Commercial property

Big changes to Section 106 Agreements - the Small Development Exemption

Row of red brick houses

Recent changes to the SDLT regime have made headline news. However, a further change to the housing market has gone largely unnoticed, which could have a larger impact.

The Department for Communities and Local Government has announced that it will change English national planning policy so that: 

Local planning authorities (LPAs) should not seek affordable housing and tariff style contributions (e.g. for open space, schools etc) on small scale sites of 10 units or less, and which have a maximum combined gross floor space of 1,000 square metres.
In the case of designated rural areas, LPAs may choose to implement a lower threshold of 5 units or less.

 In addition, when calculating the affordable housing requirement, LPAs should credit the developer by deducting from the calculation a contribution equivalent to the existing gross floor space of any vacant buildings brought back into use or demolished for re-development. 

Does this mean that no planning obligations can be sought for these exempt developments? 

Some planning obligations may still be required to make a development acceptable in planning terms. Planning obligations should not be sought to contribute to affordable housing or to pooled funding ‘pots’ intended to fund the provision of general infrastructure in the wider area. Authorities can still seek obligations for site specific infrastructure – such as improving road access and the provision of adequate street lighting. 

What action should developers take? 

We have spoken to various District Council regarding the implementation of these new regulations, and the approach is not uniform.  Some are implementing the regulations now, and are writing to qualifying developers and advising them of that there is no longer an obligation to pay. Others have postponed any decision as to implementation until the New Year. As such each District Council should be contacted direct to ascertain the basis upon which they are proceeding. 

District Councils are expected to lose a substantial amount of contributions as a result of the changes. It is anticipated that a number of District Councils will challenge this by way of Judicial Review. Councils have until mid-January to bring a challenge. 

Tees’ Commercial Property Team shall be keeping a close eye on how this matter progresses, and will continue to provide updates.

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