In 2014, a BBC investigation revealed that councils in England were holding £1.5 billion of unspent S106 financial contributions received from developers. The BBC said that its investigation had also revealed that over the previous five years £9.8 million of S106 cash had been returned to developers, often because it had not been spent within a set time period.
What is a S106 Financial Contribution?
A S106 financial contribution is a sum of money secured against the landowner of a development by way of an agreement or undertaking (pursuant to section 106 of the Town and Country Planning Act 1990) and payable to a local planning authority so as to facilitate the grant of planning permission for a development. The key characteristic are:
- Amount – there will be a specified sum payable to the authority (usually indexed linked)
- Purpose – there will be a specified purpose for which the contribution can be used (eg. a road scheme)
- Interest – there may be an obligation on the authority to hold the amount in an interest bearing account until expended
- Refund – there may be an express refund period agreed by the authority (eg. 5 years from payment)
When is it Refundable?
The agreement which provided for the S106 financial contribution may have included a refund provision on the local planning authority. You should check the terms of the agreement to see whether an express refund period was provided.
If an express refund provision was not provided (as would be the case if the S106 financial contribution arose from an undertaking) you may still be entitled to a refund of any unspent contributions. The courts have found that in the absence of an express refund provision then some additional term is required to be read into the document in order to achieve business efficacy by determining what is to happen to any unexpended balance once the purpose for which the contribution was made had been achieved.
Want to Claim a Refund?
If you think you might be entitled to a refund of a paid S106 financial contribution YOU SHOULD undertake the following enquiries:
- Check the terms of document which provides for the S106 financial contribution including the purpose for which it was paid and whether there is an express refund period
- Make a request to the relevant authority for information as to: (a) what schemes the S106 financial contribution paid has been expended or allocated for expenditure; (b) the date of expenditure or allocation; (c) how much has been allocated; and (d) how much remains unspent (including any accrued interest). Such request should be made pursuant to the Freedom of Information Act 2000
Following the outcome of the above enquiries you may be entitled to a refund for:
Express Refund Provision
- Any sums (including interest) that are unspent and unallocated for expenditure as of the date for refund
- Any sums (including interest) that was spent or allocated on schemes or works outside the purpose of the S106 financial contribution and it is post the date for refund (ie. if the authority is in the expenditure period it could re-allocate the sums to an appropriate scheme before refund is due)
- Any sums (including interest) that are unspent and unallocated for expenditure, or incorrectly spent or allocated for expenditure, prior to the date for refund and the purpose of the S106 financial contribution has been completed and there are no other reasonably foreseeable schemes within the agreed purpose for which such sums can be expended or allocated
No Express Refund Provision
- Any sums (including interest) that are unspent and unallocated for expenditure, or incorrectly spent or allocated for expenditure, and the purpose of the S106 financial contribution has been completed and there are no other reasonably foreseeable schemes within the agreed purpose for which such sums can be expended or allocated
If you believe you are entitled to a refund you should then formally write to the authority requesting the refund together with an explanation of the reasons for such request.
Should you be unable to resolve the dispute with the authority then you can make a claim to the courts or follow any dispute resolution clause in the section 106 agreement (as applicable).
