Planning Agreements in NSW

By Gary Best and Scott Aitken.

Key Points:
Under a Planning Agreement there is significant scope for a developer to not only tailor the nature, scope and timing of the developer contributions, but also to carry out those contributions as works-in-kind.

Following a recent review by the NSW Government of the first year of the operation of Part 3A of the Environmental Planning and Assessment Act 1979 (NSW), there have been a number of changes made to the Act. It is therefore timely to reflect upon some aspects of the Act, and those changes, as they operate in relation to the Planning Agreement regime which commenced operation approximately 18 months ago.

As we know, the Planning Agreement regime was legislated for in mid-2005 as an adjunct to section 94 contributions.

To remind ourselves, the most significant aspects of the Planning Agreement regime are:

• While section 94 contributions are limited to a development which "will or is likely to require the provision of or increase the demand for public amenities and public services within the area" [emphasis added], on the other hand, potentially the application and effect of Planning Agreements are much broader, including the provision of regional infrastructure.
• Because a Planning Agreement is a "voluntary" agreement, the terms of which are proposed by a person (developer) who seeks a change to an environmental planning instrument or who has made or proposes to make a development application (or has entered into an agreement with someone to whom either of those two criteria apply), the nature and extent of the contributions are the subjects of substantial negotiation between the developer and the relevant tiers of Government. Accordingly, a Planning Agreement permits considerable flexibility in the nature and extent of the contributions for which it provides.
• There are a number of constraints on consent authorities to the effect that a developer cannot be required to enter into a Planning Agreement except if it has offered to do so.
• Complications can arise concerning the payment of GST when the contribution to be made is through the provision of works-in-kind which are delivered to an authority other than the relevant consent authority. A way through these complications is achieved if the developer proposes the terms of the Planning Agreement as an irrevocable offer to the consent authority at the time the change to an environmental planning instrument is sought or the development application is made.
• If a developer makes such an offer, then a consent authority can require a Planning Agreement to be entered into as a condition of development consent.

Under a Planning Agreement there is significant scope for a developer to not only tailor the nature, scope and timing of the developer contributions, but also to carry out those contributions as works-in-kind. This approach often appeals to developers as that gives the developer a high degree of control and influence over the exact scope, specifications, location and timing of the delivery of the contributions; in effect such money can be allocated by the developer directly to the development site rather than by way of cash contribution to the relevant authority.

Accordingly, to the potential advantage of Government, the developer and the community affected, developers are tailoring those development contributions with the aim of benefiting their proposed developments in a variety of facets, including improved public amenity, planning outcomes, marketability/ saleability and financial returns.

Recent amendments

The Environmental Planning Legislation Amendment Act 2006 commenced operation on 12 January 2007. In the context of Planning Agreements, the following aspects of the legislative changes are worth noting.

• Following the introduction of Part 3A, it was accepted that a project approval granted under that Part was, for the purposes of Planning Agreements, the equivalent of a development consent granted pursuant to Part 4. However, there was some doubt that a concept plan approval under Part 3A achieved the same result.
• The recent amendments have clarified that position (and have broader application). In the context of Planning Agreements, it now clear that approval for a concept plan granted under Part 3A may be made subject to satisfactory arrangements being made for the fulfilling of obligations made by the developer in its statement of commitment. The new section 75O(5) expressly provides that conditions of approval may include an obligation on the part of the developer to enter into a Planning Agreement where it has offered to do so in conjunction with its statement of commitments made as part of an application for concept plan approval under Part 3A.
• That amendment has particular relevance in the context of GST complications referred to above. Section 93I(3) provides that a consent authority can require a Planning Agreement to be entered into as a condition of a development consent on the terms of an offer made by the developer (provided such an offer has been made). It is the application, or invocation if you like, of section 93I(3) which is considered as the basis for addressing GST issues that might otherwise arise
• As part of the recent changes, section 93I(3) was expressly amended to provide that a consent authority can require a Planning Agreement to be entered into as a condition of a development consent that is in the terms of a commitment made by the developer in a statement of commitments made under Part 3A.
• Prior to these amendments, we consider the better view was that the benefits of section 93I(3) applied only when entering into the Planning Agreement was a condition of a project approval, rather than being a requirement imposed at the concept plan approval stage.
• Further amendments to the Act now provide that a Planning Agreement cannot exclude the application of sections 94 or 94A unless the consent authority for the development or the Minister is joined as a party to that Planning Agreement. In this context, it should be noted that section 93(5A) provides that a Planning Agreement cannot exclude the application of sections 94EF (special infrastructure contributions) unless the Minister for Planning or the Growth Centres Commission has given its approval to that Planning Agreement.
• Under sections 94 or 94A, a condition of development consent may now, with the Minister's consent, be imposed for the provision of "a public amenity or public service" in another Australian State or Territory where the proposed development adjoins that State or Territory. The Department of Planning has recently indicated this provision will be relied upon: " only where the public infrastructure provided from those contributions would significantly benefit the residents of the New South Wales Local Government areas in which the development is undertaken." (See Planning Circular PS07-002 issued 12 January 2007)
• It is often the case that a planning instrument will provide that a consent authority is unable to grant a development consent or project approval until a Government official (often the Director-General of the Department of Planning) has certified that "satisfactory arrangements" have been made for contributions to the provision of certain public facilities and services. In this regard, section 93D addresses the relationship between "satisfactory arrangements" required under a planning instrument and contributions made pursuant to a Planning Agreement.
• Section 93D previously stated that, other than section 93I, the Planning Agreement regime did not derogate from, or otherwise affect, a "satisfactory arrangements" requirement under a planning instrument. Section 93D has been amended by deleting the reference to section 93I. Accordingly, it is now clear that Planning Agreements do not affect the operation of the "satisfactory arrangements" provisions found in many environmental planning instruments.
• Finally, changes to section 94A of the Act restrict the imposition of maximum rates depending on the estimated cost of carrying out the proposed development.

For further information, please contact Gary Best.