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Maximum development consent period of 5 years is to apply to all developments

14 September 2010

On 26 May 2010 the Environmental Planning and Assessment Amendment (Development Consents) Act 2010 (Amendment Act) came into force. The Amendment Act, first introduced into the NSW Parliament on 22 April 2010, is intended to assist developers who are struggling in the wake of the Global Financial Crisis to commence approved developments before consent periods lapse.

What was the previous position?

Section 95 of the Environmental Planning and Assessment Act 1979 (the Act) provides that a development consent is valid for a maximum period of 5 years, however, a consent authority had the power to stipulate a consent period of between 2 and 5 years. A consent period is the period within which an approved development must be physically commenced, beginning from the date of the development consent.

It is possible for a developer to apply for a one-off extension of one year for a development consent which has been issued for a period less than the maximum period of 5 years.

How will the changes effect existing Development Consents?

The Amendment Act provides that all development consents granted with a consent period of less than 5 years, which were in force on 22 April 2010, are to be automatically extended to hold a 5 year consent period.

The Amendment Act effects all developments consents which were issued before and lapse after 22 April 2010. It does not apply to development consents which lapsed before 22 April 2010.

How will the changes effect new Development Consents?

The Amendment Act provides that new development consents issued by consent authorities between 26 May 2010 and 1 July 2011 must be issued with the maximum development consent period of 5 years. During this time consent authorities will not have power to grant consent periods of less than 5 years.

This period is able to be extended beyond 1 July 2011 by way of amendment to the Regulations.

If the period is not extended, consent authorities will once more be given the power to grant consent periods of less than 5 years after 1 July 2011. In this event the Regulations may be amended, if a future need arises, to once again provide an automatic extension to consent periods of less than 5 years.

What is meant by 'physically commenced'?

The Act provides that a consent for the erection of a building, the subdivision of land, or the carrying out of work, will not lapse so long as building, engineering or construction work is physically commenced on the land before the end of the consent period.

'Physical commencement' has been interpreted by the courts as a low threshold test, dependent on the facts in each case. The test is set out in Hunter Development[1] as all activities that involve relevant work, necessary for the building, engineering or construction of the approved development.

Tobias JA described the application of the test as follows:

That is not to say that any survey work, albeit of a physical nature, would so qualify. Simply entering land in respect of which a subdivision has been approved and knocking in one or two pegs would not, in my view, necessarily qualify. There is an element of fact and degree in each case... the requirement that the relevant work relate to the approved subdivision requires a real nexus between them. In particular, the concept that the work must be ‘physically commenced’, requires physical activity which involves an appearance of reality and which is not merely a sham. In other words, the relevant work must be more than merely notional or equivocal in that it must truly be work relating in a real sense to that which has been approved: cf Besmaw Pty Ltd (at 436 [111]).

What statutory changes are proposed to the definition of physical commencement?

The Amendment Act allows the Regulations to set out circumstances in which work is to be taken to have been 'physically commenced'.

There is no indication yet as to whether the Regulations, if amended, will adopt the test in Hunter Developments or establish a new regime, and whether any new test will increase the obligations placed on developers.