Planning with add-ons

Planning agreements are drafted by solicitors and their completion and registration is a condition precedent of many planning permissions being issued. Scottish Government Circular 1/2010 was published in January 2010 following significant stakeholder involvement. It replaces Circular 12/1996, which was considerably out of date, and is in part a response to the current economic difficulties in property development. It is one of the last planning policy areas to receive attention under planning reform and is considered to be an interim measure until the provisions of ss 75A-75C of the Planning Act are brought into force by regulations in summer of this year.

There has been an increasing use of planning agreements to control development, and in particular to deliver elements of public infrastructure (including affordable housing, new schools and financial contributions in lieu of these). Criticisms have been made of the slowness of the process and the legitimacy of the level of contribution sought, which is particularly acute (due to market conditions) in relation to housing developments.

Five policy tests

The Circular aims to improve the efficiency and transparency of planning agreements, and restates with greater authority the circumstances where a planning authority can require one. It does so by setting out five policy tests, all of which must be met. These tests not only regulate when a planning agreement is reasonable, but provide guidance on whether the level of contribution sought in money or kind is acceptable.

Planning agreements should only be sought where they meet all of the following tests:

• necessary to make a proposal acceptable in planning terms;
• serve a planning purpose;
• relate to the proposal either as a direct consequence of development or arising from a cumulative impact;
• fairly and reasonably relate in scale and kind to the proposal; and
• reasonable in all other respects.

The “necessity test” is strengthened in the Circular, which indicates that s 75 agreements should not be used where a planning condition is adequate and should not be used where singular successors in title do not require to be bound. A one-off front payment should be dealt with under an agreement under s 69 of the Local Government (Scotland) Act 1973.

The “planning purpose test” requires that it is assessed primarily by reference to the development plan. The Circular requires that planning authorities include policies on the use of planning agreements within development plans. In drafting development plans and supplementary guidance, planning authorities are now required to liaise with the infrastructure providers, local authority departments and other consultees to assess infrastructure requirements, and funding implications and timescales for the implementation of such infrastructure. Supplementary guidance will require to set out the methods of and exact levels of contributions sought from developers in particular circumstances.

Under the “relationship to proposed development test”, what is to be delivered under a planning agreement must be required to (1) make up a necessary deficiency in facilities created by the proposal, or (2) deliver necessary mitigation which cannot be delivered through planning conditions. Planning agreements must not be used to extract advantages, benefits or payments not directly related to the proposal.

The “scale and kind test” requires that contributions should always be proportionate to the scale of the proposed development. In recognition of the impact on project viability, the Circular states that where financial contributions are sought, stage payments in line with the construction programme should be considered.

The “reasonableness test” requires that a planning agreement should be so directly related to the regulation of the proposed development that it should not be permitted without it.

Process

Heads of terms should be concluded at as early a stage in the application process as possible. Moreover, the negotiation of heads of terms must take as its basis the infrastructure requirements detailed in the development plan and supplementary guidance, allowing for increased certainty in the process. To further accelerate the process, planning authorities are encouraged to make use of model agreements or clauses, and actively to consider draft heads of terms or draft agreements provided by developers. Planning authorities should aim to get the approval of consultees to the heads of terms prior to entering final negotiations.

The planning authority must notify the applicant as soon as possible as to whether it is minded to grant planning permission subject to an agreement being concluded. The decision, when issued, should be accompanied by a note of the likely terms of the agreement, in order that it can be finalised as quickly as possible thereafter.

In order to speed up the process, the Circular recommends finalising an agreement prior to the granting of planning permission, including a clause providing that the agreement will only take effect should the permission be granted. This will enable agreements to be finalised significantly earlier than under the previous system.

• Alastair McKie, partner and accredited specialist in planning law, Anderson Strathern LLP