Development “top up” ruled unlawful by High Court

Media Statement
4 September 2008

Development contribution “top up” ruled unlawful by High Court Judge

A High Court ruling has blown the whistle on Auckland City Council overcharging development contributions on new subdivisions.

The ruling relates to Auckland City Council using development contributions as a so-called “top-up”, after first having charged a financial contribution on the same development. The Court ruled that practice illegal, which sets a precedent for other developers who have also been overcharged by councils who seek top-up payments.

Daniel Newman, Property Council’s Policy Director said the Court’s ruling sent another clear message to the local government sector that development contributions are not a ‘blank cheque’.

“Local councils need to learn that they cannot double-dip. The High Court decision is further confirmation that the local government sector needs a prescriptive policy framework for determining whether or not they can charge development contributions, when such a charge can apply, and how much they can levy.

“As a result of the ruling against Auckland City Council, other developers who have also been the victim of council demands for top-up payments will be reviewing whether those demands were appropriate. We would expect the Council would have to review its own potential liability under this circumstance,” Daniel Newman said.

The judicial review arose when in January 2004 Auckland City Council charged Domain Nominee Ltd. a financial contribution of $222, 318 and took 510m² for reserves based on a 27-unit residential development in Parnell. In January 2007, the company decided to subdivide the property and reduce the number of units to 24. During this period, Auckland City Council had introduced a development contributions policy and subsequently demanded a development contribution for the second consent.

The Judge concluded that if Parliament had intended to give local councils the ability to impose development contributions as an additional levy on top of financial contributions during the phase-out period, the law would have expressly stated that entitlement.

“Once again the High Court has had to be called in to read the Local Government Act 2002 back to the local government sector. Just as the Court found North Shore City Council’s 2004 development contributions policy to be in error of law, so too is Auckland City Council’s practice of demanding top-up payments.

“It is our hope that the Council can work with the plaintiffs to agree on an appropriate refund. We would also expect Auckland City Council to clarify its own policy to ensure that this double-dipping practice does not occur in the future,” Daniel Newman said.

ENDS

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