Monitoring fees and the statutory tests for obligations
A monitoring fee has to be fairly and reasonably related in scale and kind to the development and reflect the authority's estimated monitoring cost. Most draft fees have never been tested against that.
A monitoring fee in a section 106 agreement is lawful, and it is also bounded. Regulation 122 of the Community Infrastructure Levy Regulations 2010 was amended in 2019 to allow an obligation to provide for a monitoring fee, on the condition that the sum is fairly and reasonably related in scale and kind to the development and reflects the authority's estimated cost of monitoring the obligations over their lifetime. So the question on any particular agreement is not whether a fee can be charged. It is whether this fee, on these obligations, meets that test, and most of the fees that land on a draft agreement have never been tested against it at all.
Where monitoring fees came from
Before 2019 authorities charged monitoring fees with no express statutory footing, and applicants resisted them on the basis that they failed the regulation 122 tests. The amendment settled the principle and left the arithmetic open.
The practical consequence is that councils now publish monitoring fee schedules, usually as a sum per obligation, or per dwelling, or as a percentage of the financial contributions secured, sometimes with a cap. Those schedules vary widely, and some of them bear no visible relationship to the cost of the monitoring they fund.
National guidance on planning obligations makes two points that get quoted in negotiations. Fees should be proportionate and reasonable, reflecting the actual cost of monitoring. And they should not be used to fund the wider operation of the planning service.
The tests applied to a fee
Regulation 122 sets three conditions for an obligation to be capable of being a reason for granting permission.
| Test | What it means for a monitoring fee |
|---|---|
| Necessary to make the development acceptable in planning terms | The monitoring must relate to obligations that are themselves necessary |
| Directly related to the development | The fee must fund monitoring of this scheme, not a general function |
| Fairly and reasonably related in scale and kind | The amount must track the monitoring actually required |
A fee calculated as a flat percentage of all contributions fails the third test wherever the contributions are large and the monitoring is trivial. Monitoring a single commuted payment made on implementation is a one-off reconciliation. Monitoring a travel plan with five yearly surveys, an affordable housing scheme with nomination agreements and a biodiversity management plan running for thirty years is a different workload entirely, and a fee that treats them the same is not related in scale and kind to either.
The reverse also holds, and consultants should be honest about it. Long duration obligations do cost authorities money to monitor, and an applicant arguing a 30 year landscape management obligation should carry no monitoring cost is on weak ground.
Calculating a fee from the actual work
The defensible method is bottom up, and it is worth constructing even if you are only using it to test the council's figure.
- List each obligation in the draft agreement separately.
- For each, state what monitoring involves: receiving a notice, checking a certificate, attending a site inspection, reviewing an annual report.
- For each, state the frequency and the number of years it runs.
- Apply an hourly rate for the officer grade that will do the work, taken from the council's own published charging rates where they exist.
- Add the cost of any external input the authority really needs, such as an ecologist reviewing a management report.
- Total it, then compare with the figure in the draft.
Where the two figures are within a reasonable distance of each other, pay it and move on. Where the published schedule produces a figure several times the bottom up total, you have a position grounded in the regulation rather than in indignation.
Challenging a fee that cannot be justified
The force of the argument is that an obligation failing the regulation 122 tests cannot lawfully be a reason for granting permission. An authority cannot refuse permission because an applicant declines to enter an obligation that fails the tests, and on appeal an inspector will disregard an obligation that does not meet them.
In practice the exchange is less dramatic. Ask the authority, in writing, for the basis of the calculation and the published schedule it comes from. Then make four specific points if they apply: that certain obligations require no ongoing monitoring, that the duration assumed is longer than the obligation runs, that the rate exceeds the council's own published charging rates, and that the total exceeds the estimated cost of monitoring.
Expect a negotiation rather than a capitulation. Common landing points are a cap on the total, the removal of monitoring from obligations that are discharged by a single payment, and a reduction where several obligations are monitored through one annual report.
Where the fee is material against the scheme's margin, it belongs in the appraisal alongside the other section 106 costs, and the discipline described in our note on the independent review of a viability appraisal applies to it as much as to anything else. On a scheme where the highway works are also substantial, read it with our note on highway works costs in a development appraisal, because the two cost lines are often confused in draft heads of terms.
Indexation and payment timing
Two mechanical points cost money quietly.
Indexation: most agreements index contributions, and many index the monitoring fee too. Check which index applies, from what base date, and whether it applies to the monitoring fee at all. A fee indexed from the date of a cabinet report four years before completion has grown before you have paid anything.
Timing: the default drafting often requires the monitoring fee on completion of the agreement, which means paying for thirty years of monitoring before a brick is laid. Ask for payment on implementation, or in tranches tied to the obligations being monitored, or for a refund mechanism where an obligation falls away. A refund clause is unusual and not unreasonable, because the fee is an estimate of cost rather than a charge for a right.
Reporting through the infrastructure funding statement
Authorities have to publish an infrastructure funding statement for each financial year, setting out what was secured, what was received and what was spent, including monitoring fee income. The statutory deadline for publication is the end of December following the financial year it covers.
That document is useful to a consultant for three reasons. It shows what the authority has actually been charging and collecting. It shows whether monitoring income is being spent on monitoring. And it provides evidence for an argument about proportionality that does not rely on assertion.
Read the last two statements before you negotiate a fee on a large scheme. If an authority collected substantial monitoring income and reported no monitoring expenditure, that is a question worth asking politely at the right moment.
Negotiating position before completion
The room to negotiate sits before the agreement is engrossed and disappears afterwards, so the sequence matters.
Raise the fee at heads of terms stage, not at engrossment. Provide the bottom up calculation rather than a bare objection. Offer a structure the authority can accept without appearing to have been beaten: a cap, a tranche schedule, a single consolidated annual report covering several obligations. And decide in advance what the fee is worth fighting about, because on most schemes the monitoring fee is a small line against the delay cost of a two month argument.
Where the obligations themselves are disproportionate, the fee is the wrong target. A Viability Assessment addressing the whole obligation package, and an Affordable Housing Statement setting out what the scheme can carry, deal with the substance.
One forward-looking note. The Levelling-up and Regeneration Act 2023 contains powers for an Infrastructure Levy intended to take over part of the ground currently covered by obligations and the levy. The implementation route has been staged and partial, so check the position that applies to your authority rather than assuming either regime has changed.
This is general guidance rather than legal advice, so take advice on the particular agreement before completing. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval.
Frequently asked questions
Are section 106 monitoring fees lawful?
Yes. Regulation 122 of the Community Infrastructure Levy Regulations 2010 was amended in 2019 to allow an obligation to provide for a monitoring fee, where the sum is fairly and reasonably related in scale and kind to the development and reflects the authority's estimated cost of monitoring the obligations over their lifetime.
Can a monitoring fee be a percentage of contributions?
It can be calculated that way, but a flat percentage often fails the test that the amount be fairly and reasonably related in scale and kind. Monitoring a single commuted payment is a one-off reconciliation, while a thirty year management plan is continuous work, and a percentage treats them identically.
How do I build a defensible fee calculation?
List each obligation separately, state what monitoring each one involves, state the frequency and the number of years it runs, apply the council's own published officer charging rate, add any genuine external input such as an ecologist reviewing a report, and total it. Then compare that figure with the one in the draft agreement.
What happens if a fee fails the regulation 122 tests?
An obligation that fails the tests cannot lawfully be a reason for granting permission, and an inspector on appeal will disregard it. In practice the exchange is a negotiation: ask for the basis of the calculation in writing, identify the obligations needing no ongoing monitoring, and propose a cap.
When should the monitoring fee be paid?
Default drafting often requires payment on completion of the agreement, which means paying for decades of monitoring before work starts. Ask for payment on implementation, or in tranches tied to the obligations being monitored, and check whether indexation applies to the fee and from which base date.
Where can I see what a council actually charges?
In its infrastructure funding statement, which authorities must publish for each financial year by the end of December following. It reports what was secured, received and spent, including monitoring income, so it shows both the charging practice and whether the income is being spent on monitoring.
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.