Allens

Real Estate

Focus: Planning & Development – May 2005

Update on NSW planning legislation

In brief: Planning agreements will have a statutory framework to support them which did not previously exist, following the passage by the New South Wales Legislative Assembly of the Environmental Planning and Assessment Amendment (Development Contributions) Bill 2005 with a significant amendment that could assist with timing in the negotiation of planning agreements. Partner Nicholas Cowie (view CV) and Lawyer Al Knox explain.

Commencement

While the Environmental Planning and Assessment Amendment (Development Contributions) Bill 2005 (NSW) (the Bill) was passed on 4 May 2005, it has not yet commenced and will commence on an unknown date of proclamation, rather than the usual 28 days after receiving assent. It is likely that this is to enable the regulations to accompany the amended Environmental Planning and Assessment Act 1979 (NSW) to be drafted. 

Amendment to planning agreement provisions

The Bill provides a statutory framework for negotiated developer contributions with respect to development applications, which are described as planning agreements. In AAR's Focus: Planning & Development, February 2005, we commented that the reforms proposed will, with respect to planning agreements, require a timetable that factors in time for the negotiation of planning agreements prior to developers submitting development applications or seeking alterations to planning instruments. Previously the Bill did not permit a consent authority to require a planning agreement to be entered into as a condition of development consent.

An amendment to the Bill now permits a planning agreement to be entered into as a condition of development consent, provided that it is in the terms of an offer made by a developer. While this might seem a minor amendment, it removes the necessity for a developer to negotiate a concluded planning agreement before development consent and permits the negotiation of a 'heads of agreement' type arrangement that can subsequently be formally documented after development consent has been granted.

This change enables the assessment of the development application and the negotiation of the planning agreement to be concurrently undertaken. However, while this has the potential to save time, a 'heads of agreement' type arrangement may fail to address a number of issues involving risk transfer and cost, including:

  • GST: particularly where one or more government entities are involved and there is a risk of a split supply and the inability to claim input tax credits;
  • parties: which government entities are entering into the planning agreement; and
  • delivery agreements: whether the consent authority or various authorities who will become involved in the development process have standard form delivery agreements that may include provisions that need to be subsequently negotiated.

We think that the prudent strategy for developers to follow would be to:

  • negotiate a 'heads of agreement' type arrangement before the submission of a development consent or concurrently with the development assessment; and
  • negotiate the concluded planning agreement before the determination of a development consent to avoid additional risks and costs not dealt with in the 'heads of agreement'.

We will continue to monitor the progress of the legislation and keep you updated of any further changes. If you would like to discuss anything relating to these amendments or any other planning and development issue, please feel free to contact us.

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