Planning obligations

October 27th, 2017

Aberdeen City and Shire Strategic Development Planning Authority v Elsick Development Company Limited (2017) UKSC 66 raised an important question of planning law. A planning authority foresees and plans for significant growth in its area. Major investment in transport infrastructure is required to accommodate the aggregate of the planned development. The planning authority seeks to achieve this investment by adopting a policy in its development plan which in substance requires developers to enter into planning obligations with it to make financial contributions to the pooled fund to be spent on the infrastructure, including interventions at places where a particular development has only a trivial impact. Is such a policy within the existing powers of the planning authority under current planning legislation?

The central issue in the appeal to the Supreme Court was the lawfulness of the planning obligation which Elsick has entered into in conformity with the requirements of the Supplementary Guidance. The Authority challenges the conclusion that the tests applicable to a planning condition are properly to be applied to a planning obligation. To address this challenge Lord Hodge examined (i) the correct legal test as to the lawfulness of a planning condition, (ii) the correct legal test as to the lawfulness of a planning obligation, (iii) the role of a planning obligation in the decision to grant or refuse planning permission, and (iv) the boundary between questions of legality and questions of policy.

Lord Hodge said:-

“Question (i): the lawfulness of a planning condition

  1. A planning condition is a statutory creation. Section 37(1) of the 1997 Act … and similar legislative provisions in England and Wales … authorise a planning authority to impose planning conditions when it grants a planning permission. The apparently unlimited power (“subject to such conditions as they think fit”) has long been interpreted restrictively by the courts to prevent its abuse. The courts have formulated three principal constraints. First, the conditions must be imposed for a planning purpose and not solely to achieve some ulterior object, however desirable in the public interest that object may be. Secondly, the conditions must “fairly and reasonably relate to the permitted development”. Thirdly, the conditions must not be unreasonable in the Wednesbury sense … .
  2. The first constraint arises from the statutory origin of the power of a planning authority to impose conditions: administrative law provides that it must be exercised for … planning purposes. The second constraint … arises from the statutory context of the power … : a planning authority is tasked with determining an application for planning permission on its merits having regard to the development plan so far as relevant and other material considerations; the power to attach conditions to the permission is an inherent part of the power to grant permission for the development of land; therefore the conditions imposed on the grant of that permission must relate to the development for which permission is given. The third constraint is a feature of our administrative law.
  3. The second legal requirement – that a condition must fairly and reasonably relate to the development – requires there to be a reasonably close relationship between the development and the condition which governs it. …
  4. Such a relationship between a condition and the permitted development existed where a planning authority imposed a negative suspensive condition, that development of a site should not commence until an event had occurred which the developer alone did not have power to bring about. In Grampian Regional Council v Secretary of State for Scotland and City of Aberdeen District Council 1984 SC (HL) 58 the House of Lords upheld the validity of such a condition which overcame an objection to a proposed industrial development on the ground of road traffic safety. The condition was that the development of the site could not commence until the road on the western boundary of the site had been closed by a road closure order which the Secretary of State would have to confirm. In the leading speech, Lord Keith of Kinkel (pp 66-67) accepted the three tests which I have stated in para 28 above and which have come to be associated with the Newbury case and held that the condition met the third test because it was not unreasonable to impose such a condition which was in the public interest and where there were reasonable prospects that a road closure order would be confirmed.
  5. The three-fold legal test for validity, having been repeatedly approved by judges at the highest level, is an established part of planning law. Other rules of administrative law, such as the requirement to take account of all relevant considerations and not to take account of irrelevant considerations in decision-making, apply to a decision to impose a particular condition.

Question (ii): the lawfulness of a planning obligation

  1. A planning obligation also is a statutory creation. As with a particular planning condition, the lawfulness of a particular obligation depends upon (i) the wording of the statute, and (ii) the rules of our administrative law.
  2. Section 75 of the 1997 Act, like its predecessor legislation, … requires that the obligation restricts or regulates the development or use of the land to which it relates. … the planning obligation can include the payment of money.
  3. Prima facie the planning authority is given a wide discretion as to the circumstances in which it can seek a planning obligation and the nature of that obligation. While it is not uncommon for planning authorities to duplicate some planning conditions in a section 75 agreement and thereby obtain an alternative means of enforcement, planning obligations also enable a planning authority to control matters which it might otherwise have no power to control by the imposition of planning conditions. Planning obligations are most commonly required in the context of an application for planning permission, but they are not confined to such circumstances and are available as a means of keeping land free from any development. It is not surprising therefore that there is no general legal requirement that there be a relationship to a permitted development.
  4. In Good v Epping Forest District Council [1994] 1 WLR 376, in which Ralph Gibson LJ delivered the leading judgment, the Court of Appeal addressed the question whether a planning authority could validly achieve by agreement any purpose which it could not validly achieve by planning condition or whether the test for validity was the same in each case. In substance, the Court held that the powers of a planning authority to bring about a planning obligation were not controlled by the nature and extent of its statutory powers to grant planning permission subject to conditions (p 387C). A planning obligation did not have to relate to a permitted development.
  5. In Tesco Stores Ltd v Secretary of State for the Environment [1995] 1 WLR 759, which I discuss more fully when addressing question (iii) below, both Lord Keith of Kinkel (769B-C) and Lord Hoffmann (779C-D) referred with approval to the judgment of the Court of Appeal in Good v Epping Forest District Council (above). Lord Hoffmann (779D) summarised the case thus: “the only tests for the validity of a planning obligation outside the express terms of section 106 [of the 1990 Act] are that it must be for a planning purpose and not Wednesbury unreasonable”. Thus beyond the restrictions implicit in the words of the section there are only the constraints of administrative law, which requires the planning authority to exercise its power to seek a planning obligation for a planning purpose: its exercise solely for a purpose unrelated to land use planning would be an abuse of power. Similarly, if a local planning authority acts unreasonably in the Wednesbury sense in requiring the undertaking of a planning obligation, the obligation may be reduced (nullified). Other rules of administrative law, such as the requirement to take into account all relevant considerations, also apply.
  6. The express words of section 75 require a relationship between the planning obligation and the land to be burdened by the obligation because the obligation must in some way restrict or regulate the development or the use of that land. But those restrictions or regulation do not necessarily relate to a particular permitted development on the burdened land. A planning obligation may prohibit the development of the land in a particular way or the use of the land for particular purposes. A planning obligation may keep the burdened land free from any development and may be entered into in circumstances which are not connected with any planning application.
  7. Restrictions may validly be imposed in the context of the development of another site. …
  8. A planning obligation may also regulate the development or use of the burdened site. An example, in the context of a planning application, is where a planning obligation requires the developer to provide affordable housing as a component of a development on its site or to create specified infrastructure on its land to meet the needs of that development.
  9. Similarly, a planning authority may contract for the payment of financial contributions towards, for example, educational facilities, healthcare facilities, sewerage or waste and re-cycling: requiring a development to contribute to, or meet, its own external costs in terms of infrastructure involves regulating the development of the land which is burdened by the obligation. The financial contribution can be applied towards infrastructure necessitated by the cumulative effects of various developments, so long as the land which is subject to the planning obligation contributes to that cumulative effect and thereby creates a sufficient relationship between the obligation in question and the land so that one can fairly speak of the obligation as regulating the development of the land.
  10. In each of the examples in paras 38-41 above the restriction or regulation serves a purpose in relation to the development or use of the burdened site. In this appeal a question of principle arises: can a restriction or regulation of a site be imposed in the form of a negative suspensive planning obligation, analogous to the negative suspensive planning condition in the Grampian Regional Council case, for a purpose which does not relate to the development or use of the site? In particular, is it lawful by planning obligation to restrict the commencement of the development of a site until the developer undertakes to make a financial contribution towards infrastructure which is unconnected to the development of the site? Alternatively, is it lawful to require contributions towards such infrastructure in a planning obligation which does not restrict the development of the site by means of a negative suspensive obligation?
  11. The answer to each question is no. Dealing first with the latter question, a planning obligation which required a developer to contribute to infrastructure unconnected with its development but did not make the payment of the contribution a pre-condition of development of the site would not fall within section 75 as it would neither restrict nor regulate the development or use of the site. …
  12. A planning obligation, which required as a pre-condition for commencing development that a developer pay a financial contribution for a purpose which did not relate to the burdened land, could be said to restrict the development of the site, but it would also be unlawful. Were such a restriction lawful, a planning authority could use a planning obligation in the context of an application for planning permission to extract from a developer benefits for the community which were wholly unconnected with the proposed development, thereby undermining the obligation on the planning authority to determine the application on its merits. Similarly, a developer could seek to obtain a planning permission by unilaterally undertaking a planning obligation not to develop its site until it had funded extraneous infrastructure or other community facilities unconnected with its development. This could amount to the buying and selling of a planning permission. Section 75, when interpreted in its statutory context, contains an implicit limitation on the purposes of a negative suspensive planning obligation, namely that the restriction must serve a purpose in relation to the development or use of the burdened site. An ulterior purpose, even if it could be categorised as a planning purpose in a broad sense, will not suffice. It is that implicit restriction which makes it both ultra vires and also unreasonable in the Wednesbury sense for a planning authority to use planning obligations for such an ulterior purpose.”

“Question (iii): the role of the planning obligation in the grant or refusal of planning permission

  1. What is the role of a planning obligation in the decision to grant or refuse planning permission? In Scotland that decision is governed by section 37(2) of the 1997 Act which requires that the planning authority have regard to the provisions of the development plan, so far as material to the application, and to any other material considerations … . In Tesco Stores Ltd v Secretary of State for the Environment (above) the House of Lords, when considering a legislative provision in identical terms (section 70(2) of the 1990 Act), gave guidance on the relevance of a planning obligation to the grant or refusal of planning permission. That guidance is not challenged in this appeal.
  2. In the leading speech, which Lord Keith of Kinkel delivered, the House held that for a planning obligation to be a “material consideration”, which it interpreted as a “relevant consideration” (764G), in the decision whether to grant planning permission, the obligation must have some connection with the proposed development which is not de minimis (ie too trifling for the law to be concerned with it). …”

“50.     No challenge was made in Tesco, in the House of Lords or in the courts below it, to the validity of the planning obligation: the question whether the obligation regulated the development of Tesco’s site was not put in issue … .

  1. The inclusion of a policy in the development plan, that the planning authority will seek such a planning obligation from developers, would not make relevant what otherwise would be irrelevant. Section 37(2) … requires the planning authority to have regard to the provisions of the development plan “so far as material to the application” and treats its provisions as a relevant consideration only to that extent. Thus, a green belt policy will be relevant to an application if the site of the application falls within the specified green belt and a requirement that a certain amount of open space is provided in a proposal for residential development will be relevant to an application for residential development. Similarly, a requirement in the plan that an applicant should agree to contribute to the cost of offsite infrastructure, which is related to its development, will be relevant to the application. But the words, which I have emphasised, mean that if a planning obligation, which is otherwise irrelevant to the planning application, is sought as a policy in the development plan, the policy seeking to impose such an obligation is an irrelevant consideration when the planning authority considers the application for planning permission.
  2. It is important to recall that the question whether a benefit conferred by a planning obligation is a material consideration in the determination of an application for planning permission is quite separate from the question whether a planning obligation restricts or regulates the development or use of a particular piece of land. …

Question (iv): The boundary between questions of legality and questions of policy

  1. Relevant ministerial guidance which sets out national planning policy is unquestionably a material consideration for any planning authority when it determines applications for planning permission. A failure by a planning authority to take into consideration national guidance, such as that in the Circular … on the tests which a planning authority should apply when deciding whether to seek a planning obligation, would be unlawful. Further, if a planning authority were to depart from national planning guidance when refusing an application for planning permission, it might risk an appeal by the disappointed applicant to the Scottish Ministers. But a decision by the planning authority is not illegal if it departs from ministerial guidance in a planning circular, provided that the authority has treated that guidance as a relevant consideration when it reached its decision.
  2. In Tesco (above) Lord Hoffmann pointed out (780F-G) that the law has always made “a clear distinction between the question of whether something is a material consideration and the weight which it should be given”. The former is a question of law; the latter is a matter for the planning judgement of the planning authority. Accordingly, a failure by a planning authority to have regard to relevant guidance as a material planning consideration would be an error of law. A decision, after considering the guidance, not to follow it, would (absent another ground of challenge in administrative law) be a matter of planning judgement, in which the courts have no role.”

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