Better bargaining

Many aspects of the Planning etc (Scotland) Bill (published on 21 December 2005) will have a direct impact on solicitors involved in property transactions. One reform has been particularly keenly welcomed by planning/property lawyers with clients who own and/or develop land and property. This is the proposed replacement of planning agreements (in their current form, i.e. as governed by section 75 of the Town and Country Planning (Scotland) Act 1997) with planning obligations and unilateral undertakings.

Planning agreements are often entered into between a landowner/developer and the planning authority as a means of softening public impacts generated by a proposed development. Very often a public benefit extrinsic to the development (“planning gain”) must be offered to offset such impacts. At present, however, the applicant often does not enter into the negotiation process freely, with equal bargaining power. If the developer does not enter into the agreement, the development will simply not proceed.

The unilateral alternative

The bill therefore proposes a system of unilateral undertakings whereby a developer can offer competing terms, either when agreement with the planning authority is not forthcoming, or at appeals or call-ins where there are objections that only such undertakings can resolve. Already frequently used in England when only the developer needs to be bound by the agreement, it is to be hoped they will prove valuable to those seeking planning consent by equalising bargaining power and reducing the tendency for planning gain “negotiations” to resemble simply a last minute ambush by planning authorities.

Planning agreements have often been employed to restrict the use of land. But while central and local government policy often discourages further housing in the countryside, such housing is frequently required due to reorganisation of landholdings, the need for supervision of livestock or disrepair of existing farmhouses. Often the planning authority will (quite rightly) grant planning consent only on condition that an agreement is completed restricting occupation of a house to those employed in farming.

Many such occupancy restrictions, however, quickly become redundant and can no longer be justified. Very often the agricultural need that justified the condition no longer exists. The rural economy diversifies, farms change hands and workers are dismissed. What if the employee has funded the house himself and is then unable to obtain agricultural employment consistent with the condition? Technically, the house may have to be razed. In practice that may not happen but solutions are not obvious. As the agreement is binding on singular successors, severe difficulties may arise when the owner seeks to sell the property and the planning authority is unwilling to discharge the use restriction. Demonstrating that the rural business is unmarketable, or that there are no opportunities for agricultural workers, is a protracted and imprecise process.

A get-out route

Unlike other title burdens, planning agreements are currently incapable of being modified or discharged by the Lands Tribunal. If a discharge clause is not included in the agreement its content is theoretically fixed in perpetuity. The proposed reforms would therefore give statutory backing to amendment or discharge by agreement. Importantly it is also intended that, where the planning authority refuses a request for such amendment or discharge, there would be a right of appeal to the Scottish Ministers, who could uphold the agreement, modify or discharge it. No such appeal is possible under existing law, which often leaves landowners and developers at the mercy of the authority if circumstances change and amendment or discharge is desired.

One criticism of planning agreements not addressed by the bill is that they have sometimes been used by local authorities to extract benefits from developers that seem of doubtful relevance to their large-scale out-of-town shopping centres or showpiece office complexes. Linking benefits such as birdwatching hides and public art to development projects is largely artificial and sometimes restricts the flow of funding to necessary infrastructure. The ad-hoc bargaining approach of planning agreements also undermines both the idea of a strategic approach to infrastructure provision and the ostensible certainty generated by a plan-led planning system.

A planning gain supplement, essentially a tax on planning gain, might potentially address this. If such a tax (currently the subject of consultation – see Journal, January 2006, page 22) is proposed for Scotland, the scope of future planning obligations and unilateral undertakings might finally be scaled back to the core aim of mitigating the direct impacts of the development itself. However, no doubt by then the focus of attention will be the rate and applicability of the tax, not the agreements and undertakings. Sooner or later it all comes down to money, or the lack of it, for the infrastructure local authorities can no longer afford to provide.

Robin Priestley and Martin Whiteford, Planning & Environment, Anderson Strathern