The Meriton Rating Appeal – when 'for residential accommodation' means being capable of providing residential accommodation
Court decision represents an important determination as to how one rates land.
On 14 November 2018, judgment was handed down by the New South Wales Supreme Court, Court of Appeal on whether a commercial land owner was entitled to recover rates, levied and paid, during the construction phase of a development, when the dominant use of the land was not for residential accommodation (North Sydney Council, Council of the City of Sydney & Bayside Council v various 'Karimbla Properties' Companies  NSWCA 257).
The Appeal Court considered whether for the purposes of section 516(1)(a) of the Local Government Act 1993 the dominant use of the land could be categorised as being for residential accommodation when the relevant land was being developed for the purpose of construction of residential apartments.
Various Karimbla Properties Companies (Meriton) lodged applications with Bayside Council, Council of the City of Sydney and North Sydney Council (the Councils) to change the rating categorisation of the lands from 'business' to 'residential' (the Applications).
The Applications, in most cases, were not determined and as a consequence Meriton filed multiple Class 3 Applications in the Land and Environment Court (the Lower Court) seeking orders that the various lands be declared within the 'residential' rating category under the Act and an adjustment of rates previously paid and payable under the 'business' rating category be refund as monies overpaid.
The primary judge in the Lower Court handed down judgment declaring the lands at the time of demolition and construction of residential apartments were within the residential rating category and ordered the Councils to pay various sums of monies, being an adjustment of rates consequential upon that declaration. The Lower Court essentially followed a previous decision of Pain J in Meriton Apartments Pty Limited v Parramatta City Council  NSWLEC 309 (Meriton Apartments).
The Councils appealed against declarations and orders made in the Lower Court.
The critical issue for the Appeal Court to determine was the meaning of the words in section 516(1)(a) of the Act “its dominant use is for residential accommodation” and in particular the importance of 'for' in the phrase.
Meriton submitted that the dominant use of the land was for residential accommodation from the time that physical activities of demolition commenced. The Council of the City of Sydney and Bayside Council submitted that the lands were not used for residential accommodation until an Occupation Certificate had been issued so that it would be lawful for the buildings to be used as residential accommodation. North Sydney Council contended that the lands were not used for residential accommodation until they were actually occupied as such.
The Appeal Court accepted the Councils’ construction of the phrase where Emmett AJA and McColl JA took the view that the issue of an Occupation Certificate was the appropriate indication that a future intended use for residential accommodation had come sufficiently into fruition to become a present use for residential accommodation. White JA accepted North Sydney Council’s proposition that an issue of an Occupation Certificate was not sufficient indication that a use for residential accommodation has come sufficiently into fruition to become a present use but rather the commencement of physical occupation for residential purpose.
In addition, Emmett AJA expressed the opinion that section 527 of the Act created no right or cause of action providing an entitlement to a refund, repay or recovery of rates paid voluntarily without protest under a lawful rate notice and that an adjustment of rates in the statutory context and scheme meant an adjustment in the record required to be kept by a council under section 602 of the Act.
Why is this decision important to local government?
The Appeal Court judgment overturns the authority in Meriton Apartments and represents an important determination as to how one rates land when the dominant use of land can be categorised as being for residential accommodation when the relevant land is being developed for the purposes of the construction of residential apartments.
In addition, local government now has a clear understanding that the adjustment of a rating category does not mean a monetary refund.
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