The tit-for-tat between State and Local Government over infill development has stepped up in recent months with attacks on the viability of many apartment projects which have been approved via the State administered Development Assessment Panel (DAP) process.
Some inner city metropolitan local governments have recently advised developers who have received development approval via the DAP process that they will be imposing a condition on any future built-strata subdivision applications requiring them to pay a "cash in lieu" of public open space contribution.
The amount of money sought is equivalent to 10 per cent of the value of the underlying land. The figure is derived from State policy aimed at greenfield land subdivisions in circumstances where there is no existing population, no existing development, and no existing public open space in a locality. This is obviously materially different to a situation where development is occurring in older suburbs, with existing populations, and existing public amenities.
The attempt by some local governments to extract a payment at the point when construction is complete and when costs for developers are at their most extreme, has the potential to cause many developers to face insolvency unless the condition is removed.
In many cases, the imposition of such a condition by local government can be challenged by developers on the basis that it is unlawful.
Here's why.
In considering an application for built-strata subdivision, a local government is required to either approve, refuse or approve with such conditions as the local government thinks fit. However, the power to impose conditions on an approval is not limitless.
Test for validity of planning conditions
The legal test for the validity of a planning approval condition is known as the Newbury Test, which arose out of a UK case and has been accepted in Australia.
In summary, the Newbury Test provides that a condition is valid if it:
a) has a planning purpose (Element 1);
b) fairly and reasonably relates to the development (Element 2); and
c) is not so unreasonable that no reasonable planning authority could have imposed it (Element 3).
Understanding the nuances of the Newbury Test as it should be applied in Western Australia is critically important in determining whether a condition requiring cash in lieu of public open space can lawfully be imposed on built-strata subdivision.
Western Australia's Court of Appeal has ruled that the three separate elements of the Newbury Test must each be satisfied independently for a condition to be validly imposed.
The Court of Appeal has also clarified that when it comes to Element 2, a development must actually cause a change before a condition can be imposed in order to mitigate, manage or address that change.
Apartment buildings already exist at the point of built strata subdivision and title creation, and as a result, those same apartments could still be used as apartments without the act of subdivision and the issuance of separate titles.
In other words, the act of subdivision in a built-strata subdivision context does not change anything on the ground or cause an increased demand for public open space. The construction is complete and a built-strata subdivision won't change the physical characteristics of the development or the number of persons who could occupy the development.
While there is a single historical case from the State Administrative Tribunal in support of the local government position to impose such a condition, this single case can easily be distinguished as the applicant in that matter was not legally represented and the decision was determined prior to clarification of the Newbury Test by the Court of Appeal.
Property developers who receive a subdivision or planning approval with questionable conditions should seek advice from experts in planning and development law.
