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Official horse trading

Architects, clients and planners must ensure that Section 106 Agreements express clearly and precisely what is intended

Planning obligations - as Section 106 Agreements are properly termed - involve direct costs, so your client has to become involved. And it is the architect who is usually regarded as the agent with the responsibility for seeing that the negotiations and terms of an agreement are well considered and consistent with the client's development objectives.

There is a parallel with dealing with conditions, but conditions are far less treacherous. Firstly, they are circumscribed in their scope, by a circular, to resist unreasonable conditions. Secondly, they are fairly clear because they have to be set out in the officer's report and in the permission notice. And finally, a condition can also be appealed without threatening the validity of the underlying consent.

A Section 106 Agreement is legally binding and, like the permission, goes with the land. At the time it is reported to committee it is merely an agreement to agree, and generally has not yet taken legal form.

The permission is resolved to be granted subject to entering into the agreement, and the planning officer passes the matter over to the council's solicitor. There it might rest for months, especially if the points covered are not clear, or if the council expects a payment on signature and one side has yet to confirm a commitment to proceed. (The wise architect, if due any part of their fee when permission is granted, knows this problem well enough and their fee agreement will usually include the phrase 'payment is due upon the council's resolving to grant consent'. ) So how best to proceed in the client's interest?

First, report to the client any suggestions by officers that demands may be made. Second, discuss, minute and confirm the scope and justification for any such demands. In particular, insist that 'contributions' are, as far as possible, directly related to the development to ensure that the council is not just treating the developer as some sort of Golden Goose. Where unrelated demands are made, insist on policy justification. Where it is ambiguous - a contribution to street furniture, for example - insist that the street furniture is located to benefit the immediate environs of the site, and hence the client.

Something for nothing

The most difficult issue is 'affordable housing' quotas as a part of the development. In the early days of this extraordinary business, the demand was for a cash amount towards the council's relevant fund. Now the disposition, tenure and means of providing the social housing are all hotly negotiated.

Even the ability of a housing association to meet the cost of its own construction cannot be taken for granted, as some councils do not have Housing Corporation grants available for many categories of housing.

So the cost to the client can include free land contribution, a substantial part of the building cost and probably a reduction in the sale value of the market housing as a result of the mixed tenure.

With current suggestions that social housing may be required in very small schemes and in commercial developments, things can only get more complex. The viability of an increasing number of schemes is also threatened in a weaker housing market .

It is important that the architect does not assume responsibility without the client's involvement at every step - the consequent liabilities could be enormous. Good advice to the client includes capping any financial contribution, subject to an inflation index, and ensuring that no contribution is to be made until 'the commencement of development'.

Above all, minute the terms agreed, confirm them in writing first with the client and then, on their authority, with the planning officer and insist on a reply confirming agreement to the heads of terms.

A recent Court of Appeal case involved a housebuilder who had entered into a Section 106 agreement in return for planning permission for 69 residential units. The agreement required the developer to commence construction of a hotel at the same time as the houses, and that the hotel should be 'substantially complete prior to the occupation of the 50th residential unit'.

The local authority had accepted that the construction of the hotel should not start until an operator had been found. But none was found and the 50th unit was occupied before work had even started on the hotel.

The council obtained an injunction against the housebuilder, restraining occupation of the remaining units and any exchange of contracts and/or completion of sales of the remaining units.

The Court of Appeal confined itself to the actual wording of the relevant clause in the agreement. This did not impose an obligation on the housebuilder to prevent the occupation of more than 50 units if the hotel had not been commenced or its construction had not proceeded diligently.

The solicitor commented: 'While it may have been the parties' intention that the construction of the hotel proceeded in tandem with the construction of the residential units, the clause had certainly not been worded in a way that expressed this intention.'

The decision in favour of the housebuilder demonstrates that developers and councils must ensure that, in preparing a Section 106 agreement, it is worded so as to express clearly and precisely what has been agreed and is intended. The same is true of the agreed record between architect, client and planning officer.

Brian Waters is principal of the Boisot Waters Cohen Partnership. Tel 020 7828 6555 or email brian@bwcp. co. uk

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