Section 106 triggers and when a payment falls due

A trigger in a section 106 agreement is the event that makes an obligation fall due. It might be commencement of development, first occupation, occupation of a stated number of dwellings, or practical completion of a phase. The section 106 trigger payment structure is therefore the part of the agreement that decides your cash flow, and it is negotiated far less often than it should be, usually because it is agreed in the last fortnight before committee when nobody has the appetite for another round.

What a trigger is and why it matters

Section 106 of the Town and Country Planning Act 1990 allows obligations to be entered into that restrict development, require operations, require land to be used in a specified way or require payments. Those obligations bind the land and are enforceable against successors in title.

A trigger converts an obligation from a promise into a debt. Until the trigger occurs, nothing is payable. Once it occurs, the sum is due on the date the agreement specifies.

That makes the trigger a financing question as much as a planning one. A contribution due on commencement comes out of the development finance before any revenue exists. The same contribution due on occupation of the tenth dwelling comes out of sales receipts.

The planning tests do not change with the trigger. Obligations relied on as a reason for granting permission must meet the tests in regulation 122 of the Community Infrastructure Levy Regulations 2010, meaning necessary to make the development acceptable, directly related to the development and fairly and reasonably related in scale and kind.

Commencement, occupation and phase triggers

Commencement triggers are the most common for infrastructure that has to exist before anyone moves in, such as a highway works package or a construction management obligation.

Occupation triggers suit contributions towards services that the new residents will use, such as education, health or open space maintenance. They are usually expressed as occupation of a numbered dwelling, so the drafting has to define occupation, because a show home and a sales office are not occupation in the ordinary sense and a poorly drafted clause will say they are.

Phase triggers apply the same logic across a larger site, tying each phase's obligations to that phase's commencement or occupation. They need a defined phasing plan attached to the agreement, and a mechanism for varying it, because the phasing on a ten-year site will change.

Indexation between agreement and payment

Almost every financial obligation is indexed, and on a site where three years pass between the agreement and the payment, indexation is a real number rather than a rounding.

The agreement should state the index used, the base date and the date at which the calculation is made. Different indices behave differently, and an index tied to construction tender prices can move far more sharply than a general price index.

Two drafting points repay attention. First, the base date should be the date of the agreement rather than an earlier committee resolution, because the gap can be months. Second, the agreement should say what happens if the index is discontinued or rebased, which happens more often than people expect.

Check that the indexation clause applies only to the contributions and not, by accident, to the monitoring fee as well.

Late payment, interest and enforcement

Agreements normally provide for interest on late payment at a stated margin above a base rate, running from the due date.

Enforcement is real. A local authority can apply for an injunction to restrain a breach, and unpaid sums can be recovered as a debt. Some agreements also provide that no further occupation may take place until the payment is made, which is a stronger remedy than interest because it stops sales.

A breach also surfaces at the worst moment. A buyer's solicitor will ask for evidence that all obligations due to date have been discharged, and an outstanding contribution can hold up a sale or a refinancing. The Community Infrastructure Levy liability and commencement notice regime runs alongside this with its own surcharges, and the two are frequently confused.

Negotiating triggers for cash flow

Authorities are more flexible on triggers than on quantum, because the trigger does not change what the community receives.

Four arguments work.

1. The contribution funds a service used by residents, so it is reasonable for it to fall due as residents arrive rather than before.
2. The infrastructure being funded will not be delivered by the authority for some years, so early payment sits in a council account earning nothing.
3. Spreading payments across occupations reduces the risk of the scheme stalling, which serves the authority's interest in delivery.
4. On a phased site, matching obligations to phases keeps the whole scheme viable if a later phase is delayed.

Support the argument with the cash flow rather than asserting it. A Viability Assessment that shows the effect of a commencement trigger on the profit position is more persuasive than a request.

What rarely works is asking for a later trigger after the heads of terms are agreed. Raise it at the heads of terms stage, in writing.

Monitoring fees and reporting duties

Most authorities now charge a monitoring fee to cover the cost of tracking compliance, and many agreements impose reporting duties on the developer, such as notifying commencement, notifying first occupation and confirming occupation numbers.

Those notices matter. An obligation triggered by occupation depends on the authority knowing occupation has happened, and an agreement that requires notice within a stated period creates a breach if the notice is missed even where the payment is made. The practical position on commencement notices is covered in what developers tell the council on commencement.

Diarise every notice date in the agreement on the day it completes, and give the list to whoever will be running the site in two years time.

Checking triggers before drawing down finance

Read the agreement before the facility is agreed, not after. A lender will want to know when obligations fall due and whether any of them restrict occupation or disposal.

Four checks are worth making. Which obligations fall due before any revenue arrives. Whether any obligation prevents occupation or transfer until satisfied. Whether the indexation could materially change the sums. And whether the affordable housing obligations in the Affordable Housing Statement and the agreement say the same thing, because they are drafted by different people and sometimes drift apart.

Where the agreement has become unworkable, section 106A allows an application to modify or discharge an obligation after five years, and authorities will sometimes agree a deed of variation sooner. Neither is quick, so it is not a substitute for reading the drafting properly the first time.

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.