Planning obligation: when a contribution may be required

A planning obligation is a deed under section 106 of the Town and Country Planning Act 1990 that binds land rather than a person, so it runs with the site and is enforceable against whoever owns it next. The planning obligation section 106 test that decides whether a council can rely on one is statutory, not a matter of negotiation: the obligation must be necessary to make the development acceptable in planning terms, directly related to the development, and fairly and reasonably related in scale and kind to it.

Those three limbs sit in regulation 122 of the Community Infrastructure Levy Regulations 2010. They are worth knowing verbatim, because the most useful thing a developer can do in a contributions negotiation is ask which limb a particular ask satisfies.

What the term covers

An obligation can require a payment, restrict the use of land, require land to be used in a specified way, or require operations or activities to be carried out. It takes effect either as an agreement between the authority and the landowner or as a unilateral undertaking given by the landowner alone, which is the usual route at appeal.

It has to be entered into by everyone with an interest capable of binding the land. A forgotten mortgagee or a leaseholder over part of the site will hold up completion, and that discovery usually arrives a fortnight before committee.

Obligations are registered as local land charges and show up on searches. They survive the grant of a new permission only if drafted to, which is why a section 73 variation normally needs a supplemental deed.

The three statutory tests

Regulation 122 means an authority cannot take an obligation into account as a reason for granting permission unless all three limbs are met.

Necessary is the hardest. It asks whether, without the obligation, permission would have to be refused. A contribution towards a town centre improvement scheme several miles away, sought from a 40-dwelling site, will struggle on necessity and on direct relationship together.

Directly related asks whether the obligation addresses an impact of this development. Education contributions calculated from the child yield of the proposed mix pass easily. A contribution to a library refurbishment generally does not, unless the authority can show the development's occupants create the need.

Fairly and reasonably related in scale and kind is about proportionality. A formula in an adopted supplementary planning document helps the authority here, provided the formula is applied rather than rounded up.

Ask for the evidence base behind each figure. An adopted contributions document with a published methodology is defensible. A spreadsheet produced by a consultee without one is negotiable.

Obligation or condition

National guidance expects conditions to be used in preference to obligations where a condition can achieve the same outcome, because conditions are simpler, quicker and do not need a deed.

Conditions cannot require the payment of money. They also struggle with works on land outside the application site and with obligations that have to run for decades. So the split falls out as follows.

Where the works depend on land the applicant does not own, the problem is commercial before it is legal, and our note on ransom strips and the access nobody owns covers how that plays out.

An illustrative set of heads of terms

The following is illustrative, for a scheme of 75 dwellings on an allocated edge-of-settlement site in a two-tier authority area.

• Affordable housing at the policy percentage, with tenure split, unit mix, transfer arrangements and a cascade if no registered provider acquires.
• Education contribution by formula, split between primary and secondary places, index linked and payable in tranches.
• On-site public open space and play space, with a transfer or management company arrangement and a commuted maintenance sum.
• Sustainable transport contribution towards bus stop upgrades on the adjoining route.
• Travel plan, with a monitoring period and a review mechanism.
• Off-site biodiversity units where the on-site metric falls short, with a 30-year management obligation.
• A monitoring fee, which authorities have been able to charge since the 2019 amendments provided it is proportionate to the monitoring actually required.

Index linking and trigger points are where money is won and lost. A contribution payable on first occupation costs less in cash flow terms than one payable on implementation, and a payment indexed from the date of the agreement rather than from the date of the fee schedule can differ materially over a three-year build.

Where the obligation contains fallbacks, the drafting deserves specialist attention, as set out in cascade mechanisms in a section 106 agreement.

How it differs from the levy

The Community Infrastructure Levy is a charge per square metre set by a published charging schedule, calculated rather than negotiated, and spent on infrastructure identified by the charging authority. A planning obligation is site specific and addresses the impacts of that development.

Two consequences follow. An authority cannot use an obligation to fund something it has told the world will be funded by the levy, because the necessity test would fail. And a scheme can be liable for both, so the levy figure belongs in the appraisal alongside the obligation.

Authorities publish an infrastructure funding statement each year setting out what they have collected and spent through both routes. Read the most recent one before a negotiation. It shows which items the authority treats as levy funded, and it occasionally reveals that a contribution sought from you has gone unspent for years.

The pooling restriction that once limited an authority to five obligations funding any one infrastructure project was lifted in September 2019. Contributions towards the same project can now be pooled without that cap, which has changed how education and transport asks are framed.

Modifying an obligation

Section 106A allows an obligation to be modified or discharged by agreement with the authority at any time, and by application after five years have passed, with a right of appeal if the authority refuses.

In practice most renegotiation happens by agreement, supported by viability evidence. That route needs a Viability Assessment prepared to the standards the guidance expects, with a benchmark land value that the authority's reviewer can test. Expect the assessment to be published, since transparency is now the default.

Checking the position for a site

Five documents tell you what a site will be asked for before you speak to anyone.

1. The adopted local plan policies on affordable housing and infrastructure, with their thresholds.
2. Any supplementary planning document on planning contributions, including the formulae and the index used.
3. The charging schedule for the levy, with the rates and the zones.
4. The latest infrastructure funding statement.
5. Completed obligations on comparable sites nearby, available on the authority's planning register.

That last one is the most useful and the least used. A completed deed on a similar scheme shows what the authority actually accepted rather than what it asks for. Affordable housing is usually the largest single item, and the policy position should be set out in an Affordable Housing Statement at application stage.

Enter your postcode on PlanScope to see which documents a scheme of your scale is likely to need.

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.