Phasing triggers in a section 106 and what they key to

On a phased scheme, the section 106 phasing triggers decide your cashflow far more than the headline contribution figure does. A £4m obligation paid on occupation of the last unit in each phase is a different project from the same £4m paid when work starts on phase one. Lenders read the triggers before they read the totals, and so should you.

The drafting that follows the heads of terms is where schemes get into difficulty. Local authority standard precedents are written for a single-phase site, and bolting phasing onto them produces definitions that do not work once the build programme slips.

Why triggers matter more than totals

A planning obligation under section 106 of the Town and Country Planning Act 1990 runs with the land and binds successors in title. Once the deed is completed, the only routes out are agreement with the authority, a deed of variation, or an application under section 106A, which cannot normally be made until five years have passed.

So the obligation outlives your programme assumptions. If the trigger is wrong, you live with it through a market cycle. Three features of a trigger decide whether you can live with it:

• the event that fires it, and whether that event is within your control
• whether the sum is fixed at the date of the deed or indexed to the payment date
• what happens if the event never happens, which is what a longstop date addresses

Authorities care about certainty of delivery, and the CIL Regulation 122 tests mean an obligation has to be necessary to make the development acceptable, directly related to it, and fairly and reasonably related in scale and kind. Those tests are about the substance of the obligation rather than its timing, so timing is more negotiable than the principle usually is.

Occupation, completion and sale triggers compared

Occupation triggers are the usual landing point because they correlate with receipts and the authority can verify them. Define occupation carefully. The definition should exclude occupation for construction purposes, for marketing or show home use, and for security, otherwise a site hut and a show flat have inadvertently fired your first payment.

Counting triggers need a notice mechanism. The deed should require the developer to notify the authority within a stated number of working days of each triggering occupation, with a schedule showing the running total. Without that, the authority relies on council tax listings and arguments follow.

Triggers that fire when work starts

Authorities like start-of-works triggers because they secure money before anything can go wrong. They are the worst outcome for a developer on a phased site, because a material operation is a low bar. Section 56(4) treats trench digging, road laying out and the laying of underground mains as material operations, so an enabling works package can fire an obligation years before the phase produces revenue.

Two mitigations are usually available. The first is to split the obligation so that a modest proportion is payable at the start of works and the balance on an occupation trigger, which gives the authority an early demonstration of commitment. The second is to define the triggering event more narrowly than section 56 does, excluding site clearance, demolition, archaeological investigation, remediation, service diversions and ecological mitigation. Authorities will usually accept the second where the excluded works are themselves required by condition.

Watch the interaction with conditions that must be discharged before development begins. If a condition requires a scheme of remediation before any development, and the deed treats remediation as the triggering event, you have built a circular problem into your own consent. Where the works sit on land you do not control, that interaction gets harder still, and how Grampian conditions work on land outside your control sets out the pattern.

Defining a phase so it can be enforced

A phase has to be identifiable on a plan, and the deed and the conditions have to use the same definition. The common failure is a condition requiring submission and approval of a phasing plan, with a deed that refers to phases by number without reference to that approved plan. Two documents then define the same word differently.

Draft the definition as the land shown edged or hatched on a numbered plan annexed to the deed, with a mechanism for substituting a revised plan by written agreement with the authority. Include the ability to subdivide a phase, because sites get sold in smaller parcels than anyone planned.

Then test each obligation against a plausible failure. If phase three is never built, does the phase one obligation still deliver the road? If phases are built out of numerical order, does the trigger still work? If a parcel is sold to another housebuilder, which party owes what, and is there a mortgagee exclusion so a lender in possession is not pursued for the whole sum?

Indexation between trigger dates

On a scheme with phases ten years apart, indexation is the single largest number in the deed after the contributions themselves.

Identify the index, the base date and the publication used. Construction-related contributions are typically indexed to a tender price index, while education and other service contributions may be indexed to a consumer price measure or a local cost basis. A base date at the date of the resolution to grant, rather than the date of the deed, quietly adds months of indexation before you have even started.

Ask for a cap, or at least a collar and cap, on cumulative indexation. Authorities resist caps on principle, but they are more open to them where the obligation is for a specific facility with a known cost. Also check whether indexation applies to monitoring fees, which it frequently does without anyone noticing, and the position on travel plan monitoring fees and default bonds illustrates how those sums accumulate.

Longstop dates and interest

A longstop date converts an event-based trigger into a date-based one. The authority gets certainty that the money arrives by a stated date even if occupation never happens, and the developer gets a trigger that is otherwise within its control.

Negotiate the longstop against a realistic programme with contingency, not the appraisal programme. Then negotiate what happens if the longstop passes because of something outside your control. Force majeure wording is rare in planning deeds and worth asking for where a statutory undertaker or a highway authority sits on the critical path.

Interest on late payment is normal. The usual formulation is a stated margin above the base rate of a named clearing bank, running from the due date. Check it is simple rather than compound, check there is a grace period of a few working days to allow for banking, and check that interest does not run while a disputed sum is being determined.

Reconciling triggers with the build programme

Before you complete the deed, model it. Put every trigger on the development programme alongside the sales or letting curve, apply the indexation, and look at the peak funding requirement. Then move the programme six months to the right and look again.

That exercise usually identifies one or two triggers that need changing, and it is far easier to change them before completion than afterwards. Where the scheme is marginal, the output also feeds the Viability Assessment, because the timing of obligations affects the residual value as well as the total. If a section 73 application later changes the phasing, the original deed does not automatically follow the new permission, and making the original section 106 bind a section 73 permission explains the step that is easy to forget.

PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval. Section 106 drafting is a legal exercise and this article is general guidance rather than legal advice, so instruct a solicitor on the deed itself. Enter your postcode on PlanScope to see which reports your site is likely to need.