Back to basics: the impact of old planning agreements

When purchasing land, it is always advisable to check what obligations could come with ownership. Such obligations include planning obligations, which are now made pursuant to section 106 of the Town and Country Planning Act 1990 (the 1990 Act) but used to be made under the Town and Country Planning Act 1971 (section 52 agreements). What happens where a new planning permission is granted over land that is bound by old planning agreements? Does the grant of a new planning permission supersede restrictions imposed on a site under a historical section 52 agreement? Is an old section 52 agreement still relevant? If so, can it be discharged or modified? If you uncover a historical section 52 agreement relating to land, these are the sorts of questions you may need to ask. So what exactly is the effect of these old agreements and what can be done about them?

Section 52 of the 1971 Act was superseded by the coming into force of section 106 of the 1990 Act, which was later amended by the Planning and Compensation Act 1991 (the 1991 Act). Most section 52 agreements will have been entered into either unilaterally or with the local planning authority. Like section 106 agreements, they “run with the land” and bind anyone acquiring an interest in the land subject to any overriding clause in the agreement or until they have been formally discharged. Unlike obligations under section 106 which, since 25 October 1991 (the date on which the 1991 Act amendments came into effect) can be formally discharged pursuant to section 106A of the 1990 Act, there is no statutory mechanism for the discharge of section 52 obligations under the 1971 Act, or for section 106 obligations entered into before that date.

So, how can an old planning agreement be discharged?

Discharging an old planning agreement

A section 52 agreement entered into before 25 October 1991, or a section 106 agreement entered into before that date, can only be discharged or modified in one of three ways:

  1. by an application pursuant to section 84 of the Law of Property Act 1925 (the LPA 1925); or
  2. by agreement between the parties; or
  3. by legislation.

Option 1: by application pursuant to section 84 of the LPA 1925

The first option requires an application to the Upper Tribunal (Lands Chamber) for a discharge or modification of a restrictive covenant under section 84 of the Law of Property Act 1925. The Upper Tribunal may discharge or modify a restrictive covenant if satisfied that one of the following grounds applies:

  • the covenant is obsolete (section 84(1)(a) LPA 1925);
  • the covenant impedes some reasonable use of the land (section 84(1)(aa) LPA 1925);
  • the beneficiaries expressly or impliedly agree (section 84(1)(b) LPA 1925); and
  • no injury will be caused (section 84(1)(c) LPA 1925).

Option 2: by agreement between the parties

The second option is that the parties could agree to the discharge of the agreement on a consensual basis. It is a principle of common law that an agreement/deed can be discharged or varied by parties. This is clearly the simplest method to modify or discharge a planning agreement and the negotiations are typically embodied in a deed of variation.

Option 3: by legislation

The third option is using legislative powers to override the agreement. One such power lies in section 120(4) of the Planning Act 2008 which provides that a Development Consent Order (DCO) may make provision for any of the matters listed in Part 1 of Schedule 5, including “the abrogation or modification of agreements relating to land”. Although we aren’t aware of any instances where this power has been used in any DCOs to date, we envisage that it will be increasingly relied on to modify or abolish restrictions contained in planning agreements.

In many instances, the obligations contained within section 52 agreements will be historical and there is a good chance they will have been discharged around the time permission was granted. However, obligations can be ongoing and therefore it is important to read the agreement carefully to check if there are any restrictions, particularly in relation to the use of land. Although the risk of enforcement for historical obligations may be low, strictly speaking the section 52 agreement will run with the land and may continue to appear on the land charges register until it is formally discharged using one of the three routes discussed above.

Practical steps

Ask the seller for evidence confirming that all relevant planning obligations have been discharged. If no evidence is available, or if there are ongoing restrictive obligations that conflict with redevelopment proposals, then consider making the transaction conditional on a deed of variation being entered into. If the local planning authority has granted a subsequent planning permission which is inconsistent with a restriction contained in a section 52 agreement, this will generally be a good indication of the authority’s willingness to enter into a deed of variation or discharge agreement. On the contrary, if the local planning authority is not willing to enter into a variation, then this is likely to be an indication that they feel the restrictions contained in the agreement still serve a valid planning purpose. In such a situation, a buyer will need to reconsider any development proposals that conflict with restrictive obligations (eg in relation to use) in the extant planning agreement, or factor the obligations into the price of the land.

Author: Lisa Bazalo, senior associate (New Zealand), planning, London

For further information, please contact:

Lisa Bazalo
Lisa Bazalo
Senior associate (New Zealand), planning, London
+44 20 7466 2957
Catherine Howard
Catherine Howard
Partner, planning, London
+44 20 7466 2858

CIL Infrastructure Funding Statements – Clarifying the Opaque

New planning guidance was published by the Government on Sunday 1 September regarding the Community Infrastructure Levy (CIL) in light of recent amendments made to the CIL Regulations. One of the key changes made is the revocation of Regulation 123 (see here for our recent blog on this), which provided that a development could not be required to pay a planning contribution in relation to infrastructure where CIL had been identified as responsible for funding its delivery, and restricted the pooling of funds towards specific pieces of infrastructure. In connection with this amendment, which allows authorities to choose to use funding from different sources towards the same infrastructure, a new requirement has been inserted into the CIL Regulations requiring charging authorities to publish an “infrastructure funding statement”.

The infrastructure funding statements are required to set out the infrastructure projects or types of infrastructure that the authority intends to fund, either wholly or partly, by the levy or planning obligations, though this will not dictate how funds must be spent and in turn collected. These statements will become increasingly important for developers who wish to understand what the appropriate level of planning obligations payable in relation to a development is, and in particular the types of planning obligations that should properly be payable in relation to that development based on what is outlined in the statement and what should properly be funded by the CIL it pays. Importantly, it is possible for an infrastructure funding statement to identify that an item of infrastructure may be funded by both CIL and by planning obligations.

The infrastructure funding statements are non-binding and thus will likely result in a lot of negotiation regarding the types of planning obligations that should be payable before a developer can fully understand the quantum of the applicable planning obligations/CIL. This will make assessing the viability of a development, and in particular determining the land value for a site following updates to viability guidance and approach over the last 18 months more strictly requiring land values to be calculated taking planning obligations/CIL into account, even more difficult.

However, the immediate problem would appear to be that the first infrastructure funding statements are not required to be published until 31 December 2020, so until then what the split should be between planning obligations/CIL will be opaque, with Regulation 122 likely to be increasingly relied upon (by all parties) to determine when a planning obligation is appropriate. Further, whilst an authority “must” publish an infrastructure funding statement, there is no penalty included in the CIL Regulations for not doing so.

The potential positive impact of the changes is that it will allow a developer and the authority more freedom to confirm the infrastructure to be funded by the overall contribution to be made in connection with the development, and give authorities more freedom to direct funds to immediate infrastructure needs to unlock sites and provide a greater certainty of delivery. However, taking into account one of the main complaints regarding CIL was the lack of delivery of infrastructure using CIL monies, which is likely as a result of issues beyond the effect of the now revoked Regulation 123, it’s very much a “watch this space” to see if those potential positives can be realised.

Author: Martyn Jarvis, senior associate, planning, London

Martyn Jarvis
Martyn Jarvis
Senior associate, planning and environment, London
+44 20 7466 2680
Matthew White
Matthew White
Partner and head of UK planning practice, London
+44 20 7466 2461

CIL reform: What the dickens!

“Large amounts don’t grow on trees.
You’ve got to pick-a-pocket or two.”

On 1 September 2019, the CIL Regulations will be amended – yet again. Among the various technical changes is the removal of Regulation 123, which currently prevents local planning authorities using more than five section 106 obligations to fund a single infrastructure project. This is widely referred to as the “pooling restriction”.

This change has two significant implications for developers:

  • First, there will no longer be any restriction on local planning authorities asking for section 106 contributions towards infrastructure that is also being funded by CIL. This practice, known as “double dipping” means that developers could end up paying twice towards the same infrastructure.
  • Secondly, local planning authorities will no longer be restricted to spending CIL receipts on infrastructure that is specified in their Regulation 123 lists. Instead, an annual infrastructure funding statement will be published which sets out the infrastructure projects which the charging authority intends will be, or may be, wholly or partly funded by CIL; and which reports on CIL and planning obligations received and spent over the previous year.

How has this happened?

The pooling restriction was certainly a problem. In 2016, the City of London Law Society Planning and Environmental Law Committee was among the organisations that gave evidence to the government’s independent CIL Review Panel saying that the pooling restriction had become a barrier to the delivery of infrastructure, particularly in relation to strategic sites in multiple ownerships and involving multiple applications. The Committee recommended allowing applicants for major developments to opt out of the CIL regime in favour of negotiating a bespoke infrastructure agreement under existing section 106 arrangements instead.

Unfortunately, the changes to the Regulations only deal with one side of the equation. By removing Regulation 123, infrastructure can be funded by section 106 contributions once again. But by failing to allow major developments to opt out of CIL, the door has been opened to double dipping.

The government’s summary of responses to its technical consultation on the proposed reforms revealed that three private sector organisations expressed concerns about double dipping and four local authorities called for guidance to clarify the position on this issue. The government acknowledged the comments made about the use of CIL and section 106 planning obligations in this way and said that guidance will be provided on this issue. No new guidance has been issued yet, however.

My understanding of MHCLG’s view is that CIL receipts will never be enough to fund all of the infrastructure needed in an area, so it is legitimate to collect section 106 contributions in addition to CIL. But that view ignores the whole foundation on which CIL was originally established: to fund specific items of infrastructure identified by the local authority, with charging rates set according to their anticipated cost after independent examination.

The government considers that these reforms will increase transparency. But by removing Regulation 123 lists and allowing double dipping, the link between CIL rates and the cost of defined infrastructure projects has been broken. Consequently, from 1 September CIL will become a very complex land value capture mechanism masquerading as an infrastructure funding tariff.

Author: Matthew White, partner and head of UK planning practice, London

For further information please contact:

Matthew White
Matthew White
Partner and head of UK planning practice, London
+44 20 7466 2461

Reasons to be cheerful

It is good practice for a local planning authority to give reasons for the grant of planning permission. Failure to give adequate reasons may be serious enough to justify quashing the permission.

There is a statutory duty to give reasons for the grant of permission for EIA development.  However, even if it is not EIA development, reasons will need to be given where the grant of permission does not follow the planning officer’s recommendation; where the development would not comply with planning policy; and where there is significant public interest in the proposals. The law on the duty to give reasons was summarised and confirmed recently in a Supreme Court case, Dover District Council v CPRE Kent (2017) UKSC 79.

1. Background

2. Supreme Court

3. Comment

 

1. Background

The Dover case related to a planning application for a large residential development in an area of outstanding natural beauty (AONB). Before the local authority granted permission, the planning officer’s report had made several recommendations, including reducing the number of residential units, to reduce the harm caused to the AONB. The report stated that this would preserve scheme viability and retain the economic benefits of the development, which helped to provide the finely balanced exceptional justification needed for causing harm to the AONB. The officer’s report also recommended implementation as a ‘single comprehensive scheme’ to secure those economic benefits (including a hotel and conference centre) and conditions or planning obligations to achieve this.

Planning permission was granted by the local authority without following these recommendations. No reasons were given by the local authority for this departure from the officer’s report.

2. Supreme Court

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