Commercial Property: Part 2 – The Difference between Planning Obligations and Community Infrastructure Levy

When you develop or make major changes to a commercial property, obtaining planning permission is only part of the process. Local authorities may also require contributions to support the community. These usually come through planning obligations (Section 106 agreements) or the Community Infrastructure Levy (CIL).

Here, we explore and explain how planning obligations and Community Infrastructure Levy compare, and what they mean for commercial property projects.

Section 106 obligations are negotiated agreements between the developer and the council. They’re specific to the project and designed to deal with its direct impacts.

For commercial property, this could mean funding new road junctions, improving transport links, or making contributions to local services. The obligations must be proportionate to the development’s scale and impact.

CIL is a standard charge set by the council, usually based on the size of new floorspace. Unlike Section 106, the funds raised are pooled and used for wider infrastructure such as schools, transport, or parks. It doesn’t have to directly relate to the project that paid for it.

Although both are designed to ensure that developments support the local community, they operate in very different ways.

Section 106 agreements are individually negotiated between the developer and the local authority and must be directly linked to a project’s impacts. By contrast, the Community Infrastructure Levy is a fixed, standardised charge, making CIL far more predictable. This often allows developers to estimate costs in advance simply by reviewing the relevant charging schedule.

In some cases, developments may be subject to both Section 106 and CIL and need to pay both. For instance, a large commercial project might be required to pay the standard CIL charge while also entering into a Section 106 agreement to mitigate a very specific local impact.

For owners of commercial property, these contributions can have a significant effect on budgets and timelines. By reviewing the council’s CIL rates and discussing potential Section 106 obligations at the pre-application stage, you can gain a clearer understanding of your liabilities early on, which can help you plan ahead and avoid costly surprises further down the line!

Our professionals are experts when it comes to commercial property. If you’re dealing with questions or challenges and need legal advice, our experienced team can help. Contact us today.

Tel:      01245 893400 | 01702 410880
Email: info@backhouse-solicitors.co.uk
Visit our Chelmsford office: 17 Duke Street, Chelmsford, Essex, CM1 1JU
Visit our Leigh-on-Sea office: 22-24 Elm Road, Leigh-on-Sea, Essex, SS9 1SN
Or send us a message through the Contact Us page on this website