Section 106 agreements and section 2 LP(MP)A 1989

Do agreements under section 106 TCPA 1990, which provide for the grant or transfer of an interest in land in favour of a third party, need to be signed by all of the parties, including the third party, in order to satisfy the contractual formalities of section 2 LP(MP)A 1989? Some time ago, the High Court had held this to be the case in Jelson Ltd v Derby City Council [2000] JPL 203. In that case, a section 106 agreement between a developer and the planning authority, which required the developer to transfer part of its site to a housing association to be nominated by the council for affordable housing purposes fell foul of section 2 of the 1989 Act because it had not been (indeed it could not have been) signed by the eventual nominated transferee. However, in Milebush Properties Ltd v Tameside Metropolitan Borough Council & Ors [2010] EWHC 1022 (Ch), the High Court has declined to follow the Jelson decision, stating that “it would substantially frustrate the statutory scheme contained in section 106 of the 1990 Act to interpret section 2 of the 1989 Act as invalidating section 106 agreements which benefit third parties [where the third party has not signed the agreement]”. In this present case, Arnold J is following a line taken similarly by Neuberger J (as he then was) in R. G. Kensington Management Co Ltd v Hutchinson IDH Ltd [2003] 2 P&CR 13. Neuberger’s view was that the wording of section 2(3) “require the contract, or the parts of the contract to be signed by 'each party to the contract', not by 'each party to the prospective conveyance or transfer'.”