Understanding section 106 agreements
Section 106 agreements are a production of the Town and County Planning Act of 1990. Section 106 agreements are utilized by the LPA when handling applications for permissions for housing development projects. The role of the agreements is to encourage developers to give back to the local residents and community for planning permission. The end goal is to enhance and assist local areas. It is a win-win situation.
Understanding section 106 agreements
Section 106 agreements are a production of the Town and County Planning Act of 1990. Section 106 agreements are utilized by the LPA when handling applications for permissions for housing development projects. The role of the agreements is to encourage developers to give back to the local residents and community for planning permission. The end goal is to enhance and assist local areas. It is a win-win situation.
For example, since residents have to love with the noise and disruption caused by construction works, as per the Section 106 Agreements, the developers have to agree to provide affordable housing or create a parking area that will benefit the community.
In case there isn’t a particular request or item the local authority wants from the developer; they can request a financial contribution. The money will be used to provide the amenities required in a particular area.
Section 106 agreement is put in place when there is a necessity to make the development acceptable in planning. The stipulations of the arrangement have to be directly associated with the development. They also have to be at least fairly or practically linked in measure and kind of development.
Applications of the Section 106 Agreement
According to the Section 106 Agreement, local authorities usually have a schedule of infrastructures that need development or improvement. This is where the money received from the agreements is used. Different local authorities will have various particular infrastructures on their list.
Following the recent cuts in the local authority budgets, the organizations have suffered a lot of pressure trying to meet their demands and fulfil items on their schedule. Section 106 Agreements help to take away some of the pressure by being a source of funding for local communities.
Section 106 agreements are used by developers to make their proposals more acceptable, especially where the development would fall short.
Who can enter the agreement (section 106)?
The agreement can be entered into by developers and local planning authorities. However, the legislation allows anyone with an interest in the land to move into the agreement. The third party can either be a mortgage firm or somebody looking g to acquire the property from the developer. For instance, if a real estate company is developing residential buildings in an area, the company can enter an agreement with the local planning authority and build a play area also. Additionally, a company looking to invest in the property may also have to enter the agreement and offer low housing rates as part of the S106 agreement.
Why are S106 agreements necessary?
Below are some common reasons why these planning obligations are applied;
• Prescribe- this is where a developer has to give a percentage of the developed residential properties to the local authority. The contribution can also be offered to the local housing association in the form of affordable housing.
• Compensate- this is where development is set to cause a particular type of loss or damage to the environment of the residents. It can either be noise or any other kind of disruption. In such a case, an agreement can be entered between the developer and the local authority, where the developer has to compensate the residents. By doing so, the development causes better than harm to the environment.
• Mitigate- this is where development could have negative impacts on the local community. The planning obligations can be used to mitigate the effects of development. For instance, if a developer plans to develop several residential buildings in a small area. This can result in pressures on local amenities, like schools and hospitals. To mitigate these pressures, the planning obligations will see to it that the developers help to construct extra classrooms to ease the stress.
Bilateral and unilateral section 106 agreements
S106 agreements are often entered by developers and local planning authorities hence making them bilateral agreements. For instance, a developer and a local planning authority can enter into official discussions and enter a mutual agreement about a project and how it will give back to the community. However, the developers can also opt for unilateral contracts. This may happen when the developer feels like the local authority’s demands are unfounded and too much. In such cases, the developer may offer unilateral undertakings without necessarily cooperating with the local planning authority.
How a Section 106 Agreement is prepared
Before the two parties agree, the local planning authority comes with a draft copy. The role of the draft is to initiate the negotiations. The two parties get to negotiate the agreement through their solicitors. Once the two parties have fully agreed on the terms and conditions of the agreement and they are satisfied with the final draft, the local planning authority requests an undertaking from the legal team of the developer to make a full payment. The payment caters to the financial aspects of the drafting process. Once the prices have been cleared, the two parties come together to sign the agreement. All relevant parties, including third parties and the solicitors, also get to sign the deal.
An example of a Section 106 Agreement
A local developer may come up with a project proposal to develop a shopping mall on an empty chunk of land in a local community. This may seem like a good idea because it will create more jobs for locals, better facilities and infrastructure. However, there might be members of the community who object to the project. For instance, some members of the community may oppose it because of the pending pressures on infrastructure that the project may cause. The project may also cause an increase in transportation costs and compete with small independent shops in the area. Such complaints pose a significant threat to the future of the project.
This is where the planning agreement (S106) comes in! The local planning authority steps in and looks into how the developer and the development could contribute to the community and its enhancement. The local planning authority may request the creator to enter into an S106 agreement. The agreement may see to it that the developer makes disbursements to the local authority for set aside improvements like transportation links, highway conservation, or create a local community centre. At this point, the two parties go into negotiations for the agreement. Once they sign the final agreement, the developer becomes legally bound by its terms and conditions.
Can a section 106 agreement be modified or lifted?
The simple answer to this question is YES. The planning obligations can be modified and discharged. However, this can only happen in the following conditions;
• Suppose it is changed or lifted within the first five years of the completion date. This has to happen among the board and the person in charge of enforcing the agreement.
• It can also be amended after five years from the completion date of the obligations set forth in the agreement. For instance, five years after the developer has already developed a local play area or parking as per the agreement. For further information contact a good online conveyancing company such as My Conveyancing Specialist who will be able to guide you in the right direction.
What transpires if a creator does not own a company with the planning obligations?
Failure to comply or to default is always a considerable risk. However, following the recent financial challenges like depression and the financial burdens placed on developers to comply with the obligations, more developers have had a hard time complying. The solution would be to negotiate a change in the agreement because the developer cannot simply fail to comply as it is a legal obligation. The creator and the local planning authority can either reduce the financial obligations of the agreement or change the terms entirely. Failure to see through the terms of the deal is regarded as a legal breach of contract.
Local authorities have the right to put in force against the original bodies to the contract and their successors and any other parties associated with the process. Note that the terms of the contract are also legally binding to anyone else who gets associated with the project at a later time. This implies that if the development transfers ownership or someone else acquires the development, then they become answerable for any break of the agreement.
It is also worth noting that the local planning authority can individually apply either section 106 obligations or the public infrastructure end duty for one development. The two acts cannot be used on the same project because it would be considered as placing too much pressure on a project.
The cost to change a 106 agreement
You will need to meet the Council’s planning administration costs in administering the planning process to get your new deed put in place. This is currently £112.50.
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