Planning Obligations and Infrastructure
What Section 106 and CIL Are Intended to Achieve
Development may create demands for affordable housing, transport, schools, open space and other infrastructure. Planning obligations and the Community Infrastructure Levy are different mechanisms used to address those effects.
Section 106 Agreement
A Section 106 agreement is a legally binding planning obligation entered into under the Town and Country Planning Act 1990. It can require works, financial contributions, affordable housing, land transfers, restrictions or other measures connected with a particular development.
The agreement normally binds the land, so its terms can affect the landowner, developer, lender and future owners until the obligation has been satisfied, released or modified.
Community Infrastructure Levy
CIL is a locally set charge on qualifying development in areas where the charging authority has adopted a charging schedule. Liability is usually calculated by applying the relevant indexed rate to chargeable floorspace.
It is designed to contribute towards wider infrastructure rather than negotiate every impact separately for each planning application.
Planning Conditions
A planning condition can control matters such as materials, drainage, access, landscaping, construction and the timing of development. National policy expects conditions to be used where they can satisfactorily address an impact.
An obligation should not be used simply because it is convenient where an enforceable planning condition would deal with the issue properly.
Highway Agreements
Off-site highway works may be secured through a separate agreement under highways legislation, commonly a Section 278 agreement. This can cover junction alterations, crossings, signals, footways and other works within the public highway.
The cost and timing of those works can be commercially significant even though the agreement is separate from the Section 106 document.
Section 106, CIL, planning conditions and highway agreements should be reviewed together. Looking at only one document can materially understate the obligations, infrastructure costs and timing risks attached to a planning permission.
A Separate Search Intent
Why This Guide Is Different From Planning Application Costs
The expense of preparing and submitting a planning application is not the same as the financial and delivery obligations attached to the resulting development.
Planning application costs include the application fee, consultant appointments, surveys, drawings, technical assessments and professional work needed to obtain a decision. Those costs arise while the planning case is being prepared and determined.
Section 106 obligations and CIL are different. They arise because the proposed development creates infrastructure, affordable housing or mitigation requirements. They can affect the scheme after permission has been granted and may remain relevant through land sale, development finance, commencement, construction and occupation.
For land valuation purposes, both categories matter. The promoter or developer must fund the planning process, but the completed appraisal must also allow for the affordable housing, infrastructure contributions, CIL, highway works and other obligations required to implement the scheme.
A landowner should therefore avoid treating a headline planning consent as if it were free of conditions and obligations. The value of the land depends on the permission that can actually be implemented, the net developable area, the sale value of the scheme and all costs that must be met before the development can proceed.
This page concentrates on the second category: the obligations and levies attached to development and the way they can influence residual land value, contractual terms and sale strategy.
A planning permission can increase certainty and value while still carrying substantial liabilities. The commercial question is not simply whether permission exists, but what it permits and what must be delivered or paid to use it.
The Statutory and Policy Tests
When a Planning Obligation Should Be Required
A planning obligation should satisfy all three tests. These tests help distinguish a necessary site-related requirement from a general request that should not be imposed on the development.
Necessary to Make Development Acceptable
The obligation must address a planning impact that would otherwise make the proposal unacceptable. It should not be used to secure an unrelated benefit simply because the applicant is willing to offer it.
The planning authority should be able to explain the identified harm or policy requirement and why the development could not acceptably proceed without the obligation.
Directly Related to the Development
There must be a direct connection between the proposed development and the obligation. The relationship may concern the site itself, its residents or occupiers, or a specific off-site impact caused by the scheme.
A broad infrastructure need somewhere within the authority is not automatically sufficient unless the required relationship with the development can be demonstrated.
Fairly and Reasonably Related in Scale and Kind
The scale and type of obligation should be proportionate to the development and its effects. A small development should not normally be expected to solve an infrastructure problem that is unrelated to its own impact.
The evidence, policy formula and development assumptions used to calculate the requirement should therefore be checked carefully.
The three tests apply cumulatively. An obligation that is desirable in general terms may still be inappropriate if it is not necessary, directly related and proportionate to the particular development.
Typical Section 106 Requirements
What a Section 106 Agreement May Contain
The content depends on adopted policy, the type and scale of development, site-specific effects and the measures needed to make the proposal acceptable.
Affordable housing is one of the most commercially significant obligations on residential development. The agreement may specify the percentage, tenure, dwelling mix, standards, phasing, transfer arrangements, eligibility restrictions and the point at which market housing can be occupied.
Financial contributions may be sought for education, healthcare, public transport, highways, open space, sports facilities, community provision, biodiversity or other infrastructure. The agreement should state how each contribution is calculated, when it becomes payable and whether it is indexed.
On-site works can also be secured. These may include public open space, play areas, sustainable transport measures, ecological mitigation, habitat management, drainage maintenance, community facilities or land needed for infrastructure.
A Section 106 agreement may impose restrictions on occupation or development until specified obligations have been performed. It may also contain monitoring provisions, mortgagee protections, nomination arrangements, review mechanisms and procedures for certifying compliance.
The drafting should be read as a complete legal document. Definitions, trigger dates, indexation clauses, phasing plans and cross-references can materially change when an obligation applies and who must perform it.
Common Matters to Check
- Affordable housing percentage, tenure, mix and transfer provisions
- Education, transport, healthcare and community contributions
- Open space, play, sports and long-term management requirements
- Ecology, biodiversity, landscape and habitat obligations
- Highway works and sustainable transport measures
- Contribution trigger dates and occupation restrictions
- Indexation, interest, monitoring fees and late-payment provisions
- Phasing, review clauses, security, bonds and lender protections
The headline contribution figure is only one part of the liability. Timing, indexation, affordable housing assumptions, occupation controls and on-site works can be equally important to development value.
Understanding CIL
How the Community Infrastructure Levy Is Calculated and Collected
CIL is governed by a detailed statutory process. The charging schedule, floorspace calculation, indexation and procedural notices should all be checked before value or timing assumptions are fixed.
Charging Schedule
A charging authority that operates CIL publishes a charging schedule setting the rates for relevant development. Rates may differ according to land use, geographical zone, scale or other categories permitted by the regulations.
Some authorities do not charge CIL, while others apply a zero rate to particular uses or locations. The adopted schedule and maps must therefore be checked for the actual site.
Chargeable Floorspace
The charge is normally based on qualifying gross internal floorspace. Existing buildings, demolition, changes of use and lawful-use evidence can affect the net chargeable amount under the statutory rules.
A simple multiplication of the total proposed floorspace may therefore be wrong if the scheme contains existing buildings, mixed uses, phasing or exempt development.
Indexation
The adopted rate is indexed between the year the charging schedule took effect and the year permission is granted. The indexed liability can therefore be higher than the unadjusted rate printed in an older schedule.
Indexation should be incorporated into the appraisal and revisited if the planning route or permission date changes.
Liability and Notices
The person intending to assume liability should submit the correct notice. Before chargeable development begins, the statutory commencement process must also be followed.
Failure to submit the required forms can transfer or default liability, remove instalment rights and trigger surcharges. Relief and exemption procedures also contain strict application, evidence and notification requirements.
Relief and Exemptions
Certain development may qualify for relief or exemption, but eligibility is not the same as automatic protection. The prescribed application, evidence, decision and commencement requirements must be satisfied.
Landowners and developers should obtain project-specific advice before relying on self-build, charitable, social housing or other relief.
Phased Development
Where planning permission expressly authorises phases, CIL can be assessed and triggered by phase rather than necessarily treating the entire scheme as one event. Correct phasing can therefore affect cash flow materially.
The permission, phasing plans and CIL notices must align. Informal construction sequencing is not a substitute for a legally recognised phased permission.
CIL is often described as a fixed charge, but the correct liability still depends on the applicable schedule, indexed rate, use, zone, floorspace, existing buildings, reliefs, phasing and procedural compliance.
Different Planning Mechanisms
Section 106, CIL, Conditions and Highway Works Compared
Each mechanism performs a different role. A development can be affected by all four at the same time.
| Mechanism | Main Purpose | Typical Content | Commercial Point |
|---|---|---|---|
| Section 106 planning obligation | Makes a particular development acceptable by securing site-related mitigation, infrastructure, affordable housing or restrictions. | Affordable housing; financial contributions; land transfers; open space; ecological measures; occupation controls; monitoring and management. | Negotiated and legally binding. Drafting, trigger dates, indexation and review mechanisms can materially affect value and delivery. |
| Community Infrastructure Levy | Collects a locally set charge from qualifying development to help fund wider infrastructure. | Indexed charge based on the adopted schedule and chargeable floorspace, subject to the regulations and any valid relief. | Usually less negotiable than Section 106. Accurate floorspace, lawful-use evidence, phasing and procedural notices are critical. |
| Planning condition | Controls the detail, timing or implementation of the permission where a condition satisfies the national policy tests. | Materials; access; drainage; landscaping; ecology; contamination; construction management; phasing and other approval requirements. | May delay commencement or occupation and require further reports, designs, approvals and works. |
| Highway agreement | Authorises and secures works within or affecting the public highway under highways legislation. | Junctions; crossings; signals; road widening; footways; cycle routes; drainage and associated commuted sums. | Design approvals, legal agreements, bonds and construction timing can create substantial cost and programme risk. |
An appraisal should not assume that a Section 106 contribution replaces CIL, planning conditions or highway works. The permission package must be reviewed as a whole.
Residual Land Value
How Planning Obligations Can Affect Development Land Value
Development land is generally valued by considering the completed value of the scheme and deducting the costs, obligations, finance and return needed to deliver it.
Affordable housing can reduce the gross development value compared with an entirely open-market scheme, while also creating policy compliance and planning certainty. The effect depends on tenure, transfer values, dwelling mix, grant assumptions, standards and the relationship between affordable and market homes.
Financial contributions and CIL are direct development costs. Highway works, school land, open space, drainage, biodiversity measures and long-term management can require both capital expenditure and land that would otherwise support saleable development.
Timing matters as much as amount. A contribution payable before commencement can affect initial funding; a payment triggered before occupation can restrict sales or drawdown; and an indexed contribution may increase if the programme is delayed. Finance costs can therefore magnify the effect of an obligation.
The obligations may also reduce the net developable area. Land needed for public open space, drainage, habitat, highways or community infrastructure still contributes to the overall scheme but may not generate the same direct sales income as market housing or commercial floorspace.
A robust valuation should model the actual planning package and likely delivery programme rather than relying on a generic per-acre rate. Two permissions for the same number of homes can produce different land values because their affordable housing, infrastructure, conditions and abnormal costs differ.
For a landowner, this does not mean planning obligations are simply negative. A policy-compliant and deliverable permission may command much greater value than unconsented land. The objective is to understand the net position and avoid agreeing land terms based on a headline value that ignores the obligations needed to create it.
The relevant figure is the value of an implementable, policy-compliant scheme after its obligations and costs—not the theoretical value of development with no affordable housing, infrastructure or mitigation.
Trigger Dates and Cash Flow
Why the Timing of Payments and Works Matters
Obligations often become due at different stages. The sequence can influence funding, phasing, land payments and the practical ability to occupy or sell completed development.
A Section 106 agreement may trigger obligations on implementation, commencement, occupation of a stated number or percentage of dwellings, completion of a phase, first use of a building or another defined event. Those definitions should be checked against the construction and sales programme.
Some obligations require action before development can start. Others allow initial construction but prevent occupation beyond a threshold until infrastructure, affordable housing or financial payments have been delivered. A missed trigger can stop sales, expose the owner to enforcement and create lender concerns.
Contributions are commonly indexed. The agreement should identify the base date, index, calculation method and any minimum or maximum adjustment. Interest may also arise if payment is late after the trigger date.
Where a site will be developed in phases, the parties should understand whether the obligation is site-wide or phase-specific. A site-wide restriction can affect a later land parcel even where the relevant failure arose on an earlier phase.
Land sale contracts and promotion agreements should allocate responsibility for compliance, evidence, certificates, security and retained liabilities. The transaction should also address what happens if the planning package changes before completion.
Programme Questions
- What event legally constitutes commencement or implementation?
- Which obligations must be completed before construction begins?
- Are payments due before occupation, sale or a stated dwelling threshold?
- Does indexation run from the agreement date, permission date or another base?
- Can an obligation prevent occupation of an entire phase?
- Are contributions payable once or in instalments?
- Does a later phase depend on infrastructure delivered in an earlier phase?
- Who provides bonds, guarantees, certificates and evidence of compliance?
A contribution that appears manageable in total can still undermine delivery if it falls due before the scheme has generated sufficient receipts or development finance.
Viability and Policy Compliance
When Viability Evidence May Be Relevant
Planning policies should normally be tested for viability when they are prepared, so a policy-compliant development is generally expected to meet the obligations in the adopted plan.
A developer should not assume that affordable housing or infrastructure requirements will automatically be reduced through negotiation. Where an application departs from policy on viability grounds, the applicant will normally need to provide proportionate and transparent evidence explaining why the policy requirement cannot be met.
The appraisal should use realistic assumptions for sales values, construction costs, finance, abnormal works, developer return and land value. The benchmark land value should reflect planning policy and should not simply preserve an historic or aspirational landowner expectation.
Site-specific abnormal costs can be important. Contamination, major utilities, flood mitigation, retaining structures, access works or unusual infrastructure may affect the capacity of the development to support obligations. However, the evidence must distinguish genuine site costs from ordinary development expenditure already contemplated by policy.
Where uncertainty remains, an agreement may contain a review mechanism. This can reassess viability at a later stage and require additional affordable housing or contributions if values, costs or delivery circumstances improve. The drafting and timing of any review should be understood before land value is fixed.
Viability is therefore both a planning and commercial issue. An unrealistic bid that assumes obligations will later be negotiated away can expose the landowner to delay, reduced price, contract disputes or a scheme that cannot proceed.
The strongest sale or promotion strategy is based on a realistic policy-compliant appraisal, with any genuine viability issue identified and evidenced early rather than treated as a later rescue mechanism.
Landowner Due Diligence
What Should Be Reviewed Before Agreeing Land Terms?
A purchaser or promoter may present a headline price or percentage before the planning obligations have been defined. The agreement should contain safeguards for how those liabilities are assessed and controlled.
Policy Position
Check adopted affordable housing, CIL, infrastructure and planning obligation policies together with supplementary documents and the current charging schedule.
An emerging plan or new charging schedule may also affect a long-term promotion strategy.
Development Appraisal
The appraisal should show market and affordable values, density, sales mix, construction costs, CIL, Section 106, highways, infrastructure, finance and developer return.
Key assumptions should be capable of review rather than hidden inside a single net land figure.
Expenditure Control
Promotion and option documents should define which planning, technical, legal and infrastructure costs may be deducted from sale proceeds or used in the price calculation.
Landowners should understand approval rights, budgets, evidence and treatment of abortive or duplicated costs.
Planning Strategy
The proposed scale, tenure, phasing and infrastructure strategy should be credible. An over-optimistic scheme can produce an attractive paper value but fail during planning or viability testing.
The planning route should also preserve flexibility to respond to policy and technical evidence.
Sale Documentation
Contracts should address outstanding obligations, indemnities, compliance certificates, retained land, overage, security, completion conditions and responsibility for later variations.
The legal effect of the Section 106 agreement should be checked against the actual title and transaction structure.
Independent Advice
Planning, valuation, tax and legal advice should be coordinated. Each discipline sees a different part of the obligation and value position.
Advice is most useful before exclusivity, option, promotion or conditional sale terms become binding.
A landowner does not need every contribution to be fixed at the outset, but the agreement should establish a transparent process for pursuing a viable permission and protecting the landowner’s share of value.
A Practical Review Process
How to Assess Section 106 and CIL on a Development Site
The following sequence helps move from broad policy assumptions to a site-specific and commercially usable assessment.
Identify the Charging and Planning Authorities
Confirm whether CIL operates, obtain the adopted charging schedule and identify the Local Plan policies governing affordable housing and infrastructure.
Prepare a Credible Development Concept
Estimate use, scale, density, floorspace, housing mix, phasing, access, open space, drainage and the land required for infrastructure.
Calculate Initial Obligations and Costs
Apply the likely CIL rate and policy formulas, then allow for affordable housing, financial contributions, highway works and on-site mitigation.
Test Value and Delivery
Review residual value, cash flow, trigger points, finance, abnormal costs and whether the proposed scheme remains policy compliant and deliverable.
The assessment should be revisited as the masterplan, surveys, planning policy and Section 106 drafting develop. Early figures are useful, but they should not be mistaken for the final liability.
Our Development Review
How Value My Land Considers Planning Obligations
We assess the planning opportunity and the commercial route needed to turn that opportunity into a realistic land value.
Our initial review considers the planning authority, Local Plan position, housing or employment need, likely development use, settlement relationship, access and the principal technical constraints affecting the site.
Where further work is justified, the promotion strategy can include a more detailed concept, consultant evidence and an appraisal that allows for planning obligations, affordable housing, infrastructure, CIL and abnormal costs.
Under a land promotion arrangement, the promoter normally funds and manages the planning process at its own risk, subject to the agreed terms. The objective is to secure an appropriate permission and expose the land to the market competitively rather than transfer it to a single developer at an early fixed price.
The final sale strategy should provide bidders with the planning permission, Section 106 agreement, CIL position, technical information and a clear explanation of outstanding conditions and infrastructure. Better information can reduce purchaser uncertainty and support stronger, more comparable bids.
Every site is different. A policy requirement that is modest on one development may be decisive on another because of density, values, abnormal costs or infrastructure. The assessment must therefore be site-specific rather than based on a standard deduction per acre.
Value My Land’s focus is not simply obtaining any planning permission. The aim is to pursue a deliverable permission and sale strategy that protects and maximises the landowner’s net value.
Continue Your Research
Related Guides
These guides explain the planning, valuation, technical and contractual subjects that sit alongside this page without duplicating its main purpose.
Planning Conditions and Development Land Value
Understand how pre-commencement, occupation and other planning conditions can affect timing, cost, marketability and land value.
Click herePlanning Application Costs for Development Land
Review the professional, survey and application costs involved in preparing and pursuing planning permission.
Click hereLand Value With Planning Permission
Learn how an implementable permission, development capacity, obligations and abnormal costs influence residual land value.
Click herePlanning Policy and Development Land
Understand how national policy, Local Plans and development requirements shape planning potential.
Click hereTypes of Planning Applications in England
Compare outline, full, reserved matters, Permission in Principle and other planning application routes.
Click hereLand Promotion Agreements
Find out how a promoter can fund and manage the planning process before competitively marketing the land.
Click hereConditional Contracts for Development Land
Understand how a conditional sale can depend on obtaining an acceptable planning permission and satisfying agreed conditions.
Click hereSelling Land for Development
Review the planning, valuation, legal and marketing steps involved in selling development land.
Click hereIs My Land Suitable for Development?
Assess location, policy, access, constraints, infrastructure and deliverability before assuming development value.
Click hereFrequently Asked Questions About Section 106, CIL and Development Land Value
What is a Section 106 agreement?
A Section 106 agreement is a legally binding planning obligation connected with land. It can secure affordable housing, financial contributions, infrastructure, works, restrictions, management arrangements and other measures needed to make a development acceptable. The exact obligations depend on planning policy and the effects of the proposed scheme.
What is the Community Infrastructure Levy?
CIL is a locally set charge on qualifying development in areas where the charging authority has adopted a charging schedule. The liability is generally calculated using the relevant indexed rate and chargeable floorspace, subject to the detailed statutory rules on existing buildings, phasing, relief and exemptions.
Can a development be subject to both Section 106 and CIL?
Yes. CIL contributes towards wider infrastructure, while Section 106 can address site-specific impacts and affordable housing. A scheme may also require planning conditions and a separate highway agreement, so the complete planning package should be assessed.
Does CIL apply everywhere in England?
No. CIL only applies where the relevant charging authority has brought an adopted charging schedule into effect. Rates can also vary by use, location and development category. The current schedule and charging-zone map must be checked for the site.
Is affordable housing collected through CIL?
Affordable housing is normally secured through Section 106 planning obligations rather than CIL. The agreement may control the amount, tenure, mix, standards, phasing, transfer and occupancy arrangements. These details can have a substantial effect on development value.
Can Section 106 contributions be negotiated?
The agreement is negotiated, but the planning authority should apply adopted policy and the statutory tests. A developer should not assume policy requirements will simply be waived. Any viability-based departure normally requires proportionate evidence and may lead to a review mechanism.
Can a planning condition be used instead of a Section 106 obligation?
Yes, where a condition can satisfactorily address the planning impact and meets the relevant policy tests. National policy expects obligations to be used only where the effect cannot properly be dealt with by a condition.
When does CIL become payable?
The statutory liability is generally triggered by commencement of chargeable development, subject to the authority’s instalment policy and the detailed regulations. The required liability and commencement notices must be handled correctly before work begins.
What happens if a CIL commencement notice is not submitted?
Failure to follow the statutory process can lead to surcharges, loss of instalment rights and transfer or default of liability. The precise consequences can depend on the permission, liability notice and applicable regulatory provisions, so project-specific advice should be obtained before any material operation begins.
How does indexation affect Section 106 and CIL?
CIL rates are indexed under the statutory calculation, and Section 106 agreements commonly index financial contributions using the index and base date stated in the document. Delays can therefore increase the amount payable, and this should be included in the appraisal.
Do planning obligations reduce land value?
They are development costs and can reduce the residual sum available for the land compared with a theoretical scheme with no obligations. However, an implementable policy-compliant permission can still create a substantial uplift over existing-use value. The correct comparison is the net value of the actual permission.
Can a Section 106 agreement prevent homes being occupied?
Yes. Agreements often restrict occupation beyond stated thresholds until affordable housing, infrastructure, payments or other obligations have been delivered. These triggers must be integrated into the construction, finance and sales programme.
What should a landowner check in a promotion or option agreement?
The agreement should address the planning strategy, expenditure, valuation assumptions, affordable housing and infrastructure, deductions, approval rights, minimum-price protections, marketing, responsibility for obligations and the treatment of any later planning variation.
Can an existing Section 106 agreement be changed?
Modification or discharge may be possible by agreement or through the applicable statutory process, depending on the circumstances and age of the obligation. A fresh or varied permission may also require the existing agreement to be reviewed or supplemented. Specialist legal and planning advice is needed.
What information is needed for an initial review?
A postcode, map pin, what3words reference or plan showing the land is normally enough to start. Existing permissions, draft heads of terms, CIL notices, title information, appraisal material or correspondence from the council can help where they are available.
Understand the Net Development Opportunity Before Agreeing Land Terms
Send us the location of your land for a free initial review of its planning position, likely development route and the principal factors that may influence value.
You do not need a completed appraisal or draft Section 106 agreement. A postcode, map pin, what3words reference or site plan is usually enough for us to begin.