Draft Development Contributions SPD - September 2022

(2) 2 PROCESS, PROCEDURE & MANAGEMENT

2.1 Pre-application stage

2.1.1 Pre-application discussions offer the opportunity for the council to clarify the planning policies and material considerations that will be relevant to determining an application, as well as enabling issues to be resolved through a collaborative process.

2.1.2 National Planning Policy Framework at paragraph 96 sets out that engagement between local authorities and promoters, delivery partners and statutory bodies before applications are submitted can ensure the faster delivery of public service infrastructure.

2.1.3 Discussions regarding the type and level of developer contributions should take place at the pre-application stage. Draft S106 Heads of Terms will be considered at this stage. The Council will accept the submission of and develop a draft Heads of Terms as part of any pre-application advice for housing developments expected to exceed 10 units of 1,000sqm in floor space, or any other form of development for which an obligation may be expected. The level of detail included will depend on the specific issues relating to the proposed development, as well as whether an Outline or Full planning permission to be is sought. Where proposals are general in nature, for instance unit mixes are not yet specified, indicative S106 contributions will be calculated on the assumption that any future scheme would be fully policy- compliant.

2.1.4 Where an application requires developer contributions that would be delivered by an organisation other than the Council or the applicant, pre-application discussions may be encouraged with that organisation also. This may include, but is not limited to, discussions with: Registered Providers, Hertfordshire County Council, the Police and Crime Commissioner on behalf of Hertfordshire Constabulary, utility providers and the NHS. The Council will approach most organisations which will be engaged in the forming of the S106 obligations document. The above organisations are recommended as they provide independent, chargeable, pre-application advice services, or have particular requirements which may require further, independent engagement.

2.1.5 For schemes where viability is raised as an issue by the applicant, a draft viability appraisal will be required at pre-application stage if comments from the Council are required on this matter. For further advice, please see section 2.3 of this document.

2.2 Application stage

2.2.1 Where pre-application discussions have identified that developer contributions will be required, applicants should submit heads of terms with their planning application.

2.2.2 Any developer contributions required will be considered at application stage by the case officer, other Council directorates, Hertfordshire County Council and any other external service providers and statutory consultees as relevant to the application. All developer contribution requests and requirements will be coordinated by the relevant North Hertfordshire Council case officer. This is to ensure that:

• correct processes are followed;
• applications can be dealt with in a fair and consistent way having regard to all relevant policy requirements; and
• all requests for contributions are assessed to meet the relevant regulatory and policy tests.

2.2.3 This holistic approach may require compromise between competing interests (for example the preferred approach of the highway authority vs urban design and place-making considerations). Whilst applicants are encouraged to engage in pre-application discussions with certain organisations, no obligation should be agreed independently of the case officer representing the Council.

2.2.4 The case officer will discuss the required developer contributions with the applicant, ensuring conformity with CIL Regulations 2010 (as amended). Where agreement cannot be reached between the applicant and the Council regarding the required obligations, or the applicant does not sign the S106 legal agreement within the required timescales, the planning application may be refused by the Council^[10]. For this reason, close dialogue between case officers and specific Council service areas and applicants is recommended from an early stage.

2.2.5 Planning applications that require obligations and that are determined by the Council's Planning Control Committee will not be recommended favourably to the Planning Control Committee until all parties to the agreement have agreed the content of the document. The legal documents which secure the obligations, whether via section 106 or unilateral undertaking, must be agreed in regards to wording of definitions, scale, phasing of delivery and trigger points of any obligations prior to the deadline for draft reports for the targeted Committee date.

2.2.6 Standard templates for the legal agreements and Unilateral Undertakings can be found on the Council's webpage at: https://www.north-herts.gov.uk/home/planning/apply-planning-permission/planning-obligations/.

2.2.7 Developers / applicants will need to produce satisfactory proof of title for their particular site and all persons with an interest in the development site including owners, mortgagees, tenants and option holders must be party to the agreement.

2.2.8  Applicants will be required to pay the Council's legal costs as well as their own for drafting and checking legal agreements, and will need to provide a solicitor's undertaking to do so. Applicants should also be aware that a solicitor's undertaking to cover the County Councils legal costs for negotiating and checking of the legal agreement as well as proof of title will be required by Hertfordshire County Council where applicable.

2.2.9 Where an applicant challenges the contributions required at application stage on viability grounds, a viability appraisal will be required. For further advice, please see section 2.3 of this guidance document.

2.3 Viability

2.3.1 Applicants should ensure that development proposals adhere to Local Plan and Neighbourhood Plan policies and that these requirements are factored into land value. The Local Plan should be treated as the starting point, with the underlying viability evidence demonstrating overall viability^[11]. This reflects National Planning Practice Guidance, which states that where up-to-date policies have set out the contributions expected from development, planning applications that comply with them should be assumed to be viable. It is therefore up to the applicant to demonstrate whether particular circumstances justify the need for a viability assessment at the application stage and where needed, provide evidence of what has changed since then.

2.3.2 Overpayment for land will not be accepted as a reason for reducing contributions.

2.3.3 A viability appraisal should cover and consider whether viability enhancements could improve the situation, for example deferring triggers for contribution payments. It should be an 'open book' assessment which should include information covering (but not necessarily limited to) the following:

• Existing use values;
• Proposed use values (sales and rental);
• Demolition and construction costs;
• Finance and marketing costs;
• Assumed yield;
• Construction site abnormals;
• Development phasing/timetable.

2.3.4 A viability appraisal should be submitted at application stage for any planning application where viability is a factor in determining the application. The viability appraisal will be independently assessed by consultants acting on behalf of the Council and the cost of this will be covered by the applicant.

2.3.5 A revised viability appraisal will be required where material changes are made following the submission of the planning application, or where there are delays where issues have not been resolved within the timescales originally envisaged.

2.3.6 National Planning Practice Guidance provides further information on the expected requirements in relation to viability appraisals, including but not limited to: assessment of land value, inputs and assumptions as well as an open book approach and ensuring accountability. The viability assessment shall be treated as a public document and made available on the Council's planning portal in line with national policy.

2.4 Viability review mechanisms

2.4.1 The Council will consider using a viability review mechanism where obligations or covenants are agreed at lower than policy compliant levels on viability grounds. A viability review mechanism can trigger a review of the originally agreed contributions where there is an improvement in viability and/or broader economic conditions since the original viability appraisal was undertaken.

2.4.2 A viability review mechanism may be used for multi-phased or long-term development schemes. Viability review mechanisms may also be appropriate whereby there are large scale, estimates or bespoke costs which may be subject to change or further surety upon investigation. The trigger point(s) for review will be set out at application stage, and be relevant to the reason for the inclusion of the viability review mechanism. Further developer contributions will only be required if a surplus is identified during the review over and above the returns necessary to be deemed viable.

2.4.3 The applicant will be expected to pay for the full cost of a viability appraisal required by a viability review mechanism. The appraisal should meet the requirements set out above. The viability review mechanism would be included in the S106 agreement, and will, as is necessary, be bespoke based on the facts of the case and reasons for its requirements in the first place.

2.5 Policy priorities and planning obligations

2.5.1 This SPD outlines in further detail the type of planning obligations that may be required. The coverage of likely obligations is not exhaustive, and each application will be considered on its merits on a case-by-case basis. Nonetheless, in every instance, the obligations sought will be in line with the CIL Regulations 2010 (as amended or subsequently replaced).

2.5.2 Paragraph 4.83 of the emerging Local Plan identifies that there may be instances whereby policy requirements are prioritised. Where an agreed viability study has been produced in accordance with relevant policies, the Council will consider the requirements most critical to securing development and meeting the overall objectives of the Local Plan.

2.5.3 The Council will normally prioritise those contributions that have been properly tested through the Local Plan, in accordance with National Planning Practice Guidance. The Council will have regard to potential alternative sources of funding and / or the likelihood of direct funding (in whole or part) of infrastructure for which s106 requests have been received.

2.5.4 Whether contributions have been subject to appropriate levels of consultation, examination and / or testing, is a significant factor in the viability of a scheme. The Council reserves the right to continue to require fully policy-compliant affordable housing provision (and other forms of properly tested contributions) at the expense of other requests.

2.5.5 The Council will seek to work with the relevant infrastructure provider to understand other potential forms of funding to fill any shortfall and negotiate an appropriately reduced level of contribution from the applicant.

2.6 Deeds of variation

2.6.1 In some cases, it may be necessary to change the contents of an agreement after it has been completed and signed. In such instances, the variation would need to be agreed by all parties affected by the variation prior to the submission of any application under Section 106B of the Town and Country Planning Act 1990 (as amended). This will result in additional costs to the applicant to take into account the negotiation, preparation and drafting of the variation. These costs include the costs of the applicant's legal representation, the reasonable costs of any signatories' legal representation as well as the costs of the application to vary or modify an obligation in of itself.

2.7 Monitoring, enforcement and allocation

2.7.1 The Council monitors all agreements, taking into account the trigger points and the different obligations included. Monitoring fees will be sought through S106 agreements and will meet the requirements of Part 11 Regulation 122 of the Community Infrastructure Levy Regulations 2010 as amended by Regulation 10 of the Community Infrastructure Levy (Amendment) (England) (No. 2) Regulations 2019. Those requirements are that the sum to be paid fairly and reasonable relates in scale and kind to the development and does not exceed the authority's estimate of its costs. Fees may be required to cover the cost of land transfer, where applicable.

2.7.2 The authority's estimate of costs for monitoring of obligations will, necessarily, be bespoke and context dependent. The estimated costs may include the monitoring costs of other departments in and or outside of the Council. Fees for monitoring will be negotiated by the case officer.

2.7.3 The Council may additionally seek contributions to cover reasonable legal costs, such as for the transfer of land for open space.

2.7.4 The Town and Country Planning Act 1990 (as amended) outlines provisions for local authorities to enforce planning obligations. Due to this, the applicant may be required to provide evidence as the development progresses that all financial and non-financial obligations have been met.

2.7.5 The Council will charge interest on any payment that is paid late, and this will be payable from the date that the payment was due to the date of payment. Interest will be applied at two percentage points above the base lending rate of Lloyds Bank, as varied from time to time.

2.7.6 A S106 agreement and Unilateral Undertaking report is produced by the Planning Department and the information is reported to the Area Committees annually. This information can be found on the following webpage: https://democracy.north-herts.gov.uk/mgListCommittees.aspx?bcr=1

2.7.7 The Council will comply with the requirements of Part 10A, Regulation 121A of the Community Infrastructure Levy Regulations 2010 as amended by Regulation 9 of the Community Infrastructure Levy (Amendment) (England) (No. 2) Regulations 2019 in so far as it relates to planning obligations. The Council also produces an annual Infrastructure Funding Statement.

2.8 Indexation

2.8.1 Commuted sums will be indexed linked from the date of the agreement to the date when the contribution is requested. Where the contribution relates to a commuted maintenance payment, this will be index linked from when maintenance costs are agreed. The Retail Price Index (RPI) will be used for ongoing revenue costs, and PubSec for all capital costs. This is to ensure that the value of an obligation does not reduce over time. This information is subject to change.

2.8.2 For contributions required by Hertfordshire County Council, indexation will be calculated having regard to any relevant requirements in their own planning obligations guidance^[12].

2.9 Bonds

2.9.1 A bond may be used in cases where a developer will be delivering the work or where payments are phased. For instance, where the contribution relates to Highway infrastructure works, a bond may be used to provide a guarantee to the Council that the infrastructure can be delivered and to required standards.

2.9.2 Bonds may also be requested by the Council to hold for future decommissioning works, such as a solar farm subject to a temporary planning permission or in other circumstances deemed appropriate.