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Will Homeowners have to pay Section 106 money to Councils?

Local councils across Yorkshire are owed an estimated £5 million from developers, but it’s the current property owners who may have to pay up 

Conveyancing Solicitors acting for homebuyers are tasked to uncover any agreements or covenants which may affect the home they wish to purchase. These should show up in a local search.

The Conveyancing Solicitor will then obtain a copy of any problematic agreement to see whether it will continue to affect the property their client is buying. If it will, enquiries can be made to find out whether the original builder has completed the works required under the agreement, or paid any money due to the council, before signing contracts.

Builders and developers often enter into Section 106 agreements with councils as a condition to getting planning consent for new housing developments. For example, they might agree to carry out improvement works to an adjacent road, provide land and equipment for a children’s playground, or agree to provide social housing.

But developers who have gone out of business, or find themselves in financial difficulties are failing to complete works which they have agreed to do, or pay the local authority to carry out the works for them. Investigations by the Yorkshire Post show that councils across Yorkshire are owed millions of pounds of money which is supposed to be spent on public projects.

Anyone buying a new home, or one that has been built within the last few years, would be forgiven for thinking that this will be of little or no importance for them. But several councils, finding they cannot get money from the developer, are now considering going after individual homeowners for the money they are owed. How can they do this?

At the time when planning approval was given, the builder will have entered into an agreement with the council under S106 of the Town and Country Planning Act 1990. Many of these s106 Agreements are not only legally enforceable against the original builder, but his ‘successors in title’.

This includes anyone who has bought a house or flat on an affected development. So a private homeowner who has bought a house or flat which is still subject to a Section 106 charge may have to pay a share of what is owing to a local authority to pay for a new park or sculpture. And this will also apply to subsequent purchasers who might be quite unaware of the existence of any agreement.

Although some local authorities agree to include a clause in these agreements excluding subsequent purchasers from liability, this is by no means universal. Leeds Council is just one local authority that has a clause in its agreements which allows them to chase anyone who has bought property from a developer which later defaults on obligations under the legislation.

If you are unlucky enough to receive a demand for payment then get in touch with the Conveyancing Solicitors who acted for you when you purchased the property. They will be able to check the terms of the relevant agreement and advise you accordingly.

 

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