Clifford Gouldson Lawyers

Development Approval Decision Means Extra Caution for Buyers

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Buyers of land over which a development approval has previously been granted are required to comply with its original conditions even when those conditions have been incorrectly reflected in a registered easement due to Council’s mistake.

The take home message? Full due diligence should include obtaining copies of development approvals and checking compliance with their conditions.

The recent High Court decision in Pike v Tighe* on the correct interpretation of section 245(1) of the Sustainable Planning Act 2009 (Qld) (the Act) has led to changes to the standard terms of the REIQ residential property sale contract.

The facts

On 29 May 2009 the Townville City Council (Council) issued a decision notice under the Integrated Planning Act 1997 (Qld). It approved a development application for the land to be reconfigured into two lots, on conditions including an access and utility easement. An easement was registered, but it failed to reflect the condition. The Council overlooked this when finalising its approval.

In November 2010, a second easement (on identical terms to the first) was registered over the original lot, which was subsequently reconfigured into two lots. The developer then on-sold both lots.

Lot 1 was subsequently owned by the Tighes, and was burdened by the easement.

Lot 2 was subsequently owned by the Pikes, and was benefitted by the easement.

The preliminary decisions

On 13 February 2015, the Pikes filed an application in the Planning and Environment Court, seeking a declaration that the development approval had been breached (due to the missing access and utility easement terms), and seeking an enforcement order requiring the Tighes to comply with the condition, even though the Tighes were not the original developer.

The Tighes opposed the application, and maintained that the failure to comply with the development approval could only be held against the original registered proprietors.

The Pikes were successful in the first instance, with the primary judge finding section 245(1) of the Act bound successors in title.

No enforcement order was made, as the primary judge expressed an expectation that the parties would reasonably act on the basis of the findings to comply with the original development application.

The Tighes successfully appealed this decision to the Court of Appeal on the basis that the original condition was created by a development application that did not necessarily contemplate or approve the further reconfiguration or development of the two lots.

The High Court decision

The Pikes successfully appealed to the High Court. In a joint judgment the High Court was critical of the Court of Appeal and found that the development application containing the condition bound the land. As the two subsequent, reconfigured lots were derived from the original land, those lots were also bound.

The High Court ruled that the terms of the development application bound the successors in title, on the plain reading of section 245 of the Act. Consequently, an enforcement order could be made pursuant to ss601, 604 and 605 of the Act.

The High Court further found that a contravention offence pursuant to section 580 of the Act could occur if there was non-compliance with a condition within a reasonable time, inferring that given the length of time elapsed and the dogmatic attitude of the Tighes made them liable for an offence.

The most important point was that a successor in title, discovering they have inherited non-compliance with a development approval under the Act, is not immediately liable but will become so if it does not act reasonably to become compliant.

Consequential changes to the REIQ standard terms flowing from the decision

Following the decision of Pike v Tighe, there is now a revised clause 7.7(e) in the standard terms of the Residential House & Land Contract. This new clause permits a buyer to terminate the contract if there is an outstanding condition of a development approval attaching to the land which, if complied with, would constitute a material mistake or omission in the seller’s title under clause 7.5(2)(c).

It will become a matter of due diligence both for the seller (prior to entering into the contract) and the buyer (prior to completing the contract) to make inquiries to establish whether development application conditions attaching to the subject land have been complied with.

The ramifications could be significant, as the buyer will inherit the responsibility of compliance.

If you require advice on this or similar matters please contact our Commercial + Property team.

*Pike v Tighe [2018] HCA 9)

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