Australia: Court decision highlights importance of investigating outstanding development conditions on property purchases

Planning and Environment Alert: 5 Mar 2012
Last Updated: 13 March 2012

By David Nicholls, Partner

A decision recently handed down in the Planning and Environment Court is a timely reminder of why it is important for purchasers to instruct their lawyers to investigate whether there are outstanding development conditions which require infrastructure contributions to be paid on the property they are purchasing.

In Sunshine Coast Regional Council v Recora Pty Ltd & Golder Associates Pty Ltd [1], the purchasing entity, Recora, and its tenant, Golder Associates, were declared to be unlawfully using an office building because development conditions requiring monetary contributions for infrastructure had not been complied with by the developer who sold them the land and building.

Here, partner David Nicholls outlines the proceedings in this case and how purchasers can be caught unaware by outstanding development conditions.

Key points

  • Because development conditions "run with the land", subsequent owners are bound by the conditions that are attached to a property.
  • In the case of subdivision, contributions usually must be paid before plan sealing. However, there is no requirement for a certifier to require proof of payment of infrastructure contributions before issuing a certificate of classification.
  • As a result, purchasers of new buildings can be caught with unsatisfied conditions.
  • There ought to be a public register which records any infrastructure charges imposed on development and whether those charges have been paid.

Sunshine Coast Regional Council v Recora & Golder Associates

The development conditions in this case were in a standard form. The Court's judgment only sets out one of them, which relates to sewerage headworks:

"6. The applicant must pay a monetary contribution towards sewerage headworks in accordance with Planning Scheme Policy No. DC1 - Water Supply and Sewerage Infrastructure. The contribution must be paid prior to the commencement of use or issue of a certificate of classification whichever is the sooner. The actual amount of the contribution must be in accordance with the Policy at the time of payment.

Note: For an estimate of contributions payable under current Policies refer to the Advisory Note section of this Decision Notice."

A certificate of classification was issued by a private certifier in September 2008, and Recora became the registered proprietor of the land a few days later. The infrastructure contributions were not paid and the Council did not contact Recora about the outstanding charges until January 2011.

The infrastructure contribution condition is in a form which is commonly used by local governments. Ordinarily, it is when development is complete and able to be used that charges become payable, and usually local governments have security for payment through their control over the plan sealing process, where reconfiguration of a lot is involved. However, there is no requirement in the Building Act 1975 for a certifier to require proof of payment of infrastructure contributions before issuing the certificate of classification.

Development conditions "run with the land" and subsequent owners, including owners who have purchased subdivided parts of the original parcel of land, are bound by the conditions [2].

Additionally, it is a development offence for anyone to contravene a development approval, including any condition in the approval. That offence carries a maximum penalty of $166,500 (or $832,500 for a corporation).

The Court has determined that undertaking the use of land in accordance with a development permit, where there has not been compliance with all of the conditions of the development permit, is unlawful activity.

In Sunshine Coast Regional Council v Recora & Golder Associates, the owner and tenant attempted to argue that they did not commit a development offence because once the certificate of classification had been issued, the condition was not thereafter capable of being complied with. The Court considered this to be an artificial construction of the condition noting that, in accordance with the Court's previous decisions, an overly technical approach is not required when construing development approvals. His Honour Judge Robertson went on to say:

"[10] In my opinion the Respondents' approach tends to isolate the relevant words in Conditions 6 to 10 from the remaining important terms and the whole approval in a highly technical way, and ignores the principle that those who take the benefit of an approval should pay their share of demand on infrastructure created by development: Serenity Lakes Noosa Pty Ltd v Noosa Shire Council [2007] QPELR 334; MC Property Investments Pty Ltd v Sunshine Coast Regional Council (No. 2) [2011] QPEC 133 at [39].

[11] The conditions are straightforward and in conventional terms. Each condition imposes an obligation on the applicant (and as a matter of law on their successor in title; in this case Recora), to pay an amount calculated by reference to the Planning Scheme Policy applicable at the time of payment. The condition sets a deadline to pay which had passed by the time Recora assumed the benefit of the approval. The failure to pay in a timely way does not discharge the responsibility to pay the contributions nor does it sever the condition from the approval. To be fair to Mr Loos, he does not suggest this but rather he submits that because of the failure to pay in a timely way, the condition was incapable of performance by his client once it became the beneficiary of the approval (with all its conditions). The condition still binds Recora and is one that was, and still is, breached by non-performance."

Satisfying the conditions of a development approval

The Sustainable Planning Act 2009 (SPA) does not make it easy for purchasers or intending lessees to find out if conditions of a development approval have been satisfied. This can only be achieved by obtaining a full town planning certificate from the local government, which is an expensive and relatively slow process. A standard town planning certificate, which is the type of certificate most purchasers elect to obtain, does not disclose this information. Obviously, purchasers who choose to only obtain a standard certificate do so at the risk of incurring significant financial exposure given the potentially large sum of infrastructure charges these days.

The overall position may improve a little under the new infrastructure charging regime because unpaid infrastructure charges must be disclosed under a standard planning certificate. Under the new regime, the charges will operate in the same way as rates, and will attach as a charge on the land.

However, where a contribution is required by a condition of the development approval and is not paid, the liability will remain indefinitely once the development approval is implemented, because from that point the development approval will not lapse. The condition runs with the land, and non-compliance with it remains susceptible to enforcement. As a result, intending purchasers will be subject to this difficulty for some time to come.

From a legal and administrative perspective, the situation described here is unsatisfactory. There ought to be a public register available for inspection which records any infrastructure charges imposed on development and whether those charges have been paid. There should be one register for charges imposed by way of a development condition, and another for charges imposed through an infrastructure charges notice. Alternatively, there could be a unique certification mechanism under the SPA for monetary contributions, which is separate from the full and standard town planning certification. The search should be free of charge and the results ought to be available within a few working days of receiving the search. Either way, there should be a simple, inexpensive and fail safe way for purchasers to find out if they are exposed to an unsatisfied condition to which financial liability is attached.

For more information on infrastructure contributions, please contact HopgoodGanim's Planning and Environment team.

© HopgoodGanim Lawyers

Award-winning law firm HopgoodGanim offers commercially-focused advice, coupled with reliable and responsive service, to clients throughout Australia and across international borders.

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.

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