On 13 August 2012, the Government issued a consultation paper Renegotiation of Section 106 planning obligations, which seeks to facilitate the modification of obligations agreed in a better economic climate.
The consultation document follows a CLG letter in March 2011 encouraging local planning authorities (LPAs) to review existing obligations with a view to kick-starting development frustrated by viability concerns.
However, whether the changes proposed can ultimately deliver the desired outcome is a matter of debate.
Current legal position
Unless otherwise agreed by an LPA, planning obligations cannot be varied or discharged until the expiry of five years from the date that they are entered into.
After five years, an application to modify or discharge an obligation can be made, and if the LPA refuses that application, there is a right of appeal.
The current 'legal' test for discharge requires the developer to show that the obligation no longer serves a 'useful purpose'. In the absence of that then it is unlikely to be discharged or adequately modified to overcome the financial viability hurdles to development.
The proposed changes would enable any planning obligation entered into prior to 6 April 2010 to be challenged and remove the current five-year moratorium. The 2010 date coincides with the coming into force of the Community Infrastructure Regulations.
However, there are no proposals to amend the legal test in Section 106A of the TCPA 1990 itself. That is a major flaw with the proposals, as the test has been interpreted very broadly by the courts, resulting in case law that makes it very difficult to demonstrate successfully that an obligation does not serve a 'useful purpose'.
Further, it is arguable whether discharging an existing planning obligation for reasons of economic viability is lawful, if the relevant obligation still serves a useful purpose.
While it may be possible to renegotiate affordable housing provisions by providing a different mix of units or tenure; just how do you modify a financial payment obligation so that it serves a purpose 'equally well', whilst also reducing the costs associated with that obligation.
The introduction of specific reference to economic viability is unlikely to be popular with LPAs, but while developers may welcome an earlier opportunity to challenge obligations, the practical and commercial benefits may be limited if the legal test itself effectively remains the same.
At this stage, however, it appears that the Government has no plans to introduce legislation to address that particular issue.
The consultation ends on 8 October 2012 and can be viewed online at http://www.communities.gov.uk/publications/planningandbuilding/renegotiationobligationsconsult