The three tests for planning obligations under regulation 122

Regulation 122 of the Community Infrastructure Levy Regulations 2010 sets three tests, and a planning obligation may only be a reason for granting planning permission if it meets all of them. 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 the development.

These are statutory tests, not policy guidance. An officer who recommends approval partly because of a contribution that fails one of them has taken into account something they were not entitled to rely on, and the recommendation is vulnerable.

Where the tests come from and their statutory force

Section 106 of the Town and Country Planning Act 1990 creates the power to enter into planning obligations. Regulation 122 limits when an obligation can count towards the decision. The distinction is worth holding on to, because the tests do not stop a developer offering something. They stop the authority treating the offer as a reason to grant permission.

The same three tests also appear in national policy, so they operate twice: once as law and once as policy. That doubling is why officers quote them verbatim in reports rather than paraphrasing.

Regulation 123 used to add a fourth constraint, limiting the pooling of contributions from more than five obligations towards a single infrastructure project. That restriction was removed by amendment regulations in September 2019, which changed the practical position for authorities collecting contributions towards a single school or junction from many small schemes.

Necessary to make the development acceptable

This is the hardest test and the one most contributions fail on the evidence rather than the principle. Necessary means the permission could not properly be granted without the obligation, because otherwise there would be an unacceptable planning effect.

The evidence has to identify the effect. A contribution towards primary school places is necessary where the authority can show the child yield arising from the development, the capacity position in the relevant planning area, and the cost of providing the additional places. A contribution towards education generally, with no capacity evidence, is a tariff.

The Supreme Court has confirmed that an obligation offered by a developer that does not serve a planning purpose cannot be a reason for granting permission, however attractive the offer is to the local community. That reasoning is a useful check on anything presented as a community benefit rather than as mitigation.

Where affordable housing is the obligation, the necessity case comes from the development plan policy and the identified need, and the Affordable Housing Statement is where the applicant sets out how the offer responds to it.

Directly related to the development

The obligation must address an effect of this development, at a place and in a form connected to it. A contribution to a play area serving the estate is directly related. A contribution to a play area four miles away, in a different ward, serving a different catchment, is not, unless the authority can show residents of the scheme would actually use it.

Geography does most of the work here, but not all of it. Timing matters too. An obligation funding infrastructure already delivered and paid for, with no capacity consequence from this scheme, struggles on this test.

Watch for contributions labelled as mitigation that are really a policy aspiration. Public art is the classic example. Where a plan policy requires it and the scheme's scale and prominence create the effect the policy addresses, the argument can be made. Where it is a standing charge per square metre, it cannot.

Fairly and reasonably related in scale and kind

Proportionality. A scheme of eight flats cannot be asked to fund a junction improvement needed by a wider growth area, though it can be asked for a share proportionate to its contribution to the problem.

Calculation method is where this test is argued. Authorities use formulae in supplementary planning documents, and formulae are acceptable where they are evidence based and applied with judgement. They become vulnerable where they are applied mechanically to a scheme with different characteristics from the ones the formula was built for.

Two practical points for anyone negotiating. First, ask how the rate was derived and when the evidence behind it was last updated, because many formulae carry indexation but not review. Second, check whether the same effect is being charged twice, once through the levy and once through an obligation. The levy and section 106 are meant to cover different things, and double charging fails the scale and kind test.

Where the contribution is large enough to affect deliverability, the argument shifts to viability, and a Viability Assessment becomes the vehicle. That is a different conversation from the regulation 122 tests and should not be confused with them.

How officers apply the tests in a committee report

Good reports deal with each obligation separately and each test explicitly. The structure officers use looks like this:

The last row is not decoration. Where a report is silent on the tests, the decision is harder to defend, and the point is raised routinely in challenges.

Authorities also charge monitoring fees on section 106 agreements, and amendment regulations in 2019 expressly allowed this provided the fee is proportionate to the monitoring actually required. A flat percentage of the total contribution, unrelated to what will be monitored, is worth questioning.

Challenging a contribution that fails a test

Raise it early, in writing, before the heads of terms are agreed. Once a deed is engrossed and the committee date is set, the incentive to argue collapses and most developers pay.

The sequence that works:

1. Ask for the policy basis and the evidence for the specific contribution.
2. Ask how the amount was calculated and for the underlying assumptions.
3. Set out which of the three tests you say is not met, and why, in a short note the officer can put on the file.
4. Offer an alternative that does meet the tests, if one exists, such as an on-site provision instead of a payment.
5. If the contribution is still sought, ask for the officer's report to record the disagreement.

An appeal is the formal route if permission is refused, and an inspector will apply the same tests. Where permission is granted with an obligation the developer thinks is unlawful, the options narrow quickly, which is why the argument belongs before the deed is signed.

Authorities publish what they have collected and spent through annual infrastructure funding statements, and those documents are useful evidence in a negotiation. We have looked at how to read them in our note on infrastructure funding statements.

Recording the justification

For applicants, keep a written record of the heads of terms as they evolved and the justification given for each item. It is the material you need if the scheme is later the subject of a deed of variation or a viability review.

For officers, the file note matters more than the report paragraph. Contributions are frequently revisited years later when a site changes hands, and the reasoning behind an unusual item is rarely obvious from the deed alone. Contributions on smaller schemes are a recurring flashpoint, as our note on open space and play space contributions on small schemes sets out.

Browse the 66 report types to see which supporting documents carry the evidence base behind a section 106 negotiation.

This is general guidance, not legal advice; check the position with your local planning authority or a qualified professional before relying on it.