16 January, 2017
On 9th January, Inside Housing published the results of a recent survey. The survey asked local authorities if they had processes in place to ensuring developers provide the social housing they are required to under s. 106 Agreements.
Of the 41 councils asked, most confirmed that they had proper processes in place or employed full-time planning obligations officers to conduct site visits, however, 14 authorities (including Manchester, Sheffield and Leeds) were unable to confirm either way.
Only one council, London-based Bexley Council, admitted to having no monitoring system in place. Although, according to Inside Housing, a spokesperson from Bexley did say "my colleagues in housing strategy have a close working partnership with our local housing associations and meet frequently to discuss current and approved planning applications with affordable housing provision."
Whilst it may be easy to shrug the Inside Housing's investigations off as a problem for councils, and one that should be dealt with between them and developers, it does pose an issue for registered providers of social housing.
The burden of the obligations under a s.106 Agreement 'run with the land' (i.e. they become the responsibility of any subsequent purchaser) and this means any unfulfilled obligations will be passed to RSLs and, in turn, shared ownership leaseholders. If any covenants or obligations under the s.106 Agreement have not been complied with, the council may come to you as owner to fulfil those obligations which can range from development of housing to off-site contributions easily totalling tens of thousands of pounds.
s.106 Agreements are listed as local land charges. This means that they will be listed on a local search and, if you have one carried out, you will be deemed to be aware of the contents of the agreement. Most people are aware that the agreement needs to be agreeable to your lender (i.e. it will need to include appropriate mortgagee exclusion clauses) but you and your solicitor should also be ensuring that the obligations have been complied with. This means obtaining confirmation of discharge from the developer or, ideally, directly from the council - this can be very difficult, but it is certainly worth the effort!
Ensuring that the obligations under s. 106 Agreements are enforced is a key part of due diligence for a site and the research revealed by Inside Housing merely highlights its importance. Whilst it is comforting that the majority of councils asked do have a system in place, this should by no means be considered a substitute for full and proper due diligence when purchasing a site.
You can read the full Inside Housing piece here.
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