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DEALING WITH EXISTING USE RIGHTS

DEALING WITH EXISTING USE RIGHTS

Following nearly 20 years of relative stability, existing use rights have been the subject of change over the past two and a half years. According to the Department of Planning1, change has been brought about by the move to a standard LEP template with its reduced number of zones and the consequent possibility that unlimited numbers of existing use right properties might be created. This paper examines the basis for the Department's actions and describes the situation that is now beginning to emerge as new comprehensive LEPs are brought forward for gazettal.

What are existing use rights?

S106 of the EPA Act describes existing uses as lawfully commenced uses which are subsequently prohibited by an Environmental Planning Instrument. S107 describes the situation under which such uses are extinguished – essentially by abandonment or the unlawful replacement of the uses. Thus, the corner bakery, petrol station or smash repair shop in the midst of a residential area is usually an existing use as defined in the Act. The underlying purpose of defining existing uses is to control historical and now non-conforming uses, allowing such uses to continue in spite of zoning (land use) changes until they cease for commercial reasons.

McHugh JA in Royal Agricultural Society of NSW v Sydney City Council (1987) 61 LGERA 305 explains the purposes of the provisions as follows

'The object of "existing use" provisions in town planning legislation is to permit the continuation of the use of land for any purpose for which it was used immediately before the passing of the legislation even though the terms of the legislation prohibit that purpose wholly or partly or upon conditions. The rationale of these saving provisions is that it is unjust to deprive an owner of the right to use his land for an existing purpose.'

Changing existing uses

Prior to about 1986, changes to existing uses were permitted as long as such uses were not enlarged by more than 10% of their floor areas and new uses had a lesser environmental impact. This sought to encourage the swapping of very non-conforming uses to less non-conforming uses eg industrial to light industrial or commercial uses within residential zones, or even all the way to conforming uses. Presumably, concern about the slow rate of take up of these provisions led to the removal of the 10% limit and the totally unfettered swapping of prohibited uses, until March 2006.

Traditionally, existing uses were very tightly defined in a series of court cases prior to the proclamation of the EPA Act in 1980. Subsequently, the Courts interpreted existing uses more broadly. In Royal Agricultural Society of NSW v Sydney City Council (1987) 61 LGERA 305 McHugh JA states

Because "existing use" provisions are incompatible with the main objects of the legislation of which they form part, the courts have had to develop principles which reconcile the right of owners to have the full benefit of the existing use of land with the right of the local authority to enforce the conflicting objectives of town planning legislation. The courts have done so by refusing to categorise an "existing use" so narrowly that natural changes in the method of using the land or carrying on a business or industry will render an existing use right valueless.

McHugh JA's analysis thus suggested that some degree of change was permitted, even without further approvals. Kirby P in North Sydney Municipal Council v Boyts Radio and Electrical Pty Ltd and Ors (1989) 67 LGRA 344 (CA) reinforces that view

'the general approach to be taken is one of construing the "use" broadly. It is to be construed liberally such that confining the user to precise activity is not required. What is required is the determination of the appropriate genus which best describes the activities in question'.

Beyond the natural change which did not require approval, was the deliberate change which met the controls of the time and which was council-determined on a merit basis. An example of the merit based approach, pre 2006, is the group of shops completed about 2-3 years ago in Oxford Street, Paddington, opposite Victoria Barracks. Here, in a Residential 2(b) zone under the Woollahra LEP 1995, a service station was replaced by an equally prohibited group of retail uses, of higher floor space. On a merit basis, this was the ideal use for the land, reducing the gap between shops in one of Sydney's best shopping strips and eliminating a service station that had been the subject of controversy in the locality (due to its large LPG tank). Elsewhere, service stations in residential zones were swapped for townhouses or low rise apartment blocks, closer in function to the uses surrounding. The results were appropriate to the need for gradual change and the slow phasing out of non-conforming uses inimical to the land use within which they stood.

However, the swap of land uses in the Paddington example was no longer possible after March 2006 as the floor space increased by much more than 10% and the uses permitted were equally prohibited.

March 2006 restrictions on existing use rights

The EPA Amendment (Existing Uses) Regulation 2006 which came into force on 29 March 2006 amended the EPA Regulation so that:

  • an existing use could no longer be changed to another prohibited use (unless the zoning was also changed to permit that use)
  • enlargement of existing uses was limited to 10% of gross floor area
  • an existing use could only be changed to a use that was permissible in the zone.2

The change was gazetted without any notice to the development industry or the professions, with a guide note published days later. This was clearly a blitzkrieg strike! Its immediate impact was to greatly devalue properties holding existing use rights. As noted above, the purpose of the change was to prevent a general outbreak of existing use rights for properties caught up in the change from older LEPs to the standard LEP which had, by that time, been adopted. The change was further justified by the Department's analysis of the treatment of use swapping by councils and the Land and Environment Court which were said3 to have resulted in unacceptable environmental consequences. In some measure, the concern for the degree of close fit between the very reduced set of zones in the standard LEP and the wide spread of uses already existing in LGAs was justified.

Local government took a very restrictive view of the provisions of the regulatory change, refusing to accept the legal position outlined in the cases cited above. In a development which was the subject of my firm's attention in early 2006, existing use rights to sell carpet were said by the local council to prohibit any other type of retailing than floor coverings. Even a swap to vacuum cleaner sales would have been prohibited, as would conversion to a local grocery, etc. In a second case at the time, we found a client operating a vehicle service training facility unable to occupy an industrial unit which had been used for the distribution of medical products.

Some suggested the use of SEPP 4 – Development without consent to remedy the situation. However, the very narrow provisions offered help to few applications and this was seen as an inadequate approach.4

At that time, a further problem arose as a consequence of the staged DA process. Meriton, which had then recently won a Court approval for the swap of existing caravan park use to residential development, subject to further DAs for the individual buildings, was unable to implement the approval. Pressure built on the Department to reign in the more restrictive council practices.

February 2007 further amendment

On 9 February 2007, minor but important amendments were made to the Regulations. The "Meriton" problem was cured by transitional arrangements allowing the development of staged projects and even fitouts. The swapping of "commercial" and "light industrial" uses was facilitated, subject to conditions. "Commercial" and "light industrial" uses were defined as per the standard instrument. Swapping was allowed between commercial uses, between light industrial uses and from light industrial to commercial but only for uses not more than 1,000 sqm in area. Minor alterations and additions were permitted. Enlargement was limited to 10%, rebuilding prohibited as was intensification of use. All of these conditions were designed to increase the pace of transforming non-conforming uses to permitted uses in line with zoning changes.

Land uses under the standard instrument

By restricting the flexibility of existing uses, the Department invariably placed more pressure on the need for compatibility between existing uses and the new zones. Such pressure was already high due to the need for local councils to manipulate their existing zones into the new and reduced suite of zones. Whilst my initial response to the reduced suite of zones was that this would introduce flexibility, this is proving not necessarily true. For example, bulky goods retailing is not a mandatory use in any of the light industrial/ employment/ enterprise zone. Thus, if a council wishes to allow bulky goods retailing, it must tag bulky goods retailing onto a zone, potentially allowing the spread of bulky goods throughout the zone. The only other alternative is to schedule individual sites for that use – such schedules are at odds with the inherent simplification sought by the adoption of the standard instrument. By placing individual sites with special land uses within the schedule, we will create a block by block zoning plan, sacrificing flexibility for micro control not justified by any planning philosophy.

Critics of the unfettered, broad land use zones will, no doubt, call for tighter control to avoid the spread of retail/ bulky goods retail/commercial/office uses within zones taking no account of infrastructure (especially transport) or the viability of existing centres. It seems we may need to resolve the inherent conflict between centralised and decentralised retail and commercial uses before we embark on a micro-managed planning regime.

Conflict between existing uses and the new zones

Nowhere is the potential for problems better illustrated than a recent client case. My firm had been asked to prepare a DA for a new tenant going into a 15 year old bulky goods retail centre. During the course of our usual investigations, we found that a draft LEP had not only been through its s65 exhibition, but was already with the Department for final checking and gazettal. Imagine our surprise and our client's dismay to find the new zoning for the area was IN1 General Industrial and bulky goods retailing was no longer permitted.

Our reading of the regulations was that all types of bulky goods retailing swap were prohibited, whether or not over 1,000 sqm. Council officers had the view that swapping between uses was permitted subject only to the usual merit assessment. In the end, the Department advised that swaps under 1,000 sqm were permitted but those over this figure, the three major tenancies of the centre, could not be changed. The problem was solved by consigning the site to the schedule at the end of the LEP with an additional permitted use of bulky goods retailing.

Conclusion

Instead of the more flexible and simple system envisaged by the authors of the standard instrument, we seam to be heading towards micro-managed land use planning with all of the bad connotations implied by the term "micro-managed". We have abandoned the flexible Warringah LEP model (which offered much) and substituted an over-rigid system which will come to rely more and more on rezoning as a means to solve misclassification problems.

An immediate solution would be to free up the regulations restricting the flexibility of existing uses. Whilst this represents back tracking on past amendments, this seems a far easier solution than reviewing the standard instrument or moving to another zoning model. Instead of the previous unlimited flexibility given to existing use rights, swapping of uses could be made totally open (subject to merit assessment), restricted to maximum 10% enlargement and with the proviso that the new uses must be complementary to the surrounding zoned uses. There should be no limit on gross floor area. With such flexibility, we could avoid problems due to the misalignment of existing and proposed uses, avoid micro-managed land use zones and encourage commercial flexibility.


1 Pers comm., Yolande Stone, Department of Planning at EPLA Twilight Seminar, mid 2006
2 NSW Department of Planning, 'Planning Circular 06-007 Changes to Existing Use Rights' 31 March 2006
3 Stone op cit
4 Kim Bauer, Existing use rights: Analysing recent changes, Cityscape, April 2007