Most Section 106 agreements are not underwriteable in the format they arrive.
They are long PDFs, written for legal execution, containing:
- defined terms,
- cross-references,
- schedules,
- tables,
- triggers,
- indexation,
- caps,
- and conditions precedent.
A lender or broker does not need a legal education.
They need a credit-file-ready summary that answers a small number of questions, reliably, every time.
This post sets out what that annex should contain.
No predictions. No opinions. Just structured evidence.
The Underwriting Questions an S106 Must Answer
A credit committee needs to understand:
- What must be paid?
- To whom?
- When? (trigger)
- How is it indexed?
- Is it capped?
- What stops development? (hard gates)
- What are the non-financial obligations that can delay or block delivery?
- Is anything conditional (and on what)?
- What is the total exposure (and what is the calculation basis)?
- Where did each number come from? (provenance)
If your "summary" doesn't answer these, it's not lender-ready.
1) Site and Agreement Identification
Start with what can be verified:
- LPA
- decision reference(s)
- site address / description
- date of agreement
- parties (developer/owner, LPA, county, others)
- document provenance (hash / upload ID)
This is basic but crucial.
It lets a lender tie the annex to the executed agreement without ambiguity.
2) One-Line Executive Summary
This should be factual:
- number of financial obligations identified
- number of non-financial obligations identified
- indexation basis present? (yes/no, which indices)
- any "hard gate" obligations present? (yes/no)
Avoid claims like "low risk".
Credit committees don't want tone. They want structure.
3) Financial Obligations Table (The Core)
This is the single most important section.
Every financial obligation should be a row with:
- obligation type (education / highways / open space / monitoring / etc.)
- payee
- stated amount (as written in the agreement)
- basis (lump sum / per dwelling / per sqm / per bedspace)
- units used (dwellings, sqm) and the source for that unit count
- cap (if any)
- indexation (index name + base date + calculation reference)
- trigger (commencement / occupation N / prior to first occupation / etc.)
- computed total (if per-unit and units are known)
- notes for ambiguity (if units are unclear or schedule incomplete)
Key point: a lender-ready annex must distinguish:
- stated amount (the legal text)
- computed total (rate × units, capped)
That avoids the most common error in S106 summaries: treating per-unit rates as totals.
4) Indexation as a First-Class Object (Not a Footnote)
Indexation is where misunderstandings happen.
A lender-ready annex should show:
- which obligations are indexed
- which index applies (BCIS, RPI, CPI, etc.)
- base date (often agreement date or a specified index quarter)
- whether indexation is applied from base to payment date
- any bespoke wording that changes the standard approach
Indexation is not optional detail.
It changes exposure.
5) Trigger Map (Cashflow-Relevant)
Triggers should be normalised into a short list:
- on commencement
- prior to implementation
- prior to occupation
- on occupation of Nth unit
- on first occupation
- on final occupation
- prior to disposal
And each obligation should reference a trigger.
A lender should be able to glance and understand:
- what hits cashflow early
- what can be staged
- what is back-ended
This is how S106 connects to drawdown, interest roll-up and exit.
6) Non-Financial Obligations (The Hidden Delay Layer)
Non-financial obligations drive time friction.
These include:
- pre-commencement conditions embedded via S106 mechanics
- restrictions on occupation until works are complete
- notification and certification steps
- travel plans / management plans
- ecological mitigation delivery requirements
- monitoring and reporting obligations
- legal restrictions and covenants that bite before occupation
A lender-ready annex should list these separately and flag anything that functions as a gate.
7) Hard Gates and "Stopper" Clauses
Hard gates are obligations that can prevent:
- lawful commencement
- lawful occupation
- lawful disposal
Examples:
- "No occupation until highway works are completed"
- "No commencement until drainage scheme approved"
- "No development until ecology mitigation delivered"
- "No occupation until affordable housing is transferred"
These must be called out as hard gates, not buried in narrative.
They are underwriting-critical.
8) Conditionality and Fallbacks
Many agreements contain conditional pathways:
- obligation applies only if a certain phase proceeds
- reduced contributions if a threshold is met
- replacement obligations if works are delivered in-kind
- review mechanisms
A lender-ready annex should summarise conditionality in plain structure:
- condition → consequence
This is where "it depends" becomes legible.
9) Coverage and Extraction Confidence
An honest annex includes a coverage note:
- schedules identified
- schedules extracted
- any schedules detected but not extracted
- ambiguity flags (units unclear, table unreadable, missing base dates)
This is not weakness.
It is audit-grade transparency.
It tells a lender what still needs manual confirmation.
10) Provenance (Clause-Linked Evidence)
The final piece that makes an annex credit-file-ready is provenance:
- clause/schedule reference for each obligation
- source text excerpt (short, not full reproduction)
- document hash / upload ID
- engine version / schema version used
This is what prevents disputes later.
If challenged, the lender can trace every number back to the agreement.
Why This Matters
The risk in S106 is rarely "the agreement exists".
The risk is:
- underestimating totals (per-unit treated as total),
- missing triggers that hit early cashflow,
- missing gates that delay occupation,
- misunderstanding indexation,
- and losing auditability.
A lender-ready annex prevents those failure modes.
When you receive an S106 agreement, convert it into structured obligations, triggers, indexation, gates, and provenance. That is what credit committees can actually underwrite.