S.106: Don't Pay For Unconnected Infrastructure

A Supreme Court decision in late October 2017 raises an important issue: can a developer lawfully be required under a s106 agreement to pay into a pooled fund for infrastructure where the development has little or no impact on the need for that infrastructure? The clear answer given by the Supreme Court is: no.

In light of the case local planning authorities will need to think carefully about how they apply local plan policies requiring financial contributions. Developers would be well-advised to carefully review with their legal advisers heads of terms for a proposed s106 planning obligation in light of this judgement.

The facts of the case

In Aberdeen City and Shire Strategic Development Planning Authority (the "Authority") v Elsick Development Company Limited (the "Developer") the Authority sought major investment in transport infrastructure through planning obligations associated with the Developer's scheme to build approximately 4,000 houses together with commercial, retail and community facilities at Elsick, south of Aberdeen.

Though this case is based on Scottish law, the point is directly applicable to England and Wales because the provisions relating to planning obligations in s75 of the Town and Country Planning (Scotland) Act 1997 are for present purposes all but identical to the provisions of s.106 of the Town and Country Planning Act 1990 in force in England and Wales.

The planning obligation in this instance was imposed to comply with draft planning guidance supplementary to the Authority's development plan. Under this, developers were required to make financial contributions to a pooled fund to be spent on infrastructure, including at specific traffic "hotspots" in the highways network. The Developer entered into the s.75 agreement with the Authority on the basis that if the obligation to contribute to the pooled fund was found to be invalid, then no contribution would be made.

The Developer appealed against the adoption of the draft supplementary planning guidance on the basis that it was contrary to Scottish Government guidance. It was argued that there was not a sufficiently clear and direct relationship between the development and the infrastructure. A transport appraisal backed this up with data showing that the Developer was expected to contribute towards highways which would see a 0.1% increase in traffic following the development. The court of first instance quashed the policy, upholding the Developer's submission...

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