Drafting section 106 heads of terms for a minor scheme

Heads of terms are the short document that decides how long your section 106 takes. On a minor scheme, the obligation itself is usually simple: a contribution, a habitat management commitment, an occupancy restriction. What delays the decision is a set of heads agreed loosely in an email, handed to two firms of solicitors who then discover that the trigger is undefined, the index is not named and the mortgagee has not been asked.

Write them as if the solicitor drafting the deed will have no other instructions, because often they will not.

When a unilateral undertaking beats a bilateral agreement

Section 106 of the Town and Country Planning Act 1990 allows an obligation to be entered into by agreement with the authority or given unilaterally by the person with an interest in the land. On a small scheme the unilateral route is usually faster, because the council does not have to sign and its legal team only has to approve the wording.

The bilateral agreement earns its place where the authority has to do something in return: repay a contribution if it is not spent within a period, grant a licence for works on its land, or accept a transfer of open space. A unilateral undertaking cannot bind the council, so anything requiring the authority to act belongs in an agreement.

Appeals are the other case for a unilateral undertaking, since an applicant can submit one to address a reason for refusal without the authority agreeing to anything. The practical differences are set out in our note on unilateral undertakings under section 106.

Setting out the obligations in plain terms

Each obligation needs four things: what is promised, by whom, when, and what happens if it is not done. Write one numbered paragraph for each, in plain words, and resist the urge to use the council's template wording unless you have read it.

A workable head of terms for a contribution reads something like this. The owner shall pay the council the sum of £4,200 towards improvements to the play area at a named park, index linked from the date of this undertaking, before first occupation of the fifth dwelling, to be spent within five years of receipt and otherwise repaid.

Every element of that sentence does work. The purpose ties the money to a project, which is what the regulation 122 tests require. The trigger is objective. The spending period and repayment make the obligation defensible.

Index linking and payment triggers

Name the index and the base date. Construction related contributions are commonly linked to a tender price index published for the construction industry, while general contributions are often linked to a consumer prices measure. Either is fine if stated, and neither works if the deed says only "index linked".

Triggers should be events that can be evidenced from the record:

1. The date of the undertaking, for anything payable up front
2. Implementation of the permission, defined by reference to the material operations in the Act
3. First occupation of a numbered dwelling, which is the most common trigger on small schemes
4. Practical completion of a specified element, where the obligation relates to works
5. A fixed long stop date, so the obligation cannot be avoided by never occupying

Avoid triggers that depend on someone's opinion. "On substantial completion" invites an argument, while "before first occupation of plot 5" does not.

Binding successors in title and mortgagee protection

A planning obligation binds the land, not just the person who signed it, and it is registered as a local land charge so that buyers find it. That is what makes it work, and it is also why lenders take an interest.

Two clauses matter on a minor scheme. The first excludes from liability anyone who has parted with their interest, so a seller is not chased for a trigger that occurs after completion. The second protects a mortgagee in possession, who otherwise inherits obligations they cannot perform. Councils accept both as standard, but they have to be in the draft.

If the site is subject to a charge, the lender is normally required to be a party and to consent to the obligation. Ask the lender early. A three week wait for a bank's consent is a common cause of a permission slipping past its determination date.

Timing against the determination deadline

The application clock does not stop for legal drafting. A minor application has eight weeks, and if the deed is not completed the authority will either refuse, or agree an extension of time in writing. Most officers will agree an extension, but they need to be asked before the deadline rather than after.

Work backwards. Circulate draft heads of terms with the application or at the first sign that an obligation is needed, get the title checked in parallel, and ask the council's legal team for its template at the same time. Where affordable housing or a review mechanism is involved, the viability position needs to be settled first, which is why the viability assessment has to run ahead of the drafting rather than alongside it.

On schemes delivering discounted units, the tenure detail belongs in the Affordable Housing Statement and the mechanics in the deed, including the discount and its perpetuity as covered in our note on how the First Homes obligation works.

Legal fees and who pays them

The applicant pays the council's reasonable legal costs, and the undertaking to pay is usually required before the authority's solicitor starts work. Ask for an estimate and ask what happens if the application is refused, because some authorities charge for work done either way.

Keep the cost down by sending a clean draft. Councils charge by the hour for reading, and a deed that follows their template with tracked changes limited to points of substance is faster to approve than a bespoke document. Where you are asked for a contribution you think fails the regulation 122 tests, make that argument in the planning correspondence rather than in the legal drafting, because the solicitors cannot resolve it.

Getting the title checked before drafting starts

Order the official copies at the start. Everyone with an interest in the land has to be a party, which includes freeholders, leaseholders with a long lease, mortgagees and sometimes an option holder. An obligation signed by someone who does not own the whole site is worth very little.

Check for restrictions on the title requiring consent to any disposition, for rights of way and covenants that the obligation might conflict with, and for unregistered strips such as an access verge that turns out to belong to a former estate. On a small infill plot the strip of land between the site and the road is the classic problem, and it surfaces at the worst moment.

One caveat worth stating plainly. Model heads of terms circulate between agents and get reused without checking whether the local policy that generated them still applies, and councils do the same with their templates. Read the current policy, and delete what it no longer supports.

PlanScope drafts the planning documents that support the obligations case, including the planning statement, and flags where figures are missing. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval. The deed itself is legal drafting and belongs with a solicitor.

This is general guidance, not legal advice. Check the position with your local planning authority and your legal adviser before relying on it. Enter your postcode on PlanScope to see which supporting documents your scheme is likely to need.