Seller did not pay S106 obligations to the Council

[barry_allen1]

A small development company has built four houses and there was an S106 liability to pay £83000 to the council in two parts. The first payment of £41500 after the sale of the second dwelling and the subsequent amount of £41500 after the sale of the third dwelling.

The Developer has not paid this amount and seems to be not willing to pay as well. The council has sent a Letter of Claim to all four occupiers of the houses and the developer (Now with interest it is £100K). According to the S106, the liability falls on the occupiers of the land as well.

I was the first buyer of the property and when my conveyancer asked about the S106 agreement, the seller's solicitor said it is only payable after the second sale. There was no way for me to ensure the payment at that time. An indemnity clause was included in the Sale Agreement to indemnify the buyers from the liabilities of non-observance of planning agreements.

What actions should I take? The Developer is still trading and I believe they are liable for the payments.

[atticus]

This could be tricky. Notwithstanding that the developer is still trading, can it actually pay?

In theory you have the right to be indemnified, but an indemnity is only as good as the ability of the person or company giving it to pay.

Were you advised of the risk?

Do you have legal expenses insurance cover?

[barry_allen1]

This could be tricky. Notwithstanding that the developer is still trading, can it actually pay?

In theory you have the right to be indemnified, but an indemnity is only as good as the ability of the person or company giving it to pay.

Were you advised of the risk?

Do you have legal expenses insurance cover?

I was not advised of the risk at the time of purchase. I recently came to know about this.
I believe the trader is still capable of paying. They have a new development ongoing somewhere. The developer somehow believes he doesn't have to pay this money as it was a small development and CIL was paid, something like that. The council has clearly explained to the developer that it does not apply in their case and the developer needs to pay.

What action should I take? One of my neighbours is thinking of paying it off as the interest is accruing and avoiding legal costs later. I am not able to afford this amount and I don't think this is the money I should be paying.

Yes, I do have legal insurance cover. I have submitted all details and haven't got a response yet though.

[atticus]

Press the insurers. If the council has given you a deadline make sure that they understand this.

If they will support you, you will get professional advice on the action you should take.

Apart from that, have you sent a copy of the correspondence that you have received from the council to the developer with a request that they arrange immediate payment?

[barry_allen1]

Press the insurers. If the council has given you a deadline make sure that they understand this.

If they will support you, you will get professional advice on the action you should take.

Apart from that, have you sent a copy of the correspondence that you have received from the council to the developer with a request that they arrange immediate payment?

I have sent emails and messages to the developer and they are not responding at all.

In the reply I have drafted, I did not mention the insurance and legal advice I am seeking. Will include that and mention I need more time. Thanks for the tip.

The summary of what I have written is requesting them to pursue the Developer legally as they are still trading and exclude the buyers. The council does not seem to have exhausted all options against the developer.

[atticus]

Top tip: write a letter to the developer. Send it by post.

Your reply to the council may gain you the time to obtain professional advice.

When did you buy this house?

[barry_allen1]

Top tip: write a letter to the developer. Send it by post.

Your reply to the council may gain you the time to obtain professional advice.

When did you buy this house?

I bought this house in December 2020.
The S106 agreement is dated April 2017.

The issue came to light in September 2022 when my neighbour tried to sell the property. The council does not seem to have done any proper monitoring until then.