01.08.2009

Restrictive Covenants

What Victorian Developers need to know about removing and varying Restrictive Covenants

by Clause:1 Planning

This is the final component of a four-part article looking in detail at the three methods available for removing or varying a restrictive covenant in Victoria. The proceeding sections have been published in previous editions of the BDAV News under the following headings:

  • Part 1:  Introduction and Planning Permit Applications
  • Part 2:  Planning Scheme Amendment Process
  • Part 3:  Supreme Court Applications

Part 4: Important Considerations and Criteria for Selecting the Best Method

Readers who have followed this article should now be aware of the different processes and tests associated with removing or varying a restrictive covenant via the three methods available in Victoria; a planning permit application, a planning scheme amendment or an application to the Victorian Supreme Court. So considering the differences in processes and legislative tests for each method, which then should you choose? The following will attempt to provide some guidance on how you can answer this question.

As you might expect the answer to this question is not one-size-fit- all and will vary from site to site. Below is a list of characteristics that should be considered prior to selecting a preferred method of removing or varying a restrictive covenant.

Although planning scheme amendments are discussed in some portions of this article; for the sake of simplifying the discussion the following editorial focuses primarily on the two most commonly used methods for removing or varying a restrictive covenant; planning permit applications and Supreme Court applications. The rationale for omitting substantial consideration of planning scheme amendments is based on the fact that without overt Council support a request for a planning scheme amendment cannot proceed. Applicants who can garnish Council’s support for a planning scheme amendment should seriously consider that option unless the discussion below including potential time and cost considerations convinces them otherwise.
Finally, we note that the following list is by no means a complete list of the issues that require consideration when determining the best method to use.

Characteristics Relevant to Selecting the Best Method

Clause:1 Planning have summarised the below characteristics relevant to selecting the best method:

Type of Restriction

It is essential to consider what the covenant actually prohibits and what it doesn’t. If unsure seek assistance with the interpretation of the restriction before taking any other action.

If the covenant is sought to be altered in conjunction with a development proposal, often the most efficient way to deal with a restrictive covenant is to find a work-around (if possible) that ensures that no breach is committed. This is particularly poignant for covenants restricting the types of material used for walls or roofing or other relatively minor issues. Where a work-around is not possible proponents should consider the following.

The Date of the Covenant

Covenants registered prior to June 1991 will be required to meet the more arduous legislative test of ‘perceived detriment’ (as explained in Part 1 of this article) if assessed as part of a planning permit application.  These covenants lend themselves to be removed or varied via Supreme Court applications. However, would-be applicants should carefully consider the other characteristics of their covenant before taking this potentially expensive and time consuming route.

Existing Breach

If the existing conditions on site breach the restrictive covenant it might be possible to seek an expeditious planning permit to vary or remove the contentious restriction. In these circumstances a planning permit application should be considered as the preferred method for altering the covenant.

Beneficiaries

After the above information has been determined and regardless of which method you decide to use to remove or vary your covenant a detailed search identifying all relevant beneficiaries to the covenant will need to be undertaken.
Once you have the list of who the beneficiaries are and their relevant titles you should identify the following information:

  • The total number of beneficiaries;
  • The location of those beneficiaries in comparison to the subject site;
  • The extent of their likely interest in your covenant;
  • The affect the proposed removal/variation of the covenant will have on them.

Generally the lower the number of beneficiaries and further away from the site they are located the higher the likelihood that of a planning permit application succeeding. In situations where the subject site is located within close proximity to a large number of beneficiaries more weight would be given to considering the Supreme Court method.

Consent

In situations where the number of benefi-ciaries is low and/or beneficiaries are located some distance from the subject site we would recommend attempting to garnish their written consent. If consent can be obtained a town planning application will be the most efficient way of dealing with the matter.

Site and Subdivision History

On completion of your beneficiaries search you should have a detailed title history that will allow you to identify the extent to which breaches to the covenant have been exercised on yours and other affected lots.

In addition, a detailed historical search should be undertaken to determine the number and type of building approvals and planning applications affecting the subject site and whether any other sites in the subdivision have been successful in having the convent removed from their titles.

Generally, the more titles from which a covenant has been removed or that are currently in breach of the covenant the greater the likelihood of successfully having the covenant removed or varied. In situations where no breach can be found throughout the subdivision and the benefit from the covenant can be said to be in pristine condition weight should be given to considering the Supreme Court method (or planning scheme amendment method).

Case Review

Would-be applicants should review VCAT, Supreme Court, Panels Victoria and Council records for similar applications to vary or remove covenants within their subdivision in order to gauge their likely success and identify any beneficiaries who have previously objected to such applications.

Weight should be given to previous methods used that have resulted in favourable decisions and the justification for their approval(s) carefully considered.

Planning Scheme, Strategic and Council Support

Applicants should review the relevant planning scheme, confirm whether any planning scheme amendments affect the subject land and seek Council’s guidance on the strategic direction for area in which the land resides.

The aim here is to find planning policy support for the type of development or use that the developer is seeking to undertake (in breach of the covenant) on the land. Generally the higher the policy and strategic support for removing restrictive covenants the more likely Council would be to support such an application.

In addition applicants should review Schedule 52.02 of the planning scheme to see if any other restrictions/covenants have been authorised via planning scheme amendments. If there are exclusions in the Schedule to Cl52.02 would-be applicants should visit the land listed in the schedule to ascertain the similarities and site context before preparing to contact Council to discuss the merits of a planning scheme amendment.

Preparation of Development Plans

The preparation of detailed development plans to accompany any of the three methods available provides a means of clarifying the potential impact of the covenant’s removal and overcoming the detriment claims of beneficiaries. Where plans are prepared, definitive parameters can be imposed over the form of development (or use) which will occur on the site and provide a means by which offsite impacts resulting from the variation/removal can be measured. Through the use of plans and discussions with beneficiaries and/or Council, a proponent also has the potential to alleviate their concerns and garnish support for the proposal prior to applying. Where plans are prepared and a variation approved, the wording of the covenant will normally be amended to make reference to the plans (or proposal). This will have the effect of ensuring the future development of the land is done in accordance with the plans proposed. Where a planning permit is required to develop (or use) the land a combined planning application also seeking to remove or vary the covenant can be lodged, potentially saving significant time.

Removal versus Variation

The benefits of preparing development plans to accompany an application or request also highlights the differences between seeking to vary and fully removing a covenant. Where a covenant is removed from Title, any impediment over use or development of the land which formally applied are overcome. Conversely, where a covenant is varied it will remain on Title and some limitations will continue to apply. Typical examples of when a covenant is varied may be to ensure that land is developed in accordance with approved plans or to increase the number of dwellings which may be constructed on the site. There is however no limitations on how the wording of a covenant can be varied. The benefit of pursuing a variation over a removal is that, once again, it provides beneficiaries and relevant decision authority with some form of certainty as to how the land will be used or developed if approved. This may in turn have the effect of tempering or overcoming opposition to the proposal.

Time and Costs Considerations

The costs and time associated with removing or varying a restrictive covenant differ substantially from method to method as too may the cost of using the same method on two different sites depending on the specific details of each individual case.

Bearing in mind the above disclaimer the following information is provided as a rough guide to the potential costs and timeframe required to finalise each of the three methods. Please note that the following rough estimates exclude design fees, preparation of town planning drawings, statutory fees (such as application fees, public notification fees etc), title searches and lodgement to Title Office.

  • Planning permit application
    Cost expectation: $4K – $10K
    Time expectation: 3 – 9 months
  • In addition if the matter is required to be determined on appeal at VCAT an applicant could also expect:
    Cost expectation: $5K – $15K
    Time expectation: 4 – 6 months
  • Amendment to the Scheme
    Cost expectation: $15K – $40K
    Time expectation: 10 – 24 months
  • Supreme Court Application
    Cost expectation: $15K – $50K
    Time expectation: 10 – 18 months

*It is important to note that regardless of which method is selected a detailed title search for beneficiaries will need to be undertaken. The costs associated with such a search are dependant of the number of beneficiaries. In some cases hundred or even thousands of beneficiaries may be identified and the cost of such searches can be extremely high.

Conclusion

This four part article has attempted to provide a succinct outline of the complex issues which surround the three methods available for removing or varying restrictive covenants in Victoria.

For each method; planning permit applications, planning scheme amendments and Supreme Court applications, the legal tests, processes and the potential cost differ substantially. Determining the most appropriate method to utilise can, itself, be a time consuming and costly task. Choosing the wrong option can substantially impact the likelihood of success, the cost and timeframe required to finalise the application.

Perhaps the most frustrating part for developers in Victoria is that regardless of which of the three methods is selected no guarantee can be given that an application seeking to remove or vary a restrictive covenant will be successful.

Perhaps its time the Victorian Government revisited these archaic instruments of development control with the view of bringing them into line with the objectives and aspirations of the Victorian Planning Provisions.

This feature is part of the regular contribution made by Clause:1 Planning to BDAV News. For more information, contact Ashley Thompson on (03) 9370 9599 or visit Clause 1.

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