Section 106 agreements form a crucial part of the planning system in the UK. These agreements are typically entered into when a local authority grants planning permission for a development, and are used to secure benefits that are necessary to make the development acceptable in planning terms. One of the key considerations when agreeing these benefits is ensuring that they remain relevant in the future, and this is where indexation comes in.
Indexation is the process of adjusting the value of a payment or other obligation over time, by reference to a particular measure of inflation or other economic indicator. In the context of section 106 agreements, indexation is typically used to ensure that financial contributions or other obligations remain proportionate to the cost of delivering the benefits they are intended to support.
There are several different methods of indexation that can be used in section 106 agreements, depending on the nature of the obligation and the preferences of the parties involved. One of the most common is to link the obligation to the Retail Prices Index (RPI), which is a measure of inflation that is widely used in the UK.
Another approach is to use a different index that is more closely aligned with the costs of the specific benefit being provided. For example, if the obligation is to provide affordable housing, it might be appropriate to link the value of the obligation to house price inflation, rather than general inflation.
There are some practical considerations that need to be taken into account when using indexation in section 106 agreements. For example, it is important to agree a clear and consistent method of calculation, and to ensure that the relevant index data is readily available and updated regularly.
It is also important to be aware of the potential impact of indexation on the financial viability of the development. In some cases, the use of indexation may mean that the value of an obligation increases significantly over time, which could make the development unviable or reduce the amount of funding available for other benefits.
Overall, section 106 agreement indexation is a complex but important topic for those involved in the planning process. By carefully considering the appropriate method of indexation and taking practical considerations into account, it is possible to ensure that financial contributions and other obligations remain relevant and proportionate over time, while also supporting the delivery of the wider benefits that are required to make a development acceptable in planning terms.