Cutting Through The Red Tape
For a beginner developer, the perils of the consent process are magnified due to a lack of experience and knowledge. So how do you easily navigate the necessary red tape involved in a development or sub-division project? Miriam Bell finds out, in Part Two of our four-part development series.
1 March 2016
Stories of nightmare consent application processes are numerous. Whether they are tales of labyrinthine dealings with councils, or ‘surprise’ discoveries which blow out costs and timeframes, they are enough to strike doubt, if not fear, into the hearts of aspiring developers.
Many development industry figures are outspoken about the impact of bureaucratic delays and excessive fees on housing projects. Some developers say the interpretation of relevant legislation by different councils and officers can slow down the consent process.
Such issues are pertinent to those embarking on development projects of all sizes. But while both central and local government are working at improving and speeding up the processes surrounding housing development, in the current system, gaining a consent can be full of stumbling blocks. In part two of our beginners guide to property development, we look at the best ways to tackle the consent process, along with the legal and tax requirements involved.
Key To Success
All too often, aspiring developers are not aware of how little they know when it comes to the consent process. This in itself can lead to disaster.
Warren Lovegrove, director of land development consultancy CKL, says there is a perception that land development is easy and lots of money will be made from it. “That can be the case – but only with experience and knowledge. That perception means newbie developers often don’t get crucial advice upfront. And they can get badly caught out by that.” Anyone thinking about developing property needs to consult with a relevant professional - for example, a surveyor or planner upfront, he says. This is due to their knowledge of district plans and zoning requirements. “They understand the rules and can tell you what sort of restrictions there are in that area, which can vary widely across cities and regions. Different zones provide for different development opportunities, so you need to know what applies.”
Surveyors and planning consultants can project manage the whole consent process for their clients. This involves preparation of the sub-division application, overseeing the engineering plans and managing the land transfer process. This can also include overseeing the earthworks and dealing with the council.
Lovegrove says this is the best way for an inexperienced developer to go about the consent process. “Someone is asking for trouble trying to do it all by themselves – without having the specific knowledge necessary. Guidance and support are crucial to success.”
Easing The Process
Dairy farmer Sam Mallard took this approach when subdividing his Ashburton investment property. He chose to get the building company he was employing to build the dwellings and to take care of the consent process for him. “It enabled us to avoid dealing with it all, and with the council, by ourselves.”
While the council wasn’t bad to deal with, negotiation was required to get full consent. “Originally, they wanted us to put a sealed driveway in before building the second house,” Mallard says. “We didn’t want to do this as it would be damaged during the construction process. We wanted to save the cost of doing the driveway twice and do the build before putting in the driveway.”
Eventually, the council agreed – after Mallard established he was willing to do everything required, but in a different order, he says. “We got the two necessary consents, resource and building, but the timing was a little skewed.”
In his view, getting the building company to take care of the consent process was a good move. “If you had to do it all by yourself, you’d probably give up. But because we had somebody saying ‘yes, you can do this’, we kept at it.”
Further, contracting out the consent process enabled Mallard to use his time more effectively, doing other things. “You can buy your section and have it under offer and get the ball rolling, and then you can get someone else to do the consent work for you. It was well worth paying for.”
Doing The Homework
Once a surveyor or planner has been secured, the first thing they will do is comprehensive feasibility work.
The Surveying Company director Alan Parkin says this involves surveyors discussing the proposed project, visiting the site to see if it’s viable, drawing up a scheme, and talking to the council. “This enables us to find out what the risks are for a particular property and what [the] council says about those risks before the client commits to anything,” Parkin says. "We often discover stuff that is not obvious.”
As an example, he cites the case of a client who wanted to develop five blocks on their site. “When we did the feasibility, we found out that it was a flood zone, which the client didn’t know about. We were able to tell them council wouldn’t approve their plans because of that. This stopped them from rushing in to the project only to meet a dead end.”
What can appear straightforward isn’t necessarily so, as complexities can arise during the feasibility stage, Parkin says. This stage helps identify potential issues, along with the projected costs and the relevant engineering standards required.
It also establishes whether there is genuine value to be gained from the project. If there is, the surveyor provides a written report for the client to take to their lenders. This is important as banks often require a resource consent before they lend to ensure the project’s completion.
Cutting The Red Tape
The next step is to apply for a resource consent. To do this, the applicant doesn’t just simply fill in the council application form and leave it at that. Rather, applicants must provide their plans, a typographical survey which includes features like drains, a final scheme plan, and an Assessment of Environmental Effect (AEE), along with the application form. The AAE can be particularly complex as it covers the effects on the environment, neighbours, and compliance with zoning requirements.
Parkin says this is where the red tape really starts. “You might get a discretionary consent. This means council has the discretion to override some rules that have only minor effects. But sometimes they will come back and say you need consent from affected parties, like neighbours. Or they might kick the application upstairs to a hearing.”
If a consent goes to a hearing, there will be starting costs of around $10,000 and council won’t necessarily say yes, he says. “It can still be subject to approval from neighbours. Then it goes to the Environment Court, which is around $100,000 in starting costs. It might then go to mediation, or it might be appealed to higher courts.”
With more straightforward applications, like a simple sub-division, this is unlikely to happen – although any large greenfield development will go to the Environment Court. “Usually it’s a relatively linear process and, sometimes, some things can be done concurrently,” Parkin says.
Conditions To The Fore
Aspiring developers need to be aware that lodging the application is not the end of the process, even if the project is straightforward. Once a consent is lodged, the council has 10 working days to accept the application. If incomplete, the application can be turned down and those 10 days end. If an application is accepted, a 20 working-day window to process the consent is available.
Parkin says the council can extend the process. For example, they might ask for additional information – which puts time on hold. “Under the current Act, [the] council can only ask for extra information once,” Parkin says. “So they only have one shot at it which means they have to be careful what they ask for.”
However, a council should respond to the application within four to six weeks.
The response will include consent conditions the council requires to be met. These might be construction of entrances and access to council standards, payment of financial contributions, and/or completion of sanitary systems, storm water systems and utilities to council standards. Negotiation on these is possible.
A New Title
Further, other consents are required before development can take place. These can include land-use, earthworks and building consents. As noted, these can sometimes be obtained concurrently.
But Warren Lovegrove warns the process for each consent type is different. “They also go through different parts of council. This means you can’t just provide one type of information: it’s not a one stop shop.”
There is a five year window for the various conditions, along with any engineering, design and/or construction requirements, to be completed and signed off. This includes the payment of financial contributions to council.
During this stage, the actual surveying work and preparation of Land Transfer Survey Plans can be carried out. This allows the applicant to obtain a Section 223 Certificate (obtained by submitting a Survey Plan to council). The completed plans can then be lodged with Land Information New Zealand.
Only once all of this is completed, is it possible to obtain a Section 224 Completion Certificate. In turn, this allows for the creation of the required new titles for the project.
The key is to be upfront with the work you have undertaken to remove risk and uncertainty, Lovegrove says. “If not, there are all sorts of fishhooks that come out in the process. It is complex and relationships with people are crucial.”
Path Of Least Resistance
For property management specialist Vesna Wells, planning and access to information were key to making the consent process run smoothly. She worked closely with council planners when seeking consent for her sub-division project.
“One of the key aspects of avoiding a notifiable consent process when building our two townhouses was ensuring the council was happy with our plans,” Wells says. “Their guidance and insight was paramount to the development. It is worth spending time talking to the town planners.”
While her plans were compliant with the relevant subdivision rules, the council suggested Wells get written approval from the neighbours. This process took several months and resulted in Wells putting up two metre high fences on the boundary, at the request of the neighbours.
“It was the path of least resistance and meant no further time would be lost, although it was an extra cost,” she says. “People shouldn’t underestimate the time it can take to seek everyone's permission before your resource consent application is lodged. Also, be willing to compromise where you can as delay equals cost or lost opportunity.
Working With Council
Communicating openly with council, and other interested parties, is a sensible approach to take.
Auckland City Council’s general manager of resource consents, Ian Smallburn, says people should engage with their council early. “We encourage people to talk to us throughout the process,” Smallburn says. “We are not ogres. We are there to help.”
Aspiring developers often don’t know the details of what is required, he says. “That is why coming into the council and talking through all the possible risks and issues is important. Because we can provide realistic guidance.”
While all projects have a risk profile, the difficulty involved in getting a consent depends on the complexity of the proposal. If a project is complicated it’s sensible to get a professional involved, Smallburn says.
“But, if an application is simple, all the necessary information is there, and we have had a good discussion earlier, it should be straightforward.
People should make their application as simple as possible.” People need to be aware of pitfalls. Prime among these are changing plans, which can cause flow on effects for infringements and requirements, he says. “That’s why you should nut out the issues and finalise the plans before submitting your application.”
Letter Of The Law
Keeping the lines of communication with a lawyer open is useful throughout the consent process.
The Property Law Centre’s Guy Seton says with smaller developments, lawyers tend to come in at the end of the process. Otherwise, a lawyer’s involvement would be subject to particular issues that might arise – for example, neighbour consent issues. “There might also be ownership issues if the project is a partnership or joint venture.”
However, with a bigger development a lawyer would provide more assistance. “For example, if a block of units was being sold off the plans, you would need a lawyer to deal with the sale of the units. Then there are more complex provisions to deal with all the ifs and buts and what happens if you want to get out.”
Auckland District Law Society vice-president Joanna Pidgeon says development plans should be discussed with a lawyer as part of the project team. “That would be to see if they have anything to add, but the planner usually handles the initial application work,” Pidgeon says.
If there were issues with the council refusing consent, or if the developer was unhappy with the consent terms, there would be more opportunity for legal involvement, she says. “And seeing a lawyer early to assist with tax effective structures for developments is always helpful.”