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Client Update: Lapsing of development consents in NSW

31 May 2010

In brief: The NSW Government passed legislation on 26 May 2010 that amends the Environmental Planning and Assessment Act 1979 (NSW) to mandate a maximum five-year lapsing period for all development consents in the state. Partner Paul Lalich (view CV) and Lawyers Brooke Newell and Tom Cregan discuss what will change with the new legislation.

• Background
• The amending Act
• Removal of 'substantial commencement' requirement
• Implications

Background

The Environmental Planning and Assessment Act 1979 (NSW) (the EP&A Act) previously provided that a development consent will lapse five years after the date it becomes operative, if the development is not 'physically commenced' within that period.¹ However, when approving development, a consent authority had the power to impose a reduced lapsing period at its discretion, to a minimum of two years.²

The amending Act

The new legislation – the Environmental Planning and Assessment Amendment (Development Consents) Act 2010 (the amending Act) – amends the EP&A Act to mandate a lapsing period of five years for all development consents that:

• operate before and lapse after 22 April 2010, if a consent period of less than five years has been applied by the consent authority; or
• commence operation between 22 April 2010 and 1 July 2011.

The Government has stated that the amendment is to ensure that existing consents can be taken up as finance flows back into the building and construction industries.³

Removal of 'substantial commencement' requirement

The Environmental Planning and Assessment Amendment Act 2008 (NSW) introduced the requirement that, in addition to the need for development to be 'physically commenced' within five years from the date that a consent becomes operative, development must also be 'substantially commenced' within the following two years. While this provision had not yet commenced, the amending Act has caused its removal.

Implications

The 'physical commencement' test provides greater certainty in commencing development than the more subjective 'substantial commencement' test. The proposed introduction of this test in 2008 was intended to provide a consent authority with certainty about an approved development's  completion. However, this requirement did not reflect changing circumstances in the financial markets; nor did it appreciate the significant time and cost associated with securing development consent.

The removal of the 'substantial commencement' requirement is, therefore, both timely and welcome.

Footnotes

1. EP&A Act, s95(1). 
2. EP&A Act, ss 95(2), 95(3). 
3. Environmental Planning and Assessment Amendment (Development Consents) Bill 2010 (NSW), Agreement in Principle Speech.

For further information, please contact:

• Paul LalichPartner, Sydney
  Ph: +61 2 9230 4026
  Paul.Lalich@aar.com.au
• Jim ParkerPartner, Sydney
  Ph: +61 2 9230 4362
  Jim.Parker@aar.com.au