If you are buying a new-build home, developing land, or simply trying to understand how planning works in England and Wales, you may come across the term Section 106 agreement. It is often mentioned in planning decisions, local authority documents, and property searches.
But what does it actually mean — and why does it matter to you?
This guide explains Section 106 agreements in simple terms, why they are used, what they cover, and how they can affect you as a developer, landowner, buyer, or member of the local community.
What Is a Section 106 Agreement?
A Section 106 agreement (often called an S106 agreement) is a legally binding agreement between a local planning authority and a developer.
It is called “Section 106” because it comes from Section 106 of the Town and Country Planning Act 1990.
These agreements are linked to planning permission. They are also known as planning obligations.
In simple terms, a Section 106 agreement makes sure that when a development goes ahead, the developer provides certain improvements or contributions to reduce the impact of that development on the local area.
Why Do Section 106 Agreements Exist?
When new development takes place, especially housing developments, it can create pressure on the local area.
For example, imagine a developer builds 200 new homes. That may lead to:
- More children needing school places
- Increased traffic on local roads
- More demand for GP services
- Greater use of parks and open spaces
- Strain on local infrastructure
Planning conditions alone are not always enough to deal with these wider impacts.
A Section 106 agreement allows the local authority to require the developer to contribute towards improving infrastructure or services. This helps ensure the development is acceptable in planning terms.
In short, it is about balance. If a development creates additional pressure, the developer may need to help support the area that will be affected.
When Is a Section 106 Agreement Used?
A Section 106 agreement is usually required when:
- A development is large or significant
- The impact of the development cannot be controlled by planning conditions alone
- The local authority believes extra measures are needed to make the development acceptable
Smaller developments may not require one. However, larger residential schemes almost always involve planning obligations.
If you are applying for planning permission for a substantial project, you should expect discussions about Section 106 early in the process.
What Does a Section 106 Agreement Cover?
The exact contents depend on the type of development and the needs of the local area.
However, common obligations include:
Affordable Housing
One of the most common requirements is that a percentage of the homes must be provided as affordable housing.
This could mean:
- Social rent
- Affordable rent
- Shared ownership
If you are buying on a new estate, some of the properties may exist because of a Section 106 requirement.
Public Open Space
Developers may need to provide:
- New parks
- Play areas
- Green spaces
Or they may need to pay a financial contribution for improving existing open spaces.
This ensures residents have suitable outdoor areas and recreation facilities.
Education Contributions
A large housing development may increase demand for school places.
A Section 106 agreement may require the developer to:
- Contribute money towards expanding local schools
- Provide land for a new school
This helps prevent overcrowding in local education facilities.
Highways and Transport Improvements
More homes usually mean more traffic.
The agreement may require:
- Road widening
- New junctions
- Traffic calming measures
- Pedestrian crossings
- Contributions towards public transport
If you live near a major new development, improvements to roads or bus services may be funded through a Section 106 obligation.
Health Services
New residents increase pressure on GP surgeries and other healthcare services.
Developers may need to contribute towards:
- Expanding local health facilities
- Funding new healthcare infrastructure
Town Centre Improvements
In some cases, contributions may support:
- Regeneration projects
- Public realm improvements
- Enhancements to shopping areas
This helps ensure the wider community benefits from development.
Environmental Measures and Mitigation
Some developments impact local habitats or protected areas.
Section 106 agreements can secure:
- Environmental mitigation
- Recreation disturbance avoidance and mitigation strategies (RAMS)
- Biodiversity improvements
If you are developing land near a protected site, environmental contributions may be required.
How Is a Section 106 Agreement Different from Planning Conditions?
Planning conditions are attached to a planning permission. They might control:
- The materials used
- The layout
- The hours of construction
However, conditions cannot require the developer to make financial payments or provide off-site improvements.
That is where Section 106 comes in.
It allows legally enforceable obligations that go beyond simple conditions. It is more flexible and more powerful.
Is a Section 106 Agreement Legally Binding?
Yes.
A Section 106 agreement is legally binding once completed.
It usually:
- Runs with the land
- Binds future owners
- Is registered as a local land charge
If you buy land or property that is subject to a Section 106 agreement, you may inherit the obligations.
That is why property searches are important when buying development land.
Can a Developer Offer a Unilateral Undertaking?
Yes.
In some cases, instead of a negotiated agreement between the authority and the developer, the developer may offer a unilateral undertaking.
This is still legally binding but is offered by the developer alone.
It can help speed up the planning process if the developer agrees to certain contributions without extended negotiation.
How Are Contributions Calculated?
Contributions are usually based on:
- The size of the development
- The number of units
- Local planning policy
- Evidence of infrastructure needs
Each local authority will have its own policies and guidance setting out how contributions are assessed.
If you are developing land, you will need to factor these costs into your financial planning from the start.
When Are Payments Made?
The agreement will set out triggers for payment or delivery.
For example:
- On commencement of development
- After a certain number of homes are built
- Before occupation of the first dwelling
- At a specified stage of construction
This ensures obligations are delivered at appropriate times.
Can a Section 106 Agreement Be Changed?
Yes, but it is not automatic.
If circumstances change — for example, if a development becomes financially unviable — a developer can apply to modify or discharge certain obligations.
However, this requires agreement from the local authority or formal application procedures.
It is not something that can simply be ignored.
How Does Section 106 Affect You as a Buyer?
If you are buying a home on a new estate, Section 106 may affect:
- The availability of affordable housing
- The presence of local parks and play areas
- Improvements to nearby roads
- Community facilities
You may not deal directly with the agreement, but it often shapes the infrastructure around you.
If you are buying development land, it is critical to review any existing Section 106 obligations carefully. They can significantly affect cost and viability.
Why Section 106 Agreements Matter for Communities
Section 106 agreements are designed to make development more sustainable and fair.
Without them, large developments could:
- Overwhelm local services
- Create traffic congestion
- Reduce quality of life
They help ensure that growth is supported by infrastructure.
While some critics argue they can delay development or increase housing costs, they remain a central part of the UK planning system.
Key Points to Remember
If you want a simple summary, keep these points in mind:
- A Section 106 agreement is a legal planning obligation.
- It is made between a local authority and a developer.
- It is used when planning conditions alone are not enough.
- It helps reduce the impact of development.
- It often covers affordable housing, education, highways, health, and open space.
- It is legally binding and runs with the land.
Final Thoughts
If you are involved in property, development, or planning in England and Wales, understanding what a Section 106 agreement is can save you time, money, and confusion.
For developers, it affects project costs and timelines.
For buyers, it shapes the infrastructure around new homes.
For communities, it ensures that development contributes positively to local life.
In simple terms, a Section 106 agreement is about responsibility. When development creates impact, it should also help support the area it changes.
Knowing how it works allows you to approach planning decisions with clarity and confidence.