Time to check those old and existing s106 agreements and unilaterals. Could you be entitled to a refund or free of an obligation?

The High Court in Norfolk Homes Ltd v North Norfolk District Council [2020] has ruled that s73 planning permissions will not be bound by s106 Agreements from the original permissions unless they were drafted as such or varied by deed so as to bind the s73 permission. What does this mean for you?

The High Court Decision

The important facts of the Norfolk Homes case are fairly simple and will be familiar to those that have dealt with an agreement or unilateral undertaking under section 106 of the Town and Country Planning Act 1990 (“the 1990 Act”).

In short, the council in 2012 granted outline planning permission which was bound by a Section 106 Agreement. Such agreement made no express reference to it also binding any subsequent planning permissions granted under section 73 of the 1990 Act. In 2013 and 2015 the council granted respective section 73 permissions modifying various planning conditions but without varying the Section 106 Agreement. The developer argued that the Section 106 Agreement did not bind the section 73 permissions granted in 2013 and 2015, the latter of which was implemented. The council contended that either:

• On a proper interpretation of the Section 106 Agreement, according to its plain and natural meaning in the light of the Supreme Court’s decision in Lambeth London Borough Council v Secretary of State for Housing, Communities and Local Government [2019] 1 WLR 4317, the owner’s obligations in the agreement apply to development carried out under the section 73 permissions; or
• Additional wording should be implied into the Section 106 Agreement as follows:
  • “Development” would mean “the development carried out pursuant to the Planning Permission granted in accordance with the Application [i.e. PO/11/0978] or any variation under section 73 of the Act”; and
  • “Planning Permission” would mean “the outline planning permission subject to conditions to be granted by the Council pursuant to the Application as set out in the Second Schedule, or any variations of those conditions under s.73 of the Act”.

The first above contention of the council relied heavily upon the recent decision of the Supreme Court in the Lambeth case. That case has similarities to the present case in that an application to modify a planning condition had been made under section 73 of the 1990 Act and permission was then granted without repeating the original planning conditions which were not the subject of the application. The question was whether the section 73 permission incorporated these non-modified planning conditions of the original permission. The Supreme Court held that a reasonable reader would have read the particular section 73 permission as being a simple variation of the original permission and therefore, implicitly, such section 73 permission should be interpreted as subject to the non-modified conditions attached to that original permission.

The council’s argument was rejected by the court. Importantly, Holgate J noted key legal differences between interpreting section 106 obligations and section 73 permissions. Namely: (i) Section 106 Agreements and Unilaterals are freestanding legal instruments which do not form an intrinsic part of a grant of permission. Hence they are signed before grant of permission; and (ii) the Lambeth case was concerned with the interpretation of the new section 73 permission at the time of grant in the context of the original permission. By comparison, the council’s contended interpretation of the Section 106 Agreement is on the original document itself which was completed prior to the grant (and therein without knowledge or context) of the section 73 permission.

The council’s second above contention was also rejected by the court. Holgate J finding that the Section 106 Agreement was well drafted, unambiguous in its interpretation, and there were no gaps or defects in the agreement needing to be addressed by implied language in order to give effect to the objective purpose of the agreement.

The developer was therefore free of the obligations in the Section 106 Agreement which included financial contributions and affordable housing requirements.

What the decision might mean for you?

The decision of the court is clear. If a Section 106 Agreement or Unilateral Undertaking has not been expressly drafted such as to also apply to section 73 permissions arising from the original planning permission, or has not been varied to do so by subsequent deed, then the development permitted by the section 73 permission will be free of the planning obligations.

If this scenario applies to you, whether it be old or current Section 106 Agreements and Unilaterals, then the practical implications could be as follows:

• Outstanding planning obligations – these planning obligations will likely cease to apply, do not need to be complied with and will likely be unenforceable by the council.
• Continuing planning obligations – some planning obligations may be continuing in operation. They may restrict the use of land or obligate the land to be use in a particular way. For example, an obligation to maintain part of the land as open space. These will likely cease to apply and will likely be unenforceable by the council.
• Complied with planning obligations – some planning obligations may have already been complied with by the landowner/developer. A classic example is the payment of financial contributions. These contributions are likely to have been paid without there being a legal obligation to do so with the resultant argument that the council has been unjustly enriched. In such circumstances you may be entitled to claim the return of the paid contributions. Unspent contributions will likely be harder for councils to refuse immediate repayment. Spent contributions will likely be more contentious with councils who could try and raise such defence arguments as limitation periods, estoppel, public policy and/or change of position.

The above suggested implications will always be dependent upon the individual circumstances of each case and, in particular, the drafting of the Section 106 Agreement or Unilateral Undertaking in question. It is therefore advisable that you obtain legal advice to understand your legal options.

Lessons

Some councils typically include reference to section 73 permissions in their Section 106 Agreements and Unilaterals. Similarly, many councils as a condition before granting a section 73 permission will require a deed of variation of the original Section 106 Agreement or Unilateral expressly incorporating such permission into its terms. However, as this case demonstrates such practice is not always taken by councils and there will no doubt be similar agreements and unilaterals which councils may well now be concerned about and landowners/developers may now be reviewing.