Legal report

Planning, 29 August 2008

Issue 9 of the Planning Inspectorate Newsletter, published in June, raises an important question that will have a profound effect on the use of Grampian conditions to compel developers to sign section 106 agreements.

Essentially, the Planning Inspectorate (PINS) has changed its advice to inspectors so as to caution against using conditions that would have the effect of requiring a section 106 agreement to be entered into before development can begin. The switch arises from last October's decision by the secretary of state on five recovered appeals involving a major mixed development in South Bedfordshire.

Condition's wording rejected

The secretary of state declined the inspector's recommendation to accept a condition in the following terms: "No development shall take place on a phase of the project until details of a scheme for the provision of affordable housing, recreational, educational, transportation and community services infrastructure to meet the needs of the development in accordance with policies contained in the development plan have been submitted to and approved in writing by the local planning authority. The scheme shall include a timetable for the provision to be made and shall be carried out in accordance with the approved details."

The secretary of state concluded that this condition was unacceptable on three principal grounds. First, she agreed with the inspector that because it was unlikely that a robust scheme could be formulated without requiring payments to be made, the condition effectively required cash payments. This breached the principle that there can be no taxation without clear support in legislation.

Secondly, she found that the condition did not contain enough detail and so was insufficiently precise to fulfil the tests of Circular 11/1995. Third, she decided that it was inconsistent with the guidance in paragraph 13 of the same circular that states: "Planning permission cannot be granted subject to a condition that the applicant enters into a planning obligation under section 106 or an agreement under other powers."

Accordingly, the secretary of state granted planning permission subject to certain conditions, but not including the one recommended by the inspector. In addition, she advised the development parties to submit a unilateral undertaking - which had not been executed at the time of the inquiry because various consents had not been obtained - to remove the need for any condition relating to the scheme.

The newsletter explains: "In the light of the secretary of state's comments, we have advised inspectors that such a condition should no longer be used. If a proposed development is only acceptable when a financial contribution is made towards the provision of infrastructure and there is no completed and satisfactory obligation to secure payment, then the only course of action may be to dismiss the appeal. However, this does not mean that a condition should never be used as an alternative to a missing or unsatisfactory obligation, as long as it meets the tests in Circular 11/1995."

Acquisitions route in question

The importance of this issue extends far beyond situations in which developers have been unable to finalise planning obligations before appeals are determined. When applied too stringently, the condition could fundamentally undermine delivery of major regeneration schemes where developers and councils intend to use compulsory purchase orders (CPOs) to assemble sites and will be unable to enter into the necessary planning obligations until these have been confirmed and implemented.

In major regeneration cases involving CPOs, it has been common to obtain planning permission backed by a detailed section 106 agreement setting out all the relevant mitigation and delivery measures needed to make the scheme acceptable. Often the preferred developer has sealed the deal but it may not be binding across the whole site. Grampian conditions have been used to prevent development commencing until all interests in the site have been bound into an agreement and a form of deed is specified for that purpose.

The Arsenal stadium regeneration scheme and the London 2012 Olympics site CPO are among examples of projects where this approach has been used. As a matter of legal principle, this would seem to comply with the tests set out in the circular. We hope that the PINS guidance can be clarified to avoid unnecessary difficulties for regeneration cases in such circumstances.

Paul Winter is a partner and Marcus Bate a solicitor at Eversheds LLP.