Date: Wednesday 17 September 2008 Andrew Walker Special Counsel Accredited Planning & Environment Law Specialist D

1. Covenant Confusion and Restriction AfflictionThe Use of Restrictions in Greenfield SubdivisionsPresentation to the Surveying and Spatial Information Victoria 2008 Summit Date: Wednesday 17 September 2008 Andrew Walker Special Counsel Accredited Planning & Environment Law Specialist DLA Phillips Fox 117584203

2. Introduction • Restrictions and Section 173 Agreements both seek the same end – that is to control the use and development of land • There are differences between the 2 land control mechanisms • This talk will focus on the use of Restrictions • How can they be amended or removed? • What matters can Restrictions address, and when should they be used?

3. What are Restrictions and Restrictive Covenants? • Restrictions are a quasi form Restrictive Covenants • Restrictive Covenants are essentially contractual agreements between individuals (although following amendments to the Planning and Environment Act 1987 (‘the Act’) a Council cannot issue a planning permit which would conflict with a Restrictive Covenant) • Restrictive Covenants must be registered on the title to the land to be effective • A Restrictive Covenant: • must be negative and prohibit the performance of specified acts (that is, cannot impose positive obligations); • must be given for the benefit of land held by the covenantee; • must touch and concern the land; and • must be intended to run with the land • The Act was amended in 2000, so that a permit applicant is required to provide a copy of any registered restrictive covenant, and many Councils require a permit applicant to sign a declaration that copies of any registered restrictive covenants have been provided

4. What are Restrictions and Restrictive Covenants? (cont) • The term ‘Registered Restrictive Covenant’ is defined in the Act. • Defined as a restriction within the meaning of the term in the Subdivision Act • Under the Subdivision Act – Restrictive Covenant is a restriction which can be registered under the Transfer of Land Act • Under the Transfer of Land Act, Section 88 allows the registration of a ‘Restrictive Covenant’ but the section does not apply to the creation, removal or creation of a Restrictive Covenant: • as plan of a plan of subdivision; • authorised by a planning scheme or permit under the Act • The Transfer of Land Act does not define the term ‘Restrictive Covenant’

5. What are Restrictions and Restrictive Covenants? (cont) • The term Registered Restrictive Covenant: • Does not include a Section 173 Agreement – see Heydon v Mansfield Shire Council [2003] VCAT 102. A Section 173 Agreement is registered under Section 181 of the Act and therefore not a covenant registered under the Transfer of Land Act 1958 • A restriction on a plan of subdivision is not a ‘Registered Restrictive Covenant’ within the meaning of the Act, as such a restriction is registered under the Subdivision Act 1988 and not registered under the Transfer of Land Act 1958 • However, Section 60 of the Act is drafted on the basis that a restriction is a Registered Restrictive Covenant, and the VCAT cases seem to assume this is the case.

6. What are Restrictions and why are they used? • Restrictions are now used extensively in green field subdivisions to control development within a development • Used as a point of differentiation by developers • Impose controls on the development of land where there are no planning controls • If registered, provide an exemption from the requirement to obtain the report and consent of a Council under the Building Regulations 2006 • Registered on the title as a restriction shown on or attached to a plan of subdivision and on registration of the plan of subdivision under Section 24(1)(d) of the Subdivision Act

7. How are Restrictions created? • Condition inserted in a subdivision permit authorising the creation of the restrictions • A typical condition (“a restriction condition”) may provide: “The plans submitted for certification may provide the creation of a restriction to control the construction of dwellings on lots to locations defined by building envelopes to the satisfaction of the Responsible Authority.” • VCAT and restriction conditions

8. How are Restrictions Removed? • There are 5 ways: • Under Section 84 of the Property Law Act 1958 (which requires an application to the Supreme Court). This is expensive and slow • Obtain a planning permit under Section 60(5) of the Act. The application is made under section 23 of the Subdivision Act 1988. • By amending the Scheme to remove or vary the restrictive covenant • By a combined Planning Scheme Amendment application process • Section 88(1B) of the Transfer of Land Act 1958 (but this does not act to remove the restriction from the title)

9. How are Restrictions Removed? (cont) • If all landowners affected by the restriction agreed, then: • Lodge an amended plan of subdivision (or plan amending the previous plan) under Section 22 of the Subdivision Act BUT • Query whether the subdivision permit has expired • Subdivision permit must have a secondary consent condition

10. Restrictive Covenants – Section 60(5) of the Act • Section 60(5) provides: ‘(5) The responsible authority must not grant a permit which allows the removal or variation of a restriction referred to in sub-section (4) unless it is satisfied that: (a) the owner of any land benefited by the restriction (other than an owner who, before or after the making of the application for the permit but not more than 3 months before its making, has consented in writing to the grant of the permit) will be unlikely to suffer any detriment of any kind (including any perceived detriment) as a consequence of the removal or variation of the restriction; and (b) if that owner has objected to the grant of the permit, the objection is vexatious and not made in good faith.’

11. Restrictive Covenants – Section 60(5) of the Act (cont) • This is a pretty stringent test • Obviously, the best option for an applicant is to obtain the consent in writing of any owners who have the benefit of the covenant, or seek the agreement of land owners benefited by the restriction not to object • However, the permit must have a secondary consent provision

12. Restrictive Covenants – Section 60(5) of the Act (cont) • If there are objections, then: • any likely detriment, even a minor one more than counter balanced by other positive considerations, will prevent a permit from being issued; and • further, any obligation must be vexatious or not made in good faith. • However, Senior Member Byard in Castles and Maney –v- Bayside City Council [2004] VCAT 864 does open the door somewhat. • In Castles, Senior Member Byard stated: ‘Detriment is only to be considered in light of the terms of the covenant. So, for example, consideration of a planning permit authorising buildings to be constructed to the street, does not cause detriment if the covenant is only concerned with building heights (in other words – does the permit breach the terms of the restrictive covenant).’

13. Restrictive Covenants – Section 60(5) of the Act (cont) • The second limb has been construed widely. So in Castles, the objectors were found to be acting vexatiously as their objection was not based on upholding the matters sought to be protected by the covenant (the urban design objective of having houses with frontages facing roads) but on an objection to the effect that the development was an over-development. • This is obviously a very wide interpretation.

14. Restrictive Covenants – Section 84(1) of the Act • Under Section 84(1) of the Property Law Act1958, in addition to the circumstances where the persons entitled to the benefit of the restrictive covenant have agreed to discharge the restrictive covenant, the Supreme Court also has the power to remove a restrictive covenant if it is satisfied: • By reason of changes in the character of the property or the neighbourhood or the circumstances of the case, the restriction ought to be deemed obsolete; or • the continued existence of the restrictive covenant would impede the reasonable uses of the land without securing practical benefits to other persons • the proposed discharge will not substantially injure the persons entitled to the benefit of the restriction • In Stanhill Pty Ltd v Jackson [2005] VSC 169, Morris J took a wide view of the court’s powers: • For the first limb, ‘obsolete’ means ‘outmoded or out of date’ (traditionally, the first limb was interpreted as meaning the restriction was virtually valueless to the benefiting persons by reference to the original purpose of the covenant)

15. Restrictive Covenants – Section 84(1) of the Act (cont) • For the second limb, it can be made out if the restriction impedes a user of land acting reasonably. Town planning controls are relevant in ascertain what is a reasonable use (compare with previous Victorian authority which stated that a restriction does not impede reasonable use if another use remains open) • For the third limb, ‘injure’ means to harm and ‘substantially’ means of real significance and importance • The manner in which Morris J interpreted the second limb is much wider than the approach previously taken in both England and Australia and in a subsequent decision by Ashley J in Bevilacqua v. Merakovsky [2005] VSC 235 • Stanhill was followed by Justice Byrne in Re Milbex [2006] BSE 298. • If Stanhill is followed, it has the potential to make restrictive covenants ineffective

16. Amending Restrictions – Planning Scheme Amendments • Amending Schedule 52.02 of the relevant Scheme to amend or remove the restriction • Involves a “community benefit” test. This involves a panel assessing the planning merits of a particular proposal vs interests in having private rights upheld • Requires a proponent to convince a Council to proceed with a Planning Scheme Amendment, and if submissions are received, to appoint a panel to consider submissions, and ultimately have the Amendment approved by the Council and if the Council is not authorised to approve the Amendment, also have the Minister approve the Amendment

17. Restrictions - problems • Common problems with the content of restrictions • Many fail to specify when they will end • They fail to specify who is bound and in what circumstances • Is the restriction intended to apply over all lots when the land is subdivided? • Plans are poorly photocopied or referenced • The content of the restriction should be clear, so that they are enforceable • Can they impose positive obligations? • Do they touch and concern the land?

18. Restrictions – problems (cont) • Don’t specify a process for amending the restriction • Don’t set an end date for the restriction

19. Issues – Private Rights v Strategic Planning Objectives • Tension between private proprietary interests enshrined in MCPs v strategic planning objectives (particularly as circumstances change) • The Government is undertaking a review of the role of restrictive covenants in the Victorian Planning system

20. Section 173 Agreements • The Council has a role • Process for VCAT to amend them. • No doubt that they can impose positive obligations • Is development contribution reasonable?