Draft Planning Obligations Supplementary Planning Document

Ended on the 19 January 2023
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5. Considerations in drafting a Section 106 Agreement Framework

5.1. The Council will set out a consistent approach to planning applications via a S106 agreement template, so that regardless of when development sites come forward, this will provide clarity and certainty for developers and landowners over the obligations they will be expected to enter into.

5.2. It should be noted that this template is separate to ECC's S106 template, which only focusses on the contributions ECC has requested. ECC's template agreement is provided in the DGIC, with a separate schedule for each type of contribution. ECC's template should also be considered as a starting point to avoid delays and unnecessary expense.

5.3. The S106 agreement template will contain a "Part 1" (Strategic Infrastructure) and a "Part 2" (Site Specific Infrastructure) which will respectively set out the provisions which the Council will expect to be included in S106 agreements relating to the development. The template S106 agreement will state that "Part 1" provisions are expected to be included as standard across all development sites with adjustments limited to those that are minor development not forming part of a wider development. "Part 1" will include the following considerations:

  1. Cost and payment of strategic infrastructure contributions
  2. Works in kind
  3. Provision of land, costs of providing the land and equalisation agreement
  4. Review and indexation
  5. Trigger points
  6. Conditions
  7. Access provisions
  8. Statutory agreements
  9. External funding
  10. Reimbursement to forward funders
  11. Reimbursement of unspent contributions
  12. Access to adjacent land
  13. Sites of multiple ownership
  14. Negotiations/ Viability
  15. Escrow agreement and bonds
  16. Payment for specialist study

Cost and payment of strategic infrastructure contributions

5.4. As discussed above, developers will be expected to make S106 contributions towards items of strategic infrastructure as identified in the most up to date IDP Part B. The amount of contributions payable will be determined by the Council on a consistent and proportionate basis in accordance with Regulation 122 of the Community Infrastructure Levy Regulations 2010 (as amended or replaced) and will be informed by the IDP and other available relevant evidence and guidance.

5.5. In some instances, such contributions shall be payable retrospectively; even if the strategic infrastructure has been fully built or provided as at the date the relevant S106 agreement is entered into, the S106 agreement will require payment of those contributions. Early delivery of certain items of infrastructure may be beneficial or necessary in order to unlock or facilitate development. The contributions may be paid in instalments to be agreed in the relevant S106 agreement and the payment date(s) for payment of the contributions will also be agreed in the relevant S106 agreement.

Where contributions to strategic transport infrastructure are secured under the monitor and manage approach, the Council will require the cost of monitoring to be funded by developers.

Works in kind

5.6. Where it is appropriate to do so, the Council will secure contributions by means of works-in-kind.

5.7. The Council will be open to discussing the possibility of the developer constructing all or part of those items. Any developer proposing to carry out works in kind is encouraged to discuss their proposals with the Council, ECC (in relation to County matters) and other landowners in the allocation area at the earliest possible opportunity - the Council will expect such discussions to have taken place prior to the submission of any planning application.

5.8. The applicant will be expected to include with the planning application an allocation-wide deliverability appraisal which shall reflect any agreements entered into by landowners and include the proposed delivery arrangements for the strategic infrastructure including the nature, scale and timing of delivery and a proposal as to how the landowner will be appropriately compensated by other landowners in the allocation area in respect of the proposed works in kind (such compensation may be monetary, through the provision of land or through agreement to meet or offset any S106 obligations otherwise falling to be met by the relevant landowner/developer or a combination thereof). If such agreements have not been made, the S106 agreement may restrict development until such agreements have been entered into and/or set out an expert determination provision to resolve any dispute between landowners.

5.9. Any works in kind proposals which are agreed by the Council (and County Council, in relation to County matters) will be subject to the developer agreeing appropriate fall-back provisions, including step-in rights for the Council or County Council (in relation to County matters), to ensure the delivery of infrastructure when it is needed. The decision on whether to accept infrastructure works in kind shall be at the Council's discretion, bearing in mind all relevant circumstances. Where the Council does permit works in kind the developer will be expected to obtain the approval of the Council (and where appropriate to its functions the County Council) to the detailed design of those works, obtain all necessary consents and enter into all statutory agreements required, provide the Council (and where appropriate to its functions the County Council) with suitable collateral warranties in relation to the design and construction of those works and provide appropriate security, including bonds, where reasonably required to help guarantee the performance of those works. The developer will also be expected to transfer the ownership of such works (including the freehold ownership of the land on which the works are built) to the Council (or the County Council in relation to County infrastructure) when required by the Council.

Provision of land, costs of providing the land and equalisation agreement

5.10. The Council and ECC will not pay the relevant landowner/ developer for the cost of land on which an item of strategic infrastructure shall be built, whether that item is identified by the IDP or proposed by the landowner / developer.

5.11. Landowners will need to have regard to the role their land has within the wider context of Local Plan growth, the wider allocation as well as the need to achieve a coordinated approach to development and delivery of associated infrastructure. There may be a need to take into account instances where one developer has provided land and/or delivered infrastructure which will be used by a number of sites; in this instance, the Council will require land equalisation agreements between developers to be in place to achieve holistic spatial objectives.

5.12. In relation to land on which it is identified in the IDP that an item of strategic infrastructure shall be built, there shall be a presumption in favour of that item of strategic infrastructure being provided on that land. In relation to land on which a landowner or developer proposes that an item of strategic infrastructure will be built (where it is not identified as such by this SPD), the Council will expect the developer to have discussed and agreed such proposal with the Council (and ECC in relation to County matters) prior to the submission of any planning application. Where multiple landowners are involved, they should agree an equalisation mechanism amongst themselves to ensure a fair apportioning of the burden of providing land for infrastructure. In both cases, the applicant(s) should include with the planning application an allocation-wide deliverability appraisal which shall reflect any equalisation agreements entered into by landowners and include the proposed delivery arrangements for the strategic infrastructure including the nature, scale and timing of delivery and a proposal as to how the landowner will be appropriately compensated by other landowners in the allocation area for the loss of that strategic infrastructure land as development land (such compensation may be monetary, through the provision of land or through agreement to meet or offset any S106 obligations otherwise falling to be met by the relevant landowner/developer or a combination thereof).

5.13. If such agreements have not been made, the Council may consider, via S106 agreement, restricting development until such agreements have been entered into and/or set out an expert determination provision to resolve any dispute between landowners.

Review and indexation

5.14. All payments set out in S106 agreements will be indexed from the date that costs were agreed or from the committee date when it was resolved that planning permission should be granted subject to a S106 agreement using an appropriate index. The legal agreement will set out the choice of index and/or the indexation calculation.

5.15. Where specific costs have been referenced in this SPD, these costs will be indexed from the date of publication.

Trigger points

5.16. In order to allow developers to spread the cost of their contributions and to maintain a revenue stream, the trigger points for payments prior to commencement and/or completion will be agreed through the development management process. Guidance on trigger points of site-specific contributions are set out in Chapter 3, section C of this document. Guidance on trigger points of the contributions ECC has requested are set out in ECC's DGIC.

5.17. Trigger points for mitigation measures falling under the monitor and manage mechanism will be informed by the TMMP.

Conditions

5.18. The Council may, where appropriate, use pre-commencement and/or pre-occupation conditions on planning permissions to prevent development and/or occupation of relevant phases of the development in advance of the necessary strategic infrastructure being in place.

Access provisions

5.19. Landowners/developers will be expected to provide access to the Council (or County Council as appropriate) and their contractors for the purpose of enabling the Council (or County Council) to construct the strategic infrastructure works at nil cost.

Statutory agreements

5.20. The Council and County Council may require conditions to form part of any planning permission or obligations in a S106 agreement requiring the landowners/developers to enter into highways agreements to secure adoption of any roads or other public rights of way forming part of the strategic infrastructure and/or any other planning or infrastructure agreements that may be required at the relevant time.

External funding

5.21. Where funding is to be provided by external bodies for the provision of infrastructure: there will be a provision in the legal agreement between the Council and the landowner / developer providing a mechanism to off-set or pay back the correct proportion of the contribution paid by the landowner/developer towards the same infrastructure as appropriate. It may not be possible to assess this until all the relevant infrastructure has been delivered and comprehensive final costs of delivery are known.

Reimbursement to forward funder(s)

5.22. Where forward funding has taken place in order to ensure the early provision of infrastructure: the Council will use reasonable endeavours to secure S106 contributions retrospectively with the grant of planning permissions post-dating the provision of such infrastructure so as to reimburse the forward funder(s) of the infrastructure.

Reimbursement of unspent contributions

5.23. In relation to provisions regarding the repayment of unspent and uncommitted strategic infrastructure S106 contributions: once all funding requirements and obligations have been met, the Council will act consistently in deciding whether or not to include such provisions. Any reimbursement will be proportionate and subject to the development to which it relates being policy compliant and all other infrastructure needs of that development having been met; if not then any reimbursement monies due in respect of that development may first be applied by the Council towards making that development policy compliant.

Access to adjacent land

5.24. Where a parcel of land within a development site is the subject of a planning application for development, the landowner/developer will be expected to ensure that the development is designed in such a way as to facilitate vehicular and pedestrian/bridleway access from that land to adjacent parcels of land to ensure appropriate site-wide connectivity. This will ensure that the development site can move forward on a viable comprehensive basis. The safeguarding of suitable land for access to adjacent parcels of land will be protected through S106 agreements.

Sites of multiple ownership

5.25. Sites in multiple ownerships are likely to be developed through a number of planning applications coming forward at different times. The submission of numerous applications at different stages can present a challenge in securing the funding and land for the infrastructure that would be required by the comprehensive development and shared by all users.

5.26. In this case, the Council will take a holistic approach in securing and provision of necessary shared infrastructure. The Council will not accept ad hoc or piecemeal development which is detrimental to the delivery of necessary infrastructure and the wider planned growth. The Council will only accept variations to the identified infrastructure if it can be satisfied that appropriate alternative arrangements will be delivered in full and at the appropriate time and in general accordance with the approach and provisions outlined within this SPD.

Negotiations/ Viability

5.27. Proposals should be designed in a way that accords with Local Plan policies, including the requirement to contribute towards strategic infrastructure costs and any other items that may be secured through S106 agreements.

5.28. Where, in the opinion of a developer, its proposed development cannot meet Local Plan policy requirements and the requirements of this SPD, the developer is required to robustly demonstrate that the development is clearly unviable by submitting a financial viability assessment (FVA) to the Council. An FVA should normally be submitted no later than the submission of the planning application for the proposed development scheme and must in any event be submitted well in advance of determination of that planning application. The broad level of viability will often be known before the final content and form of the development has been settled and this should be made known to the case officer at an early stage in order to avoid post submissions delays. The developer will be required to fund the examination of a viability assessor on behalf of the Council and any specialist professionals required in that examination. This funding should be made available up front to avoid future delays.

5.29. All FVAs submitted by developers should contain the following information with supporting evidence:

  1. a summary of the main assessment assumptions (evidenced from an independent expert or source);
  2. site or building acquisition cost and existing use value;
  3. construction costs and programme;
  4. detailed cashflow on an annual basis;
  5. fees and other on costs;
  6. projected sale prices of dwellings/non-residential floorspace;
  7. details of discussions with registered providers of affordable housing (if relevant) to inform the value of affordable housing assumed within the FVA;
  8. gross and net margin;
  9. other costs and receipts;
  10. other relevant information dependent on the nature of the obligation(s) under discussion;
  11. a summary clearly setting out the reasons that make a development proposal unviable; and
  12. if applicable, any request to vary S106 agreements and/or affordable housing requirements from those set out in the Local Plan and this SPD and stating the proposed level of obligations, demonstrating why they are the maximum that can be provided, provided that this shall only be acceptable if all of the following have already been completed and a justificatory statement in respect of the same has been provided to the local planning authority:
    1. a review of all assumptions within the viability model with a view to improving viability, including land value, build and development costs, sales prices, dwelling types, phasing, funding (including borrowing costs) and legal, professional and marketing costs has been carried out;
    2. consideration of a reduction in the minimum anticipated developer profit for the scheme to offset any degree of non-compliance with Local Plan or SPD requirements has been undertaken;
    3. consideration of how growth assumptions (value increases over time) have been factored into the viability model;
    4. available options for public sector funding which would enable the proposed development to be compliant with Local Plan or SPD requirements have been actively explored; and
    5. a consideration of how adjustments to the tenure mix and/or phasing of affordable housing affect the viability model, as well as adjustments in percentage terms, has been undertaken.

5.30. FVA will be scrutinised by the Council with advice from a suitably qualified external consultant and the reasonable cost of this external consultant is to be met by the developer who has submitted the FVA. If material changes are made to an application after submission that could affect scheme viability, a revised FVA will be required.

5.31. Where the Council is satisfied that S106 contributions or works required by the Local Plan policies and this SPD cannot be met in full on a particular development proposal due to financial viability, the Council will make the decision on how to apportion the funding that is available and may choose to:

  1. reduce the S106 contributions payable pursuant to this SPD; and/or
  2. adjust the timetable for delivery of strategic infrastructure to be funded by those S106 contributions or provided in kind; and/or
  3. reduce or amend other planning obligations for that development proposal, provided that the Council will continue to pay due regard to the objective of ensuring an equitable and proportionate apportionment of the costs of delivering strategic infrastructure and those that are required to make development acceptable; and/or
  4. liaise with relevant service providers, authorities and local communities as necessary, to determine which infrastructure should be prioritised to benefit from the additional funding and how contributions should be spent; the Council will be the one to make the final decision.

5.32. The financial viability of development proposals may change over time due to the prevailing economic climate, including changing property values and construction costs. In all cases, therefore, where the Council have agreed to any of the reduction or adjustment items set out above such that the resultant planning obligations are below the level needed to fully fund or provide the strategic and local infrastructure requirements to comply with Local Plan policy requirements, the Council will require a viability review of the relevant development with an updated FVA to be provided at appropriate intervals to determine whether greater or full compliance with this SPD and the Local Plan policy requirements can be achieved throughout the carrying out of the relevant development proposal.

Escrow agreement and bonds

5.33. For relevant contributions involving the use of bonds and escrow account, S106 agreement should detail the terms and condition regarding the use of bonds or payments into a joint escrow account and appropriate arrangement to manage spending of such funds.

Payment for specialist study

5.34. Where a Planning Performance Agreement has not been entered into, which sets out a list of particular specialist investigation/ study and makes allowances for its payment, the Council may require the applicant to pay a lump sum for the purpose of commissioning specialist study as required. Any amount unspent will be refunded to the applicant.

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