Developer Prevented from Avoiding Affordable Housing and Education Duties

The Secretary of State’s Inspector has upheld Thurrock Council’s decision to refuse a request to revise-down education and affordable housing commitments on the grounds that doing so would impact the viability of the development.

The appeal concerns a request by Ingleton Luxury Homes Lawns Court Ltd to modify a planning obligation (s.106 agreement) related to the construction of 18 dwellings at Lawns Court, East Tilbury, Essex. The original obligation (agreed in 2018) required payment of an index-linked contribution of £70 154, towards the provision of education in the district (“the Education Obligation”), and the provision of six affordable dwellings (“the Housing Obligation”). The Education Obligation was payable before the occupation of 50% of the market dwellings. The Housing Obligation required delivery before 33% of the market homes were occupied. The developer built out the entirety of the market dwellings without paying the Education Obligation or delivering the Housing Obligation. It then sought to have the obligations varied on the basis that it was no longer financially viable to complete the development if they remained unchanged.

Section 106 of the Town and Country Planning Act provides for developers to agree binding unilateral obligations to offset the planning harms of proposed developments (thereby making the developments more attractive and securing planning permission). Section 106A empowers local planning authorities to agree variations of these obligations, inter alia, where the proposed variation will “serve the purpose” of the original obligation “equally well”. Section 106B provides for a right to appeal to the Secretary of State where the local authority refuses to agree a variation.

The Inspector’s decision turned on three key questions:

1. Whether the developer was required to argue the appeal on the basis of the application that it made to the Council or was entitled to vary and amend the proposal through the course of the appeal.
2. Whether (in respect of the Education Obligation) a variation which promised the same sum (still subject to indexation) but paid at a later date would serve the purpose of the original obligation “equally well”.
3. Whether a variation which proposed replace the Housing Obligation with an obligation to pay a commuted sum (roughly equivalent to the value of one dwelling) would serve the purpose of the original obligation “equally well”.[1]

As to the basis of the application: The Appellant argued that it was entitled to advance its appeal on the Housing Obligation on the basis of a different commuted sum than that proposed in its initial application to the Council. It argued that the Inspector was entitled to impose any variation that he thought met the statutory test (regardless of whether it had been sought in the original application). The Inspector, siding with the Council, rejected this contention. He gave the following reasons: (a) Section 106B specifies that the appeal is in respect of the “modifications specified in the application”, (b) the variations advanced on appeal were “substantially different” from those sought in the application, and (c) it would, in any event, be procedurally unfair to follow the Appellant’s approach since the Council had not been given (And the statute did not provide for) an opportunity to consult on the new variations.

As to the Education Obligation: The Inspector rejected the Appellant’s argument that, given the monetary amount (adjusted for inflation) was the same, the variation served the purpose equally well. He agreed with the Council’s argument that delaying payment imposed a further “opportunity” cost on the Council, accepting the Council’s reliance on authority (drawn from commercial law) endorsing the principle that “a bird in the hand is worth two in the bush”.

As to the Housing Obligation: The Inspector’s decision on the proper basis of the appeal, in effect, disposed of this part of the Appellant’s case. The Appellant proposed a higher commuted sum at appeal than it had sought in the original application, thereby admitting that the sum proposed at the application stage would not serve the purpose of the original obligation equally well. The Inspector also rejected the Appellant’s substantive case on this point, finding that the expert evidence on which it relied had double counted certain costs and provided a “random lumped figure” for certain costs rather than the itemised schedule that would be expected. The Inspector, in general, preferred the evidence of the independent expert engaged by the Council (Bespoke Property Consultants).

This case is probably most significant for the Inspector’s decision to adopt the approach, urged by the Council, of applying principles established in other parts of planning (and commercial) law in the context of an appeal under section 106B. The Inspector’s decision on the procedural issue was rooted in the language of the statute but he also adopted the procedural safeguards imposed on appeals under section 78 in R (Holborn Studios Ltd) v Hackney Borough Council [2017] EWHC 2823 (Admin) (this case was relied on in oral argument by the Council). The Inspector’s decision on the Education Obligation adopted the principle (again, urged by the Council) advanced, in a commercial context, in Buttle v Saunders [1950] 2 All ER 3.[2] The Council and Appellant approached the case in very different ways: The Appellant urged the Inspector to focus solely on the expert evidence and, where necessary, adopt a “stand back” approach based on his own view of what seemed reasonable in the circumstances. The Council, by contrast, argued that the Inspector must hew to the language of the statute and established public law principles (even where established in a different, but comparable, context). The Inspector preferred the latter approach. There is a tendency to treat planning as a jurisdiction apart. This decision shows that it remains a public law jurisdiction and must be treated as such.

Sam Fowles acted for the successful Council in this appeal, against Richard Turney KC of Landmark Chambers.

[1] Several lines of argument were not considered by the Inspector because they were advanced on an “in the alternative” basis and it was not necessary to do so since the appeal had already failed. These included the question of whether viability can, in any case, be a material consideration in an appeal under section 106B. That issue was considered in detail in the Chilmington Green appeal.

[2] The same principle has been applied in a local government (but not planning) context in Cilldara Group Holdings v West Northamptonshire Council and ors [2023] EWHC 1675 (Admin) and Borough of Telford and Wrekin and ors v Secretary of State for Communities and Local Government [2014] EWCA Civ 507