Section 106 (S106) of the Town and Country Planning Act 1990 allows a local planning authority (LPA) to enter into a legally binding agreement or planning obligation with a landowner in association with the granting of planning permission. The obligation is termed a Section 106 Agreement. These agreements are a way of delivering or addressing matters that are necessary to make a development acceptable in planning terms.

What can they be used for?

They are increasingly used to support the provision of services and infrastructure, such as highways, recreational facilities, education, health and affordable housing. Typically, an S106 will require an element of any new housing to be sold to a specific customer (as described in the S106).These may be key workers such as nurses or police officers, or restrict ownership to existing members of the local community. The price covenant will be that they require the property to be sold at a discount of its open market value.

For example, a property that is worth £120,000 might be sold in conjunction with the S106 at £100,000. It is important to note that the buyer will never benefit from the discount as when they sell they will only receive the equivalent percentage back, and the property must be sold on in accordance with the S106 again.