Northlake’s no-objection clause heads to the High Court
Posted at 6:04am Thursday 29 Aug, 2019 | By Emma Conyngham email@example.com
In a move that has been anticipated by many, Wanaka Community Supporting Our Northlake Neighbours Inc (WCSONNI) has filed papers in the High Court, challenging the no-objection clause in the restrictive covenants on their titles. It's a move that could shake property development the length and breadth of New Zealand.
No-objection clauses are not new. They have been used my many developers throughout New Zealand and around Wanaka: The Wanaka Sun has obtained copies of the no-objection clauses for Peninsula Bay, Hikuwai, Timsfield, Riverside, West Meadows, Three Parks and Meadowstone. But it is only in Northlake where they have proven their bite and subsequently caused anger, frustration and in some cases, outrage. (Notably, there is a development in Taupo's Acacia Bay where a developer is using the same tactics to construct a lodge in a residential gated community; a case that reads almost like a carbon copy to Northlake's proposed hotel.)
The no-objection clause means owners cannot object to changes to the masterplan by the developer, and in Northlake's case, they are also required to give their unqualified approval if requested by the developer, even if it is expressly against their wishes.
Niamh Shaw, WCSONNI president, said, “The result of these general no-objection clauses is that there is currently nobody holding Northlake Investments Limited (NIL) accountable for its actions. Since those directly affected are prohibited from submitting, and the wider community's opinion was roundly disregarded as being ‘unexpert', the developer has absolute licence to do whatever it wants.
“If we do not challenge the validity of the no-objection clauses, we are back at square one the next time the developer applies for a resource consent. We want to definitively address the question as to whether these broad no-objection clauses that prevent any resident opposition to any development, are valid or simply an assault on the democratic process.
“One of the reasons the no-objection clauses are so significant in this particular instance, is that the hotel is a major departure from NIL's masterplan and/or sales plan from 2015 and 2016, both of which show two tennis courts and a small business park (labelled) where the hotel is proposed.”
Shaw continued, “This is no longer ‘just' about a hotel in a residential suburb in Wanaka; it's about residents' democratic right to voice an opinion on their living environment and its future. I think the overwhelming community response is because a segment of our community is effectively being silenced. Whether or not it is legal, if feels unjust.
“I can understand the appeal of general no-objection covenants from the perspective of a Developer. However, I've seen at first hand the effect it has on a small community, and in my opinion it's devastating.”
-‘It could be a big win'
Local lawyer, Janice Hughes from Aspiring Law said, “Legal people think this case is really interesting because of the arguments involved. It will be a big win for the society if they are successful.”
Whether or not this move is enough to prevent the proposed hotel from going ahead remains to be seen. Hughes said, “The problem is that the Northlake Hotel application has already gone through a hearing process. A decision has been made and that decision has been appealed. Only those parties involved in the appeal now have standing.”
This case is going to be watched very closely by property developers and lawyers throughout the country. “‘No objection covenants' are a commonly used tool in property developments these days, so the outcome of a case about the enforceability of those types of covenants is pretty important to both developers and purchasers,” said Hughes.
“If the no objection covenant in the WCSONNI application was modified or extinguished by the court then developers would need to look at that decision carefully to assess whether they needed to make changes to what they are doing as a result.
“It is possible they would need to modify the wording in the contracts they were using, and/or modify the way they were progressing their developments from a consenting perspective, or the sales pitch they are using.
“It is also possible that they wouldn't need to change anything at all, if the no objection clause in question is modified solely to address particular facts raised by WCSONNI.”
-Good planning looks after people
Senior policy advisor Joel Cayford from the New Zealand Planning Institute said “Public participation and involvement is at the core of good planning and if you've got a developer that's breaking their promises and going away from their masterplan that people bought into and taking away people's rights -- this takes away from what good planning is in New Zealand.”
“Where you have developers that keep faith with their customers, these kinds of instruments [no objection clauses] are not a problem, but if you have a developer that pushes through changes on the basis there is no opposition from anybody, it goes against the spirit of planning which is to consider the interests of the people living there.”
Hughes agreed, “most developers around here have an overall plan for their developments and they complete their developments according to that plan without many changes along the way. People who buy into the developments have then received what they were promised and are therefore generally happy… [hence] The no-objection clauses have not been particularly problematic in the Upper Clutha until recently because, in general, we have well-planned and executed developments that have delivered to purchasers what they were promised.”
For Allan Dippie, the developer behind West Meadows, Meadowstone, and Three Parks, no-objection clauses have never caused him strife. “Willowridge Developments has done quite a few new developments in Wanaka over the years and whilst we have a mild form of this type of clause we have never had to use it or insist upon enforcing it. Talking to people is better and usually common ground is found when developers act in an inclusive way.”
“There are two bits of wisdom that some of the newbie developers in the town could note: listen to the community and be a part of the community, and be open and honest and above all do what you say you are going to do. We have found this simple approach has been of enormous benefit to our company and it's why we have had so many repeat customers over the years.”
Cayford said the no-objection clauses could be problematic on two fronts: firstly, “The whole point of the Resource Management Act is that it allows people to make submissions and have their say, so for a developer to make large changes on the basis the receiving community can't object, could be challenged in court.”
“[This is] fundamentally about property rights and none of the residents who bought in Winton's development would have thought they were signing away their rights in perpetuity to object to any change subsequently after they bought there. None of them would have thought that's what they were buying into. They bought into something that had swimming pools, tennis courts and community amenity… that's what gives the property its value.”
-Removing people's rights under a statute is ‘untested'
Stuart Ryan is an Auckland-based barrister who has previously written on the interaction between restrictive covenants and controls in district plans.
He says that the relationship between controls in district plans, which are meant to recognise the public and participatory ethos of the Resource Management Act, and restrictive covenants, which are a form of private planning control, has long been an unresolved tension, which gives rise to a number of issues.
“Usually the intent of a restrictive covenant in a residential subdivision context is to have controls which protect the amenities and values of the subdivision. Developers and their agents will usually promote the subdivision as having the benefit of the protections offered by the restrictive covenants such as common design, lot size, height or layout. However people purchasing in a residential context may not appreciate that where the covenant contains a no-complaints clause, then as purchasers they may in effect be ‘signing away' their rights to submit or object to adjoining development, and to participate at Council hearings or on appeal. Most people purchasing in a residential context are unlikely to read the fine-print. The covenants are usually written in ‘legalese', even though they will be registered on the purchaser's title,” he said. (Editor's note: like many people in Wanaka, we were so fixated on the colours, materials and styles restricted in the covenant, whilst dreaming of our new home, that we had not noticed the no-objection clause in our Peninsula Bay covenant — nor did our lawyer point it out to us. This is a “very common” problem according to Hughes.)
Ryan explained that no-complaints covenants were first recognised in a case concerning the Ports of Auckland who were receiving noise complaints from nearby apartments who had been built adjacent to the Port. The Port had been present long before the apartments, and who were ‘coming to the nuisance'. In a more recent case in the Environment Court concerning the development of Jack's Point in Queenstown, the Court upheld a no-complaints covenant, which bound owners to provide their consent to proposed development on land adjoining Jack's Point.
However cases dealing with restrictive covenants tend to deal with their own facts, and the drafting of the covenants is not uniform. Whether the no-complaint covenant is effective, while upheld in some cases, will depend on the drafting of the individual covenant and its context and purpose. There is also a view that the public policy implications of removing people's rights under a statute have not been fully considered within case law to date. It is possible that any Court reviewing the terms of the covenant will strictly construe the terms of the covenant. For example, covenants which purport to prevent "owners" from complaining are unlikely to bind people who are tenants, or short-stay occupiers.
“Here the complaint from the Society representing owners within Northlake is that the developer of the subdivision with the benefit of the no-complaints covenant has ‘upscaled' development on the adjoining land covered by the covenant, beyond what was originally represented as part of the sales plan for the subdivision.
“If the Queenstown Lakes District Plan now allows for a greater level of intensity of development as of right on the adjoining land (or with only minor consents necessary) then it would be tempting for a developer who has the benefit of a widely drafted no-complaint covenant to seek to upscale to development upon the adjoining land, to take advantage of more favourable planning rules.”
Ryan said that in addition to the High Court's powers to declare what is meant by the covenant, the High Court also has the power to extinguish or modify a covenant under the Property Law Act. This could take account of any change in circumstances since the covenant was entered into. The same provisions also allow the developer to apply to a court to enforce the covenant, which recognises that both an application to extinguish or modify a covenant may be combined with enforcement of a covenant.
Ryan said that, “The powers available to apply to modify a covenant have been little utilised to date,” but WSONNI's case may bring those powers to the fore.