On 18 November 2020, the Planning (Scotland) Act 2019 (Commencement No. 5 and Saving, Transitional and Consequential Provisions) Regulations 2020 come into force. The name belies the importance of the provisions - which will fundamentally alter the basis upon which legal deeds securing developer contributions and obligations (known as "Section 75 Agreements" or "Section 75 Unilateral Undertakings") can be entered into and amended.
The Current Provisions
Section 75 of the Town and Country Planning (Scotland) Act 1997 allows a person to enter into a "planning obligation" (either unilaterally in a S75 Unilateral Undertaking or in agreement with the relevant planning authority in a Section 75 Agreement) restricting or regulating the development or use of land. A planning obligation may be subject to conditions, require the payment of developer contributions, and/or contain any other necessary or expedient incidental and consequential provisions. A Section 75 Agreement or Unilateral Undertaking may contain multiple planning obligations.
The UK Supreme Court considered Section 75 in detail in Elsick Development Co Ltd v Aberdeen City and Shire Strategic Development Planning Authority  UKSC 66, and confirmed that it is not lawful for a planning obligation to require the payment of developer contributions without restricting or regulating the development or use of land.
Many planning authorities have interpreted the Court's judgement in Elsick to mean that a planning obligation must require payment (or part payment) of the relevant developer contribution before development can commence under the relevant planning permission. In our view, any restriction would be sufficient - for example prohibiting the occupation of more than a specified number of residential units prior to payment of a contribution.
The Planning (Scotland) Act 2019
The 2019 Act introduced a number of amendments to Section 75 of the 1997 Act, which appear to be a response to the Elsick case. Those amendments will come into force on 18 November 2020.
The 2019 Act redefines "planning obligation" as an obligation which does any of the following:
(a) restricts or regulates the development or use of land,
(b) requires the payment—
(i) of a specified amount or an amount determined in accordance with the relevant instrument, or
(ii) of periodical sums either indefinitely or for such period as is specified in the relevant instrument.
It will therefore be possible to secure payment of developer contributions in a planning obligation without needing to link payment to the restriction or regulation of the development or use of the land to which the obligation relates. This means that a developer contribution does not need to be tied to a prohibition on development.
Importantly, this is not a green flag for planning authorities to demand financial contributions without justification. No change has been proposed to the policy tests in Circular 3/2012 'Planning Obligations and Good Neighbour Agreements' - a planning obligation must still be necessary, serve a planning purpose, relate to the proposed development, fairly and reasonably relate in scale and kind to the proposed development, and be reasonable in all other respects.
Modification or Discharge of Planning Obligations
Section 75 Agreements or Unilateral Undertakings are generally secured as a pre-requisite to the grant of planning permission. For large developments this can mean that the level of financial contributions is set several years before payment falls due. Circumstances may change in that time - for example it may become apparent that the planning authority has overestimated the education provision it will require as a result of development, and that a lesser level of contribution is required.
Currently, Section 75A allows developers to apply to the planning authority to modify or discharge the terms of a planning obligation. The authority can only grant or refuse the application as presented to them, so too a Reporter on appeal. Unlike a planning application or appeal, the decision maker has no flexibility in the process.
This can lead to situations where the planning authority or Scottish Ministers agree that the existing planning obligation is not appropriate, but do not agree with the modifications proposed by the developer. Under the current system, such applications must be refused.
Financial contributions will often be the subject of negotiation and compromise, and the amendments introduce welcome flexibility into the Section 75A/75B process. The requirement for the developer’s consent to alternative modifications protects against the risk of the decision-maker imposing more onerous provisions.
Where an application seeks to modify/discharge multiple planning obligations contained in the same Section 75 Agreement or Unilateral Undertaking, the 2019 Act will now allow decision-makers to make separate determinations in respect of each planning obligation. This will prevent the need to make multiple applications.
The 2020 Regulations confirm that the amendments to Section 75 “do not affect the validity of an existing planning obligation and the provisions of section 75 continue to apply in relation to an existing planning obligation as they did immediately before 18 November 2020.”
The validity of existing planning obligations is therefore not affected by the changes, and they must still be compliant with the terms of Section 75 as they are at the moment.
The amendments to Section 75B and 75C apply in relation to existing planning obligations as they will apply to planning obligations entered into on or after 18 November 2020.
Existing planning obligations will therefore be able to benefit from the new flexible provisions when a S75A application is made after 18 November 2020. It would also appear that appeals under S75B made after 18 November 2020 will also benefit, even if the S75A application to which it relates was made before 18 November 2020.
The amendments to Sections 75, 75B and 75C will introduce welcome flexibility into the system. The ability for decision-makers to grant alternative modifications to planning obligations will move the process away from an "all or nothing" situation to allow for more discussion.