Understanding the possibility of securing finance for properties subject to planning restrictions can present a real challenge for many potential homebuyers and investors across the UK. Among the various planning constraints that can influence the purchase and ownership of a property, the planning agreement under Section 106 of the Town and Country Planning Act 1990 is one that commonly raises questions — especially when it comes to getting a mortgage.

These agreements, often referred to as “Section 106 agreements” or “planning obligations”, are legal instruments used by local authorities to mitigate the impact of new developments on local communities. While they serve a crucial public purpose, properties subject to these agreements can come with significant limitations. This article explores how Section 106 affects the property buying process, whether and how it is possible to get a mortgage on such properties, and what prospective buyers need to consider.

Understanding What the Planning Obligation Means

A Section 106 agreement is a legal condition connected to a planning permission, requiring developers to contribute to the social and economic infrastructure of the local area. This might include affordable housing provisions, payments towards schools and health centres, or environmental protections.

In the context of residential homes, Section 106 frequently relates to affordable housing. Local councils often use these agreements to ensure that a portion of new housing stock remains within financial reach for local residents. As such, some homes built under these agreements can only be sold to people meeting certain qualifying criteria, such as having a connection to the area, being a first-time buyer, or earning below a certain income threshold.

From a planning policy perspective, this arrangement ensures housing is distributed more equitably. However, these conditions impact the property’s resale market, perceived value, and — crucially — its mortgageability.

Why Mortgage Lenders Are Cautious

Lenders are, by nature, risk-averse. When offering a mortgage, they assess the security of the loan, generally based on the property’s resale value and marketability in the event of repossession. A property encumbered by a Section 106 agreement introduces an element of restriction that affects both dimensions — it narrows the pool of prospective buyers and potentially affects resale price.

Because of these limitations, some high street lenders may be reluctant to provide mortgages on such properties. The concerns can range from the affordability covenant limiting future sales, to the requirement that any new buyer must have a local connection or meet income criteria — hurdles which can delay or complicate the resale.

Nonetheless, not all lenders view such properties in the same light. Some mortgage providers, especially those who specialise in affordable housing or shared ownership schemes, are prepared to consider lending in the context of a Section 106 agreement. It often depends on several finer details.

Factors Affecting Mortgageability

Simply knowing that a property is under a Section 106 agreement does not immediately render it unmortgageable. A number of nuanced factors come into play, which can affect a lender’s decision:

1. Nature of the Restriction: If the restriction limits ownership solely to individuals with a local connection or income cap, it may be viewed more favourably than a restriction that permanently limits resale prices. In contrast, if the covenant designates the property to be sold at a fixed discount (for instance, no higher than 70% of market value), lenders may apply more caution.

2. Permanence of the Clause: Some Section 106 conditions are irreversible — they remain on the property title permanently unless formally amended through a legal process. Others may lapse after a certain number of years, after which the property becomes ‘normal’ in market conditions. Temporary restrictions are more likely to be acceptable to lenders.

3. Amendment Capability: Some local councils allow existing property owners to negotiate a variation of the Section 106 terms, making them less restrictive over time. If it is feasible to appeal or vary the agreement, the property becomes more favourably viewed by lenders.

4. Geographic Consideration: Rural exception sites are a particular category of concern for lenders. These are small-scale developments permitted in rural areas specifically to provide affordable housing to local people. If the property lies on such a site, the restrictions may be strict, durable, and less likely to be removed or varied, thereby making mainstream mortgage options fewer.

5. Developer Agreements with Lenders: In some cases, the original developers of the housing scheme may have anticipated the implications and agreed to terms with a panel of lenders in advance. This can greatly smooth the process of securing a mortgage by pre-removing doubts lenders may have about the associated risks.

The Role of the Local Authority

A Section 106 agreement is drafted and controlled by the local council who granted the planning permission. As such, they hold significant influence both in defining the initial conditions and in allowing potential modifications later on. Most local councils understand the balance between ensuring compliance with housing targets and enabling people to securely fund and purchase homes.

When considering purchasing such a property, it’s a good idea to request a full copy of the planning agreement from the local authority. This acts as the definitive document on what restrictions apply, how long they last, and under what circumstances they might be altered.

In certain cases, councils may also provide written confirmation if they allow prospective buyers to apply to remove or vary a Section 106 agreement after a specific term, or if this has already been done in similar cases in the local area.

Legal Advice Is Essential

Because of the complexities and potential long-term limitations associated with Section 106 obligations, it is highly advisable — if not crucial — to seek help from a solicitor or licensed conveyancer who has experience with planning restrictions and affordable housing schemes.

A property lawyer can interpret the meaning of the clauses in practical terms, propose whether an application to remove or vary the restriction may be possible, and guide a buyer through the conveyancing process with those limits in mind. For example, they might investigate whether a mortgage lender would accept a restriction as long as a waiver is in place, or if an indemnity would be required.

They can also probe whether the seller complied fully with the terms of the Section 106, which is particularly important; non-compliance by previous owners can sometimes delay or derail sales.

Lender-Specific Policies

Not every lender takes the same approach to property restrictions. There are notable differences between national high street banks, regional building societies, and niche or specialist lenders. While one might have a firm “no” policy on properties with any form of resale restriction, another might routinely approve mortgages on homes subject to planning obligations.

For example, some building societies — especially those operating in rural or market towns — may have underwriters specially trained to evaluate such cases on their own merit. These lenders may take a more bespoke, manual underwriting approach rather than rejecting a case purely on a tick-box basis.

Furthermore, specialist mortgage brokers with experience in affordable housing can prove invaluable. They maintain relationships with lenders willing to consider these scenarios and can present the case in a way that highlights mitigations or supporting factors that increase lender confidence.

How to Approach Buying a Property with a Planning Obligation

If you’ve found a home that you love — but it’s subject to planning restrictions under Section 106 — don’t be alarmed. Although such properties can be trickier to buy than standard open-market homes, they are not out of reach, especially with proper guidance.

Start by requesting the full Section 106 agreement and reviewing it with your solicitor. Identify what the restriction is, who it applies to, and whether it affects future sales. Be sure to verify whether this obligation has an end date or review clause.

Next, contact lenders directly (or go through a broker) to assess their position. Be prepared to provide supporting documentation about the restriction — clarity helps.

It’s also worth liaising directly with the local council housing or planning department. They may confirm eligibility or offer insight into how the Council views such sales. Some councils facilitate resale by maintaining eligibility lists of qualified buyers, which can assist with mortgage underwriting as well.

Finally, be sure you’re personally eligible to buy the property — if local residency, employment, or income criteria apply, ensure you fit the profile. Any failed verification down the line, especially after a mortgage has been agreed in principle, can seriously delay or derail the transaction.

Potential Advantages for Buyers

It’s easy to assume that any property with a legal restriction is automatically more trouble than it’s worth. But that’s not always true.

Firstly, homes subject to Section 106 restrictions often sell at a lower price point than similar properties on the open market. Though this is to reflect the resale limitation, it also provides a lower barrier to entry for initial buyers.

Secondly, because these homes are intended for local people, in areas where open-market prices have soared, they represent one of the few realistic entry points for aspiring homeowners. That gives buyers an opportunity to lay down roots in their community — something priced out by market forces for many.

Thirdly, assuming the buyer meets the eligibility conditions and is not focused on quick capital gains, such purchases can offer stability and security. Shelter and location — not speculation — become the priority.

Beyond the Mortgage: Consider Long-Term Implications

Anyone buying a property is also investing in their long-term future. With a Section 106 home, buyers need to understand that any future sale might take longer than usual or may require vetting of the new buyer by the local authority to ensure they also comply with the restriction. This can lengthen the completion process and narrow the eligible audience.

It’s also worth preparing for the possibility that capital growth on the property may be lower than wider market trends if resale limitations persist. In some cases, price caps form part of the agreement, limiting capital appreciation or pegging growth to inflation rather than local market increases.

That said, if the local authority grants permission to vary or remove the agreement over time — often after 5 or 10 years — then original owners can sometimes ‘graduate’ into the open market, having enjoyed the initial benefits