There is a lot of noise about ‘value capture’ at present. One of the current NSW legal mechanisms for value capture in NSW sits within the framework for Voluntary Planning Agreements (VPA) set out in the Environmental Planning and Assessment Act 1979 (EP&A Act). These agreements have in some cases been used by Planning Authorities to capture a share of an uplift in land value as a result of the Planning Authority’s activities improving the development potential of a site (eg through up-zoning).

While value capture is generally being used in a positive sense in the context of creating funding for new infrastructure, it is also important to note that the VPA framework has also been noted for the perception of bribery it can generate. For example, ICAC commented in 2012 that:

With most NSW councils facing infrastructure funding problems, this power [to enter VPAs] provides an opportunity for a developer to make their noncompliant or controversial development more acceptable by proposing a generous VPA that would provide money for current or proposed council infrastructure. The perception could arise that a developer bribed a council to facilitate a favourable decision.

The courts have not heard any cases along these lines – since the introduction of VPAs into the EP&A Act, there have only been a few cases which have directly dealt with VPAs, including Progress & Properties v Burwood Council [2008] NSWLEC 1178 (which this author was involved in), and other cases like Sweetwater Action Group Inc v Minister For Planning [2011] NSWLEC 106. However, there have been two cases this year which have, in an indirect way, considered the use of VPAs and the implications of not using them where uplifts in Floor Space Ratios (FSRs) are sought.

In Moskovich v Waverley Council [2016] NSWLEC 1015, a residential flat building in Bondi was approved by the court where there was a significant increase (633sqm) in the floor space ratio (FSR) above the maximum FSR permitted. This decision is of principal importance to the use of clause 4.6 objections for the variation of applicable height and FSR controls, but the case is also relevant in the way the court disregarded the Council’s VPA policy and ignored the fact no VPA had been entered by the applicant. In this regard, the court’s decision referred to the Council’s fairly recent Planning Agreement Policy (2014) which according to the judgment ‘includes requirements for development applications which propose floor space above that permitted under cl 4.4 of the LEP’. Although not stated in the case, the policy sets out:

the value of 50% of the increase in net value to the development arising from an increase in FSR beyond WLEP 2012 provisions in clause 4.4 may be considered an appropriate contribution.

In other words, the Council’s guide to working out appropriate ‘value capture’ is to press for a 50% share of the FSR uplift obtained as a result of the breach of the planning control.

Despite the VPA policy, the Council did not contend that the application should be refused on the basis of the policy, and accordingly the court gave ‘little weight to the policy’. Instead, the court upheld the clause 4.6 variation for the exceedance above the FSR control in circumstances where there was no VPA.

In contrast to Moskovich, in Jubilee Properties v Warringah Council [2015] NSW LEC 1042 a planning agreement had been agreed with the Council involving contributions valued by the Council at $2,665,500. However, the court rejected the developer’s use of the VPA to justify a contravention of the development standards. Again, this was in the context of a clause 4.6 application which sought to demonstrate that the application of the development standard was unreasonable or unnecessary, and that there were sufficient environmental planning grounds to justify a contravention.

In this case, the proposed development exceeded the height control by more than doubling the permitted height of 24 metres, and part of the developer’s justification for the exceedance linked back to the public benefits associated with the VPA.

Despite the offer to enter the VPA and Council’s resolution agreeing to enter the VPA, the court placed ‘no weight’ on the VPA that had been offered. Commissioner Morris instead stated that:

consideration of environmental planning grounds must be limited to tangible controls that can be consistently applied across a locality. It does not extend to other extenuating circumstances that may give rise to other decisions in relation to built form.

The Commissioner also stated:

the VPA offer is not a mechanism by which a building height variation can be supported in this case, however, it would be a matter for consideration as part of the public interest under s79C of the EP&AAct.

The development application was refused by the court.

These cases demonstrate two things:

  • A VPA will not guarantee an uplift in FSR and one should not place too heavy a reliance on a VPA to support a clause 4.6 objection. Clause 4.6 objections need to be carefully drafted and justifications for an exceedance need to be looked at holistically.
  • The failure of a developer to offer to enter a VPA will not determine the fate of a clause 4.6 objection. It is possible a clause 4.6 objection can be satisfied even where a VPA is not offered.