September 2009

Purchasing a property that has a development consent from council: what are you buying?

It is quite common for developers to purchase a property with the benefit of a development consent, with a view to implementing the consent.  Usually, the purchaser will rely on the notification of the consent given by the council to the vendor, together with accompanying plans.  But a recent decision of the NSW Court of Appeal warns that this may not be a safe course to follow.

Pselletes v Randwick City Council [2009 NSWCA 262]

This case raised the question of what the \"development consent\" actually is.  Section 80 of the Environmental Planning and Assessment Act requires the consent authority to determine a development application by granting consent, with or without conditions, or by refusal.  Section 81 requires the consent authority to notify the determination to the applicant. 

In the case before the Court of Appeal, there was an inconsistency between the Council determination of the application, and the notification to the applicant and in that case the Court held that the actual determination by the Council was the effective \"consent\"; with the terms of the notification to the applicant being merely evidence of that consent.  As a result the applicant was prevented from taking advantage of the obvious mistake by the Council of including in the notification an aspect of the original application which had been withdrawn by the applicant, and which was not included in the Council determination. 

Implications of the decision

One result of the decision is that a purchaser can no longer rely on the terms of a notification from the Council over the actual determination by resolution of the Council or under delegated authority.  The purchaser may have the benefit of an implied or (preferably) express warranty from the vendor as to the accuracy of the notification; but this may be of small comfort to the purchaser in seeking to implement the consent, particularly having regard to the other possible consequence of the inconsistency as discussed below. 

The only safe course for the purchaser is to insist on seeing the actual Council decision, in the form of an extract from the minute papers (generally available on the Council website) or of the appropriate determination by a Council officer under delegated authority.

The possible effects of an inconsistency are exacerbated by the provisions of section 83 of the Environmental Planning and Assessment Act, which provides that a consent becomes effective and operates from the date endorsed on the notification to the applicant.  With implied support the Court of Appeal referred to an earlier decision of the Land and Environment Court in which it was held that a notification that was not consistent with the actual determination was invalid, and hence that the consent had not become operative. 

The Court of Appeal suggested that this might well be the case.  So the purchaser in such a case might not only have an effective consent which is different from what it understands to be the case, but no effective consent at all!  Of course, one might expect the Council to re-notify promptly in such a situation, which will cure the second problem, but not the first. 

Clearly, uncovering such an inconsistency prior to contract, or at the very least providing for a rescission if inconsistency is found prior to completion, is the preferable way to go.

The lesson: If the consent is important then check the source before you commit, or give yourself an out in the contract.

This publication is intended as a source of information only. No reader should act on any matter without first obtaining professional advice.

Peter Kelso