Tue 21 Oct 2014

Section 75 agreements - in with the new, but remember out with the old

It is funny how a crop of similar enquiries tend to come across the desk within a short space of time. Currently I am seeing a lot of transactions where a developer or landowner entered into a Section 75 Agreement before the crash. 

Now that there is an upturn in the development industry, and thus the market for land, there has been a re-negotiation of the terms of the Section 75 Agreement, or else a completely different development proposal.  This has involved the negotiation of a new Section 75 Agreement.  (Incidentally, while the technically correct term for such Agreements is now Planning Obligations, there is little appetite for this term in the development industry, and so all but the most bitter pedants seem to be resolutely hanging on to the tried and tested "Section 75 Agreement.")

What happens if the existing Section 75 Agreement is not removed?

The issue which has come to light is - what happens to the existing Section 75 Agreement if a new one is put in place?  What my recent crop of enquiries has shown is that the existing one can often be forgotten about, or else left in place because of a misunderstanding about the way to deal with it. 

This can become a problem when it is noticed by the lawyers acting for future purchasers or tenants - if it contains restrictions or obligations that are onerous, and which the new owners would not wish to see remaining on their title.

How to get rid of the old one?

There is a solution, but as with so many things in this area, the solution can take up valuable time.  Better therefore to ensure that things are correctly dealt with at the time of entering into the new Section 75 Agreement.

Until the changes to Section 75 Agreements introduced by the Planning etc. (Scotland) Act 2006 there was no such thing as a discharge of a Section 75 Agreement.  The practice therefore grew up over many years that the way to deal with an "old" Section 75 Agreement was to include a clause in the "new" one to the effect that it superceded the earlier Agreement. 

However, the 2006 Act remedied this omission, and introduced a provision which means that the only way to discharge or amend a Section 75 Agreement is by means of a new procedure which is detailed in Circular 3/2012: Planning Obligations and Good Neighbour Agreements. I emphasise "only;" this procedure is not optional. It involves submitting an Application for Discharge to the planning authority in question, which requires to be intimated to interested parties, and determined by the authority - even in situations where it seems obvious that the planning authority is agreeing to the old Agreement being "swept away." To become effective, the notice of determination issued by the planning authority needs to be registered in the Land Register.

In a case where it is accepted by both the developer/landowner and the planning authority that the new Section 75 Agreement is superceding the old Agreement, it is none the less necessary for the applicant to submit an Application to have the old Agreement discharged. The Application form requires reasons for seeking discharge.  In a case such as I have outlined, the reason is simply that the old Section 75 Agreement will no longer be required, as the planning authority has determined that the new Section 75 Agreement is to be entered into.  The determination should be a formality.

Technicalities of the form of the Notice of Determination

Any developer or landowner and his planning consultant should be aware of the need to comply strictly with the requirements for the form of the Notice of Determination.

As I have mentioned, it is the registration of the Notice of Determination in the Land Register that effectively discharges the old Section 75 Agreement.  The Notice of Determination therefore has to comply with all of the requirements of the Keeper of the Registers of Scotland for documents to be registered e.g. it must contain a full, technical conveyancing description of the land affected.

I have not yet seen a Notice of Determination that meets all of the Keeper's requirements, and therefore the Keeper will accept a separate document which contains all the requirements and annexes the Notice of Determination.  Therefore while the Application form does look temptingly simple, the reality is that a document of this sort needs to be drawn up.  It is better that this is done up front, as part of the application process, so that as soon as the application is determined, the document can be signed and registered, incorporating the Notice of Determination.

What if the new Section 75 only covers part of the site?

Further, there is a variation to the rules to be kept in mind when dealing with a situation where part only of a site is being taken out of the previous development, and incorporated in a new proposal, for which a new Section 75 Agreement will be entered into. 

In that scenario, it is not a case of seeking a partial discharge of the old Section 75 Agreement.  There is no such thing.  What is required in that case is a Modification, to the effect of amending the area affected by the old Section 75 Agreement to remove the area that will be covered by the new Agreement.  Otherwise the procedure is the same; the Application form covers both modification and discharge.


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