Drafting section 106 agreements – more lessons

The Court of Appeal issued its decision in Savage v. Mansfield [2015]EWCA Civ 4 on 15th January. The case is interesting for those involved in section 106 agreements for two reasons, both dealt with in a few admirably pithy paragraphs at the end of the judgment of Lord Justice Lewison.

The first is that the agreement contained a covenant by the landowner not to claim compensation if the permission was revoked. That provision was redrafted before the decision to say that the landowner would repay any compensation. That is because, though the judge refrained from pointing this out, the way it was originally put was simply not within s.106. The second formula is within s.106(1)(d) – a payment to the planning authority. There is earlier authority on just this point – R v. Somerset County Council, ex p Dixon [1997] JPL 1030.

The second point concerns Reg 122 of the Community Infrastructure Regulations 2010 which enshrines the policy tests for s.106 agreements in law and says that a planning obligation which fails to meet the tests of necessity, direct relation to the development and reasonableness, may not be taken into account as a reason to grant permission. The provision was addressing the possibility that the permission which might have to be revoked under the Habitats Regulations, in which case in the normal run of affairs the planning authority would have to pay compensation. Lewison LJ held that because revocation could only occur to the extent the development was not built the obligation could not have been a factor which was taken into account in deciding to grant permission. It did not overcome a planning objection, and therefore Reg 122 was not engaged. Now this strikes me as odd, because the argument against the clause was precisely that – it did not overcome a legitimate planning objection, and was not necessary to do so.

Lewison LJ went on to point out that in the reasons for the grant of permission the clause was not mentioned, which sounds like pretty good evidence that it was not taken into account in the decision to grant. I am no fan of Reg 122, and it is spawning much litigation on an area which was previously quiet, but does not the other reasoning in this decision and Derwent Holdings v. Trafford BC [2011]EWCA Civ 832 undermine Reg 122, whose intent appears to be to outlaw all planning obligations which do not meet the policy tests?