Naturally Resourceful

14 Oct 2008

Having your cake and eating it too – 'No Complaints Covenants' given some teeth

A recent High Court decision may reduce one of the biggest  criticisms of the RMA; the ability for neighbours, existing or new, to complain about existing land uses on neighbouring properties.

James Winchester looks at why developers, manufacturers, farmers and even port/airport operators should welcome the Court’s validation of no complaints covenants; an effective and enforceable tool to prevent future residents complaining about the effects of existing neighbouring land uses.

What Are ‘No Complaints Covenants’?

‘No complaints covenants’ are a commonly used but previously untested private arrangement between neighbouring land owners. They seek to achieve a win-win solution in situations where a land owner's existing lawful activity has unavoidable adverse environmental effects, and a neighbouring land owner wishes to obtain a resource consent to develop their property or establish a new, more sensitive, land use. One that is potentially incompatible with the existing established activity. 

This can give rise to the well recognised RMA concept of ‘reverse sensitivity’. In such a situation, the land owner with the existing activity may consent to the neighbour's development on the condition that a no complaints covenant is entered into. 

While the requirement to enter into such a covenant cannot be imposed by a council as a condition of resource consent, a private agreement can be negotiated as the price of ensuring that a consent application is supported - or at least not opposed. Effectively the developer agrees not to complain about the effects of the neighbouring existing activity and covenants are to be registered against the title to the developer's land. Without such covenants, new residents or successive owners of the neighbouring land, may subsequently complain about the effects of the existing activity, with the potential for it to be compromised or even shut down.

Enforceability Was In Doubt Until Now

Until recently, the enforceability of these covenants had been in some doubt. However a recent High Court decision of South Pacific Tyres NZ Ltd v Powerland (NZ) Ltd (CIV 2008-485-427) appears to have erased any lingering doubt as to the validity and enforceability of such covenants. This highlights the potential of these covenants to provide some certainty for parties when considering their positions on applications for resource consent. 

The Facts of the Case

South Pacific Tyres NZ Ltd (the tyre company) had been operating as a tyre manufacturer on its land since 1948, and sought summary judgment and specific performance against Powerland (NZ) Ltd (the developer) whose land adjoined the tyre company land.

The developer planned to develop its land for residential purposes and the council was prepared to grant resource consent only if the tyre company consented. In 2002 the parties entered into a covenant which was to be registered against the title of the developer's land, whereby the tyre company agreed to consent to the development subject to a number of conditions, one of which involved a no complaint clause on the part of the developer as to the effects (noise and odour) of the existing use of the tyre company land. 

Immediately after the resource consent was granted, the developer notified the tyre company that it intended to cancel the covenant. Following a complaint being laid by the developer with the council about the tyre company's noise, the tyre company filed the present proceedings seeking to enforce the agreement and the terms of the covenant.

Can an Individual Give Up Their Rights Under the RMA?

The developer argued that the agreement to covenant was illegal under the Illegal Contracts Act 1970 (ICA) in that it restricted it from complaining about and seeking enforcement orders against activities which may contravene the RMA. Specifically, the developer alleged that the covenant ousted it from its rights under the enforcement provisions of the RMA, and from lodging an information in support of a prosecution. 

The Court concluded that the effect of the covenant did not oust the jurisdiction of the Court in such a way as to breach the common law, because it did not exclude the Court's jurisdiction to determine questions of law. The agreement to a covenant meant the developer merely waived its right to complain under the RMA (amongst other things) in return for the tyre company's consent to the residential development.

The Court considered that it was apparent from case law that people could freely contract to waive their rights to participate under the RMA, especially in cases where the developer obtained direct benefit from doing so. The Court also found that such covenants were not contrary to public policy.

Therefore, the covenant was upheld as being valid and enforceable. The developer had enjoyed the benefit of the covenant by being able to develop its land, and now had to fulfil its obligation by registering an instrument against its title that recorded the terms of the covenant. The Court made an order by way of summary judgment for specific performance.

The Effect of the Decision

Providing ‘no complaints covenants’ are agreed between the parties, any lingering doubt as to the certainty that they provide parties as to their future rights appears to have been addressed by this decision. Such covenants can protect the necessary existence of an activity which produces adverse effects while enabling more sensitive development to proceed at the developer's risk.

As a result of this decision, the use of no complaints covenants is likely to be more widespread in the future. They now represent a tool that will smooth the way for more intensive land use, especially in the industrial-commercial and rural fringe. 

Authors

Phillip Merfield

Partner - Property & Infrastructure

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Jonathan Salter

Partner - Public Sector

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Michael Scannell

Partner - Property & Infrastructure

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Michael Wood

Partner - Property & Infrastructure

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