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Client Update: Changes to the policy framework for Voluntary Planning Agreements in NSW

10 November 2016

In brief: The New South Wales Government has released a draft suite of documents aimed at improving the policy framework for Voluntary Planning Agreements. These include a draft Ministerial direction for planning authorities, a draft revised practice note, and a draft planning circular. The new policy is an attempt to encourage greater transparency between developers, councils and communities to produce fair VPAs that deliver infrastructure and other public benefits that relate to the development. Partner Paul Lalich , Planning Special Counsel Marcia Doheny (view CV) and Lawyer Claire Macdonald consider the new policy framework and its implications.

The intent of the changes

When the NSW Minister for Planning, Rob Stokes, announced the new framework, he referred to developers being 'held to ransom' by some councils demanding excessive sums in association with rezonings or development consents.

He also identified the need for a fairer, more transparent Voluntary Planning Agreements' (VPAs) process that includes strategic infrastructure planning carried out with communities so that the public benefits offered under VPAs can be linked to infrastructure identified as being required as a result of growth.

VPAs are a mechanism under section 93F of the Environmental Planning and Assessment Act 1979 (NSW) (the EPA Act) that allow councils to secure infrastructure funding and other public benefits through planning proposals or development applications. The reform of the VPA framework is intended to engender a fairer and more transparent negotiation process and encourage councils and developers to work together with communities to facilitate the delivery of public benefits that suit the needs of those communities.

Comment

While the proposed changes will make it more difficult for the continuation of the poor practices that have resulted in developers being unfairly treated by some councils, VPAs will continue to provide a flexible mechanism for negotiating planning gains in association with the provision of public benefits.

Key points

Strategic infrastructure planning
  • Planning authorities to work with stakeholders to identify the infrastructure need generated by growth and avoid site-by-site ad hoc VPAs.
  • Planning agreements should not be used to capture windfall gain and should have regard to a developer's entitlement to a share of profit while continuing to ensure that new development is appropriately serviced by infrastructure.
  • Planning authorities should not prioritise site-specific planning proposals on the basis that they provide an opportunity to capture a windfall gain, over an opportunity to undertake broader strategic planning initiatives.
Use of the contributions
  • Planning authorities should identify what public benefit the funds contributed under a VPA will be allocated to including where contributions paid under several VPAs are pooled.
  • A clear link is needed between the public benefits paid under a VPA and the development and the public benefit cannot be wholly unrelated.
Public participation
  • The new practice note on VPAs (the Practice Note) goes into much more detail about public participation in the planning agreement process, including requiring an explanatory note to accompany public notices, written in plain English.
  • Parties are required to consider whether other types of consultation material can aid in the public participation process.
Interaction with other contribution mechanisms
  • Planning agreements should not be de facto substitutes for contributions plans.
  • Large rezonings that will generate the need for public benefits and where there are clear advantages in the managed delivery of the public benefits in association with development are among the kinds of development that are suitable for VPAs.
VPA policies and procedures
  • Additional new areas to be included in planning authorities' policies and procedures dealing with VPAs include:
    • use of VPAs within the broader strategic planning framework;
    • land use planning and development objectives sought to be addressed by the use of VPAs;
    • the role served by the VPA in the infrastructure funding systems of the planning authority;
    • the types of development to which planning agreements will ordinarily apply; and
    • whether any thresholds or exemptions apply to the use of planning agreements in particular circumstances.
Registration and security
  • As a precondition to execution of a VPA, written agreement to the registration of the planning agreement of each person with an interest in the land to which it applies should be furnished by the developer to the planning authority.
  • The Practice Note also sets out various means of ensuring performance by the developer, including the provision of financial security, a pre-acquisition agreement, or tying performance to the issuing of certificates under Part 4A of the EPA Act.

Background: VPAs in New South Wales

As previously discussed in our Focus, the current framework for planning agreements arose in 2005 via amendments to the EPA Act. On Friday, 4 November, the NSW Government released a new Draft Practice Note – Planning Agreements, for submissions until 27 January 2016.

The draft documents being exhibited are:

  • draft Ministerial direction for planning authorities on principles to be followed in VPA negotiations (the Direction),
  • Practice Note, and
  • draft planning circular (the Circular).

The draft VPA Framework documents are proposed to replace the 2005 Practice Note – Planning Agreements, issued by the then Department of Infrastructure Planning and Natural Resources. The fundamental principles for planning authorities that are participating in planning agreements remain unchanged, as well as the public interest and probity considerations that arise in connection with the use of VPAs, including the 'acceptability test' for determining the acceptability of a planning agreement.

However, the insertion into the guideline, of a new section on public participation in the context of planning agreements seeks to demonstrate that the wider community must be given an opportunity to provide input into the planning agreement process, signalling an increasing focus on transparency. The guideline also now includes an additional requirement that 'how and when public benefit will be spent should be made transparent by the planning authority to the developer'.

Further, the new Practice Note specifies that VPAs should complement other mechanisms, namely s94 contributions and s94A levies, and should not be de facto substitutes for contributions plans. It includes a table (on page 13) identifying factors to be considered in selecting the appropriate contributions mechanism.

In addition, the insertion of a section on strategic infrastructure planning underlines that planning authorities should not use VPAs as a mechanism to capture windfall gains, and should ensure:

  • that VPAs are evidence-based and preferably independently peer reviewed;
  • the fair apportionment of costs in the context of the provision of public benefits under VPAs;
  • a clear, justified method of quantifying the public benefit to be delivered under VPAs, recognising that developers are entitled to profits; and
  • proper investigation of development feasibility, preferably on an open-book basis.

The new draft VPA framework also places importance on ensuring that planning authorities do not use bargaining power by reason of their regulatory functions under the EPA Act, or attempt to force developers to enter into VPAs. Similarly, unwillingness of a developer to enter into a VPA should not be a reason why a planning proposal or development application is refused.

The new Practice Note also provides greater guidance about issues such as what constitutes an offer to enter into a planning agreement, registration of planning agreements, and methods of requiring security for performance by the developer.

The draft Direction requires local councils to have regard to Parts 2 and 3 of the Practice Note, while the Circular emphasises the importance of strategic infrastructure planning and the necessity of ensuring that the full range of contributions mechanisms are considered.

Submissions are invited on the draft documents until 27 January 2017.

Key changes

What remains the same in the new Practice Note?What has changed?
  • Generally applicable 'acceptability test' for determining the acceptability of a planning agreement
  • Fundamental principles remain unchanged
  • Same public interest and probity considerations
  • Need for a clear public benefit arising from the VPA
  • The need for efficient negotiation systems
  • The basic statutory procedure (including 7 steps) remains identical
  • Part 4, containing examples of the use of planning agreements, is unchanged
  • Emphasis on strategic infrastructure planning
  • Increased focus on public participation and transparency
  • Linkage required between development and public benefit
  • VPAs should complement other contributions mechanisms
  • Detail as to what constitutes an 'offer' for the purpose of s93I(3) of the EPA Act
  • Requirement that all people with an interest in land consent to a VPA
  • Additional information on registration of planning agreements
  • More guidance on security to be provided by developer

For further information, please contact:

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