Footprint

Welcome to the June 2012 edition of Footprint.

In this edition, we:

• emphasise the importance of the enforceability of pre-sales contracts, especially in the current shifting market
• comment on a court ruling which invalidated the determination of agricultural land in relation to a mining lease application
• review how participants in property developments frequently grant and acquire easements over land. But do parties really understand their rights?
• review a draft exposure bill released by the Victorian Government concerning landholder duty
• In case you missed it in a recent legal update, provide a summary of proposed reforms to Part 3A of the Environmental Planning and Assessment Act.

We hope you enjoy this edition and look forward to any feedback you may have.

Kind regards

Nicholas Afaras
Partner and editor of Footprint

Matthew Derrick and Tarryn Barker

Market conditions have created a difficult environment for developers (particularly of residential product) and emphasised the importance of the enforceability of pre-sales contracts against a background of shifting market conditions and values.

Background

Litigious activity focused on pre-sales in projects completing during and after the GFC shows that buyers will seek whatever mechanisms are available to them to avoid a accepting an asset with diminished market value and to mitigate their changed financial circumstances. Large projects that may run for an entire property cycle have been particularly exposed to this attitude.

New projects face considerable implementation thresholds (well in excess of pre-GFC requirements) in limited or patchy markets, uncertainty about future values on completion and high pre-sales and debt cover ratios. Pre-sales remain a keystone for project underwriting but recent experience has raised scepticism about their value if litigation is the only option for enforcement.

Attacks on pre-sales contracts have traditionally focused on technical non compliances with consumer legislation, especially in Queensland where the legislative framework has over time provided a buffet of termination arguments for buyers to choose from. Recent steps to reduce complexity and remove technical grounds for overturning contracts in Queensland are accordingly welcomed (and commented on further below) as is the new Queensland State Government’s pledge to reduce red tape and untangle development from it.

However, compliance with consumer protection requirements is and will remain a core issue for pre-sales in all jurisdictions and the introduction of the ACL unfair contracts regime is a new player in this field. Moreover, alleged misrepresentations are an almost mandatory basis for buyers to seek to circumvent contractual obligations. The lessons for developers from recent experience and judicial determinations are several.

Recent case law

Recent decisions in Queensland perhaps indicate that obsessive emphasis on the “consumer protection” element of legislative policy won’t always be a barrier to enforcement of contract commitments.

The decisions of Mirvac Queensland P/L v Horne & Ors¹ and Mirvac Queensland Pty Ltd v Beioley & Anor² concerned contracts in the same development. The Queensland Supreme Court was asked to consider whether a change in the configuration of a lot (in one case, a change to the floor area of the lot and in the other, a change to the lot balconies) triggered the rectification statement obligations under Queensland’s Land Sales Act 1984 and in turn termination rights. The Court, in both cases, qualified the legislative trigger to give further disclosure by reference to contractual provisions that allowed the developer to vary the area and configuration of the lots within certain parameters. This was notwithstanding a prohibition on contracting out of the statutory disclosure obligations. The concept of what was sold was related to the right of the seller to change the area of the lot within a 5 per cent tolerance and any change within that range did not result in the statutory triggers for further disclosure applying.

The Court arguably went further in Beioley where despite the area of the balcony changing by more than five per cent, there was no inaccuracy in the originally disclosed material if the lot remained as substantially shown in the disclosure statement, including in respect of function and amenity – the changes to the balcony area alone were not considered to change the nature of what was sold in material way.

These cases emphasise the need to consider how disclosure material will be reviewed by buyers and may change over the course of a project between point of sale and settlement. It is not enough to satisfy the obligation as to what is to be disclosed initially. Developers’ contracts must recognise the interpretations that may be applied to legislative requirements for further disclosure and use (to the extent permitted) contractual provisions to limit the triggers for further disclosure.

Buyers have also sought to use statutory disclosure regimes as alternatives to pleading misrepresentation claims (which may have a different evidentiary basis). Termination rights for material prejudice created by a change to disclosed information are given under legislation in Queensland (and in other jurisdictions). Buyers may seek to use an “inaccuracy” in disclosed information as a “foot in the door” to argue that they will be prejudiced by what might be seen as, objectively, remote risks.

For example, in the Oracle decision – Gough & Anor v South Sky Investments Pty Ltd³ (and related cases involving other buyers in the development) - the Court was asked to accept that the on-site management operation as implemented changed the nature of the development from a residential tower to a hotel operation, in turn making disclosure inaccurate. The Buyers argued that they were materially prejudiced by that inaccuracy (for a range of reasons). The Buyers also argued that the branding of the building had changed making initial disclosure inaccurate and the change in branding was also prejudicial to them. They also sought to link increased use of facilities by short term visitors and a deprivation of a sector of the rental market (i.e. long term rentals) by virtue of the on-site operation being focused on short term stays as grounds for material prejudice.

The Court rejected that view that any contractual commitment had been made as to what type of residential tower would be developed or that the nature of the on-site operation was confined to long term tenancies by virtue of the disclosed management rights agreements. The fact that hotel style services were available did not mean that the tower ceased to be a residential tower and in substance the developer had delivered what the contract required – a lot in a residential tower. Moreover the disclosure made was accurate because it referred to a residential tower and that had not changed.

In considering the statutory provisions governing further disclosure and termination rights, the Court noted that the fact that some people might label the building a hotel did not make the disclosure statements as issued inaccurate – the Court had found that the building was still a “residential” tower despite the nature of services offered and which had been identified in the disclosed material from the outset. While the name of the building had changed and this was an inaccuracy there was no material prejudice found to have been caused by that inaccuracy. Nor did the Court accept that the buyers suffered prejudice because the building may or may not be attractive to a class of potential occupiers – short term or long term occupiers and it rejected the idea that the disclosure statement had made any particular statement as to the mix of occupants that could be the basis for an inaccuracy.

The forensic examination in the Oracle decisions of the substance of the contract (that is, what was offered – a lot in a residential tower), the incorporation of disclosed material as terms of the contract and the impact of the tower not being branded as originally forecast confirms the importance of ensuring that contractual terms are consistent with disclosed material and point of sale representations. Any discrepancy will be a potential ground for termination utilising statutory disclosure rights if the buyer can prove the developer has failed to deliver what it contractually provided for or changes mean that the buyer is disadvantaged substantially or to an important extent.

The Court in Oracle noted that matters extraneous to the disclosure statements, such as brochures and representations by sales staff may have created expectations in the minds of buyers but the disclosure statement did not make representations of that nature. It might be thought that the buyers could have run misrepresentation cases based on “extraneous matters” but that was not how these actions were pleaded. It may have been perhaps too hard for buyers to establish that representations were in fact made, that they were relied on, formed a significant part of the buyer’s decision to contract and loss is attributable to the buyer acting on the representation. Those elements are not part of the consideration of the termination rights arising from statutory disclosure – the test of material prejudice in Queensland is one that focuses on the materials disclosed not extraneous materials.

Misrepresentation claims and disclaimers

While Buyers have sought to maximise use of statutory rights, they have not abandoned claims of misrepresentation and misleading and deceptive conduct, centred on point of sale disclosure and representations made by selling agents and/or developers. Many of these claims include alleged representations about value and returns, the lawfulness of uses and occupation as at the settlement date, the nature and basis of on-site management operations (similar to claims in the Oracle decision discussed above), views (a favourite in seaside projects) and other amenities as delivered.

Proposals in relation to a project that don’t create inaccuracies in disclosed materials (and invoke statutory rights) may have an altogether different consequence from the perspective of buyers and reliance by them on conduct or statements made in the sales process.

The developer’s defence to such attacks has traditionally been to rely on disclaimers and exclusionary language in advertising and promotional material and exclusionary provisions in contracts. However, these mechanisms suffer from a number of limitations, most relevantly that the exclusionary provisions are generally read narrowly and against those seeking to rely upon them. The Courts have generally said that for “No reliance” or similar exclusionary provisions contained in contracts to be effective, they must rectify the inaccuracy or misrepresentations complained of – which is difficult to do after the event and through generally worded clauses.

Rather than rely upon broad disclaimers, developers should establish an evidentiary protection against future claims. Appropriate instructions to sale teams and sales agents as to the parameters for the making of statements about a development is an integral part of any selling process. The decisions of Courts in Mirvac Queensland Pty Ltd v Tyan Pty Ltd ATF Tavakol Investment Trust⁴ (where the sales manual process was accepted as counting against the claimed representation) Nifsan Developments Pty Ltd v Buskley & Anor⁵ (where the buyer’s evidence based on a course of dealings with the selling agent concerning views was preferred), and Avis & Anor v Mark Bain Constructions Pty Ltd⁶ (where the buyers specific statements pre contract as to the significance of views gave it a termination right) demonstrate this.

In the off-the-plan context, representations are usually those in respect of future matters and allegations will often be tested some years after the alleged time at which the allegations were claimed to have been made. A contemporaneous record of statements made and any particular matters of concern to the buyer should assist in removing the scope for different views about what was said and by whom. Developers would do well to include specific acknowledgments in their contract packages that are given by buyers prior to the buyer signing the contract and acknowledged as such. Such an acknowledgment would provide the opportunity for the buyer to state what representations it was relying on (if any) and for the seller to consider then what risk there is of accepting an offer on that basis.

Conclusion

In a shifting market buyers are refusing to complete contracts until forced to by Court order or relying on litigation as an escape route. Statutory sunset dates can run where contracts are not terminated but kept on foot pending litigation outcomes resulting in the developer being divested of all of its enforcement rights - Norton Rose Australia and its client Juniper Development Group achieved amendment to the Land Sales Act in Queensland in March this year to prevent that outcome for off the plan sales in Queensland.

Buyers’ tactics affect the integrity of compliant pre-sales contracts from an underwriting perspective and make financiers nervous.

To counter this, developers must heed the lessons from the cases and look ahead when drafting contracts and disclosure. The sales process should involve embedded acknowledgments from buyers about critical matters. Claimed representations need to be identified at point of sale and not left to emerge several years later. In summary, protection for pre–sale contracts can be constructed if claims are properly anticipated in the first place.

¹[2009] QSC 269
²[2010] QSC 113
³[2011] QSC 361
⁴[2010] QSC 333
⁵[2011[ QSC 314
⁶[2011] QSC 80

Jacinta Studdert, Susan Rose, Amelia Dixon-Weidner

On 8 November 2011, Moore AJ handed down his judgment in the Land and Environment Court in Moolarben Coal Mines Pty Ltd v Director-General of the (former) Department of Industry and Investment NSW (Agriculture Division); Moolarben Coal Mines Pty Ltd v Director-General of the Department of Trade and Investment, Regional Infrastructure and Services.¹

The Court examined whether a determination of ‘agricultural land’ under the Mining Act 1992 (NSW) (Mining Act) by the Director-General of the Department of Industry and Investment NSW (Agricultural Division) (Director-General) in relation to the granting of a mining lease, was valid.

The decision makes it clear that where any procedure is set out in legislation, a decision-maker must, before making a determination, apply the principles of procedural fairness, unless expressly or impliedly displaced. Should procedural fairness not be afforded, there is a risk that the determination will be invalidated.

Background

On 20 July 2004, Moolarben Coal Mines Pty Ltd (Moolarben) lodged an exploration licence application and was subsequently granted a licence which operated for five years. On 21 April 2009, Moolarben lodged a mining lease application over part of the land that was subject to the exploration licence.

Part of the land that was the subject of the mining lease application was owned by Ulan Coal Mines Pty Ltd (Ulan). Ulan objected to the grant of a mining lease on the basis that their land was “agricultural land” (Land) for the purpose of the Mining Act.

The Mining Act provides that a mining lease cannot be granted over the surface of land determined to be “agricultural land” without the consent of the landholder.

Based upon a review of relevant background information (including maps and historical use information), landholder interviews and a detailed field inspection, the Director-General determined the Land was “agricultural land” (Determination). Accordingly, a mining lease could not be granted over the Land without Ulan’s consent.

Basis of challenge

Moolarben challenged the validity of the Determination on four grounds. Specifically, Moolarben asserted that:

1. it was denied procedural fairness as the Director-General failed to take a number of requisite steps identified in the Mining Act, including that Moolarben was entitled to know the basis of Ulan’s objection, be given an opportunity to inspect the Land and respond to the Director- General’s recommendation that the Land was “agricultural land”
2. the Director-General failed to follow certain procedures, including:
   1. a failure to address the question of whether the Land satisfied the definition of “agricultural land” at the time the mining lease and exploration licence applications were lodged (as well as the 10 preceding years of both dates). In this case, the Director-General had only considered the question at the time that the exploration licence was lodged, and
   2. whether the relevant expression “successful use” question posed by the definition of “agricultural land” was misconstrued
3. the Determination was uncertain as it did not identify the land to be agricultural land with sufficient precision, and
4. no reasonable decision-maker would have come to such a conclusion had they considered all relevant material (relying on the principle of ‘Wednesbury unreasonableness’: Associated Provincial Picture Houses Ltd v Wednesbury Corporation².
   The case was decided on the outcome of the first and second grounds.

Judgment

The Court stated:

“It is well settled that the repository of a statutory power is obliged to afford procedural fairness to a person whose rights or interests may be adversely affected by the exercise of the statutory power and that position is displaced only by “plain words of necessary intendment”” (at 30).

The Court found that despite the absence of detailed processes providing a mining lease applicant with express rights to make submissions, the principles of procedural fairness applied and in this case, the Determination was found invalid on the basis that procedural fairness was not afforded (at 32 and 46). The Court held:

• despite various provisions within Schedule 1 of the Mining Act that identified procedural steps relating to the grant of a mining lease, there is no express or implied provision within the legislation that displaces the principles of procedural fairness, and
• in considering whether Moolarben had a right to be afforded procedural fairness, that:
  • “[Moolarben] was entitled to seek to secure, if lawfully possible, a lease unencumbered by any limitation as to specific areas in which it could mine and free of the attendant burden of having to obtain the consent of landholders of the specific areas. In other words, Moolarben was entitled to resist objections asserting any of the land was agricultural land and to be afforded procedural fairness in that process” (at 37).

The Court found that Moolarben therefore “had an interest attracting procedural fairness as an applicant for a mining lease for part of the area to which its licence related” (at 37).

The Court considered what the principles of procedural fairness involved having regard to the statutory context and whether, based on the particular facts, procedural fairness had been provided to Moolarben. Specifically and applying various cases, the Court held (at 39 and 40):

• procedural fairness includes an opportunity to put information and submissions to the decision-maker in support of an outcome supporting his or her interests, and may also require an opportunity to rebut and comment on adverse material from other sources put before the decision-maker (depending on the content of the material): Commissioner for Australian Capital Territory Revenue v Alphaone Pty Ltd³, and
• circumstances may arise where adverse material not personal to the individual or party should be made available for comment: Re Minister for Immigration and Multicultural Affairs ex parte Miah⁴.

In reaching its conclusion, the Court held that the Director-General had failed to inform Moolarben of Ulan’s objection, the details of the objection and provide relevant documents to allow Moolarben to submit to the Director-General such material in order to persuade the Director-General not to uphold the objection (at 45 and 46).

The Court also found:

• the evidence indicated that the Director-General had failed to determine whether the Land was “agricultural land” at the times prescribed in the Mining Act (at 51), the failure of which led to the invalidation of the Determination (at 61), and
• even if there was an error in misconstruing the expression “successful use”, this did not provide a basis to invalidate the Determination (at 49).

Despite these findings, the failure to afford procedural fairness was the basis upon which the Determination was invalidated in this case.

The Court ordered that the Determination was invalid and of no effect on the grounds of a denial of procedural fairness and failure to apply procedures pursuant to the Mining Act.

Implications

In these particular circumstances, it is clear that under the Mining Act, the Director-General must comply with all procedural steps set out in the legislative regime and in particular Schedules 1 and 2 of the Mining Act, when making determinations.

The decision highlights the importance courts attribute to procedural fairness when decisions are made by government departments and agencies as well as the interaction between this principle of administrative law and the procedures and considerations outlined in the legislation under which a decision is to be made.

¹[2011] NSWLEC 191
²[1948] 1 KB 223
³[1994] 49 FCR 576
⁴[2001] 206 CLR 57

Samuel Tyrer

Participants in property developments frequently grant and acquire easements over land. But do parties really understand their rights? In this article we examine the nature of rights under easements and makes suggestions to assist parties negotiating easements to create clearly defined rights, which achieve their purposes.

Introduction

Participants in property developments frequently grant and acquire easements over land. In essence, an easement is ‘a right to make use of the subject matter of another’s right of property’¹.

Some examples of easements are rights of way, rights to support and rights of drainage. This article provides a brief overview of rights under easements and suggests what parties negotiating easements can do to create clearly defined rights, which achieve their purposes.

Rights under easements

Easements create only such rights as are expressed in the terms of the grant. The relevant document creating the easement usually sets out rights. In addition, the grant of an easement also confers such implied rights as may be reasonably necessary for the enjoyment of the easement.²

In practice, easement rights are not always clear. Disputes can arise where the express wording of the easement is ambiguous, or does not confer all the rights necessary for the easement to achieve its purpose. The courts are often called on to determine the rights of parties. In the context of property development, any delay caused by litigation may result in additional costs under contracts.

What can be done?

Parties should take care to clearly define their rights and thus avoid conflict in the future. To this end, the writer makes various suggestions for parties acquiring and granting easements.  

Parties acquiring easements should consider the various purposes for which the easement may be used (including in the future) and what rights will be necessary to achieve this purpose. For example, does the owner of a right of way need the right to load and unload? Or to park on the way? Such questions should be considered before the easement is acquired, to avoid disputes arising in the future. A recent High Court decision, in the context of a development in central Sydney, illustrates this point well.

In Westfield Management Ltd v Perpetual Trustee Co Ltd³ , a carriageway easement existed over Lot A (servient land) for access to Lot B (dominant land). It was held that the easement owner could enter Lot A to access Lot B, but not Lot C (which was further beyond Lot B and which was the subject of a development). The High Court suggested that the words “and across” could have been included in the instrument to provide the right to pass across Lot B to Lot C. It is possible that the party acquiring the easement in this case did not consider all the possible uses of the easement. Had they done so, they may have realised that it would be necessary to pass across Lot B to a further lot and acquired such a right. Accordingly, the dispute could have been avoided.

Admittedly, not all the purposes for which an easement will be used at a future date will be clear. This would appear to have been the case in Westfield, where the carriageway easement was created in 1988 and the dispute arose almost 20 years later. If this is the case, it is suggested that those acquiring easements seek the inclusion of a broad right to facilitate use of the easement for multiple purposes.

Conversely, the interests of parties granting easements are better served by a more specific and limited approach to drafting. Broad drafting does leave open the possibility of ambiguity, and with it the potential for disputes as to rights. In one case a dispute arose as to whether a landowner could construct a roof over a water supply easement on the land.⁴ The court found that the landowner was not entitled to construct the roof, as this would have interfered with the easement owner’s ability to repair and replace pipes. Had the easement been more specific as to the rights of the landowner (for example, to construct on their land) this dispute could possibly have been avoided.  

Parties granting easements should also consider the possible rights that may be implied in favour of the easement owner. As noted, rights will be implied when they are reasonably necessary for the enjoyment of the easement. Examples of rights implied by the courts in respect of rights of way easements include:

• the right to maintain, repair and upgrade, including entering onto a servient owner’s land to carry out repairs⁵
• the right to load and unload⁶
• the right to park⁷
• the right to illuminate⁸

Other types of easements can also have implied rights. For example, the owner of a transmission line easement has been held to have an implied right to have the surface area beneath the transmission line accessible⁹.

If there is a possibility that such rights may conflict with the landowners intended use of the land, specific wording should be included in the easement to address the conflict. A simple approach is to exclude any implied or ancillary rights.

In Westfield, the court considered whether there was an implied right for the easement owner to access the further land. As access to this land was not necessary for the enjoyment of the easement, no such right was implied. A right must be ‘reasonably necessary’ before it will be implied and will not be implied merely because it is it convenient. Those acquiring easements should therefore ensure that rights are expressly provided for in the relevant instrument.

Lesson

The lesson for all parties (ie those acquiring and granting easements) is a simple one – take the time and effort to ensure that rights are expressly provided for in the relevant instrument creating the easement.

¹R J Finlayson v Elder, Smith & Co Ltd [1936] SASR 209 at 227 per Richards J, as cited in Easements and Restrictive Covenants in Australia, Bradbrook and Neave (2nd edition).
²Jones v Pritchard [1908] 1 Ch 630
³(2007) 233 CLR 528
⁴Ex parte Purcell (1982) 47 LGRA 433
⁵Hemmes Hermitage Pty Ltd v Abdurahman (1991) 22 NSWLR 343 (CA); Zenere v Leate (1980) 1 BPR 9300; Byrne v Steel [1932] VR 43; Bland and Another v Levi and Others [2000] NSW Supreme Court 161
⁶Elliott v Renner [1923] St R Qd 172; Deanshaw v Marshall [1978] 20 SASR 146
⁷Masters v Snell [1979] 1 NZLR 34; Butler v Muddle (1995) 6 BPR 13
⁸Owners of Strata Plan 48754 v Anderson and Another [1999] NSWSC 580
⁹Prospect County Council v Cross (1990) 21 NSWLR 601

Claire Falkner and Adam Smith

Background

The Victorian Government has released an exposure draft of the Duties Amendment (Landholder) Bill 2012 (Vic) (Bill), to introduce a new Victorian landholder duty regime to take effect from 1 July 2012. The Bill generally accords with the model outlined in a Consultation Paper published in September 2011, however there are some notable differences in relation to the phase-in of duty, economic entitlements and entity conversions.

The move from a land rich duty regime to a landholder duty regime reflects a trend across all Australian states and territories, with South Australia and Queensland both having changed to the landholder model from 1 July 2011, and following Victoria’s move the only state with a land rich model will be Tasmania.

Key features

The key features of the Bill are as follows:

• Landholder duty will apply if:
  • an entity acquires (together with its associates, and other entities which acquire in associated transactions) a ‘significant interest’ in a ‘landholder’; or
  • an entity (together with its associates) acquires an ‘economic entitlement’ of 50 per cent or more in a ‘landholder’. This concept was not included in the September 2011 Consultation Paper, nor is it present in the landholder duty regime of any other state or territory.
• An entity will be a ‘landholder’ where it has landholdings in Victoria with an unencumbered value of AUD$1m or more, but the amount of duty charged is phased in from nil to the full amount where the value of Victorian landholdings is between AUD$1m and AUD$2m.
• The ‘landholder’ definition includes private companies, private unit trusts, wholesale unit trusts, and has been expanded to include listed companies and public unit trusts (which is a listed trust, widely held trust or registered public unit trust).
• The ‘significant interest’ threshold is:
  • for listed companies and public unit trusts, 90 per cent or more, but landholder duty will be charged at only 10 per cent of the standard rate of transfer duty (to qualify for this concessional rate, listed companies, listed trusts and widely held trusts must have had such status for at least 12 months);
  • for private companies and wholesale unit trusts, 50 per cent or more; and
  • for private unit trusts, 20 per cent or more.
• All interests will be aggregated when determining whether a ‘significant interest’ has been acquired in a landholder, although duty will only be charged on acquisitions made in the last three years. By contrast, the current provisions aggregate only interests acquired in the last three years when assessing whether a significant interest is acquired.
• An ‘economic entitlement’ includes an arrangement under which a person is entitled to participate in dividends, income, rents, profits, capital growth or sale proceeds derived from the land holdings of a landholder. It appears that the provisions potentially apply to profit sharing arrangements under land development agreements.
• A new definition of ‘land’ has been included that expands its meaning to include anything fixed to the land, regardless of whether it constitutes a fixture at common law, is owned separately from the land or is notionally severed from the land.
• The Commissioner’s discretion under the current provisions to exempt a transaction on the grounds that it is ‘just and reasonable’ will be replaced with a discretion to reduce the duty payable on a relevant acquisition where there is ‘an anomalous duty outcome’.
• The conversion provisions have been expanded so that the conversion of a private company to a listed company, or the conversion of a private unit trust to a public unit trust, will be treated as if it were an acquisition of a 100 per cent interest. However, the duty payable on the conversion will be 10 per cent of the duty that would otherwise be payable.

Transitional Arrangements

The following interests will not be aggregated for purposes of determining whether landholder duty is triggered:

• an interest in a private unit trust, private company, wholesale unit trust or public unit trust that was acquired before 1 July 2009; and
• an interest in a listed company or an economic entitlement that was acquired before 1 July 2012.

Also, duty will not be charged on an aggregated significant interest in a private unit trust, private company or wholesale unit trust to the extent that the interest was acquired on or after 1 July 2009 and before 1 July 2012 if land rich duty was not chargeable on that interest when acquired and no land rich duty would have been chargeable on that interest had the post 1 July 2012 acquisition occurred prior to 1 July 2012.

Next steps

If you are contemplating a transaction in an entity that holds land in Victoria with an unencumbered value of AUD$1 million or more, you should consider whether it would be preferable to undertake the transaction before 1 July 2012 (under the existing land rich provisions).

Entities proposing to enter into arrangements after 1 July 2012 that involve the sharing of income or profits from land will need to carefully consider the new provisions relating to ‘economic entitlements’.

Introduction

Felicity Rourke and Rebecca Pleming

On 27 March 2012, the Minister for Planning and Infrastructure (Minister) released a discussion paper entitled “More local, more accountable plan making” seeking council, industry and community feedback on proposed changes to Part 3 of the Environmental Planning and Assessment Act 1979 (NSW) (EP&A Act) aimed at:

• giving local councils delegation to approve certain Local Environment Plans (LEPs) – including spot rezonings; and
• providing an opportunity for independent reviews of certain council and departmental decisions, including rezoning proposals, by a Joint Regional Planning Panel (JRPP) or Planning Assessment Commission (PAC) at certain stages in the plan-making process.

These proposed changes follow the NSW Government’s announcement to reform the planning system as part of the Government’s 10 year State plan (NSW 2021) and address issues that have been identified as part of the planning legislation review currently being undertaken by Ron Dyer and Tim Moore.

If enacted, these proposed changes will provide an opportunity for increased local engagement between councils and proponents in making certain types of LEPs, and they have the potential to speed up the rezoning process. Importantly these reforms will also provide an opportunity for independent review of some plan-making decisions.

What are the key changes proposed?

1. Council delegation to approve certain LEPs

The discussion paper proposes to delegate the Minister’s functions in relation to making LEPs (under section 59(2), (3) and (4) of the EP&A Act) to councils where a Gateway Determination has been issued in respect of the following types of LEPs:

• spot rezoning consistent with an endorsed strategy or surrounding zones or in accordance with broader Government policy;
• mapping alterations or corrections that do not alter strategy endorsed development standards;
• amending references to documents/agencies, minor errors and anomalies (section 73A of the EP&A Act);
• reclassifications of land consistent with a strategy/supported by an adopted Open Space study; and
• heritage LEPs supported by an Office of Environment and Heritage endorsed study.

The Department will generally play no further role in the process once the LEP is delegated to a council, other than routine monitoring of the process to ensure that Gateway Determination timeframes continue to be met.

Councils will also have obligations to report quarterly to the Department on processing times for delegated LEPs.

2. Proponents can request a Pre-Gateway Review

The discussion paper proposes a new review mechanism which would allow a proponent of a planning proposal to seek a review of Council’s decision by the JRPP:

• where the council has decided to not prepare a planning proposal; or
• the council has not made a decision after 60 days of receiving the proponent’s request.

In either case, the proponent will have 40 days to seek a review of the council’s decision.

There are, however, strict requirements that must be satisfied before a proposal will be eligible for review. The proponent will need to be able to demonstrate that the proposal meets a number of criteria, including that the proposal:

• will utilise existing capacity in infrastructure networks or that capacity can be otherwise provided for;
• will be adequately integrated with existing public transport networks;
• is likely to be supported by key environmental agencies;
• will not detrimentally impact on the viability of identified centres; and
• is consistent with endorsed local or regional strategies.

Demonstrating that a proposal meets these criteria will therefore be fundamental. Responsibility for conducting the eligibility assessment will rest with the Department.

For proposals which are eligible for review, the discussion paper suggests that the review process will effectively be managed by the Department which will prepare a report on the proposal for the JRPP. The discussion paper suggests that there will be an opportunity for Council, the Department and the proponent to meet with the JRPP as part of the review process.

Following a review, the JRPP will advise the Minister on whether or not the proposed instrument should be submitted for a Gateway Determination (and may require the council to submit such a planning proposal within 40 days). The JRPP’s advice will be made publicly available.

In cases where there is no JRPP (such as the City of Sydney), the PAC will conduct the review.

3. Proponents and councils can request a Gateway Review

A further proposed change is that a council or proponent may request the Minister (or delegate) to alter a Gateway Determination concerning a planning proposal, when a Gateway Determination is made by a delegate of the Minister that:

• a planning proposal should not proceed (40 days to seek a review);
• a planning proposal should be resubmitted for Gateway Determination (40 days to seek a review); or
• imposes requirements (other than consultation requirements) or makes variations to the planning proposal that the proponent or council thinks should be reconsidered (14 days to seek a review).

This type of review will not be available where the Gateway Determination is made by the Minister.

The Minister or Director-General may alter the Gateway Determination following receipt of advice from the PAC and decide whether the planning proposal should proceed, at which point the council and proponent will be notified of the altered determination and (if appropriate) post-Gateway consultation on the planning proposal can commence.

Conclusion

The proposed changes are likely to have significance for councils and proponents alike, providing an opportunity for increased local engagement in local plan-making and also providing opportunities for reviews of decisions in certain circumstances.

Public submissions are invited on the discussion paper. Submissions close on 4 May 2012. Please contact us if you have any questions in relation to the proposed changes or if we can assist in preparing a submission on the discussion paper.