Can I renegotiate a s106 agreement if the viability on my site has changed as a result of the current climate?
The Government acknowledges that there may need to be some flexibility to enable developers to meet any existing s106 obligations, in particular financial contributions, during the current health crisis and in recent guidance it encourages Councils “to consider whether it would be appropriate to allow the developer to defer delivery”. However, the Government considers that the existing arrangements for varying a section 106 agreement by way of a deed are sufficient and will not be legislating for any additional temporary mechanisms.
In the absence of any formal variation, the Government does however advise Councils to take a “pragmatic and proportionate approach” to enforcement of planning obligations at the current time.
The Government’s advice does not refer to concerns over the quantum of any planning obligations but is concerned only with the timing for delivery. However, the viability behind many sites is likely to change as a result of temporary site closures, or the availability of construction materials and labour once sites can re-open. Where there is already a s106 agreement in place, a developer may wish to renegotiate their position on the basis that certain planning obligations are no longer affordable.
Where a s106 agreement was entered into longer than 5 years ago, an application can be made to the Council to formally vary a planning obligation that is now “without purpose”. Any refusals can be appealed to the Secretary of State.
Where a s106 agreement was entered into within the last 5 years, the agreement can only be modified with the agreement of the Council. The ability to renegotiate a s106 agreement will therefore come down to the willingness of the Council to accept the revised viability position. Where Councils are willing to consider this, a robust viability assessment agreed with the Council is likely to be needed.
Related FAQs
With the exception of the Covid-19 Corporate Financing Facility (see below), there was initially little dedicated financial assistance for medium-sized and larger businesses affected by the coronavirus outbreak (the so-called “stranded middle”); however, from 20 April 2020 such businesses (with a turnover above £45 million) have been able to access finance via the Coronavirus Large Business Interruption Loan Scheme (“CLBILS“).
CLBILS operates in a similar manner to CBILS except that a lender can provide:
- up to £25 million to businesses with turnover from £45 million up to £250 million; and
- up to £50 million to businesses for those with a turnover of over £250 million.
Finance is available in the form of:
- term loans
- revolving credit facilities (including overdrafts)
- invoice finance and
- asset finance,
in each case available on repayment terms of up to three years.
Several changes to CLBILS took effect from 26 May 2020. The maximum amount available through CLBILS to a borrower and its group increased from £50m to £200m. Term loans and revolving credit facilities over £50m will be offered by CLBILS lenders which have secured additional accreditation. The maximum size for invoice finance and asset finance facilities remains at £50m. Companies borrowing more than £50m through CLBILS will be subject to further restrictions on dividend payments, senior pay and share buy-backs during the period of the loan. Further information on the most recent changes, including new provisions on seniority of CLBILS facilities, can be found on the CLBILS page on the British Business Bank website. There is also an in-depth FAQs section for businesses, which has the full details of the changes to the scheme.
Unlike CBILS, the UK government will not make payments to cover the interest and any lender-levied fees in the first 12 months of any facility so these larger businesses will not benefit from the no upfront costs and lower initial repayments that smaller businesses eligible for CBILS benefit from. The other key provisions of CLBILS, such as the eligibility criteria, the 80% government-backed guarantee and security, are similar to those of CBILS.
Eligibility is similar to CBILS and businesses must:
- Be UK-based in its business activity
- Have an annual turnover of more than £45 million
- Have a borrowing proposal which the lender would consider viable, were it not for the current pandemic, and for which the lender believes the provision of finance will enable the business to trade out of any short-term to medium-term difficulty
- Self-certify that it has been adversely impacted by the coronavirus (COVID-19)
- Not have received a facility under the Bank of England’s Covid Corporate Financing Facility.
Businesses from any sector can apply, except the following:
- Credit institutions (falling within the remit of the Bank Recovery and Resolution Directive), insurers and reinsurers (but not insurance brokers)
- Building Societies
- Public-sector bodies
- Further-education establishments, if they are grant-funded
- State-funded primary and secondary schools
All lending decisions remain fully delegated to the accredited lenders.
Suspension should always be a last resort and not a knee jerk reaction. We would not advise suspension unless a the above steps around the risk assessment have been undertaken. Depending on your local policies, suspension could then be an option on the basis that their health and safety and the health and safety of others are put at risk by their actions.
The Government will allocate £360 million to charities providing key services and supporting vulnerable people during the crisis. £200 million of this amount will be paid to Hospices UK to be distributed to hospices to help increase capacity and give stability to the sector. The remaining amount is to be allocated to:
- St Johns Ambulance to support the NHS
- victims charities, including domestic abuse, to help with potential increase in demand for charities providing these services
- charities supporting vulnerable children, so they can continue delivering services on behalf of local authorities;
- disabled people
- Citizens Advice Bureau to increase the number of staff providing advice during this difficult time
The Government Departments will identify priority recipients, with the aim that these charities will receive money in the form of a cash grant over the next few weeks and by the end of April to assist in paying amongst other costs April’s wage bill.
Where an apprentice is made redundant the training provider should support the apprentice in seeking alternative employment within a 12 week period. ESFA will support this process. Where an apprentice is placed on unpaid leave or the nature of their employment no longer supports their apprenticeship, it should be considered whether a break in learning would be appropriate.
An employer who wishes to make an apprentice redundant should seek advice on the process to be followed for this.
With the outbreak of coronavirus leading to a requirement for more employees to be working remotely, especially following Government advice that all non-essential travel including to and from work should be avoided, there has been an increased requirement for businesses to be more flexible in their approach to signing contracts.
The traditional approach has been for contracts to be printed and signed with a “wet ink” signature. However, this is not a strict legal requirement in the majority of circumstances and contracts can be formed without this degree of formality. English law recognises that contracts can be formed by electronic means – including the exchange of emails or the typing of a name into a document to signify agreement to it.
Whilst this approach offers a lot of flexibility, more sophisticated electronic signature tools are recommended for important documents, to enable the identity of the signatory to be validated and reduce the possibility of fraud.
If businesses are considering changing their contracting processes because of coronavirus, or because of a general shift towards paperless working, it is important to ensure that proper approval processes remain in place, and to consider whether a software tool should be used to complement them. Systems such as DocuSign are widely used.
There also remain some situations where legal advice is recommended before relying on an electronic signature:
- Where the other party is abroad – as local laws that are different from English law might apply
- If executing a deed – the law requires certain types of document to be executed as a deed (for example, transfers of land and powers of attorney), and the issues around electronic signature and witnessing are more complicated here