Understanding your Section 106 agreement

What is a s106 Agreement?

They are also known as planning obligations, and are agreements made under Section 106 of the Town and Country Planning Act 1990. A s106 is a legally binding document which forms part of the planning permission for your home.

Your s106 agreement will usually specify who would qualify to buy, and at what price. So before you put your home on the market, it’s important that you check the requirements in your s106 agreement.

Legal documents can be difficult to understand. The parts of the s106 that are most relevant to you involve Local Connection, explained later in this guide, Occupancy, meaning who is eligible to live in your home and Price – how much you can sell your home for.

Rural properties bought under the Right to Buy scheme contain similar occupancy conditions, but no s106 agreement. Instead there will be a restrictive covenant in the Deeds under s157 of the Housing Act 1985, so speak with your solicitor about this. Your buyer will need to have a Local Connection to Cornwall having lived or worked here for 3 years prior to their application to purchase the property.  Your buyer will require a certificate from Cornwall Council stating that the transaction is made in accordance with Section 157 of the Housing Act 1985.  Applications for a certificate are dealt with by the Council’s Legal department and not the Affordable Housing Team. Please email these types of requests to Legal157Instructions@cornwall.gov.uk

Your s106 agreement is usually kept with the Deeds of your home, alongside the documents provided when you bought your home. Check with the solicitor that you used, or with the Bank or Building Society who provided your mortgage. If you cannot find your s106 you can obtain a copy from the Council’s Planning office. There is a fee for this.  For further details please contact the Section 106 Monitoring Officers through planning@cornwall.gov.uk

Most s106 agreements give priority to potential owners who have a Local Connection to a particular area. First priority is usually given to people who work or live in the same parish. After a set period of time, most agreements allow you to consider people from adjoining parishes, and after another period of time, people from other parts of Cornwall. Your s106 should specify those areas, the time limits, and how a person demonstrates that they have the correct local connection.

Your s106 agreement will explain how you calculate the resale price. In more up-to-date agreements, the price is usually specified as a percentage discount to open market value. In older agreements the price may be based on a person’s income, and if this applies to you, your s106 may need updating so that it contains a percentage.

This is a technical part of a s106 agreement which protects the bank or building society that provides a mortgage for an affordable home. If the worst happens, and the bank or building society has to repossess your home, they will want to be able to get back the mortgage that you owe them. To do this, they will want to be able to sell your home without complying with the same restrictions that apply to you. A ‘Mortgagee in Possession’ clause allows them to do that. All modern s106 agreements have this included, but some older s106 agreements do not, and so it is possible that a future lender will ask to have an older s106 changed to include this.

Your s106 agreement can usually be updated to reflect the requirements of your lenders or we can replace an old s106 agreement with a current version which banks and building societies prefer. You will need to pay the Council’s legal fees for doing this. The process involves applying for a Deed of Modification. However, please be aware that the Council takes the obligations in these agreements very seriously and they are meant to remain in place. We do not therefore usually agree to change or lift requirements which restrict the price or the local connection criteria or keep the dwelling as affordable.  For full details please see the what if my Section 106 agreement needs to be changed page.