A Section 106 Agreement, also known as a planning obligation, is a legal agreement entered into under Section 106 of the Town and Country Planning Act 1990. It is used by local planning authorities to secure developer contributions that mitigate the impact of a proposed development. In UK property development finance, these agreements often require funding for affordable housing, highways, education, or community facilities. Section 106 Agreements are binding on land and must be factored into development appraisals, as they directly affect viability and delivery timelines. Compliance is essential for lawful implementation of planning consent.
From a development finance perspective, Section 106 obligations must be assessed early because they can materially influence land value, scheme viability, cash flow forecasts and lender risk analysis. The timing and scale of required contributions often affect funding requirements and may alter the overall return profile of a project. As a result, developers, funders and professional advisers typically review these obligations alongside wider Property and Title Related matters during due diligence and planning negotiations. Where a scheme delivers measurable community benefits such as affordable housing or public infrastructure, the development may also align with certain forms of Social Impact Equity, although the commercial viability of the project remains a primary consideration.
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