Limitation on monitoring fees in section 106 agreements

In the recent case of Oxfordshire CC v Secretary of State for Communities and Local Government the High Court held that a Planning Inspector had not misinterpreted Regulation 122 of the CIL Regulations (‘the Regulations’). The Inspector had determined that a local planning authority was not entitled to fees for administering/monitoring planning obligations in a section 106 agreement.

The section 106 agreement included various infrastructure related provisions, and a contribution of £3,750 towards administration and monitoring.   The monitoring sum was calculated as a percentage of the total contributions payable under the agreement and did not, in the view of the Inspector, reflect an accurate assessment of the true costs involved in the monitoring of the obligations in the section 106 agreement.

The agreement contained a “blue pencil clause” allowing the Inspector to strike out contributions that did not meet the Regulation 122 tests.  This led the Inspector to strike out the monitoring and administration fee, concluding that it did not meet the test of necessity:

“With regard to…the payment of monitoring fees…the payment of a monitoring/administration fee [is] not necessary to make the development acceptable in planning terms”.

The claimant authority sought to overturn the Inspector’s decision claiming that the Inspector had misinterpreted Regulation 122 and had made an irrational decision in finding that, whilst some of the obligations met the necessity test to, the monitoring fee did not.

The application was refused by the High Court on the basis that there was nothing in the legislation which permitted a local planning authority to seek monitoring fees as planning obligations.  Contrast this with the fact that there are provisions which allow for the payment of fees relating to planning applications, discharge of conditions etc.  The Court held that the administration, monitoring and enforcement of planning obligations was part of a local authority’s functions and therefore they should make provision for this in their budget.

In addition the Court held that the allowable contributions in this case related to single payments which were payable prior to commencement of development and ongoing maintenance was not required.

This is by no means the end of monitoring contributions. However, for more modest schemes with, in particular, up front obligations it is clear that a standardised monitoring fee may not meet the statutory requirements.

Please click here for a link to the judgment. 

For more information about any of the issues raised in this article, please contact Mark Howard at mark.howard@michelmores.com