Section 106 agreements cannot set parking permit restrictions

The recent Court of Appeal (CoA) case of R (Khodari) v Royal Borough of Kensington and Chelsea Council and another [2017] EWCA Civ 333 (Khodari) will affect the ability of local authorities to preclude occupiers of a development from applying for permits to park on the public highway.

In the Khodari case Mr and Mrs Khodari were leaseholders of one of five existing flats in a building at Egerton Gardens. In March 2015, the Royal Borough of Kensington and Chelsea Council (the Council) granted a developer planning permission to convert the building into eight flats. The Council’s development plan stated that due to pressure on parking that Section 106 agreements would have to include obligations that all new residential development should be permit free. The Council therefore required the three additional flats to be subject to that obligation.

The developer entered into an agreement with the Council covenanting:

• not to apply for parking permits for the additional flats, nor knowingly permit any owner or occupier of the additional flats to do so; and to surrender any permit issued for those flats;
• to notify prospective owners or occupiers of the additional flats that they would not be entitled to apply for parking permits; and
• to include a covenant in any lease of the additional flats preventing the lessee from applying for a parking permit and entitling the Council to enforce that obligation as a third party.

The agreement was expressed to be made under statutory powers including Section 106 of the Town and Country Planning Act 1990 (1990 Act) and Section 16 of the Greater London Council General Powers Act 1974 (GLCGPA 1974).

This was all of interest to Mr and Mrs Khodari as their lease could be terminated under a redevelopment break clause. They challenged the grant of planning permission on a couple of grounds including that the imposition of the parking permit obligation was unlawful and outside the Council’s statutory powers. The High Court agreed with this second ground of challenge and quashed the planning permission. The reasoning was that the obligation did not fall within the scope of Section 106 (3) (enforceable against the person entering into the agreement and their successors) and (5) (enforceable by injunction) of the 1990 Act and was therefore not a planning obligation.

The Council appealed to the Court of Appeal. The CoA agreed with the High Court that the parking permit obligation was not a planning obligation under Section 106 of the 1990 Act, as Section 106 is concerned with “the land” in which a person has a legal interest. That “land” may be different to that covered by the planning permission, providing the “land” and the land that the planning permission relates to are directly related.

In the Khodari case, the developer only had a legal interest in the building in which the flats would be created, not the highway in relation to which the parking permit obligation related. The Council was trying to prevent the use of the highway for parking rather than restrict the use of a flat or the building. As applying for a parking permit was not a use of the building it could not be dealt with through a Section 106 agreement. The CoA confirmed that Section 106 of the 1990 Act requires the obligation to restrict the use of the land which is bound by it and in which the person entering into the agreement has a legal interest.

Despite the above, the agreement had also been made under Section 16 of the GLCGPA 1974 which required the agreement to be made “in connection with the land”. It did not have to regulate the use of the land itself and the phrase “in connection with” had a wide meaning. The CoA concluded that there was a connection between the use of the additional flats and the potential grant of additional parking permits, not least because residence was a qualification for a parking permit. There was therefore a sufficient connection between the obligation and the development.

Comment

The implication of the Khodari case is that local authorities in Greater London may continue to have the ability to impose parking permit obligations, but local authorities outside of Greater London will be left without that power. There may be other mechanisms by which local authorities could achieve the same outcome including excluding new properties from the schedule of streets in the relevant statutory instrument creating a Controlled Parking Zone. Some have also suggested that it may be possible to re-word obligations to read along the lines of a restriction on occupation such as “the residential units are not to be occupied by any person who holds a parking permit”. The lawfulness of such an obligation, and the appetite of a local planning authority to enforce it are doubtful though.

The Khodari case also raises the prospect that parking permit obligations in existing Section 106 agreements which are similar to those in the Khodari case will no longer be enforceable.