Martha Grekos explains how planning obligations can be enforced and possible defences to their enforceability
Enforcement of planning obligations is dealt with by way of private law claim, either in court or by arbitration. It requires an understanding of private law remedies and defences as well as statutory law and public law. Although a planning obligation is a creature of statute, it is also a contract between at least two parties – the local planning authority and the person who has an interest in the land. Planning obligations are normally entered into as a condition of the grant of planning permission and are conditional on the implementation of the planning permission. If the developer has the benefit of the planning permission, and there is a breach of a planning obligation, it is perceived by the courts as unfair that the developer should be able to escape the obligation and there is a willingness of the courts to enforce obligations in section 106 agreements.
Enforcement
Section 106 of the Town and Country Planning Act 1990 (as amended) (“the 1990 Act”) specifies two methods of enforcement: (1) injunction; and (2) self help.
(1) Injunction
In the case of a negative covenant, an injunction can be granted to restrain a breach before it occurs or to reverse the effect of a breach after it has occurred in appropriate cases. A positive covenant is enforceable by specific performance.
However, an injunction will not be awarded if damages are an adequate remedy so it needs to be first considered what damages would be awarded.
An award of damages is intended to put the injured party in the position she/he would have been in if the covenant had been complied with. Normally the council will suffer no loss but, in an appropriate case, could be awarded damages representing what it could have charged for permitting a breach of contract. In the case of a covenant requiring operations on land, the question arises whether a council could be awarded the anticipated cost of carrying out the work itself – which may be seen as more attractive than self–help, where the work has to be done first. However, a court is likely to decline to award damages on the ground that to do so would be inconsistent with section 106 of the 1990 Act, which provides a self-contained code for enforcement.
There are various equitable defences to either type of injunction. The most common is that there has been unreasonable delay in commencing proceedings after the defendant refused to perform the contract or ceased to do so. Delay will be disregarded if the parties are negotiating with each other over the problems that have arisen.
With regard to the enforcement of positive covenants, the courts are reluctant to grant specific performance if constant supervision of the court is required, or it is uncertain what is required, because of the undesirability of repeated applications for committal, which are likely to be expensive in terms of costs to the parties and the resources to the judicial system. There is, however, a distinction to be drawn between cases requiring a particular result and those requiring an activity to be carried out.
In Wychavon v Westbury Homes (Holdings) Ltd [2001] PLCR 13 the council sought to enforce an obligation which required low-cost affordable housing to be provided at a ratio of 10% of the total number of houses on the land. The court held that the obligation was clear and certain and granted a negative injunction restraining the defendant from selling or transferring the houses other than in a manner that ensured that they were enjoyed as low-cost affordable houses by occupiers.
In London Borough of Waltham Forest v Oakmesh Ltd, Family Mosaic Housing [2009] EWHC 1688; [2009] PLSCS 258 there was an obligation on the developer to provide a footpath at nil cost to the council. In addition, the detailed design was to be submitted to the council for approval prior to the construction of the road network servicing the footpath and the footpath was to be constructed according to the agreed details prior to the first occupation of the final phase of the residential units. Design details in principle were submitted but final details were never provided. The successor in title applied to discharge the covenant under section 106A but the application was dismissed. The council brought proceedings claiming a mandatory injunction to carry out the work. The successor in title argued that the injunction should not be granted because it was impossible to perform, too uncertain and the council should rely on its self-help remedy. The court rejected all these arguments and granted the injunction.
(2) Self help
Councils are reluctant to use this power as it requires them to carry out the work first and then seek to recover the “expenses reasonably incurred”. There is uncertainty as to whether costs were reasonably incurred. In theory, a council could seek a declaration in advance of carrying out the works that the proposed works (and the costs) were reasonable, but such litigation could take time and money and would not deal with the actual final costs due to inflation and unforeseen circumstances.
Defences
Section 106 agreements raise four particular issues with regard to potential defences:
(1) Lack of sufficient nexus
The courts have repeatedly made clear that it cannot be alleged that a section 106 agreement, once enforceable, is illegal or invalid for lack of adequate nexus with the development – see Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759; [1995] 2 EGLR 147 and R (on the application of Millgate Developments Ltd) v Wokingham Borough Council [2011] EWCA Civ 1062; [2012] 3 EGLR 87 where it was held that enforceability of a section 106 agreement does not depend on its nexus to the development, but on the terms of the contract.
(2) Estoppel
In some cases, the section 106 agreement is entered into and the development is carried out – and only later does the owner seek to raise defences to the agreement. The courts have held that the owner is estopped from asserting that the agreement is void or not within section 106 of the 1990 Act. For example, in London Borough of Waltham Forest the court held that the successor in title was estopped from denying that it was bound by the obligation, as the parties dealt with each other for many years on the basis that the obligation was enforceable and that the successor in title even applied under section 106A to discharge it.
(3) Sections 106A and 106BA
Section 106A provides for modification or discharge of a planning obligation, either by the developer and the council agreeing to vary the obligation by deed, or by the developer making an application to the council. An application under section 106A can generally only be made after five years have elapsed from the date on which the original section 106 obligation was entered into. Section 106BA was inserted by the Growth and Infrastructure Act 2013 and introduces a temporary power and procedure for modifying or discharging planning obligations on planning permission which relate to the provision of affordable housing.
There have been a handful of cases that have so far been determined, mainly to do with reduction or removal of affordable housing contributions. The relative success or failure of these cases in part turns on any or all of the following:
(a) whether there has been open and constructive dialogue and engagement between the council and the applicant from the outset of the application being lodged and throughout the appeal process;
(b) whether underpinning these applications there is in existence reliable, robust and cogent evidence that has been complied with in accordance with settled and established principles on land valuation; and a viability assessment that addresses the question of whether the affordable housing requirement as contained in the planning obligation jeopardises the economic viability of the development proposal to which it relates; and
(c) whether both parties hold realistic expectations in terms of the nature and extent of those obligations that are required in order to make the development proposal acceptable in planning terms at the same time as protecting and safeguarding the economic viability of the new development.
(4) Rescission
Rescission is normally an available remedy for misrepresentation, economic duress and equitable mistake. It is however questionable whether the remedy is available in claims to enforce a section 106 agreement because rescission cannot be ordered unless the parties could be substantially restored to their original position. Once planning permission has been granted and implemented, it is hard to see how parties can be restored to the position they were in before the agreement was entered into.
Why this matters
- The cases demonstrate a willingness of the courts to enforce planning obligations and not to allow technical arguments to get in the way. Beyond the statutory provisions for modification and discharge of obligations under section 106A/BA of the 1990 Act, the scope for argument as to possible defences on enforceability is limited.
- When entering into a section 106 agreement, developers should be aware that local planning authorities have a variety of enforcement mechanisms open to them if development is carried out in a way which breaches the section 106 obligations.
- No one involved in the development process is immune to an economic downturn. Planning obligations that simply sit on the shelf while their associated planning permissions languish and then lapse add no value to anyone. If delivery of particular developments is important, local planning authorities need to be prepared to contemplate revisiting the scale of agreed planning obligations. Local planning authorities should insist on rigorous testing of any claim that the development can no longer afford agreed benefits. But if that case is made, local planning authorities do have the freedom to agree to modifications under section 106A of the 1990 Act and to secure safeguards which best protect the public interest.
Further reading
- JA Pye (Oxford) Ltd v South Gloucestershire District Council [2001] 2 PLR 66, in which the court declined to quash a planning agreement showing clear willingness to enforce section 106 agreements.
- Avon County Council v Millard [1986] JPL 21; [1985] 1 EGLR 171, in which the court saw an injunction as the normal remedy where a council is seeking to enforce a planning obligation as damages would normally be inappropriate.
- Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759; [1995] 2 EGLR 147 and R (on the application of Millgate Developments Ltd) v Wokingham Borough Council [2011] EWCA Civ 1062; [2012] 3 EGLR 87 in which it was held that enforceability of a section 106 agreement does not depend on its nexus to the development, but on the terms of the contract.
Martha Grekos is partner and head of planning and infrastructure at Irwin Mitchell
