Section 106 agreements: what they are and 3 ways they affect your home purchase

A Section 106 agreement is a legal contract between a council and a developer, signed when planning permission is granted. It sets out what the developer must provide alongside the new homes—affordable housing, parks, schools, road improvements—to make the development acceptable. Albert Street walks through what these agreements contain, how they shape the estate you might move onto, and what to check before you buy.

The planning obligation behind most housing estates

When a developer applies for permission to build, the council weighs the impact on local services, roads and green space. A large development increases demand for school places and strains junctions. Section 106 agreements mitigate that impact by requiring the developer to contribute infrastructure, public space or affordable homes as part of the scheme.

The obligations are negotiated case by case. One development might deliver a playground and widen a junction; another funds a GP surgery extension or sets aside flats for social rent. The agreement is recorded on the Land Registry title and binds future owners of the land, not just the original developer.

These contributions do not appear on your purchase contract, but they determine what facilities arrive with the estate and when. A promised community centre delayed by viability reviews will not open the day you move in, and that affects daily life more than any brochure suggests.

Affordable housing within the development

Most Section 106 agreements require a percentage of homes to be sold or rented at below-market rates. The exact share depends on council policy—some ask for a third of all units, others for a quarter. Affordable housing can mean shared ownership, social rent managed by a housing association, or discounted market sale.

The tenure mix is written into the agreement. A buyer of a market-rate home on the same estate shares communal areas, access roads and green space with affordable tenants. Estate management charges apply to all, though service-charge structures vary. Check the development's section plan: affordable blocks are sometimes clustered, sometimes interspersed, and that layout shapes the feel of the neighbourhood.

Developers sometimes renegotiate the affordable quota mid-build, citing viability. If construction costs rise or sales slow, they return to the council and argue the original percentage is unaffordable. Councils may agree to reduce the number of affordable homes or accept a cash payment instead. That renegotiation is public record, and reading it tells you whether the estate you are considering will deliver what was first promised.

Infrastructure promises and their timetable

Section 106 agreements tie infrastructure to occupation. A new primary school might be required before the five-hundredth home is occupied; road widening before the first resident moves in. These milestones are called trigger points, and they bind the developer legally.

Delays happen when a developer phases construction differently from the original plan, or when funding for off-site works—improvements to a distant roundabout, for instance—depends on contributions from multiple developments. A promised bus route might wait for another estate two miles away to reach its own trigger. The council's planning portal publishes monitoring reports that track whether obligations have been met. Read them before you commit to a purchase.

Some contributions are financial rather than physical. The developer pays a sum into the council's fund for education, healthcare or biodiversity offsetting, and the council spends it according to need. You will not see a plaque crediting the development, and you may not know the money was spent locally at all. Financial contributions offer flexibility but less certainty that the estate itself gains tangible benefit.

What to check before buying on a Section 106 estate

1. Request the Section 106 agreement from the council. Planning departments hold copies on file; some publish them online alongside the original permission. The document runs to dozens of pages, but the schedule at the back lists every obligation, its trigger point and its status.
2. Ask the developer which obligations have been discharged. Discharged means the council has confirmed the work is complete or the payment made. Undischarged obligations remain outstanding, and if the developer enters administration before completing them, they may never be delivered.
3. Check the estate management structure. Some Section 106 sites are adopted by the council—roads, lighting and green space become public—while others remain private, managed by a company funded through annual charges. Private estates mean you pay twice: council tax and a separate levy for services the council would normally provide. The agreement itself does not always clarify adoption; your conveyancer must confirm it with the developer and the council's highways team.

When viability reviews rewrite the deal

Viability reviews let developers argue that market conditions have changed since permission was granted, making the original Section 106 unaffordable. The council appoints an independent surveyor to examine the developer's costs, sales values and profit margin. If the review concludes the scheme is unviable, obligations can be reduced or deferred.

These reviews are confidential during negotiation but become public once agreed. A reduced affordable-housing quota or a cancelled community building changes what the estate offers. Buyers relying on the original permission's promises may find themselves on a different development entirely. Search the council's planning portal for any viability review related to your site, and read the outcome before exchanging contracts.

Some agreements include clawback clauses. If the developer's profit exceeds a set threshold—because sales were stronger than forecast—the council can claw back additional contributions. That money might fund the infrastructure originally cut. Clawback happens after most homes are sold, so early buyers see the reduced scheme, while later changes benefit residents who arrive afterwards.

How Section 106 differs from the Community Infrastructure Levy

The Community Infrastructure Levy is a standard charge per square metre of new floorspace, set by the council and paid by the developer at commencement. The money funds borough-wide infrastructure—transport, schools, health facilities—rather than site-specific obligations. Many developments are subject to both CIL and Section 106, but the two cannot double-charge for the same thing.

Section 106 is negotiated; CIL is fixed. That makes CIL more predictable but less tailored to a site's specific impact. A large greenfield estate on the edge of town still needs its own access road and drainage, and Section 106 secures those. CIL funds the new secondary school serving several neighbourhoods. Your purchase price reflects both contributions, though neither appears as a separate line on the contract.

Reading the agreement yourself

Section 106 documents follow a template but vary in detail. The recitals at the front set out the background: the planning application reference, the parties, the date permission was granted. The schedule lists obligations, often in a table with columns for the obligation, the trigger and the party responsible. Look for words such as "prior to first occupation" or "before commencement of Phase Two"—they tell you what should already be in place.

Legal jargon fills the middle sections—definitions, dispute resolution, indexation of financial contributions. The schedule and any attached plans matter most. Plans show land to be transferred to the council, the location of affordable housing, and areas designated as public open space. Compare them to the developer's sales material: discrepancies are rare but not unknown, and they affect what you are actually buying into.

Some agreements include review mechanisms that let either party propose amendments if circumstances change substantially. A review is not automatic; it requires both sides to agree or, failing that, arbitration. Knowing a review clause exists warns you that the estate's final form is not yet fixed.

#Section 106 #Planning permission

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