The NSW Planning Agreement You Sign Before You Can Lodge

A PLANNING AGREEMENT CAN CHANGE YOUR PROJECT COSTS.NSW: test obligations before assuming the approval pathway.

You find a site that only works if you can put three dwellings on it. The zoning seems to allow it. Then your planner tells you that a clause in the local plan requires you to make satisfactory arrangements for infrastructure before the council can consent at all, and that those arrangements are usually secured by a planning agreement.

That is not a small administrative step. It is a negotiated legal document that sits on the critical path in front of your consent, and the applicant pays for it.

The deal question: what must be agreed before consent can even issue?

NSW Planning states that most State Voluntary Planning Agreements relate to a clause in councils' Local Environmental Plans requiring the developer to make satisfactory arrangements for the provision of state infrastructure to service their development. Those clauses require the infrastructure, or a contribution towards its cost, to be secured before a planning authority can provide consent, and in most cases a planning agreement must be in effect prior to certifying that satisfactory arrangements have been made. See the NSW State Voluntary Planning Agreements page for the current wording. The practice note that governs how these agreements are negotiated sits alongside the planning agreements practice note and the contributions framework.

So the question that decides your deal is not only whether the scheme permits three dwellings. It is what you must agree to deliver, or pay, before the consent will issue, and whether the uplift still clears your margin after that.

First, work out which mechanism actually applies

NSW runs three different local mechanisms and they behave differently. NSW Planning lists section 7.11 contributions, charged where there is a demonstrated link between the development and the infrastructure to be funded and usually calculated per dwelling or per square metre; section 7.12 levies, charged as a percentage of the estimated cost of the development with a maximum of 1 per cent in most areas; and planning agreements, described as a legal agreement negotiated between a developer and a planning authority to deliver an infrastructure outcome. The local infrastructure contributions page sets out the three types and their current update date.

Getting this wrong is expensive in both directions. If a fixed contribution applies, you can model it from the contributions plan with some confidence. If a negotiated agreement applies, you are modelling a negotiation.

The checks a student would run, in order

1. Read the local plan clause that applies to the land. Find the clause requiring satisfactory arrangements, if there is one. That clause is what creates the obligation.
2. Identify which mechanism is in play. A contributions plan rate is calculated. A planning agreement is negotiated. Confirm which one your consent will carry.
3. Establish what must be secured before consent. Work out whether the agreement must be in effect before the authority certifies satisfactory arrangements, and therefore before consent.
4. Price your own legal costs. NSW Planning states the applicant meets the cost of preparing the legal agreements. Get a real quotation rather than a guess.
5. Map the notification period. All SVPAs are publicly notified and made available for public feedback before they are finalised. That time is not yours to control.
6. Test the obligation against the uplift. Put the contribution, the legal costs and the added holding time into the feasibility as separate funded items.
7. Check the limits on what can be asked. The guidance sets out what an agreement should not be used for; read it before you negotiate.
8. Confirm the structure with your lender. An obligation with a fixed payment date changes your peak debt and your settlement cash flow.

What the published guidance says an agreement should not be used for

Planning agreements are not a blank cheque. NSW Planning states that there is no requirement to demonstrate a direct connection or nexus with development as there is for section 7.11 contributions, but that planning agreements should not provide for public benefits that are wholly unrelated to development, should not be used as a means of general revenue raising or to overcome revenue shortfalls, and should not be used primarily for value capture such as capturing land value uplift from a rezoning. Councils should always consider the proposal on its merits, not on the basis of a planning agreement. The using planning agreements guidance sets this out in full.

That matters practically. It tells you that a requirement can be questioned on principle, and it tells you the test is relationship to the development, not simply the size of the uplift you are capturing.

The trap: treating it as voluntary, or as a council fee

The word voluntary in State Voluntary Planning Agreement is about which mechanism is used, not about whether you can avoid it. Where the local plan clause applies, the agreement is the route to consent. Students commonly make one of two mistakes. The first is leaving the whole item out of the feasibility because it appears nowhere on a council fee schedule. The second is assuming it can be negotiated after lodgement in parallel with assessment, when in most cases it must be in effect before satisfactory arrangements can be certified.

There is a third trap worth naming: assuming the agreement behaves like a fixed charge. A section 7.12 levy is a percentage of estimated development cost with a published cap. A negotiated agreement can include delivered works and recurrent costs as well as money, and NSW Planning notes it may require contributions towards recurrent costs of infrastructure. Those obligations can land on your cash flow years after completion, so read the drafting terms, not just the headline figure.

How to brief this properly

You are not expected to interpret the Environmental Planning and Assessment Act 1979 or argue a drafting position against a council. Your job is to find out early whether an obligation exists, to price it honestly, and to give your specialists a clear brief. A town planner should confirm whether any clause in the current local plan for that land requires satisfactory arrangements and which mechanism follows. A property lawyer should review the draft agreement, its security, its delivery obligations and your exposure before you sign. Your finance broker or lender should confirm how the obligation and its timing change your funding and peak debt, and an accountant or tax adviser should confirm how the contribution is treated. All of them should work from the current instrument for the site, not from a general description like this one.

Practical next steps checklist

• Pull the current local plan and find the clause dealing with satisfactory arrangements.
• Confirm whether a contributions plan rate applies instead of, or as well as, a planning agreement.
• Ask the planning authority whether an agreement must be in effect before consent or before certification.
• Obtain a written estimate of your own legal costs to prepare and negotiate the agreement.
• Find out the notification and consultation period and add it to your programme.
• Model the obligation, the legal costs and the extra holding time as separate funded line items.
• Re-run the feasibility with the contribution removed to see whether the deal still works.
• Check the SVPA register for comparable agreements in the same council area.

Key takeaway

A NSW planning agreement is not a fee you look up and not a negotiation you start after lodgement. It is a site-specific obligation that can sit in front of your consent, and the applicant carries the cost of preparing it. Establish whether it applies before you make an offer, price it as a funded cost, and let your planner and lawyer confirm the detail for the actual land.

Reader question: on your current site, have you confirmed whether the local plan clause requires satisfactory arrangements, or have you assumed the contribution schedule tells the whole story?

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