Lead Forensics
Prettys Solicitors Ipswich

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House Purchasers Liability for Planning Obligations

Are house purchasers on new residential developments liable for breaches of any S.106 planning obligation (including financial contributions) that relates to the housing development?

Planning obligations (also known as S106 agreements) are registerable as local land charges and should be revealed in the Local Search carried out before contracts are exchanged. If the search shows there is a planning obligation affecting the land, careful checks should be carried out to ascertain if the obligations are outstanding since If the developer defaults the local planning authority (LPA) may be able to pursue future landowners to secure compliance with the section 106 agreement. So the Answer is “Yes” unless a specific exclusion clause applies.

A section 106 agreement forms part of the planning process and is ancillary to a planning permission sought by a developer. It is a bilateral agreement entered into between a developer and an LPA under section 106 of the Town and Country Planning Act 1990 (TCPA 1990). A section 106 agreement enables an LPA to secure restrictions upon the use of the land or the operation of the development or, to make financial contributions towards local facilities and infrastructure.

Planning obligations bind successors in title i.e. future purchasers of any part of the land that is subject to the obligations, as they are deemed to run with the land.  This means that a planning obligation can be enforced against both the original covenanter (this is usually the development site owner) and against anyone who subsequently acquires an interest in the land. Therefore, even though if a subsequent purchaser of an individual house was not party to the section 106 agreement that is subject to the section 106 agreement, if the developer, for example, is not financially sound or cannot be located, the LPA could take enforcement action against the house purchaser as the successor in title.

The local planning authority’s enforcement provisions relating to planning obligations provide that:

Importance of checking for the risk of liability falling on individual house purchasers.

Checking the wording of a section 106 agreement that has been registered against the development site as a local land charge  to see whether all or part of the obligations are  enforceable against owner-occupiers of the housing development is essential.

Modern section 106 agreement drafting practice normally excludes purchasers of individual dwellings (and the lenders on the individual houses) from liability for some or all of the planning obligations.  This is usually because the local authority recognises that the houses or flats would be potentially un-mortgagable if a claim could be made against the owner. This does however needed to be checked very carefully, as not all planning obligations include the relevant exclusion clause, and there may be possible limitations on the operation of an exclusion clause.

The purchasers of the houses will have an interest in land and be bound by the section 106 obligations. It is possible for a person not to be bound by a planning obligation when they no longer have an interest in land (section 106(4), TCPA 1990) under the statutory release in section 106(4) of the TCPA 1990, provided that a breach has not already arisen.

If there is no owner-occupier exclusion, a request should be made for the LPA to enter into a deed of release from the section 106 agreement in respect of the purchasers ( and lenders) of  individual house plots.  Any variation must be made by deed; a section 106 agreement cannot be varied by a letter. This can be very time-consuming.

An indemnity in the sales agreement from the developer in relation to the future performance of any undischarged planning obligations is generally insufficient protection as the LPA is only likely to pursue individual house-owners if the developer that entered into the obligation is not worth pursuing, for example because the developer has subsequently become insolvent.

This article does not constitute legal advice and is published for general information only.

Based on an article published by Thomson Reuter Practical Law Company.

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