One of the most potent elements of the CIL regulations has taken effect. This change has the potential to affect how developments moderate their impact through the use of section 106 obligations.
What is the change?
With effect from 6 April 2015, the CIL regulations restrict the use of section 106 agreements by prohibiting the pooling of contributions from five or more sources. This change will come into effect regardless of whether a local planning authority (LPA) has or hasn't adopted a CIL charging schedule.
Regulation 123 states a section 106 obligation cannot constitute a reason for granting planning permission if:
- the obligation relates to the 'funding or provision of an infrastructure project or type of infrastructure', and
- five or more separate planning obligations already exist in the LPA's area for that project or infrastructure
This raises two points.
First, infrastructure has a wide legal definition in the Planning Act 2008 but includes, amongst others, highway projects, open space, educational, sport and health facilities plus flood defences. It therefore covers a multitude of areas and projects. It does not include the provision of affordable housing.
Secondly, it seems the wording of the regulations indicates the particular obligation will either be for the funding or provision of a specific infrastructure project or to provide the funding or provision of a type of infrastructure - a division that could create issues if not carefully managed.
What impact will this change have?
These restrictions will curtail an LPA's ability to use section 106 agreements as an instrument for funding strategic or non-strategic infrastructure post April 2015.
The impact of these changes will be that, during negotiations on individual planning applications, applicants will need to check whether similar obligations have already been requested and secured by section 106obligations with the LPA. When totting up existing obligations, the LPA will need to review all section 106 agreements completed in their area since 6 April 2010.
It won't be in every case that five or more previous agreements have been completed. However, on some sites the five-plus cap will be reached. In these circumstances, it will be unlawful for the LPA to enter into a sixth section 106 obligation to fund the particular piece of infrastructure - the result of which could lead to planning applications being refused as the impact of the development cannot be properly mitigated.
Furthermore, where an authority has included a type of infrastructure on its regulation 123 list, specific projects that fall within that type of infrastructure will be outlawed from consideration. On the other hand, inclusion of specific projects on the list would not preclude other projects of a similar type of infrastructure or types of infrastructure. This view would appear to accord with the guidance in the planning policy guidance.
Other consequences of this change could include:
- since only 26% of all LPAs in England currently have a CIL charging schedule in place, there is likely to be a rush of local authorities developing one in the next two years - the average length of time the CIL process takes. This will be particularly obvious in the north of England since CILs are currently operating predominantly in the south
- there is some evidence that CIL levels are set too high and may deter development so this may affect the numbers of houses that will be delivered in a borough
- there is evidence that whilst infrastructure can be delivered by CILs, it is often at the expense of affordable housing numbers as sites cannot viably deliver both
- more LPAs will develop regulation 123 CIL infrastructure lists- a list outlining an LPA's infrastructure requirements and priorities - which is great if the infrastructure you require to get your site off the ground is on it, but problematic if it isn't
- some LPAs may attempt to use s278 agreements to deliver road improvements since these do not have the restrictions s106/CIL have
- education, health, open space and public transport contributions are all likely to become more site specific in nature as the new pooling requirement means than LPAs have, in most cases, already pooled five schemes general contributions since 6 April 2010 in such areas.LPAs are likely increasingly to seek to phase different types of contributions into a single, site specific obligation to avoid the pooling prohibition
- in respect of the provision of infrastructure required for a strategic development site, it could potentially overlap with the more general infrastructure elements to be funded through CIL and therefore result in 'double dipping'
- there is concern is that the restrictions in regulation 123 may significantly impair the opportunities to bring forward infrastructure required for strategic development where there may be contributions required from a number of parties which may engage the pooling prohibition.A recent legal case of Oxfordshire CC v Secretary of State for CLG  has shown that monitoring charges are unlawful and cannot be justified. As such, these will disappear as CILs are introduced
Is there a way round the changes?
In introducing the new pooling restriction, the government has offered no guidance on how this problem can be overcome.
The restriction was conceived in 2010 as a way to force LPAs to introduce CIL in their area - an initiative which appears to have come unstuck given that very few councils in England have actually adopted a CIL charging schedule and many have not even started the process.
Will any new government reconsider the position? It is impossible to say at this stage but it is clear that new ways round the problem need to be found.
There are potentially a number of different options to get round the new restriction and it is unlikely that there will be a 'one size fits all' answer.
In some cases, thought will need to be given to carving up infrastructure into smaller, very specific projects to increase the number of section 106 contributions that can be collected.
Developers will also need to consider the possibility of using carefully worded planning conditions- possibly a negatively worded condition to prohibit development authorised by the planning permission until a specified action has been taken - supported by non-section 106 based legal agreements (like s278 agreements or agreements based on s111 of the Local Government Act, s1 of the Localism Act 2011 or specific provision under the Education Acts) to secure the payment or provision of infrastructure.
Viability work may also be necessary where CILs are set at unrealistic levels or borough infrastructure requirements are high. Work may be needed to ensure LPAs include the infrastructure you require in their regulation 123 CIL infrastructure lists. Checks will need to be undertaken to ensure councils only pool the requisite number of contributions and 'double counting' doesn't occur.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.