CIL Watch: Why revised section 106 deal in Lancashire has wider implications

A council and developer have agreed to revise the structure of a section 106 agreement for a major scheme in Lancashire in response to new rules restricting the use of pooled infrastructure contributions.

Lancashire: council and developer agreed to revise s106 agreement
Lancashire: council and developer agreed to revise s106 agreement

A decision last week by communities secretary Greg Clark to grant planning permission for up to 360 homes at Warton, Lancashire, has wider implications, according to experts.

In the run-up to his decision, the Department for Communities and Local Government had been exchanging letters with developer Hallam Land Management and Fylde Borough Council discussing the section 106 agreement, which had accompanied the application. Under the original agreement, Hallam would have made a general education contribution towards primary school places in the area. However, after the planning inspector held an inquiry into the proposals last October – before the secretary of state issued his decision – new Community Infrastructure Levy (CIL) regulations have come into force restricting the use of pooled infrastructure contributions.

Under the regulations, which came into effect this April, instead of being able to collect generic obligations under terms such as "open space", "education" or "transport", councils have to show that the contributions are "necessary to make a development acceptable in planning terms; directly related to the development; and fairly and reasonably related in scale and kind to the development." Once these tests are met, section 106 payments can still be used to fund local infrastructure, but councils are only able to pool up to five contributions to pay for any one project. This applies to all contributions made since 2010.

Because the borough council had already agreed more than five primary school education contributions in advance of the ruling, the government proposed that the council and developer rethink their section 106 agreement. As a result, they reworded the contribution to go towards facilities at one particular school rather than simply generic school places.

Beverley Firth, partner and head of planning at law firm Mills & Reeve, said the ruling "is significant because it shows a pragmatic approach when dealing with pools that were previously relied on and are now ‘closed’", adding that it "puts down a marker for future appeal decisions".

Stephen Ashworth, partner at law firm Dentons, said he also finds it "very encouraging to see that they have clearly had a debate about finding a mechanism that allows consent to be granted". But he also raised concern that "it’s a little bit of smoke and mirrors because the consequence is the same – it’s just the description that surrounds it that’s different." Clark’s decision, he added, encourages authorities to "play the game of presenting identical things differently".

Clark’s approach was "too strict" and placed a heavy "administrative burden" onto the council and developer, "which is simply silly," Ashworth argued. A more sensitive way to deal with the matter, he said, would have been to make use of another clause in the CIL regulations, which "makes it quite clear" that planning permission can be granted even when the section 106 agreement does not comply with CIL regulations, so long as the agreement is not taken into account as a reason for approval.

However, Adrian Kerrison, project manager at the Nationwide CIL Service, said this would render "the pooling restriction meaningless because then you can have as many as you like but then state that it hasn’t influenced your decision." That, he said, "would be nonsense".

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