Section 106 Agreements Explained: Developer Contributions & Planning Obligations

A Section 106 agreement is a legally binding obligation under the Town and Country Planning Act 1990 that requires developers to make financial contributions or provide infrastructure — typically affordable housing (20-40% of units), education, highways, and open space — as a condition of planning permission. S106 contributions totalled over £7 billion per year at their peak, funding critical local infrastructure. If you're a developer, S106 can make or break a project's viability; if you're a homeowner or community member, it's how your area benefits from new development. This guide explains how S106 works, what it pays for, and how it differs from CIL.

What Is a Section 106 Agreement?

Key Section 106 Facts (England, 2024)

• Legal basis: Section 106, Town and Country Planning Act 1990
• Typical affordable housing requirement: 20-40% of total units
• S106 obligations are registered as local land charges (bind future owners)
• Modification possible after 5 years under Section 106A
• NPPF requires obligations to be: necessary, directly related, and fairly related in scale
• Viability assessments can reduce S106 obligations (but are increasingly scrutinised)

What is the difference between S106 and CIL? Section 106 agreements are negotiated on a case-by-case basis for specific developments, typically requiring site-specific contributions like affordable housing and access roads. CIL (Community Infrastructure Levy) is a fixed-rate charge per square metre of new floor space, set by the council, funding general infrastructure. Both can apply to the same development.

A Section 106 agreement (often shortened to "S106") is a legally binding agreement between a developer and the local planning authority, made under Section 106 of the Town and Country Planning Act 1990.

These agreements require the developer to do certain things — called planning obligations — to make a development acceptable in planning terms. Without these obligations, the planning application would be refused because the development's negative impacts wouldn't be adequately mitigated.

The Legal Tests

Since the Community Infrastructure Levy Regulations 2010, planning obligations must meet three legal tests. They must be:

1. Necessary to make the development acceptable in planning terms
2. Directly related to the development
3. Fairly and reasonably related in scale and kind to the development

If a planning obligation fails any of these tests, it cannot lawfully be required. This is important — developers can challenge unreasonable demands, and councils must justify each obligation.

What Do Section 106 Agreements Cover?

Affordable Housing

The single biggest use of S106 agreements. Most local plans require developments above a certain threshold (typically 10+ dwellings) to provide a percentage of affordable housing — usually 20-40% depending on the area.

Affordable housing can be provided in several ways:

• On-site: Building affordable units as part of the development
• Off-site: Contributing land or building affordable units elsewhere
• Commuted sum: Paying a financial contribution for the council to build affordable housing

The type of affordable housing is also specified:

• Social rent (lowest rents)
• Affordable rent (up to 80% of market rent)
• Shared ownership
• First Homes (at least 30% discount, new since 2021)

Education

New housing generates demand for school places. S106 contributions fund:

• Primary school expansions or new schools
• Secondary school places
• Early years provision
• Special educational needs facilities

Contributions are typically calculated per dwelling based on the expected number of children generated by the development type and size.

Highway Improvements

Increased traffic from new development may require:

• Junction improvements
• New access roads
• Traffic calming measures
• Pedestrian and cycle infrastructure
• Public transport contributions (bus stops, route subsidies)

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Healthcare

The NHS and Clinical Commissioning Groups (now Integrated Care Boards) increasingly request S106 contributions for:

• GP surgery extensions or new premises
• Dental practice capacity
• Mental health services

Open Space and Recreation

Developments must often provide or contribute to:

• Public open space (parks, playing fields)
• Children's play areas
• Allotments
• Sports facilities
• Maintenance funds for these facilities

Other Common Obligations

• Biodiversity offsetting: Where on-site biodiversity net gain isn't achievable
• Employment and training: Local employment targets, apprenticeships during construction
• Travel plans: Measures to encourage sustainable transport
• Public art: Contributions towards public art installations
• Community facilities: Libraries, community centres, places of worship
• Environmental mitigation: Noise barriers, air quality measures, flood prevention

How Section 106 Negotiations Work

The Process

1. Policy requirement: The council's local plan sets out what obligations are expected for different types and sizes of development
2. Pre-application: Developers discuss likely obligations with the council before submitting
3. Application submission: The application is submitted, often with a draft S106 heads of terms
4. Consultation: Statutory consultees (highways, education, NHS) request specific contributions
5. Negotiation: The developer and council negotiate the specific obligations
6. Committee resolution: The planning committee resolves to approve "subject to S106"
7. Legal drafting: Solicitors draft the legal agreement
8. Signing and completion: All parties sign; planning permission is then issued

The Timeline

S106 negotiations are one of the biggest causes of delay in the planning system. After a committee resolution to approve, it commonly takes 3-6 months (and sometimes over a year) to finalise the legal agreement. During this time, the developer cannot start building.

Who Pays the Legal Costs?

The developer typically pays both sides' legal costs — their own solicitors and the council's legal fees for drafting and negotiating the agreement. Council legal fees are usually £1,000-£5,000 for standard agreements, but can be much more for complex multi-party agreements.

Viability Assessments: When Developers Can't Afford It

One of the most contentious aspects of S106 is the viability assessment. If a developer claims that providing the full policy-compliant S106 obligations would make the development unviable (i.e., unprofitable), they can submit a viability assessment to argue for reduced contributions.

How Viability Works

The developer provides a financial appraisal showing:

• Gross development value (what the completed development is worth)
• Build costs (construction, fees, finance)
• Land value (what the developer paid or expects to pay)
• Developer profit (typically 15-20% of GDV)
• S106 and CIL costs

If the sums don't add up, the developer argues that some obligations should be reduced — most commonly affordable housing.

Controversy

Viability assessments are widely criticised:

• Developers may inflate costs or deflate values to reduce contributions
• Many assessments are done in private, lacking transparency
• The system allows developers to profit from the affordable housing they don't provide
• Communities feel short-changed when developments offer reduced contributions

The NPPF now states that viability should be assessed at the plan-making stage, meaning developers shouldn't normally need to argue viability at the application stage unless circumstances have genuinely changed.

Section 106 vs Community Infrastructure Levy (CIL)

There's sometimes confusion between S106 and CIL. They serve different purposes:

Section 106

• Negotiable: Terms are agreed case-by-case
• Site-specific: Obligations relate directly to the development's impacts
• No pooling limit (since 2019): Contributions can be pooled from multiple developments
• Used for: Affordable housing, site-specific infrastructure, bespoke obligations

Community Infrastructure Levy (CIL)

• Fixed rate: Set in advance by the council's charging schedule
• Generic: Charged per square metre of new development
• Non-negotiable: The rate is the rate (with limited exceptions)
• Used for: General infrastructure — schools, roads, health, open space

Many councils use both S106 and CIL. Typically, CIL funds generic infrastructure while S106 handles affordable housing and site-specific requirements. Some councils haven't adopted CIL and continue to use S106 for everything.

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Monitoring and Enforcement

How Are S106 Obligations Enforced?

S106 agreements are registered as local land charges against the land. This means they bind not just the original developer but anyone who subsequently acquires the land or the development.

Councils are responsible for monitoring compliance. Common enforcement mechanisms include:

• Trigger points: Obligations are linked to development milestones (e.g., "before occupation of the 50th dwelling")
• Financial bonds: Developers may be required to deposit money as security
• Injunctions: Councils can seek court orders to enforce obligations
• Planning enforcement: Breach of a S106 can be treated as a breach of planning control

Monitoring Fees

Councils increasingly charge monitoring fees (typically 1-5% of the total S106 value) to fund the officer time needed to track compliance. This is itself a contentious issue, but the practice has been endorsed by recent court decisions.

Modifying or Discharging S106 Agreements

Section 106A: Modification and Discharge

After 5 years, any party to a S106 agreement can apply to the council to have it modified or discharged. The council assesses whether the obligations continue to serve a useful purpose.

Common reasons for modification:

• Changed economic conditions making contributions unaffordable
• Infrastructure already provided by other means
• Changes to the development that alter the impact
• Obligations that have become impossible to comply with

Section 106BA: Affordable Housing (Historical)

Between 2013 and 2016, a special provision allowed developers to apply to reduce affordable housing obligations on the grounds of viability. This has now expired, but some applications from this period are still working through the system.

What Happens to the Money?

S106 financial contributions must be spent on the purposes specified in the agreement. If the council fails to spend the money within the agreed timeframe (typically 5-10 years), it must be returned to the developer with interest.

Councils are required to publish an Infrastructure Funding Statement annually, showing:

• How much S106 money was received
• How much was spent
• What it was spent on
• How much is unspent and allocated
• What infrastructure is planned

These statements are public documents — you can check how S106 money is being spent in your area.

Frequently Asked Questions

Does Section 106 apply to small developments?

Most S106 obligations are triggered by developments of 10 or more dwellings (or sites of 0.5 hectares or more). Smaller developments generally don't attract S106, though there are exceptions in designated rural areas where affordable housing contributions can be required for schemes of 6-9 dwellings.

Can I see the S106 agreement for a development near me?

Yes. S106 agreements are public documents. You can request a copy from the council's planning department. Many councils now publish S106 agreements online alongside the planning application documents.

How much does Section 106 typically cost a developer?

This varies enormously. For a small housing development, S106 costs might be £5,000-£20,000 per dwelling. For major schemes, affordable housing alone can represent 20-40% of the total development, with additional contributions of £10,000-£30,000+ per dwelling for infrastructure.

Can residents influence what S106 money is spent on?

Indirectly, yes. Parish and town councils are consulted during planning applications and can request specific contributions. Community groups can lobby their ward councillors. Neighbourhood plans can also influence how contributions are directed in the local area. If you want to engage more directly, our guide on how to object to a planning application covers how to raise concerns about inadequate S106 provisions during the consultation period.

What's the difference between S106 and CIL?

S106 is negotiable, site-specific, and used mainly for affordable housing and bespoke infrastructure. CIL is a fixed-rate charge per square metre used for general infrastructure. Many councils use both. S106 cannot be used to fund infrastructure that's already on the council's CIL spending list (to avoid "double-dipping").

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Further Reading

Related Guides

• How to Appeal a Planning Decision
• Permitted Development Rights Explained
• Planning Enforcement: When Rules Are Broken
• What Are Material Planning Considerations?
• Conservation Areas and Planning
• The Planning Permission Process — Complete Guide
• How to Object to a Planning Application
• New Housing Development Near Me

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