When it comes to property transactions, section 106 agreements are an essential aspect that cannot be overlooked. These agreements, also known as planning obligations, are used by local authorities to ensure that developments benefit the community and the wider environment. They are usually negotiated between developers and local planning authorities and can include provisions for affordable housing, public open space, or sustainable transport.

However, it is essential to consider the impact of the Limitation Act on section 106 agreements and their enforceability. The Limitation Act sets out the time limit for bringing legal claims, and it can have a significant impact on the validity of section 106 agreements.

The Limitation Act 1980 provides that any action for breach of contract must be brought within six years of the breach occurring. This means that if a party wants to enforce a section 106 agreement, they must bring a claim within six years of the breach occurring. After this time, the claimant may be barred from pursuing the claim, and the agreement may become unenforceable.

This can have significant implications for developers and local authorities alike. For developers, failing to comply with section 106 agreements can lead to costly legal action for breach of contract. For local authorities, the failure to enforce the agreement within the limitation period can mean that the development does not provide the intended benefits to the community.

However, there is an exception to the six-year time limit under the Limitation Act. This is known as the “discovery” rule, which means that the six-year limitation period starts from the date when the claimant becomes aware of the breach. This is particularly relevant in cases where a breach of the section 106 agreement may not be immediately evident, such as a failure to provide the agreed number of affordable housing units.

It is also worth noting that there may be other legal remedies available to parties seeking to enforce section 106 agreements. For example, local planning authorities can use planning enforcement powers to ensure that agreed obligations are met. However, the Limitation Act is an essential consideration, and parties should seek legal advice to understand the impact of the Act on their agreements.

In conclusion, the Limitation Act does apply to section 106 agreements, and parties should be aware of the time limit for bringing legal claims. The six-year limitation period can have significant implications for developers and local authorities, and parties should seek legal advice to understand the impact of the Act on their agreements. However, the discovery rule provides some flexibility, and other legal remedies may be available to parties seeking to enforce their obligations.