NSW Planning Law Reforms – The Real Implications

The most significant reforms to NSW Planning Laws since the introduction of the Environmental Planning and Assessment Act in 1979 are now only a month or two away. In this update, we explore a number of critical consequences of the planning reforms which do not appear to have been recognised in the media coverage (or government announcements) surrounding the proposed reforms to date.

In our December 2007 update (to view click here), gadens lawyers described the proposed planning reforms, following the release of a Discussion Paper released by the State Government in November 2007. Broadly, the reforms will:

• fast-track the making of Local Environmental Plans for the rezoning of land, by introducing an up-front "gateway" assessment to determine whether the proposal should proceed.
• alter the development application assessment process so that it is tailored to the size and scale of the proposed development. This includes the introduction of new approval authorities other than local councils.
• reform the system of developer contributions in NSW by overhauling section 94 of the Act, and making councils accountable for expenditure of all funds levied.
• increasing the use and uptake of 'exempt' and 'complying' development (development needing no development application at all) - interestingly, 'complying development' will now include development that does not in fact comply with the nominated criteria.
• reforms to certification of development.

The NSW Government last week released a Draft Exposure Bill setting out the proposed legislation. It seems certain that the reforms will be implemented in an incredibly short time-frame, with Planning Minister Frank Sartor having said recently that he expects the Bill to be tabled in parliament next month and for it to be passed in June 2008. Public consultation on the Exposure Bill is only open until 24 April 2008 - again, a very short period.

Although the proposed reforms have received wide coverage, they are generally being described in most quarters as procedural reforms to speed up the planning-approvals process and to customize those processes to suit the scale of development proposed. However, we believe that there are a number of critical consequences of the reforms which go well beyond matters of procedure, and which demand close scrutiny. Some of the issues we have identified are:

Councils Set To Lose Substantial Power And Control Over 'Bread And Butter' Development Applications

About 95% of all DAs in NSW relate to single residential dwelling houses, and it is proposed that in relation to this category of development (all single dwelling houses, regardless of their cost, and all other residential work up to a capital value of $1 million), applicants will be able to have council decisions reviewed by an outside consultant to be known as a 'Planning Arbitrator'. They will be chosen by the State Government, not the councils. Applicants who are unhappy with a decision of a council will be able to have the decision reviewed by a Planning Arbitrator and, where a council has not made a decision within a short timeframe (probably 30 days but the detail is not disclosed), applicants can automatically put the application over to a Planning Arbitrator. The costs will be nominal (a few hundred dollars). Applicants will be able to amend their DA plans when the matter goes to an Arbitrator. That Arbitrator then must determine the application within a timeframe that is yet to be disclosed, but the Discussion Paper released in November indicated that it would be 14 days. That is an incredibly tight timeframe given that the Arbitrator will not be familiar with the matter, and the DA plans may have been amended in any event. There is no requirement that neighbours or objectors be involved in the arbitration or notified of it. Lawyers are not permitted to be involved. In short, it will be a very fast decision by an outside consultant. Importantly, only applicants may appeal against a decision of an Arbitrator (an appeal is to the Land and Environment Court).

This is obviously very good news for applicants as it means that they can lodge a DA with a council, seek review of the "deemed refusal" within a very short timeframe (probably 30 days) at minimal cost, which takes the matter out of the hands of the council. The Arbitrator then must make a decision within a very tight timeframe, possibly with amended DA plans that have not been notified to neighbours or objectors, and if the applicant is unhappy with the Arbitrator's decision they can appeal to the Land and Environment Court, whereas the council cannot.

This sets up a situation where many decisions in a local government area will be taken out of the hands of the local council and the council will have no right of appeal against the decision of the Arbitrator.

Interestingly, Councils must pay the Arbitrators, and must indemnify them for any costs orders made if an applicant successfully appeals against the Arbitrator's decision in the Land and Environment Court. The council may not even wish to defend the Arbitrator's decision, but the council will be liable for any costs orders made in the applicant's favour. In addition, it will be a criminal offence for a council not to assist an arbitrator by producing relevant documents on request or making staff available on request.

This really is a breathtaking loss of power and control to councils in relation to a category of development which, as mentioned above, amounts to about 95% of all DA's in NSW.

Attempt To Prevent Legal Challenges Looks Set To Backfire

There is an express intention in the planning reforms to limit legal appeals and challenges. For example, applicant and developer appeal rights will be slashed down from 12 months to 3 months.

However in circumstances where Planning Arbitrators must make a decision within such a short timeframe, - probably 14 days - there are bound to be legal errors. Lawyers cannot attend to address the Arbitrator on legal issues relating to a decision, for example on the correct legal interpretation of a planning requirement under the Act or under a Council's Local Environmental Plan. In those circumstances, the result is likely to be that decisions made by Arbitrators (when they approve a DA) will be susceptible to legal challenge in the Land and Environment Court by dissatisfied neighbours, objectors and even by Councils. Such action is available under s.124 of the Environmental Planning and Assessment Act 1979.

At present these types of challenges are made against councils, however councils are generally far less prone to legal error, as they may take time to consider applications carefully, and to obtain legal advice where necessary. Lawyers can attend council meetings and advise councils as required. Planning Arbitrators will not have that luxury and their decisions may well be prone to legal error, opening the floodgates for potential s.124 actions.

There is however a proposed provision excusing Arbitrators from any personal liability in relation to their decisions. Therefore, where an invalid decision is made and the decision is overturned, applicants will have no ability to recover damages (delay costs and the like) against the arbitrator.

It also seems likely that objectors will, for the first time, be given a right of appeal to the Land and Environment Court against the approval of certain residential development. However we are not told when these rights would arise (the detail is left to the Regulations), but it appears that it will apply where significant breaches of numerical planning controls are proposed (a figure of 25% breach has been mentioned).

Lapsing Of Development Consents

At present, a development consent cannot lapse (expire) if it is "physically commenced" within a certain time frame specified in the consent (generally 3 to 5 years). This requires only that some physical works (relating to the consent) be carried out before the lapse date. However the planning reforms now propose that even where that has already occurred, the development consent will expire if the work has not been "substantially commenced" within a further 2 years. This is a much more difficult threshold, requiring far more comprehensive works to be carried out. Importantly, this has the potential to catch out a lot of developers and landowners who may have development consents where physical commencement has occurred but the consent has otherwise been left in abeyance without "substantial" commencement of works. For those people, even the additional 2 years that is proposed beyond the ordinary lapse date may already have expired or may be nearing expiration. In those cases, unless they are aware of this proposed planning reform, they may lose the ability to carry out the development.

Example: Developer / landowner has a consent requiring commencement within 3 years. It was issued 5 years ago. Developer carried out physical works prior to the 3 years and obtained legal advice and / or Council signoff confirming that physical commencement is achieved. Developer now has a more valuable site because it can be sold with the development consent for future owner to build. However, the new planning reforms will mean that "substantial" works had to be carried out within 2 years after the original 3 year lapse date (5 years in total). That is now. Therefore the consent lapses now as "substantial" works have not been carried out. Developer / owner simply lose their development consent.

This amendment does expressly apply to old development consents - there is no savings or transitional provision to protect those consents.

Approval via new DA may no longer be permissible at all on the land, depending on the current zoning and planning controls.

Costs In Land And Environment Court Proceedings

Another stated intention of the legislation is to deter developers and applicants from taking Land and Environment Court appeals.

Applicants in appeals often amend their plans along the way, to respond to and overcome concerns or issues raised by the Council or objectors. This has generally been said to be an acceptable practice, because it leads to a better planning outcome for the site. The two most recent Chief Judges of the Land and Environment Court (Preston and McClellan) have emphasised that planning appeals should not reflect an adversarial system of winners and losers. Rather the goal should be to achieve an acceptable outcome for a site in terms of what building or use is approved. The process of amending plans to respond to concerns of councils or residents in the locality is an appropriate means of achieving that.

However the planning reforms aim to deter applicants from amending plans by introducing a new rule that where an applicant elects to amend its plans in any significant way, it must automatically pay the entire legal costs of the council. Although it is not clear, it seems that this means the costs must be paid on an indemnity basis - meaning whatever costs the Council has incurred, whether or not they are reasonable, they must automatically be paid by the applicant / developer. For example if Council uses 3 senior barristers in Court, their costs must all be paid. Indemnity costs are awarded very rarely indeed in any Court - generally only where one party's conduct has been reprehensible. They are almost never awarded in the Land and Environment Court. Rather, costs are awarded from time to time, but only on a "party / party" basis, meaning an assessment is made as to what costs were reasonably incurred, and the unsuccessful party pays those reasonable costs only.

Generally at present, where an applicant amends plans, the costs payable are only "costs thrown away", meaning wasted costs as a result of Council now having to look at new plans.

The proposal to award automatically all costs of the proceedings on an indemnity basis means that applicants will rarely agree to amend a proposal to achieve a better outcome, unless they have deep pockets indeed. Complaints of councils and objectors will be ignored and argued in Court. We will almost certainly see a significant shift back to a highly adversarial system where there is only a win or a loss, but no compromise other than where an applicant has significant financial resources.

Alternatively, applicants may be able to amend just prior to lodging an appeal. Advice on this will be needed.

Compulsory Acquisition Of Land For Profit

The planning reforms will allow the Minister to compulsorily acquire land (at fair market value) and on-sell it to other developers to use/ develop "whether for profit or otherwise". The only limitation on this extraordinary power is that the land must be acquired in connection with "urban renewal proposals" or "urban land releases" and result in a "net public benefit". None of those terms are defined. In short, we believe this means the Minister may acquire land compulsorily, on-sell it to developers to subdivide and build upon for profit and, arguably, the resulting increase in housing density will result in a "net public benefit" because of the need for increased housing stock in NSW. Landowners beware.

Minister To Protect Certain Decisions He Makes From Any Legal Challenge

The Planning Reforms go to the unusual lengths of preventing any legal challenge whatsoever against certain decisions where the Minister has not followed the legal procedure provided for in these very reforms. In those cases, the reforms actually prevent any legal challenge, even expressly overriding challenges on the grounds of "procedural fairness" and "natural justice". Challenges on those grounds are almost always available, reflecting the deeply entrenched principle that everybody is entitled to procedural fairness and that decision makers are bound by the laws of natural justice. In this case, the Planning Reforms seek expressly to set the Minister free of those entrenched obligations. It is a highly unusual level of protection for an administrative decision-maker.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.