Section 106 Planning Restriction

Posted on 19 October 2010 by Duncan

My parents are are are being asked by their local planning department to enter into a section 106 agreement in respect of a planning application on their property.  They have an equity release mortgage through Northern Rock who are refusing to enter into the 106, forcing my parents to pay the 106 fees up front. They intend to sell the property with planning permission attached and have no intention of building the proposal themselves. I feel this is grossly unfair. Is this legal?

Hi Duncan

A Section 106 agreement is a planning obligation placed on a development by the Local Authority and is most commonly used to ensure that the development meets local and national requirements for affordable housing.  However, they may also cover other situations such as the improvement of the local transport network.

Not only is this legal, but the Council would be failing in it's duties if it did not insist on such an agreement.  As far as Northern Rock are concerned, they have an existing secured charge on your parents property and an interest in it's value and marketability. A Section 106 agreement can detrimentally effect the value and they are under no obligation to agree to the planning restriction.  Indeed, if they feel that your parents are in breach of their mortgage covenants they could ask for the loan to be repaid.

Presumably, your parents have applied for planning permission in an effort to increase the value of their property before they sell it? In this instance, the decision for your parents is between paying any costs and achieving a higher sale value and leaving things alone and selling without at a lower price.

I recommend that your parents take independent legal advice in this matter.

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