sides of the process namely applicant developers, those with interests in the land, public authorities and third parties. 2.

The question of weight that can be attached to any obligation is interesting. It will depend on the extent to which it resolves planning objections to the proposed development and should be judged against the legal considerations and policy considerations. Different decision makers may take different policy views and different considerations apply when a developer is considering offering an obligation at the planning committee stage, as opposed to the appeal stage. There will however be a need to consider some of the legal and policy issues involved before going on to consider wider tactical considerations and the issues of challenge and enforcement. Appropriateness legal and policy considerations Legal considerations S106 provides a very broad power, namely that:
(1) Any person interested in land in the area of a local planning authority may, by agreement or otherwise, enter into an obligation (referred to in this section and sections 106A and 106B as a planning obligation), enforceable to the extent mentioned in subsection (3) (a) restricting the development or use of the land in any specified way; (b) requiring specified operations or activities to be carried out in, on, under or over the land; (c) requiring the land to be used in any specified way; or

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(d) requiring a sum or sums to be paid to the authority on a specified date or dates or periodically.

It is immediately apparent that there is some scope for debate as to who may enter into a planning obligation different people may do so for different purposes and the nature and extent of the planning obligation itself. Furthermore, it is clear that the provision also contemplates an obligation other than by agreement with the local planning authority. The section does however spell out in clear terms the matters that may be included in a planning obligation. This makes it difficult for the courts to read further limitations into the plain language employed by Parliament. There is of course the overlap between the two mechanisms which can be used for restricting the scope of a planning permission: by planning conditions pursuant to s72 or by a planning obligation, linked to the planning permission, pursuant to s106. The terms that are enforceable under s106 (1), for example, go well beyond those which could be included in a planning condition. See Newbury District Council v. Secretary of State for the Environment [1981] A.C. 578 and DOE Circular 11/1995 - The Use of Conditions in Planning Permissions issued on 20th July 1995.

One of the fundamental principles of planning obligations is that they should not be used to enable developers and local planning authorities to buy or sell planning permission. It is therefore not legitimate for unacceptable development to be permitted because of benefits or inducements offered by a developer which are not necessary to make the development acceptable in planning terms. However, a planning obligation is an established and, some would say, valuable mechanism for securing planning matters arising from a development proposal. They are commonly used to make development acceptable and to bring it in line with the objectives of the relevant local, regional and national planning policies particularly with respect to, for example, sustainability. They have not until now been used by local planning authorities to allow the local community to share the profits from any developments, a principle known as the Betterment Levy. The position is however changing to a certain extent with the proposed introduction of the Community Infrastructure Levy contained in the Planning Bill 2007-2008 and addressed in the Community Infrastructure Levy Guidance issued by CLG on 24th January 2008. While the Secretary of State has urged that, as with conditions, planning obligations should be sought

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only where they are necessary to the grant of permission, relevant to planning, and relevant to the development to be permitted

The Circular guidance is that:

Where there is a choice between imposing conditions and entering into a planning obligation, the imposition of a condition is preferable.

Parliament's failure to limit the power expressly, suggests that it did not intend planning obligations to be too readily susceptible to external legal challenge on vires grounds. The matter is now clearly resolved. The validity of planning obligations should not be measured by the same tests applicable to planning conditions. See Tesco Stores Ltd v. Secretary of State for the Environment [1995] 2 All E.R. 636, where the House of Lords was unanimous in that conclusion. In essence the threshold is the bare test of materiality clearly set out by the courts. There is no legal requirement that an obligation can only be imposed if it is necessary to enable a development to proceed. If it meets the statutory requirements, and has a more than de minimis relationship with the proposed development, it is lawful and is capable of being a material planning consideration. The weight to be attached to an obligation is a matter for the decision-maker. Policy considerations ODPM Circular 05/2005 - Planning Obligations was issued on 18th July 2005 to:
provide revised guidance to local authorities in England on the use of planning obligations.

This is because it enables a developer to appeal to the Secretary of State regarding the imposition of the condition. However, the Planning Inspectorate (PINS) take a more expansive view in the advice note to Inspectors (30th November 2006). This suggests that a positively worded condition, which requires any of the parties to enter into an obligation, either unilaterally or by agreement, should not be considered. However a negatively worded condition could be used restricting the commencement of development until certain arrangements have been put in place with the agreement of the local planning authority. This could also provide for implementation of those arrangements before the occupation of the development permitted. There is also advice that in appropriate circumstances a more general form of words for a condition might be used although the suggested form of words in the advice note might be argued to be imprecise and too vague to be able to assess whether its requirements reasonably relate in scale and kind to the proposed development and in failing to quantify the amount of infrastructure to be provided. There has been careful consideration of this by PINS. It

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has however been decided that, in the interests of planning delivery, such an approach remains valid. Unless and until successfully challenged, PINS will continue to support Inspectors who use such conditions in the appropriate circumstances. See R v Weymouth and Portland Borough Council ex parte Portland Port Limited and another [2001], which is an example of the flexibility taken by the courts to the overlap of s72 and s106. In this case, the s106 agreement required an application for the approval for the development to be in accordance with the masterplan, the design statement and the environmental statement. The environmental assessment gave a detailed description of the key features of the proposed development and the design statement had tables giving a breakdown of the proposed uses by location on the site, the proposed gross building areas for each use, the approximate number of dwellings in each case of the residential uses and the number of car parking spaces for each use. That being the case the court was satisfied that the provisions ensured that the proposed development kept within the parameters of the development assessed in the environmental assessment. The Secretary of State's policy set out in Circular 05/2005 requires, amongst other factors, that planning obligations are only sought where they meet certain tests. The planning obligation under this test must therefore be:

o o o o o

Relevant to planning; Necessary to make the proposed development acceptable in planning terms; Directly related to the proposed development; Fairly and reasonably related in scale and kind to the proposed development; and Reasonable in all other respects.

A crucial consideration in relation to necessity is the development plan. These are created by local planning authorities in consultation with potential developers, local bodies and the general public, and the documents set out matters considered to be essential for local development. Directly related means that for an obligation to be permissible the development should not be permitted without it. For example, there must be some sort of link either in function or in location between the proposed obligation and the development. The imposition of requirements for assistance with public transport within a development site is a prime example of such a link where there is a clear geographical and functional link. Other examples often include obligations being used to replace any landscape features, open spaces or rights of way. Planning obligations should not be used to satisfy existing short falls in services within a local area or to be used to gain contribution to a wider local government planning policy.

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In deciding the scale and type of obligations that may be used consideration should be given by the local planning authority to what is economically viable for the development to proceed and to what extent development within the local area should be encouraged. As such the local planning authority may decide to take on the cost of providing some of the services or infrastructure themselves to assist in making the development appropriate in planning terms. The Circular does not however state a principle of law. See R. v. Plymouth City Council, ex p. Plymouth and South Devon Co-operative Society [1993] J.P.L. Furthermore, the tests in the circular cannot take a narrower approach than the test of materiality set out by the courts, and any failure to comply with the requirements of the circular will not invalidate the grant of planning permission as a matter of law. See the Tesco Stores Ltd case. This also confirms that a local planning authority is not legally bound to apply the Secretary of State's policy. Any authority would not be acting unlawfully if it failed to apply the Secretary of State's necessity test in considering whether a planning obligation should be required or accepted. Equally, nor would an authority be acting unlawfully if it did, as a matter of policy, apply a necessity test.

3.

Using Obligations at the planning committee and appeal stage Planning obligations provide a viable alternative to the obviously preferable planning conditions. Planning obligations are in themselves useful tools in obtaining planning permission for developments which otherwise might be unacceptable in planning terms. They are essentially private arrangements, which take the form of either a private agreement between the developer and the local planning authority or in the form of a unilateral undertaking issued by the developer to the authority. The process of setting planning obligations policies and negotiating planning obligations, Circular 05/2005 advises, should however be conducted as openly, fairly and reasonably as possible and members of the public should be given every reasonable assistance in locating and examining proposed and agreed planning obligations which are of interest to them. The reality however is that members of the public play little real, if any, part in the process of arriving at the final form of any planning obligation. The issue of a planning obligation may arise in a number of different contexts: o The development plan may have identified circumstances in which a planning obligation is

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required e.g. a requirement to provide affordable housing; The development itself may give rise to site specific issues that must be addressed in order to make the proposal acceptable in planning terms e.g. the need to carry out certain infrastructure works or to make provision for something that may be lost as a result of the proposal; There may be a logjam in any negotiations between the applicant and the local planning authority; and The local planning authority committee members may be hostile, for what ever reasons, to the proposal which officers are minded to support and planning obligations are offered to bring pressure to bear on the local planning authority.

which the asset is to be vested where it is intended for wider public use. The Planning Obligations Good Practice Guidance provides guidance in Table 3:1 regarding making the choice between in-kind and financial contributions. In-kind contributions are said to be generally more appropriate in circumstances where affordable housing is being provided through a planning obligation; the developer will provide considerable economies of scale and value for money by building or providing the obligation themselves; there is a need to ensure that the development and the facilities provided through the obligation are particularly closely integrated in terms of design and construction; or the developer possesses the specialist and necessary skills to provide the infrastructure themselves. Financial contributions are said to be generally more appropriate where an alternative organisation (such as the local authority or Primary Care Trust) is better placed to provide the infrastructure at similar or better value for money and at the desired standard of quality; the funding of a particular facility through obligations is being partfunded by a number of developments; or the contribution is in the form of a maintenance payment and the body carrying out the maintenance is not the developer.

Planning obligations may also take different forms. There can be financial contributions, for example payments in the form of a lump sum or an endowment. This can be a single payment or take the form of phased payments, over a period of time, related to defined dates, events and triggers. There may provisions for maintenance payments (i.e. for physical upkeep), which would be appropriate where facilities are provided predominantly for the benefit of the users of the associated development. Payments in perpetuity are possible but as a general rule the costs of subsequent maintenance and other recurrent expenditure should normally be borne by the body or authority in

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The guidance also suggests that there may be circumstances where a combination of in-kind and financial obligation is appropriate namely where the developer possesses the skills and expertise to provide part of the infrastructure themselves, but the remainder needs to be provided by an alternative organisation. The point at the planning application stage is that the local planning authority can request more than the Circular 05/2005 requirements. Any planning obligation concluded will be lawful and enforceable. If the matter goes to appeal the local planning authority must expect that the Inspector will only support what is necessary. If the local planning authoritys conduct was considered unreasonable a costs award might follow. Weight will not be attached to these items in the planning decision. There is therefore a very strong incentive to act reasonably. Clearly, if there were an underlying policy or site-specific justification for the request of a planning obligation then the local planning authority would be within its powers to do so. If however a local planning authority seeks an unreasonable obligation in relation to the grant of planning permission then the applicant can refuse to enter into the agreement. This is usually likely to end up with the refusal of the application for permission; the grant of permission with some form of unacceptable condition; or a failure to determine the application at all; all giving rise to the right of appeal to the Secretary of State.

Any developer would however wish, if possible, to avoid the uncertainty, delay and cost usually associated with an appeal. It is therefore preferable to try and resolve the issue of any planning obligation, or the heads of terms thereof, at least by the time the relevant planning committee meets to consider the application. There can however be considerable delay between committee resolution to grant and the actual decision notice. In addition to this continuing uncertainty for the developer, the local planning authority must take account of any change in circumstances that may occur. The relevant question will then be whether the officer delegated to issue the decision notice, subject to the conclusion of the s106, remains entitled to act on the original resolution. This will depend upon whether the change of circumstances is such as to require the relevant committee to be invited to form a fresh judgement. See R v South Cambridgeshire DC ex Kides and others [2002] EWCA Civ 1370 where after a five year delay it was held that the test of a material change is an objective one, and it is not an issue for the delegated officer to decide. Indeed some applications, particularly major applications, may give rise to substantial pre-application discussion and negotiation on the terms of any proposed planning obligation well in advance of the committee meeting. Some local planning authorities have pre-application protocols in place advising prospective developers on

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how they would wish to proceed in these circumstances and the information that the local planning authority would wish to see coming forward to assist the process e.g. title information and confirmation from landowners, whose land is comprised with the proposed application but who are not applicants, that they will enter into the relevant obligations. The process of negotiating s106 agreements has also become easier with the increased use of Formulae and Standard Charges; and Standard Agreements/Undertakings (see the Model form of agreement). If the form of the proposed planning obligation is agreed, at least at officer level, before the committee meeting then it is relatively easy and quick to complete the planning obligation and issue the necessary planning permission thereafter. If not, or the members take a different view, then there is likely to be a delay in the further negotiations required. Some authorities, with one eye on Planning Delivery Grant (in part dependant on meeting application determination targets), resolve to grant permission subject to the prior completion of the required planning obligation with a specified period of time thereafter. If the obligation is not completed within the timeframe allowed the matter is then likely to be refused. Some developers take a different view to planning obligations and submit, at least in draft form, a planning

obligation, whether agreement or unilateral obligation, at the time of submission of their application. This is usually designed to try and restrict the parameters of the associated negotiations and put pressure on the local planning authority. Developers however always assert that this is done to assist overworked local planning authorities and their officers. Where the applicant exercises its right of appeal there will be the opportunity as part of the process to submit a planning obligation either in the form of a draft agreement or a unilateral undertaking setting out any obligations which they believe necessary to bring their planning permission application within the guidance provided by Circular 05/2005. It is the case that the Inspector now requires a completed planning obligation, whether agreement or unilateral obligation, to be submitted no later than the close of any hearing or inquiry. In the past, if the local planning authority remained unwilling to enter into an agreement, the Secretary of State had no choice but to dismiss the appeal. However, the developer is now able to overcome the authority's recalcitrance to some extent by the submission of a unilateral obligation, but it remains a second-best option. It cannot, for example, secure the authority's consent to actually undertake necessary off-site works, nor to use its compulsory purchase powers to acquire any necessary land. Where the difference is between a highway authority's requirements for road works, and a more

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modest scheme proposed by the developer, a unilateral obligation may provide the highway authority with the funding appropriate to the developer's scheme, but not require them actually to carry it out. As ever the issue of costs lurks in the background. Unreasonable conduct on the part of one party, giving rise to another incurring costs it would not otherwise have done, inevitably gives rise to the issue of a costs award. See for example R. v. Secretary of State for the Environment, ex p. Wakefield Metropolitan Borough Council (The Times, October 29, 1996) where the local planning authority refused to enter into a planning agreement or alternatively to consider the terms of a unilateral undertaking. Unilateral obligations are only appropriate where only the developer needs to be bound by the agreement, and there are no reciprocal commitments by the local planning authority (a developer cannot for instance force the local planning authority or any other party to accept land unilaterally); or the likely requirements can be determined in advance, e.g. where there are detailed policies, particularly those based on formulae and standard charges following pre-application discussions. Unilateral undertakings are commonly used at appeals or call-ins where there are planning objections that only a planning obligation can resolve. Where a unilateral undertaking is offered, it should still be referred to the

local planning authority to seek their views. This is the one way to deal with an unreasonable local planning authority, which is insisting on obligations that the developer is not prepared to accept. Unilateral obligations may also arise where
local planning authorities may wish to encourage developers to submit unilateral undertakings with their planning application (if possible based on a standard document) in the interest of speed.

In some cases where a developer is faced with having to deal with more than one authority, commonly in rural areas with both a district and county council, it is not uncommon to see two forms of planning obligation. The approach is usually advocated on the basis of the perceived delay and cost associated with carrying out of multi party negotiations with authorities whose interests may not be wholly compatible. One in the form of an agreement negotiated with the district local planning authority and a second unilateral obligation provided in favour of the county in its capacity as highway or education authority. The unilateral obligation in these circumstances usually provides no more than the payment of monies e.g. for highway works or school places and is inevitably provided on a condition that the money is applied for specified purposes within a specified period of time.

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Additional guidance is set out and contained in the CLG Planning Obligations: Practical Guidance document issued July 2006. 4. Procedural pitfalls and lawful authority The local planning authority in dealing with applications for planning permission and associated planning obligations need to ensure that their decision making process is robust and complies with all relevant requirements. The obvious requirements relating to the submission of the application itself (documentation and plans, certification, fees, notification, consultation etc) are outside the strict confines of this paper. Nevertheless they must be addressed as part of the application process. The starting point in interpreting a s106 planning obligation is as summarised in Stroude v (1) Beazer Homes Ltd (2) Beazer Group Ltd (3) Persimmon Homes Ltd [2005] EWHC 2686:
Some aspects of the section 106 Agreement fall, , within section 106 Town & Country Planning Act 1990 and other aspects fall within section 38 Highways Act 1980. But first and foremost, the section 106 Agreement is a contract between the parties to it which, in my judgement, falls to be construed accordingly to ordinary principles of construction. The fact that the section 106 Agreement is made in the contract of the statutory provisions is, no doubt, part of the factual matrix against which it has to be construed; accordingly, it should be construed, so far as possible,

in a way which enables the statutory provisions to operate. But I do not consider that there are otherwise any special canons of construction which apply to a section 106/section 38 agreement.

The commencement clauses are often critical in a s106 agreement. They need proper interpretation. Whilst many may be linked to the commencement of development others may be phased. Timing is equally important. In Crest Nicholson PLC v South Gloucestershire Council (2007), the claimant successfully argued that it was no longer bound to transfer land to the local authority because using the normal rules of construction of the s106 agreement as a deed, the option to acquire land owned by the company ceased to have effect when the local planning authority failed to enter into a works contract by a specified date. The local planning authority in dealing with a planning obligation must be satisfied as to the capacity of the person entering into it to do so. There may be continuing obligations that run with the land and the ability to bind successors in title must be addressed. Due diligence checks will therefore be required in respect of title and landowners, mortgagees and other relevant interests will need to be included within the planning obligation. The local planning authority will also need for rather obvious reasons to comply with the procedural requirements of s106.

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S106 (9) provides that:

A planning obligation may not be entered into except by an instrument executed as a deed which (a) states that the obligation is a planning obligation for the purposes of this section; (b) identifies the land in which the person entering into the obligation is interested; (c) identifies the person entering into the obligation and states what his interest in the land is; and (d) identifies the local planning authority by whom the obligation is enforceable.

under s70 (2) in determining whether to grant permission. The process should not however be abused, either by authorities seeking extraneous inducements or benefits as the price of granting a planning permission, or by developers offering unrelated benefits in an attempt to get planning permission for unacceptable development. Where, for example, the local planning authority decides to grant planning permission subject to, inter alia, an agreement under s106 then it should do just that. In the case of R (on the application of Carroll) v South Somerset District Council [2007] EWHC 104 (Admin), the decision to grant planning permission had been unlawful as there was nothing to indicate that there had been an agreement under s106 before the grant of permission and in that context, the sensible and correct approach was to dispose of the s106 agreement before planning permission was granted. Accordingly, the planning permission was quashed and the application was remitted to a planning officer for consideration in accordance with s106. Details of planning obligations must also be recorded in both Parts I and II of the local planning authority's planning register. See - The Town and Country Planning (General Development Procedure) (Amendment) (England) Order 2002 (Statutory Instrument 2002 no. 828).

A copy will also need to be given to the enforcing authority if different to the local planning authority (see s106 (10)). The provisions will also need to be registered as a local land charge in order to secure notice to subsequent purchasers. S106 (11) provides that:
A planning obligation shall be a local land charge and for the purposes of the Local Land Charges Act 1975 the authority by whom the obligation is enforceable shall be treated as the originating authority as respects such a charge.

Legal and policy requirements will need to be addressed in order to avoid potential difficulties and subsequent challenges. The proposed planning obligation should not stray outside the confines of the statutory provision contained within s106 (1). To the extent that a planning obligation will overcome a legitimate planning objection to a development, its existence is a material consideration

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Part I must include details of any planning obligation (including unilateral undertakings) entered into or proposed in respect of an application for planning permission or application for the approval of reserved matters, and of any other relevant planning obligation or agreement in respect of the land which is the subject of the application. Given that negotiations may take some time and often give rise to changes along the way the practical approach advocated by the Circular Guidance is heads of terms at the start of the process and any significant changes thereafter should be recorded. Part II must include details of any planning obligation (including unilateral undertakings) entered into in connection with a planning decision by a local planning authority or the Secretary of State, and of any other planning obligation or agreement taken into account when making the decision, together with particulars of any modification or discharge of any such obligation or agreement. 5. Enforcement of obligations The relevant provisions of S106 are as follows:
(3) Subject to subsection (4) a planning obligation is enforceable by the authority identified in accordance with subsection (9) (d) (a) against the person entering into the obligation; and (b) against any person deriving title from that person. (4) The instrument by which a planning obligation is entered into may provide that a person shall not be bound by the

obligation in respect of any period during which he no longer has an interest in the land. (5) A restriction or requirement imposed under a planning obligation is enforceable by injunction. (6) Without prejudice to subsection (5), if there is a breach of a requirement in a planning obligation to carry out any operations in, on, under or over the land to which the obligation relates, the authority by whom the obligation is enforceable may (a) enter the land and carry out the operations; and (b) recover from the person or persons against whom the obligation is enforceable any expenses reasonably incurred by them in doing so. (7) Before an authority exercise their power under subsection (6) (a) they shall give not less than 21 days' notice of their intention to do so to any person against whom the planning obligation is enforceable. (8) Any person who willfully obstructs a person acting in the exercise of a power under subsection (6) (a) shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale.

Enforcement of planning obligations is always carried out by the local planning authority identified within the obligation (or by the local planning authority to whom a contribution is made under the agreement) against either the party with whom the agreement was made or against any additional party deriving title from that party. Discretion may be applied in deciding whether to enforce a planning obligation. There is no requirement to have first exhausted other planning enforcement remedies and

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the ordinary civil remedies for breach of contract are available. This is however subject to s106 (4), which provides that a clause may be included, exempting from any enforcement action those parties who have disposed of their interest save for prior breaches. Planning obligations almost invariably include such a provision to reflect disposal by the original applicant and often seek to exclude from liability end users such as the occupants of residential properties constructed as a result of the planning permission. Caution should be exercised in the drafting of such clauses and in seeking to enforce them. The court would be most reluctant to enforce provisions against the owners and occupiers of residential properties, which might then involve interference with personal property rights within Human Rights Act 1998 terms. The statute provides for enforcing the terms of a planning obligation by means of injunction against the party in breach including successors in title to the original covenanting party. Local planning authorities are entitled to commence proceedings in their own names. See s222 Local Government Act 1972. The local planning authority is also empowered to enter onto the land to perform the requirements and then recover any reasonably incurred expenses from the

party/parties against whom the obligation is enforceable. If the local planning authority wishes to enter the land they must however provide 21 days notice of their intention to do so to the party/parties in breach. If the local planning authority is prevented from performing their rights under the act the obstructing party is guilty of a criminal offence, which may result in summary conviction and/or a fine not exceeding level 3 on the standard scale. Aside from the local planning authority seeking to enforce the terms of any planning obligation, there may be others who would wish to do so. A s106 obligation can be enforced between parties who are jointly liable. The High Court has held that a s106 agreement which required a landowner and a developer to build a bypass before the commencement of development of a housing scheme gave the landowner a right of access onto the developers land in order to discharge the obligation. The court applied basic contract law, and looked at whether it was a right that could be implied, as the mutual obligations on both to build the bypass. See Stroude above. Clearly the other parties thereto (the applicant, landowner(s) and mortgagees) may wish to do so particularly where there are obligations required to be performed by the local planning authority and it has failed to do so e.g. the carrying out of specified works or the

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application of monies to a particular purpose within a specified period of time. The developer can also seek to enforce the local planning authoritys obligation. This is well illustrated by two court cases that have arisen from the same development, regarding highway contributions linked to the development by a religious charity of the site of an old school for housing. See Patel and others v Brent London Borough Council [2004] EWHC 763 (Ch) [2004] 3 PLR 74 [2005] EWCA Civ 644, [2005] NPC 73. The case involved a planning obligation dealing with the payment of 550,000 to be paid for highway improvements and/or traffic management measures necessary to improve access arrangements to/from the site and which in the opinion of the engineer are necessary in the interests of highway safety. The local planning authority council for its part undertook to use reasonable endeavours to complete the works by a specified date. The return of the monies was demanded and after proceedings were commenced the local planning authority then purported to spend the money on a scheme of signalisation and footpath work. The trustees of the religious charity brought the claims. The first case emphasised the nature of the trust that is created when money is paid for a specified purpose to the local planning authority. It cannot then use the money as

it pleases. It will be liable to account to the developer for any profit made. The local planning authority had no beneficial interest in the funds although it was entitled to benefit from them in accordance with the agreement. Its obligations were those of a conventional trustee. Rather than placing the funds in a designated interest bearing account, as agreed, it had placed the funds into a nondesignated and non-interest bearing account and held the funds as available for its use on the money markets. The trustees sought an account of the profits made by the local planning authority from its use of the 550,000 deposited for the purpose of highway maintenance. The profit for which the local planning authority remained accountable was the sum of 136,870.55, which was the excess earned over and above the expected interest. The second case was more wide ranging. The claim for the return of the sum paid to the local planning authority was upheld on the ground that the authority had failed to carry out the highway improvements and traffic management measures for which the sum had been paid, by the date specified in the agreement. In particular the court noted: o A s106 obligation is not discharged when it is breached, as it has statutory status. It could only be discharged by s106A. o The payment of the 550,000 had created a form of trust, and the religious charity remained the beneficial owners of this until the local

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planning authority used it for the specified purpose. The claimant was bound to permit such a drawdown in accordance with the criteria laid down, unless and until that obligation was itself discharged or modified. The court decided that in order to give business efficacy to the contract, it was necessary to imply a term into it that the local planning authority would continue to use its reasonable endeavours after the initial completion date to complete the works within a reasonable time. Their obligations did not cease at that date. Nor were they at liberty to sit on the money until either they chose to do something or the claimants made an application to discharge the planning obligation under s106A. The local planning authority was entitled to pray in aid its own organisational inadequacies as an excuse for non-compliance. The actual signalisation scheme and other works could not be said to be necessary for the purposes of the development, and A Master should hold an inquiry as to what, if any, damages had been causes to it as a result of the local planning authoritys works not having been completed by the end of the initial completion date.

The court also held that the engineers opinion could only be challenged if it could be shown either (a) that it was not his bona fide opinion or (b) he had misconstrued the criteria that he was applying, or (c) there was no evidence available that could have enabled a competent engineer to form such an opinion. The concept of necessity in the clause was to be interpreted as that which was necessary to make the grant of planning permission acceptable. There was material on which the engineer could form the opinion that he had expressed, and his approach could not be characterised as lacking in good faith or as unreasonable and capricious. In addition third party interests may seek to enforce the planning obligations but these may be thwarted by the inclusion of the usual exclusion of the provisions of the Contracts (Rights of Third Parties Act) 1999. Enforcement is however a matter for the local planning authority alone. The only third party right of action would be by seeking a relator action, to bring enforcement proceedings. This could only be achieved by persuading the Attorney General to pick up the public cause. It would however remain possible to challenge the local planning authoritys decision to decide not to enforce by way of Judicial Review. The local planning authority has discretion to decide not to enforce a s106 obligation. The Court of Appeal has long held the local planning authority does not have to first exhaust the planning enforcement remedies and the

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ordinary civil remedies for breach of contract are available (see Avon CC v Millard [1986] JPL 211 CA). The obligation may be enforced against the original covenantor as a matter of contract law. The right to enforce against the successors in title arises under s106 (2). An agreement may be enforced by way of an action for an injunction. Indeed, as a local planning authority would not normally suffer financial loss in these circumstances, an injunction rather than damages would normally be the only remedy available to them. An interim injunction may also be sought. It would seem that the normal balance of convenience is weighted in favour of the local planning authority enforcing the public interest. See Tower Hamlets LBC v Stanton Rubber and Plastics Ltd [1990] JPL 512 where the Court of Appeal held that the local planning authority did not need to give special consideration to the serious financial implications to the defendants. But the court does need to look at the overall balance. The court has a broad discretion, and it can grant an interlocutory injunction restraining a breach of the covenant whilst granting a stay of the main action for the purposes of an appeal to be made. 6. Action by developers modification and discharge

The general principal is that planning obligations cannot be modified or discharged. It is one of the less obvious aspects of the public decision making process normally involved in planning decisions that the local planning authority may at any time release a party bound by a s106 obligation from any obligation imposed by it, or, by agreement with such party, vary the terms of the agreement. There are three exceptions to the general rule: o Through compliance of the requirements contained within the agreement itself that is to say Compliance discharge; o Through agreement between the local planning authority to whom the planning obligation was given and the party against whom the agreement is enforceable at any given time that is to say Merits discharge or modification; or o In accordance with the statutory procedures and provisions provided by the appeals process that is to say Modification or Discharge by Appeal. It is clearly beneficial for the applicant developer or landowner to ensure that the original planning obligation contains a clause providing for the automatic compliance discharge of an obligation upon evidencing fulfilment thereof. Given that planning obligations are registered as local land charges, it would also be advisable under the

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same clause to provide for the automatic removal of any notice(s) from the register to prevent any complications on future disposals and additional costs which may arise consequent thereon. Particular attention to this will be required when negotiating a County planning matter when the local land charges authority will be at the District level. Under the Merits discharge or modification approach an applicant must agree any modifications or discharge of the planning obligation with the local planning authority by way of Deed. See s106A (2). The Modification or discharge by way of the appeal process can only be instigated following the completion of the relevant period. In relation to planning obligations this therefore currently means five years from the date when the obligation was entered into. After this period the applicant may apply to the local planning authority entitled to enforce the obligation to either give effect to the modifications set out in the application or for the discharge of the obligation. It also only arises under these procedures if the planning obligation was entered into on or after 25 October 1991. The five year period appears to have been chosen to coincide with the then life of an unimplemented planning permission. It should not therefore be possible for a developer to escape liability for capital works or payments

required prior to the commencement of development. See (paragraph A.18, Circular 05/2005).
It would not be reasonable to allow an obligation to be reviewed very soon after it had been entered into. This would give no certainty to a local planning authority which had granted planning permission on the understanding that a developer would meet certain requirements. Other affected parties might also be disadvantaged by allowing obligations to be swiftly brought to an end. On the other hand, where over a period of time the overall planning circumstances of an area have been altered it may not be reasonable for a landowner to be bound by an obligation indefinitely. Allowing the give year period to stand appropriately reconciles these various considerations.

There is no bar on applying before the 5 years is up. Planning circumstances may have radically changed in the interim and the courts have held that the local planning authority should apply the same test namely whether the obligation still serves a useful purpose see R (oao Batchelor Enterprises Ltd) v North Dorset DC [2003]. This decision can be subject to judicial review, although no right of appeal to the Secretary of State arises. An application, which proposes to modify obligations to the effect that an obligation is imposed, upon any other person against whom the agreement is enforceable, will not be approved. See s106A (5). The Town and Country Planning (Modification and Discharge of Planning Obligations) Regulations 1992 (SI 1992/2832) set out the procedures to be followed. They

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only apply to planning obligations entered into under s106 or s299A of the 1990 Act, as substituted and inserted by s12 of the Planning and Compensation Act 1991. They do not apply to agreements entered into under other powers, including s106 as originally enacted. The application should be made on the relevant form provided by the local planning authority and should contain the following information: o Name and address of the applicant; o Address and/or location of the land to which the application relates to; o The nature of the applicants interest in the land; o Sufficient information for the local planning authority to be able to identify the obligation which the applicant wants to modify or discharge; o Reasons setting out why the applicant wants the obligation modified or discharged; and o Any other information as requested or required by the relevant local planning authority. The applicant is required to serve notice of the application on any party who 21 days prior to the application being made may have had the obligation enforced against them. The applicant has a duty to take reasonable steps to try and obtain names and addresses of any other party against whom the obligation may be enforced. If the

applicant is unable to ascertain the name and address then during the 21-day period they are responsible for publishing notice of the application in a local newspaper circulating within the locality of the land where the obligation may have had effect. The notice (either served or advertised) should contain an invitation for parties to make representations within 21 days of publication/service. Upon fulfilling this requirement the applicant should submit the application along with a map identifying the land covered by the obligation and a certificate stating that the above notice requirements have been complied with. Upon receipt of the application, the Local Planning authority is responsible for: o Posting notice of the application on or near the land to which the planning obligation relates for not less than 21 days; o Serving notice of the application on the owners and occupiers of land adjoining that land; o Publishing notice of the application in a local newspaper circulating in the locality in which that land is situated; and o Making the application and the initial agreement containing the obligation available for inspection during the above periods. The posted noticed should invite representations to be made within 21 days from the posting of the notice. The

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published notice should invite representations to be made within 14 days from the publishing of the notice. After the expiry of the above time periods the local planning authority must, within eight weeks of its decision, provide written notice of its determination to either: o Maintain the obligation without modification; o Discharge the obligation if it feels that it serves no further useful purpose; or o Give effect to the modification if it is felt that the obligation still serves a useful purpose but would serve that purpose equally well when modified. The local planning authority will discharged the obligation, rather than just modify it, it is considers that the obligation no longer serves any useful purpose (s106A (6)). If the obligation would serve a useful purpose equally well with the modifications specified by the applicant, the local planning authority can decide to consent to the modifications sought. The Circular states that the Secretary of State considers that the expression no longer serves any useful purpose should be understood in land-use planning terms. Whilst this is the overall context of the regime, it may be that wider considerations could be argued (e.g. human rights). If the decision is made to subject the obligations to the modifications proposed in the application then these changes will have effect from the date the determination notice is given to the applicant. See s106A (8).

S84 of the Law of Property Act 1925 does not apply to obligations made under s106 (it is specifically disapplied by s106A (10)). S84 is the normal route to seek to modify or discharge a restrictive covenant, and this did use to include covenants contained in a planning obligation (e.g. it still applies to s52 agreements). Applications were made to the Lands Tribunal, and there are a number of reported cases where this has occurred. It could not be used to modify or discharge positive covenants, and the test under s84 is arguably more stringent than the one now proposed under s106A. However, if the decision is made to maintain the obligation without modification then the local planning authority should provide the applicant with a statement providing that the applicant has the right to appeal to the Secretary of State (appeal is to the Assembly if in Wales) against the decision within six months of the date of the decision notice. This period of six months may be varied upon the agreement of the Secretary of State. The appeal must be made on the form prescribed by the Secretary of State and include the following information: o The application made to the local planning authority; o The certificate which accompanied the application; o The original agreement containing the planning obligation;

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o o

Any correspondence with the authority relating to the application; and The notice of decision.

This form must also be submitted to the local planning authority, which rejected the application at the same time. Before making a determination the Secretary of State must provide the appellant, and the local planning authority whose decision is being appealed, an opportunity to make representations in person. The Secretary of State will consider each appeal on its merits but is unlikely to make any decision, which doesnt satisfy the requirements provide by Circular 05/2005. The appeal is likely to be determined by a Planning Inspector. The Secretary of State will only call-in (i.e. decide to recover an appeal for his or her own determination) in line with the published criteria for planning appeals. Most of the advice in the PINS booklet Making your planning appeal (which covers the procedures involved in making an appeal against refusal of planning permission) applies equally to modification or discharge of planning obligation appeals. PINS direct appellants to this, although there is a separate appeal form. A written representations appeal will follow the spirit of the Town and Country Planning (Appeals) (Written Representations) Rules.

Both the appellant and the local planning authority have a right to a hearing (s106B (5)). They will be asked in the appeal forms to state whether they wish to be heard before an Inspector, or whether they are content for the appeal to be determined by exchanges of written representations. Even if neither party asks to be heard, the Secretary of State may still consider that a local inquiry is necessary, although the preference these days is to try and persuade the parties to have the appeal dealt with by written representations. A hearing can be in the form of a less formal hearing (following the procedure in the Town and Country Planning (Hearings Procedure) (England) Rules 2000). Where there is a local inquiry the spirit of the Town and Country Planning (Inquiries Procedure) Rules 2000 or of the Town and Country Planning Appeals (Determination by Inspectors) (Inquiries Procedure) Rules 2000) will be applied. It is important to also note that any determination by the Secretary of State is final. See s106B (6). The question of a useful purpose is different from the question whether the obligation still serves its original purpose. It means that the planning merits of the current situation can be argued and that an application could be refused as the obligation serves a different useful purpose from that originally stated. See R (on the application of The Garden and Leisure Group Ltd) v North Somerset Council & Vanderplank (2003) where the court quashed

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the local planning authoritys decision as it had failed to properly understand the statutory test under s106A. The court also rejected the suggestion that the local planning authority could pick a lesser list of modifications than that proposed in the application. It had to decide whether the modifications as specified should be made. Not if it might be made if the application was changed. A s106A application is about the planning merits. It will therefore often be difficult to show that the restrictions no longer serve some planning purpose. 7. Third party scrutiny and potential challenges Scrutiny and more importantly challenges from third parties can come in a variety of forms, for example from rival developers and landowners with their army of consultants and experts; to members of the general public; to elected members of the local planning authority; and even to applicants themselves! In certain circumstances the developer and the local planning authority may decide that they wish to involve third party experts to assess the viability of obligations in relation to the development or to use them as mediators when there is a degree of conflict regarding the obligations to be imposed.

Further scrutiny may come from the general public. The policy principle in the Circular is clear on Public Involvement:
The process of setting planning obligation policies and negotiating planning obligations should be conducted as openly, fairly and reasonably as possible and members of the public should be given every reasonable assistance in locating and examining proposed and agreed planning obligations which are of interest to them.

Recording requirements (see paragraphs 4.10 to 4.12 above) mean that the public has access to much more information regarding planning obligations than was ever the case. The Freedom of Information Act 2000 also allows greater access to information than before. There may be exemptions available but these may be subject to the application of a public interest test. In the Plymouth City Council case the third party challenge came from a rival supermarket operator. In essence a spoiler challenge to competing supermarket proposals. See also R. (on the application of Mount Cook Limited) v Westminster City Council [2003] EWCA Civ 1346 where the Court of Appeal expressed the view that motive was generally irrelevant in judicial review proceedings. See also R (on the application of Legal & General Assurance Society Ltd) v Rushmore Borough Council & Pillar (Farnborough) Ltd (2004) where the relevant permissions would be quashed because the court could not rule out the possibility that conditions

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attached to the planning permission might well have been more onerous had that error not been made. In R. v Westminster City Council, ex p. Monahan [1989] J.P.L. 107; [1989] 1 P.L.R. 36 the case involved a third party challenge from a member of the Covenant Garden Community Association to the proposed grant of planning permission in respect of the Royal Opera House redevelopment scheme. In the Carroll case the challenge came from the local planning authoritys own Leader arising out of the failure by the council planning officers to secure the s106 agreement required by the local planning authority as a pre-condition to the issue of planning permission. Most recently, there is reported in Planning 11th April 2008 an appeal decision (APP/Z1775/A/07/2060065) where the inspector allowed an appeal. Although the appellant had submitted unilateral planning obligations dealing with financial matters they challenged the local planning authoritys position and the functional and geographical link between the development and the improvements requested. The inspector however decided that it would be wrong for him to set aside the obligation. In addition, there is a further appeal decision (APP/U3935/A/07/2055697) reported in Planning 2nd May 2008 where the inspector dismissed the appeal in circumstances where there were 2 unilateral obligations

submitted. The obligations duplicated the terms except for the trigger giving rise to both payments falling due in respect of the one proposal and there was no clause revoking one upon the execution of the other. The inspector also felt that the obligation to pay on the grant of permission didnt comply with Circular 05/2005 because it would require payment even if the proposed scheme were not implemented. Challenge usually arises in the context of either an appeal/call in inquiry or by way of an application for judicial review. In the context of judicial review, issues such as whether the applicant has sufficient standing; is within the usually strict time limits applicable; and has sufficient resources to back such an action usually figure highly in the consideration of whether to mount such a challenge. 8. Conclusions There is a clear distinction between what the courts will allow and what the Secretary of State will accept. This may allow a different approach to be lawfully adopted by the local planning authority when dealing with planning obligations. Early consideration of planning obligation issues can greatly assist the progress of any application for planning permission particularly those that qualify as major applications. Greater transparency in the process may

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give rise to greater scrutiny and the potential for challenge. Unilateral obligations are a useful vehicle for progressing matters in the face of delay or recalcitrance on the part of the local planning authority. The statutory requirements associated with planning obligations require a certain amount of attention to detail particularly with regard to drafting if they are to fulfil their intentions. Enforcement options are available to a number of different parties but drafting considerations may close off some action. For further information contact: David Merson Steeles (Law) LLP Bedford House 21a John Street London WC1N 2BF Tel: Fax: Direct E-Mail: General E-mail: Website: +44 020 7421 1720 +44 020 7421 1749 dmerson@steeleslaw.co.uk planning@steeleslaw.co.uk www.steeleslaw.co.uk

The modification and discharge provisions contain a highly regulated scheme. In the absence of an agreed way forward timing becomes an issue particularly when looking at the implementation of planning permission in the context of the required obligations. Scrutiny and challenge can come from a number of different, including the most unexpected, of quarters.

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