Why a court ruling means that councils could lose out on developer contributions when consents are updated

A High Court judgment should mean local authorities and developers checking the planning gain agreements they have with each other in cases where fresh 'section 73' permissions for a proposal have been subsequently secured, experts say.

Image: Jim Barton / geograph (CC BY-SA 2.0)
Image: Jim Barton / geograph (CC BY-SA 2.0)

The High Court last month granted developer Norfolk Homes a declaration confirming that a housing development previously granted two new permissions under section 73 (s73) of the Town and Country Planning Act 1990 is not bound by the planning gain agreement (under section 106 of the same act) the firm made with North Norfolk District Council that formed part of the original consent.

North Norfolk Council  originally gave outline consent to the housebuilder’s application for up to 85 homes in Holt in June 2012. This permission was subject to a section 106 agreement that included provision of 45 per cent affordable housing. Using section 73, which allows applicants to change or withdraw planning conditions attached to a consent without having the whole application reassessed, Norfolk Homes successfully sought new permissions for the scheme in September 2013 and September 2015. However, in September 2018, the council refused a request by the developer seeking confirmation that the later permission could lawfully be implemented without triggering the landowner's section 106 obligations under the 2012 agreement, which prompted the successful legal challenge.

North Norfolk Homes was represented by planning barrister Christopher Lockhart-Mummery QC, who told Planning the later changes the developer made to the project “were relatively minor, but they were new permissions”. He said: “The local authority failed on either occasion to say: ‘We are happy to grant you the s73, but with a deed of variation, or you are required to enter into a new s106 tied to what we are granting you’.” In the absence of this, “the developer got a windfall, because much to his surprise he had no s106 and no affordable housing obligation”, Lockhart-Mummery said.

He added: “Many councils don’t realise that s73s are separate permissions. They tend to think they are changes to existing permissions, and that anything that goes with the original permission just carries on. It’s something they need to be alert to - to check that the terms of the original agreement don’t need varying. Some s106 agreements contain specific clauses to guard against this. They can be drafted to apply also to any subsequent s73 that may be granted.”

Central to the local authority’s defence was the so-called “Lambeth judgment” published by the Supreme Court last year. This ruled that a retailer was still bound by a condition in the original planning consent which was not explicitly restated in a subsequent s73 permission. Lockhart-Mummery added: “The council’s argument suggested you could [similarly] construe the s106 in light of the subsequent s73, but Lambeth provided no support for the council in this case – the two cases are completely unrelated.”

Chris Burgess, an associate in Hansells Solicitors’ commercial property department, a former local government solicitor and a Royal Town Planning Institute legal associate, said the judgment “confirms that some local planning authorities continue to be completely confused about the status of a s73 permission to the point where, not only do they not regard it as a new permission, but they also often fail to add all of the other conditions from the previous permission into the new s73 permission decision notice, which is best practice”.

In similar situations involving section 73 permissions where such diligence has been lacking, Brendon Lee, an associate in law firm Hewitsons’ planning and environment team, suggested the judgment could have a range of implications for both developers and councils. As well as no longer being obliged to go through with future planning obligations, developers could find that an already agreed obligation to, for example, maintain part of the land as open space “will likely cease to apply and will likely be unenforceable by the council” in such a situation.

And, in such cases, where the developer has already contributed financially as part of an obligation to the authority, “these contributions are likely to have been paid without there being a legal obligation to do so, with the resultant argument that the council has been unjustly enriched”, he pointed out. He added: “I doubt for local authorities that it's an isolated instance. I would presume there is a reasonable number of s106 agreements affected.”

Commentators said that, though local authorities can avoid this potential pitfall with an initial section 106 agreement that makes advance provision for subsequent section 73 consents, they tend not to do so. Iain Warner, director of Bristol-based consultancy Tetlow King Planning, said: “My experience with section 106 agreements is that councils shy away from using the clauses that allow for subsequent s73 applications without the need for deeds of variation, instead preferring the option of required deeds of variation [when issuing subsequent consents under s73].”

Warner said he was not sure why this was the case, but added: "All too often, councils have templates for s106 agreements that they follow and don’t like to move from them and as a default this provision is not included." But this "inevitably leads to additional costs and delays in securing consents for the developer with little or no real benefit to the council", he suggested.

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