Section 106 Explained: What You Need to Know

Section 106 agreements, negotiated between developers and local authorities, ensure that new developments contribute to essential infrastructure, services, and community facilities, including schools, nurseries, community buildings, and green spaces.

We’ve laid out the essentials of Section 106, looked at how these buildings can be funded, and highlighted how our award-winning buildings can help developers meet their obligations while maintaining control over budgets and schedules.

What is a Section 106 agreement?

A Section 106 agreement is a legally binding contract between housing developers and local planning authorities in the UK, initiated as part of the application process for developing land. When large numbers of houses are built in a local area, there will be a clear impact on the community, which Section 106 seeks to mitigate by requiring the developers to contribute to infrastructure, services, or facilities.

Negotiated between the council and developers, these agreements can include affordable housing, new education or community buildings, transport, and green spaces, providing long-term benefits for the surrounding area. The specific obligations of a Section 106 agreement will vary depending on the development’s size, location, and local needs.

For developers, Section 106 will have a clear influence on project costs, timelines, and planning approval. Depending on the agreement, developers can either oversee the additional work themselves or make a payment to the local authority.

What can Section 106 money be used for?

Section 106 agreements can often stipulate the construction of new school buildings

When a developer is applying to build a large number of new homes in an area, the council will be looking to offset the impacts and address local needs within their Section 106 agreement. This could include specifying the following:

• New Education Buildings: A council could request funding for new classrooms, entire school buildings, nurseries, and SEND facilities to accommodate growing pupil numbers.
• Affordable Housing: Many developers will agree to provide a percentage of homes at below-market rates or fund new social housing developments. Councils will often stipulate a rate of up to 40% affordable housing within a development.
• Healthcare Buildings: Developers could agree to create new GP surgeries, health centres, or hospital expansions.
• Community Facilities: A Section 106 agreement could cover funding for sports halls, libraries, youth centres, and multi-use community buildings.
• Transport and Highways: Section 106 agreements often stipulate improvements to roads, cycle paths, pedestrian areas, and public transport links.
• Green Spaces: Councils could also look to increase the number of parks and playgrounds within their area.

How does Section 106 funding work?

Section 106 agreements are negotiated between housing developers and local authorities at the early stages of development. For developers, this can be a crucial wedge when bidding on projects. As part of this process, developers will create an outline design for the local authorities showcasing what their proposed Section 106 buildings will look like. If an agreement is reached, they will receive outline planning permission and can start the detailed design process.

The Section 106 agreement will lay out what needs to be built and when it needs to be completed before. For things like affordable housing and roads, developers will often complete the work themselves, but for other spaces such as school buildings and community centres, they will usually need to find an external partner to complete the work. There are two paths they can take to meet this:

• Financial Contribution: For something like a school building, developers can give the council the agreed budget for the project, and allow them to take responsibility for commissioning, designing, and delivering the building.
• Direct Delivery: Alternatively, the developer can subcontract the Section 106 building to an external partner, like TG Escapes. This method ensures better adherence to their schedules and potentially saves them money if the building can be delivered for less than the initially agreed budget.

How long do Section 106 agreements last?

Section 106 agreements are usually time-sensitive, meaning that if a developer is overseeing them, they will need to complete the agreed buildings at a certain time. In larger developments, this completion deadline will often be at a certain stage of overall construction, to ensure that Section 106 buildings are not left until last.

For projects where developers give money to the council to handle buildings, there are sometimes agreed deadlines for the council to spend the money, after which the money could be returned to the developers. However, there are many cases in the UK where councils are sitting on Section 106 money, often for many years (a FOI survey showed £6 Billion in unspent Section 106 payments across the UK).

Working with developers on their Section 106 projects

We created high-quality buildings for Paper Lane Nursery as part of a Section 106 project

TG Escapes are a trusted partner for developers across the UK looking to meet Section 106 agreements. We create a full range of educational and community buildings using a bespoke modular system that delivers high-quality permanent timber buildings with reliable cost and time savings.

For Section 106 projects, we offer a fully turnkey solution, with our team handling design, manufacture, installation, and finishing, all for a single upfront price. We have a focus on sustainability and Biodiversity Net Gain, achieving net zero in operation as standard on all buildings.

A great example of our Section 106 work is Paper Lane Nursery, where we worked with developer Kenninghall to deliver a 60-place nursery building, completing on-site work within just 12 weeks.

Find out more about our work with developers at our Section 106 Buildings page, or get in contact with a member of our team to enquire about your next project.

FAQ

What triggers a Section 106?

A Section 106 agreement is triggered when a proposed development is deemed to have a significant impact on local infrastructure or services. This is usually for large housing projects, where additional schools, community buildings, or transport improvements are needed. Local authorities will assess the impact and negotiate contributions as part of planning approval.

How is Section 106 calculated?

Section 106 contributions are calculated based on the scale of the development and its impact on local services. The amount varies by location and development type and is negotiated between councils and developers. Some councils like Nottingham have a more transparent formula for calculating contributions.

Can multiple buildings be covered by a Section 106 agreement?

Yes, a single Section 106 agreement can cover multiple buildings across a development. For example, a housing project might require contributions towards both a new school and a community building.

Do Section 106 agreements come with time limits?

Yes, Section 106 agreements often include timeframes for payments or project delivery. Developers must meet these deadlines, or councils can take enforcement action. If a financial contribution to the council isn’t spent within a set period, in some cases the developer may be able to reclaim the unused funds.

Are there alternatives to Section 106 agreements?

Yes, the Community Infrastructure Levy (CIL) is an alternative to Section 106. CIL is a fixed charge per square metre of new development, whereas Section 106 is negotiated case by case. Some developments may be subject to both, depending on local policies and the nature of the project.

Can Section 106 obligations be renegotiated?

Yes, developers can request to renegotiate Section 106 obligations if circumstances change. This is common if a project becomes financially unviable or if local needs evolve. Formal renegotiation can take place after five years, but councils may consider changes earlier if both parties agree.