Travel plan bonds and penalty payments in an obligation

A travel plan bond in a section 106 obligation is money the developer lodges with the council, which the council can draw on if the agreed modal share targets are missed. Penalty payments work the other way round: no money is held up front, and a sum becomes payable if a target is not met at a review point. Both mechanisms exist because a travel plan is a set of promises about what happens after occupation, and a planning condition is a poor tool for enforcing a promise about behaviour.

The mechanism is negotiable, and the drafting matters far more than the headline figure.

Why travel plans end up in an obligation

A condition can require a Travel Plan to be submitted and approved before occupation. What a condition cannot easily do is require payments, hold money, or oblige someone to keep doing something for five years once the developer has sold the last unit.

Section 106 of the Town and Country Planning Act 1990 handles all three. It binds the land rather than the applicant, so successors in title inherit the obligation, and it can create financial commitments. That is why the travel plan package usually ends up split: a condition requiring the plan itself, and an obligation carrying the money, the monitoring and the enforcement.

Any obligation has to satisfy regulation 122 of the Community Infrastructure Levy Regulations 2010. It must be necessary to make the development acceptable in planning terms, directly related to the development, and fairly and reasonably related in scale and kind. Regulation 122(2A) specifically allows a sum to be used for monitoring the performance of obligations, which is the statutory basis for monitoring fees.

Bonds, deposits and drawdown

A bond is the more common mechanism on larger schemes. The developer provides either a cash deposit held by the council or a bank guarantee, and the agreement sets out the circumstances in which the council may draw on it.

The detail that matters is what the drawdown funds. A well-drafted bond is spent on additional travel plan measures at the development: more cycle parking, an extended shuttle contract, a higher subsidy on public transport season tickets, improved wayfinding. A badly drafted one lets the authority take the money into general funds, which breaks the link to the development and makes the obligation harder to justify under regulation 122.

Three drafting points repay attention.

• Define the drawdown trigger objectively, by reference to a survey result against a stated target, rather than to the council's opinion that progress is inadequate.
• Limit drawdown to a menu of measures agreed in the obligation, or to measures approved by both parties, so the money goes back into the scheme.
• Specify what happens to the balance at the end of the monitoring period, with a clear release mechanism.

Bank guarantees are usually preferable to cash deposits on cash flow grounds, but councils are sometimes reluctant and the form of security needs agreeing early rather than at engrossment.

Penalty payments tied to targets

Penalty payments are more contentious. The theory is simple: if the survey shows single-occupancy car use above the agreed level, a sum becomes payable, often calculated per percentage point or per vehicle trip above target.

The legal difficulty is the regulation 122 test. A payment that operates as a fine for failure is hard to describe as necessary to make the development acceptable. A payment calculated to fund specific additional mitigation proportionate to the shortfall is much easier to defend, because the sum has a purpose connected to the harm.

So the better drafting ties the payment to something. Set out what the money will be spent on, cap the total liability across the life of the obligation, and index-link the figure with the index named in the agreement. Open-ended liability with no cap is the single most common reason these clauses stall in negotiation, and funders will not accept it.

Where a council insists on a punitive structure, the honest advice is to resist it rather than accept a clause that may be unenforceable. An obligation nobody can enforce helps neither party.

Monitoring surveys and who carries them out

Everything depends on the survey, which is why the methodology belongs in the obligation rather than in correspondence afterwards.

A workable monitoring framework specifies the survey type, usually a travel survey of residents or staff rather than a traffic count, the minimum response rate for a valid survey, the timing and frequency, and who commissions and pays for it. Developers generally prefer to commission the survey and submit the results. Councils often prefer to commission it themselves and recover the cost. Either works provided the method is fixed.

Timing is where results get distorted. A survey run in August at a residential scheme, or during a school holiday at a workplace, will not represent normal conditions, and the obligation should require neutral periods in the same way a traffic count does. The validity question is set out in our note on traffic counts in neutral months.

Response rates deserve a number in the agreement. A survey returned by a tenth of occupiers tells you almost nothing, and arguing about it after a failed target is worse than agreeing a threshold in advance.

Review points and revising targets

Most obligations set a baseline survey at or shortly after first occupation, then reviews at intervals across a monitoring period of around five years. The baseline is the most valuable one and the easiest to get wrong, because occupation is partial and travel patterns have not settled.

Build in the ability to revise targets where circumstances change outside the developer's control. A bus route withdrawn by the operator, a cycle route the highway authority never built, a change in a major employer nearby: all affect modal share and none are the developer's doing. A review clause allowing the targets to be reconsidered on evidence, rather than a fixed set of numbers for five years, is the clause that stops the mechanism becoming unfair.

Targets should also be realistic at the outset. Numbers taken from an urban scheme and applied to an edge-of-settlement site produce guaranteed failure, and a Transport Assessment that sets ambitious modal share to win the access argument stores up a liability for the later stages of the obligation.

Releasing the bond

The release mechanism is often the least considered clause and the one that matters most to the developer's balance sheet.

A clean structure says that on completion of the final monitoring survey, and provided the targets have been met or the agreed drawdowns have been made, the balance is released within a stated number of working days. Add a mechanism for partial release as monitoring periods complete, so the full sum is not tied up for five years, and a dispute resolution route, usually expert determination, for disagreements about survey interpretation.

Where the development is sold on, the obligation should make clear who holds the benefit of the release. Bonds have been left unclaimed because the entity that lodged them no longer existed.

Negotiating something workable

The pattern that tends to survive is modest in scale and precise in drafting. A proportionate monitoring fee, calculated on the council's published basis where one exists, as discussed in our note on travel plan monitoring fees and review triggers. A capped bond spent on agreed measures at the development. Targets with a review mechanism. A survey method fixed in the agreement. A clear release.

What tends to fail is an uncapped penalty regime attached to targets nobody tested against the site. Those clauses either get renegotiated through a section 106A variation years later, or quietly ignored by both sides until a new owner's solicitor finds them during a sale.

This is general guidance rather than legal advice. Check the position with your local planning authority or a qualified professional before relying on it, and take legal advice on the drafting of any obligation.

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