30 Jul 2014

It's just over 12 months since a new application process to modify or discharge affordable housing requirements was introduced and in that period the Secretary of State has heard six appeals in relation to this new process and at least another five appeals are awaiting a decision.

This article highlights the key differences between the new application regime and the more familiar mechanism for amending planning obligations which existed previously. It also examines the benefits and risks inherent with the new procedure as well as outlining the key points which need to be addressed in any application. This process requires dialogue with the LPA, a robust evidence base to address viability as well as the realistic and pragmatic expectations of a developer.

Use and method

Section 106A of the Town and Country Planning Act 1990 (1990 Act) allows the modification or discharge of any planning obligation, either by the developer and the local planning authority (LPA) agreeing to vary the obligation by Deed, or by the developer making an application to the LPA. An application under section 106A can generally only be made after five years have elapsed from the date on which the original section 106 obligation was entered in to.

Under section 106BA of the 1990 Act a developer may apply for the modification, replacement or discharge of an obligation that is solely concerned with affordable housing requirements although unlike the minimum 5 year time period in respect of S106A, an application under S106BA can be made at any point after the section 106 obligation is entered into. However, the modification or discharge may not be agreed and implemented by Deed; the developer must make a formal application to the LPA.

LPA’s options

Upon receiving an application under section 106A, the LPA can decide whether to reject the application, discharge the obligation or agree to the modification proposed in the application, the legal test being whether the obligation continues to provide a useful purpose or if that purpose could equally be served in the manner specified in the application. The modification must not place a new obligation on someone other than the applicant.

The LPA’s options under the new section 106BA regime are quite different: when a developer makes an application under Section 106BA to vary an affordable housing obligation for the first time the LPA have to assess the affordable housing obligation and decide whether it prevents the development from being economically viable. After making this assessment, if the LPA find that the development remains economically viable then it has no choice but to keep the obligation as it is. If the LPA find that the obligation prevents the development from being economically viable then it has to deal with the application in a way that safeguards and promotes the economic viability of the development proposal to which it relates.

In order to achieve this, the LPA has three options:

  1. It can modify the obligation either in the way the application suggests or in another way if more appropriate.
  2. It can replace the obligation again in the way suggested by the application or with another obligation if more appropriate.
  3. It can remove the obligation altogether.

When modifying or replacing the obligation the replacing provision must not be more onerous than the original provision and must not place a new obligation on someone other than the applicant.

It is worth noting that if a developer is making a second or subsequent application to the LPA in relation to an affordable housing obligation under Section 106BA, the LPA is not bound to assess viability as it is with a first application. In such circumstances the legislation provides the LPA with a broader discretion when coming to a decision on whether to again vary or modify an affordable housing obligation.

Formal determination

There are different determination periods for applications under the 2 procedures.  The LPA has 8 weeks to make a determination in relation to a section 106A application, but only 4 weeks to determine a section 106BA application. In both cases, if the relevant period expires and no determination is reached, the LPA is considered to have rejected the application and the applicant will be at liberty to make an appeal to the Secretary of State.

Formalities

There are formal procedures concerning how to make an application and how determination notices must be drafted in relation to the section 106A regime.  These are set out in Regulations relating solely to the process under Section 106A.  As yet no such formal procedures have been introduced for the section 106BA regime. Until this happens it would seem a sensible course of action to adapt and follow the procedures and forms that have been introduced for the process under section 106A.

Appeals

The section 106A and section 106BA application regimes have corresponding appeals procedures set out in section 106B and section 106BC respectively (and a 6 month time limit in which to lodge an appeal applies to both). The appeals procedures can be used if the LPA doesn’t make a determination (i.e. the deemed refusal) or if the application is refused. In the case of a section 106BA application, the applicant can also appeal if the LPA has modified the provision in a different way to that suggested in the application.

As with the application regimes, the section 106B appeal procedure is set out in Regulations, but as yet there is no corresponding secondary legislation or guidance pertaining to the section 106BC procedure. Again adopting the section 106B procedure would seem sensible for the time being.

Outcome of appeals

Of the six housing obligation appeals that have so far been decided by the Secretary of State under Sections 106BA and 106BC, four have been successful in that the affordable housing contributions were reduced or in one case removed completely. Of the remaining two appeals one of them was deemed premature by the inspector as it related to an outline planning permission (in respect of which the reserved matters details had yet to be submitted) and the other appeal was rejected outright because the inspector was not persuaded on the evidence that a viable scheme could proceed with the imposition of a full affordable housing contribution of £194,000.

There are at least a further five appeals in the pipeline and from an analysis of the law and the approach that has been taken by the Planning Inspectorate on the handful of cases that have so far been determined, the relative success or failure of the remaining appeals will in part turn on any or all of the following:

  1. Whether there has been open and constructive dialogue and engagement between the LPA and the applicant from the outset of the application being lodged and throughout the appeal process (particularly given the legislative shortcomings and gap in guidance concerning the form and process of S106BA applications and S106BC appeals).
  2. Whether underpinning these applications there is in existence reliable, robust and cogent evidence that has been applied in accordance with settled and established principles on land valuation and viability assessment that addresses the question of whether the affordable housing requirement as contained in the planning obligation jeopardises the economic viability of the development proposal to which it relates.
  3. Whether both parties hold realistic expectations in terms of the nature and extent of those obligations that are required in order to make the development proposal acceptable in planning terms at the same time as protecting and safeguarding the economic viability of new development.

We have advised on both the application process and appeals and our experience endorses the three key points. If you wish to discuss any variation to planning obligations then please do get in touch.