💡 Top tip: if a new build in Essex looks noticeably cheaper than similar homes nearby, check whether it’s tied to a Section 106 agreement before you get too attached. That lower price can be a real opportunity, but it can also affect your mortgage choices and your resale options later. I’ll explain the catch and how to handle it as we go.
Buying your first home is stressful enough without planning jargon landing in the middle of it. You spot a smart new build in Chelmsford, Braintree or Colchester, the price looks within reach, and then someone mentions “S106” and the whole thing suddenly feels more complicated.
That’s exactly why it helps to understand what a Section 106 is in plain English. Once you strip away the legal wording, it becomes much easier to see what it means for your deposit, your lender, your solicitor, and your long-term plans.
Contents
An Introduction to Section 106 Agreements
A Section 106 agreement often appears when a buyer finds a home that seems unusually affordable for the area. That can be good news, especially if you’re trying to get on the ladder in Essex, but it usually means the property comes with extra rules attached.
For a first-time buyer, those rules can be easy to miss at the viewing stage. The kitchen looks new, the show home is polished, and the monthly payments seem possible. Then the legal paperwork starts, and you realise the property may be available only to certain buyers, or may have restrictions on how it can be sold in the future.
Practical rule: If the asking price makes you think, “This feels cheaper than it should be”, pause and ask whether a Section 106 agreement is involved.
That doesn’t mean you should walk away. Many buyers move ahead with these homes quite happily. The key is to understand the agreement before you spend money on surveys, legal work, and mortgage applications.
If you’re still at the stage of viewing homes and weighing up whether to proceed, this guide to making an offer on a house can help you organise the early steps properly.
Why buyers get caught out
It is commonly assumed that, when hearing “affordable housing,” the process will be simpler. In reality, Section 106 can make a purchase more technical, not less. The price may be lower, but the lender may look harder at resale restrictions, and your solicitor will need to check exactly what the agreement says.
The simple way to think about it
Treat Section 106 as a property-specific rulebook. If you know the rules early, you can judge whether the home still suits your plans. If you ignore them, the deal can become frustrating very quickly.
What Exactly Is a Section 106 Agreement
A Section 106 agreement is a legally binding planning obligation linked to a property or development. It comes from a specific legal provision within the Town and Country Planning Act 1990, and the government’s planning guidance explains that these agreements are negotiated instruments which “run with the land”, so they remain enforceable even when ownership changes, as set out in the government’s planning obligations guidance.
That phrase, run with the land, matters more than most buyers realise. It means the agreement doesn’t stay with the original developer or the first owner. It stays attached to the property itself. If you buy the home, you inherit the obligations that come with it.
A plain-English example
It’s like a permanent note pinned to the title deeds.
Not a temporary promise. Not a casual side arrangement. A formal legal obligation that follows the property from one owner to the next.
That obligation might restrict who can buy the home. It might control how the property is valued for resale. It might require a sale to follow a certain process. The exact wording varies, which is why your solicitor has to read it carefully rather than relying on the estate agent’s summary.
How it differs from normal planning conditions
Readers often find the difference unclear. A standard planning condition is usually imposed by the council as part of granting permission. A Section 106 agreement is different because it is negotiated.
That sounds subtle, but it has real consequences. A negotiated agreement can be much more detailed. It can set out restrictions, require certain works, or require money to be paid for an agreed purpose. It’s part of the legal framework behind the development, not just a routine note on a file.
Many buyers assume S106 is just admin from the planning stage. It isn’t. It can shape what you can do with the property and how a lender views it.
Why this matters to you as a buyer
When people ask what a Section 106 is, they’re often really asking a more practical question. “Is there anything about this home that could trip me up later?”
The answer is yes, potentially. Not because the property is defective, but because the home may come with eligibility rules and resale restrictions that affect both mortgage underwriting and future saleability.
That’s why Section 106 needs to be understood as a core feature of the property, not a minor legal footnote.
The Purpose of Section 106 and Developer Contributions
Section 106 exists because new development can put pressure on local areas. More homes can mean more demand for roads, green space, health services and other community infrastructure. Local planning authorities use Section 106 to deal with that impact in a structured way.
The Local Government Association’s planning archive describes S106 agreements as a critical tool for securing developer contributions for infrastructure or for requiring the delivery of affordable housing units, and notes that these obligations can alter the financial model of a development, with non-compliance leading to enforcement action, as outlined in this archived section on S106 obligations.
What councils are trying to achieve
In practical terms, a council in Chelmsford or Colchester may want a development to contribute towards the wider needs created by that scheme. That could mean funding or delivering facilities that help the area cope with growth.
Typical examples include:
Local infrastructure: road changes, access improvements, or works necessary to ensure the development functions properly.
Community facilities: green spaces, public areas, or other amenities linked to the development.
Affordable housing delivery: homes sold or managed on terms designed to widen access to housing.
This is why Section 106 shouldn’t be viewed only as a restriction on buyers. It also has a planning purpose. It helps shape places so that development isn’t added without proper consideration for local impact.
Why developers care so much about it
For developers, these obligations aren’t a side issue. They affect costs, timing and profitability. If a scheme must provide affordable homes or make payments for agreed purposes, it changes the site’s economics.
That matters to buyers because the affordable home you’re looking at may exist only because Section 106 formed part of the planning deal in the first place. In some cases, buyers who are also exploring shared ownership mortgage deals compare the two routes because both can improve access to a home, but they work in very different ways.
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How Section 106 Affects New Build Homebuyers
For buyers, the biggest attraction is obvious. A Section 106 property can make a new build feel reachable when an open-market home on the same development doesn’t.
That’s the upside. The trade-off is that the home may come with conditions that shape who can buy it, how it can be sold, and what a lender is prepared to do.
The benefit is access
A discounted purchase price can open a door that would otherwise stay shut. For a first-time buyer in Braintree or Colchester, that can be the difference between renting for longer and buying.
But a lower price isn’t the whole story. The property may only be available if you meet certain criteria. These can include local connection rules, first-time buyer status, or other eligibility requirements set out in the agreement or related scheme documents.
The hidden issue is flexibility
Many buyers get uneasy at this point, and rightly so. The same restrictions that help make the home affordable can also limit your freedom later.
You may find that:
Your buyer pool is narrower: resale may need to be directed at people who meet specific conditions.
Your valuation can be affected: restrictions can influence how the property is assessed.
Your onward plans need more thought: moving later may be less straightforward than with a standard free-market home.
If you’re buying brand new, it helps to understand the wider new build home buying process early, because S106 adds an extra layer to an already paperwork-heavy purchase.
Why mortgage advice matters more here
One of the least understood points in Essex is that restrictive S106 clauses can significantly reduce the loan-to-value ratio a lender is willing to offer, or lead to a need for a specialist lender, while some high-street lenders may see resale restrictions as a risk, as discussed in this Housing UK discussion on Section 106 in layman’s terms.
That is the practical hurdle. You may be able to afford the home in everyday terms, but the lender may still have concerns about future saleability. A buyer who hasn’t checked lender appetite early can lose time and money very quickly.
A cheaper home doesn’t always mean an easier purchase. With S106 homes, the legal restriction is often what drives the mortgage challenge.
Securing a Mortgage on a Section 106 Property
This is usually the point where a purchase either settles down or becomes messy.
A lender isn’t only looking at whether you can afford the monthly payments. It’s also looking at the property as security. If the home carries resale restrictions, a lender may worry that it would be harder to sell if it ever needed to recover the debt.
Why some lenders hesitate
With a standard property, a lender usually assumes there will be a broad market if the home is sold in future. With a Section 106 property, that market may be narrower because the agreement can restrict who is eligible to buy.
That’s why some lenders take a cautious view. In Essex, these clauses can reduce the loan-to-value a lender will offer or push the case towards a specialist lender rather than a mainstream option, particularly in places such as Braintree and Colchester where buyers may not expect these limits at first glance.
Valuation can be different from the asking price
This catches buyers out all the time. The fact that the home is sold at a reduced figure doesn’t mean every lender will assess it in the same way. The surveyor has to consider the restrictions attached to the property and how they affect open-market appeal.
If you want a clearer feel for how lenders and surveyors approach this part of the process, these Advice on mortgage valuations for homebuyers are useful background reading before you commit yourself financially.
A buyer’s working checklist
Use these questions before you pay reservation money or submit a full application:
Ask for the exact Section 106 wording: your solicitor needs the full agreement, not a summary from the sales office.
Check lender appetite early: not every bank treats S106 property the same way.
Confirm the resale mechanism: if the property must be marketed to a limited group first, that matters to underwriting.
Understand the valuation basis: don’t assume the lender will automatically follow the price you’ve agreed.
Review the whole funding plan: deposit, fees and any valuation shortfall need to be considered together.
If you’re specifically looking at a newly built home, it also helps to compare criteria under new-build mortgage options, as lender rules for new builds and S106 can overlap.
What a smoother application looks like
The strongest S106 mortgage applications are usually those where the paperwork is clean and the buyer asks the awkward questions early. A lender wants clarity. It wants to know exactly what the restriction is, how resale works, and whether the valuation supports the loan requested.
“Many buyers assume a lower purchase price means an easier mortgage application. With Section 106 properties, the opposite can be true. The key is working with a broker who has access to lenders that understand and accept the unique nature of these agreements.”
A buyer who treats Section 106 as “just legal stuff” can end up surprised when the lender trims the loan or declines the case. A buyer who prepares for those issues from the start has a much better chance of keeping the purchase on track.
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Key Questions to Ask Before You Buy
By the time a Section 106 issue reaches your mortgage offer, you’ve left it too late. The better approach is to push for answers at reservation stage, or earlier.
Your solicitor, broker and the developer all hold different pieces of the puzzle. You need all three.
Your Section 106 due diligence checklist
| Question Area | Specific Question to Ask | Who to Ask | Why It Matters |
|---|---|---|---|
| Eligibility | Who is allowed to buy this property now and on resale? | Developer and solicitor | It tells you whether the home is restricted to certain buyers, such as those with a local connection |
| Valuation | How are the restrictions likely to affect lender valuation? | Broker and surveyor | A lower valuation can affect deposit requirements and mortgage choice |
| Resale | Is there a nomination or marketing period before I can sell on the open market? | Solicitor | This affects how easy it may be to move later |
| Price restriction | Is the discount fixed and does it apply in future sales? | Solicitor | You need to know how the resale price may be controlled |
| Ongoing costs | Are there any charges or obligations linked to the development that I should budget for? | Developer and solicitor | Affordability is about more than the mortgage payment |
Questions that deserve a proper answer
Some replies will sound reassuring without being precise. Don’t accept vague wording like “it’s a standard affordable unit” or “most lenders are fine with it”. You need detail.
Ask these follow-up questions:
Can I see the exact clause? If nobody can show you the wording, treat that as a warning sign.
Can the restriction ever be changed or removed? Sometimes buyers assume it falls away later. Don’t rely on that.
How will resale be handled in practice? The process matters just as much as the principle.
What happens if my circumstances change? A home that suits you now may need to be sold or remortgaged later.
The right question isn’t “Can I buy it?” The right question is “Can I buy it, mortgage it, live with it, and sell it later without nasty surprises?”
Why your conveyancer is central
A lot of this comes down to legal interpretation. That’s why the conveyancing stage matters so much. If you want a refresher on what your solicitor does during the purchase, this guide to what the conveyancing process involves is worth reading before you commit to a property with extra planning obligations.
Keep your decision practical
A Section 106 home can still be a very good buy. The test is whether the restrictions fit your life.
If you expect to stay put for a while, meet the eligibility criteria comfortably, and have mortgage options that work for you, the property may suit you well. If you’re already worried about future resale, lender choice or a likely move in the near term, it’s better to be honest with yourself before you proceed.
The Future of S106 and Selling Your Property Post 2026
Buying is only half the story. Selling can be just as important, especially if you’re planning ahead rather than focusing only on your first mortgage.
The government’s roadmap introduces a point that many homeowners still don’t know about. Under that policy, developers must upload uncontracted S106 homes to the Homes England Clearing Service by 1 June 2026, and those homes then go through a mandatory bidding period for Registered Providers before they can be sold to private buyers, as set out in the government’s roadmap for Section 106 delivery in England.
What that means in plain English
If a property falls within that process, a sale may not move straight to a private buyer. There may be a required first stage, where Registered Providers have the chance to bid.
For sellers, that can mean delay.
For buyers, it means the property’s route to market may not be as simple as a normal resale. That’s particularly relevant if you’re already thinking ahead to remortgaging, downsizing, or moving later in life.
Why future resale should affect today’s decision
Many first-time buyers focus only on getting accepted now. That’s understandable, but with S106 homes you also need to think about your exit route. If a future sale could involve extra steps or a pause in the transaction, that should shape your expectations from day one.
Buying well means understanding not only how you get in, but how you may get out later.
Conclusion: Your Next Steps with EHF Mortgages
Section 106 properties can be a real opportunity. For many buyers in Chelmsford, Braintree, Colchester and across Essex, they offer a route into a home that might otherwise feel out of reach.
But they aren’t standard purchases. The legal agreement can affect eligibility, valuation, lender choice and resale. None of those issues means you should automatically avoid the property. It means you need clear advice before you commit.
If you’re considering a Section 106 purchase, moving home, or remortgaging a property with restrictions, the smart next step is to get personalised guidance.
If you’re ready to discuss your plans with EHF Mortgages, use the button below to get in touch.
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