The NSW Court of Appeal has held that development consent for a gym in an RSL club was not a separate or independent use. As a result, when the premises was sold and use as an RSL club ceased, the gym no longer had development consent.
Snapshot
- The decision highlights the importance of understanding the precise uses and works authorised by development consents, particularly in the context of property transactions.
- Commercial tenants should be aware of the risks posed by changes in co-occupancy or ownership to the lawfulness of their own uses and development.
Background
In 2014, Interslice Pty Ltd entered into a five-year registered lease with Bass Hill RSL Club, including an option to renew for a further five years. The premises were located on the lower ground floor of the Club building. Clause 10.1(a)(ii) of the lease required the tenant to "obtain, keep current and comply with all consents ... necessary" for its use of the premises.
In 2019, the tenant exercised its renewal option. Shortly thereafter, the Club sold the property to CCA Investments – Bass Hill Pty Ltd. Relations between the tenant and new landlord deteriorated. The tenant alleged repudiation of the lease, purported to terminate it, and initiated proceedings. The landlord cross-claimed, arguing among other things that the tenant lacked the necessary planning consent.
Planning context
Under the Bankstown Local Environmental Plan 2001, the land was zoned "2(a) – Residential A", prohibiting uses including "Registered clubs" and "Recreation facilities" (including gyms). However, clause 12 of the 2001 Plan allowed consent for prohibited uses in certain circumstances (such as where the use was not inconsistent with the relevant zone).
In 2006, the Club obtained development consent for "Refurbishment to Existing Bass Hill RSL Club Including Internal Alterations and Construction of Health Club, Children's Play Area and Rear External Terrace" (emphasis added).
The 2001 Plan was then replaced with the Bankstown Local Environmental Plan 2015, which maintained the prohibition on "Registered clubs" and "Recreation facilities (indoor)". Thus, the gym could only continue operating under the "existing use" provisions of ss 4.65 and 4.66(1) of the Environmental Planning and Assessment Act 1979 (NSW) – i.e., if the use was lawful prior to the 2015 Plan but would otherwise be prohibited under it.
The key issue in dispute
The use of the premises as a Club had ceased when the new landlord purchased the property. Therefore, the question was whether the 2006 Consent approved the gym as a "separate and independent" use of the land, separate from its use as a Club.
In Court
The primary judge considered that the gym "use" was not a separate and independent use. Rather, the gym "use" approved by the consent was "to operate the gym as part of the RSL Club".
The Court of Appeal agreed with this reasoning. The Court agreed that the 2006 Consent was for a "change of use", specifically to use the lower ground floor as a gym. The Court further held that the gym, while a "separate" use, was not "independent".
Considering whether it was a "separate" use, the Court considered the documents forming part of the 2006 Consent, including the Statement of Environmental Effects, which called for separate assessment of the proposed gym and considered it distinctly from the Club. It was therefore not "subsumed within the dominant purpose" of the land.
The Court also noted the use of the word "including" in the description of the development in the 2006 Consent (which suggested that the gym was included in the broader refurbishment of the Club).
In finding that the use was not "independent", the Court set out the test as being a question of fact and degree in the circumstances of the case, which could not be answered merely by questioning whether the use was "ancillary". The Court considered the nature of the development as a whole, including the use of carparking by gym members, the description of gym users as "members and guests" of the club, and the fact that the gym was not self-contained. The Court also considered the manner in which the development was described in the Statement of Environmental Effects from the 2006 Consent. As a result, the use as a gym was "inextricably bound up" with the use of the land as a Club.
The result was that the "existing use" was as a Club with a gym, and not separately as a gym. This use was abandoned when the Club was sold. Accordingly, the gym did not have consent and was in breach of its lease.
Key takeaways
- This case underscores the importance of verifying planning consents in property transactions.
- Leases should be drafted with precision, especially where a tenant's use depends on another party's consent.
- Care should be taken when preparing development applications, to precisely frame the nature of the use or works for which consent is being sought.
- Tenants should be aware of the risks posed by changes in co-occupancy or ownership.
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