Section 106 or CIL: which applies to your scheme

The levy is a fixed charge on floorspace that nobody negotiates. A section 106 agreement is a site-specific set of obligations drafted for one scheme, and it is negotiated line by line. Which applies to your development is rarely an either or question, because on anything above a handful of units the answer is usually both.

What matters for an appraisal is knowing which mechanism carries which cost, and where a council is asking for something it cannot lawfully require.

This is general guidance rather than legal advice. Take advice on the drafting of any agreement before you sign it.

The legal tests a planning obligation must pass

Regulation 122 of the levy regulations sets three tests. An obligation may only be taken into account in deciding an application where it is 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.

All three have to be satisfied. The tests are statutory, so an obligation that fails one of them cannot lawfully form part of the reason for granting permission, and an applicant is entitled to say so.

In practice the second and third limbs do most of the work. A contribution towards a library four miles away, calculated on a formula that takes no account of the size of the scheme, struggles on both. A contribution to expand the primary school your residents will use, calculated per bedroom against published pupil yield figures, does not.

Ask the council to identify, for each requested contribution, the infrastructure project it funds and the evidence for the amount. Most authorities can. The ones that cannot usually withdraw the request.

What the levy is designed to cover instead

The levy exists to fund the general infrastructure needed to support development across an area: roads, schools, health facilities, open space, flood defences. It is charged per square metre of net additional floorspace, calculated mechanically, and there is no negotiation about the rate.

It cannot deliver affordable housing, which is why the Affordable Housing Statement and the section 106 agreement remain the route for that, and why affordable housing dominates obligation negotiations on residential schemes.

Nor can the levy secure things that have to be done rather than paid for: a travel plan, a management company for open space, a restriction on occupancy, a phasing arrangement, or a local employment commitment. Obligations do those because they bind the land.

Pooling and the double counting rule after 2019

For most of the last decade councils could not pool more than five separate obligations towards a single infrastructure project. That restriction was removed in 2019, alongside the abolition of regulation 123 lists.

The protection against double counting now runs through transparency instead. Charging authorities publish annual infrastructure funding statements recording levy and obligation receipts, what has been spent, and the infrastructure they intend to fund. Read the latest one before negotiating, because it shows whether the council is already collecting through the levy for the item it is asking you to fund again.

Where a council seeks both, ask it to explain in writing how the two requests avoid overlap. That question, put politely and early, resolves more contributions than any viability argument.

A typical split on a small residential scheme

On a scheme of ten to fifteen homes in a charging authority, the pattern is fairly consistent.

1. The levy is calculated on net additional floorspace, with any qualifying existing building deducted.
2. Affordable housing is secured by the agreement, either on site or as a commuted sum where policy allows.
3. Site-specific mitigation goes into the agreement: open space maintenance, a travel plan, ecology or habitat management, monitoring.
4. Highway works are handled separately under a highways agreement.
5. A monitoring fee for the obligations is added, which councils have been able to charge since 2019.

Environmental mitigation is where this list has grown most in recent years. Schemes in a catchment affected by nutrient mitigation your council will ask for carry obligations that did not exist a decade ago, often with land or credit purchase behind them.

Highway works and why section 278 sits apart

Works on the existing public highway, such as a new access, a footway crossing, a right turn lane or a signal alteration, are carried out under an agreement with the highway authority under section 278 of the Highways Act 1980. It is a separate contract with its own fees, bonds and inspection charges.

New roads intended to become public are dealt with under section 38 of the same Act. A section 106 agreement will often oblige you to enter into those agreements, but it does not replace them.

Budget the commuted sums, the technical approval fees and the bond separately. They are frequently missing from appraisals and they are rarely small.

Viability arguments on contributions

Where policy compliant obligations make a scheme unviable, the argument runs through a Viability Assessment. National guidance sets the frame: viability should mostly be resolved at plan making, so assessments at application stage are the exception rather than the norm, and the price paid for the land is not a justification for reducing contributions.

Two practical points. Assessments submitted at application stage are normally published, so write them expecting to be read by objectors. And the levy itself is very difficult to reduce this way, because the rates were examined on area-wide viability evidence, so the negotiation realistically concerns the obligations.

Where a council agrees a reduced package, expect a review mechanism in the deed, requiring a re-run of the appraisal at a defined stage and an additional payment if values have moved.

Getting the triggers right in the deed

Payment triggers decide the cash flow more than the headline sum does. A contribution due on commencement is a very different proposition from one due on occupation of the fiftieth unit. Ask for triggers tied to occupation rather than to commencement wherever the infrastructure is needed by occupiers, and check that each trigger is defined by reference to something measurable.

Reading the council's developer contributions guidance

Most councils publish a developer contributions supplementary planning document setting out formulas, standard clauses and monitoring fees. It is guidance rather than plan policy, so it is a material consideration and not a rule, but it tells you what the first draft of the agreement will say.

Read it alongside the infrastructure funding statement and the charging schedule. Those three documents, taken together, let you build a contributions line in the appraisal that survives contact with the case officer, which is more than most schemes manage at the outset.

Budget for the application documents at the same time. See PlanScope pricing for one free report, £50 per report, or Professional for unlimited reports.

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