Medway Developer Contributions and Obligations Guide

1.1 Purpose

1.1.1 The development of new housing increases the number of people living in an area and with that the demand on local services, such as schools, health services, parks, and transport. The planning system recognises the need to address the impacts arising from development, and can use legal obligations, agreements and unilateral undertakings to secure acceptable development. Developer contributions are an important component of this process. Planning obligations assist in mitigating the impact of unacceptable development to make it acceptable in planning terms. Comment

1.1.2 The purpose of this guide is to inform and assist developers, the Council’s own staff and all stakeholders (which includes members of the public) to Comment

• Ensure the impacts of developments are properly mitigated
• Ensure that there is clear information on the Council’s policy for developer contributions
• Ensure consistency, transparency and accountability
• Provide a streamlined, efficient service
• Achieve greater speed in determining planning applications.

1.1.3 The Guide and/or Technical Appendices will be reviewed when significant changes are made to service strategies and in evidence to support Medway’s infrastructure requirements. Significant changes will be subject to further consultation. Comment

1.1.4 Planning Committee meets every four weeks to determine planning applications. The agenda is available on line five working days prior to the committee meeting and includes a committee report for each application submitted. Details of developer contributions are included in the committee report. In some circumstances a major application can be determined under delegated powers and will not be submitted to Planning Committee for a decision. Comment

1.1.5 Planning Committee regularly receives S106 reports which set out all contributions received in the reporting period. These reports also include information on all S106 agreements completed in the timeframe and expenditure. These reports are available online with the Planning Committee report pack. Comment

1.1.6 An Infrastructure Funding Statement is published annually in December and includes information on individual services as well as S106 receipts and expenditure for the previous financial year. It also includes information on future infrastructure projects. Comment

1.2 What is a Section 106 (S106) agreement

1.2.1 S106 agreements provide the mechanism for Medway Council to ensure developers commit to payment of developer contributions to mitigate impacts. S106 agreements apply to developments of 10 or more dwellings (referred to as major developments). These legal agreements can include a commitment by the developer to pay contributions towards improved infrastructure that is delivered by council teams or third-party providers such as the NHS to address the impact of development. Major developments require the provision of new infrastructure or expansion of existing infrastructure. S106 agreements may also include clauses to commit the developer to provide infrastructure, for example a new highways access to a development or provision of a bus service and bus stops. All these commitments are known as obligations. Comment

1.2.2 S106 agreements are signed by Medway Council and others who have an interest in the development (e.g. landowner, developer, finance company). Unilateral Undertakings (UUs) include the same obligations as a S106 agreement, but they are not signed by Medway Council. One party (e.g. landowner, developer, finance company) signs the agreement and commits to giving the contributions to Medway Council. Comment

1.2.3 S106 agreements include deadlines for when the contributions must be spent (usually 5 years from receipt of the total contribution – some contributions are paid in instalments). Developers may request evidence that contributions have been spent in accordance with the wording in the agreement; failure to provide such evidence can result in the contribution being refunded to the developer with additional interest. Comment

1.2.4 UUs do not have a deadline as the contributions are ‘given’ to the council, but contributions must be spent in line with the wording in the agreement, as they must for S106 agreements. Comment

1.2.5 The main principles governing the use of obligations are that: Comment

• They should only be used when planning conditions are not appropriate
• They are intended to make development acceptable which would otherwise be unacceptable in planning terms
• They can be used to prescribe the nature of the development (e.g. a proportion of the housing must be affordable), to compensate for loss or damage caused by the development (e.g. loss of open space) or mitigate a development’s impact (e.g. increase public transport provision).

1.2.6 Obligations run with the land and, providing all parties with an interest in the land enter into the agreement, affect everyone with an interest in it, including successors in title. They are registered as Local Land Charges. Comment

1.2.7 Section 106 of the 1990 Act provides that anyone with an interest in land may enter into a planning obligation, which is enforceable by a Local Planning Authority. An obligation may be created by agreement or by the party with an interest in the land making a unilateral undertaking. Obligations may: Comment

• Restrict the development or use of land
• Require operations to be carried out in, on, under or over the land
• Require the land to be used in any specified way; or
• Require payments to be made to the Local Planning Authority, either in a single sum or periodically

1.3 Why do contributions in an agreement change?

1.3.1 There are several reasons why the contributions received are not the same as the amount in the agreement: Comment

1. If the agreement states contributions are due to be paid 12 months after the date the agreement was signed, the contributions become subject to indexation. This is usually the retail price index (RPI) or Building Cost Information Service (BCIS) indexation.
2. If payment of the contribution is late it can be subject to interest.
3. If circumstances change from the time a contribution was requested, to when it becomes due (which can be several years) it may be more appropriate and sensible to support a different scheme/project. For example, a highways scheme would be more effective in a different place to that specified in the agreement. The change can be regularised in the following ways:
   • By updating the agreement with a ‘deed of variation’ (DoV); this can also be referred to as a supplemental deed or agreement. These require both Medway Council and the other signatory/signatories to agree and sign the agreement. These are published alongside the original agreement.
   • Sometimes the change can be minor and if the other signatory agrees, a ‘side letter’ is signed by Medway Council and the other signatory to approve the updated wording. These are published alongside the original agreement.
4. If a planning application is refused the applicant may appeal. A Planning Inspector would review the developer contributions and may decide to alter or cancel contributions
5. Viability: As stated above, it can be several years from the submission of a planning application to when the development commences. In that time market conditions can change significantly. This can mean a huge rise in the cost of construction which in turn can make a development unviable. In such cases an independent specialist would review the financial aspects of the case and may conclude that contributions would need to be reduced, or deleted from the agreement, to make the development viable. This does have implications for the infrastructure required but the provision of new housing is of paramount importance.