Section 106 Agreement when selling a house

A Section 106 Agreement (S106) is a legal agreement that is implemented in residential property development plannings known as Planning Obligations. Planning Obligations are negotiated between a developer and the local authority, and are secured through a S106.

Many people are unaware of a S106 until they are faced with one when looking at a prospective property. If the current developer has failed to follow through with the Planning Obligations, the future buyer could inherit the responsibility of meeting the S106 agreement.

What is a Section 106 Agreement?

A S106 Agreement refers to Section 106 of the Town and Country Planning Act 1990. It is an agreement between the developer and local planning authority used to mitigate the effects of development on communities.

A S106 Agreement intends to make development possible that would otherwise be unlikely. It is a legally binding contract that allows authorities to restrict or force the granting of planning permission.

It is used by the local planning authority when dealing with applications for planning permission for housing development enterprises. The point of enforcing the agreement is to motivate the developer to help the community in return for granting the planning permission. This will aid the local area and community.

S106 manages legal obligations that are used to reduce the effects of a development proposal. For example, your development might need to help maintain roads in the local area. Planning Obligations will ensure these improvements are funded and implemented.

When are Section 106 Agreements drafted?

There are many situations in which Section 106 agreements are drafted - the most common being when building developments are predicted to impact local areas, and cannot be regulated by means of conditions attached to a planning decision.

Another reason is that when developers are unable to get planning permission for a project, the S106 agreement is drawn up to place conditions for the development to take place. The agreement ensures that local communities are taken into consideration when development begins.

An S106 agreement is registered in opposition to the property at the Land Charges Department, and on occasions, at the Land Registry.

Similarly to Section 106, the local authority can also apply the Community Infrastructure Levy for a development. The local planning authority and the developer then enter into the agreement, which is known as a Bilateral Agreement.

What is applicable under S106?

New developments are likely to make house prices rise. Due to a shortage of affordable housing, the S106 agreement can allow for a number of dwellings or plots to be set aside for economic properties - homes for young families as well as the elderly and pensioners.

Can S106 impact how you sell your home?

Some Section 106 agreements may place restrictive covenants on properties. These restrictions can interfere with the main process of selling your home.

Restrictions under Section 106 Agreement

One restrictive covenant in particular is affordable housing. This will determine at what price you can sell your property for. Generally, a percentage of it is open market value.

It’s important to be aware of any restrictions or future implications that are caused by the S106 agreement, such as restricted occupancy obligations. These include:

• Who can live in the property
• Who the property can be sold to
• How the property is marketed
• The price at which the property can be sold
• Limiting the development or use of land

The restrictions put on a Section 106 property ensure that it’s sold to the right buyer as agreed by local authorities prior to construction.

Another typical S106 requirement is for a developer to undertake works to the highway or other public spaces near the initial site. S106 can also cover works or payments depending on the site and the specific impacts of proposed developments.

You may be selling your home at a discounted price or local needs under Planning Obligations. This legal agreement helps those looking for an affordable home. Having a local needs home determines who can buy your home, and at what price.

What the Section 106 agreement covers

Money from S106 is directly associated with the development of a local community and can only be spent if the developer agrees.

Section 106 covers a range of local developments, including:

• Affordable housing
• Public open space
• Transport links
• Education
• Highways
• Town centre improvements

Legal requirements of S106

S106 obligations must be:

• Necessary
• Directly related to the development
• Fair and reasonable

What does Section 106 mean as a seller?

As a seller with a property under S106, there are legal requirements which specify who can qualify to buy your home and at what price.

This can make it tricky for you to sell your property because there are certain regulations you must follow.

Helping the sale of your home under Section 106

Advertising your home is vital to ensure that all local buyers know your home is available for sale. It is common for your S106 agreement to require that you agree to an advertising scheme with the council.

Advertising and marketing your property as an affordable home will no doubt help its sale.

Make the selling process easier

As a seller with a property under S106, you may be struggling to find a buyer that meets the requirements.

You must make certain that you’re doing all you can to promote your property. Ask your estate agent for advice. They may suggest you declutter and decorate your home and potentially reduce the asking price.

Finding the right estate agent to sell your home can be a difficult task.

Our free Agent Comparison Tool draws on the latest data from the HMC Land Registry and property portals to compare local agents based on:

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Are planning regulations negotiable?

Yes, planning regulations are in fact negotiable! Plans should set forth any contributions that are expected from the development, for example, contributions towards infrastructure and affordable housing. Planning Obligations can supply flexibility in making sure planning permission answers to site and scheme state conditions.

Summary : Selling your home should be no issue

A Section 106 Agreement, otherwise known as Planning Obligations is a legal agreement that ensures a local community is unaffected by any developmental prospects. With these agreements, you’re still able to sell your home and it should not cause you any problems.

However, your sale must follow all of the regulations and restrictions set by the local planning authority to make certain that you’re abiding by the S106 agreement.

Some of these restrictions include at what price your home will be sold. Although this is not ideal, it will ensure you’re following local community guidelines, such as affordable housing.

Having a property under S106 is beneficial to the local community and allows for an understanding and progressive local area.