Top 10 Tips: What you need to know about development in NSW in 2021

Our prediction: The legal landscape is shifting away from being a roadblock to investment and towards facilitating upward momentum in the development space.

In 2020 we have seen a mass exodus from CBD commercial premises to remote working. There have been significant structural changes by planning authorities to streamline decision making and maintain investment in development and the employment it generates. Even the courts have gone online.

Below, we reflect on the biggest changes this year, what we have learnt and our tips for developers in 2021.

1. Expect the unexpected – have a strategy and implement it early

Unexpected events can derail projects. Covid-19 has shown that very clearly this year. What has also become clear is that well managed projects with strategies around delays, approvals and stakeholders can achieve success even in the most difficult circumstances. Our tips for a robust planning strategy are:

• Get your planning pathway right – seek advice on all consents and approvals required and plan for delays caused by consultation, assessment and potential appeals as well as unexpected delays.
• Engage with consent authorities and regulators early – take advantage of a pre-lodgement meeting and be prepared to make changes to the proposed development to increase your chances of successful approval.
• Develop a thorough stakeholder engagement strategy – the community can make or break a project. Start early. Be prepared to offer options and compromises.
• Engage the right experts – a team of experienced experts will give both the regulator and the community reassurance that the assessment of the proposed development is sound and will set the development up to meet any tricky jurisdiction-specific requirements. We work closely with technical experts to ensure the legal and technical strategy is aligned.

What this means for developers in 2021:

Putting in the effort to develop a comprehensive planning strategy upfront will save time and mitigate risks down the track.

2. Directors who are the ‘guiding mind’ of a company should be extra diligent in ensuring environmental compliance to avoid personal criminal liability

Company directors and managers may be pursued personally for environmental crimes committed by the company in NSW. Traditionally, regulators have prosecuted individual directors only where there is a clear wrongdoing by the individual who is the ‘guiding mind’ of the company, usually as the sole director and shareholder.

This trend has continued in 2020: EPA v Albiston [2020] NSWLEC 80, EPA v Grafil; EPA v Mackenzie (No 3) [2020] NSWLEC 90, Transport for NSW v East Coast Wharf Constructions Pty Ltd; Transport for NSW v King [2020] NSWLEC 112).

While cases in NSW have been limited to very active directors, prosecutors have the power to pursue directors and persons concerned in the management of companies more broadly, including where the regulator wants to set an example about compliance. We have seen this occur in other jurisdictions.

What this means for developers in 2021:

It is important for directors and executives to be aware of their responsibilities under environment and planning law and to encourage a culture of compliance within their organisations. If you are a director or manager, ask yourself whether you know what your obligations are and whether you are exercising all due diligence to ensure environmental compliance. Get in touch with us if it is time for you to update your director and manager environmental compliance training.

3. Consider climate change impacts when seeking development consent

Consent authorities are increasingly considering the impacts of climate change when assessing coastal development applications.

The Land and Environment Court recently agreed with Northern Beaches Council that it was appropriate to place a time limit of 60 years on a development consent. Engineering advice was that the proposed coastal protection works could withstand sea level rise for a period of approximately 60 years. The Court permitted the condition in part on the basis that section 27 of the Coastal Management Act 2016 (NSW) required consent authorities to be satisfied that works would not pose or be likely to pose a threat to public safety: Salama v Northern Beaches Council [2020] NSWLEC 143

The case adds to a growing body of case law in which the Courts have taken sea level rise and climate change considerations into account when considering coastal developments. A trend towards time limits on development consents due to sea level rise will impact the financial viability of some projects and the desirability of some coastal locations going forward.

What this means for developers in 2021:

Reassess the viability of coastal development projects and clearly articulate sea level rise mitigation strategies in the environmental assessment for any development application.

4. Comprehensive structural reforms within the planning system are aiming to drive productivity in the development sector

The ‘NSW Planning Reform Action Plan’, a 3 year action plan for long term structural reform within the planning system was announced in 2020 to:

• Accelerate assessment of development applications through better coordination between agencies, reduced need for concurrence and referrals, better case management the potential introduction of a two-tiered risk based assessment system for State significant development.
• Increase complying development pathways for commercial, industrial and employment generating development & government projects e.g. emerging industries (data centres), neighbourhood centres.
• Appoint additional Commissioners to the Land and Environment Court to deal with the backlog of planning appeals.
• Augment functionality in ePlanning with additional maps and layers to be added to spatial viewer.
• Accelerate whole of Government precinct coordination through the establishment of a precincts portfolio strategy and precincts coordination program that aims to prioritise, accelerate and improve coordinated delivery of strategic precincts.

What this means for developers in 2021:

Faster timeframes for development application assessments and appeals by 2023 (we hope).

5. Infrastructure contributions reform offers opportunities for medium to long-term developments

The process of reforming infrastructure contributions is well underway.

Peter Achterstraat AM, NSW Productivity Commissioner has completed his review of NSW infrastructure contributions and issued his findings and recommendations for reform in a Final Report released on 3 December 2020. The Final Report makes 29 recommendations for reform.

The reforms focus changes to make contributions certain, efficient, simple, transparent and consistent. For example, the Report recommends:

• making predicting contributions easier through upfront contributions plans at the rezoning stage and a digital estimating tool;
• deferring payment of local contributions to the occupation certificate stage;
• simplifying special infrastructure contributions into broad-based regional charges; and
• requiring openness and accountability through contributions reporting.

We know many of the recommended changes will be welcomed by developers as improving project feasibility.

The Productivity Commissioner’s report comes on top of a series of immediate 'system improvements' to infrastructure contributions and associated guidance proposed by DPIE:

• increased flexibility and transparency around the planning agreement process: ‘Draft planning agreements policy framework’
• efficiency reforms to the review process for section 7.11 contributions plans: ‘Improving the review of local infrastructure contributions plans discussion paper’
• criteria for clarity and guidance on when higher percentage rates for section 7.12 contributions may be appropriate: ‘Criteria to request a higher section 7.12 percentage discussion paper’;
• greater transparency around the purpose and function of Special Infrastructure Contributions: ‘Draft SIC guidelines’; and
• improved transparency for accounting and reporting on contributions by councils and planning authorities: Proposed amendments to the Environmental Planning and Assessment Regulation 2000.

What this means for developers in 2021:

Track the implementation of the proposed reforms throughout 2021 for opportunities to provide innovative solutions to infrastructure needs that may reduce the overall cost of contributions while providing a better outcome. Get in touch with us for assistance navigating the reforms.

6. The bar has been raised – what constitutes ‘physical commencement’ of a development consent

‘Physical commencement’ of a development consent remains an important test in determining whether or not the consent has lapsed. In May 2020, the Environmental Planning and Assessment Regulation 2000 (EP&A Regulation) was amended to include a clause clarifying the level of work that is required to ‘physically commence’ a development, or more precisely, it specifies works that will not be sufficient to physically commence a development consent.

Previously there was no specific definition under the Environmental Planning and Assessment Act 1979 (EP&A Act) or Regulation and case law precedents set the bar low. Examples of works found by the courts to constitute physical commencement include: survey works, preparatory work, erosion and sediment control works, engineering works in the form of acoustic testing (despite it involving no physical manifestation on the land), taking away and testing soil from a site, and the preparation of a remediation and validation report.

Under the amendments to the EP&A Regulation, ‘physical commencement’ is now specified to not include:

• creating a bore hole for testing;
• removing water or soil for testing;
• carrying out of survey work (including the placing of pegs or other survey equipment);
• acoustic testing;
• removing vegetation as an ancillary activity to those activities approved under the development consent; or
• marking the ground to indicate how land will be developed.

The new threshold will only apply to development consents granted after 15 May 2020.

What this means for developers in 2021:

It is true that some greater certainty will now exist, however in practice this amendment is likely to substantially raise the bar for what is required to commence a development consent.

7. More time to commence approved developments and appeal rejected ones

The EP&A Act has been amended to extended lapsing dates for development consents.

Section 4.53 of the EP&A Act has been amended so that:

• all consents granted in the 2 year period from 25 March 2020 to 2022 will have a 5 year lapsing period that cannot be reduced by the consent authority (this applies even if the consent itself stipulates a lapsing period of less than 5 years);
• for consents granted prior to 25 March 2020 that would lapse between that date and 25 March 2022, the lapsing date has been extended by 2 years. For example, if a consent would have lapsed on 30 March 2020, it has been revived and is now valid until 30 March 2022; and
• consents granted after 25 March 2022 will lapse after 5 years, but a consent authority may reduce this period in certain circumstances.

What this means for developers in 2021:

You may have additional time to arrange finance and commence works. Review the status of your development consents and ensure that your development program includes a plan for commencement action. Be mindful that the commencement action will need to meet the higher standards discussed above.

Merit appeal periods have doubled for decisions during the Covid period

Previously, section 8.10 of the EP&A Act limited timeframes for merit appeals to be made within 6 months for applicants, and 28 days for objectors. This has been amended so that:

• Applicants for development consent have 12 months in which to appeal a decision made between 25 September 2019 and 25 March 2022; and
• Objectors have 56 days in which to appeal a decision made between 26 February 2020 and 25 March 2022.

What this means for developers in 2021:

Additional flexibility can be built into your planning strategy as well as the additional risk associated with a longer time before there is certainty as to whether or not objectors will appeal.

8. Higher objector threshold in SSD applications for IPC determination

Amendments to State Environmental Planning Policy (State and Regional Development) 2011 raised the threshold for determination of State significant development applications by the IPC:

• The threshold for the number of objections has been increased from 25 to 50 persons (other than a council).
• Both a petition and any submissions that contain the same or substantially the same text will be viewed as ‘one submission’ only.
• Modification applications will no longer be determined by the IPC unless the applicant has disclosed a reportable political donation in connection with the application.

What this means for developers in 2021:

These changes narrow the referral threshold and will streamline the pathway to approval for some projects. However, where early consultation shows that a project is likely to be controversial, it would be prudent to build assessment and determination by the IPC into your planning strategy. 50 submissions can mount up quickly.

9. To ‘unblock the planning system' developers will be given a right of appeal in rezoning decisions

The Government has proposed that development proponents will, for the first time, have a right to appeal rezoning decisions. Little detail or timing has been released at this stage. To create a ‘new class of appeals’ in the Land and Environment Court it will be necessary to amend the Land and Environment Court Act 1979 and probably the EP&A Act.

What this means for developers in 2021:

It is not clear whether these changes will commence in 2021. When they do, however, developers will have more opportunities to have a say on rezoning. To maximise those opportunities, it will be important to keep abreast of rezoning plans across your portfolio and in key target development areas.

10. A stricter regime around certifying residential apartment buildings seeks to address the Mascot Towers disaster

A series of reforms have been made to improve the quality of residential apartment building construction.

(a) The Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 introduces reforms including:

• a requirement for developers to notify the Secretary of an application for an occupation certificate (OC) at least 6 months, but not more than 12 months prior to the application being made;
• the Building Commissioner may delay an occupation certificate from being issued in cases where:
  • serious defects are present;
  • the developer has not given 6 months’ notice of a proposed application for an OC; or
  • the as-building drawings and the building bond are not provided (if required);
• intervention by the Secretary requiring the correction of ‘serious defects’;
• building work rectification orders where the Secretary has a reasonable belief that building work was or is being conducted in a manner that could result in a serious defect with heavy penalties for those who fail to comply with an order; and
• extensive investigation and enforcement powers for authorised officers, including authority to enter occupied premises and undertake (potentially destructive) testing of the building work.

(b) The Design and Building Practitioners Act 2020 (DBP Act) will impose a duty of care on any person who carries out construction work to exercise reasonable care to avoid economic loss caused by defects in or related to a building for which the work is done, and arising from the construction work. The duty is owed to both current and subsequent owners of the building. It will also apply retrospectively (backdating over a 10 year period).

(c) The DBP Act will also establish a registration scheme requiring designs for certain types of building work be certified for compliance with building regulations by registered design practitioners.

What this means for developers in 2021:

Higher quality expectations in residential apartment building development. New procedures to adapt to around occupation certificates and the design registration scheme. Ensure that your insurance policy and contractual arrangements are updated to cover risks associated with the new duty of care.

By Rebecca Davie, Senior Associate and Peter Briggs, Partner.

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