Posted on January 23, 2019 by Anna Sinclair and Sue Puckeridge

Land Rating – When is land used ‘for’ residential accommodation?

A recent decision of the NSW Court of Appeal deals with whether land being developed for the purpose of residential apartments can be categorised as ‘residential’ for rating purposes under s516 of the Local Government Act 1993 (LG Act).

This decision is important for local councils and developers as it overturns the law as pronounced previously by the Land and Environment Court (LEC) and may significantly increase the amount of rates payable by developers during the construction phase of residential buildings.

Unfortunately, the case does not resolve the question of whether a Council has the power to refund the overpayment of rates.


Section 516 of the LG Act relevantly prescribes that land is to be categorised as residential if it is a parcel of rateable land valued as one assessment and:

‘(a) its dominant use is for residential accommodation (otherwise than as a hotel, motel, guest-house, backpacker hostel or nursing home or any other form of residential accommodation (not being a boarding house or a lodging house)  prescribed by the regulations)…’

A number of Karimbla Properties companies (Karimbla), which are part of the Meriton Group, applied to the LEC challenging the business rating categorisations of twelve development sites determined by the City of Sydney, Bayside City Council and North Sydney Council.

Karimbla sought orders to change the rating categorisations from ‘business’ to ‘residential’ and refunds from the Councils for the overpayment of rates.

The primary judge affirmed and applied the decision of Meriton Apartments Pty Ltd v Parramatta City Council [2003] NSWLEC 309, determining that as the ultimate use would be ‘residential accommodation’, once the erection of buildings for that use commences, the dominant use of the land during this period was also for residential accommodation.  The land was therefore to be categorised for rating purposes as for ‘residential accommodation’.

The primary judge further found that the LEC had the necessary power and jurisdiction to order the Councils to repay to Karimbla any rates paid under the categorisation of its land as ‘business’, which was up to $1M per site.

The Councils appealed the decision to the NSW Court of Appeal.

Court of Appeal proceedings

When is the use of land for ‘residential accommodation’?

The Court of Appeal was required to determine the meaning of the words ‘its dominant use for residential accommodation’, and particularly the meaning of the word ‘for’.

The City of Sydney and Bayside Council argued that the dominant use of the properties was ‘for’ residential accommodation from the time an occupation certificate was issued, and when the apartments could be lawfully occupied.  North Sydney Council submitted that it was when the properties were physically used as residential accommodation. Karimbla submitted that the dominant use of the land was for residential accommodation once the erection of the apartments had commenced.

The majority of the Court of Appeal accepted the City of Sydney and Bayside Councils’ construction of s516(1)(a).

Emmett AJA (with McColl JA agreeing) found that the concept of ‘use’ of land being for ‘residential accommodation’ signifies a present use. During the period that land is in the development phase, it is not being used for ‘residential accommodation’. The determination of the use of land requires a focus on physical acts in relation to the land, as opposed to a more general inquiry into purpose.

White JA found that the exclusions and exceptions in ss516(1) and 516(1A) of the LG Act indicate that the reference to land being used ‘for residential accommodation’ is to be understood as land being used ‘as residential accommodation’.  Land is only used ‘as’ residential accommodation once a building, or apartments within a building are actually occupied.

Powers to require a refund of the overpayment of land rates 

A further issue raised in the appeal was whether s527 of the LG Act provided a statutory right for recovery or repayment of overpaid rates, and whether the LEC had the power to order refunds for the overpayment of rates.

Emmett AJA indicated that by reason of ss527, 546 and 602 of the LG Act, if a change in the category of land results in a lower rate being payable, any instalments paid at the higher rate will be taken into account for any future amounts payable.

His Honour further stated that there are cogent reasons to conclude that s527 does not create any right or cause of action for a refund or repayment of rates, where the rates had been paid voluntarily without protest under a lawful rate notice. However, as this question did not arise in this case, His Honour did not consider this issue further, or the issue of whether the LEC had the power to order refunds for the overpayment of rates.


Land categorised as ‘business’ generally incurs higher rates than land categorised for ‘residential accommodation’.  Therefore, the holding costs for land being developed for residential accommodation will increase.

In light of the Court of Appeal’s comments, it is arguable that Councils do not have the power to refund an overpayment of rates, although the amount overpaid can be applied to reduce the subsequent amounts due. However, given the Court of Appeal’s failure to deal with the issue, and the primary judge’s position, the law is not clear on this point.

Read the case here in full: Bayside Council v Karimbla Properties (No 3) Pty Ltd [2018] NSWCA 257

Should you wish to discuss the issues raised in this post, please contact Sue Puckeridge, Partner on 8235 9702.