In February 2015 the High Court handed down judgment in Oxfordshire County Council v Secretary of State for Communities and Local Government and others [2015] EWHC 186 (Admin); [2015] PLSCS 43. This was billed as a watershed moment for section 106 monitoring fees: the administration costs frequently charged by the local authorities to ensure that section 106 agreements are complied with.
The court ruled that there was nothing in the wording of the legislation, policy or guidance which suggested that authorities could or should claim administration and monitoring fees as part of section 106 agreements. It was said that monitoring of section 106 obligations should fall within the general administrative duties of the authority and be funded out of tax revenues. In particular, under regulation 122 of the Community Infrastructure Levy Regulations 2010, monitoring fees were not “necessary” to make the development acceptable in planning terms, therefore were unlawful.
It seemed that monitoring fees would not be considered to be “necessary” (as required by the CIL Regulations) to make a development acceptable in planning terms, even where the authority has adopted a policy basis for charging monitoring fees. The court did say that monitoring fees could be justified but only in exceptional cases, assessed on a case-by-case basis not by reference to standard tariffs.
Impact of Oxfordshire
The months following this judgment saw a flurry of developers quoting Oxfordshire in an attempt to remove monitoring fees from draft section 106 agreements. But a few months later, the case was conveniently forgotten. Most local authorities continued to seek monitoring fees, while developers continued paying without fuss.
For authorities, monitoring fees are an important revenue stream for stretched planning departments and the need for that revenue outweighed risks of legal challenge and adverse appeal decisions. For developers, fees were usually too low to justify risking planning refusal or delaying permission to argue the point to appeal. They remained an accepted cost of doing business.
As a result, the clarity offered by Oxfordshire dimmed with time.
Arguably, monitoring fees on complex developments were left unaffected by Oxfordshire, as they could be said to be “exceptional”. However this has limited applicability, so other ways round the ruling for smaller schemes were considered. Some authorities simply moved away from standard scale fees and tariffs, justifying any fees sought proportionately against the actual costs of monitoring particular obligations. While this approach cannot be said to meet the exceptionality envisaged in Oxfordshire, it does at least attempt to impose fees that genuinely reflect the administrative burden.
Care was also taken to ensure that committee reports and resolutions, if mentioning monitoring fees at all, made clear that such fees were not a reason for granting planning permission, thereby hoping to avoid the scope of regulation 122. This is analogous to local authority legal fees collected in section 106 agreements. Some authorities began collecting monitoring fees along with legal costs, without reference in the agreement at all.
In appeals, many inspectors exercised planning judgment and assessed the obligations to ascertain whether the local authority would be burdened by unusual administrative costs. Frequently, inspectors have followed Oxfordshire and found monitoring fees to fail the test in the CIL Regulations. Developers now frequently insert a suitably drafted “blue pencil” clause in their agreements to invalidate any monitoring fee where an inspector finds it unlawful.
The most prevalent course of action by local authorities was to draft section 106 agreements routinely under additional powers, such as section 1 of the Localism Act 2011. “Planning obligations” as defined in the CIL Regulations means an agreement under section 106 of the town and Country Planning Act 1990, so it was argued that fees collected under other powers may avoid the legal tests.
However, Oxfordshire addressed this point, at least in substance, by noting that
the secretary of state has a broad power to make provision for fees and has not done so in relation to monitoring fees. As the courts say frequently, the planning legislation is a “comprehensive code”, so why then should local authorities be free to supplement that code with other powers to suit their needs?
Clarity at last?
Things are now clearer following the concise ruling of the Court of Appeal in R (on the application of Khodari) v Kensington and Chelsea Royal London Borough Council [2017] EWCA Civ 333; [2017] EGLR 28. The court stated that monitoring fees are an obligation to pay money, so fall within the scope of section 106(1)(d) of the Town and Country Planning Act 1990 and therefore potentially trigger regulation 122 of the CIL Regulations. However, in the case of Khodari itself, the court found there was nothing in the committee report or officer’s recommendation from which it could be inferred that the monitoring fee was a reason for granting planning permission, therefore “regulation 122 presents no obstacle to the monitoring fee”.
For local authorities, then, the way forward is to take care to ensure nothing in the committee reports/resolutions and the section 106 agreement itself indicates the monitoring fee has been taken into consideration in deciding to grant planning permission.
For developers, nothing has changed. Blue pencil clauses should still be sought and authorities careless with drafting may still find monitoring fees struck out on appeal.
However, following Khodari, authorities now have a legal basis for seeking monitoring fees. It seems the only way this can change is through parliament.
Tim Brown is an associate in the planning department at Trowers & Hamlins
