Planning obligations and good neighbour agreements: What should housebuilders be aware of?

On 12 December 2025, the Scottish Government issued new planning guidance in its Planning Circular 4/2025: Planning Obligations and Good Neighbour Agreements.

This new guidance replaces and revokes Planning Circular 3/2012, which was last amended in November 2020. 

The new guidance intends to steer planning authorities on how planning obligations should be utilised in order to make proposed new style developments ‘acceptable in planning terms’. In this article, we highlight the elements of the new guidance that housebuilders should be aware of, and its potential implications for new housing development. 

Policy tests

Before requesting that a developer agree to a planning obligation, planning authorities must ensure that any obligation strictly complies with the five policy tests which are set out in National Planning Framework 4 (“NPF4”). These are that the obligation:

1. Is necessary to make the proposed development acceptable in planning terms;
2. Serves a planning purpose;
3. Relates to the impacts of the proposed development;
4. Fairly and reasonably relates in scale and kind to the proposed development; and
5. Is reasonable in all other respects 

The guidance is clear that planning obligations or other legal agreements should not be used to resolve issues that could be dealt with in another way, stating that planning conditions are preferred. Accordingly, the guidance considers that a planning obligation will typically only be necessary where successors in title need to be bound by the obligation. In this respect, planning authorities should take into account the existence of any other agreements or conditions that already apply to the development and, in deciding whether a planning obligation is required, should consider whether the overall burden is reasonable.

Viability 

It is acknowledged within the guidance that a range of factors that may affect the viability of a development. This includes the sales value achievable, the costs of development and profit, and developer contributions.

It is a matter of public interest whether a development proceeds without a contribution being sought.  However, the guidance places an expectation on planning authorities to consider whether it is appropriate for developers to make staged or phased payments, and to consider whether other alternatives (such as off-site provision) may improve viability issues.

The guidance observes that it may be beneficial for developers to submit a viability assessment if, and when, seeking a reduction in contributions. Developers should, however, be aware that a planning obligation which makes a development unviable will not necessarily result in the contribution being reduced. Instead, it remains a matter for the planning authority to decide (taking into account what is in the public interest) whether the development should be delivered without the contribution. 

Restrictions on use 

Planning obligations may also restrict the use of land. Although this is less common, the guidance is clear that there is a limited role for this type of obligation, largely due to the impact that restrictions may have on a subsequent sale. In considering whether a restriction should be imposed, planning authorities are accordingly minded to refer to the overarching policy test of necessity, as set out above. 

Development management 

It is stated within the guidance that the local development plan should establish the need for, and use of, planning obligations. In this respect, the guidance invites effective cross-service management within the local authority, encouraging relevant agencies to be involved in pre-application discussions. Processing agreements are also encouraged, and parties should agree heads of terms as quickly as possible. 

The guidance also pushes the use of model obligations, clauses or templates, noting that a planning agreement may be agreed prior to a decision concerning planning permission being granted. However, it is acknowledged that a balance needs to be struck, as an application may be refused, or the terms of the agreement may require amendments. 

Where practicable, planning obligations should contain a clause which enables applications for future consent (for substantially the same development) without the need to negotiate a new agreement, or vary the original. This should be borne in mind at the drafting stage, to make provisions as future proof as possible.  

Monitoring obligations and repayment obligations

Planning authorities are also required, by virtue of the new guidance, to have mechanisms and procedures in place to demonstrate that agreed obligations have been facilitated. This includes mechanisms to monitor the collection and drawing down of funds, the provision of the infrastructure / housing, and an illustration of how long funds are to be held. 

Where relevant, other public bodies should be informed of progress with delivering obligations and funding expiration dates. If funds are not used for the agreed purpose and within the agreed period, they should be returned to developers, with the guidance recommending that an officer be designated for this purpose. 

It is hoped that this aspect of the guidance will provide developers with greater transparency concerning the utilisation of their contributions and will give them grounds for requesting that such provisions be included within the agreement. 

Changes still to come 

Outstanding legislative changes will also have an impact on the future use of planning obligations. Sections 35 and 36 of the Planning (Scotland) Act 2019, which are not yet in force, will amend Sections 75 and 75A of the Town and Country Planning (Scotland) Act 1997. 

Once operative, these provisions will require authorities to publicise materials by preparing and publishing annual reports which detail all the planning obligations entered in that year, as well as providing individual planning agreements and notices of determination. 

The Scottish Government’s new guidance contains a number of useful comments which developers can rely upon when negotiating future planning agreements. 

If would like to discuss anything raised in this article, or you require assistance with negotiating a Section 75 Agreement, please do not hesitate to get in touch with the Planning team at Burness Paull. 

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