COVID-19 and planning viability considerations

With an increasing number of contractors downing tools in response to the COVID-19 outbreak, one of many things that developers will need to consider is how construction delays may affect any early stage viability review triggers attached to section 106 planning obligations.

Early stage viability review is usually triggered where a substantial start on site (however it may be defined) is not achieved within a specified time frame. Where planning permission has already been granted, the current situation is likely to materially reduce the time frame for achieving a substantial start and may increase the chances of an early stage viability review being triggered. The implications of that will require careful consideration, depending on the detailed wording of the review clauses.

Developers who are in the process of negotiating section 106 agreements with a local planning authority with a view to obtaining planning permission before operations are back to full strength may seek appropriate wording to extend the period for a substantial start to reflect any period where sites are unable to operate under usual conditions.

In reviewing cash flow during these difficult circumstances, thought also needs to be given to the timing of payment of CIL installments and compliance with other section 106 obligations and planning conditions. Early discussions with the local authority may be sensible if issues are likely to arise.