Background
Westminster City Council granted planning permission in 2013 for a mixed-use development that included 60 flats. A contemporaneous agreement under section 106 of the Town and Country Planning Act 1990 restricted 16 flats to affordable housing. It required long leases of those flats to be granted to a registered social provider, while clause 10.1.1 exempted a mortgagee of such a provider—and anyone deriving title through that mortgagee or its receiver—from the agreement’s Schedule 1 obligations.
The leases ultimately became vested in Kinsman Housing Limited, then a registered provider, and were subject to a legal charge in favour of PEP Securities No.17 Limited. After regulatory concerns about Kinsman’s governance, viability, risk management, and health-and-safety compliance, the Regulator of Social Housing removed it from the register in September 2023. Securities exercised its power of sale in February 2024 and assigned the leases to Gems House Residences Chiltern Street Limited.
Westminster sought an injunction enforcing the affordable-housing restriction. The High Court dismissed the claim, holding that the relevant time for determining whether the lender was a mortgagee of a registered social provider was when the mortgage was granted, not when the lender later sold the flats. Westminster appealed.
The Court’s Holding
The Court of Appeal upheld the High Court’s construction of clause 10.1.1 and dismissed Westminster’s appeal. A purchaser deriving title through a mortgagee falls within the exemption where the mortgage was granted by a qualifying registered social provider. The provider did not also have to remain registered when the mortgagee exercised its power of sale.
Read in the context of the agreement as a whole, the clause protected the mortgagee and persons deriving title through it so that lenders could rely on the value of their security. Westminster’s proposed “ambulatory” interpretation would make that protection depend on the mortgagor’s later regulatory status, exposing lenders to the risk that deregistration—an event beyond their control—would impair the security.
Because Kinsman was a registered social provider when the relevant mortgage arrangements took effect, Gems House could rely on the mortgagee exclusion despite Kinsman’s deregistration before the sale. The affordable-housing obligation therefore did not bind the respondents, and Westminster was not entitled to the requested permanent injunction.
Key Takeaways
- The status of the mortgagor for purposes of this mortgagee-protection clause was assessed when the mortgage was granted, not when the mortgagee later disposed of the property.
- A purchaser deriving title through the protected mortgagee received the benefit of the section 106 agreement’s exemption even though the social provider had been deregistered before the sale.
- Section 106 agreements are public documents interpreted objectively from their language, structure, purposes, and practical consequences.
Why It Matters
The decision confirms that the wording of a mortgagee exclusion can permit affordable-housing units to pass into the general housing market following enforcement. It also gives secured lenders greater certainty that a provider’s later deregistration will not retrospectively undermine expressly negotiated protection for their security.
For planning authorities and developers, the case underscores that the precise temporal language of mortgagee clauses matters. If an authority intends protection to depend on a provider retaining registered status through the date of enforcement or sale, the agreement must say so clearly.