Modifying or discharging a section 106 obligation

There are two ways to modify a section 106 agreement and most people reach for the wrong one first. The quick route is a deed of variation agreed with the local planning authority, available at any time under section 106A(1) of the Town and Country Planning Act 1990, needing only the consent of everyone with an interest in the land. The statutory route is an application to modify or discharge under section 106A(3), which is only available once five years have passed since the obligation was entered into, and which carries a right of appeal.

If the authority will talk, vary by deed. The statutory application exists for when it will not.

The five year rule and the statutory application

Section 106A(3) lets any person against whom an obligation is enforceable apply to the authority to have it modified or discharged, but only after the relevant period has expired. The relevant period is five years from the date the obligation was entered into, unless the deed itself specifies a different period.

On an application the authority has three options, and only three. It can determine that the obligation shall continue without modification. It can discharge the obligation, if it no longer serves a useful purpose. Or it can determine that the obligation continues to serve a useful purpose but would serve that purpose equally well if modified in the way applied for.

That third limb is the one to aim at. It means the modification you propose has to deliver the same planning purpose, not a reduced version of it. An application that says the affordable housing requirement should drop from 35 per cent to 15 per cent because the scheme is tight will fail on this test, because 15 per cent does not serve the purpose equally well.

Applications where the third limb works tend to be about mechanism rather than quantum. Changing the tenure mix while keeping the number of affordable homes. Moving a trigger from occupation of the tenth unit to occupation of the twentieth. Substituting an on-site play area for a contribution towards an equivalent facility 200 metres away.

Agreeing a deed of variation instead

Most modifications happen by agreement and never touch section 106A(3).

The mechanics are straightforward and the conveyancing is where it goes wrong. Everyone with an interest in the land has to be a party, which in practice means the freeholder, any leaseholder whose interest predates the obligation, and any mortgagee. A registered charge that was not consented at the time of the original deed can block a variation years later.

Authorities normally require their legal costs to be paid on an undertaking before drafting starts, and many have a standard fee for a simple variation. Ask for the estimate in writing before you instruct.

The obligation is a local land charge, so the variation has to be registered as well as executed. An unregistered variation still binds the parties but causes a problem on every subsequent sale, because the buyer's search will show the original terms.

Evidence that an obligation no longer serves a useful purpose

Discharge is rarer than modification and the bar is real. The obligation has to have stopped serving a useful planning purpose, not become inconvenient.

Cases that work usually fall into a few patterns. The facility the contribution was to fund has been built and paid for from another source. The policy the obligation implemented has been superseded by an adopted plan that no longer seeks it. The obligation restricts occupancy to a class of person that no longer exists, such as a local employment tie to a business that closed. Or the obligation duplicates a requirement now delivered through a condition or through the Community Infrastructure Levy.

Evidence means documents, not assertion. The authority's own committee report on the facility, the adopted plan policy, the CIL charging schedule, correspondence confirming the contribution was not spent within the period allowed and has been repaid.

Where a contribution has already been paid and the works done, the obligation has been performed and there may be nothing left to discharge. Check the deed before applying, because many agreements are drafted so that spent obligations fall away automatically.

Appealing a refusal to modify

Section 106B gives a right of appeal to the Secretary of State against a refusal of a section 106A application, or against a failure to determine it within the prescribed period. The appeal is normally dealt with by written representations and decided by an inspector.

Check the current appeal period against the procedural rules before relying on a date, because the time limits for planning appeals have been changed more than once. Submit early rather than close to the deadline.

The inspector applies the same statutory test as the authority. An appeal that argues the obligation is unaffordable, without showing that the modified obligation serves the purpose equally well, is arguing the wrong case.

There is no equivalent statutory appeal against a refusal to enter a deed of variation, because there is no application to refuse. That asymmetry is why some applicants make a section 106A application specifically to generate an appealable decision.

Viability evidence in a renegotiation

The time-limited route for renegotiating affordable housing on viability grounds, introduced in 2013, closed to new applications on 30 April 2016. What remains is ordinary negotiation with the authority, supported by evidence, or a fresh application for planning permission with a new obligation.

Where viability is the reason for the request, the evidence has to follow the national approach. The Planning Practice Guidance on viability expects an assessment based on benchmark land value derived from existing use value plus a premium, with an assumed return to the developer, and it expects the assessment to be published. Councils generally expect a suitably qualified author for a Viability Assessment, usually a chartered surveyor working to the RICS guidance, and professional review is strongly advised.

Two arguments recur and neither travels well. That the land was bought at a price that assumed a lower obligation, which the guidance treats as the applicant's risk. And that current sales values are below appraisal, without evidence from comparable transactions. The detail on inputs is covered in developer return assumptions in planning viability and abnormal costs in a planning viability appraisal.

Section 73 and the obligation that does not follow

A section 73 permission is a new planning permission. It does not automatically carry the section 106 obligations attached to the original, unless the original deed was drafted to bind any subsequent permission granted under section 73 or section 96A.

Well-drafted modern agreements include that wording. Older ones often do not. Where the deed is silent, implementing the section 73 permission can leave the development free of the obligation, which sounds attractive until the authority notices and refuses to issue the section 73 without a new deed.

Check the definition of "the Permission" in the deed before you apply. It is usually the single most valuable paragraph in the document and it takes two minutes to read.

Registering the variation and closing the file

Once executed, the deed of variation or the section 106A determination needs to reach the local land charges register. Where the obligation is protected by a restriction or notice at the Land Registry, the register entries need updating too.

Then update the Affordable Housing Statement and the scheme's own compliance schedule so that the site team is working from the varied triggers rather than the original ones. Missed triggers on a varied agreement are a common cause of an authority refusing to issue compliance confirmation on plot sales.

This is general guidance, not legal advice, so take your own legal advice on any section 106 variation before relying on it.

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