Money matters: Many developers are keen to retain planning permission for stalled schemes until the property market recovers, but this is fraught with complications
With the fall in property prices, many development proposals have become financially unviable and developers are looking to preserve planning permission until market conditions improve. However, this is more complicated than it seems. In 2004, the Planning and Compulsory Purchase Act reduced the life of planning permissions from five years to three. Furthermore, it effectively removed the possibility of renewing permissions: if a permission expires, a new application has to be made.
Developers applying for fresh permission face considerable expense. They may also find that planning policies have changed by the time they do. For instance, as local authorities are starting to adopt local development frameworks, more onerous conditions or section 106 obligations may apply, including increased contributions towards local infrastructure.
As such, many businesses will be looking to keep existing planning permissions alive until market conditions improve. This can, of course, be done by commencing development. Carrying out a “material operation”, as defined in section 56 of the Town and Country Planning Act 1990, may involve as little as demolishing a wall or digging a trench to contain the foundations. Once this first step has been taken, the permission will remain indefinitely.
However, developers should examine all the conditions of their permission and any regulations agreements with local authorities before doing this to ensure they do not encount er unexpected expenses or hurdles.
For instance, permission is not valid until any reserved matters applications and pre-commencement conditions have been discharged. Before that, a material operation may well be in breach of planning control. Of course, discharging these conditions will cost money.
Developers should also pay attention to the conditions of their section 106 agreements.
Beginning development may involve as little as demolishing a wall or digging a trench to contain the foundations. Once this is done permission will remain indefinitely
In many cases, obligations must be fulfilled and financial contributions paid as soon as work begins on site. If this is the case, developers should ensure that the payments triggered by material operation will be affordable. If the amount owed on commencement is modest, it may be worth paying it. After all, if the local authority accepts the payment, it will find it difficult to claim later that the permission was not valid when work commenced.
Developers should also look at how “commencement” – often referred to in section 106 agreements as “implementation” – is defined in their particular agreements. Operations such as demolition and site preparation will often not trigger section 106 payments, but could constitute commencement under section 56 and thus keep a planning permission alive.
If all else fails, it may be possible, especially in the current climate, to negotiate amendments to section 106 agreements with the local authority. Even for new planning applications the poor state of the property market has become a consideration, in that it is being used to justify lower infrastructure contributions and less affordable housing in schemes. Planning authorities that are keen for new developments of the type being proposed to begin may be willing to reduce their normal requirements on this basis.
As far as existing planning agreements go, section 106A (1) of the Town and Country Planning Act 1990 makes it clear that a bilateral section 106 obligation can always be modified by agreement between the parties. Modifications might include, for instance, a later trigger point for payments due under the agreement, a phased approach so that the part payable on commencement is modest, with the balance due later in the process or even a reduction in the requirements.
Despite all the rules and regulations, many local authorities are ultimately keen for development in their areas to continue and may be prepared to be flexible.
Nigel Hewitson is head of planning at Norton Rose
Original print headline: Can you dig it?