Getting section 106 agreements right

Section 106 agreements are the most significant mechanism for building affordable housing and local infrastructure in England, and their importance cannot be overstated.  

However, so far this year the planning system has come under increasing strain. Published in January and updated in March, the government's roadmap for section 106 reform focuses on tackling some of the most common barriers to house building.  

This includes lengthy negotiations, inconsistent requirements between local authorities, and affordable homes remaining uncontracted where registered providers are unable or unwilling to acquire them. 

For surveyors and legal teams involved in these cases, this is not an abstract debate. The requirements are tied to a site, and when they are agreed, have a major effect on land value and project timelines.  

When issues around infrastructure and viability are left until the planning committee stage, negotiations can stall and significantly extend timelines. The timing of this government roadmap illustrates the reality of these pressures.  

Developers are required to provide at least 15 percentage points more affordable housing than local policy requires, up to a maximum of 50%. These obligations can significantly increase development costs, affecting both scheme viability and land values. 

This has major commercial and planning implications. Section 106 development accounts for a substantial share of the overall supply of housing. Of the 62,289 affordable homes built in England in 2023–24, 44% were funded through nil-grant section 106 agreements.  

One key element that the roadmap seeks to resolve is what happens to homes that are built but that no one will buy. Developers who have these uncontracted units must demonstrate that they have tried every means to find a registered provider.  

Developers must list any unsold or uncontracted section 106 affordable homes on the Homes England Clearing Service by 1 June 2026 for at least six weeks. If no buyer comes forward during that period, the local authority may agree to vary the original section 106 agreement. 

These requirements apply to new residential developments going through the planning process, rather than homes that have already been built or purchased. 

These local planning authorities are expected to take an evidence-based approach to what counts as a fair bid. The roadmap outlines viable evidence such as commuted sum policies, prevailing grant rates, independent surveyor valuations, and similar section 106 transactions.  

Any deed of variation is expected to be completed in 12 weeks and should include a safeguard that if homes are not built by 1 December 2027, then the scheme returns to the original tenure mix.  

For legal teams, the priority should be to ensure the section 106 agreement includes solid cascade mechanisms and clear variation procedures from the beginning, rather than relying on later amendments if a registered provider falls through.  

For surveyors, my recommendation would be to build this evidence trail into the appraisal from the outset rather than treating it as a backup. Marketing records, grant rates and comparable transaction evidence all carry significant weight and are not just negotiating assets.  

Developers are generally expected to make a return of 15% to 20% of gross development value. The guidance says viability assessments should clearly show land values, costs and profit assumptions, making it easier to check whether they are reasonable. 

The price that developers pay for the land is ultimately their responsibility and not the local authority's. This means that viability arguments on paying too much for a site are unlikely to carry much weight with planning committees or inspectors.  

Proposed reforms include tightening the rules on site-specific viability assessments so they can only be used in rare and exceptional circumstances. In practice, this would make it harder for developers to argue that affordable housing or other planning requirements should be reduced on viability grounds, requiring these costs to be factored into land values from the outset. 

This builds on the golden rules approach, which already places significant restrictions on viability negotiations in the green and grey belt. 

From a legal point of view, viability arguments that are not backed up by evidence are unlikely to persuade planning committees and may create problems later if the resulting obligations need to be enforced. 

What's crucial is that surveyors are brought in before terms are agreed and that viability is not seen as a fall back to fix  problems late in the planning process.  

These key legal checks are not just a box-ticking exercise. In Wright v Resilient Energy Severndale Ltd and Forest of Dean District Council (2019), the Supreme Court made it clear that planning permission cannot be granted on the argument of unrelated financial benefits.  

In this case a community wind turbine was proposed, with 4% of gross revenue resulting from it promised to a local community benefit fund. Any contribution put forward by a development must have a direct planning purpose to the development and be proportionate to its impact.  

The Supreme Court was unanimous in its decision that the turbine did not serve a genuine planning purpose.  

This case is an important reminder that planning obligations must be justified by the development itself and the development alone. If not, the planning permission is vulnerable to legal challenge.  

Where disputes arise over uncontracted homes, the roadmap directs parties to alternative dispute resolution rather than allowing them to simply become another source of delay. This should give more clarity and flexibility in the system, which is much needed. As ever, implementation and engagement will be key. 

For solicitors drafting alongside planning consultants and surveyors, early engagement is essential. Test potential heads of terms and viability before the application is validated, not after.  

This means confirming who needs to be party to the deed early, such as funders or any registered provider. Agreeing trigger and payment schedules as part of the initial negotiation is also recommended, even where detail is refined later.  

Doing your due diligence and creating a base of evidence of comparable transactions means you are aware of standards set out in past cases, with grant rates and cost data that will support the position if it is challenged.  

Stick to these rules and you are less likely to drift into the delayed disputes that the roadmap is trying to deal with. While you can never remove the inherent tension of section 106 agreements, you can avoid becoming unstuck late in the process.  

Early legal involvement can help identify and resolve title and drafting issues before submission, ensure all relevant landowners are included, and reduce the risk of delays caused by unclear or disputed section 106 obligations.

This is all to try to ensure that negotiations don't drift and that there is less tolerance for those that do. Detailed, well-evidenced engagement is no longer just good practice but is becoming a must for a workable deal.  

The earlier affordable housing, infrastructure contributions and viability assumptions are agreed, the greater the certainty for everyone involved. Resolving these issues upfront reduces the risk of delays, renegotiations and legal challenges later in the process.