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.

On the Up: Air Rights & Council Properties

In 53 years, from 1858 to 1911, New Zealand's population grew from just over 100,000 to over one million.  In the last 98 years it has quadrupled to almost 4.3 million.  Despite the fact that New Zealand is largely a low-rise/low density country, infill development and vertical development are two measures that might help meet the increasing demand for commercial, residential and leisure space.  An increasing trend in terms of Government policy.  Phillip Merfield takes a look at how councils can maximise low rise developments to make the most of the 'space above our heads.'

Developments will get more intensive
Aside from engineering (including seismic code) and design issues, adding additional storeys to an existing building represents an economic way to intensify land use.  It can be beneficial in terms of meeting commercial, residential or mixed use needs and indeed, improving the overall urban form.  The policy background to this is about making the urban form denser, with consequential benefits for sustainable transport.  The NZ Transport Agency report, Managing transport challenges when oil prices rise, reflects on making our towns and cities more dense.

Some opportunities are up in the air
Where no height restrictions exist, the air above a commercial property can be transformed into something of tangible value.  Given the low rise nature of many commercial properties in prime commercial areas, air rights can be exploited, but taking expert advice (legal, planning, geotechnical and civil) is a prerequisite.  Air rights are bespoke to a property and its locality. 

Simpson Grierson, for instance, advised Auckland City Council on the sale of air rights above an inner city carpark.  This radically transformed something with absolutely no value into something of economic value.  While any development to exploit air rights will be subject to the RMA in the normal way, in this situation, the council realised value by selling rights to the three-dimensional space above an asset to a developer.  RMA risk and development risk was transferred but yielded apartments of a very high standard.  This has the added benefit of increasing densities on land used for multiple uses.

Exploiting air rights is a relatively new evolution in New Zealand but is common overseas where physical space is at a premium. 

Going through the ups and downs
While engineering and design issues can be overcome, some properties in a council portfolio might be subject to height restrictions.  This is another area where sound legal and planning advice is needed if authorities are to realise maximum value once a decision has been made to 'go up'.

Maximum height is normally provided for as a condition of a land use consent (rather than subdivision consent).  In some cases a subdivision consent and a land use consent for a building may be issued as part of the same decision.  If that is the case, any height restriction could be by means of what is called a consent notice (section 221 of the Resource Management Act 1991). 

Consent notices are used as a tool to ensure compliance with a condition of resource consent.  Once a consent notice is registered on a certificate of title, it is deemed to be a covenant that runs with the land and binds all subsequent owners.

Checking current and future policies
It is important to understand the reason why any building is subject to a height restriction in the first place.  This is where detective work can reap handsome commercial rewards.  The reasoning may be part of the decision granting either land use consent or subdivision consent, and should be available on your council's property file.  While reasons are wide and varied it is important to put the property in question in the current policy environment. 

Of New Zealand's 74 territorial authorities, 39 are projected to have more people in 2026 than in 2001.  This is where intensification of land use comes into the policy nexus.  While some reasons maybe intractable (conservation/heritage zone or protected views etc), for many, it is worthwhile investigating if the potential commercial returns make it justifiable.  What made sense in the early 1970s is often different today.

Varying or cancelling conditions
Local authority property professionals will be well aware that to vary or cancel any condition, including a height restriction, an application must be made to their council.  The process is similar to that for an application for resource consent.  Any application could be subject to public notification, limited notification or processed on a non-notified basis. 

Each of these three options will require a different  tactical approach from you.  In deciding whether or not to grant an application, to vary or cancel a condition, the consent authority (or if the decision is appealed, the Environment Court) must assess the effects (positive and negative) of varying or cancelling the condition against the provisions of the district plan.

In addition, the consent authority must take into account the reasons why the consent notice was imposed in the first place, and importantly, whether those reasons are still valid today.  That lies at the heart of testing viability in  a planning sense.

Some final thoughts
While going up may potentially be feasible, other standards, such as car parking, are tightening and is the flipside of the NZTA report mentioned earlier.  This is the trade off for land use intensification.  Taking detailed expert advice on the RMA should form your initial economic analysis with other experts.  This ensures the full context can be added into any business plan to establish if 'going up' ‘stacks up’ financially.