The NSW Department of Planning, Industry and Environment has released its ‘Planning Agreements Practice Note’ dated April 2020 (Draft Practice Note) for public comment. The Department has also released a draft Ministerial Direction which (if made) will require local councils to have regard to the Practice Note when negotiating or preparing a planning agreement.

The effect of this is that the Draft Practice Note may be given considerable weight by local councils in their approach to the negotiation of planning agreements with developers. This may present challenges for developers in circumstances where the Draft Practice Note places greater emphasis on planning agreements aligning with, and complementing, strategic land use and infrastructure policies, and other contribution plans. While those objectives have merit, it may inherently create risks of delay and reduced flexibility for planning agreements.

The Draft Practice Note also seeks to place constraints on the approach of local councils to value capture, by introducing a principle that value capture should not be the primary purpose of a planning agreement. There is a question around whether that goes far enough to protect developers – particularly in the context of planning proposals for rezoning and variations to planning controls.

It will be important for developers to consider the risks and opportunities presented by the Draft Practice Note – as it is likely to guide local councils and the Department’s approach to this critical development tool for a considerable period of time (noting that it replaces the previous ‘Practice Note – Planning Agreements’ that was issued by the Department back in July 2005).

Key Changes

The key changes proposed by the Draft Practice Note include:

• Section 2.1 Fundamental Principles - Greater nexus with strategic land use and infrastructure planning, including that ‘Planning agreements must be underpinned by proper strategic land use and infrastructure planning carried out on a regular basis and must address expected growth and the associated infrastructure demand’. Also introduces a new principle that ‘value capture should not be the primary purpose of a planning agreement’;
• Section 2.2 Public Interest and Probity Considerations – List of examples where planning agreements may produce undesirable outcomes contains new infrastructure planning scenarios including where ‘A planning authority has not undertaken appropriate infrastructure planning as part of strategic land use planning, resulting in growth being poorly aligned with infrastructure planning and funding, infrastructure demand and costs relating to infrastructure operation’;
• Section 2.3 Value Capture – seeks to deal more squarely with the issue of value capture by providing that ‘planning agreements should not be used explicitly for value capture in connection with the making of planning decisions’;
• Section 2.6 Policies and Procedures - requirements for councils to align planning agreements with their local, district and regional strategic plans and policies – and to consider how the planning agreement will fit within those boarder land use planning policies, goals and strategies;
• Section 3.1 When to use planning agreements – identifies that planning agreements should complement contributions plans, and ‘should not be used as de facto substitutes for contributions plans’;
• Section 3.2 Land Use and Strategic Infrastructure Planning – emphasis on planning agreements ‘supporting’ broader strategic infrastructure planning, including a requirement for the priorities and infrastructure needs for an area that are identified in local strategic planning statements to ‘be reflected in planning agreements that demonstrate a comprehensive approach to infrastructure planning and funding’;
• Section 4.4 Security for enforcement/registration on title – more detailed guidance on mechanisms for security for enforcement and registration on title (including circumstances when the notation of the planning agreement on the title to land can be removed);
• Section 4.5 Public participation and notification – introduces a threshold test for renotification of any amendment to proposed planning agreement after public notification. This includes whether the proposed changes would ‘materially affect’, among other matters, whether ‘a non-involved member of the community would have made a submission objecting to the change if it had been publicly notified’;
• Part 5 Examples of the use of planning agreements – new example of using planning agreements to fund the recurrent costs of habitat protection under the Biodiversity Offsets Scheme, or the implementation of a biodiversity stewardship agreement on the land.

Next Steps

The last date for submissions in relation to the Draft Practice Note is Friday 12 June 2020.

Please contact us if you would like to discuss the potential implications of the Draft Practice Note for your business - or require any assistance with the drafting of a submission to the Department.