The advent of the new community infrastructure levy will have an important impact on s106 agreements (which are typically used by LAs to ensure that developers include benefits for the local community, such as infrastructure improvements that will benefit the whole neighbourhood). Going forward, the idea is that CIL will be seen as the proper way to seek contributions from developers to fund local infrastructure changes. Thus, steps have now been taken to limit the scope of s106 planning obligations (and so encourage the take-up by LAs of CIL – given that it is for LAs to decide whether or not to implement CIL).

In the future, planning obligations in s106 agreements will continue to be used to deal with the provision of affordable housing, and also for Crossrail, but otherwise their use to fund infrastructure will be limited. The new regulations now put the government’s policy test for the use of s106 onto a statutory footing, thereby removing the discretion of LAs as to whether or not the test is strictly applied. The test now requires that a planning obligation should be (i) necessary to make the development acceptable in planning terms, (ii) directly related to the development; (iii) fairly and reasonably related in scale and kind to the development.

All of this means that the wide interpretation of s106 which has long been supported by the courts (and which has allowed LAs to seek a range of benefits that were not necessarily directly related, or proportionate, to the development) will no longer apply. Developers will be in a stronger negotiating position.

Accordingly, planning obligations will now be restricted to matters that mitigate the direct impact of the development proposals to which they relate, so as to make the development acceptable in planning terms. Source: DLA Piper.