Section 106 obligations and the land registry

Developers will be familiar with being required to enter into planning obligations under s106 and the Town and Country Planning Act 1990. These obligations can be entered into bilaterally, i.e. within an agreement between the council and the developer (and the land owner if different) or can be entered into unilaterally (by the landowners).

The planning obligations contained in s106 Agreements or s106 Unilateral Undertakings being derived from statutory rules take effect as local land charges and are registrable as such in the public registers maintained by the councils. Such entries are automatically made and are apparent to any prospective purchaser or lender who carries out a Local Authority search.

This means that any purchaser or lender should become aware of the existence of the s106 obligations.

The obligations contained in s106 Agreements automatically bind successors in title to the landowners who entered into the obligations without it being necessary for there to be any additional deed of covenant or other steps taken. S106 obligations therefore bind purchasers, mortgagees and tenants of the affected land.

Despite these structures created by the Town and Country Planning Act 1990 a number of planning authorities have made a policy decision to try to impose additional entries at the Land Registry.

This can take the form of a notice, either a unilateral notice or an agreed notice which is registered on the title or a restriction on the title preventing sales or other transaction unless certain consents or certificates are issued.

Under the Land Registration Act local land charges are classified as “overriding interests” and therefore, separate registration at the Land Registry is not necessary as they are automatically binding upon future owners and tenants of the affected land. Nevertheless many councils persist in adopting this approach and seek to impose such requirements on landowners seeking to agree planning obligations.

What is the problem with s106 obligations?

We start with the obvious remark that imposing a requirement for registration at the Land Registry falls outside the scope of what would be proper under regulation 122 of the CIL regulations on the grounds that it is not “necessary” to enable planning permission to be granted for the proposed development. There is no justification for arguing that long established rules about planning obligations binding future owners are deficient in any way.

Beyond that there are good practical reasons why a landowner should resist cluttering up their Land Registry title with details of s106 obligations.

1. In the case of a unilateral or agreed notice, buyers and lenders will be wary about inheriting liability and may insist upon the notice being removed before entering into any transaction, especially where the liability only affects land other than the area they are interested in for their particular transaction.
   
   It is commonplace for registrations to be made against the registered title without paying proper regard to the extent of the land affected by the registration. Where a land registry notice or restriction relates only to a small part of a large holding contained within a single registered title, it is common to see the whole of that title affected by the registration rather than just the small part which is relevant.
    
2. The reservations expressed above apply even more strongly in the case of a Land Registry restriction, taking into account the very significant impact of such restrictions on the ability to deal with the property. One approach adopted by those councils who have adopted a policy of imposing such restrictions is to force a buyer of the site to enter into a deed of covenant promising to comply, before they are willing to issue a certificate allowing a sale to be registered.
   
   Such a deed of covenant commits the new owner to complying with the terms of the s106 Agreement so far as they have not already been dealt with. There are several objections to this in principle:

• The operation of a s106 to the Town and Country Planning Act means that the obligations are automatically binding on future owners and therefore there is no need for a deed of covenant by a buyer at all.
• As indicated above the wording of many restrictions means that it often applies to the whole of a landowner’s title not just the area immediately affected by the planning application. A purchaser of a remote part of the title is still required to enter into a deed of covenant to comply with the s106 obligation affecting a piece of land they are not interested in.
• The standard wording of many restrictions can also effectively sterilise a site.

The wording commonly prevents carrying out any “disposition” until the relevant requirements have been complied with. The word “disposition” is often defined by reference to the Land Registry definition of the same word. Whilst convenient, this causes significant problems because the Land Registry definition includes leases, mortgages and granting of easements

If for whatever reason a landowner is willing to agree to enter into arrangements to register a restriction on the title it is imperative that they make sure that there is no impediment to the landowners entering into tenancies, mortgages or granting rights of way or other easements. In addition transactions in favour of utility companies should also be exempted from any such controls.

Cautious developers should therefore be very wary about accepting obligations in s106 Agreements or unilateral undertakings to register notices or restrictions on their Land Registry title.

Local Authorities who have adopted such a policy explain their approach on the grounds that many people involved in such transactions fail adequately to check the extent of s106 obligations, notice of which appears on the local land charges register and that by forcing them to sign a deed of covenant, the issue of compliance with the obligation is highlighted.

The fact that purchasers of properties may be in too much of a hurry or too careless to carry out proper investigations before acquiring land is not something that should properly be a factor in determining planning policy. As stated above we consider that the imposition of such obligations by a local planning authority would fall outside the scope of Regulation 122 of the CIL Regulations on the grounds it is not “necessary” to enable planning permission to be granted for the particular development.

Planning obligations entered into under pressure of time, often in the run up to an appeal, can give rise to unintended consequences which cause major problems for future dealings with a landowner’s property. It is bad enough to have the restrictions affecting the land subject to the original planning application it is many times worse when the restrictions are registered against the whole of a larger holding.

Boyes Turner has recently experienced the consequence of such an arrangement threatening the sale of land outside the area affected by the s106. Whilst it should be possible in most circumstances to resolve the problem it does require spending time and money in making an approach to be made to the local planning authority and if that is not successful, an application to be made the Land Registrar for an Order overriding or removing the terms of the restriction.

Adverse impacts for developers and landowners

The conclusion is that what appears to be a matter of convenience for Local Authorities to impose registrations at the Land Registry quite often gives rise to significant adverse impacts for developers and landowners unless very careful attention is given to the precise wording used. Eagerness to secure planning permission or to win a planning appeal often means that time is not often available to carry out this careful assessment of the long term consequences, leading to delays or worse later.

Lawyers negotiating s106 obligations need to be well versed in land registry procedures and need to ensure that the wording is future proofed so as not to impede later transactions.