Spend deadlines and repayment clauses in obligations
A spend deadline gives the authority a fixed period to apply a contribution to the named project, and a repayment clause gets the unspent balance back. The drafting that makes it work.
A section 106 spend deadline repayment clause is the provision that gets you your money back when a council takes a contribution and never spends it. Without one, a contribution paid on first occupation sits in a council account indefinitely, and the payer has no contractual route to recover it. With one, the authority has a defined period to spend the money on the identified project, and an obligation to repay what remains. The clause costs nothing to negotiate at heads of terms stage and is nearly impossible to add afterwards.
Why spend deadlines exist
Regulation 122 of the Community Infrastructure Levy Regulations 2010 allows a planning obligation to be a reason for granting permission only 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.
A contribution that sits unspent for a decade invites an obvious question about whether it was necessary at all. That is the policy logic, and it is why the Planning Practice Guidance on planning obligations supports time limits and repayment provisions.
The practical logic is different and blunter. Councils hold money against projects that get delayed, redesigned or abandoned, and a contribution towards a junction improvement that is never built has not mitigated anything.
Since 2019 authorities have had to publish an annual infrastructure funding statement recording obligation receipts, how much has been spent and what remains unspent. That changed the conversation, because the unspent balances are now a published figure rather than an internal one.
Typical periods and what triggers them
Five and ten years from the date of payment are the common periods, with five more usual for small discrete works and ten for strategic infrastructure.
The trigger matters as much as the length. Three drafting approaches are in circulation.
| Trigger basis | How it works | Risk |
|---|---|---|
| Period from the date of payment | Simplest and easiest to monitor | None material, provided receipt is evidenced |
| Period from the date of practical completion or first occupation | Aligns with when the impact arises | Needs a defined and evidenced completion event |
| Period from the date the authority identifies a scheme | Gives the council flexibility | The clock may never start, which defeats the purpose |
The third approach should be resisted. A deadline that the authority controls the start of is not a deadline.
Watch for periods expressed from the date of the agreement rather than from payment. On a scheme with a long build programme that can mean most of the period expires before the money is handed over.
Repayment with or without interest
Three positions, and the difference on a large contribution is material.
Repayment of the unspent principal only. This is the default where the deed is silent on interest, and it transfers the time value of the money to the authority.
Repayment with interest at a stated rate, usually expressed as a margin over the Bank of England base rate, accruing from the date of payment or from the spend deadline. The negotiating question is which of those two dates, and the answer is worth the argument.
Index-linked repayment, where the contribution was index-linked on the way in. Where a deed indexes the contribution from the date of the agreement to the date of payment, symmetry suggests indexing the repayment too, and councils often accept that point once it is put.
Add a provision dealing with interest earned by the authority while it held the money, because in the absence of one the council keeps it.
Monitoring whether money has been spent
The payer carries the burden of noticing, so build the monitoring into the deed rather than relying on diligence years later.
- A covenant requiring the authority to notify the payer in writing when the contribution is spent, with the date and the project.
- A covenant to provide a written statement of the position on request, no more than once a year, within a stated number of working days.
- An express right to inspect the relevant accounting records on reasonable notice.
- Identification of the project by name in a schedule, so that spending on something else is a breach rather than a matter of interpretation.
- A definition of "spent" that excludes money merely allocated, committed or transferred between council accounts.
That last definition is the one authorities push back on, and it is the one worth holding. Without it, a contribution moved into a capital programme line is treated as spent while nothing has been built.
The published infrastructure funding statement is the external check. Read the authority's statement for the relevant years before you write a letter, because the figures occasionally show the position more clearly than the council's own correspondence does.
Enforcing a repayment clause
A planning obligation is a deed, so the limitation period for an action on it is twelve years under section 8 of the Limitation Act 1980. That is generous and it is not a reason to wait.
The sequence that works:
- Establish the payment date and the amount from your own records and the completion statement.
- Check the infrastructure funding statements covering the period, and note the unspent balance attributed to the site or the project.
- Write to the authority's legal and section 106 monitoring officers quoting the clause, the dates and the sum claimed, with interest calculated.
- Where the response is that the money has been committed, ask for the evidence that it has been spent as defined in the deed.
- Escalate to a letter before action, since the claim is a contractual one and does not go through the planning system at all.
Two practical obstacles come up. The right to repayment may have been drafted in favour of the original covenantor, who may be a dissolved special purpose company, so check who is entitled to claim. And where the development has been sold, the deed needs to say whether the benefit passes to successors in title or stays with the payer.
Drafting that makes repayment workable
Six provisions do most of the work.
Name the project and the purpose precisely, with a short description rather than a policy reference. Define "spent" to mean money irrevocably applied to the identified project. Set the period from the date of payment. State the interest rate and the date from which it accrues. Identify the person entitled to repayment, including on a sale of the development. And require the authority to repay within a stated number of working days of written demand, rather than leaving the timing open.
Add a clause requiring the authority to notify the payer if the project is abandoned or materially altered, which brings the repayment forward rather than leaving the money sitting until the deadline.
Where affordable housing is being secured by a commuted sum rather than on-site units, the same discipline applies and the stakes are usually higher. Set out the basis of the sum in the Affordable Housing Statement and make the deed consistent with it, because an inconsistency between the two is where arguments start. The appraisal that produced the sum should be capable of standing up to scrutiny, as our notes on the independent review of a viability appraisal and on viability appraisal outputs set out.
One honest uncertainty. Councils differ widely in how they treat repayment requests, and some will argue that money allocated within a capital programme has been applied even where the deed says otherwise. A tight definition of "spent" is the only reliable answer, and it has to be in the deed from the start.
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Frequently asked questions
How long is a typical spend deadline?
Five or ten years from the date of payment, with five more usual for small discrete works and ten for strategic infrastructure. The trigger matters as much as the length. Resist a period that starts when the authority identifies a scheme, because a deadline whose start the council controls can be postponed indefinitely.
Is interest payable on an unspent contribution?
Only if the deed says so. Where it is silent, the authority repays the principal and keeps the benefit of having held the money. Negotiate a stated rate, usually a margin over the Bank of England base rate, and settle whether it accrues from the date of payment or from the spend deadline, since the difference can be substantial.
How do I find out whether the money has been spent?
Check the authority's annual infrastructure funding statement, which records obligation receipts, spend and unspent balances. Then write to the section 106 monitoring officer quoting the clause. Build a notification covenant and an inspection right into the deed at the outset, because retrospective enquiries rely on the council's goodwill.
What does spent mean in a repayment clause?
Whatever the deed defines it to mean, which is why the definition matters. Without one, a council may treat money allocated to a capital programme line, or transferred between internal accounts, as spent. Define it as money irrevocably applied to the identified project, and name the project in a schedule.
How long do I have to claim repayment?
A planning obligation is a deed, so section 8 of the Limitation Act 1980 gives twelve years for an action on it. That is not a reason to wait. Check who holds the right to claim first, because it may sit with the original covenantor rather than with a successor who bought the development.
Sources and further reading
This article is general guidance about the planning system in England and, where stated, the rest of the UK. It is not legal or professional advice. Check your local planning authority’s validation requirements and take professional advice for your specific site.