A section 106 is a legal document which forms part of the planning permission for your home.
How does the Section 106 affect me?
Your s106 agreement will usually specify who would qualify to occupy the home, and at what price it can be sold for.
When you are thinking of selling your home, it’s important that you check the requirements in your s106 agreement.
Price of the property
Your s106 agreement will explain how the resale price is calculated.
- In more up-to-date agreements, the price is usually specified as a percentage of the open market value.
- In older agreements the price may be based on a person’s income. If this applies to you, your s106 may need updating so that it contains a percentage.
What if my Section 106 agreement needs to be changed?
If you have an old s106 agreement you may need to get this updated to make your property mortgageable.
The Council can help by putting a new agreement in place that lenders will accept. You will need to pay the Council's legal and planning fees plus your own legal fees.
Lender friendly terms
The Council have a Section 106 template agreement which includes clauses acceptable to lenders who will lend on discounted schemes. The terms are:
- Reference to sale at a percentage of open market value and removal of any reference to a restricted price based on local earnings.
- A clause which allows the owner to sell the property to any purchaser regardless of housing need or local connection (but still at the discounted price) after 90 days of advertising. Please note that the Council will need evidence of extensive advertising in line with an agreed advertising scheme before this provision can be applied
- A robust mortgagee protection clause. This is a clause that lenders need in the unlikely event that they re-possess your property.
A few older ‘Local Needs’ homes will not be subject to a price restriction on resale. If this is the case with your home the resale percentage will not be applicable.
Cost to change the section 106?
You will need to meet the Council’s legal costs in drawing up the document. This is currently £350 (rising to £400 April 2024) plus disbursements based on using the Council's template agreement. Disbursements are the costs of obtaining title documents and registering with Land Charges and are normally a maximum of £24.
You will need to meet the Council's planning administration costs in administering the planning process to get your new deed put in place. This is currently £122.
The Council's Legal Services team will ask your solicitors for a legal undertaking to cover the costs of the work. If you choose not to use a solicitor we will need full payment up front from you.
You may wish to take your own independent legal advice. If you currently have a mortgage or are seeking to re-mortgage your property, it is likely that the mortgage company will need you to instruct your own solicitor. Your own solicitor will also charge you a fee for advising you about the s.106 agreement. In some cases your lender or freeholder (or any other party to the agreement) may also charge for checking and signing the new agreement.
The process
In the first instance you should contact the Council's Affordable Homeownership Service for advice. If it is agreed that an updated deed can be put in place, we will deal with the planning aspects including consulting with your local Councillor if applicable.
Once the matter is handed over to our solicitors, they will liaise with your legal representation and a draft of the agreement will be shown and explained to you by your own solicitor.
You or your solicitor will be responsible for arranging for the new agreement to be signed. A final version of the agreement will be sent by the Council to each party for signature. This will include your lender if you have a mortgage on the property. If your property is a leasehold then this will include the freeholder.
Once all the signed documents have been returned to the Council’s Legal services they seal and date them. A signed original is sent to each party. Your solicitor will need to register the document at the Land Registry. The Council’s legal services register the document with the Local Land Charges team.
How long will it take?
As a rule of thumb the process takes a minimum of 8-12 weeks from the date you request a new agreement. It could take longer depending on how long it takes to arrange signature by all relevant parties. It is therefore important to start the process early to avoid delays in exchanging contracts on the sale of your home or your remortgage.
How do I proceed?
Please speak to the Affordable Homeownership Team using the details on this page.
We will need:
- Name and address of all owner(s)
- Full address of your property including postcode
- Name and contact details (including email address and phone/mobile number) of your solicitor
- Your own contact details (including email address and phone/mobile number) for the purpose of forwarding to our legal services