It is common practice for local planning authorities to have an obligation in s106 agreements requiring developers to pay monitoring/administration fees in relation to monitoring and compliance of s106 agreements.
Oxfordshire County Council case
The obligation requiring developers to pay for a monitoring fee was challenged in the High Court case of Oxfordshire County Council v Secretary of Sate for Communities and Local Government and Other  EWHC (Admin). The High Court held that the planning inspector was not wrong in interpreting Regulation 122 of the Community Infrastructure Levy 2010 (CIL) or acted irrationally in concluding that the local authorities was not entitled to fees for administration and monitoring of planning obligations in s106 agreements on the ground that the payment for such fees was not necessary to make the development acceptable in planning terms.
The High Court held that the administrative and monitoring costs incurred by a local planning authority in ensuring that planning obligations were observed were not capable of being planning obligation in their own right and that it is part of normal, everyday functions of a local planning authority to administer, monitor and enforce planning obligations in s106 agreements. It was held that the payment of a monitoring and administration fee listed as a planning obligation in a s106 agreement could not be recovered and that the planning obligation failed the test in Regulation 122 of CIL.
The High Court found that this was relatively small development where the local planning authority was seeking a fee based on its standardised table of fees rather than a individual assessment of costs incurred for that particular development, that the financial contributions towards education and library services didn’t require ongoing management or maintenance and that they were single payment s to be made prior to commencement of development. However, the High Court did not go far as to suggest that this would universally be the case.
In more recent case of R (on the application of Khodari) v Kensington and Chelsea RLBC  EWCA Civ 333 , the Court of Appeal came to a different conclusion on the issue of monitoring fee to the High Court case of Oxfordshire County Council. The Court of Appeal found that s106(1)(d) permits an obligation requiring a sum to be paid to a local authority and that the obligation to pay the monitoring fee falls within this section. The Court of Appeal also considered Regulation 122 of CIL, and whether an agreement to pay the monitoring fee was a reason for granting permission and the court found that the formal recommendation in the planning officer’s report didn’t mention the monitoring fee and that it wasn’t mentioned in the committee debate which considered the officer’s recommendation. It was held by Court of Appeal that the monitoring fee was not a reason for granting planning permission and the obligation requiring monitoring fee was therefore considered valid.
Different approaches of the two court decisions
The decision in Khodari case differs from the Oxfordshire County Council case, in that the High Court found that the obligation to pay the monitoring didn’t satisfy the three test of Regulation 122 i.e. (a) necessary to make the development acceptable in planning terms, (b) directly related to the development; and (c) fairly and reasonably related in scale and kind. In the Khodari case, the Court of Appeal also considered Regulation 122, and found that the monitoring fee wasn’t referred to in the planning officer’s report, it did not form part of the debate by members, was not cited as a reason for granting planning permission and therefore the Court of Appeal did not then go onto consider the three test under Regulation 122 of CIL.
A further interesting point to be noted is that in the Khodari case the Oxfordshire County Council was not cited or referred to and the monitoring fee was not the main point of consideration, but one of the points that the court looked at. Further, the High Court in Oxfordshire County Council case didn’t go as far to say that the local planning authorities couldn’t charge for monitoring fees at all and that there could be exceptional cases where a monitoring fee could be justified. i.e. on large complex development in a small authority which would justify a planning obligation to cover administration and monitoring costs given the number of obligations in the s106 which would require monitoring to ensure compliance.
What the outcome of the two court decisions means
Until there is further case law on the point giving more definitive guidance and clarity, it is for local planning authorities and developers to agree whether a monitoring fee is justified on a case by case basis and included as a planning obligation in the s106 agreements.
If you require any assisstance on S106 Agreements please contact Sabah by completing the form below or calling Sabah directly on 01494 419191.
Consultant Solicitor Planning