Reported Decision : 114 LGERA 1 Land and Environment Court of New South Wales CITATION : Fortunate Investments Pty Ltd v North Sydney Council [2001] NSWLEC 70 APPLICANT Fortunate Investments Pty Ltd PARTIES : RESPONDENT North Sydney Council FILE NUMBER(S) : 11040 of 2000 CORAM: Pearlman J KEY ISSUES: Development Consent :- conditions - boarding house - restrictive covenant LEGISLATION CITED: Environmental Planning and Assessment Act 1979 s 96 North Sydney Local Environmental Plan 1989 CASES CITED: MacDonald v Mosman Municipal Council (1999) 105 LGERA 49; NTL Australia v Willoughby Council [2000] NSWLEC 244 DATES OF HEARING: 15/03/2001 EX TEMPORE JUDGMENT DATE : 03/15/2001 APPLICANT Mr P R Rigg SOLICITORS Deacons LEGAL REPRESENTATIVES: RESPONDENT Ms D J Townsend SOLICITORS Mallesons Stephen Jaques JUDGMENT: IN THE LAND AND 11040 of 2000 ENVIRONMENT COURT Pearlman J OF NEW SOUTH WALES 15 March 2001 FORTUNATE INVESTMENTS PTY LTD Applicant v NORTH SYDNEY COUNCIL Respondent JUDGMENT 1. The matter before me is a class 1 appeal brought by the applicant against the deemed refusal of the council to grant consent to a strata and stratum subdivision of the property at 31 - 33 Broughton Street, Kirribilli ("the premises"). 2. The premises comprise two shops plus a component of the building intended to be used as a boarding house. The intention under the present development application is to obtain approval for a subdivision of the whole of the premises, that is, of the shops and the boarding house component into three stratum lots and a further subdivision of the boarding house stratum lot into ten strata lots. 3. The use of part of the premises as a boarding house is the subject of a development approval granted by this Court. I refer to the decision of Senior Commissioner Jensen given on 14 April 2000. That consent was granted subject to conditions. Conditions 60 to 68 inclusive were conditions imposed in order to ensure that the boarding house component is actually used as a boarding house. 4. The use of part of the premises as a boarding house is development permissible with consent. The term "boarding house" is defined in the North Sydney Local Environmental Plan 1989 as follows: Boarding house means a residential building that is let in lodgings which primarily or principally provide lodgers with a principal place of residence but does not include backpackers accommodation, serviced apartments or a motel. 5. It is the understanding of the council, as reflected by the evidence given on its behalf by Mr G Shiels, that the practical effect of that definition is that the boarding house is to provide temporary residence for lodgers. Mr Shiels spoke of a period of residence of three months or longer. It is the council's view, which does not seem to be in dispute, that the definition is not meant to encompass owner occupation. 6. The council does not oppose development consent being granted for the subdivision that is sought, subject however to conditions of consent. Conditions of consent, in draft form, were furnished as ex 'D'. Those conditions are acceptable to the applicant except for condition A9, which is the subject of the dispute which the Court has to determine. 7. Condition A9 provides as follows: The applicant must cause a positive covenant in favour of Council to be registered with the strata plan in respect of stratum lot 3 (which burdens every lot in the strata plan) or the terms set out in schedule 1. 8. The terms of that positive covenant do not need to be repeated here, but they involve a covenant by each of the owners of the strata lots to comply with a plan of management. The plan of management is defined in schedule 1 under the proposed covenant to be: … the Plan of Management and house rules titled "Plan of Management Boarding House Rental Accommodation Nos 31-33 Broughton Street Kirribilli" attached to the conditions of development consent granted by the Land and Environment Court in respect of development application DA47/01, as amended or replaced with the Council's written approval … 9. The dispute concerning condition A9, that is, the placing of a restrictive covenant on the title, can be encapsulated in this way. The council is principally concerned that purchasers of the units or lots in the boarding house strata plan will not be aware of the quite serious restrictions on the use of those lots which are the subject of the plan of management without there being a restrictive covenant registered on the title to alert prospective purchasers. The council is concerned to preserve, by this method, a means of notice of the boarding house use to prospective purchasers. The council is concerned that, on the face of it, a lot in this strata plan will look like a bedsitter or a residential apartment, but in fact it is boarding house accommodation and prospective purchasers need to know its consequential restrictions in advance of purchase. 10. The applicant opposes the imposition of a restrictive covenant on the title principally because it is concerned about the inflexibility which such a restrictive covenant will impose. A restrictive covenant on the title is notice to all the world, but it can only be varied either in accordance with its terms, that is, with the written consent of the council, or upon an application to the Supreme Court. This Court has no jurisdiction in respect of dispute about restrictive covenants once created. This Court does, however, have jurisdiction to grant modification to conditions of a development consent under s 96 of the Environmental Planning and Assessment Act 1979. The applicant fears that its right to seek such a modification will be limited by the fact that there will be a restrictive covenant on the title. Its right to modification under s 96 will not be flexible but instead will require, in some circumstances, that is, in the case of council's refusal to grant its written consent to modification, an application to another court. 11. I accept that I have power to impose a condition requiring the restrictive covenant. In the quite recent decision of NTL Australia v Willoughby Council [2000] NSWLEC 244 delivered by Bignold J on 27 November 2000, his Honour held that there was power in this Court to impose a condition requiring a restrictive covenant to maintain and keep in repair an on site detention infrastructure. The question of the power of the Court to impose a condition requiring a restrictive covenant was not really the subject of debate during the hearing today. I accept that there is power for the Court to do so, if the circumstances are appropriate, and it is to the circumstances that the Court must direct its attention today. 12. There is a line of authority, conveniently set out in the decision of MacDonald v Mosman Municipal Council (1999) 105 LGERA 49, which supports the proposition that it is unnecessary and inappropriate to impose a condition requiring a restrictive covenant. Indeed in that case Lloyd J concluded that there was no need for the power of the council to be reinforced by the imposition of a condition requiring a restrictive covenant. His Honour said, in par 14, by reference to the authorities he had examined, that: The Court has not, in the past, been favourably disposed towards conditions requiring registered restrictions as to user. 13. Ms Townsend, appearing for the council, sought to distinguish those cases on the basis that they involved covenants which were intended to reinforce restrictions on development and in effect were an endeavour to limit the ability of persons to obtain development consent in the future. She contended that this is not such a case. I agree with her. There is power for the Court to impose the condition. The question is whether it is appropriate to do so in the circumstances. 14. Mr Rigg, appearing for the applicant, said that there was sufficient enforcement of the boarding house requirements in the conditions of consent, both on the development consent as originally granted and the development consent that is to be granted today in respect of the subdivision. The plan of management contains a number of conditions which require the boarding house premises to be used in accordance with its terms. The plan of management and the house rules cannot be varied or replaced without council's written consent, and each occupant must be provided with a copy of them. 15. I think there is a good deal of enforcement capacity in the conditions of consent incorporating the plan of management and I would not regard it as necessary to impose a condition requiring a restrictive covenant for that purpose. However, I also think Ms Townsend's submission that it is important that notice be given to purchasers is critical in this case. For that purpose, it is appropriate to impose a condition requiring a restrictive covenant. 16. I do not agree with Mr Rigg's submission that this will impose upon the applicant a condition which unduly limits its rights. The applicant will still be able to seek a modification of the conditions of consent through a s 96 application. If the Court on such an application considers that the modification should be granted, then it would no doubt be appropriate for the council to consent to the variation of the covenant as it is empowered to do under the terms of the covenant. 17. The applicant is concerned that the council may not act reasonably and carry out that further step. I think that would be a remote possibility. However the applicant, depending upon the nature of the modification sought, may not need to modify the actual restrictive covenant. There may also be other means, without the necessity of a Supreme Court action, to require the council to consent, such as making an application to the Court to control conditions of consent and to ensure that the plan of management, if it is modified, is fully modified. 18. I accept that the subdivision application is an unusual situation. I am aware from the documents which were tendered and in particular the report of council planning officer, Ms Higgins, that the council does not know of any situation where a boarding house has been the subject of a subdivision into strata lots. 19. I infer, because the circumstances are unusual, that prospective purchasers might not readily know that this is a boarding house and that it must be used as such, subject to the restrictions that are imposed because of that use. I conclude, in all the circumstances, that it is appropriate that there be a restrictive covenant. 20. There were two amendments to the conditions which were suggested during the course of the hearing. I think that they are appropriate and I propose to make them. 21. The first one is to the definition of "plan of management" in schedule 1, that is, to add the words "or as modified pursuant to s 96 of the Environmental Planning and Assessment Act 1979". 22. Secondly, there was a suggestion that the details of names of the residents of the boarding house be kept on record by the manager. I propose to amend cl 5 of the plan of management by inserting after the words "details of their" in the second line, the word "names", so that it reads: The manager shall maintain a computer record of all residents with details of their names, length of stay, number of persons in each room, which should be available to Council annually. 23. I make the following formal orders: (1) The appeal is upheld. (2) Development approval for the stratum and strata subdivision of 31 - 33 Broughton Street, Kirribilli is granted subject to conditions set out in ex 'D' as amended. (3) The exhibits may be returned with the exception of exhibit D. 24. I make no order as to costs. Fortunate Investments Pty Ltd v North Sydney Council Property: 31 - 33 Broughton Street, Kirribilli Conditions of Consent Development in Accordance with PlansDevelopment in accordance with Plans A1. The development being carried out in accordance with drawings numbered 7073/1, 7073/2, 7073/3, 7073sp1, 7073sp2, 7073sp3, 7073sp4 and 7073sp5, dated 31 June 2000, drawn by Asher McNeill Niall and received by Council on 3 August 2000 except, where amended by the following conditions. (Reason: Statutory) Subdivision A2. The original linen plan and nine (9) copies shall be submitted to Council for endorsement with the submission of each application for Subdivision Certificate. (Reason: Compliance) Sydney Water A3. The person acting upon this Consent shall submit to Council a certificate from Sydney Water under Section 73 of the Water Board (Corporatisation) Act, 1994, or equivalent approval demonstrating that the authority's requirements, if any, in relation to this subdivision have been met, prior to the issue of the Subdivision Certificate for the stratum subdivision. Under no circumstances will Council release plans without the certificate. (Reason: Statutory) Plan of Management A4. The boarding house premises are to be used and operated in accordance with the Plan of Management (and house rules forming part of the Plan of Management) which is annexed and marked "A". (Reason: Compliance) A5. The Plan of Management and house rules must not be varied or replaced without Council's written consent. A6. Each occupant of the premises must be provided with a copy of the Plan of Management and house rules at time they commence their occupancy. A7. All occupancies of the premises are to be conditional on the occupant complying with the Plan of Management and house rules. Strata Management Statement A8. The applicant must incorporate the Plan of Management and house rules in the Strata Management Statement registered with the strata plan in respect of stratum lot 3. The Strata Management Statement must oblige owners and occupiers of the premises to comply with the Management Plan and house rules. (Reason: Statutory) Positive Covenant A9. The applicant must cause a positive covenant in favour of Council to be registered with the strata plan in respect of stratum lot 3 (which burdens every lot in the strata plan) on the terms set out in schedule 1. (Reason: Compliance) Schedule 1 Terms of positive covenant (under section 88E of the Conveyancing Act 1919) 1. Definitions 1.1 In this instrument, unless the context otherwise requires: Building means the part of the building comprised in lot 3 in DP [insert DP number for the stratum plan]. Council means North Sydney Council its successors and assigns or any other body serving the same or a similar function and, where not repugnant to the context, includes the servants, agents and contractors of North Sydney Council (or the body serving the same or similar function). Plan means the strata plan to which its instrument relates. Plan of Management means the Plan of Management and house rules titled "Plan of Management Boarding House Rental Accommodation Nos 31-33 Broughton Street Kirribilli" attached to the conditions of development consent granted by the Land and Environment Court in respect of development application DA 47/01, as amended or replaced with Council's written approval or as modified pursuant to section 96 of the Environmental Planning and Assessment Act 1979. Strata Management Statement means the Strata Management Statement registered with the Plan. 2. Terms of Positive Covenant 2.1 This covenant may not be released, varied or modified without the written consent of the Council. 2.2 The owner of the lot burdened for itself and other owners from time to time of the lot burdened covenants with Council under section 88E of the Conveyancing Act that: (a) it will comply with the Plan of Management in respect of the use of the lot burdened as if the Plan of Management were set out in full in this positive covenant; and (b) it will not amend the Plan of Management without Council's approval. "A" - P LAN OF MANAGEMENT – BOARDING HOUSE RENTAL ACCOMODATION Nos 31-33 BROUGHTON STREET, KIRRIBILLI 1.0 Purpose of the Plan The purpose of this plan is to ensure that the approved boarding house is used in accordance with the development consent, notwithstanding that approval is granted for a Strata sub-division. 2.0 The site and building description The site is known as Nos 31-33 Broughton Street, Kirribilli. It has northern and southern boundaries of 30.56m, an eastern boundary to Humphrey Place of 9.9m and a western boundary to Broughton Street of 9.86m, providing a total site area of approximately 303m2. On completion the site will be occupied by two shops and ten strata lots, which will be each room within the boarding house. In addition, there are areas designated as common property. 3.0 Background and approval On 14 April 2000 the Land and Environment Court approved the development of the site for two shops and a ten room boarding house, subject to a number of conditions. These conditions stated, inter alia, "60. Boarding house This property is to be managed as a boarding house as defined in Council's controls. The definition states, ' Boarding house means a residential building that is let in lodgings, which primarily or principally provides lodgers with a principal place of residence, but does not include backpackers accommodation, serviced apartments or a motel.' 62. Management of a boarding house A management plan is provided to Council which covers: (a) House rules, prepared by management for residents and addressing pets, noise, use of outdoor common areas etc. Any outdoor space should have a curfew on its use (11pm). (b) Cleaning and maintenance of common areas. (c) A 24-hour telephone number so contact can be made with the manager. 65. The building created pursuant to this consent must not be used for any purpose other than a boarding house in accordance with the definition contained in the Northern Sydney Local Environmental Plan 1989." Although there are a total of 68 conditions relating to this consent, there are 10 conditions that relate to the use, operation, management and advertising of the property as a boarding house which are incorporated in this plan of management and also included as Attachment B. 4.0 Tenure All residents in the boarding house are to sign a lease or licence agreeing to comply with the house rules, with the length of the lease to be determined by the management on the explicit understanding that accommodation is not to be provided on a temporary basis to persons on recreational pursuits. The length of lease considered appropriate is to be generally not less than 3 months. Owners of individual rooms are generally not to occupy their room or other rooms, with all rooms being used in the conduct of a boarding house. 5.0 Management The manager is to be responsible for the ongoing management, cleaning and maintenance of the premises. The manager will be responsible to a body corporate to satisfy his management duties, the provisions of the management plan and ensure that the residents comply with the house rules. The manager shall maintain a computer record of all residents with details of their names, length of stay, number of persons in each room, which should be available to Council annually. 6.0 Duties of the resident caretaker In addition to the general duties described in Section 5 above, the duties of a resident caretaker shall include: 6.1 The caretaker will generally be available 24 hours in the conduct of his duties, and in particular, if any emergency should arise. 6.2 The caretaker shall ensure that a notice is placed near the entrance in a visible position to the public advising of his name and contact number. 7.0 Keys The manager, upon signing of the lease or licence agreement, will give boarders a key to their individual room and common areas. 8.0 Occupancy rates The number of adult persons residing at the boarding house is not to exceed the Council's recommended density of 1 person per 12m2 (net). Inspections may be undertaken by Council from time to time to ensure that this density is being satisfied. 9.0 Privacy The management shall ensure that privacy screens and/or mechanisms are in place to maintain an acceptable level of privacy from the decks to Rooms 8 and 9 and to minimise overlooking into the courtyard from rooms 4 and 5 (subject to further instructions). 10.0 Hours of operation The communal areas are to be generally restricted to the hours of between 6am and 11pm, 7 days a week except with the approval of management. 11.0 Kitchen facilities Individual rooms are to be restricted to plug in appliances such as microwave ovens, toasters, kettles and the like. 12.0 House rules The management is to ensure that individual tenants/boarders comply with the house rules and the respective lease or licence agreements shall contain a copy of the house rules and a clause advising the tenant/boarder that they will need to comply with these requirements. ATTACHMENT A - HOUSE RULES – Nos 31-33 BROUGHTON STREET, KIRRIBILLI The following house rules apply to all lodgers of the boarding house. Residents are to sign a copy of the rules, confirming they have read and are prepared to abide by these provisions. 1) Rental Accommodation - Residents staying in the boarding house are on a permanent or semi-permanent basis of periods normally in excess of 3 months. 2) Occupation Rate - The number of occupants in each room is to be notified to the manager at the time of signing the lease or licence and any change in occupancy is to be subsequently notified. 3) Pets - No pets of any kind are allowed on the boarding house premises without the approval of the management. 4) Hygiene - The individual rooms and common areas are to be maintained in a clean and tidy state and individual's rubbish is to be placed in the appropriate receptacles . 5) Fire Precautions - No fire, candles or naked flames are permitted within individual rooms. 6) Common Areas - Common areas are for quiet, unobtrusive use by lodgers. The manager reserves the right to restrict behaviour in these areas should any nuisance activities occur. 7) Noise - Noise levels are generally to be contained within individual rooms and not intrude into other rooms and common spaces. Agreement I have read and understand the above rules and agree to be bound thereby Surname……………………………………….Given names…………………………….. Birth date………………………………………Driver's licence No……………………….. Room No…….…..Signature……………………………………….Date…………………. ATTACHMENT B Extract from Conditions of Development Consent – Fortunate Investments Pty Ltd v North Sydney Council 10918 of 1999 Boarding House 60. This property is to be managed as a boarding house as defined in Council's controls – ie. Provide a principal place of residence and not temporary stay accommodation for persons on recreational pursuits. a) Any advertising of the property should clearly state that it provides a principle place of residence for residents and not temporary stay accommodation for persons on recreational pursuits. Opportunities for advertising include the local neighbourhood centre (Kirribilli Neighbourhood Centre, Fitzroy Street, Kirribilli) which produces a list of boarding houses in the local area in consultation with owners/managers, with details about contact numbers, tariffs, service to rooms, etc; tertiary institutions which may be able to provide block bookings for students; and local housing association (Community Housing Lower North Shore). b) Advertise tariffs per week, not per night. c) The kitchen is available 24 hours per day, 7 days a week. Boarding House Operations 61. Management is to keep records tariffs and each resident's length of stay, which may be sought by Council annually through the conduct of a survey. Computer records can be prepared to code by resident, not room. (This avoids a 'new' booking registering if a resident changes rooms). Management of Boarding House 62. A management plan is provided to Council which covers: a) House rules, prepared by management for residents and addressing pets, noise, use of outdoor common areas etc. Any outdoor space should have a curfew on its use (11pm). [management} b) Cleaning and maintenance of common areas. [management} c) A 24-hour telephone number so contact can be made with the manager. {management} Common Room 63. The door to the kitchen and common room is to be clear glazed. Decks 64. The decks to rooms 8 and 9 are to be designed so as to minimise overlooking into the courtyard areas of rooms 4 and 5. 65. The building created pursuant to this consent must not be used for any purpose other than as a Boarding House in accordance with the definition contained in the North Sydney Local Environmental Plan. 1989. 66. A full time resident caretaker must be nominated for the overall supervision of the Boarding House. A notice board must be provided near the entrance to the building visible to the public advising the name and contact number of the caretaker. 67. The communal kitchen and dining room must be available to residents of the Boarding House 24 hours per day, 7 days per week. 68. The use of communal deck area at the rear of the building shall be restricted to the hours 8am to 11pm, 7 days per week. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.