Developers can only be required to contribute to the cost of community facilities and infrastructure if they serve a useful purpose that is connected to the project in hand. In a guideline decision, however, the High Court has ruled that such a purpose may include the fair recovery of public funds.
As long ago as 1998, a council had granted consent for a mixed employment and residential development, subject to an agreement under Section 106 of the Town and Country Planning Act 1990 that the developer would pay 75 per cent of the cost of constructing an access road. The road had been built by the council, but the planning permission had not been implemented.
The developer’s obligation to pay almost £460,000 towards the cost of building the road was rolled forward by the adoption of successive Section 106 agreements in respect of further planning permissions that were granted over the years, the last of which was for construction of 215 new homes on the site. It was agreed that each of those agreements extinguished its predecessor.
The developer paid £160,000 to the council, but argued successfully before a government inspector that it was not obliged to pay the balance. The inspector ruled that the latest Section 106 agreement served no useful purpose because the road had by then been in place for many years. It was no longer needed to make the development acceptable and a requirement to pay towards the cost of the highway works bore no direct relationship to the development that was then proposed.
In upholding the council’s challenge to that decision, the Court noted that the Act does not define or expressly limit what is, or is not, a useful purpose within the meaning of Section 106. The obvious purpose of the latest Section 106 agreement was to enable the council to recover public money expended on the new road, construction of which had made the site a candidate for development in the first place.
The council had agreed to delay enforcement of the payment obligation in order to assist the developer and to encourage appropriate development of the site. Were the developer to escape that obligation at this stage, the public interest would suffer a considerable disservice. The Section 106 agreement served a useful purpose, both in planning terms and otherwise, and was thus enforceable.