Posted on January 14, 2024 by Frances Tse and Lindsay Taylor 3

Overview of Revised NSW Local Planning Agreements Practice Note

The Department of Planning and Environment is publicly exhibiting a document titled ‘Local infrastructure contributions practice notes‘ (Draft VPA Practice Note) as part of its set of new infrastructure contribution practice notes. The Department is seeking feedback until Friday 23 February 2024.

The Draft VPA Practice Note will be made by the Planning Secretary under s203(6) of the Environmental Planning and Assessment Regulation 2021 and, once made, will replace the existing Planning Agreements Practice Note – February 2021 (2021 VPA Practice Note).

As is currently the case, local councils proposing to negotiate and enter into planning agreements under section 7.4 of the Environmental Planning and Assessment Act 1979 (NSW) will be required to consider the new practice note. The same requirement does not apply to other planning authorities, such as the Minister for Planning and Public Spaces, when negotiating and entering into planning agreements.

The Department’s website states that the Draft VPA Practice Note has been written primarily to assist councils although it can be considered by other planning authorities.

The Draft VPA Practice Note appears as webpages on the NSW Planning Portal and is organised into the following modules.

1.  Using planning agreements
2.  Council policies and procedures for planning agreements
3.  Negotiating and entering into planning agreements
4.  Notifying planning agreements

There is also a downloadable PDF version of the practice note on the Department’s website.

Using planning agreements 

This module sets out the legislative requirements, policy positions and best practice guidance to local councils for using planning agreements.

It emphasises that before starting to negotiate planning agreements, councils should determine that it is the best mechanism to deliver the required infrastructure.

The draft practice note sets out the base policy positions for using planning agreements including the acceptability test which is unchanged from the 2021 VPA Practice Note. However, it expressly allows councils to adopt additional policy positions in their planning agreements policies.

The best practice guidance covers matters such as how councils should consider planning agreements along with s7.11 contributions and s7.12 levies, how the role of planning agreements should be considered in connection with planning proposals and development applications, and how value capture should be considered.

In respect of value capture, the new practice note reiterates the statement in the 2021 VPA Practice Note that planning agreements should not be used primarily for value capture such as to exclusively capture land value uplift resulting from rezoning or variations to planning controls. However, it goes on to clarify that ‘For each planning agreement, council should consider the development and identify legitimate infrastructure requirements that may be delivered through the agreement to benefit the community‘. This suggests that so long as there are legitimate infrastructure requirements that can be identified, then the funding for them could be obtained using value capture in a planning agreement.

Council policies and procedures for planning agreements

The Draft VPA Practice Note states that ‘Councils should develop a policy detailing how it will use planning agreements‘ and sets out in detail the expectations of what such policies and procedures should include.

The Draft VPA Practice Note reiterates the statement in the 2021 VPA Practice Note that councils are strongly encouraged to publish a planning agreements policy and associated procedures concerning their use of planning agreements. It expressly acknowledges that the legislation does not mandate that councils prepare planning agreements policy but goes on to state that ‘councils are strongly encouraged to prepare them to ensure planning agreements are used in a transparent and certain manner, which is important to public interest and the integrity of the planning system.’

These statements coupled with the fact that councils are mandated by the Regulation to consider the practice note when negotiating and entering into planning agreements suggests that a council’s legal obligation is to conscientiously consider adopting a planning agreements policy that is consistent with the practice note and not depart from that guidance without good reasons.

The Draft VPA Practice Note expressly states that ‘The planning agreement policy does not need to reproduce the requirements set out in the legislation or the contents of this practice note.’  Amongst other things, it requires planning agreements policies and procedures to:

• demonstrate and detail how councils will consider and determine various aspects of the negotiation and use of planning agreements,
• include templates,
• include clear step-by-step procedures of how a council will negotiate a planning agreement, and
• include council’s preference for various aspects of a planning agreement.

The Department clearly expects for there to be minimal need for lengthy negotiations once a council adopts a planning agreement policy.

A notable difference between the 2021 VPA Practice Note and the Draft VPA Practice Note is that the new practice note no longer discusses the Department’s position on security and registration of a planning agreement on title. It leaves those matters up to each council to specify in their planning agreements policy.

Negotiating and entering into planning agreements

This module of the Draft VPA Practice Note sets out the legislative requirements, policy position and best practice guidance on the procedure for negotiating and entering into planning agreements.

The draft practice note expressly states that planning agreements must be voluntary. It also includes some best practice guidance on the negotiation process which was not previously included in the 2021 VPA Practice Note such as recommending that parties should have an agreed dispute resolution path defined so that disputes during the negotiation process can be effectively managed. All such procedures should be documented in the council’s planning agreements policy and procedures.

Notifying planning agreements

This module sets out the legislative requirements, policy position and best practice guidance on public notification of planning agreements.

Within this module are the requirements for the explanatory note to a planning agreement which must be considered by the parties when preparing the explanatory note as required under s205(2) of the Environmental Planning and Assessment Regulation 2021.

Like the 2021 VPA Practice Note, the Draft VPA Practice Note refers to re-notification of planning agreements in certain circumstances. The Draft VPA Practice Note also clarifies that although councils are only required to publicly notify draft planning agreements, the best practice is to formally exhibit the planning agreement which includes accepting and considering public submissions.

Conclusion

The Department’s website states:

‘The practice notes have been rewritten to modernise the guidance and make them easier to use. The updates include simplifying the language, expanding on best practice guidance and providing worked examples.’

In our view, the Draft VPA Practice Note does achieve this. That said, compared to the 2021 VPA Practice Note, the new practice note places more emphasis on the planning agreements policy of each council.

If you would like to discuss any aspect of this article, please don’t hesitate to contact Dr Lindsay Taylor or Frances Tse.