What is Clawback?
Many S106 agreements include "clawback clauses" — provisions that allow developers to reclaim contributions if they're not spent within a specified time period. These clauses exist because S106 money is meant to mitigate the impact of specific developments, not sit indefinitely in council accounts.
Typical clawback periods range from 5 to 10 years from the date of payment, though some agreements specify shorter or longer windows. When the deadline passes, the developer can request their money back, often with interest.
Why Clawback Clauses Exist
From a legal perspective, clawback clauses serve an important purpose. S106 contributions must comply with CIL Regulation 122, which requires that planning obligations are:
- Necessary to make the development acceptable
- Directly related to the development
- Fairly and reasonably related in scale and kind
If money sits unspent indefinitely, it becomes increasingly difficult to argue it was necessary to make the development acceptable. Clawback clauses ensure councils either use the money for its intended purpose or return it.
The Scale of the Risk
With billions of pounds in unspent S106 contributions sitting in council accounts, the clawback risk is substantial. One council reported that its earliest clawback deadline was 2027, with the furthest extending to 2033 — meaning significant amounts could be at risk over the coming years.
When funds are clawed back, communities lose out on infrastructure they were promised. The school places, park improvements, or transport upgrades simply don't happen.
Can You Get a Refund as a Developer?
Developers seeking refunds should note that even without an express clawback provision, refunds may be possible. A landmark court case established that terms can be implied into S106 agreements in limited circumstances where parties plainly intended them to be part of the contract.
If you believe you're entitled to a refund, you should:
- Check the terms of the S106 agreement, including the purpose of contributions and any express refund provisions
- Request information from the council about how funds have been spent or allocated
- Check whether any accrued interest is also due
How Councils Can Protect Against Clawback
The best protection against clawback is proactive management. Here's what leading councils do:
1. Maintain Visibility Over Deadlines
You can't manage what you can't see. Every S106 agreement with a clawback clause needs its deadline tracked and monitored. This sounds simple but becomes complex when you have hundreds of active agreements across multiple systems and spreadsheets.
2. Build in Early Warning Systems
By the time a deadline is imminent, it may be too late to deliver a project. Effective councils set alerts well in advance — typically 2–3 years before deadlines — to ensure there's time to identify and deliver appropriate projects.
3. Keep an Infrastructure Pipeline
Having a ready pipeline of infrastructure projects that could absorb S106 funding makes it easier to act when money becomes available or deadlines approach. Work with service departments to understand their needs and have costed proposals ready.
4. Consider Allocation vs. Spending
Some S106 agreements distinguish between "allocated" and "spent." If allocation to a specific project is sufficient to prevent clawback, this buys time. But check the specific wording — some agreements require actual expenditure.
5. Negotiate Variations When Needed
If circumstances have changed and the original spending purpose is no longer feasible, it may be possible to negotiate a deed of variation with the developer. This isn't always successful, but it's better than losing the money entirely.
What Good S106 Agreements Look Like
For councils drafting new agreements, careful attention to clawback provisions can avoid future problems:
- Reasonable timeframes — Periods should reflect realistic project delivery timescales
- Clear definitions — Define whether "spent" means allocated, committed, or actually disbursed
- Flexibility provisions — Allow for alternative uses if the original purpose becomes impractical
- Extension mechanisms — Include processes for extending deadlines where there's good reason
The Bigger Picture
Clawback isn't just a compliance issue — it's a symptom of broader S106 management challenges. Councils that struggle with deadlines typically also struggle with visibility, allocation, and reporting.
Addressing these underlying issues doesn't just prevent clawback; it ensures S106 funds deliver the community benefits they were intended to provide.