Are monitoring and administration fees justified anymore?
Planning law is an ever changing beast and at no time before, that I can remember, have changes been more abundant than the weeks leading up to the general election. It would be a full time job to constantly comment on all the changes. However, the courts have been doing their bit too and the case of Oxfordshire CC v Secretary of State and CALA and others, in February 2015, should certainly be of interest to all developers.
In summary, it casts doubt on the justification and ability of local planning authority requests for monitoring and administrative fees in section 106 agreements.
The section 106 in this case required monitoring and admin fees for monitoring the payment of financial obligations, all of which were payable on or before commencement of development. During the course of the planning appeal and court case the authority sought to rely on a number of arguments to justify its request. These included:
- reference to its planning obligations supplementary planning document
- the cumulative effect of monitoring and admin many section 106 agreements annually, each with individual obligations, was burdensome
- that costs incurred in seeking to enforce planning obligations should be considered as part and parcel of the payment
- that it was an essential requirement under planning statute
- reference to wording in the superseded Circular 05/05
- reference to the Planning Obligations: Practice Guidance (July 2006)
- reference to the standard tariffs being based on a sliding scale and percentage of the value of the financial contribution.
Despite such arguments the court could not find "any indication that the planning authority could or should charge the cost of admin and monitoring to the developer". It was also instructive that nowhere in the provisions for the payment of fees for the discharge of local planning authority functions were admin and monitoring charges covered. The court went further and concluded it was "envisaged that the cost of essential administration, monitoring and enforcement would be met out of the authority’s own budget".
It was accepted that only in exceptional circumstances would the request for monitoring and admin fees meet the tests of a valid obligation now set out in Regulation 122 of the Community Infrastructure Levy Regulations 2010. There may be genuinely exceptional reasons, for example a very complex development and section 106 agreement or a very small authority dealing with an exceptionally large development that doesn't routinely have commensurate resources available.
So, the position would seem clear and accepted by local authorities? In practice, my experience is that this is not the case.
Considerations are complicated by bullish local authorities that may seek to threaten an applicant with the refusal of permission due to attempts to omit the provision. Developers may simply want to see planning permissions granted so that they can continue to build and turn a profit, releasing money for the next development. To that extent a commercial decision may be taken and the point conceded in the course of negotiation.
However, in an appeal scenario a more confrontational approach may be taken. A section 106 agreement could provide for monitoring and admin costs to be conditional on the Inspector expressly finding that they are justified and exceptional in his decision letter.
Yet again, the old planning adage that matters should be considered on a case by case basis has never rung more true. However, it is equally clear that such practice is now questionable and something on which planning authorities can no longer rely.