Planning decisions can involve legal and financial requirements as well as the grant of planning permission itself. These requirements are principally secured through planning obligations, including Section 106 agreements, and the Community Infrastructure Levy. Although they can apply to the same development, they serve different purposes and operate in different ways.

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What is a Section 106 agreement?

 

A Section 106 agreement is a legally binding agreement used to secure planning obligations connected with a development. It is made under section 106 of the Town and Country Planning Act 1990, usually between a local planning authority, a landowner and, where relevant, a developer or mortgage lender.

 

The agreement can require particular works to be carried out, financial contributions to be paid or restrictions to be placed on the use or development of the land.

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When is a Section 106 agreement required?

 

A Section 106 agreement is normally used where a planning condition would not adequately address the effects of a proposed development.

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Common obligations include:

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• the provision and retention of affordable housing;

• financial contributions towards local infrastructure;

• highway, public-realm or accessibility improvements;

• restrictions on the occupation or use of a development;

• employment and training measures;

• environmental mitigation;

• travel plans and monitoring arrangements; and

• the provision or management of open space.

 

An agreement may contain requirements that must be met before planning permission is granted, development begins, a particular phase is commenced or the completed development is occupied.

 

What are the legal tests?

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A planning obligation may only constitute a reason for granting planning permission where it is:

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• necessary to make the development acceptable in planning terms;

• directly related to the development; and

• fairly and reasonably related in scale and kind to the development.

 

These tests are contained in regulation 122 of the Community Infrastructure Levy Regulations 2010 and reflected in national planning policy.

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A local authority cannot properly use a Section 106 agreement simply to obtain benefits that have no sufficient relationship with the proposed development.

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How is an agreement completed?

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The terms are normally negotiated while the planning application is being considered. The agreement must be completed as a deed and usually binds the land rather than only the person who signed it. Its obligations can therefore affect future owners.

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Anyone with a legal interest in the land may need to be a party. A lender may also be required to join so that the obligations continue to bind the land if the lender takes possession.

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Planning permission may be approved subject to the completion of the agreement. The decision notice is then issued after the agreement has been signed by all parties.

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What is a unilateral undertaking?

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A unilateral undertaking is a planning obligation offered by a landowner without the local planning authority entering into the deed as a contracting party.

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It can be used during a planning application, but is particularly common in planning appeals. For example, an appellant may submit a unilateral undertaking to secure an affordable housing contribution or other mitigation required if the appeal is allowed.

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The obligation must still satisfy the relevant legal and policy tests. Offering an undertaking does not require the decision-maker to accept that its provisions are necessary or sufficient.

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Can a Section 106 agreement be changed?

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The parties may agree to modify or release an obligation at any time through a deed of variation.

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There is also a statutory procedure for seeking the modification or discharge of an obligation once the applicable period has expired. For obligations entered into on or after 6 April 2010, this is generally five years from the date on which the obligation was entered into. A right of appeal may arise if the authority refuses the application or does not determine it within the prescribed period.

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Whether an obligation should be changed depends on its wording, purpose, the development already undertaken and the current planning circumstances.

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What is Community Infrastructure Levy?

 

The Community Infrastructure Levy, usually called CIL, is a locally set charge on certain new development. It allows charging authorities to raise funds for infrastructure needed to support development in their area.

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Unlike most Section 106 contributions, CIL is calculated using a published charging schedule rather than negotiated separately for each planning application.

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Where does CIL apply?

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CIL only applies where the relevant charging authority has adopted a charging schedule. In London, a development can potentially be liable for both borough CIL and the Mayor of London’s CIL.

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Charging schedules usually set different rates according to the type, size and location of development. A rate may be £0 per square metre for some forms of development.

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CIL generally applies to development that creates at least 100 square metres of new gross internal floorspace or creates a new dwelling, although the detailed rules contain exemptions, reliefs and exclusions.

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How is CIL calculated?

 

CIL liability is broadly calculated by applying the relevant rate to the development’s net additional floorspace. The statutory formula also takes account of indexation.

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Existing floorspace may sometimes be deducted, but this depends on matters including its lawful use and the extent to which it has been in use during the relevant period. The treatment of existing buildings can therefore have a significant effect on the final liability.

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The charging authority normally issues a liability notice once planning permission has been granted. Liability generally becomes payable when development commences, subject to any instalment policy operated by the authority.

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What must a developer do?

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CIL is procedural as well as financial. The relevant notices must be submitted at the correct stages.

 

These commonly include:

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• an assumption of liability notice;

• a commencement notice submitted before development begins; and

• an application for any available exemption or relief before commencement.

 

Failure to follow the correct process can result in the loss of relief, immediate liability for the full amount, surcharges and interest.

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“Commencement” has a legal meaning and can include carrying out a material operation such as demolition, excavation or foundation works. It should not be assumed that only substantial construction work will trigger liability.

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Are exemptions and reliefs available?

 

Depending on the development and the local charging arrangements, relief or exemption may be available for matters including:

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• social housing;

• charitable development;

• self-build housing;

• residential extensions; and

• residential annexes.

 

The qualifying conditions and procedural requirements must be satisfied. Some reliefs can be withdrawn if a disqualifying event occurs during a specified period after the development is completed.

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What does CIL fund?

 

CIL receipts may be used to fund infrastructure that supports the development of an area. This can include transport, schools, health facilities, open space and other strategic or local infrastructure.

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A proportion of CIL receipts is generally passed to the neighbourhood in which the development takes place. The applicable proportion depends on local circumstances, including whether a neighbourhood plan is in force.

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What is a planning obligation?

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A planning obligation is a legally enforceable commitment made under section 106 of the Town and Country Planning Act 1990. It may be created through a bilateral Section 106 agreement or a unilateral undertaking.

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“Planning obligation” is therefore the legal concept. “Section 106 agreement” describes one of the principal documents used to create those obligations.

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What can a planning obligation do?

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Section 106 permits an obligation to:

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• restrict the development or use of land;

• require specified operations or activities to be carried out;

• require land to be used in a specified way; or

• require money to be paid to the local planning authority.

 

An obligation may apply indefinitely or for a specified period. It may impose continuing requirements, such as retaining affordable housing, or requirements triggered at particular stages of a development.

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How does a planning obligation differ from a planning condition?

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A planning condition is imposed by the decision-maker on the grant of planning permission. A planning obligation is entered into by a person with an interest in the land.

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Conditions are generally preferable where they can properly and effectively control the relevant matter. Planning obligations are used where a condition cannot adequately secure what is required, particularly where payments, transfers of land or more complex long-term arrangements are involved.

 

Both must be necessary and relevant to the development. A planning obligation should not be used to circumvent the legal and policy tests governing planning conditions.

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How do planning obligations differ from CIL?

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CIL is usually a standardised, non-negotiable charge calculated under an adopted charging schedule. Planning obligations are site-specific commitments designed to address the particular effects of a development.

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CIL does not remove the need for Section 106 agreements. A development may be required to pay CIL and also enter into planning obligations, provided that the respective requirements are lawful and do not amount to inappropriate duplication.

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Affordable housing is generally secured through planning obligations rather than CIL. Section 106 agreements also remain important for site-specific infrastructure and mitigation that is necessary to make a development acceptable.

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Can planning obligations affect development viability?

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Planning obligations can have substantial effects on development costs and viability. National policy expects affordable housing requirements and other contributions to be established primarily through the plan-making process so that they are reflected in land values and development decisions.

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Where a proposal does not comply with relevant policy requirements, viability evidence may sometimes be submitted. Whether a viability assessment is necessary and how much weight it receives will depend on the development plan, national policy and the circumstances of the proposal.

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Viability discussions can affect the content of an agreement, including the level or timing of contributions and the use of review mechanisms. They do not automatically displace properly adopted planning policies.

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Key points

 

• A planning obligation is a legally enforceable commitment made under section 106 of the Town and Country Planning Act 1990.

• A Section 106 agreement is a common means of securing planning obligations between a local authority and parties with interests in the land.

• Obligations must be necessary, directly related to the development, and fairly and reasonably related in scale and kind.

• CIL is a separately calculated infrastructure charge applying in areas with an adopted charging schedule.

• A development can be subject to both CIL and Section 106 obligations.

• CIL notices, exemptions and commencement procedures must be handled carefully because procedural mistakes can have significant financial consequences.

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When should professional advice be sought?

 

Planning and legal advice should be obtained early where a development is likely to require affordable housing, significant mitigation or infrastructure contributions. Early review can identify likely obligations, establish potential CIL liability and ensure that the development programme allows sufficient time to negotiate and complete the necessary legal documentation.

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Updated 27 July 2026