A planning agreement (VPA) is a voluntary contractual arrangement between a developer and one or more planning authorities, regulated under sections 93F to 93L of the Environmental Planning and Assessment Act 1979 (EP&A Act). These provisions were included in the EP&A Act in 2005 to enable planning authorities to achieve developer funding for public infrastructure, amenities and services necessary to support new development in metropolitan and regional growth areas and established urban areas.
Concerned about potential community exposure to “planning harm”,1 and the misuse of VPAs by planning authorities, particularly local councils, on 4 November 2016 the Minister for Planning (Minister) announced changes would be made to VPAs as part of the reform proposed to the NSW planning system. The changes will seek to create more transparency and accountability around the negotiation of and entry into VPAs, protect the probity of the VPA bargaining process and ensure development contributions delivered under VPAs are relatable to the development or the planning proposal.
In this case note, we summarise three draft policy documents released by the Department of Planning and Environment (DPE) which outline the proposed changes to VPAs.
VPAs are used widely in the NSW planning system as a tool for delivering infrastructure and public benefit outcomes in connection with planning proposals or development applications, which go beyond the scope of either section 94 development contributions or section 94A fixed development consent levies.
Legitimate objectives of VPAs include meeting the demand created by development for public infrastructure, amenities and service or compensating their loss, prescribing the nature of development to achieve specific planning objectives, or securing off-site planning benefits for the wider community so that the development delivers a net community benefit.
It appears that the changes in part stem from industry concerns around councils adopting policies that determine development contributions on the basis of the value uplift associated with a planning proposal to rezone land. These policies are then typically implemented through a VPA.
For example, Hornsby Shire Council has a policy of seeking to capture 70 per cent of the land value increase resulting from a change to planning controls.2 Parramatta City Council, Waverley Municipal Council, Woollahra Municipal Council and the former Leichhardt Council (now the Inner West Council) seek to capture up to 50 per cent of the value uplift.3
Proposed changes to VPAs
The Secretary of the DPE may from time to time issue practice notes to assist parties in the preparation of planning agreements.4 When issued, the Practice Note revokes and replaces the previous Practice Note issued by the former Department of Infrastructure, Planning and Natural resources in July 2005.
The DPE has released the following draft documents for public submissions:
- a Ministerial direction to planning authorities on principles to be followed in negotiating VPAs under section 93K of the EP&A Act (Ministerial Direction);
- a revised practice note setting out key principles of VPAs and best practice in their use and administration (Practice Note); and
- a planning circular, providing advice on ensuring planning proposals consider infrastructure needs and options for funding (Planning Circular).
The Ministerial Direction provides that local councils must have regard to Parts 2 and 3 of the Practice Note, when negotiating or preparing a VPA. Planning authorities, particularly local councils, are being asked to publish policies and procedures concerning their use of VPAs. These publications are expected to align with the values expressed in the Practice Note, and go further than a formulaic attempt at formal compliance with the Practice Note.
Principles for the use of VPAs
Part 2 of the Practice Note sets out fundamental principles which planning authorities should follow, public interest and probity considerations and a best practice policy on the use of VPAs. In brief, a planning authority should ensure that:
- VPAs are not be used as a means of revenue raising, to overcome spending limitations, or for other improper purposes;
- VPAs do not secure public benefits which are unrelated to the development;
- the interests of individuals or interest groups do not outweigh the public interest;
- when considering a planning proposal or development application, a local council does not take into account a wholly unrelated VPA or attribute disproportionate weight to a VPA;
- the benefits under a VPA are not provided in exchange for a variation from a development standard under clause 4.6 of a standard LEP instrument; and
- appropriate safeguards are put in place, to avoid the misuse of VPAs.
Safeguards applying to the use of VPAs should include:
- a generally applicable test for determining acceptability, requiring that a VPA be directed towards a legitimate planning purpose identifiable from statutory planning controls and other planning policies which apply to the development, provide a public benefit which is related to the development and produce outcomes that meet public expectations;
- published policies and procedures which deal with all aspects of the use of VPAs, including the method for valuing public benefit, planning objectives sought to be promoted by the use of VPAs and the circumstances in which a planning authority ordinarily considers entering into one;
- specific measures to protect the public interest and prevent misuse of VPAs, which ensure regulatory independence of the planning authority and that fairness is afforded to all parties; and
- effective, formalised public participation, including providing consultation material in addition to an explanatory note.
Procedure and decision making
Part 3 of the Practice Note deals with procedures and decision making for VPAs. It sets out:
- what should constitute an offer to enter into a VPA;
- the speed, predictability and transparency with which negotiations should take place;
- how independent third parties should be called on where appropriate (such as where independent assessment or special expertise is required);
- how standard form VPAs should be preferred, to expedite negotiations, ensure predictability and minimise costs;
- how costs should be decided and GST considerations made early to avoid surprises;
- guidance as to how registration of VPAs should ideally be dealt with; and
- what is considered best practice in relation to security for enforcement, monitoring and discharge of a developer’s obligations under a VPA.
The Planning Circular concerns the use of VPAs in connection with the consideration of planning proposals. It identifies inappropriate uses of VPAs, such as if a planning proposal is assessed based on the financial outcome achievable through a VPA, or if a planning authority refuses to make a gateway determination because a VPA related to land value uplift has not been offered, and encourages the adoption of a plan or policy outlining infrastructure objectives, to improve transparency.
The draft documents are on exhibition for public submissions until 27 January 2017. If you would like further advice regarding the impacts of the proposed changes to VPAs, or assistance with making a submission, please contact Peter Holt, Special Counsel in our Planning and Environment team.
Author: Rebecca Hiscock
Joseph Monaghan, Partner
T: +61 3 9321 9857
Breellen Warry, Partner
T: +61 2 8083 0420
Peter Holt, Special Counsel
T: +61 2 8083 0421
Gerard Timbs, Partner
T: +61 7 3135 0644
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.
 Department of Planning and Environment, Planning Agreements (draft practice note, November 2016) page 10.
 Hornsby Shire Council, Policy on Planning Agreements (adopted 1 November 2007).
 See Parramatta City Council, Parramatta CBD Planning Strategy (adopted 27 April 2015) p 18; Waverley Municipal Council, Planning Agreement Policy (adopted 7 October 2014) p 15; Woollahra Municipal Council, Draft Woollahra Voluntary Planning Agreement Policy (8 February 2016) p 19; Leichhardt Council, Voluntary Planning Agreements Policy (adopted 11 August 2015) p 15.
 Environmental Planning and Assessment Regulation 2000 cl.25B(2).