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Compensation for natural hazards - 2 September 2016

In June 2016, the east coast of Australia experienced two intense “east coast lows” bringing heavy rain, flooding and strong winds. The first of these events was exacerbated by a king tide and resulted in severe coastal and structural damage. Some residents with damaged beachfront homes in Collaroy and Coogee, New South Wales have vowed to “take on” the relevant local government and State Government with respect to the failure of plans to provide any real protection for coastal properties.

It is timely therefore to consider the effect of changes made to a planning scheme to reduce risks associated with natural hazards and whether an owner is entitled to claim compensation where the change reduces the value of their property.

Currently under the Sustainable Planning Act 2009 (SPA), there is an ability for landowners to claim compensation from a local government when a new planning scheme or a change to an existing planning scheme reduces the value of an interest in land. That is continued by the incoming Planning Act 2016 (Planning Act). In both the SPA and the Planning Act, however, there are a range of exceptions to the ability to claim compensation, one of which concerns planning changes aimed at reducing risks associated with natural hazards.

Under SPA, compensation is not payable if the change affects development that, had it happened under the superseded planning scheme, would have led to significant risk to persons or property from natural processes (including flooding, land slippage or erosion) and the risk could not have been significantly reduced by conditions attached to a development approval (section 706(1)(i)(i)).

Under the Planning Act, compensation is not payable if the change is made:

  • to reduce a material risk of serious harm to persons or property on the premises from natural events or processes (bush fires, coastal erosion, flooding or landslides, for example); and
  • under the Minister’s Rules (section 30(4)(e)).

While the Minister’s Rules have not yet been released, section 30(5) of the Planning Act identifies that the Minister’s Rules in respect of section 30(4)(e) must require a local government to prepare a report assessing feasible alternatives for reducing the risk, including imposing development conditions on development approvals. The reduction of risk through conditions attached to a development approval that was relevant in the SPA is therefore picked up in the Planning Act, but arguably with less prominence than the SPA.

In undertaking consultation on the draft Planning Bill, the State Government specifically sought feedback with respect to compensation arrangements in relation to natural hazards. Submissions received from local governments largely supported the natural hazard compensation exceptions for local governments in relation to adverse planning changes. However, concerns were raised by urban development and property industry associations about an increased scope being given to local government to make changes to a planning scheme in response to natural hazard risks without triggering compensation. Concerns were also raised with respect to local government’s preparing their assessment report at the time the downzoning decision is made, absent the opportunity to explore innovative solutions with landowners.

Overall, the new Planning Act continues the policy of ensuring that the wider community is not required to pay the costs of allowing development in locations where there is a risk to persons or property from natural processes. Compensation associated with natural hazards under section 30(4)(e) of the Planning Act will not be payable if a change is made to reduce a material risk of serious harm associated with natural hazards and is made under the Minister’s Rules. Some comfort can be taken from section 30(5) of the Planning Act however we eagerly await the release of the Minister’s Rules and hope:

  • there is enough rigour to ensure that an owner retains the right to demonstrate that a relevant risk could have been substantially reduced through conditions imposed on future development approval (as is the approach in the SPA);
  • they contain objective criteria for determining if and when there is a material risk of serious harm; and 
  • they provide precision with respect to preparation of the local government’s report including for assessments to be undertaken in good faith by an appropriately qualified person having regard to the best available information.  

This article forms part of the Winter Edition of Envisage: HopgoodGanim Lawyers' Quarterly Planning & Environment magazine

For more information or discussion, please contact our Planning & Environment team.  

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