Section 106 costs beyond the contribution itself

The contributions written into a section 106 agreement are the number everyone budgets for. The transaction costs around them are the number that gets missed, and on a small scheme they can add a five-figure sum to a deal that was priced without them. Section 106 legal fees, monitoring fees, your own advisers' time and the cost of varying the agreement later all sit outside the contributions schedule, and none of them is optional.

Price them at the point you agree heads of terms, not when the engrossment arrives.

The council's legal fees

Local planning authorities do not absorb the cost of drafting and completing a planning obligation. The applicant pays, and the usual mechanism is an undertaking given by your solicitor to pay the council's reasonable legal costs whether or not the agreement completes.

Read that undertaking carefully. It is often uncapped, and the words "whether or not the matter proceeds" mean you pay for the drafting even if you withdraw the application. Ask for an estimate at the outset and ask for a cap. Councils will frequently agree a cap on a straightforward agreement, and they will usually explain what drives the figure when asked.

Costs rise with complexity rather than with the value of the contributions. A single payment triggered on implementation takes little time to document. Phased triggers, affordable housing provisions, a mortgagee exclusion clause, overage and step-in rights all add drafting time, and each round of comments adds more.

Where the council uses external solicitors because its in-house team is at capacity, the hourly rate changes and the estimate should be revisited.

Monitoring fees and where the power comes from

Since the 2019 amendments to the Community Infrastructure Levy Regulations 2010, local planning authorities can charge a fee for monitoring and reporting on planning obligations. The fee has to be proportionate and reasonably related in scale and kind to the development, and it cannot be used to fund general planning services.

In practice monitoring fees are charged either as a fixed sum per obligation, a percentage of the contributions, or a sum per trigger point, and the basis is usually published. Ask which basis applies before agreeing the heads of terms, because a percentage basis on a large contribution produces a very different figure from a per-obligation charge.

The fee is properly challengeable where it is disproportionate, and the argument is easier to make before the agreement is drafted than after. The regulation 122 tests that apply to the obligations themselves, requiring them to be necessary, directly related to the development and fairly and reasonably related in scale and kind, do not apply in the same way to a monitoring fee, so the argument is about proportionality rather than about the tests.

Your own advisers

Your solicitor's time is the larger of the two legal bills on most schemes, because they are reviewing, negotiating and reporting to you as well as corresponding with the council.

Expect to pay for:

• Reviewing the council's draft and advising on each obligation.
• Title work, including official copies, filed plans and identifying every party who must be joined.
• Obtaining the consent of any mortgagee, which takes longer than anyone allows for.
• Certificates of title or land registry compliance work on completion.
• Registration of the agreement as a local land charge, which the council handles, and any associated registration at HM Land Registry.

Your planning consultant's time also belongs in this line. Negotiating heads of terms, preparing evidence on the necessity of a contribution and, where the scheme is marginal, instructing a Viability Assessment all consume fee. Viability work is professionally demanding and councils expect a suitably qualified author, so professional review is strongly advised.

Parties, title and the surprises in the deeds

An obligation binds the land, so every person with an interest in it has to be a party or the agreement is unenforceable against them. That includes freeholders, leaseholders with a long interest, mortgagees and sometimes option holders.

Two things routinely delay completion. The first is a lender whose consent process runs to several weeks and whose solicitors charge their own fee, payable by you. The second is a title defect that nobody looked at because the site was acquired years ago and the planning application was prepared on a plan rather than a title.

Order official copies at the start of the application, not at the end. A ransom strip, an unregistered access or a restrictive covenant discovered during the section 106 process is expensive at that point and far less so six months earlier.

Indexation and what the cost becomes by the time you pay

Contributions are almost always indexed, typically to a construction cost or tender price index, running from the date of the agreement or the date of permission to the date of payment. On a scheme that takes three years from permission to trigger, indexation can add a meaningful sum, and it is not a sum you can negotiate away later.

Model it. Take the contribution, apply a reasonable annual uplift over your programme to the trigger date, and budget the indexed figure rather than the headline one. Then check which index is specified and where its figures are published, because different indices move at different rates.

The same applies to highway works secured separately, where the cost is the works themselves plus the authority's fees, a point covered in section 278 and section 38 costs on a small scheme.

Deeds of variation and the cost of changing your mind

Schemes change. A deed of variation to a section 106 agreement is a new agreement in all but name, with its own drafting, its own council legal fee, its own party consents and often a fresh monitoring fee.

Where the change follows a section 73 application to vary conditions, the council will usually require the obligation to be tied to the new permission, which means a deed of variation or a supplemental agreement even where the obligations themselves are unchanged. Budget for that whenever a section 73 is likely.

There is a statutory route to modify or discharge an obligation after five years under section 106A of the Town and Country Planning Act 1990, with an appeal to the Secretary of State. It is slower and more expensive than negotiation, and it is rarely the first option.

Phased schemes multiply all of this, because each phase can trigger its own paperwork and its own fees, which is part of the wider pattern set out in how planning costs recur when a scheme is phased.

Budgeting the whole obligation

Build a single line in the appraisal that carries every one of these items rather than burying them in professional fees.

1. Contributions at the indexed figure you expect to pay, by trigger date.
2. Council legal fees, capped where possible, with an allowance for two rounds of comments.
3. Monitoring fee on the published basis.
4. Your solicitor's fee, including title work and mortgagee consent.
5. Planning consultant time for negotiation and any viability evidence.
6. A contingency for one deed of variation.

Ask for the council's draft agreement and its published fee basis at pre-application stage. Most authorities will provide both, and having them before you commit to a land price changes what you can pay for the site.

And treat the heads of terms as the moment the costs are set. Once the drafting starts, the bill runs whether the scheme proceeds or not. Where you are pricing the documents that support the application at the same time, PlanScope pricing sets out what the drafting side costs.

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.