Late-stage viability reviews and how they are drafted
A late stage review revisits viability once values and costs are known. Developers negotiate the percentage and ignore the machinery, and the machinery decides whether anyone pays.
A late stage viability review revisits the numbers after a scheme is substantially built, when the sales values and the build costs are known rather than forecast. If the scheme has done better than the appraisal predicted, a share of the surplus is paid to the local planning authority, normally towards affordable housing. The mechanism is secured in the section 106 agreement, and almost everything that matters about it is a drafting question rather than a policy one.
Developers tend to negotiate the percentage and ignore the machinery. The machinery is what decides whether anyone ever pays.
Why review mechanisms exist and what they secure
Reviews exist because viability at application stage is a forecast. A scheme that could not support policy compliant affordable housing in 2026 may be comfortably profitable by the time it completes in 2030, and without a review the benefit of that improvement accrues entirely to the developer.
National guidance recognises review mechanisms as a way of dealing with that uncertainty, particularly on phased schemes and where a permission is not implemented promptly. In London the approach is more codified: schemes meeting the threshold level of affordable housing follow a faster route with lighter viability scrutiny, while schemes below it submit viability information and carry both early and late stage reviews.
What a review secures is usually a payment, not on-site homes. By the time a late stage review triggers, the building is built, so the surplus is converted into a contribution. That is worth understanding at the start, because it shapes what the council will accept in negotiation.
An early stage review is a different animal. It bites where permission has not been substantially implemented within a defined period, often two years, and its purpose is to stop a permission being banked while values rise.
The trigger point and how it is defined
Get this right and most of the rest follows. Get it wrong and the review is unworkable.
Common triggers for a late stage review are a stated proportion of private units sold or let, often around three quarters, or practical completion of the scheme or a defined phase. Each has problems. Sales-based triggers need a definition of sold: exchanged, completed, or reserved. Completion-based triggers need a definition tied to a certificate someone actually issues.
Three drafting points to settle:
- A long stop date, so a scheme that stalls does not defer the review indefinitely.
- A definition that works if the scheme is sold as an investment rather than unit by unit, which is the normal case for build to rent and for student accommodation schemes.
- A mechanism that survives a section 73 amendment, because a varied permission with a new agreement can accidentally drop the review.
Inputs fixed at permission and inputs revisited
The heart of the mechanism is the list of what gets re-tested and what does not.
| Input | Usual treatment at late stage review |
|---|---|
| Benchmark land value | Fixed at the figure agreed at permission, usually indexed |
| Developer return | Fixed at the agreed percentage of gross development value |
| Sales values | Actual achieved values, with unsold units valued at the review date |
| Build costs | Actual costs, evidenced from the contract and final account |
| Finance | Actual or a benchmark rate, depending on drafting |
| Professional fees | Actual, subject to reasonableness |
| Marketing and sales costs | Actual, often capped |
Fixing benchmark land value is the point developers most often lose and should fight hardest on. If the agreed figure is left open to reassessment at review, the whole calculation can be re-argued from the start, and the certainty the mechanism was meant to provide disappears. The original Viability Assessment should be annexed to the agreement so the inputs are not in dispute four years later.
Actual build costs cut both ways. A scheme that overran on cost will want those costs recognised. An authority will want a reasonableness test and protection against costs inflated by related-party contracting.
Profit share and the split of any surplus
Where the recalculated residual value exceeds the benchmark plus the agreed return, the excess is the surplus. Agreements typically split it between the developer and the authority, with the authority's share the larger of the two, and require the authority's share to be paid as a contribution towards affordable housing.
The split is negotiable and is usually the easiest part of the negotiation. What matters more is what the surplus is measured against and whether the calculation is symmetrical. A mechanism that captures upside without recognising genuine cost overruns will be resisted, and rightly.
Do not confuse the surplus share with the cap.
Caps on the additional contribution
The cap is the maximum the developer can be required to pay, and it is normally set at the cost of providing the policy compliant level of affordable housing that was not delivered at permission. In other words, the review can bring the scheme up to policy compliance and no further.
Two details matter. Whether the cap is indexed, and to what. And whether the cap is calculated on the position at permission or at review, which can differ substantially where values have moved.
Where a scheme delivered some affordable housing, the Affordable Housing Statement at application stage should record exactly what was delivered against what policy required, because that gap is what the cap is built from. Vague recording at the start produces an argument at the end.
Auditing the developer's figures
The authority will appoint an independent assessor, at the developer's cost, to test the submitted figures. The agreement needs to say how that works.
Useful provisions cover the information the developer must supply and by when, access to the final account and sales records, a confidentiality regime, a timetable with consequences if either side misses it, and a dispute resolution route, usually expert determination rather than litigation.
Information obligations are where reviews fail in practice. An agreement that requires a review but does not require the developer to supply audited figures leaves the authority with a right it cannot exercise. Councils have become better at this, but older agreements are full of the gap.
Authorities also have to report what they collect and spend through annual infrastructure funding statements, which makes past review outcomes traceable, as our note on infrastructure funding statements explains.
Drafting traps that make a review unworkable
The recurring faults are easy to list and easy to avoid.
- No definition of gross development value, or one that excludes a substantial element such as commercial floorspace or ground rents.
- A trigger tied to an event that nobody certifies.
- No obligation to provide information, or no deadline for providing it.
- No interest on late payment, which makes delay free.
- Phasing ambiguity, where it is unclear whether the review applies to a phase or to the whole scheme.
- No provision for a change of ownership, so the obligation does not bind a successor cleanly.
- An index that has been discontinued, which is a real problem in older agreements.
One honest uncertainty worth stating. There is no standard national form of review clause, and the drafting varies widely between authorities and between their solicitors. Ask the authority early for its model clause and negotiate from that rather than from your own, because the negotiation is shorter and the council is more likely to agree.
See PlanScope pricing if you want to draft the supporting statements around a viability negotiation while your valuer works on the appraisal.
This 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.
Frequently asked questions
What triggers a late stage viability review?
Whatever the section 106 agreement says. Common triggers are a stated proportion of private units sold or let, often around three quarters, or practical completion of the scheme or a defined phase. Sales-based triggers need a definition of sold, completion-based triggers need a certificate someone actually issues, and both need a long stop date for a stalled scheme.
Which inputs are revisited at a late stage review?
Sales values and build costs are re-tested against actuals, with unsold units valued at the review date. Finance, professional fees and sales costs are usually actual subject to reasonableness. Benchmark land value and the developer return are normally fixed at the figures agreed when permission was granted, often indexed, so the whole appraisal is not reopened.
How much can a review require a developer to pay?
Up to the cap, which is normally set at the cost of providing the policy compliant level of affordable housing that was not delivered at permission. A review can bring a scheme up to policy compliance and no further. Check whether the cap is indexed, and whether it is calculated on the position at permission or at the review date.
What is the difference between an early and a late stage review?
An early stage review bites where the permission has not been substantially implemented within a defined period, often two years, and exists to stop permissions being banked while values rise. A late stage review runs after substantial completion, when actual sales values and build costs are known, and converts any surplus into a contribution.
What makes a review mechanism unenforceable in practice?
Missing machinery. No definition of gross development value, a trigger tied to an event nobody certifies, no obligation on the developer to supply audited figures, no deadline, no interest on late payment, phasing ambiguity, no binding on successors in title, or an index that has since been discontinued. Each of these appears regularly in older agreements.
Sources and further reading
This article is general guidance about the planning system in England and, where stated, the rest of the UK. It is not legal or professional advice. Check your local planning authority’s validation requirements and take professional advice for your specific site.