The Planning and Development Act 2005 (Planning Act) commenced in Western Australia on 9 April 2006 and consolidated a handful of existing (and often confusing) planning legislation.
One of the benefits of the Planning Act was that it reduced the number of situations in which statutory approval (by way of the Western Australian Planning Commission (WAPC)) is required for long term leases or licences of land where the land comprises a part of a lot being the subject of a certificate of title, and the term is 20 years or more including options.
This article summarises the current position in relation to WAPC approval to long term leases and licences, explores a remaining ambiguity within the legislation and provides a brief checklist for, amongst others, developers, financiers, owners and tenants to ensure that long term leases and licences are not void and unenforceable.
Why is WAPC required to approve long term leases?
The policy position of WAPC (as stated in the WAPC Planning Bulletin1) is that long term leases or licences "may be tantamount to de facto subdivisions. For this reason, the WAPC has regard to similar criteria to the consideration of applications for approval to lease as it applies to applications for approval to subdivide."
Clause 139(3) of the Planning Act provides that the WAPC may, when considering an application for approval for a long term lease or licence, have regard to:
- the nature of the interests proposed to be granted;
- the classification or zoning of the land to which the lease or licence concerned will relate;
- the proposed term of the lease or licence; and
- any such matters which the WAPC considers relevant.
Our experience is that provided the provisions of the long term lease or licence (in particular, the permitted use) are consistent with the classification or zoning of land or any development approval granted in relation to the land, then WAPC will approve the long term lease or licence.
When is WAPC approval required?
WAPC approval is required for leases or licences or an agreement for lease or licence if:
- the lease or licence is in respect of part of a lot; and
- the term of the lease or licence (including options) exceeds 20 years2.
Notably, WAPC approval is not required for leases or licences of Crown land nor is it required for long term leases or licences to occupy buildings (more on that particular issue below).
How "long" can a long term lease be?
The WAPC Planning Bulletin3 states that whilst it is recognised that commercial leases may have a term of up to 99 years (including options), anything in excess of 99 years including options "should be avoided."
Our understanding of this policy is that if, for example, WAPC is requested to approve a lease for a term of 150 years (including options), WAPC will only approve the lease up to 99 years (including options).
This approval would then require the parties to vary the term of the particular lease to comply with the conditions of WAPC's approval.
Given this policy, we do not recommend that parties enter into long term leasing or licensing arrangements for any term longer than 99 years (including options).
What is the building exception?
As noted above, under section 136(3) of the Planning Act, WAPC approval is not required for long term leases and licences to occupy buildings where such buildings are or will be constructed in accordance with a building licence issued by the relevant local government authority.
Section 136(4) of the Planning Act states that a "portion" of a building includes the area outside the building where:
- the area is the subject of the same lease or licence to occupy as the lease or licence of the building itself; and
- the area is used for any purpose of "ingress to or egress from that whole or portion, advertising, parking vehicles, storing goods, loading or unloading goods or passengers or for any other purpose necessary or desirable for the convenience occupation of that whole or portion."
This means that where the area outside the building is for a purpose necessary for the "convenient occupation" of the building (such as access to the building, car parks, loading bays) then a long term lease or licence to occupy the building does not require WAPC's approval even though the leased premises includes areas outside of the building envelope.
There remains, however, some ambiguity as to how to determine whether an area outside a building envelope constitutes "convenient occupation".
Contrasting examples which were raised by an officer at WAPC with us recently was that a long term supermarket lease of a store within a shopping centre with associated customer parking fell within the exception and would not require WAPC consent; however, a long term home wares warehouse lease with associated car parking and an adjacent garden centre did not fall within the exception on the basis that the garden centre was not necessary for the "convenient occupation" of the building. In other words, the home wares example requires WAPC approval.
The critical aspect, then, is determining whether the area and purpose of the leased or licensed land in addition to the leased or licensed building falls within either a specified exception in section 136(4) of the Planning Act, or is for the "convenient occupation" of the building.
Where there are reasonable concerns that the areas that form part of the lease or licence do not fall within the scope of the exception for external areas, we consider it prudent to apply to WAPC for approval (or confirmation that WAPC approval is not required) given that the legal effect of not obtaining WAPC approval where required is that the lease or licence becomes void, and the costs for seeking approval are fairly minimal.
What happens if WAPC approval is not obtained prior to execution of the agreement?
Relevantly, there are saving provisions in sections 140(1) and 140(3) of the Planning Act:
WAPC approval can be obtained after the parties have signed the long term lease or licence so long as:
- the long term lease or licence is made subject to obtaining WAPC approval within 6 months (failing which, such other time frame as agreed between the contracting parties); and
- an application is made to WAPC within 3 months of the date of execution of the long term lease or licence.
Section 140(2) of the Planning Act reiterates that provided that section 140(1) of the Planning Act is complied with, the long term lease or licence will not be rendered illegal or void by reason only that the agreement was entered into before the approval of the Commission was obtained.
What is the consequence of failure to obtain WAPC approval?
Failure to obtain WAPC approval in accordance with section 136(1) and section 140 of the Planning Act results in the agreement being rendered void and unenforceable.
In addition, section 136(2) of the Planning Act provides that a contravention of section 136(1) of the Planning Act is an "offence".
Section 223 of the Planning Act then provides that if a person commits an offence under the Planning Act, such party is liable to a penalty of $50,000 plus a daily penalty of $5,000 whilst the offence continues.
To ensure a valid and enforceable long term lease or licence for part of a lot the subject of a certificate of title exceeding 20 years (including options), we recommend the following steps be taken:
- determine whether or not WAPC consent is, in fact, required;
- if WAPC approval is required or there is doubt as to whether the exceptions apply, ensure the agreement incorporates a condition precedent for obtaining WAPC consent within a specified time frame being not less than 6 months;
- endeavour to obtain approval prior to execution of the agreement;
- ensure, if WAPC is not obtained prior to execution of the agreement, an application is made within 3 months of the date of execution; and
- ensure that WAPC approval is obtained within the specified time frame, failing which the parties should agree on a further time frame.
Given the costs are fairly minimal and the application procedure straightforward, our final recommendation is if you are in any doubt as to whether WAPC approval is required or not, ensure the agreement is made conditional on WAPC approval and make the application to seek WAPC's approval.
1 (No 71 March 2005)
2 (section 136(1) of the Planning Act)
3 (No 71 March 2005)
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.