Publication
Options for securing planning obligations where a local authority is both landowner and applicant for planning permission
United Kingdom | Publication | July 2022
Content
Introduction
It is not infrequently the case that a local authority brings forward the development of its own land. There is of course a general encouragement in the National Planning Policy Framework (NPPF) (paragraph 121) for local authorities to identify surplus public sector land and bring it forward for redevelopment to meet development needs. In these cases, the local planning authority (LPA) will be determining the authority’s application. It will often be the case that planning obligations will be needed in order to secure required scheme mitigation before planning permission can be granted.
Despite the fact that the LPA and local authority as landowner perform separate functions, they are part of the same entity, and it is not possible for an entity to enter into an agreement with itself, which includes agreements entered into pursuant to section 106 Town and Country Planning Act 1990 (s.106) to secure planning obligations. There is no avenue by which such an agreement can be enforced. In the case of Wychavon District Council v Westbury Homes (Holdings) Limited, Family Mosaic Housing [2001] P.L.C.R. 13 the judge said:
“Section 106(3) permits the LPA to enforce a section 106 agreement against a person deriving title as if the LPA were possessed of adjacent land and as if the agreement had been expressed to be made for the benefit of such land. Clearly there is no way that the Claimant can take any enforcement proceedings against itself. That would be nonsense”.
A deed entered into unilaterally pursuant to s.106 would suffer from the same lack of enforceability, although some may argue that such a deed entered into immediately before site sale (say the same day) would make a unilateral obligation acceptable as in those circumstances the lack of enforceability would be immediately resolved. There therefore needs to be a solution in order to secure the mitigation required to off-set the impacts of the scheme, so that the scheme complies with policy, and on the basis of which the resolution to grant was determined. A failure to adequately secure mitigation, not only against the current landowner, but also successors in title, leaves a planning permission open to successful challenge.
The starting point is to minimise the number of planning obligations and draft these instead as conditions on the planning permission. This is of course best practice in any event, and supported by national Planning Practice Guidance (PPG).
“It may be possible to overcome a planning objection to a development proposal equally well by imposing a condition on the planning permission or by entering into a planning obligation under section 106 of the Town and Country Planning Act 1990. In such cases the local planning authority should use a condition rather than seeking to deal with the matter by means of a planning obligation.”
Paragraph: 011 Reference ID: 21a-011-20140306
The options
Having minimised the quantum of obligations, there are then 3 basic options for securing the remaining obligations. These are as follows.
Involve a different enforcing authority
- Involve a superior (or indeed inferior) planning authority, so in a non-metropolitan county, it is possible for the landowning authority to enter into a s.106 to be enforced by the other authority, or in London the GLA could be the enforcing authority for the purposes of s.106. This arrangement is entirely lawful. In Re Abbey Homesteads (Developments) Application (1986) 53 P&CR the Court of Appeal confirmed that a district council could enforce a county council’s planning obligations.
- Agree with a neighbouring planning authority that they will be the enforcing authority pursuant to the power in section 101(1)(b) Local Government Act 1972 (LGA 1972) which states: “…a local authority may arrange for the discharge of any of their functions— […] (b) by any other local authority.” The neighbouring authority would enter into the s.106 as enforcing authority and the LPA would enter into it as landowner / obliger.
Involve another landowner - The local authority grants an interest in the land, say an option or an agreement for lease, or a lease to AN Other, this entity could be “Dev Co Ltd”, a company set up by the local authority specifically for the purpose of entering into the s.106 and delivering the development. Even if the Dev Co is wholly owned by the local authority it doesn’t matter because it is a separate legal entity and the local authority is not therefore entering into an agreement with itself. If the Dev Co is wholly owned by the LPA then this may raise the spectre of realistic enforceability referred to below, although many local authorities now own their own housing companies and regularly enter into s.106’s with such companies without fear of judicial challenge. The interest in land gives the Dev Co the power to enter into a s.106, and give the obligations. Of course, the Dev Co’s obligations cannot bind the freehold or any superior interest, so the authority would need to ensure that the contractual arrangements provided that the Dev Co’s interest could not be collapsed before the satisfaction of the obligations, or perhaps before practical completion, or before the grant of an interest to another entity, to provide certainty of delivery of the obligations. If the local authority landowner intends to sell the site, or grant a superior interest to the Dev Co’s interest at any stage, then the s.106 can attach a confirmatory deed (to be entered into pursuant to s.106) and a covenant that any tenant / purchaser must enter into it before they commence works on / take beneficial occupation of the site, which ensures that they are bound by the s.106 obligations. Contractual arrangements could ensure that the Dev Co’s interest was collapsed / surrendered at that stage. An alternative would be for the confirmatory deed to be secured by condition (see further below).
- Where the local authority has already identified a developer to deliver the development on its land, then another option is for the developer to give the principal obligations, including an obligation not to commence development until it has acquired the freehold / other interest in the land and entered into a confirmatory deed as referred to above. The initial agreement could not be entered into pursuant to s.106 if the developer had no interest in the land, as s.106(9)(c) states “A planning obligation may not be entered into except by an instrument executed as a deed which— […] (c) identifies the person entering into the obligation and states what his interest in the land is.” However, the agreement could be entered into pursuant to s.111 LGA 1972 which gives a local authority the power to do “any thing […] which is calculated to facilitate, or is conducive or incidental to, the discharge of any of their functions.” If the developer does have an interest in the land, then the agreement can be entered into pursuant to s.106, but since the developer’s covenants cannot bind the freehold interest, but only its inferior interest, then the local authority would be well advised to support the position with a contractual obligation (not a s.106 obligation) that it will not implement the permission itself (as this would otherwise circumvent the s.106 obligations) save for any necessary step in rights to secure compliance with s.106 obligations. The same contractual commitment could also be given in the Dev Co example above.
- A further option where a developer has been identified before permission is granted, is for the contractual arrangement between the parties to oblige the developer to deliver the mitigation. This might take the form of a development agreement, joint venture agreement, land and works agreement or similar. Provided the necessary mitigation is appropriately secured, and perhaps provided that the delivery commitment is publicly transparent then this should suffice to avoid a successful legal challenge. If a JV Co is being created (between the local authority and the developer), and being given an interest in the land then the JV Co would be well placed to enter into a s.106 agreement with the LPA in the normal way.
Add a Grampian condition
- Another option would be to attach a Grampian condition (or in this case a specie of Grampian condition often referred to as an Arsenal condition) to the planning permission which prevents a planning permission from being implemented until a s.106 is entered into which binds the whole site; a “ghost s.106 deed” is then prepared and attached to the permission that any tenant / purchaser enters into when they take an interest in the land. This option is lawful, and is referred to specifically in the PPG:
“A negatively worded condition limiting the development that can take place until a planning obligation or other agreement has been entered into is unlikely to be appropriate in the majority of cases. […] However, in exceptional circumstances a negatively worded condition requiring a planning obligation or other agreement to be entered into before certain development can commence may be appropriate, […] Where consideration is given to using a negatively worded condition of this sort, it is important that the local planning authority discusses with the applicant before planning permission is granted the need for a planning obligation or other agreement and the appropriateness of using a condition. The heads of terms or principal terms need to be agreed prior to planning permission being granted to ensure that the test of necessity is met and in the interests of transparency.”
Paragraph: 010 Reference ID: 21a-010-20190723
Options that are unlikely to be satisfactory
On the other hand, there are arrangements that are unlikely to provide sufficient certainty that the planning obligations will be delivered, leaving a risk that the mitigation required to off-set the impacts of the scheme will not be delivered, such that the scheme then fails to comply with policy, and on the basis of which the resolution to grant was determined. This leaves a planning permission open to successful judicial review challenge. Examples are:
- The LPA and the local authority entering into an agreement together, as this lacks enforceability.
- An appropriate officer of the local authority entering into a s.106 agreement or s.111 agreement with the LPA, as the officer would presumably either lack the required interest in the land required for s.106, or even if they were granted such an interest (or even if they were not and the agreement proceeded under s.111), they would probably require an indemnity from the local authority should they be enforced against which would then leave the agreement suffering from lack of realistic enforceability.
- An appropriate officer of the council and the LPA entering into a Memorandum of Understanding. Even if signed, this has no legal force, and therefore lacks enforceability.
- A committee or cabinet of the local authority passing a resolution not to implement the permission until a s.106 agreement or other form of agreement has been entered into that secures the necessary mitigations. Whilst this option would be inadequate on its own, it could support a number of the other options above where the freehold interest is not bound at the point the planning permission is issued.
Conclusion
Although there is no easy solution, nor indeed a one size fits all solution to the problem of a local authority adequately securing the delivery of mitigation relating to the development of its own land, there are options available. Which option is most appropriate will be determined by the facts of the case, the local authority’s (and the developer’s if relevant) attitude to risk, and the presence or absence of resourced objectors to the scheme. What is clear is that the local authority would be well advised to take legal advice before committing to a course of action to ensure that it was adequately securing the required mitigation and minimising the risk of a successful judicial review challenge.
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