Section 106 and CIL explained

When I talk to developers I’m often asked for information about a range of technical issues such as Section 106 agreements, brownfield site development and issues relating to planning gain.

I thought it may be helpful, therefore, to produce a series of short blogs which provide background information about these issues. This first blog aims to explain section 106 legal agreements and the Community Infrastructure Levy. If you would like further information about these subjects, you’ll find some useful links at the end of this blog.

What is a Section 106 Agreement?

Section 106 (S106) agreements, which are also known as planning obligations, are legal agreements made between local authorities and developers.

S106 agreements are designed to address issues that new developments may place on local infrastructure. The agreement will vary depending on the nature of a development, but will typically address issues such as:

• Affordable housing
• Highways
• Education
• Public open space
• Town centre improvements

The content of a S106 agreement is agreed during the consultation period of the planning application and the agreement is prepared by the council’s solicitor. Smaller developments have the option of completing a Unilateral Undertaking instead of a full S106 agreement.

What is a Community Infrastructure Levy?

A Community Infrastructure Levy (CIL) is a new planning charge introduced by the government via the Planning Act 2008. It provides a means of ensuring that a new development contributes to the cost of the infrastructure that the development will rely on, such as schools and roads.

The levy applies to most new buildings and charges are based on the size and type of the floor space being created. The idea behind the CIL is that it’s fairer, faster and more certain than the system of S106 planning obligations, which are negotiated on a case-by-case basis.

Under the system of S106 planning obligations only 6 per cent of all planning permissions nationally made any contribution to the cost of supporting infrastructure. With CIL, all but the smallest building projects will make a contribution towards infrastructure costs.

S106 or CIL?

All local authorities in England & Wales are empowered, but not required, to charge a CIL on new developments in their area. Although S106 planning obligations will continue with some developments, reforms have been introduced to restrict their use.

It’s worth bearing in mind that the CIL is intended to provide infrastructure to support a development, rather than make an application acceptable in planning terms. There may therefore be some site-specific impact mitigation requirements without which a site won’t be granted planning permission. A S106 planning obligation may therefore be imposed to ensure that the consequences of a development can be mitigated.

What is and is not liable for CIL?

A development will be liable for CIL if it involves:

• new build of at least 100m2 gross internal area (GIA) floor space
or
• the creation of one or more dwellings.

A development is not liable for CIL if it:

• involves only a change of use, conversion or extension.
• is for structures such as wind turbines, pylons or buildings into which people don’t normally go (e.g. for housing plant or machinery).
• is permitted by a ‘general consent’ or is for a use which benefits from zero charges set out in the CIL charging structure.

Further information

You can find further information about S106 and CIL charges at:

www.gov.uk/guidance/planning-obligations

www.gov.uk/guidance/community-infrastructure-levy

You may also find further information in the planning section of your local authority’s website.

Want to talk about development finance?

If you want to talk about funding for a development project, then give me a call on 01799 582886 or send an e-mail to: development.enquiries@saffronbs.co.uk