The NSW Department of Planning, Industry and Environment (Department) has released its new Practice Note relating to planning agreements in the state, implementing a recommendation of the Kaldas review of decision-making in the planning system (Kaldas review). Those recommendations - all 19 of which were accepted by the NSW Government - included strengthening the role of the Independent Planning Commission, overhauling the Environmental Planning and Assessment Act 1979 (NSW) (EP&A Act) and a reform of voluntary planning agreements struck between planning authorities and developers.

The new Practice Note clarifies the Government's vision for planning agreements, which it sees as tools for 'delivering innovative or complex infrastructure and public benefit outcomes'1. Reform was inspired by the Department's ambition to resolve uncertainty in the planning system, unlock new housing supply and deliver quality public infrastructure in NSW.

The purpose of planning agreements

The use of voluntary planning agreements to manage environmental and developmental outcomes has increased steadily since the commencement of the Environmental Planning and Assessment Amendment (Development Contributions) Act 2005 (NSW). These agreements are negotiated between planning authorities and developers following the submission of planning proposals and/or development applications by developers.

Depending on the nature and context of the developer's application, a planning agreement may stipulate a number of conditions. Going beyond the local infrastructure contributions anticipated in sections 7.11 and 7.12 of the EP&A Act, a planning agreement may require a developer to provide funding to public facilities, capital and recurrent funding of public transport or the protection and improvement of the natural environment. By this, authorities can ensure that discrete developments meet wider planning strategies by providing public and environmental good.

The Department's new Practice Note

A new Practice note dated February 2021 details the fundamental principles and policy considerations for planning agreements and strategic considerations about their appropriateness. It also provides guidance for the application, negotiation and administration of planning agreements.

For example, the Practice Note stipulates that planning agreements must be underpinned by diligent planning processes which anticipate future growth and associated infrastructure demand, and facilitate the strategic use of land. Any planning agreement formed must deliver a net community benefit and, where necessary, compensate for the loss of a public amenity, service or asset 'through replacement, substitution, repair or regeneration'.

Before deciding whether to enter into a planning agreement, it is a requirement that the planning authority must be convinced that an agreement is in the public interest. Likewise, planning agreements cannot curtail the public interest by purporting to fetter a planning authority's exercise of its statutory functions. The public interest is a central consideration during the negotiation of a planning agreement, where both parties must seek to balance competing public and private interests, with a view to achieving the most-favourable financial, social and environmental outcomes. For this reason, planning agreements must be publicly notified and made available for public comment.

The Practice Note also clarifies the relationship between planning agreements and development applications. Though consent authorities are required by the EP&A Act to take into consideration any relevant planning agreement when determining a development application, a consent authority cannot refuse development consent on the grounds that a developer has not entered into, or offered to enter into, a planning agreement with a planning authority. Planning agreements are, after all, voluntary. Nor should planning agreements be used to require compliance with any conditions of development consent.

Finally, the Practice Note provides guidance for both parties about the process for entering into, negotiating and administering a planning agreement. Parties to the negotiation, particularly councils, should implement efficient and transparent negotiation systems, based on principles of cooperation and disclosure. Where appropriate, this may include the involvement of independent third-parties. In terms of enforcing a planning agreement, the Practice Note encourages a situation-specific approach, but acknowledges that planning authorities may wish to tie the performance of a developer's obligations to the issuing of construction or occupation certificates. Financial security may also be sought, such as by way of a bond or bank guarantee, taking into account the amount of any potential costs that may be incurred by a planning authority in the event of default by the developer.

The acceptability test

The Practice Note specifies a generally applicable test that applies when determining the acceptability of a proposed planning agreement. An agreement must:

  • be directed towards legitimate planning purposes and relate to adopted planning strategies and policies;
  • produce outcomes that meet the public's expectations and protect the public interest generally;
  • provide for a reasonable means of achieving the desired outcomes;
  • protect the community against adverse planning decisions.

It is important that consent authorities and developers familiarise themselves with the new Practice Note and recognise the circumstances where a planning agreement may be appropriate and desirable. It is particularly important that consent authorities put in place proper internal processes that operate to ensure the formation, negotiation and execution of acceptable planning agreements which are in the public interest.



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