What is Section 106 Agreement?

Full Definition

A section 106 agreement (often shortened to "s106") is a legally binding agreement made under section 106 of the Town and Country Planning Act 1990 between a developer and a local planning authority, used to secure contributions or obligations that mitigate the impact of a development that could not otherwise be addressed through planning conditions alone. It is typically negotiated and signed alongside the grant of planning permission for larger residential or commercial schemes, and common obligations include the provision of affordable housing within the development (either a set percentage of units or a payment in lieu), financial contributions towards local infrastructure such as new school places, healthcare facilities, public transport improvements or open space, and restrictions such as limiting a property to occupation by people with a local connection or preventing it being used as a second home. Unlike the Community Infrastructure Levy, which is a standard, non-negotiable charge based on a published rate per square metre that applies automatically to qualifying development in areas that have adopted it, a section 106 agreement is bespoke to the specific development and is negotiated between the developer and the council based on what mitigation that particular scheme is judged to require, and the two mechanisms can and often do apply alongside each other on the same development. Section 106 obligations are legally binding on the land itself (not just the original developer), meaning they bind successive owners and are typically registered as a local land charge, so a person buying a new-build property should be aware their home may carry obligations such as an affordable housing restriction, a local occupancy condition, or an ongoing service charge linked to s106-funded infrastructure, all of which can affect resale value, mortgageability, and who is eligible to buy the property in future. Because the size of section 106 contributions can be very substantial on major schemes, sometimes running into millions of pounds for large residential developments, they are a significant part of development viability assessments, and developers may seek to renegotiate agreed contributions if build costs rise or market conditions deteriorate after the original agreement was signed, subject to the local authority's agreement.

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