Understanding CIL and Section 106 on New Build Developments

Introduction: Why CIL and Section 106 Matter to New Build Buyers

When a developer builds new homes, they don’t just create houses – they create demand for schools, roads, healthcare facilities, open spaces, and other community infrastructure. To ensure that this additional demand is met, England & Wales operate two key mechanisms: the Community Infrastructure Levy (CIL) and Section 106 (S106) planning obligations. Together, these tools fund billions of pounds worth of infrastructure every year and directly influence the cost, timing, and nature of new build developments across the country.

As a buyer, understanding CIL and S106 is important for several reasons. First, the costs associated with these obligations may influence the price you pay for your new home. Second, S106 agreements can shape the very nature of the community you are moving into – determining whether there will be affordable housing, new school places, improved transport links, or green spaces nearby. Third, delays in discharging S106 obligations can sometimes affect development timelines and, consequently, your completion date.

This comprehensive guide explains both mechanisms in detail, explores how they differ, examines what they fund, and helps you understand their practical impact on your new build purchase.

What Is the Community Infrastructure Levy (CIL)?

The Community Infrastructure Levy is a charge that local planning authorities in England and Wales can levy on most new building projects in their area. Introduced by the Planning Act 2008 and brought into force through the CIL Regulations 2010 (as amended), CIL is designed to provide a fair, transparent, and predictable way of funding the infrastructure needed to support new development.

Key Features of CIL

• Fixed-rate charge: CIL is calculated using a formula based on the net additional floorspace of the development, measured in square metres. Each local authority sets its own CIL rate(s) through a charging schedule.
• Non-negotiable: Unlike S106, CIL is a fixed levy – there is no negotiation between the developer and the council on the amount.
• Applies broadly: CIL applies to most new buildings and extensions that create 100 square metres or more of new floorspace, or involve creating one or more new dwellings (even if below 100 sq m).
• Collected by the charging authority: The local planning authority (or in London, partly the Mayor) collects and administers CIL funds.
• Spent on infrastructure: CIL revenue must be spent on infrastructure that supports the development of the area, though the charging authority has discretion over which specific projects receive funding.

How CIL Is Calculated

The basic CIL formula is:

CIL Liability = Net Additional Floorspace (sq m) × CIL Rate (£/sq m) × Index Factor

The CIL rate varies significantly between local authorities and can also vary by use class (residential, commercial, retail) and by zone within the authority’s area. For example, a council might charge £150 per sq m for residential development in a high-value zone but only £75 per sq m in a lower-value zone. In London, there is an additional Mayoral CIL on top of the borough CIL, currently set at varying rates depending on the borough’s charging zone.

The index factor adjusts the rate for inflation using the RICS BCIS All-In Tender Price Index, ensuring that CIL rates keep pace with construction costs over time.

CIL Exemptions and Relief

Several important exemptions exist:

1. Self-build exemption: If you are building your own home (or commissioning someone to build it for you to live in as your sole or main residence), you can claim exemption from CIL. You must apply for the exemption before development commences and comply with conditions including living in the property for at least three years.
2. Social housing relief: Affordable housing (as defined in planning policy) that is provided by registered social landlords or through S106 obligations is generally exempt from CIL.
3. Charitable relief: Charities building for charitable purposes can claim CIL relief.
4. Minor development exemption: Development of less than 100 sq m that does not result in a new dwelling is generally exempt.
5. Residential annexes and extensions: Annexes and extensions to existing dwellings are exempt provided conditions are met.

It is worth noting that the self-build CIL exemption can represent a substantial saving. For example, on a 120 sq m home in an area with a CIL rate of £200 per sq m, the exemption could save you £24,000 or more. However, the exemption must be properly claimed before development starts, and there are clawback provisions if you sell or rent out the property within three years.

What Are Section 106 Planning Obligations?

Section 106 agreements – formally known as planning obligations under Section 106 of the Town and Country Planning Act 1990 – are legally binding agreements between a local planning authority and a developer. They are negotiated as part of the planning application process and are used to mitigate the impact of new development on the local community.

Unlike CIL, which is a fixed-rate charge, S106 agreements are bespoke and site-specific. They are negotiated on a case-by-case basis and can cover a wide range of obligations, from financial contributions to the direct provision of infrastructure or services.

What S106 Obligations Typically Fund

Section 106 agreements on new build housing developments commonly include provisions for:

• Affordable housing: This is the most significant S106 obligation on most residential developments. Local authorities typically require a percentage of new homes (often 20–40%) to be provided as affordable housing – either social rent, affordable rent, shared ownership, or First Homes.
• Education: Contributions towards new school places, either as financial payments to the local education authority or through the direct provision of school facilities on larger developments.
• Healthcare: Funding for expanded GP surgery capacity, dental services, or other primary healthcare facilities.
• Transport and highways: Improvements to local roads, junctions, pedestrian crossings, cycle routes, and public transport services. This relates to Section 38 and Section 104 agreements for roads and sewers.
• Open space and recreation: Provision of parks, playgrounds, sports facilities, allotments, and other green infrastructure.
• Ecology and biodiversity: Habitat creation, wildlife corridors, tree planting, and biodiversity net gain measures.
• Public art and community facilities: Contributions towards community centres, libraries, public art installations, or other community amenities.

How S106 Agreements Work in Practice

S106 agreements are typically drafted during the planning application stage and are signed by the developer, the local planning authority, and any other relevant parties (such as the landowner, if different from the developer). The agreement is registered as a local land charge against the title of the development site, which means its obligations transfer to future owners of the land.

Obligations within an S106 agreement may be triggered at different stages of the development – for example, a percentage of affordable housing must be completed before the developer can occupy more than a specified number of market homes, or a financial contribution must be paid before any homes are occupied.

Your solicitor should review the S106 agreement as part of the legal searches and conveyancing process to understand what obligations exist and whether they could affect your purchase. For instance, if an S106 requires the developer to complete a community playground before the 50th home is occupied, and you are buying the 48th home, you want assurance that this will happen on schedule.

CIL vs Section 106: Key Differences Explained

While both CIL and S106 aim to ensure that new development contributes to community infrastructure, they operate very differently. Understanding these differences is important when assessing a new build development.

A critical distinction is that CIL is intended to fund strategic infrastructure – things like a new primary school to serve multiple developments – while S106 is meant to address the site-specific impacts of a particular development. In practice, both systems operate alongside each other, and most major new build developments will be subject to both CIL and S106 obligations.

Since the pooling restriction on S106 was removed in September 2019, local authorities have greater flexibility in using S106 contributions from multiple developments to fund a single infrastructure project. This was previously restricted to no more than five S106 agreements contributing to the same project (to prevent S106 being used as a “tariff” that duplicated CIL). The removal of this restriction means S106 can now be used more broadly, though it must still meet the three statutory tests: it must be necessary to make the development acceptable in planning terms, directly related to the development, and fairly and reasonably related in scale and kind to the development.

Are CIL and S106 Costs Passed to Buyers?

This is one of the most common questions from new build buyers, and the answer requires some nuance. Legally, CIL and S106 obligations are the developer’s responsibility – they are levied on the party carrying out the development, not on individual homebuyers. You will not see a separate “CIL charge” or “S106 contribution” on your completion statement.

However, in economic terms, these costs form part of the overall development costs that the developer must factor into their financial appraisal. Developers typically model their projects by working backwards from the expected sales revenue and deducting all costs (including CIL, S106, construction, land, profit margin, and financing) to arrive at the residual land value. In this way, CIL and S106 are effectively shared between the developer, the landowner (through a lower land price), and potentially the buyer (through higher house prices), depending on local market conditions.

In areas where demand is strong and there is limited housing supply, a greater proportion of the cost may be reflected in house prices. In weaker markets, the developer and landowner absorb more of the cost. This is why house prices in areas with high CIL rates (often the most desirable areas) tend to be higher, though CIL is just one of many factors influencing price.

For buyers, the practical implication is that CIL and S106 are unlikely to appear as separate line items in your purchase. Instead, they are embedded within the overall pricing of the development. The more important question is what infrastructure and community benefits these contributions are delivering, as these directly affect the quality of the area you are buying into. Your conveyancing solicitor can explain what S106 obligations exist on your development and what infrastructure is planned or has been delivered.

Viability Assessments

On some developments, the developer may argue through a viability assessment that the combined burden of CIL and S106 (along with other costs) makes the development unviable. In such cases, the developer may seek to reduce S106 obligations – most commonly by reducing the proportion of affordable housing. Viability assessments have been controversial, with critics arguing they enable developers to avoid their fair share of community contributions. The National Planning Policy Framework now states that the price paid for land should reflect planning obligations, meaning viability issues should not normally lead to reduced obligations on sites allocated in up-to-date development plans.

How to Check What S106 Obligations Exist on a Development

If you are buying a new build home, it is prudent to understand what S106 obligations apply to the development. Here is how you can investigate:

1. Ask your solicitor: Your conveyancing solicitor should review the S106 agreement as part of the pre-exchange due diligence. They can obtain a copy from the local authority or the developer and explain what obligations exist and whether any are outstanding.
2. Check the planning register: Most local authorities publish planning applications and associated S106 agreements on their online planning register. Search for the development site address or application reference number.
3. Local land charges search: The local authority search carried out during conveyancing should reveal S106 agreements registered against the land.
4. Developer’s sales information: Developers are required under the Consumer Code for Home Builders to provide buyers with relevant information about the development. Ask the sales team directly about S106 commitments.
5. Council S106 monitoring reports: Many local authorities publish annual S106 monitoring reports that detail contributions received, spent, and outstanding. These can provide a broader picture of infrastructure delivery in the area.
6. CIL charging schedule: To check CIL rates, find the local authority’s CIL charging schedule on their website. This will show the applicable rates per square metre for different development types and zones.

When reviewing an S106 agreement, pay particular attention to:

• What affordable housing is being provided and where on the development it will be located
• What trigger points exist for financial contributions and infrastructure delivery
• Whether there are any obligations that could delay the overall development (such as highway improvements that must be completed before further occupation)
• Whether the developer has sought to renegotiate or modify the S106 obligations since the original agreement
• Any management company arrangements for open spaces or communal areas secured through the S106, as these may affect your service charges and management obligations

Impact of CIL and S106 on Development Timelines

Both CIL and S106 can affect the timeline of a new build development, which in turn can impact your purchase completion date. Understanding these potential delays is crucial, especially in light of your legal rights if completion is delayed.

CIL and Timing

CIL is normally payable within 60 days of development commencing, although most local authorities operate instalment policies allowing payment in stages for larger developments. If a developer fails to pay CIL on time, the local authority can impose surcharges, serve stop notices (prohibiting further development until payment is made), or even take enforcement action. While such extreme measures are rare, they can cause significant delays.

Additionally, if a developer fails to submit the required CIL forms (such as the Commencement Notice) before starting work, it can lose the right to pay in instalments and become liable for the full amount immediately. This administrative oversight can create cash-flow issues that delay construction.

S106 and Timing

S106 obligations often include trigger points that directly link to the development timeline. Common examples include:

• No more than a specified number of homes may be occupied until a particular contribution has been paid or a piece of infrastructure has been completed
• Affordable housing must be built and available for occupation before a certain percentage of market homes can be sold
• Highway improvements must be completed before a specified phase of the development can be started or occupied
• Open spaces and play areas must be laid out before a certain number of homes are occupied

If the developer is behind schedule on meeting these trigger points, it can create a bottleneck that delays the occupation of market homes. For example, if an S106 requires a new road junction to be completed before the 100th home is occupied, and the junction work is delayed, buyers purchasing homes 101 onwards could face delays even if their home is physically ready.

Your solicitor should enquire about the status of S106 compliance and any outstanding obligations before you exchange contracts. This is especially important on large, phased developments where different parts of the site may be at different stages of S106 compliance.

Frequently Asked Questions

Do I have to pay CIL as a new build buyer?

No. CIL is levied on the developer, not on individual homebuyers. You will not be asked to pay CIL directly. The developer is responsible for calculating, reporting, and paying CIL to the local authority. However, CIL costs are factored into the overall development economics and may indirectly influence house prices. If you are undertaking a self-build project, CIL may apply to you directly, but you can claim the self-build exemption provided you meet the qualifying conditions.

Can a developer renegotiate an S106 agreement after it has been signed?

Yes. Developers can apply to modify or discharge S106 obligations under Section 106A of the Town and Country Planning Act 1990. This can happen at any time, though it is most common when a developer argues that the obligations make the scheme unviable. The local authority must agree to the modification, and there is a right of appeal to the Planning Inspectorate if the authority refuses. As a buyer, if you are concerned about a potential S106 modification, ask your solicitor to investigate whether any such application has been made or is pending.

What happens to unused S106 money?

S106 financial contributions usually come with a “clawback” clause specifying a deadline by which the money must be spent (commonly 5–10 years). If the local authority does not spend the contribution within this period and on the specified purpose, the developer can reclaim it. Local authorities are increasingly publishing S106 monitoring data so residents can track how contributions are being used. If you believe S106 money related to your development has not been spent as required, you can raise this with your local councillor or the council’s planning department.

How can I find out the CIL rate in my area?

Every local authority that has adopted CIL publishes a CIL Charging Schedule on its website. This document sets out the rates per square metre for different types of development and, in many cases, different zones within the authority’s area. The Planning Advisory Service also maintains a list of authorities that have adopted CIL. Remember that if you are buying a completed new build home, the CIL has already been accounted for by the developer.

Does CIL apply to conversions and change-of-use developments?

CIL applies to the net additional floorspace created. If a building is being converted (for example, an office building converted to flats), CIL is only payable on any additional floorspace beyond the existing lawful floorspace, provided the existing building has been in lawful use for at least six months in the three years preceding the planning application. This means many conversions have little or no CIL liability, which is one reason why converted new builds can sometimes be priced competitively compared to entirely new constructions.

Conclusion: Making Informed Decisions About CIL and S106

CIL and Section 106 agreements are fundamental parts of the planning system in England and Wales, ensuring that new build developments contribute fairly to the infrastructure and services that communities need. While these obligations are primarily the developer’s responsibility, they have a tangible impact on the communities being created and, indirectly, on the price and timing of new homes.

As a new build buyer, you do not need to become an expert in CIL or S106, but having a working understanding of these mechanisms will help you ask the right questions and make more informed decisions. Your conveyancing solicitor plays a crucial role in reviewing S106 agreements, checking for outstanding obligations, and ensuring that the infrastructure promises made during planning are being delivered.

Key takeaways:

• CIL is a fixed-rate levy calculated on floorspace; S106 is a negotiated, site-specific agreement
• Both fund essential infrastructure, but S106 is the primary mechanism for securing affordable housing
• Costs are borne by the developer but may indirectly influence house prices
• Self-builders can claim CIL exemption – a potentially significant saving
• Always ask your solicitor to review S106 obligations and check compliance status before exchange
• S106 trigger points can affect development timelines and your completion date

A Note on Scotland and Northern Ireland

CIL and S106 are specific to England and Wales. Scotland uses Section 75 agreements under the Town and Country Planning (Scotland) Act 1997, which operate similarly to S106 but within the Scottish planning framework. Northern Ireland uses planning agreements under Section 76 of the Planning Act (Northern Ireland) 2011, administered by the 11 local councils. If you are buying a new build in Scotland or Northern Ireland, the general principles of developer contributions apply, but the specific legislation and processes differ – ensure your solicitor is experienced in the relevant jurisdiction.

For further guidance on the legal aspects of buying a new build home, explore our guides on planning permission and building regulations and estate adoption of roads and sewers.