Deeds of variation to a section 106 and when they pay off

Opening a section 106 agreement is a negotiation you cannot control once it starts, and that is the real cost rather than the legal fees. A deed of variation to a section 106 is agreed under section 106A of the Town and Country Planning Act 1990, needs the authority's consent, and gives the authority an opportunity to revisit anything else in the agreement it is unhappy about. Before you ask, work out what you are prepared to lose.

The legal cost is the easiest number in the exercise. The hard numbers are the viability evidence, the delay and the scope creep.

The statutory route to modify an obligation

Section 106A gives two routes. An obligation may be modified or discharged at any time by agreement between the authority and the person against whom it is enforceable, which is the deed of variation everyone uses. Or it may be modified or discharged on application to the authority, but only after the relevant period, which is five years beginning with the date the obligation was entered into unless something else is prescribed.

The difference matters. Agreement is consensual and the authority can simply refuse to engage, with no appeal. The application route after five years gives you a determination, and the authority may decide that the obligation continues unmodified, is discharged, or has effect subject to modifications. Refusal or non-determination of that application can be appealed to the Secretary of State under section 106B.

So in year two, you have no mechanism at all beyond persuasion. In year six, you have a statutory route with an appeal at the end of it. That timing is the single most useful thing to establish before you start.

Note that there is no special statutory fast track for renegotiating affordable housing obligations now. A temporary route existed for a period after 2013 and has gone, so affordable housing variations run through the ordinary section 106A machinery.

The five year rule and the discretionary route

Most variations happen by agreement well inside five years, because developers need them to fund or to build. The question is what persuades an authority to agree.

Three arguments work. The obligation has become impossible or pointless, for example a contribution towards a scheme the council has cancelled or a bus service that no longer runs. The obligation needs a technical correction, such as a wrong plan reference or a trigger tied to an occupation threshold that the phasing has overtaken. Or the scheme cannot be delivered on the original terms and the authority prefers a delivered scheme with less to a consented scheme with nothing.

One argument rarely works on its own: that the developer would make more money with a lower obligation. Authorities have heard it, and their own consultants will test it hard.

Where an obligation has outlived its purpose entirely the same machinery applies, and the evidence is the authority's own record that the scheme the money was for is no longer happening.

Legal costs on both sides and who bears them

You pay both sides. That is standard, and the authority will normally want an undertaking for its legal costs before its solicitor starts drafting, with a cap negotiated if you ask for one.

Budget the following lines:

1. Your own solicitor's fees for drafting, negotiating and engrossment.
2. The authority's legal fees, met under an undertaking.
3. The authority's planning and viability officer time, where it charges for it.
4. A consultant's fee where the authority appoints an external reviewer for the viability evidence, which is routine on affordable housing variations.
5. Land Registry fees and any mortgagee's costs for consenting to the deed.
6. A new or revised monitoring fee, since authorities frequently re-set monitoring charges when an agreement is reopened.

Ask for a cap and a scope on items two to four at the outset, in writing. An uncapped undertaking on a disputed variation is how a simple trigger change becomes a five figure legal bill. The same discipline applies to any paid arrangement with the authority, as our note on planning performance agreements and what you are paying for sets out.

Viability evidence and its cost

If the variation touches affordable housing or a financial contribution, expect to prove it with an appraisal, and expect that appraisal to be reviewed by someone the council appoints at your expense.

That exercise is neither inexpensive nor quick. The appraisal has to be built on inputs the authority will accept, reviewed, queried, revised and often argued over benchmark land value and developer return. Where the original permission was granted on a viability case, the authority will compare the two and ask what has changed, and the answer has to be specific: build cost inflation evidenced by indices and tender returns, sales values evidenced by comparables, programme delay evidenced by the contract.

Where the authority is unconvinced, a review mechanism is often the compromise. You get the reduced obligation now and an obligation to pay more if values improve, measured at a late stage review against agreed inputs.

A Viability Assessment is the document that carries this, and councils expect a suitably qualified author with professional review of the figures before submission.

Where a fresh permission is the better route

Sometimes the obligation is not the problem. The permission is.

Where the change you want is to a condition, a section 73 application to vary conditions is quicker and costs less than opening the agreement, though the interaction between the two needs care because obligations do not necessarily follow a new permission automatically. Where the scheme has changed enough that the whole consent is wrong, a fresh application with a new agreement drafted from scratch can be faster than variations layered on an old deed.

Three practical tests:

• Is the obligation itself unworkable, or is it the condition or the scheme that is unworkable.
• Would a new agreement be drafted on better terms than the one you are trying to patch, given the authority's current template.
• Does the existing agreement contain anything you want to keep, such as an indexation base date or a trigger you negotiated hard for.

Highway works secured separately under a section 278 agreement are not affected by a section 106 variation, and the split between the two is set out in our note on section 278 and section 38 highway costs.

If the existing deed is on favourable terms, patching it is worth more than replacing it. If it is an old, badly drafted agreement with obligations you are already struggling to discharge, replacement may be the better outcome.

Timescales and the effect on a funding deadline

Allow longer than the authority suggests. A straightforward technical variation with no viability element takes a few months through drafting, mortgagee consent and engrossment. A variation touching affordable housing, requiring viability review and in some authorities a committee resolution, takes considerably longer and the committee cycle is outside your control.

Build that into the funding timetable rather than assuming the deed will land when the lender needs it. Where a funding condition depends on the variation, say so early and ask the authority for an indicative programme in writing. Authorities will often accommodate a deadline they know about and will not accommodate one they learn about in the final week.

Where the variation is refused after the five year point and you appeal under section 106B, add the appeal timetable on top, and the cost comparison between written representations and a hearing is the same one set out in our note on appeal route costs.

Deciding whether to open the agreement at all

Run the decision as a straightforward balance. On one side, the value of the change you want, quantified. On the other, the legal and consultant costs, the delay, and an honest estimate of what the authority will ask for in return.

That last item is the one people underestimate. Reopening an agreement invites the authority to update indexation to current base dates, add a review mechanism, raise monitoring fees, align obligations with current policy rather than the policy in force when the deal was struck, and tighten trigger wording. On an agreement signed several years ago under a superseded local plan, the policy gap alone can exceed the saving you were chasing.

So the honest answer is sometimes to live with the obligation and manage around it. A trigger that bites at occupation of the twentieth unit can be managed by phasing. A contribution you cannot avoid can be budgeted alongside the other fixed charges covered in our note on budgeting for CIL and the exemption paperwork. Opening the deed should be for the obligations that actually stop the scheme.

If you are costing the wider submission at the same time, see PlanScope pricing for one free report, £50 per report, or Professional for unlimited reports.

PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval. This is general guidance, not legal advice; check the position with your local planning authority or a qualified professional before relying on it.