Shelf life of a planning permit: the effect of changing market forces

By David Passarella, Partner, Hannah Wilson, Lawyer, and Miranda Clark, Law Graduate

The Windsor Hotel and One Queensbridge, both of which have featured in the media recently in relation to extending time on their respective planning permits, are timely reminders of the complex and uncertain nature of extension applications. In particular, it would seem that the role of market forces and changing economic conditions are not necessarily afforded the consideration that they deserve.

Relevant considerations

A standard permit is generally issued on a ‘2 x 2 basis’, with two years to start development and two years to complete development. Such restrictive timelines are often unfeasible for major central city developments. This is especially so in the current climate, where residential sales are lower and project funding is becoming increasingly difficult to secure.

Section 69 of the Planning and Environment Act 1987 (the Act) allows an owner or occupier of land to ask the responsible authority for an extension of time:

  • if the development has not commenced, before the permit expires or within 6 months of the expiration date; or
  • if the development has lawfully commenced, but not been completed before the permit expires, within 12months of the expiration date.

Whether or not an extension is granted should ultimately depend on the responsible authority’s assessment of the particular circumstances. However, historically, decision-makers have been reluctant to depart from the principles outlined in Kantor v Murrindindi Shire Council[1] (Kantor). The Supreme Court in Kantor identified a number of key factors that a responsible authority may rightly consider when there is a request for an extension of time. These considerations include:

  • whether there has been a material change to the relevant planning controls or planning policy since the permit was granted;
  • whether the landowner is seeking to ‘warehouse’ the permit;
  • intervening circumstances as bearing upon grant or refusal;
  • the elapsed time and whether the time limit originally imposed was adequate;
  • the economic burden imposed on the permit applicant if the extension was rejected; and
  • the probability of a permit issuing should a fresh application be made.

The list of principles identified in Kantor is neither exhaustive nor definitive and was intended to provide mere guidance on matters which may be taken into consideration by a decision-maker.[2] The Court emphasised that what might be relevant to an extension application ‘undoubtedly requires the closest attention to the facts of the particular case.’

The current climate

As a result of recent market trends, many developers are finding themselves in positions where, in some circumstances, from an economic perspective, it makes no sense to act on their permits.

There should be a clear distinction drawn between developers timing projects according to market demand and ‘warehousing’ permits.  ‘Warehousing’ has been interpreted as obtaining permits ‘with no intention of acting on them in the foreseeable future’, often evidenced by a developer ‘sitting on its hands’ and doing nothing for a prolonged period of time.[3] However, in practice, it’s not uncommon for a responsible authority to refuse to extend a permit on the basis of warehousing, simply because an applicant has applied for more than one extension.

In a 2013 decision of the Victorian Civil and Administrative Tribunal,[4] the applicant sought an extension of time to a permit for a staged residential subdivision, relying on the global financial crisis and poor local market conditions as reasons for why the permit had not been acted upon. It was argued by the applicant that the downturn in market forces was an ‘intervening circumstance’ that the responsible authority should have regard to when making its decision. However, the Tribunal ultimately determined that the applicant had made ’commercial choices’ and upheld the Council’s decision to refuse the extension.

We think it’s important for decision-makers to look beyond the matters outlined in Kantor and examine each individual applicant’s reasons for not commencing or completing its development, whichever the case may be. If a permit holder advances legitimate market or funding related reasons for seeking an extension of time, we consider the decision-maker should seriously deliberate these factors as being pertinent to the particulars of the case.

A cause for change

In an ever-changing property market, it is crucial that reasonable and realistic timeframes are included in permits from the outset. That being said, there will undoubtedly be instances where applying for an extension of time is unavoidable.

While the principles in Kantor are a good starting point, it is important to remember that it is not an exhaustive list. With an assessment of the particular circumstances of a case being paramount, our view is that there is certainly scope to broaden the relevant factors in Kantor, so that market demand and commercial realities are given appropriate consideration.

 

 

[1] (1997) 18 AATR 285.

[2] Hotel Windsor Holdings Pty Ltd v Minister for Planning [2014] VCAT 993, [9]; JB & DP Milgate Property Pty Ltd v Hobsons Bay CC [2015] VCAT 1167, [15]-[16].

[3] A Genser and Associates (Aust) Pty Ltd v Yarra CC [2004] VCAT 2640, [30].

[4] Middle Creek Properties Pty Ltd v Wodonga CC [2013] VCAT 258.

For further information, please do not hesitate to contact us.

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