Planning ahead

In early November this year, the government issued a consultation on the draft revised circular on planning obligations (the draft circular). This new draft is the result of two key developments: previous consultations on reforming the system of planning obligations, and proposals in the Barker Review on housing supply

The draft circular will be supported by guidance for local planning authorities (lpas) on good practice. Planning obligations, perhaps more commonly known as ‘section 106 agreements’ or ‘planning gain’, fall into two groups. They can be legal agreements attached to a planning permission negotiated between developers and lpas to regulate development where planning conditions would not be possible or effective.

Alternatively, planning obligations can take the form of unilateral undertakings offered by an applicant for planning permission, usually currently used where permission has been refused and the applicant wishes to offer something to the planning inspector on appeal to make the application acceptable.

Either way, planning obligations run with the land and bind all successive owners of it. Government policy on the proper use of planning obligations is currently found in circular 1/97. The new circular, expected to be issued sometime in 2005, will replace this.

Why do we need change?

The system of planning obligations is frequently criticised for its complexity, difficulty in reaching agreement and the delay caused to the planning process. The draft circular is intended to promote speed, certainty, transparency and accountability.

The aim is to improve the delivery of planning obligations before more fundamental changes are brought into effect in two to three years. There are six main proposals in the draft:

• Unilateral undertakings.
• Cost recovery.
• Maintenance payments.
• Use of formulae and lpa standard charges.
• Standard agreements and model clauses.
• Use of independent third parties.

The draft circular expressly encourages the use of unilateral undertakings by applicants. Whereas circular 1/97 anticipates the use of unilateral undertakings principally at appeal stage, the draft circular encourages the submission of unilateral undertakings with planning applications where the developer can ascertain the likely requirements of the lpa in advance.

For the first time, the draft circular opens the door for developers to assist in speeding up the lpa's processes by permitting, in certain circumstances, developers to contribute towards the funding of lpa officers, legal fees, monitoring etc. It may be acceptable for developers to make such contribution where:

• The rates/levels of contributions are specified in advance.
• It can be demonstrated (presumably by the lpa) that the developer's financial contribution results in a significant improvement in the speed and efficiency with which the application is processed.

The draft circular also widens the scope for planning obligations to require developers to contribute to the maintenance of new infrastructure that is chiefly for the users of the development or their neighbours. Where such payments are made they must be limited in time and the levels and types of payments should be clear from the outset.

The current system for planning obligations is frequently criticised for its complexity, difficulty in reaching agreement and delays caused to planning.

Circular 1/97 considered it unacceptable for lpas to allocate the precise costs that would be required to be contributed in advance. However under the draft circular lpas are now expressly encouraged to use standard formulae and charges where appropriate.

LPAs will be required to publish the levels of their charges and formulae in advance. This should result in faster negotiations; and greater certainty of costs and the level of planning obligation contributions for developers.

In an attempt to speed up the process of reaching agreement and transparency, the draft circular strongly encourages the use and publication of standard heads of terms, agreements and model clauses wherever possible. Guidance on good drafting practice is being prepared and will be published with the final circular. Those wishing to depart from the guidance, must prove the need for doing so.

The draft addresses the issue of involving independent experts in negotiations. It is anticipated this will speed up the resolution of disputes.

Developers are increasingly looking to planning obligations as a means of securing planning permission. It is hoped that the proposed new system will accelerate the planning system for developers by permitting them to make payments towards lpa costs. It will also enable developers to reduce their final costs by providing greater certainty as to what is attainable, as well as permitting more of the planning costs to be passed on to others, through greater transparency with the use of standard charges and formulae.

However as the regulatory impact assessment notes, the proposals are likely to require a greater input of lpa staff time and resources to achieve these goals.

Given the problems that lpas have at present in delivering the planning system on time and on budget it will be interesting to see what responses the consultation provokes.

• Elizabeth Seymour is a solicitor with Clarks’ environmental and projects team. E-mail: eseymour@clarkslegal.com or visit: www.clarkslegal.com