Town and country planning – Section 106 agreement – Modification – Claimant local authority granting interested party permission for mixed development subject to section 106 agreement – Interested party applying to modify agreement to remove obligation to make payment for affordable housing – Claimants refusing modification – Inspector appointed by defendant secretary of state allowing appeal – Claimants challenging decision – Whether application to modify possible after housing element of development completed – Claim dismissed
In June 2007, the claimant local planning authority considered an application by the first interested party for planning permission for a substantial development. It consisted of 332 residential units and 5,738 sq m of commercial floorspace divided into 16 units, public open space, new and modified accesses and car parking at Chatham Quays. The claimants resolved to grant permission, provided that the developers entered into a deed under section 106 and 106A of the Town and Country Planning Act 1990. An agreement was entered into, which was superseded by a deed made between, among others, the claimant and the first interested party developer. By 2014 the development was largely completed. The commercial units had been constructed to shell and core stage, but still needed works to be occupied, such as floors above screed level and openings for lifts or stairs.
The first interested party applied to the claimant to modify the section 106 agreement by removal of the obligation to make an affordable housing contribution. A viability assessment from a reputable firm of surveyors concluded that the scheme could not afford to make the payments. The claimant did not determine the application within the prescribed time period and an appeal was made to the defendant under section 106BC(1)(a) of the 1990 Act.
After the appeal had been entered, the claimants resolved that they would have refused the application, on the grounds that there was no justification under section 106BA for modifying the section 106 agreement as requested. The appeal was determined by an inspector appointed by the defendant secretary of state in favour of the interested party.
The claimants applied for an order quashing that decision. They contended that, on the proper construction of section 106BA-C of the 1990 Act, affordable housing obligations could not be modified after the housing element of a development had been completed. The central issues were the meaning of the word “development” in section 106BA(13); whether an application could be made after the housing element had been completed; and whether the inspector had properly addressed the argument that the relevant completion related to housing development.
Held: The claim was dismissed.
(1) The claimant had applied to quash the decision under section 288 of the 1990 Act. However, such appeals were listed in section 284(2) or (3) of the Act and did not fall within the purview of section 288. By section 106BC(16) the defendant’s determination of an appeal under the section was final. The only remedy for challenging such a decision was by way of an application for judicial review which was subject to a strict six week time limit. Time would be extended and permission granted to apply for judicial review.
(2) In the real world of development and especially that related to regeneration such as the present, mixed use schemes were commonplace and might often have housing and commercial elements. No developer of a mixed scheme would consider the important questions of investment, cash flow, return or valuation, without considering the scheme as a whole. The markets for different kinds of development fluctuated, and the market conditions for one kind might show a different pattern from another. A developer seeking to find commercial occupiers (be they tenants or purchasers) might well not proceed beyond shell and core stage until he was aware of the occupier’s requirements. He might also decline to finish off a building when he had found no prospective occupier. It was in the interest of local planning authorities, both in terms of proper planning, but also in terms of their own finances, that there was a measure of certainty about the effect of obligations to which they were a party. It was in the interest of promoting the availability of housing to those that required it that it was assisted by the provision of affordable housing. The purpose of the making of a payment towards the provision of affordable housing was to enable the developer to pass on a policy obligation he would otherwise have had to fulfil by building a greater percentage of affordable units within his scheme.
(3) There could be no doubt that the “development” in section 106BA(13) was that authorised by the original planning permission and the development included the commercial units. The developer would be bound to consider the whole scheme when determining what affordable housing requirement to accept, including the financial contribution. Although the drafting might have resulted in an obligation to pay money calculated from across the whole scheme, but which when enforced only bound those with an interest in the land upon which the housing was built, that was a question of the wisdom of the draftsman of the obligation and agreement, not the meaning of the 1990 Act. The claimant’s argument that one should only look at the housing element was unsustainable. Not only was that impossible in the context of the statutory definition, but it did not reflect a realistic view. The developer would be bound to consider the whole scheme when determining what affordable housing requirement to accept, including as it did the financial contribution. The appraisal conducted by the surveyor for the appeal had done so, and its methodology and conclusions were accepted in terms by the claimant: Sage v Secretary of State for the Environment, Transport and the Regions [2003] UKHL 22; [2003] 1 PLR 121 considered.
(4) In this case, it was not wrong to describe the commercial development as incomplete. In its state at the time of the application and hearing, it was not in a state which could generate receipts or return, so from the point of view of the developer, the development was incomplete. In the real world, local planning authorities considering the imposition of planning obligations for affordable housing in mixed use developments, had to reflect on whether they should include triggers which restricted the effect of changes in the commercial market on the performance of the obligations. The interested party had shown that this challenge failed and there would be judgment for the defendant.
Philip Coppel QC (instructed by Medway Council Legal and Corporate Services) appeared for the claimant; Richard Turney (instructed by Trowers & Hamlins LLP) appeared for the first interested party; the defendant and the second and third interested parties did not appear and were not represented.
Eileen O’Grady, barrister
