Heads of terms template for a twelve unit scheme

On a twelve unit scheme the section 106 negotiation is seldom about the principle of the contributions. It is about when each payment falls due, what index applies, what happens if the council does not spend the money, and who pays the monitoring fee. Those four items account for most of the delay between resolution to grant and the decision notice, and a heads of terms document that settles them in advance can take weeks off the timetable.

Twelve units is a major application, which brings affordable housing policy, a Statement of Community Involvement in many authorities, and a thirteen week determination period. It is also small enough that the developer's cash flow depends directly on the trigger wording.

Parties, land and definitions to settle first

Get these agreed before discussing any figure, because unresolved definitions reappear at every subsequent stage.

• The parties. The owner, any mortgagee whose consent is needed, the local planning authority, and the county council where it is the education or highways authority.
• The land. Title numbers and a plan, with the application red line and the title boundary reconciled. Any land outside the applicant's control identified.
• Commencement of Development. Usually defined to exclude site clearance, archaeological investigation, remediation, service diversions and the construction of site accommodation, so that enabling works do not trigger payments.
• Occupation. Defined to exclude use as a marketing suite or show home, and to exclude occupation by construction staff.
• Dwelling and Open Market Dwelling. Kept distinct from Affordable Housing Unit so that trigger counts are unambiguous.
• Index. Named, with a base date, and applied consistently.

The Commencement definition is the one that repays attention. A scheme that has to make a payment on any operation amounting to development will be paying before the sales programme has begun, which is a working capital problem the drafting can avoid.

Contribution items and how each is described

Set out each item as a short paragraph: what it is, how it is calculated, and what it will be spent on. Regulation 122 of the Community Infrastructure Levy Regulations 2010 requires an obligation to be necessary to make the development acceptable, directly related to the development, and fairly and reasonably related in scale and kind to it. Ask the authority to state which of those tests each item satisfies.

The pooling restriction that used to limit contributions to five obligations per infrastructure project was removed in 2019, so an authority can now pool freely. That removes an old line of argument and leaves regulation 122 as the test that matters.

Where affordable housing is the substantial item, the Affordable Housing Statement is the document that carries the policy case, and it should describe the same mix that the heads of terms secures.

Trigger events and payment timing

This is the section to draft carefully, because it is the one that affects the money.

1. Payments before work starts. Resist these where possible, and where the authority insists, tie them to a defined start rather than to any operation.
2. Occupation triggers. Express them as "prior to first occupation of the nth Open Market Dwelling", counting open market units only, so affordable completions early in the programme do not accelerate payments.
3. Staged payments. On twelve units, two stages are usually enough: a proportion on first occupation and the balance on occupation of a later unit.
4. Affordable housing delivery. Tie transfer to a stage of construction and to a longstop date, with the practical completion certificate as the evidence.
5. Highways works. Keep them in the section 278 agreement with a Grampian condition, rather than duplicating them as a section 106 obligation.

State the payment period too. Fourteen days from the trigger is normal; anything shorter creates administrative risk for no benefit.

Indexation and the base date

Every financial obligation needs an index and a base date, and the two together need to be unambiguous.

Construction related contributions are usually indexed to a tender price index, and other contributions to a general inflation measure. Name the specific series rather than referring to construction inflation generally. Set the base date as the date of the agreement, or the date of the cost evidence the figure came from, and say which.

Then check the arithmetic clause. A formula expressed as the contribution multiplied by the index at the payment date divided by the index at the base date is standard and easy to verify. Watch for drafting that indexes from an earlier date than the evidence supports, which quietly increases the sum.

Our schedule of viability appraisal inputs covers the wider question of agreeing assumptions before an appraisal is run, and indexation should be one of the items on that list.

Clawback, repayment and spend by dates

Money paid to an authority and not spent should come back. Include a repayment clause with three elements.

A spend by date, commonly five or ten years from receipt, by which the authority must have applied the money to the purpose stated. A repayment obligation covering any unspent balance, with interest at a named rate. And an obligation on the authority to provide, on request, a statement of how the money has been applied.

Authorities publish infrastructure funding statements annually, which makes this easier to monitor than it used to be. Include a reporting obligation anyway, because a clause you have to enforce is better than none.

Clawback in the other direction is a different matter. Where the authority wants an uplift if values rise, that is a review mechanism rather than clawback, and it belongs in the section below.

Monitoring fees stated separately

Monitoring fees became explicitly permissible following the 2019 changes to the levy regulations, and most authorities now charge them. Ask for the fee to be stated as its own item rather than bundled into the contributions, and ask for its basis.

Three questions are reasonable. What does the fee cover, measured in officer time and number of obligations monitored. Is it a fixed sum or a percentage. And is it indexed, because a percentage of an indexed contribution is indexed twice if the drafting is careless.

A fee proportionate to the number of obligations being monitored is defensible. A percentage of the total contributions on a scheme with one simple payment is harder to justify, and it is worth asking the authority to explain it.

Review mechanism and what it covers

On a twelve unit scheme a viability review is less common than on a large site, but authorities do ask for one where the affordable housing offer is below policy.

If a review is included, pin down five things. When it is triggered, by date or by a construction stage. What inputs are fixed and what are revisited. Who carries out the review and who pays for it. What the maximum additional contribution can be, because an uncapped review is uninsurable in practice. And what happens if the review shows a deficit rather than a surplus.

Where the offer is below policy, the Viability Assessment needs to be capable of being tested by the district valuer, and councils normally expect a suitably qualified author working to the relevant professional standards. Professional review of any draft is strongly advised.

Put the whole thing on two or three pages, send it to the case officer early, and ask for the authority's standard clauses alongside it. A Planning Statement that refers to an agreed heads of terms is a stronger document than one that leaves the obligations to be settled after committee.

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