Australia: Round 2 of the COVID-19 planning law amendments - a mixed bag for developers and investors

In brief - An overview of further changes to NSW's planning laws in the road to COVID-19 recovery

The NSW State Government has passed a second round of amendments to the Environmental Planning and Assessment 1979 (EP&A Act) in response to the COVID-19 pandemic with the passing of the COVID-19 Legislation Amendment (Emergency Measures-Miscellaneous) Act 2020 on 12 May 2020.

The amendments enable the Minister to issue directions that, if issued, might change the timeframes within which development contributions are paid, as well as how contributions are allocated to infrastructure needs instead of having them accumulate.

The changes will also extend lapsing periods in development consents, deferred commencements, and merit appeal rights over the next two years. Most of these changes will be welcomed by developers and investors.

However, under separate changes to the Environmental Planning and Assessment Regulation 2000, which came into effect on 15 May 2020, developers can no longer, for example, "place a peg in the ground" to activate a development consent that has been granted after 15 May 2020 with the threshold for physical commencement being elevated.

Main take-aways from these amendments at a glance

• The broadening of time limits under the EP&A Act should provide more flexibility to developers in project decision making over the next two years.
• The new powers granted to the Minister to make new types of orders on development contributions have the potential to facilitate better cash flows for developers during the project life cycle. The new powers could also lead to more immediate tangible outcomes from development contributions paid for by developers.
• Despite these changes, those who benefit from a newly granted development consent face more onerous thresholds for the physical commencement of that consent.

Amendments to the Environmental Planning and Assessment Act 1979 in context

The COVID-19 Legislation Amendment (Emergency Measures-Miscellaneous) Act 2020 amends 34 separate pieces of legislation including the EP&A Act, the chief piece of planning legislation in NSW.

This is the second round of amendments to the EP&A Act as a result of the pandemic. The first being through the COVID-19 Legislation Amendment (Emergency Measures) Act 2020, which was assented to on 25 March 2020. You can read more about the first round in our article NSW planning industry responds to the COVID-19 crisis.

The first round of amendments was focused on creating new powers to facilitate swift emergency action and to ensure that key services could continue to be provided throughout the pandemic. The second round of changes are directed towards providing elasticity to some of the timeframes the development industry pay close attention to.

2 year "lifeline" to lapsing periods under the EP&A Act

Lapsing of development consents and deferred commencements

Section 4.53 has been amended to extend the period for the lapsing of development consents under the Act by 2 years. This "lifeline" affects all development consents which could have lapsed between 25 March 2020 and 25 March 2022 (the prescribed period).

Development consents that come into operation within the prescribed period will now lapse 7 years after the consent comes into operation (unless physically commenced). Prior to the changes, that period would have been 5 years unless a shorter period was specified in the development consent.

The 2 year "lifeline" does not apply to concept development applications (subsection 3(a)).

For consents granted after the prescribed period, a consent authority is still able to specify a shorter lapsing period in the development consent (subsection (2)). However, the lesser period must not be less than 5 years after the development consent comes into operation (subsection 3(b)).

For development consents subject to deferred commencement conditions, a 2 year extension has also been introduced, but only for consents that would have lapsed between 25 March 2020 and 25 March 2022 (subsection (6)).

Deferred commencement conditions will continue to have a 5 year time limit for consents granted after 25 March 2022 (subsection 6(a)-(b)).

Given construction certificate documentation can take a significant period to compile, this change provides a longer horizon to activate a consent over the next 2 years. Whilst this provides a more forgiving environment for new development if economic conditions impede commencement (which many in the industry would welcome), the changes may also slow down rather than fast- track development.

Consequences for strategic planning

These changes also have consequences for strategic planning, which the current government places great emphasis on, and can create friction within communities undergoing change.

Communities now face a reality where a development approved during the pandemic can lay dormant for 7 years.

This creates an obvious tension with strategic planning objectives, which becomes more difficult to implement when latent development approvals still exist.

Existing Use Rights

Existing use rights have similarly been granted a 2 year "lifeline" during the prescribed period of 25 March 2020 to 25 March 2022 through amendments to sections 4.66 and 4.68 of the EP&A Act. This means that an existing use right during this period will now expire only after 3 years of continuous abandonment (previously 12 months). This change will preserve existing use rights for buildings or developments which may have gone into a COVID-19 state of "hibernation" because tenants can't be found, or for other commercial reasons.

The 12-month period of abandonment in the EP&A Act sought to strike a balance between the rights of landowners whose uses of land become adversely affected by planning changes, and the public expectation that planning changes are implemented. The extension of this period is favourable to land-owners with existing use rights, but like the extensions to lapsing periods described above, they can also create tensions against strategic planning objectives.

Extensions to appeal rights

Amendments to section 8.10 of the EP&A Act have extended appeal rights to the NSW Land and Environment Court made under Division 8 of the EP&A Act.

The 6-month time limit on appeals brought by applicants for development consent has been extended to 12 months, if either the appeal right arises during the prescribed period of 25 March 2020 to 25 March 2022, or had arisen before this period but had not lapsed. In other words, the changes provide a lifeline to appeal rights that have not lapsed, but they do not resurrect appeal rights that had lapsed prior to the prescribed period.

In the case of an appeal brought by an objector, the 28-day time limit on appeals has been extended to 56 days. The changes therefore have benefits for both objectors and applicants.

An extension to the deemed refusal period of 42 days is noticeably absent from the changes. This means that consent authorities are still expected to assess and determine development applications within usual timeframes, although the extension to the applicant's appeal rights may mean that deemed refusal appeals are not commenced straight away in practice.

Opening up the door to new Ministerial orders - facilitating flexibility for development contributions

Amendments to section 7.17 of the EP&A Act have broadened the types of Ministerial Directions that the Minister for Planning and Public Spaces is able to make by permitting two additional types of directions to consent authorities. These amendments have created the legal mechanism for future changes to be implemented.

The first additional type of direction relates to the pooling of funds received by the consent authority for different purposes under a contributions plan or under different contributions plans (subsection (1)(g)). If such a direction is made by the Minister, this will lead to consent authorities more swiftly directing funds to local infrastructure projects, which might otherwise have been delayed because financial thresholds under certain contributions plans might not have been met.

The second permits the Minister to specify the time at which a monetary contribution or levy is to be paid (subsection (1)(h)). This could facilitate certain contributions being paid at different stages in a development to help developers better manage cash flows, prevent feasibility issues arising as a result of contributions needing to be paid at checkpoints in the project, which could be critical if project capital is constrained at the front end of a project or at some other point during the lifecycle. The Minister can only issue this type of order before 25 September 2020, unless the Regulations extend this by an additional 6 months.

Ultimately, both depend on Ministerial directions being made and we await any immediate practical change.

Council investigation powers brought into line with social distancing protocols

Section 9.23 enables an investigation officer (for example, a Council compliance officer with appropriate delegations) to require a person to answer questions about certain matters if the investigation officer suspects on reasonable grounds that the person has knowledge of the matter.

Amendments to this section now permit an investigation officer (for example, a Council investigation officer) to authorise that questions be answered using an audio link (e.g., by phone) or an audio-visual link (e.g., by video conference). The officer cannot compel a person to take up this technology in answering questions, however. The changes simply authorise the officer to enable answers to questions to occur by phone or AVL.

Previously, questioning had to be carried out in person.

These changes update councils' investigation powers so they harmonise with social distancing protocols, as well as enabling enforcement officers to better "work from home". They will be in effect until 13 November 2020. It remains to be seen whether a person/company subject to a section 9.23(3) request asks to respond by phone or AVL now authorised by these provisions, or instead cites social distancing protocols or COVID-19 risks to defer how, where and when questions are answered.

Similar changes have been made to investigations under the Biodiversity Conservation Act 2016, the Crown Land Management Act 2016, the Protection of the Environment (Operations) Act 1997, and the Water Management Act 2000.

Raising the threshold for physical commencement of a development consent

Separate from the above amendments, the Environmental Planning and Assessment Amendment (Lapsing of Consent) Regulation 2020 commenced on 15 May 2020 and has significantly raised the threshold for physical commencement of a development consent.

A new clause 124AA has been inserted into the Environmental Planning and Assessment Regulation 2000 (EP&A Reg), which specifies types of preliminary work that are not sufficient to prevent a development consent from lapsing. The changes mean that the following activities are no longer sufficient to physically commence a development consent:

• creating bore holes for soil testing
• removing water or soil for testing
• carrying out survey work, including the placing of pegs or other survey equipment
• acoustic testing
• removing vegetation as an ancillary activity, and
• marking the ground to indicate how land is to be developed

The new clause does not apply to development consents granted before 15 May 2020, and therefore only applies to new consents. The previous law on physical commencement will continue to apply to consents that have already been granted.

The EP&A Reg was, until now, silent on any limitations on physical commencement. The law on physical commencement has instead developed through case law. Under the Court of Appeal's seminal decision in Hunter Development Brokerage Pty Ltd v Cessnock City Council; Tovedale Pty Ltd v Shoalhaven City Council [2005] NSWCA 169, survey work involving the placing of pegs, the removal of vegetation, and the establishment of permanent survey marks were held to constitute engineering works required for a subdivision, and were sufficient to physically commence a development consent.

This change to the EP&A Reg is a permanent change, unlike the other changes to the EP&A Act which only apply for 2 years. Applicants with newly granted development consents will now need to carry out more significant and costly work to activate a consent.

No doubt the intricacies of these changes will now lead to new controversies with certifiers and consent authorities given any lapse of a development consent involves the loss of valuable rights to develop land.

Further delay to the repeal of the Regulation

Finally, the COVID-19 Legislation Amendment (Emergency Measures-Attorney General) Act 2020 (assented to on 14 May 2020) has extended the scheduled repeal of the EP&A Reg by another 12 months, moving the date for repeal out to 1 March 2022, unless repealed sooner.

This is another delay to the repeal of the EP&A Reg, which had seen a number of extensions to its original 1 September 2006 repeal date. The delay provides more time for the long awaited new Regulations to come into effect, which were expected to shortly follow the 1 March 2018 changes to the EP&A Act.

Presumably the reform to the Regulations was intended to be for "normal" conditions, rather than present circumstances, making the repeal problematic at present. It will be interesting to see what changes to the Regulations eventually arise in a post COVID-19 world.

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.