REPORT ITEM 10 – DEVELOPMENT COMMITTEE 28 MAY 2015
(Marked “to follow” on the agenda)
PUBLIC BUSINESS – ITEM FOR DECISION
10.
SALTHOUSE – PF/2006/0642 AND PF/2006/0736 – APPLICATION FOR RELEASE
OF SECTION 106 PLANNING AGREEMENT
Purpose of this Report
An application has been received to release this development from the requirement of
the Section 106 agreement associated with planning permission granted in relation to
the residential conversion of a group of barns at Bards Hill, Salthouse.
The application relates to two specific requirements contained in the agreement:
1. The requirement for the developer to pay to the District Council the sum of
£92,000 to be used for the provision of off-site affordable housing. The
agreement required this sum to be paid in two tranches each of £46,000. The
triggers for the payment were the sale of the third and sixth dwelling units
2. The requirement of the above clause to be binding on successors in title
This report sets out the background to this agreement, and compares this with the
Council’s current policy position, changes to the relevant legislation and the
Government’s policy in current National Planning Guidance and makes
recommendations as to the way forward.
Planning History
The relevant planning applications are as follows:
2006/0642- Conversion of Barn (described as “Plot 2”) to form dwelling. Planning
permission was granted on 8 June 2006
2006/0736- Conversion of the remaining Barns to five dwellings. Planning permission
was granted 15 February 2007, following the completion of the Section 106 agreement.
Planning Application 2006/0736 was considered by the Development Committee on 22
June 2006, and was considered against the then-current Local Plan (the development
plan in force prior to the North Norfolk Core Strategy). Although outside the
development boundary for Salthouse and within the Norfolk Coast Area of Outstanding
Natural Beauty and Conservation Area, the buildings were immediately adjacent to the
adopted development boundary where the Local Plan policy then in force was supportive
of their residential conversion. It was concluded that the site could only be developed
under Local Plan policy 29: The Reuse and Adaptation of Buildings in the Countryside,
subject to a contribution towards offsite affordable housing secured by a Section 106
agreement.
The application was again reported to Development Committee on 20 July 2006 with a
recommendation for delegated approval subject to resolution of affordable housing
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issues, amended design details and the imposition of appropriate conditions. The
application was approved on that basis and a Section 106 agreement completed on 8
February 2007. The key provisions were:
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
To secure a developer contribution of £92,000 towards off-site affordable housing
Payment in two tranches; £46,000 to be paid within 21 days of completion of the
sale of the third and sixth units
Agreement expressed to be binding on successors in title to the developers
The developer had purchased the Barns and commenced the conversion works prior to
the recession in 2008. Four dwellings have been completed apparently to a very high
standard and sold, two of the conversions have not been done and the remaining barn is
currently up for sale.
When the third unit was sold, the purchasers’ solicitors required £46,000 to be retained
from the sale price, being 50% of the affordable housing contribution due to NNDC
under the terms of the agreement. This sum is held “in escrow” by the developer’s
solicitors.
The Section 106 Agreement
The agreement was signed on 8 February 2007 and, at that time was considered to
meet the policy tests to be applied to such agreements; whether the requirements are
reasonable, relevant and directly related to the proposed development.
A request was made to the Council for the Section 106 agreement to be released as it
was clear at that point (2011) that the developer would make a significant loss on the
project and that payment of £92,000 contribution was no longer viable.
This matter was reported to Development Committee on 12 January 2012, when it was
resolved that:
… “Consideration of this matter be deferred for a more detailed report following advice
from the District Valuer in respect of the figures discussed under private business and
that further consideration be given to the legal consequences of the agreement on the
present and future occupiers of the barns.”
The report in January 2012 concluded with a recommendation that the developers be
allowed to proceed with the conversion of the remaining (two) units without being
required to pay the first tranche of the affordable housing contribution at that time and
that “the viability of providing the second payment be considered when all the barns
have been sold and all the cost of the conversion are known.” It is now apparent that the
basis of this report was inaccurate, and the developer was in fact then asking to be
released from the requirement of the agreement in full, such that no payment of
affordable housing contributions are required.
Current position on site
Work on the site was suspended some time ago, such that four of six barn units have
been converted, leaving two units unconverted.
The developer has made it clear that the completion of the remaining two barns is not
financially viable now or in the foreseeable future and has marketed the barns.
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In the meantime the Local Member has expressed concerns over the deteriorating
appearance of this site and possible safety issues (the unconverted building is adjacent
to the road and debris has fallen from the building).
Current Policy Context
The starting point for considering an application for release or variation of a Section 106
agreement is:
Is the obligation still necessary to render the scheme acceptable in planning terms when
assessed against current policy at the time when the variation request is made?
Therefore the application falls to be considered against the Council’s current Core
Strategy document and National Planning Policy Framework and Guidance.
Policy HO9 Conversion and Re-use of Rural Buildings as Dwellings states:
The conversion and re-use of suitably constructed building in the countryside for
permanent residential purposes will be permitted provided that:
“(criteria 5) where it is viable to do so, on all schemes resulting in two or more
units, not less than 50% of the total number of dwellings proposed are affordable,
or an equivalent contribution is made in accordance with the requirements of
Policy HO2”
In summary, barn conversions in this location are acceptable and affordable housing is
required on schemes of two or more units, but importantly any contribution is viability
tested.
The developer has been asked to be released from this agreement on viability grounds.
In summary, the information submitted by the developer (July 2014) shows the cost of
the project as follows:
Purchase price plus cost of conversion of 4 units
Sales of 4 completed units
Shortfall
Sale price of remaining barn
LOSS
£2.5 million
-£1.8million
£700,000
-£385.00
£315,000
On this basis, it would appear that the scheme is not viable and therefore the affordable
housing contribution should be lifted.
Further confirmation on the viability information submitted by the developer has been
sought from the District Valuer, and is currently awaited.
The Council’s policy position was further amended, with the introduction of the Housing
Incentive Scheme in September 2013 (initially for a year) and extended to 30 December
2015. The purpose of the scheme is to incentivise the quick delivery of developments
which have been granted planning permission, by increasing the number of dwellings
which would be permitted on a development before seeking a contribution towards
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affordable housing. The Council will allow schemes of up to 9 dwellings (new build and
conversions) without seeking contributions to affordable housing.
Since this site was last considered by the Development Committee in 2012, the
Government has made significant changes both to the legislation relating to Section 106
agreements and also to the relevant national policy, reflecting the Government’s view
that “the Planning system ought to proactively drive and support sustainable economic
development.” The DCLG document which deals with changes made to the legislative
framework for review of Section 106 agreements (April 2013) made clear that
“Unrealistic section 106 agreements negotiated in differing economic conditions can be
an obstacle to house building . The Government is keen to encourage development to
come forward, to provide more homes to meet a growing population and to promote
construction and economic growth. Stalled schemes due to economically unviable
affordable housing requirements result in no development, no regeneration and no
community benefit.”
Paragraph 204 of the National Planning Policy Framework (NPPF) states that (Section
106) Planning Obligations should only be sought where they meet all of the following
tests:
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
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Necessary to make the development acceptable in planning terms;
Directly related to the development; and
Fairly and reasonably related in scale and kind to the development
Paragraph 205 states that “where obligations are being sought or revised, local planning
authorities should take account of market conditions over time and, wherever
appropriate, be sufficiently flexible to prevent planned development being stalled”
More recent changes to the NNPF have set the threshold for requiring contributions
towards affordable housing at 10 units. The introduction of this 10 unit threshold was
introduced expressly to assist scheme viability and to speed up delivery. This change to
the NPPF is a material consideration of significant weight in the consideration of the
request for release of this agreement and supersedes the Council’s adopted Core
Strategy policy. This stance was adopted by the Council following referral of a report to
the Planning Policy and Built Heritage Working Party in January 2015.
It is also the case that were the developer or a subsequent purchaser to now apply for
Planning permission to convert the remaining barn, when considered against our current
policy framework, Officers consider that an affordable housing contribution could not be
imposed.
Local Member view
The Local Member has been made aware that this matter is being reported to
Development Committee. Any views received will be reported to the Committee.
Conclusions
The developer entered into the S106 agreement in 2007 willingly and understood the
requirements.
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However the economic climate has changed significantly as has the relevant legislative
and policy framework against which we would consider similar planning applications
today.
National guidance is clear in that Section 106 agreements should not be unreasonable
and must reflect the current economic climate. The development has stalled and it is
clear that the developer will not undertake further work to convert the remaining barn
unless the development is released from the agreement. Therefore, subject to receipt of
the District Valuer’s view on the financial information submitted and confirmation that the
scheme is unviable, it is recommended that the development be released from the
requirement to provide an off-site affordable housing contribution.
This would facilitate the completion of this development, with the benefits of two
additional homes and improvement in the appearance of the site which is in a prominent
position in the AoNB and Conservation Area.
Successors in Title
A second issue has been raised by the current owner of one of the converted barns, and
relates to the requirement that the Section 106 agreement was expressed to be binding
on successors in title to the original developer. This has arisen as the current owner is
seeking to sell the unit and solicitors have advised that the issue in relation to the
affordable housing contribution has not been resolved, and will potentially impact
adversely on future sales of the barns.
The Council’s practice with regards to enforcement of section 106 agreements has
changed since this Agreement was concluded in 2007 such that provisions relating to
developer contributions are now expressed to bind the developers undertaking the
project as successors in title, but not individual purchasers of completed dwellings. This
is because such clauses are generally related to the viability of the overall development,
and primarily in the control of the developers; again this is reflective of current
Government policy aimed at reducing obstacles in the development process.
In line with our current practice, it is therefore recommended that the successor in title
clause within this agreement is lifted.
Recommendations
It is recommended:
1. That subject to confirmation from the District Valuer that this scheme is not
viable, the Head of Planning to be authorised to release the development from
providing the off-site affordable housing contribution of £92,000.
2. The successor in title clause also be removed from the agreement.
(Source: Roger Howe (Planning Legal Manager) 01263 516016
: Nicola Baker (Head of Planning) 01263 516135)
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