Checks And Balances Of Voluntary Planning Agreements And Are They Enforceable? (Part 2 Of VPA Series)
By Justin Cotton, Partner and Head of Practitioner Advocacy at Lovegrove Solicitors
As an important addendum to my article last week on Voluntary Planning Agreements, or “VPAs”, this week I am examining these mechanisms in more detail and in particular – can they be enforced against the other contracting party? If they can be enforced, what is the best way to go about that?
VPAs have been defined as voluntary agreements or other arrangements between one or more planning authorities and a developer, by which the developer agrees to make public contributions towards a public purpose or objective, and entered into when a developer:
- Has sought a change to an environmental planning instrument (“EPI”) in connection with a development application; or
- Has made or proposes to make a development application;
in order to obtain a development consent for a construction project.
Under the agreement the Developer will be required to make some form of contribution to confer a public benefit, almost as a ‘quid pro quo’ (if you like) for the project to get the ‘green lights’.
What are some Mandatory Requirements of VPAs?
Section 93F of the EP&A Act requires planning agreements to include provisions specifying, amongst other matters:
- A description of the land to which the VPA applies
- A description of the change to the environmental planning instrument or to the development to which the VPA applies
- The nature and extent of the development contributions to be made and when and how they are to be made
- Whether and to what extent the VPA excludes the application of s94 contributions to the development
- A dispute resolution mechanism if a dispute arises under the VPA
- Methods to enforce the agreement, eg by a bond or bank guarantee, in the event of a breach of the agreement by the developer.
Notably, the EP&A Act (s93F) says a VPA will be void to the extent that it allows anything to be done that will breach the EP&A Act, or will breach any EPI or any development consent applying to the land.
In addition, a VPA cannot impose a duty on a planning authority to grant development consent or to exercise any function a certain way under the Act regarding a change to an EPI.
Section 93E of the EP&A Act compels a planning authority to hold any monetary contribution under a VPA plus any extra amount earned from the investment, strictly for the objective for which the payment was required and apply it towards that objective within a reasonable time.
However, one should beware of misuse of VPAs that can lead to unwholesome dividends. This can undermine sound planning and public confidence in the planning system.
Examples of misuse could be where a planning authority seeks inappropriate public benefits or for ‘revenue raising’, where insufficient analysis of planning impacts has been made by that authority, where the interests of small groups are allowed to prevail over public interest, or if a planning authority sought to rely on its statutory position to extract unreasonable ‘public benefits’.
Therefore any planning decisions should be exercised openly, honestly and fairly, with a high degree of consistency. This is to avoid the natural public suspicion that would occur if the system is misused, leading people to suspect that perhaps changes to EPIs and the granting of development consent can be sold to those with sufficient capital to enter into such agreements. In effect, who pays the piper then gets to call the tune.
Safeguards against potential Misuse
There are potential safeguards that can and should be honoured, including:
- A fair and consistent benchmark for determining the acceptability of a VPA and its terms;
- An observance of ‘reasonableness’ and ‘public probity’ when entering into the agreements;
- Having an ‘open’ system with the planning authority’s rules published and accessible;
- Provide for formal public participation in the process;
- Observe fairness to all parties potentially affected by the VPA;
- Ensure regulatory independence of the planning authority that enters into the VPA;
- Ensure that the VPA terms are directed at proper or legitimate planning purposes;
- Provide for public benefits that have a clear link to the development;
- Produce outcomes that meet the general values and expectations of the public;
- Minimise the risks of planning harm that affects the community.
HOW TO ENFORCE VPAs?
One should not forget that VPAs are still contractual agreements, despite their link to public imperatives. If a party such as a developer does not honour its commitment to do a specified thing under the agreement, they can be said to be in breach of contract.
The standard VPAs will have some form of dispute resolution mechanism, possibly providing for mediation of disputes in the first instance. They can also allow for security for contractual obligations, such as by a bond or bank guarantee.
One example could be a monetary contribution that had been agreed to be paid at the completion of the works, that is then not paid. This raises the possibility that the planning authority could sue for recovery under a breach of contract claim in the courts.
Even if there is not an express term of the contract that shows the non- paying party is in breach, there can be terms that can potentially be implied at common law (under the doctrines of ‘frustration’ and ‘delay’).
For example, if a developer has deliberately gone into occupation with only an Interim Occupation Certificate and has deliberately avoided for a long period the approval of any ‘final’ Occupation Certificate, such that the time for payment of the contribution has not crystallised, then this could be criticised as an “intentional delay” under the agreement.
Consideration could potentially be given to the service by the planning authority of a notice making “time of the essence” and allowing a period (say 30 days) for the developer to complete the long delayed act that will enable the contribution to be payable.
There will potentially also be a statutory remedy for breach of a VPA at the Land & Environment Court (NSW), given that as we have seen, such agreements are creatures of the legislation.
Section 123 of the EP&A Act says that any person may bring proceedings in that Court for an order to remedy or restrain a breach of the EP&A Act, whether or not a right of that person has been or may be infringed by that breach. Extending on from that, section 122(b)(v) states that in section 123 a reference to “this Act” includes a reference to a planning agreement referred to in section 93F.
For more information, please contact the writer at Lovegrove Solicitors.
By Justin Cotton, Partner, Lovegrove Solicitors
justin@lclawyers.com.au
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© Lovegrove Solicitors 2014
