Consent Buying Under the RMA

Hamilton

There has been a lot of talk about the costs developers face under the RMA. To the uninitiated these costs may sometimes seem overwhelming: council charges, costs of providing information and the expenses associated with delays caused by the requirements of the consent granting process.

One area of expense to attract increased profile in recent times has been the practice of ``consent buying''. The Resource Management Act, 1991 does not provide for consents to be purchased. It does allow applicants to avoid public notification of their applications if they can win the approval of those people who will (in the council's opinion) be affected by a proposal.

With this approval, applications may be processed by councils without public notification - saving the applicant time, money and hassle.

Winning such approval does not guarantee that a consent will be granted, it simply means that any effects on the consenting parties are no longer taken into account. (Incidentally, failure to win the approval of an affected party need not force public notification if the council is of the view that it would be ``unreasonable in the circumstances'' to demand such approval.)

While this is the legal position, the reality is that gaining the approval of an affected party is often seen not only as the prerequisite for council consent to a project, but virtually the consent itself. In the eyes of the public, decision making power seems to have shifted from the community (represented through the council) to individuals. The exchange of money between the applicants and affected parties strikes some as not being the New Zealand way of doing things.

Despite what might commonly be thought to be the case, winning the approval of affected parties (usually neighbours) is not a new concept in NZ resource management law. The RMA's predecessor, the Town and Country Planning Act 1977, had a similar provision in respect of ``dispensations and waivers''. The difference is that the RMA broadens the application of the concept so that it may apply to a range of different types and scales of development. (The affected parties' consent provision relates to all types of consent categories). The dispensation provisions of the TCPA applied only to a limited number of minor applications and therefore the practice was limited.

Some commentators would endorse `consent buying' as a sign that the market is working. In some respects they are correct. The provisions were put in the Act so that the market could generate compensation for lost property rights. Why force councils to intervene if individuals can sort things out amongst themselves - for example, if one neighbour is happy to pay for a hedge to screen an unsightly shed from another.

The principle becomes less desirable if allegedly affected parties hold developers to ransom by claiming sums of money disproportionate to the inconvenience they will suffer. This amounts to rent seeking. Pure and simple.

What can be done about it?

The first question to ask is, why would developers pay these large sums of money? The answer seems to be that they fear the notification process is even more costly. It seems to me that the most rational way around the problem is to ensure that the notification process runs as smoothly as possible. Reducing the costs associated with notification of applications eliminates much of the potential rent available to affected parties.

The second question is whether affected parties are being properly identified? Identifying someone as an affected party confers considerable status and possible financial benefit. This identification needs to be accurate but not over zealous. Ideally plans would state with some specificity who the council would consider to be affected by particular types of application.

Thirdly, there is presently no right to appeal against a council's decision on whether or not to require notification. The only legal avenue is judicial review. Permitting some form of appeal may be an option, but its real value would seem to be in setting a precedent for future practice through the awarding of costs. Appealing the decision defeats the desire for an inexpensive and speedy process.

A fourth option is to add an intermediate level of notification whereby an application is notified only to the party (or parties) who withhold consent. This may initiate a more speedy process. It would also force non consenting parties to go to the trouble of making a submission and turning up to a hearing. This may sort out the seriously affected from those just seeking to profit from the process.

Finally, the ability to exercise discretion about what is `unreasonable in the circumstances' needs to be examined. Legal advice suggests that the current wording of the Act does not allow demand for payment to be considered unreasonable. An amendment to the Act could allow such an interpretation to be taken.
As you see, there are some complex issues. The Ministry for the Environment is concerned about the notification/non-notification debate and recently commissioned a study into current practice. One of its conclusions is that council practices have resulted in uncertainty and inconsistency in decisions on notification/non-notification. The study includes recommendations made on practice issues and on priority areas for legislative change to complement the alterations in practice. We have yet to determine what steps to take in response to this report.

I should observe that market solutions work when both parties to a contract freely secure their interests. In other words, there is mutual satisfaction. When applicants are forced to become unwilling parties to a deal (because the alternative regulatory process seems worse) there will be cries of extortion. The experience with consent buying shows that the market approach is not without its transaction costs. Those who would have us move to a more market based approach would have to acknowledge that rent seeking practices such as consent buying would escalate.