S106 Agreements: What UK Businesses Need to Know About Planning Obligations

Thinking about developing new premises for your business, setting up in a growing area, or taking on a project involving land or property? You might run into something called a “Section 106 Agreement” (or s106 for short). If you’ve never dealt with one before, it’s totally normal to feel a bit confused. You’re not alone - many business owners, developers and startups aren’t sure what s106 actually means until they’re in the thick of a planning process.

The good news? Getting your head around s106 obligations early will help you avoid costly delays, negotiate more effectively with local authorities, and plan confidently for your business’s future. In this guide, we’ll break down what s106 is, why it matters for UK businesses, and the key legal steps you’ll need to consider. Let’s make s106 simple - so you can get on with building your business, not worrying about planning headaches.

What Is An S106 Agreement?

A “Section 106 Agreement” (or "planning obligation") is a legal contract between a property developer (which can be a business of any size) and a local planning authority. It’s named after Section 106 of the Town and Country Planning Act 1990, and it’s designed to make a new development acceptable in planning terms by controlling the nature of development or helping to address its impacts.

You’ll commonly find s106 agreements whenever a business applies for planning permission on a site where there will be impacts (like increased traffic, pressure on local schools, environmental changes, etc.) and the council wants something to be done or paid to offset those effects.

• For example: A new retail park may trigger s106 payments towards road improvements. A business scheme including housing might need to provide “affordable housing” under s106 terms. A leisure centre could be required to create green space or community facilities as part of its s106 deal.

In plain English: s106 is a legally binding agreement to either do, provide, or pay for things that make your development “work” for the local area.

Why Do UK Businesses Need To Worry About S106 Agreements?

If your business needs planning permission for development or change of use, s106 is something you’ll need to understand - and potentially budget for. Here’s why:

• It’s a condition for getting planning approval. Without an agreed s106, your application might be refused.
• It creates legal obligations. Once signed, an s106 agreement is enforceable by law. If you don’t comply, your business could face injunctions, fines, or even see permissions revoked.
• It impacts cash flow and project planning. S106 payments, works, or timing obligations can significantly affect your financial and operational plans.
• It could affect selling or letting your property. Most s106 agreements ‘run with the land’, so future buyers (or your own business if you sell up) will also be bound by its terms.

In short, s106 is a fundamental part of the regulatory landscape for business property and development. Understanding your obligations will help you avoid unpleasant surprises further down the line.

What Can Be Included In An S106 Agreement?

The exact contents of a s106 agreement will depend on your development, the site, and what the local planning authority decides is necessary. Common types of s106 obligations include:

• Financial contributions - e.g., payments towards local infrastructure, schools, transport improvements, health facilities, or parks.
• On-site works - such as building a cycle path, playground, or community centre as part of your project.
• Affordable housing - a commitment to include a percentage of below-market-rate homes in a residential or mixed-use scheme.
• Restrictions - for example, limiting future development, hours of operation, or how certain parts of the site can be used.
• Environmental measures - like landscaping, habitat protection, or sustainable drainage systems.
• Employability or apprenticeship requirements - obligations to create local jobs or training places as a development benefit.

Each s106 is tailored to the site and the specific project. The key is that the obligations must be necessary, directly related to your development, and fairly and reasonably related in scale.

How Is An S106 Negotiated And Agreed?

Getting a s106 agreement in place usually involves discussion (and sometimes tough negotiations) between the business or developer and the local planning authority. Here’s what typically happens:

• You submit a planning application. If the council is likely to support your plans but needs extra reassurances or mitigation, they’ll indicate the need for a s106 agreement.
• Heads of Terms are discussed. This is a preliminary list of proposed obligations, usually shared early on so everyone knows what’s expected.
• Drafting the legal agreement. Both sides’ lawyers (and sometimes technical consultants) will thrash out the details and timings for works, payments, and enforcement.
• Formal signing and completion. The s106 must be signed and exchanged before planning permission can be issued.

You can - and should! - negotiate the terms rather than simply accepting the council’s first draft. Having a legal expert with experience in s106 negotiations can help you ensure your business’s interests are protected and that you’re only agreeing to reasonable, enforceable terms. Avoid signing anything without tailored legal advice - this is a real contract with lasting consequences.

If you’re new to property contracts and development agreements, you can learn more about drafting legally enforceable contracts and the importance of getting these documents right.

What Legal Steps Should Businesses Take With S106 Agreements?

If you’re facing an s106 agreement process, here’s a step-by-step checklist to protect your business’s legal and commercial position:

1. Understand your obligations upfront. Ask the planning authority for early heads of terms. Work out what financial or operational impacts these could have on your business plan.
2. Get expert advice before agreeing. An experienced solicitor can help assess whether requests are fair, legal, and proportionate. Sometimes councils overstep - don’t be afraid to push back if certain demands don’t seem justified.
3. Negotiate timings and triggers. Try to align payments or works with practical milestones (such as occupation of the development) rather than too early in your build or business setup, which could affect your cash flow.
4. Ensure clarity in drafting. Vague or open-ended s106 wording can create years of uncertainty or liability. Be sure all obligations, timings, and enforcement mechanisms are clearly defined in plain language.
5. Register and check the s106 agreement. Once signed, s106 is usually registered as a Local Land Charge, binding successive owners. Make sure you keep a copy and understand how any obligations will affect you if you sell, let or refinance your site in the future.

Having essential legal documentation around your property and planning matters is just as important as for business contracts or employment. Don’t leave it to chance or generic templates.

Are There Any Ways To Avoid, Change, Or Discharge An S106?

Sometimes, obligations in a s106 agreement may become outdated, unworkable, or financially unviable for your business - especially if market conditions change or if you want to alter development plans.

Here are the main options:

• Modification or discharge - You can apply to the local council (after five years, or earlier if allowed) to modify or remove obligations. There’s a legal process for this, and if the council refuses, you can appeal to the Planning Inspectorate.
• Enforcement and flexibility - Councils can enforce obligations by preventing occupation, refusing future permissions, or taking legal action. But they also have discretion and may be open to renegotiating if circumstances change.
• Paying “in lieu” - Sometimes, councils will accept payment instead of delivering specific works (for example, a financial contribution rather than building affordable housing on site).

The key message? S106 obligations aren’t always set in stone - but altering them requires careful legal and planning input. If you want to explore options, updating contracts the right way is essential, and proper negotiation strategy is a must.

How Does S106 Relate To Other Planning Obligations?

S106 agreements are one part of the broader legal toolkit for controlling property development in England and Wales. Other mechanisms include:

• Community Infrastructure Levy (CIL) - Some councils charge a standard levy (on new floorspace, for example), separate from s106.
• Planning conditions - Imposed by the planning authority, these can cover narrower aspects (like operating hours) and don’t require a separate agreement.
• Unilateral undertakings - You (as the business/developer) can voluntarily offer specific obligations, which may help fast-track your planning application.

Sometimes, you’ll face both s106 and CIL charges - so make sure you budget for all types of planning costs. Check with your local authority to get a full picture of your obligations.

For a general guide to handling contracts and obligations, see our resource on hidden dangers of DIY legal documents and why getting the legal side right is crucial.

Are There Special S106 Issues For SMEs and Startups?

Absolutely. While large property developers might be used to haggling over s106 terms, small businesses and startups sometimes get caught off guard. Issues worth watching for include:

• Disproportionate costs - If the requested s106 contributions are high, they can make your business plan unviable (especially for small-scale developments).
• Complex legal language - Don’t be afraid to ask for plain English explanations or seek professional advice.
• Tied obligations - Watch for clauses tying the business to obligations long after you’ve finished the initial project.
• Transfer of obligations - If you sell or let, make sure you understand what your ongoing exposure will be, and ensure it’s clear in your contracts with buyers or tenants.

The main lesson? Don’t sign an s106 just to get approval and get started - make sure you fully understand (and can meet) every obligation. An expert legal review can save a small business from risks that only become apparent much later.

Key Takeaways

• S106 agreements (“planning obligations”) are legally binding contracts tied to planning permissions and can significantly affect your business’s property use and finances.
• You’ll need to negotiate, draft, and register s106 agreements with care - vague or onerous obligations can come back to haunt you.
• Always get expert legal advice before signing an s106. Don’t rely on templates or go it alone.
• S106 isn’t always ‘set in stone’ - changes may be possible, but it requires following the right legal process.
• SMEs and startups face unique challenges in s106 negotiations, so clarity, proportionality, and long-term risk management are especially important.
• Addressing planning obligations early, and integrating legal review as part of your overall business planning, will keep your project on track and protected from costly surprises.

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If you’d like help navigating s106 agreements, planning permission, or any other aspect of setting up your business legally, you can reach us at 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat. Our expert team can help you build your business on solid legal foundations - right from day one.