Essential Guide to Planning Agreements

The latest edition of our Essential Guide to Local Government Law will assist local councils to understand the benefits and requirements which apply to the making of a planning agreement under the Environmental Planning and Assessment Act 1979 (EPA Act).

What is a Planning Agreement?

A planning agreement is a written agreement between a planning authority (such as a local council) and a developer who has sought a change to an environmental planning instrument (EPI) or who has made or proposes to make a development application in which the developer agrees to make contributions to the authority (or who is associated with someone who has).

Although it is described as an agreement, a planning agreement usually takes the form of a deed, because the developer is making contributions but is not usually receiving any consideration in return.

A high degree of transparency is required under the EPA Act throughout the planning agreement process including mandatory public notification of the draft agreement and a ‘plain English’ explanatory note. These steps are designed to preserve the integrity of the development and planning proposal assessment processes. A developer who offers to enter into a planning agreement will want the planning authority to consider its offer when evaluating its planning proposal or development application (which is permitted under the EPA Act).[1] It is therefore important that the public can see what additional benefits the developer is offering to provide to reduce the risk of bias or of irrelevant matters being taken into account in the assessment process. Planning authorities should not place disproportionate weight on the benefits to be obtained under a planning agreement when considering the merits of a development application or a proposal to amend an EPI.[2]

Councils should be careful to ensure that, where the circumstances described above exist, they follow the prescribed process for the making of planning agreements and do not enter into agreements that have a similar effect outside that regime. Considering such agreements in the development assessment process may result in a development consent being found to be invalid.[3]

What are the benefits of a Planning Agreement?

A developer will often offer to make contributions as part of the process of seeking a change to an EPI or preparing a development application as a way to reduce potential impacts of development on the community.

A broad range of contributions can be obtained by a planning authority under a planning agreement. Common forms of contributions that are provided under voluntary planning agreements (VPAs) include (but are not limited to):

• the dedication of land free of cost, which can include land outside the scope of the land to which the relevant application relates.
• the payment of one or more monetary contributions. These can be in addition to development contributions and can exceed the development contribution cap amount. Provision can also be made in a planning agreement for monetary contributions to be reviewed and adjusted according to cost revisions as well as adjusted for inflation.
• the carrying out of works, such as the construction or upgrade of roads, stormwater infrastructure, playgrounds and community facilities, environmental works etc

Planning agreements therefore provide a flexible mechanism by which a willing developer can make contributions of a type or value which the planning authority could not require the developer to provide by other means. There does not need to be a strong connection between the proposed development and a monetary contribution or the works to be undertaken under a planning agreement, although the existence of some nexus between the two makes it less likely that the agreement might be seen as an attempt by the developer to ‘buy’ a development consent.[4]

What information must be included in a Planning Agreement?

The EPA Act requires that the following information be included in a planning agreement:[5]

1. a description of the land to which the agreement applies,
2. a description of:
   • the change to the environmental planning instrument to which the agreement applies, or
   • the development to which the agreement applies,
3. the nature and extent of the provision to be made by the developer, the time or times by which the provision is to be made and the manner in which the provision is to be made,
4. in the case of development, whether the agreement excludes (wholly or in part) or does not exclude the application of sections 7.11, 7.12 or 7.24 to the development,
5. if the agreement does not exclude the application of section 7.11 to the development, whether benefits under the agreement are or are not to be taken into consideration in determining a development contribution under section 7.11,
6. a mechanism for the resolution of disputes under the agreement,
7. the enforcement of the agreement by a suitable means, such as the provision of a bond or guarantee, in the event of a breach of the agreement by the developer.

A planning agreement cannot exclude the application of sections 7.11 or 7.12 of the EPA Act unless the consent authority for the development or the Minister is a party to the agreement. A VPA cannot exclude the application of section 7.24 of the EPA Act without the approval of the Minister.

The Regulations also prescribe the matters which must be addressed in the explanatory note for the agreement.[6] This includes a summary of the objectives, nature and effect of the proposed agreement and an assessment of the merits of the proposed agreement, including the positive and negative impacts on the public or a relevant section of the public.

Councils are required to keep a public register of planning agreements in accordance with section 206 of the Environmental Planning and Assessment Regulation 2021.

How are Planning Agreements enforced?

A planning agreement must include a suitable mechanism for its enforcement. The “suitability” of a proposed enforcement mechanism should be assessed by reference to whether the means of enforcement is likely to eliminate or reduce, to a commercially acceptable level, the risk that the obligation created by the agreement will not be performed and that the planning authority or the community will not receive the intended benefits.[7]

Common enforcement mechanisms include bonds and guarantees. A bond provides financial security by giving the planning authority access to money which it can use to fulfil a payment obligation or to complete works if a developer is unable or unwilling to do so. A deed of guarantee operates by requiring another entity to guarantee that it will fulfil the developer ’s obligations under the planning agreement if the developer is unable or unwilling to do so.  Alternative types of security could include registering the planning agreement on the title to the land or a combination of security options such as providing a bond and registering the agreement, or providing a bond and deed of guarantee from a related or parent company. An assessment as to what enforcement mechanism is ‘suitable’ should be made on a case-by-case basis.

In addition to calling on the enforcement provisions included in the planning agreement, a planning authority can enforce compliance with a planning agreement by:

1. requiring contributions to be made as a condition precedent to the issue of a subdivision certificate under s.6.15(1)(d) of the EPA Act, or
2. following the dispute resolution mechanisms in the agreement, or
3. seeking an order for compliance under s.9.45 of the EPA Act by commencing civil enforcement proceedings in the Land and Environment Court of NSW.

Practice Note

Local councils are required to consider any relevant practice note issued by the Planning Secretary when negotiating or entering into a VPA.[8]  The practice note currently in force is the  Planning Agreements Practice note – February 2021, which sets out important guidance to councils on matters relating to the preparation, making and amendment of planning agreements.