From Microbreweries To Garden Cafés – An Overhaul Of The NSW State Planning System Reflects The Changing Face Of The Retail Sector

By Nasiya Goldberg, Lawyer, MST Lawyers

Australia has not been immune from the recent global changes to the retail sector.  The growing success of international heavy-weight bricks-and-mortar retailers and e-commerce retailers has significantly impacted the Australian retail landscape.  Australia has also followed the global trends in discovering entirely new retail types, such as contemporary garden centres, artisan retailers and local distribution centres.  In August 2018, the NSW State Government introduced improvements to the retail land use definitions, that modernise NSW’s planning laws to reflect contemporary retail practices.

Key Milestones In The Recent Overhaul Of Planning Laws

• In June 2017, a report by the Retail Expert Advisory Committee (REAC) provided advice to the NSW Government on improving the planning system as it relates to retailing, by way of five major recommendations:

1. Develop a state-wide retail planning policy
2. Consider retail supply and demand in strategic plans
3. Change the Standard Instrument Local Environmental Plan
4. Improve assessment processes
5. Provide clearer planning guidance.

• In October 2017, the NSW Department of Planning and Environment (DPE) accepted the recommendations in the REAC Report.
• In April 2018, the DPE issued a media release acknowledging the significant global shifts in the retail landscape and proposing legislative changes as the first step in implementing the REAC Report, with the DPE Deputy Secretary of Policy and Communications, Alison Frame, saying that the legislative changes were aimed at “ensuring retail land uses are aligned with the contemporary retail environment”.
• From 3 April 2018 to 18 May 2018, the DPE exhibited five strategic amendments to retail land uses, seeking industry and community input.
• In July and August 2018, the legislative overhaul was introduced by way of the Standard Instrument (Local Environmental Plans) Order 2006 and certain other environmental planning instruments.

Key Legislative Change

The retail industry has welcomed the introduction of a new planning definition (specialised retail premises) to reflect changing business models in the large format retail industry.  The former land use term ‘bulky goods premises’ reflected outdated ‘showroom style’ premises where goods sold were of a size or weight required both:

1. A large area for storage/display; and
2. Direct vehicular access.

Under the new definition, only one of the above criteria is required to be met, which reflects the industry submissions advice of the changing nature of the global retail landscape where many specialist retailers no longer require showroom style premises due to direct dispatch from a central warehouse to customers.

The new definition lists a non-exhaustive list of goods that may be sold at specialised retail premises, including automotive parts and accessories, household appliances and fittings, furniture, homewares, office equipment, outdoor and recreation equipment, pet supplies and party supplies.  The definition also allows for the ancillary sale/display of food and clothing.

Summary Of The Other Key Changes

1. A revised definition of ‘garden centre’ now allows for contemporary ‘mixed-use’ gardening stores to offer customers:

• The operation of a restaurant or café
• The retail sale of outdoor furniture and furnishings, barbecues, shading and awnings, pools and spas
• The retail sale of pets and pet supplies
• The retail sale of fresh produce.

2. A new definition of ‘artisan food and drink industry’ reflects the growing artisan manufacturing industry, such as microbreweries and wine tasting tours.
3. A new definition of ‘local distribution premises’ recognises the increase in online shopping and the resultant need for ‘last mile delivery’. The new definition allows for premises used for the storage and distribution pending delivery, where no retail sales are made from the premises.
4. A new definition of ‘neighbourhood supermarket’ now allows small-scale supermarkets (of gross lettable areas of less than 1000m²) within residential areas, reflecting growing urban densification. This recognises the benefits of neighbourhood supermarkets for convenient daily shopping for consumers, rejuvenation of smaller neighbourhood centres and encouraging consumers to walk rather than travelling to major shopping centres.

The NSW retail sector has welcomed the legislative overhaul of the planning scheme in light of the significant global shifts in the retail landscape.

Does Queensland Need To Follow NSW’s Lead In Modernising Its Land Use Definitions?

It remains to be seen whether other States will follow NSW’s lead in modernising their land use definitions.  In particular, the Queensland retail sector would significantly benefit from an update to its development approval definitions, which largely mirror the previous NSW restrictions.  Change is needed to ease planning restrictions in Queensland to better support retailers facing contemporary threats such as online retailing.

Problems abound in Queensland, where the ‘showroom’ style definition used in development approvals specifically excludes the use of the premises as a ‘shop’. This is inconsistent with the contemporary terminology used in commercial leases which allows for traditional retail types, such as chemists, medical centres, and retail shops other than bulky goods shops, and modern retail types such as homemaker centres.

Failure to have a development approval for a permitted use under a commercial lease may constitute a contravention of the Planning Act 2016 (Qld), which will have serious financial and legal ramifications, such as:

1. Prosecution for development offences under the Planning Act 2016 (Qld), that can result in six-figure penalties for individuals and multi-million dollar penalties for corporate landlords.
2. Unenforceability of insurances policies over the premises.
3. Use of enforcement mechanisms.
4. Unenforceability of lease provisions requiring the tenant to pay turnover rent.

Summary

The NSW Department of Planning and Environment has taken significant steps in overhauling its planning system to reflect the global changes to the face of retail.  These changes may well be adopted in other States and Territories in Australia, which would be of particular benefit to the retail industry in Queensland.  When considering whether premises are suitable for the permitted use in Australia, it is critical that the tenant makes enquiries as to whether development approval is required.

If you require assistance with a planning or leasing matter, please email our Commercial Property team or call us on +61 3 8540 0200.