My husband loves to ask how it is possible to specialise in one section of one Act. As someone who has spent much of the last 15 years or so negotiating Section 75 Agreements, I can confirm that one of the principal features of these contracts is the length of time it normally takes to conclude them. Recently however, a change of practice by planning authorities (imposing time limits on conclusion) has resulted in some clients being up against a deadline at a time when they have still not fully understood the implications of that to which they're about to agree. More on that later.
What is a Section 75 Agreement?
To go back to first principles, a Section 75 Agreement is an Agreement entered into in the context of a planning application by a landowner, which restricts or regulates activities on his land, and/or obliges him to do certain things, or pay certain sums of money.
Typically, such Agreements are used for one of two purposes, either:-
- to restrict the use that can be made of a building - for example, the new house on a farm can only be occupied by someone working on the farm; or
- to secure payment of "contributions" towards facilities which will be affected by the proposed development - for example, a payment towards new school classrooms that will be required for the children who will live in the new houses.
Section 75 Agreements bind successor owners
Crucially, these Agreements are recorded against the landowners' title. This means that they become part of the title deeds, and will be binding on future owners. It also means that any holder of a mortgage over the property will need to consent.
These two facts often come as a surprise to clients who were initially delighted to have received the news that their planning application had been approved, subject only to what they thought was a minor matter - the entering into of a Section 75 Agreement (another thing that comes with long experience in the law, is the repetition of the same advice so regularly that your colleagues end up sniggering under their desks when they hear it for the nth time in a week. One of mine is "This isn’t a Willy Wonka golden ticket").
So - having received that killer comment from me - diplomatically put of course - and having not laughed so heartily as my colleagues - where this recent rash of clients have found themselves is with me explaining that:-
- "no", the conditions the planners want to cover in a Section 75 Agreement will not apply only for so long as they are owners, and
- "yes", they are possibly unacceptable to a mortgage lender, and therefore
- "yes" that does mean that it might not be worth building the development after all.
Why has the urgency crept in?
The urgency arises because it is becoming more and more common for local authorities, when deciding to grant planning permission subject to a Section 75 Agreement being entered into, to impose a time limit of, say, 4 or 6 months. If the Agreement is not signed within that time, the planning application will be refused. Unfortunately the clients have not understood the implications until late in the day.
What can be done and when?
My first aim is to spread the word about what it is that Section 75 Agreements do. As I say, they are not a golden ticket that can be exchanged for planning permission. They have potentially long lasting consequences, and so it is important that any landowner being asked to enter into one consults his solicitor before the Planning Authority determines his application. Dialogue with the planners, up front, before the planning application goes to committee is by far the best way of negotiating the most favourable terms.
Secondly, even after the local authority has produced the terms of its proposed Section 75 Agreement, it is often possible for the landowner's solicitor to negotiate concessions, or to revise the wording to make it more palatable to the current and future owners, and indeed to mortgage lenders.
Thirdly, we can look at the "tests" that a Section 75 Agreement must pass in terms of planning policy. It may be that, following discussion with the local authority, it can be agreed that at least certain elements of the proposed Agreement are not necessary, or are inappropriate. One of the principal tests is the "reasonableness test". Some clients may feel surprised that their view of what is reasonable is not the test that has to be passed, but this and certain other crucial tests have to be looked at. Is the Agreement necessary, does it have a planning purpose, does it relate to the proposed development and is it related in scale and kind to the proposed development?
Finally, while there is no procedure for "appealing" the requirement for a Section 75 Agreement, there is now the option of making an application to have the Agreement modified or discharged, after it has been entered into. Depending on the circumstances, the best strategy can be to enter into the Agreement now, on the basis that if there is a change in circumstances in the future, it may be possible to apply for a modification of the terms of the Agreement.
Section 75 Agreements do perform a useful function
To return to Willy Wonka, Sam Beauregarde, the indulgent father of Violet, famously said "Don’t talk to me about contracts, Wonka, I use them myself. They are strictly for suckers." Section 75 Agreements may not be Golden Tickets but nor are they for suckers. They are simply contracts that need to be carefully negotiated, like any others, - and, when they are, they can unlock planning permission, with benefit to both the landowner/developer, and the wider community.