By Aaron Gadiel, Partner

The NSW Land and Environment Court has handed down a new decision that clarifies how land can be dedicated to a local council — without a planning agreement —as part of a development application.

Since the inception of the modern planning system, drainage reserves, public reserves and public roads have been dedicated to local councils, as a matter of course, as part of the process of registering a plan of subdivision.

This longstanding practice was called into question by a decision of the Land and Environment Court in December 2021, known as L & G Management Pty Ltd v Council of the City of Sydney [2021] NSWLEC 149.  A new decision, handed down last month, helps clarify the situation.

The decision in L&G Management

In L & G Management, the Court was dealing with a development application that sought to take advantage of a floor space ratio incentive in a local environmental plan.  A prerequisite for the availability of the extra gross floor area was the provision of ‘community infrastructure’.  (The site in question was at Green Square, but similar clauses appear in Burwood, Penrith, Randwick and Warringah local environmental plans.)

‘Community infrastructure’ was defined to include development for the purposes of public roads (among other things).

In L & G Management, the developer proposed to provide a public road by providing land for the purposes of footpath widening along the Botany Road frontage of the site.  However, the local council argued that the only lawful means by which the footpath could be dedicated to the local council (as a public road) was via a planning agreement.  The local council and the developer had not agreed on a planning agreement for the development (despite the developer having made offers to enter into a planning agreement, which included dedication of the land to Council).  For this reason, the local council said that there was no legal power for the development application to be approved.

The Court accepted the local council’s argument .  It said that the sole legal basis to require development contributions (that comprised the dedication of land free of cost) was contained in:

• ‘section 7.11. of the Environmental Planning and Assessment Act 1979 (the EP&A Act); and
• the planning agreement regime — when an applicant has offered to enter into a planning agreement.

The Court also did not accept the developer’s alternative argument that a development consent condition could be imposed requiring a plan of subdivision to be registered for the purpose of conveying the dedication of land for the public road, in the absence of an offer to enter into a planning agreement.

This decision created two difficulties.

Firstly, it increased the leverage of local councils in discussions about development applications — where the applicant was reliant on ‘community infrastructure’ provisions of this kind.  This is because, if the local council did not like the development (perhaps unreasonably) it could say that it would refuse to enter into a planning agreement.  The council could then argue that the incentive provisions for extra floor space would simply not be legally available in any merit appeal to the Land and Environment Court.  (The Court does not have the power to force a local council to enter into a planning agreement, even when there is a merit appeal for a related development application.)

Secondly, it created uncertainty as to whether the age-old practice of extending the urban footprint was lawful. Almost every day, development consents are granted for plans of subdivision that create (and dedicate on registration) new public roads, public reserves and drainage reserves.   Since this decision, we have found that some local councils (when it suits them) insist that a plan of subdivision (which provides for the dedication of land) cannot proceed unless the developer also enters into a planning agreement.  As many developers will know, a planning agreement can often include (at the insistence of a local council) unreasonable requirements.  Once a developer is forced into a planning agreement pathway, they will often find the delay caused by  — and the terms of — the planning agreement very expensive.

The decision in Urban Apartments

The situation has now been clarified by a decision of the Court handed-down last month.

In Urban Apartments Pty Ltd v Penrith City Council [2023] NSWLEC 1094 the developer was also seeking to take advantage of incentive provisions in a local environmental plan that would have permitted extra gross floor area.  As in L & G Management, the extra gross floor area was only available if ‘community infrastructure’ was provided.  The developer sought to provide community infrastructure by way of a new public road and a recreation area.  There was no offer to enter into a planning agreement.

In Urban Apartments the Court accepted that land could be dedicated as a public road, on the registration of a plan of subdivision, under section 9 of the Roads Act 1993.  This means that a development application for a subdivision could put forward the dedication of land as a public road, provided that the draft plan of  subdivision bore a statement of intention to dedicate specified land as a public road.  A planning agreement (or a development contribution condition under ‘section 7.11’) was not required.

In our view, this also means that the dedication of land as public reserves and drainage reserves can be effected in the same way — under section 49 of the Local Government Act 1993.  This provision operates in a very similar way to section 9 of the Roads Act 1993.

The bottom line

There has been a period of uncertainty since December 2021. Local government has (in some circumstances) been saying that a planning agreement was required for unexceptional land dedications as part of a subdivision.

Local government may have also perceived that it had a greater ability to block developers from a genuine merit review of development applications that involve the dedication of land (because of a supposed requirement that a planning agreement must be entered into).

However, the decision in Urban Apartments clarifies that long-standing arrangements for the opening of public roads (and therefore, by inference, the dedication of public reserves and drainage reserves) continue to be available without the need for a planning agreement.