19 Jul 2011

Life after Part 3A in NSW - what it means for the commercial property sector

by Nick Thomas

The NSW Government has now passed legislation to replace the Part 3A major projects approval regime, and the new regime is expected to start next month. The Government has already handed back its approval role for most residential, retail, commercial and coastal development to local and regional decision-makers. It has also announced an 18-month timetable for its comprehensive review of the 30-year old Planning Act.

The NSW Government has delivered on its election promise to scrap the previous Government's planning approval laws for major developments, in Part 3A of the Environmental Planning and Assessment Act 1979 (Planning Act), and replace them with a new scheme with less scope for Ministerial decision-making. The Environmental Planning and Assessment Amendment (Part 3A Repeal) Act 2011 (Part 3A Repeal Act) was passed on 22 June.

The Part 3A Repeal Act won't commence until new Regulations and a State Environmental Planning Policy (SEPP) for State and Regional Development are made. In the meantime, the Government has indicated what it's proposing to do with some of the detail.

In this article we'll sketch out the main elements of the new State significant development laws and what players in commercial property need to understand about them.

Reforms delivered in stages

The Part 3A planning approval regime gives the State Government considerable flexibility in the assessment and determination of major development projects. Part 3A applies to a development if it is declared to be a Part 3A project, either specifically or as part of a class of projects, in a SEPP or a Ministerial order.

The main target of the O'Farrell Government's Part 3A repeal policy was residential, retail, commercial and coastal development, which some stakeholders had argued should not be subject to Ministerial control in Part 3A. In mid May the Government "declassified" these types of projects by amending the Major Development SEPP, and removed some of the projects in these classes which had already been accepted into Part 3A. In late May the Planning Minister delegated his Part 3A approval function to the State Government's Planning Assessment Commission (PAC) for most of the private sector development remaining under Part 3A.

In June the Government introduced the Part 3A Repeal Bill and saw it through Parliament. According to the Government, the Part 3A Repeal Act will commence in August.

The new laws at a glance

When the Part 3A Repeal Act commences, Part 3A of the Planning Act will be repealed and replaced with two separate regimes for what the Government describes as "genuinely" State significant projects:

  • the State significant development (SSD) regime will apply to private sector development and some classes of public sector development. It is essentially a development consent regime under a new Division 4.1 in Part 4 of the Planning Act, but it has some of the advantages of the Part 3A regime, and;
  • the State significant infrastructure (SSI) regime will apply to other classes of public sector development. It is an approval regime in a new Part 5.1 of the Planning Act and is very similar to the Part 3A regime.

The Planning Minister will be the consent/approval authority for both SSD and SSI, but he has already indicated that he proposes to delegate that function to the PAC for private sector development.

The Government has provided an outline of the classes of development which will be declared to be SSD or SSI. Generally, there are fewer classes of development and the thresholds in some of those classes are higher. Notable omissions are residential, retail, commercial and coastal sub-division developments. The Policy Statement also identifies seven sites where some or all development is to be identified as State significant, including parts of Sydney Harbour such as Barangaroo.

The Government claims that the total number of developments which will be classified as SSD or SSI will be about half the number of developments under Part 3A.

It will no longer be possible to approve wholly prohibited SSD, but partly prohibited SSD can still be approved. Also, local planning laws will apply to SSD. This is a significant departure from the previous Part 3A regime, and is intended to address one of its more controversial aspects.

Certain aspects of the Part 3A regime have been retained (for example, removing the need for some approvals under other laws) and included in both the SSD and the SSI regimes.

Part 3A will continue to apply to many of the major development projects currently being considered under Part 3A, by means of a transitional regime.

Site-specific, State significant declarations

The Planning Minister will retain a "call in" power (ie. the power to declare specific development proposals to be SSD or SSI), but, in the case of SSD, only after taking advice from the PAC – and that advice, and the Minister's "call in", must be made public.

A Policy Statement accompanying the Part 3A Repeal Bill says that the criteria for considering a "call in" include, but are not limited to, whether the proposal:

  • delivers significant public benefits for the State or regional communities;
  • is complex, contentious or environmentally hazardous and local authorities have requested or require State assistance; or
  • is a precinct-scale or linear project that crosses over multiple local government areas or other jurisdiction boundaries, and requires co-ordinated assessment.

Tighter controls on the use of regional panels

Projects which are not given State significant status will be dealt with under the existing regime – most likely development consent under Part 4 of the Planning Act, with the relevant local council or joint regional planning panel (JRPP) as consent authority.

JRPPs were introduced in 2008 as a way of taking local politics out of development consent processes, and assisting in the determination process for large-scale development projects. They consist of two local council and three State Government representatives. The Major Development SEPP currently lists classes of development which will be referred to a JRPP, including residential, retail, commercial coastal and other developments with capital investment values above $10 million.

The Part 3A Repeal Act makes some significant changes to the JRPP scheme. The most important of these is raising the capital investment value threshold from $10 million to $20 million. This will return the decision-making role for many large-scale residential, retail, commercial and coastal developments to local councils.

It is not clear why this change was made, or how it will help de-politicise decision-making and encourage desperately needed investment in the property sector. In practical terms, it also not clear how councils will manage what is likely to be a much larger and more complex development assessment workload, especially when the NSW property investment market picks up.

And there's more to come ...

In the 30 years that had the Planning Act has been in force, it has been amended 140 times an average of more than four times a year. The new Liberal Government has expressed concern that the Planning Act has lost its focus and has become difficult to understand. That is why the Government is moving ahead with its election promise to comprehensively review and rewrite the Act.

The Government has announced it will establish a Planning Review Panel, co-chaired by former NSW Liberal Environment Minister and current Land and Environment Court Commissioner Tim Moore and former NSW ALP Minister Ron Dyer.

The Government has announced an 18 month review process in three phases:

  • a "listening and scoping phase", culminating in a Review Panel report to the Government at the end of 2011;
  • preparation and public discussion of a Government options paper (or "green paper") in 2012; and
  • preparation and public discussion of a Government proposal (or "white paper") in late 2012, with draft legislation placed before parliament "in the latter half of 2012".

So all of the reform we're currently experiencing with the Part 3A Repeal Act is simply an "interim measure"!

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.