Section 106 payment triggers and the financial year

Section 106 payment triggers decide whether a scheme's cash flow works, and they are negotiated in the last fortnight before committee when nobody has time to think about them. A contribution payable on implementation lands before a single sale completes. The same sum payable before occupation of the tenth dwelling lands when money is coming in. The planning benefit to the council is identical. The effect on the developer is the difference between funding the obligation from equity and funding it from receipts.

Councils have their own reason to care about timing, and it is usually the end of the financial year on 31 March.

How triggers are usually drafted

An obligation under section 106 of the Town and Country Planning Act 1990 binds the land and is enforceable against successors in title. It has to satisfy the three tests in regulation 122 of the Community Infrastructure Levy Regulations 2010, being necessary to make the development acceptable in planning terms, directly related to the development, and fairly and reasonably related in scale and kind.

A payment clause has four moving parts: the sum, the index and base date, the trigger event, and the consequence of late payment. Each is negotiable and each is usually drafted from the council's template.

The trigger event is where the drafting has to be precise. "Prior to occupation" invites an argument about what occupation means on a scheme with a marketing suite and a site office. "Prior to first beneficial occupation of any dwelling" is tighter. "Prior to first occupation of the twenty-first dwelling" is tighter still and, on a scheme of forty units, spreads the cost across the sales programme.

Pre-start, occupation and phased triggers

Three families of trigger cover almost everything.

Pre-start triggers require payment before development begins, often tied to the same material operations listed in section 56(4) of the 1990 Act. These are the hardest on cash flow and the most common on smaller schemes, because a council with no monitoring capacity prefers to collect once.

Occupation triggers tie payment to the first occupation of the development, of a phase, or of a numbered unit. They align with receipts and they require the council to monitor, which means the definition of occupation needs to be something both sides can evidence. Building control completion certificates and council tax registration are the usual proxies.

Phased and staged triggers split a contribution into instalments against numbered units or dates. They are the most favourable to cash flow and the most work to negotiate, and authorities resist them where a facility has to be delivered as a whole. A contribution funding half a classroom is no use to anyone.

Two special cases sit outside this pattern. Monitoring fees are commonly payable on completion of the agreement, before anything happens on site. And where a contribution funds something the council must procure with lead time, such as a travel plan monitoring programme that includes repeat parking surveys run to a set methodology, the council will want the money before the survey season it intends to use. The timing constraints on those surveys are real, as parking surveys and the timing the methodology requires explains.

Indexation from the base date

Almost every financial obligation is index linked, and the drafting detail decides how much the developer pays.

The base date is the negotiable one. A base date set at the date of the planning permission is better for the applicant than one set at the date of the council's cost evidence, which may be two years older. On a scheme that takes four years from permission to final occupation, the difference between those two base dates on a large contribution is not small.

Ask for the calculation to be worked as an example in the agreement, with a stated index figure and a resulting sum. That example is worth more than any amount of drafting argument, because it shows both sides what the clause actually does.

Cash flow across a financial year

Councils operate on a financial year ending 31 March, and their capital programmes are built around it. That produces two patterns worth knowing.

First, officers sometimes press for payment before the year end so a contribution can be committed in the current programme. That is a reason for them to want a date; it is not a planning reason, and it does not have to determine the trigger. Say so politely and offer an occupation trigger instead.

Second, a contribution received in early April may sit unspent for the best part of a year before the council's programme reaches it. That is relevant to the repayment clause discussed below, and it is relevant to the argument that a pre-start trigger serves no purpose where the money will not be spent for eighteen months.

From the developer's side, model the obligations on the same cash flow as the sales programme rather than on a separate schedule. Put every trigger in one table with the expected date, the indexed sum and the funding source. Where a scheme carries affordable housing delivery alongside financial contributions, the interaction between the two is where viability arguments get made, and an Affordable Housing Statement or a Viability Assessment will need to reflect the payment profile rather than the headline sums.

Late payment interest and enforcement

Late payment clauses normally charge interest at a margin over the Bank of England base rate, running from the trigger date to the date of payment. The margin is negotiable and the base rate is not, so argue about the margin and check whether interest compounds.

Enforcement is stronger than many applicants assume. Section 106 obligations are enforceable by injunction, and where an authority carries out works because an obligation has not been performed it can recover its expenses as a debt. The obligation is registered as a local land charge, so it shows on a buyer's searches, which means an unpaid contribution becomes a conveyancing problem at the worst possible moment. Unlike a planning condition, there is no appeal route: the obligation is a deed, and the remedies are contractual.

A modification or discharge application can be made under section 106A once five years have passed from the date the obligation was entered into, with an appeal to the Secretary of State against refusal. That is a long time in a development programme, so treat the drafting as close to final.

Repayment clauses for unspent sums

Ask for one. A repayment clause requires the council to return any part of a contribution not spent on the identified purpose within a stated period, usually with accrued interest.

Three points make it work in practice. The purpose has to be defined narrowly enough to be checkable, because a contribution towards "transport improvements in the borough" can always be said to have been spent. The period has to be stated, and five or ten years from receipt is the usual range. And the clause should require the council to notify the developer of expenditure, since a developer with no reporting right has no way of knowing whether the money was spent.

Councils publish infrastructure funding statements setting out obligations received and spent, which is the route to checking after the event. Where a repayment clause exists and the money is unspent, chase it. Nobody in the council will volunteer it.

Negotiating triggers that match delivery

Work through the heads of terms with two questions against each item. When does the council actually need the money to deliver the thing. And when does the scheme generate the cash.

1. List every obligation with the council's proposed trigger.
2. For each, ask what the contribution funds and when that will be procured or built.
3. Propose an occupation or phased trigger wherever the delivery date is later than the proposed payment date.
4. Fix the index base date at the permission date and request a worked example in the deed.
5. Ask for a repayment clause with a defined purpose, a stated period and a reporting obligation.
6. Check that every trigger definition can be evidenced by a document that will exist, such as a building control certificate.

Then put the agreed triggers into the development appraisal before the deed is signed rather than after. Browse all 66 PlanScope report types and start a draft at the report index if the negotiation needs supporting evidence.

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.