Do Section 106 Obligations Run with the Land?
Under Section 106(3) of the Town and Country Planning Act 1990, planning obligations entered into by deed with the Local Planning Authority (LPA) automatically run with the land.
This means the legal burdens, financial contributions, and occupancy restrictions bind anyone who subsequently acquires an interest in the property. They cannot be discharged merely by selling the home or transferring title.
Standard Local Connection Criteria and Discounted Market Sales
Section 106 residential agreements typically fall into two main statutory categories:
• Local Occupancy Restrictions: Common in National Parks, rural exception sites, and coastal communities. Buyers must prove: (a) Continuous residence in the parish for 3 to 5 years, (b) Immediate family living locally, or (c) Permanent employment in the local area.
• Discounted Market Sale (DMS): The buyer purchases 100% freehold ownership, but at a permanent contractually capped discount (e.g., 75% or 80% of open market value). When you sell, you must sell at the exact same percentage discount to another qualifying local buyer.
| Obligation Type | Target Beneficiary | Resale Valuation Rule | Lender Acceptance |
|---|---|---|---|
| Discounted Market Sale | First-time local buyers | Fixed % discount (e.g. 70% of RICS valuation) | Mainstream lenders accept with MIP clause |
| Local Connection Occupancy | Local workers/residents | Open market value, but restricted buyer pool | Specialist building societies only |
| Rural Worker Dwelling | Agricultural / forestry workers | Discounted by 20% to 35% due to tie | Agricultural mortgage providers only |
| First Homes Scheme | Local first-time buyers | Minimum 30% to 50% discount against market | All major high-street lenders |
Mortgagee in Possession (MIP) Clauses: Essential for Lending
Mainstream mortgage lenders will refuse to lend on a Section 106 property unless the legal deed contains a compliant 'Mortgagee in Possession (MIP) Clause'.
An MIP clause provides that if the borrower defaults and the bank repossesses the property, the bank can market the property free from the Section 106 restriction if the council fails to find an eligible local buyer within a specified cascade period (usually 3 months). Without an MIP clause, the property is virtually unmortgageable.