Negotiating and entering into a planning agreement
Local infrastructure contributions practice notes
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Councils should aim to have predictable, transparent, and accountable negotiation systems for planning agreements. This module covers the steps for councils in negotiating and entering into a planning agreement.
Legislative requirements
There are several legislative requirements around negotiating and entering into a planning agreements.
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A planning agreement must be voluntary. |
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There are certain circumstances where a planning agreement cannot be required.
Councils can require a planning agreement as a condition of consent, but only if an offer has been made and only if it requires a planning agreement that is in the terms of that offer. |
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A planning agreement cannot impose an obligation on a planning authority to grant development consent or make any change to an environmental planning instrument. |
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Planning agreements are void if they require or allow anything to be done that would breech provision under the EP&A Act, provisions under an environmental planning instrument or a development consent applying to the relevant land. |
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A planning agreement must include:
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A planning agreement can be registered to run with land if the relevant interested parties agree. |
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A planning agreement is not entered into until it is signed by all relevant parties. |
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An executed planning agreement must be in writing, signed by all relevant parties and published on the NSW Planning Portal and the council’s website. |
Policy positions
A planning agreement should be negotiated concurrently with the related planning proposal or development application
When possible, the planning agreement should be negotiated between the council and the developer before the related development application is determined or the local environmental plan giving effect to the planning proposal is made.
This will ensure the planning agreement best responds to the development application or planning proposal and allows the plan and the application or proposal to be exhibited alongside each other.
Receiving or making an offer to enter into a planning agreement
While there is no definition for what constitutes an offer in section 7.7(3) of the EP&A Act, an offer should be:
- in writing
- addressed to council
- signed by or on behalf of all parties except the council
- address in sufficient detail:
- the matters to be included in the planning agreement as required by section 7.4(3) of the EP&A Act
- matters required by the relevant council in their planning agreement policy and procedures
- any other key terms and conditions proposed for the planning agreement to allow proper consideration by the council.
Planning agreements are voluntary for all parties. Developers are not obliged to offer to enter into planning agreements, and councils are not obliged to enter into negotiations or accept an offer.
Best practice guidance
Governance, conflicts of interest and probity measures
Councils should establish procedures for governance and probity to ensure planning agreements are in the public interest. Generally, it is in the public interest for controls to be imposed fairly for the benefit of the community. In some cases, the public interest may be best served by mitigating the adverse impacts of development on the public domain or by providing a benefit to the wider community.
Negotiating planning agreements requires discretion on both sides. The negotiation should allow councils and developers to consider different values and varying ideas about public and private interests.
The ability for a planning agreement to exclude the application of other infrastructure contributions gives councils scope to prioritise the items of infrastructure that are most needed. This means that the financial, social and environmental costs and benefits of development can be redistributed through a planning agreement. While this is a key benefit of planning agreements, it also creates the risk that the redistribution won’t be in the public interest or consistent over time.
Governance and probity are particularly important for planning agreements because they are a negotiated outcome, so the risk of improper use or undesirable outcomes is greater. For example:
- the interests of individuals or small groups may outweigh the broader public interest
- there may be an imbalance of bargaining power between the council and developer such as a council improperly relying on its statutory position to extract unreasonable public benefits
- a council’s ability to make independent decisions may be compromised, or its decisions appear to be fettered by a planning agreement
- a council could have numerous interests in a planning agreement, such as being both the consent authority and also a landowner under the agreement. Safeguards such as the use of an independent third party in the development assessment process would be appropriate in such circumstances.
For further guidance, refer to the Governance, probity, and internal controls module in the local infrastructure contributions system practice note.
Councils should implement predictable, transparent and accountable negotiation systems
To ensure transparency and efficiency, councils should outline their negotiation system for planning agreements in their planning agreement policy and procedures.
Before negotiation, the parties should consider whether other planning authorities and other parties associated with the development should be additional parties to the planning agreement.. This is particularly important in instances where there are multiple parties with an interest in the land such as leaseholders, or where the developer is a different party to the land owner.
A planning agreement cannot be registered on title without the agreement of all parties with an interest in the land, so gaining agreement of all interested parties directly impacts the security available to enforce the agreement.
Define a clear scope of negotiation
Define a clear scope of negotiation
The scope and intent of the planning agreement should be clear at the beginning of the process for all parties involved. This includes the council and the developer agreeing on the scope of technical studies and infrastructure works required.
Establish an efficient negotiation system
Establish an efficient negotiation system
The negotiation system should be based on cooperation, full disclosure, early warnings, and agreed working practices and timetables. Council should detail their preferred approach in their planning agreement policies and procedures so it is transparent and clear.
The planning agreement negotiation process should not delay ordinary planning processes but should run in parallel with them, including any pre-application stages. The negotiation process should not be unduly protracted.
Consider involving independent third parties
Consider involving independent third parties
Independent third parties can be used in a variety of situations involving planning agreements. Councils and developers are encouraged to make appropriate use of third parties during negotiation, including where:
- an independent assessment of the proposed planning proposal or development application is needed
- factual information requires validation
- sensitive financial or other confidential information must be verified or established in the course of negotiations
- facilitation of complex negotiations is required for large projects or where numerous parties or stakeholders are involved
- dispute resolution is required.
Examples of useful independent third parties include independent an quantity surveyor to verify the cost of works, or independent land valuations.
Independent third parties can be useful where dispute resolution is required. However, no party is obliged to enter into an agreement.
Define a clear dispute resolution path
Define a clear dispute resolution path
All parties should agree on how they will resolve disputes that may arise once the planning agreement has been entered into. It can also be useful to have an agreed dispute resolution path defined when negotiating a planning agreement to ensure any disputes can be effectively managed in that process.
Different kinds of dispute resolution mechanisms may suit different situations, and this should be reflected in a planning agreement. For example:
- mediation may be suitable to deal with disputes arising from grievances
- an expert determination may be suitable to resolve disputes of a technical nature
- arbitration may be suitable for resolving commercial disputes.
Councils should consider enforcement and security early in the negotiation
Security is needed to help ensure developers satisfy the obligations under a planning agreement. Security and enforcement for planning agreements could involve the use of bonds or bank guarantees, or registering the agreement to run with land so that future owners of the land will be bound to the agreement.
See Security for contributions and planning agreements for more information on appropriate forms of security.
Consideration of costs and charges when negotiating a planning agreement
Recovering administration costs. Councils and developers should negotiate and agree on costs at the earliest opportunity. Councils can include in the agreement a provision for the costs associated with the negotiation and preparation of the agreement as well as the ongoing administration costs related to monitoring and enforcing the agreement once executed.
Goods and Services Tax (GST). Both parties to a planning agreement have a potential GST liability and they should obtain advice in every case on whether a potential GST liability attaches to the agreement.
Procedure and process
Indicative steps for entering into a planning agreement
The steps below provided as general considerations. The exact steps and process will differ for each specific planning agreement and each council.
Commencement
- Consider if the initial offer to enter a planning agreement is in the public interest and meets the acceptability test.
- All parties should agree on:
- a negotiation process guided by the council’s planning agreements policy and procedures.
- the scope of any technical studies to support the planning agreement, and how the studies will be tendered and paid for.
- All parties should review the planning agreements practice note, relevant legislation and any council policies to ensure they understand what is required when negotiating a planning agreement.
Negotiation
- Negotiate the planning agreement following the agreed approach.
- All parties should consider how the planning agreement will be executed and enforced, as this will inform the security provisions and conditions of the agreement.
Drafting
- Draft the planning agreement with legal advice to ensure the provisions are appropriate and will achieve the intent.
- Formally assess the draft planning agreement against the acceptability test.
- Prepare the draft planning agreement explanatory note.
Application
The development application or planning proposal should be accompanied by the draft planning agreement and explanatory note.
Notification
The draft planning agreement and explanatory note are publicly notified, preferably at the same time as the development application or planning proposal.
Finalisation
- Council considers submissions and makes any required changes. If necessary, the amended draft planning agreement may need to be re-notified.
- Council considers the draft planning agreement and any submissions, alongside the related development application or planning proposal, in an open council meeting to ensure transparency and formally determine how to proceed.
Execution
If the decision is made to proceed the agreement can be entered in to (execuated). This may be before, during or not long after the relevant application or planning proposal is determined.
Reporting
- Publish a copy of the planning agreement and explanatory note on the council’s website and the NSW Planning Portal.
- Continue to report on the status of the planning agreement.