Court ruling stops modifying developer contributions

It was, until recently, a long held developer practice that if a condition of consent imposes excessive developer contributions, then apply to modify the consent (under s.4.55 or s.4.56 of the EP&A Act).

The Court of Appeal has turned that on its head, in Ku-ring-gai Council v Buyozo Pty Ltd [2021] NSWCA 177.

The Case

In the case, Buyozo, who had a development consent obtained via the Land & Environment Court for a warehouse, had paid its contributions which were based on GFA and built the development. But, having later successfully argued a reduction in GFA calculation, sought to reduce its contribution by modifying the consent. The L&E Court agreed, and lowered the amount payable.

The Ruling

The Court of Appeal, however did not agree.  In a nutshell, it ruled:

• once contributions have been paid, one can’t retrospectively reduce them by modifying the consent – consent conditions only act prospectively, so a condition cannot be changed retrospectively once the condition has been fulfilled);
• the power to modify a consent only arises if there is an actual change to the approved development – changing the contributions condition does not change the development, so you can’t use s.4.55 (or s.4.56 in this case, being a DA issued by the Court).

The import

This overturns the practical approach adopted by the industry and local government over the years. Lessons are;

• If you obtain consent but don’t like the contributions condition, challenge it there and then; you can’t apply to modify the condition in the future;
• Check your option terms – if your purchase option requires exercise upon receipt of development consent, then check whether it needs to be upon receipt of satisfactory consent or is otherwise affected by contribution issues;
• Check your finance terms – if you are drawing down on the basis of a consent (eg to exercise an option) then check if the draw down is only upon a consent satisfactory on its terms (to the bank or otherwise);
• If you are buying a property with a consent attached, do some due diligence on the contributions – have they been paid? Are they excessive, what can you do about it?

Which is the question: what can you do about it?

The options left to change a condition which imposes contributions are:

• Seek a review of the condition or appeal it, if you are the applicant for consent;
• Seek a declaration from the Court as to the amount (a costly, risky option);
• Change the development itself and see if the contributions can be reduced at the same time (not without risk given the Buyozo case, but the only realistic option where you have bought a property with the consent attached).