Oaks Hotels and Resorts (NSW) No. 2 Pty Ltd v The Council of the City of Sydney - [2011] NSWLEC 1049

Land and Environment Court

New South Wales

Medium Neutral Citation: Oaks Hotels & Resorts (NSW) No. 2 Pty Ltd v The Council of the City of Sydney [2011] NSWLEC 1049
Hearing dates: 9 June 2010, 23 August 2010 plans filed
Decision date: 01 March 2011
Jurisdiction: Class 1
Before: Murrell C
Decision:
1. The appeal in respect of the property known as Oaks Harmony at 107 to 121 Quay Street Haymarket is upheld.
2. The development application submitted to the Sydney City Council and as amended and for 49 of 190 residential apartments to be used as serviced apartments is granted a two year time-limited consent, subject to the conditions contained in annexure A.
3. The exhibits are returned to the parties with the exception of exhibits 1, 6, D and E.

Catchwords:
DEVELOPMENT APPLICATION: conversion of 49 of 190 residential apartments to serviced apartments within an existing building known as 'Harmony".
Conflicts with, and impact of serviced apartments on the amenity for residential apartments in the same building and on the same floors; inconsistencies with LEP, DCP and SEPP 65; and precedential effect.
Legislation Cited: Environmental Planning and Assessment Act 1979
Protection of the Environment Operations Act 1997
State Environmental Planning Policy No. 65
Sydney Local Environmental Plan 2005
Central Sydney Development Control Plan 1996
Cases Cited: Botany Bay City Council v Premier Customs Services Pty Ltd [2009] NSWCA 226
Goldin & Anor v Minister for Transport Administering the Ports Corporatisation and Waterways Management Act 1995 [2002] NSWLEC 75
Jarasius v Forestry Commission of New South Wales (1989) 17 LGRA
Jonah Pty Ltd v Pittwater Council [2006] NSWLEC 99 144 LGERA 408
Stockland Development Pty Ltd v Manly Council [2004] NSWLEC 472 revised - 01/10/2004
The Oaks Hotels & Resorts Pty Ltd v City of Holdfast Bay and Another [2010] SAERDC 16
Zhang v Canterbury City Council [2001] NSWCA 167
Category: Principal judgment
Parties: Oaks Hotels & Resorts (NSW) No. 2 Pty Ltd (Applicant)
The Council of the City of Sydney (Respondent)
Representation: Counsel:
Mr T Hale SC (Applicant)
Mr J Maston (Barrister) (Applicant)
Mr M Baird (Barrister) (Respondent)
Solicitors:
Minter Ellison (Applicant)
The Council of the City of Sydney (Respondent)

File Number(s): 10055 of 2010

Judgment

COMMISSIONER: The applicant in these proceedings is seeking approval to change the use from residential apartments to serviced apartments for 49 apartments in a total of 190 in the building known as 'Oaks Harmony' at 107-121 Quay Street, Haymarket. The appeal is for the refusal of Development Application D/200912071 by the City of Sydney Council.

The Site and Locality

The subject site is one block from Broadway as it turns into George Street. Surrounding land uses are a mix of commercial, retail and residential. The site is in close proximity to Darling Harbour, Chinatown and Railway Square.

The site has a frontage of 33m to Quay Street and a 60 m frontage to Bijou Lane to the south and has an area of approximately 2,516m 2 . Quay Street provides the primary pedestrian entrance and Bijou Lane provides vehicular access to the basement car park. The entrance and foyer area off Quay Street contains a reception desk and three lifts.

The site is occupied by a mixed use commercial/residential flat building known as 'Oaks Harmony', comprising: a 16-storey building containing 190 residential apartments; 673m 2 of ground floor commercial/retail floor space; and four basement levels of parking for 209 vehicles with an intercom system at the driveway entrance to contact reception for access to the basement parking.

Background

On 12 March 2001, a Stage 2 development application was approved for the demolition of the then "Her Majesty's Theatre" and an adjacent two storey commercial building to enable construction of a new 16 storey residential flat building containing 197 residential strata apartments, ground floor retail and commercial floor space, and 4 levels of basement parking for 209 vehicles. Subsequent s 96 modification applications amongst other things reduced the number of units to 190.

Condition 10 of the consent restricted the use of the accommodation portion of the building (Ground Level to Level 16) to permanent residential accommodation and required a restrictive covenant on title. The s 96 applications did not seek to amend this condition.

On 19 November 2003, the strata subdivision of the development was approved. Condition 10 of the Strata Subdivision Development Approval reiterated the permanent residential accommodation restriction. Restrictions on use of land were registered strata plans to the effect the apartments are to be for permanent residential use.

In August 2003, approval was sought to change the use of all residential units within the building to allow for flexible use of individual units for residential use or serviced apartments, at the discretion of the owner of each residential unit, however on 30 October 2003, the applicant withdrew the application.

By way of background only the Council in earlier Class 4 proceedings in this Court contended that some residential apartments within the development are used as serviced apartments, without development consent. His Honour Sheahan J found that Oaks 2 "The way it deals with the units in its care...is to "use " them as serviced apartments, clearly beyond the conditions of consent."

The Proposal

The applicant seeks consent to change the use of 49 out of a total of 190 residential units within the building into serviced apartments.

The proposal requires the use of lobby and lifts to access the apartments and use of common property facilities within the building for guests, including the pool, spa, sauna, gym, games room and parking.

The mix of proposed units to be used as serviced apartments is 30 x studio/1 bedroom apartments and 20 x 2 + bedroom apartments. As a total, if approved, the serviced apartment component of the development would make up slightly over 25% of the building (49 out of 190 units). The units are on levels 8 to 20 of the building and the numbers on each floor varies from 1 to 7. It is also proposed that 37 car parking spaces be used for the serviced apartments.

The development application was notified between 5 and 20 January 2010 and three submissions were received as contained in council's bundle of documents.

The application was refused by Council under delegation on 2 March 2010.

CONTENTIONS

In the respondent's Statement of Facts and Contentions, the following contentions were identified:

1.Residential amenity

The inherent conflicts associated with the proposed co-location of residential and serviced apartments on the same building levels, using the same points of access and building services, would result in unacceptable disturbances to longer term residents and diminution of the experience of serviced apartment guests, contrary to the City's goal of maintaining a high standard of amenity for residential apartments and best practice guidelines.

Particulars

Aims and objectives of the Sydney LEP

(i)One of the strategies identified under Clause 12(f) of the Sydney LEP, to achieve the aims of the plan, is the protection and enhancement of the amenity of residents, workers and visitors.

(ii)One of the objectives of the City Zone under Clause 36(d) of the Sydney LEP is to provide for increased residential development with appropriate amenity and to ensure a range of housing choices.

Objectives of the Sydney DCP

(iii)Clause 6 of the Central Sydney DCP seeks to ensure that reasonable levels of amenity, consistent with a Central Sydney location, are achieved in residential buildings including serviced apartments. The Strategy in Clause 6.1 is to ensure that residential buildings will be of high amenity. Further, serviced apartments should have a comparable level of amenity to residential buildings so that any subsequent conversion of serviced apartments to permanent residential stock is not constrained by poor amenity.

Physical constraints

(iv)The building's design and its facilities do not lend themselves to an efficient or effective functioning of the property for the proposed number and distribution of serviced apartments.

(v)The proposal involves an intensification of use of common property on a daily basis by guests, and hospitality and maintenance staff. The intermingling of residential and serviced apartments throughout the development, particularly on the same floor levels, is considered incompatible and leads to detrimental amenity impacts, or decreased amenity, to the long-term residents of the building.

User conflicts and expectations

(vi)The proposal cannot be considered a suitable mix of long-term and short-term residential accommodation uses. There is a fundamental incompatibility between the proposed mix of residential and serviced apartments that share the same floor levels and access points, in consideration of the difference in behaviour, living and activity patterns of long-term residents compared to short-term occupants, and the greater expectations of long-term residents for quiet amenity and care for the building through a greater sense of ownership and permanence compared to temporary residents.

(vii)The conversion of existing residential units to serviced apartments within this development constitutes an undesirable and inappropriate reduction in the stock of quality permanent long-term residential accommodation within the City.

Management limitations

(viii)The responsibility to resolve and control conflicts between long-term residents and short-stay users falls entirely on the serviced apartment managing agent.

(ix)A Plan of Management has not been submitted with the application.

2.Objectives and principles of SEPP No. 65

As the application involves the substantial redevelopment of an existing residential flat building, the provisions of SEPP 65 apply. The lack of separation of facilities for serviced apartment users and long-term residents and commercial tenants results in an unacceptable level of user conflicts and diminished safety and amenity within the building, contrary to SEPP 65.

Particulars

(i)One of the objectives of SEPP No.65 under Clause 2(3)(d) is to maximise amenity, safety and security for the benefit of its occupants and the wider community.

(ii)The proposed development is considered contrary to this objective of SEPP No. 65 in that the development fails to address the recommendations of the Residential Flat Design Code (RFDC), including the requirement to:

a.ensure the design of mixed use developments maintains residential amenities and preserves compatibility between uses;

b.separate permanent residential car parking from any other building use;

c.control car park access from public and common areas, and;

d.provide separate entries for residents in mixed-use buildings.

(iii)Therefore the development fails to address Part 2, Clause 16 - Principle 8 of SEPP No. 65 which requires that good design optimises safety and security. The resultant development is considered consistent with the RFDC conclusion that the coming and going of strangers can lead to security issues, especially for the residential component.

3.Access to mixed use developments

The lack of separation of facilities for serviced apartment users and long-term residents and commercial tenants results in an unacceptable level of user conflicts and diminished amenity within the building.

Particulars

(i)Clause 2.13.1 of the Central Sydney DCP provides that the consent authority should not consent to a mixed use development which includes two or more dwellings unless it is satisfied that separate lift access and a separate entrance will be provided for use exclusively for the dwellings.

(ii)The serviced apartments do not have exclusive lift and entry access; rather, users of serviced apartments and associated hospitality and maintenance personnel will share the same lifts, lobby, and other common property with longer term residential and commercial users of the building.

4.Financial burden

The proposal leads to a disproportionate financial burden on long-term residents. The proposal will require extensive building upgrades for fire safety and for access for persons with a disability.

Particulars

(i)Due to the difference in behaviour and expectations between short and long-term residents, it is likely that short-term occupants who do not have a financial interest in. the building are more likely to generate increased general wear and tear to the hallways and other common property. Therefore, there is likely to be a disproportionate financial burden placed upon long-term residents for the maintenance of common property.

(ii)The proposed change of use entails a change of building class under the Building Code of Australia (BCA) from Class 2 Residential Apartments to Class 3 Serviced Apartments.

5.Orderly development

The proposal does not constitute orderly and high quality development of land.

Particulars

(i)Clause 5(a)(ii) of the Environmental Planning and Assessment Act 1979 provides that one of the objects of the Act is to encourage the promotion and co-ordination of the orderly and economic use and development of land.

(ii)The Sydney LEP aims to encourage orderly, sustainable and high quality development of land and other resources within the City (Clause 11(d)), and one of the strategies for achieving this aim is to the protect and enhance the amenity of residents, workers and visitors to the City (Clause 12(f)). The aims and strategies of the Sydney LEP are to be applied in a consistent manner so as to provide certainty for applicants, investors, residents and the public (Clause 13 (d) and (e)).

(iii)The proposal is an ad hoc piecemeal change of use of the site that adversely impacts on existing residential and commercial users. Approval of the development would be a departure from the City's consistent application of policy and provisions relating to residential and serviced apartment buildings.

6.Public interest

The proposal is not in the public interest as it is contrary to the provisions of relevant planning instruments, development control plans, and in consideration of public submissions.

Particulars

(i)The conversion of existing residential units to serviced apartments within this development constitutes an undesirable and inappropriate reduction in the stock of quality permanent long-term residential accommodation within the City, contrary to Clause 36(d) of the Sydney LEP.

(ii)The proposal is likely to give rise to unreasonable levels of user conflicts which may place an undue burden on public resources in terms of Council compliance actions, and police investigations in terms of breaches of security.

(iii)On the balance of the above matters and in consideration of the public submissions received by Council, approval of the development would not be in the public interest.

Statutory Planning Framework

The subject site is within the City Centre Zone under the Sydney Local Environmental Plan 2005 . Clause 11 of the LEP contains the aims that include:

to protect and enhance diversity;
to foster environmental economic social and physical well-being and;
to encourage orderly, sustainable and high quality development.

The strategies for achieving the aims include:

development of the city as a vibrant culturally diverse multi-use city centre;
continued growth of a permanent residential population in central Sydney;
provision of visitor and tourist accommodation;
protection and enhancement of the amenity of residents, workers and visitors.

The Principles to be followed in implementation of the LEP referred to by the council are contained in cl 13 and in particular council identified:

(d) consistent application of the provisions of this plan so that the aims and strategies can be achieved and implemented and provide certainty for applicants for development consents, investors, residents and the public

(e) consistent and proper regard for the aims and strategies of the plan in particular when development applications are determined.

The objectives of the City Centre Zone are contained in cl 36 as follows:

to encourage Central Sydney's role and growth as one of the Asia-Pacific region's principal centres for finance, commerce, retailing, tourism, cultural activities, entertainment and government, and

to permit a diversity of uses which reinforce the multi-use character of Central Sydney, and

to facilitate the development of buildings and works that are of a scale and character consistent with achieving the other objectives of this zone, and to provide for increased residential development with appropriate amenity and to ensure the maintenance of a range of housing choices, and

to enhance the amenity of parks and community places by protecting sun access, and

to ensure wind levels are consistent with pedestrian comfort and the amenity of the public domain, and

to ensure satisfactory sky exposure, levels of daylight and ventilation to the public areas of Sydney, including the parks, places, streets and lanes, and

to recognise and enhance the character of Special Areas, and

to facilitate the conservation of items and areas of heritage significance, and

to protect the fine-grained urban fabric of Central Sydney, especially the existing network of streets and lanes, and to provide for high quality development that contributes to the existing urban form, and

to extend retail uses on frontages to retail streets, and

to provide active frontages to streets.

Apartments are a permissible use within the City Centre Zone and require development consent.

The relevant definitions contained in the LEP include:

dwelling in Central Sydney is a form of residential accommodation capable of being separately occupied.
mixed use development means a building or buildings in which two or more uses are carried out.
residential accommodation in Central Sydney means a building or part of a building that provides permanent or long-term accommodation, and includes residential flat buildings, dwellings, boardinghouses, hostels, student accommodation and the like.
serviced apartment in Central Sydney is a form of tourist and visitor accommodation and means a building or part of a building that provides self-contained accommodation which is serviced or cleaned by the owner or manager of the apartments or the owners or managers' agents.
tourist and visitor accommodation means a building or part of a building that provides temporary or short-term accommodation for travellers and tourists who generally have their principal place of business elsewhere. Tourist and visitor accommodation includes serviced apartments, backpacker accommodation, hotels, guesthouses, bed-and-breakfast establishments, motels and the like.

The Central Sydney Development Control Plan 1996 is relevant for the assessment of the application. This contains a provision for access to mixed-use developments wherein at 2.13 it states:

the consent authority should not consent to a mixed-use development which includes 2 or more dwellings unless it is satisfied that separate lift access and a separate entrance will be provided for use exclusively for the dwellings.

Section 6 contains provisions for the amenity for residential buildings and serviced apartments:

The consent authority is seeking to ensure that residential buildings within Central Sydney will be of high amenity, encouraging an increase in the residential population of the city (see Figure 6.1). Serviced apartments, which often cater for longer stay visitors, should have a comparable level of amenity to residential buildings so that any subsequent conversion of serviced apartments to permanent residential stock is not constrained by poor amenity.

For the purposes of this section, the term 'dwelling unit' refers to units in both residential buildings and serviced apartments. The amenity of dwelling units is influenced by factors including daylight access to the principal living room, siting, and orientation of the development to provide privacy.

The following provisions are intended to ensure a reasonable level of amenity for dwelling units, recognising that achievable residential amenity in Central Sydney may differ from that achievable in lower density situations. The provisions concentrate on the design of dwelling units, their relationship to their surroundings and key issues of internal amenity. Relevant aspects of AMCORD - A National Resource Document for Residential Development (Department of Housing and Urban Development 1995) should also be considered during the design phase.

State Environmental Planning Policy 65 Design Quality of Residential Flat Development applies to:

(a) the erection of a new residential flat building and

(b) the substantial redevelopment or the substantial refurbishment of existing residential flat building and

(c) the conversion of an existing building to residential flat building. In particular, the council referred to the aim contained in clause 2(D) to maximise amenity, safety and security for the benefit of its occupants and the wider community.

Clause 16 of the SEPP on safety and security states:

good design optimises safety and security, both internal to the development for the public domain.

Section 5(a)(ii) of the Environment Planning and Assessment Act requires that the orderly and economic use of the land and section 79C(1) includes consideration in the assessment of a development application of: the likely impacts; the suitability of the site for the development; submissions received; and the public interest.

Evidence

The court met on site with the parties the first morning of the hearing. Expert evidence was given on behalf of the respondent by Mr Timothy Wise, town planner. For the applicant Mr Paul Mitchell, consultant town planner and Mr Todd Spagnolo, State Revenue Manager with the Oaks Group, gave evidence to the Court.

In council's bundle of documents three objections were received to the notification of the development application. In summary, those that made written submissions made the comment that "having ever-changing neighbours is not only a security risk there is also a noise factor as people staying at serviced apartments tend to be louder and most likely have parties." Concern was also expressed about the amenity and maintenance of common areas.

It was also stated in the letters of objection that residents purchased units in 'The Harmony' on the basis of an understanding of these being residential units and allowing a significant alteration for the use of some 50 apartments for use as serviced apartments is unreasonable and unacceptable. The reasons given were that wear and tear on the building and increase in incidents of damage to the building, in particular to common areas and common facilities including lifts, hallways, lobby, gym equipment and the pool area. It was also stated that the proposal would have consequential monetary implications for the residents of 'Harmony' given the disproportionate amount of wear and tear caused by guests of the serviced apartments.

The submissions made the comment that conversion to serviced apartments would further diminish the security of 'The Harmony' property and disturb the peace of residents. The comment was made that "by their very nature as visitors and tourists these people have different aims from the residents when staying at Harmony and have little regard for the peace and comfort of the surrounding units and residents." Other comments included that the residents will lose the power and right at building committee meetings when Oaks Hotel acquire majority units for serviced apartments.

The planning experts prepared a joint report and points of agreement are summarised as follows:

for contention 1 they consider that the more appropriate goal is reasonable level of amenity and that both serviced and residential apartments should have comparable levels of amenity.
for contention 2 the council contends that the application involves substantial redevelopment and SEPP 65 applies, whereas the applicant disagrees that the works are not substantial but accepts that SEPP 65 is valid.
for contention 3 on access to mixed-use developments the experts agreed that an analysis of the plans that shows that full separation of facilities cannot be achieved.
for the contention of financial burden it is agreed that the burden of costs on contention 5 for orderly development they also agree that the development would constitute economic use of land.

The planners agreed that the behaviour of residential apartment owners, tenants, and serviced apartment occupants are difficult to determine with certainty and that there will be a proportion of anti-social occupants within all three types of residents. Mr Mitchell considers that "the distinction between residential and serviced apartments is minor to the extent of being immaterial." Mr Wise considers the distinction is quite apparent as evident by the definitions in the LEP. Mr Mitchell considers that the distinction between the definitions of serviced apartments and residential accommodation is so fine as to be meaningless.

Mr Mitchell comments that typical users of serviced apartments are workers or longer stay visitors and a typical guest would be working long hours and not inclined to noisy late-night activities. Mr Wise disagrees with this description as being typical. Mr Mitchell comments that the majority of apartments are owned by investors and are therefore rented for varying lengths of time and they are not long-term residents. Mr Wise on the other hand disagrees that the renters would not be long-term residents Mr Mitchell agrees that a proportion of renters and similarly a proportion of serviced apartment occupants would have less interest in the care of the building.

On the question differences and conflicts of users, Mr Mitchell considers that the key variable is the standard of the overall accommodation and the price paid and where a building is high-quality, as in the present case, nearly all residents would follow the expected behavioural norms. At the same time it was agreed between the experts that potentially a higher proportion of short-term occupants would be disrespectful to neighbours and it was also agreed that anti-social behaviour would not be confined to serviced apartment occupants.

On the key question of movement patterns in common areas of the lift and foyers, Mr Mitchell considers that this would be similar in frequency, whereas Mr Wise believes guests would move around the building more frequently than renters and owners.

While the planners considered that there are differences in terms of user expectations that is short-term occupants and the expectations of long-term residents for quiet amenity and care to the building, in Mr Wise's opinion this creates an unsuitable mix.

On the question of the conversion to serviced apartments being undesirable because it would lead to a reduction in the stock of quality permanent long-term residential accommodation, Mr Wise considers that the serviced apartments are a form of tourist and visitor accommodation, whereas Mr Mitchell considers it increases the diversity of the housing stock. Mr Mitchell notes the potential for amenity impacts associated with users competing interests, but concludes that the impacts cannot be substantiated, and the amenity impacts are typical of residential, whereas Mr Wise believes that these are not typical and are in fact unacceptable.

The experts agreed that a plan of management would be beneficial, however they disagree as to the effectiveness of same. Mr Mitchell believes it would be effective if it was largely self enforcing, Mr Wise is of the opinion that it is unlikely serviced apartment patrons will adhere to any prescriptive controls within a management plan given their transitory nature.

Mr Mitchell considers the proposal is a good example of the type of development envisaged by the planning controls for a change from permanent to longer stay accommodation, whereas Mr Wise disagrees and in his opinion the DCP envisages a change from serviced apartments to residential apartments but not the reverse. Mr Mitchell considers that the DCP seeks to have similar levels of amenity for serviced and residential apartments and this should allow for a change to and from serviced apartments and the building was designed to enable a change of use from residential apartments to serviced apartments. Mr Wise disagrees and states that the existing approval clearly prohibits serviced apartment use.

Mr Wise considers the proposal for serviced apartments is inconsistent with the provisions of the LEP cl 36(d) and cl 6 that relate to residential amenity, whereas Mr Mitchell considers that the co location of serviced apartments with residential apartments provides for reasonable levels of amenity.

On contention 2, Mr Mitchell considers that the proposal is not a substantial redevelopment and nor is it a mixed use by having serviced apartments within the building. Mr Wise believes that the building would be a mixed-use building with residential and serviced apartments because the two uses are separately defined. Mr Wise notes that the building was approved as a mixed-use development with the ground floor retail/commercial. However these uses are separated and not co-located as proposed in this application for serviced apartments with residential apartments.

With respect to the provisions SEPP 65, Mr Wise states that the proposal does not comply with the Residential Flat Design Code by ensuring mixed-use developments maintain residential amenity and preserve compatibility between uses by:

separating permanent residential car parking from any other building use
control car park access from public and common areas, and
provide separate entries for residents in mixed-use buildings.

Mr Mitchell disagrees that the proposal would constitute a mixed use in terms of the SEPP with the residential and serviced apartments both being residential uses.

Contention 3 for access to mixed-use developments, Mr Mitchell reiterates that separate access for different types of residents is not necessary and that different residential uses are not referred to in the code and not required to have separate lift and entry access. Mr Wise reiterates that serviced apartments cannot be classified as residential use, nor can serviced apartment guests be classified as residents.

The question of financial burden raised in contention 4, that the proposal leads to a disproportionate financial burden on long-term residents, Mr Mitchell states that the building modifications are minor for common areas and this is agreed. With respect to the greater wear and tear costs associated with serviced apartment use, Mr Wise considers that guests who are visitors and tourists in the serviced accommodation come and go with a greater frequency and intensity (i.e. with luggage). Mr Mitchell stated that he saw no evidence of disrepair to the building.

For the contention of orderly development the council contests that the proposal does not constitute orderly and high-quality development of land and that the intermingling of serviced apartments is ad hoc. Mr Mitchell considers the proposal is not ad hoc development as it is a response to expressed housing demand and preferences and is thus in the interests of both investors and residents. Mr Wise states that council has consistently refused the current co location of serviced apartments and residential apartments where there is not separate access, separate lifts and separate floors.

As set out in contention 7, Mr Wise considers the proposal is not in the public interest, and that management will not be able to ensure an acceptable levels of amenity is maintained for residential apartments where serviced apartments are sporadically located. Furthermore, he considers that the residents of serviced apartments are likely to have competing behavioural norms to the residents of residential apartments. Mr Wise does not consider serviced apartments can be classified as a form of housing, whereas Mr Mitchell considers that it provides for greater housing choice. The council also contends the proposal is contrary to clause 36 (d) of the LEP and that the proposal will give rise to unreasonable levels of user conflicts. Mr Mitchell agrees that there may be some user incompatibility, but disagrees that there would be unreasonable levels of user conflicts.

Without the benefit of any research or investigation of the current users of the serviced apartments, Mr Mitchell makes the comment that:

"Most occupants of serviced apartments would be longer term guests with accommodation costs being met by employers. In these circumstances, a typical guest would be working long hours and not inclined to noisy late-night activities."

Mr Mitchell stated that the 21 day work related occupant of a serviced apartment was one typical user of the types of occupants of serviced apartments. People on work assignments for a week or longer, people visiting family and friends generally stay longer as well, the third category, he said, would the short-term visitors. He is further of the opinion that the criteria to determine behaviour was not the length of stay but the type of building, its quality and the cost to stay there. In terms of the latter, he said that it is cheaper than a high-quality city centre hotel, about $150 a night, and this means it would not be low-cost not even medium cost, but higher cost and if you stay in a high cost quality facility people are expected to behave accordingly. Mr Wise on the other hand, considers that behavioural norms of a serviced apartment guest are difficult to determine, however short term guests also have a lot of associated movements such as cleaning and extra servicing

When Mr Wise was questioned on the evidence to support differences in behaviour between serviced apartment occupants and tenants or owners of apartments he said it was an assumption based on the characteristic of the short-term visitor compared to a permanent resident. Mr Mitchell agreed it was difficult to distinguish behavioural norms, and that is the thing that primarily determines impacts, together with differential servicing requirements and in this regard, he agrees with Mr Wise. However, at the same time, Mr Mitchell does not agree that the definitions are a basis of distinguishing impacts and this is an artificial distinction between the two categories of use.

The planners were asked whether they were aware of any studies to assess the behaviour of occupants of residential apartments as opposed to serviced apartments. Both experts were unaware of such studies or literature. The question was then put to the experts as to whether a trial period would be appropriate. Mr Wise could not see how a trial period will be effective in this instance, because in his opinion, there is inherent conflict between the two uses.

Mr Wise notes that the use has, "been operating reportedly illegally for some time and he could not see how the Court should allow that to continue when it is a clear breach of conditions of consent." Mr Wise advised the Court that the serviced apartments have operated on the site since about 2004.. He was then asked in terms of the existing operation, what particular problems, issues, conflicts or concerns that have been drawn to council's attention during this period. Mr Wise responded that the Council received three objections in relation to the application when it was notified. Mr Wise is also concerned about the precedence of a trial period and whether the trial period would then extend to more apartments in the future in the same building and expressed concern about the creep effect.

Mr Mitchell commented that, "There is still a relatively low level of objections and the objections are all anticipatory. They are not citing incidents that have occurred. They are fears about things that may occur even though the use exists and has existed for an extended period." Mr Mitchell considers that, " (a trial) would be useful to see how the building performs under the management regime that is proposed, including a longer minimum stay because a lot of the expressed concern of Council relates to the shorter stay. The other area that obviously would benefit from tighter scrutiny is access to the car park, because it's effectively a free for all at the moment ... and that could be easily controlled more effectively."

Mr Wise made a further comment to the Court that:

"Whilst I've identified a plan of management in my recommended conditions, I don't feel a plan of management in this instance or a trial period for that matter would be effective. It's simply acknowledging that there are issues with the co-location of these uses on the same level and the acknowledgement of those issues should be enough to determine if the application is unacceptable. By acknowledging the issues and saying we can manage them the best management of the issues in this instance would be the physical separation of the uses and that's what the DCP recommends."

Mr Spagnolo was asked whether he made any enquiries of the manager of the 'Oaks Harmony' as to the average length of stay of a typical guest, to which he responded, no and he had not investigated the records or gone through and identified lengths of stay of guests. In response to the question about how often the apartments are serviced, Mr Spagnolo responded that this will depend on the rate that is paid and the length of stay, but he could say that if someone was staying for 7 nights plus, they will receive a weekly service. He responded that whether an apartment is serviced daily in terms of being cleaned and tidied, it would depend upon the nightly rate. And on average for a 1 bedroom unit, this would be $175 for a 1 night stay, $160 per night for a 2 night stay, with a rate $1,015 for a 7 night stay when commenting on averages he said, "we are not in the business of 1 night stays, that's not profitable to us even 2 nights, we look for longer staying patrons."

Mr Spagnolo was asked that in terms of not being aware of the proportion of 1 or 2 night stays, whether he could confidently agree to a condition that it would still be viable for a 7 night minimum. Mr Spagnolo responded that:

"We would have procedures in place to make sure that the business coming into our organisations funnelled the longest staying business is funnelled into that particular property. If that's the case, we have the means to be able to do that in regards to our corporate suppliers our wholesale suppliers our inbound suppliers and obviously general public enquiries."

Findings

In my merits assessment of the proposal to convert 49 of the 190 residential apartments from residential to the use of serviced apartments, I have had regard to the statutory planning framework and council's guidelines and all the evidence to the Court including: that of the experts; the letters of objection; the site inspection; and the plans filed. The plans show the building and its configuration of apartments, corridors, lifts and common areas. I have determined that a trial period is appropriate in the circumstances of this case for the reasons below.

An examination of the plans shows clear access points and corridors on each floor that are some 2 m in width with a linear configuration providing appropriate sightlines and clear access to lifts and stairwells and other common areas. The foyer area, that includes the reception desk and access to the lifts, is relatively large and highly visible with a wide entry from Quay Street for the 190 apartments in the building. In the circumstances of this case, I am satisfied that the design configuration and dimensions of the common areas in the building could accommodate the co-location of residential and serviced apartments, subject to the detailed consideration of a plan of management and a two year time limited consent.

The design layout of the building is clear and legible. In these circumstances the need for the separation of access points and lifts for the two uses are capable of being varied and a trial period will allow a further assessment based on the trial to demonstrate whether the different uses of serviced apartments and residential apartments can co-exist such that the residential amenity of permanent residents is reasonably maintained. In the circumstances of this case a trial period will allow the impacts to be monitored and assessed.

I have assessed the application under the LEP in terms of the strategies contained within cl 12, including subcl (f) ' the protection and enhancement of the amenity of residents, workers and visitors'. In the circumstances of this case I am satisfied that this aim, together with the other aims and strategies identified above in the LEP, subject to conditions the proposal could be compatible and not inconsistent. I am also satisfied that the proposed development is not inconsistent with cl 36 (d) of the LEP, for mixed-use development.

In terms of cl 6 of the Central Sydney DCP, to ensure that residential buildings will be of high amenity, once again a holistic reading of the LEP in its context, having regard to uses permissible within the zone, I am satisfied the proposal is not inconsistent given the design of the building.

A Plan of Management in my assessment is an appropriate mechanism to manage the two uses on a trial basis of a 2 year time-limited consent. This trial will allow the likely impacts to be more accurately assessed as to whether the amenity for both the long-term residents of the residential apartments and the temporary occupants of the serviced apartments can be reasonably maintained for both user groups.

The provisions of SEPP 65 are relevant to an assessment of the application, even though I do not accept that the proposal represents a substantial redevelopment. For the objective to maximise amenity, safety and security for the benefit of occupants and the community, in my assessment the proposal is not inconsistent with ensuring compatibility of the uses and maintaining residential amenity. Similarly, the car park while it does not provide for a separation of the serviced and residential apartment spaces, or separate entries, at the same time swipe cards can provide for limited access to designated levels. The trial period will also provide for an assessment of this, however the design of the building provides for appropriate co-location in circumstances of this case.

The contention that the objectives and principles of SEPP 65 are not satisfied, that is, to maximise amenity, safety and security for the benefit of occupants and the wider community, I am satisfied the design of the building maintains residential amenity and compatibility between uses and the appropriate management of the car park and other common areas could be achieved within the proposed building without the necessity to provide separate entries.

I am also satisfied that the DCP provision for separate access can be varied in the circumstances of this case for the same reasons and I refer to the authority below that the DCP must be a fundamental element and focal point for my consideration. In particular the need for separate access for a mixed use development. The circumstances of this case however has led me to conclude that variation to this provision is justified. The scale and proportion of serviced apartments to the overall number at 26% could be accommodated given the design and layout of the building on the subject site.

In the judgment of the Zhang v Canterbury City Council [2001] NSWCA 167 , the Chief Justice held that:

The statutory power to determine a development application under s 80 of the Environmental Planning and Assessment Act 1979 is not unfettered and is not at large. It is subject to the obligation to take into consideration matters required by section 79C(1). Relevantly the DCP had to be treated as a fundamental element in, or a focal point of, the decision making process ...

A Development Control plan is not an environmental planning instrument. Accordingly, the requirement in s 80(2) that a consent authority must refuse an application that would result in contravention of such an instrument does not apply to a development control plan. ... Nor can such a plan contain a non-discretionary development standard which if complied with would take away a consent authority's discretion under s 79C(2). A provision so directly pertinent to the application for consent before the Council as was cl 4 of the DCP was entitled to significant weight in the decision-making process but was not, of course, determinative. ...

In my assessment of the application before me, while the proposal does not provide for separate lift access and a separate entrance, I am satisfied that the building and its configuration facilitates the co-location of serviced apartments with residential apartments, and a variation to this provision in the DCP is justified on the basis of a two-year trial period. This is also not inconsistent with the authority of Zhang , whereby a time limited condition was considered appropriate in the circumstances of that case and para 83 of Zhang states:

I do not see any necessary incompatibility between the imposition of a condition limiting a proposed use to a probationary trial period and the statutory requirement that the decision maker take into consideration both the likely impact of the development and the suitability of the site for the development. It is possible to take into consideration matters even though their full significance cannot be known with precision.

Where as in this case, the nature of the development application is for the use of the existing premises and accordingly adverse effects are readily reversible, a probationary or trial period may be an appropriate exercise of the statutory discretion.

In the circumstances of this case it is prudent that a time limited consent be imposed as there is insufficient evidence of the likely impact to approve the use without a condition limiting its duration. Clearly the change of use for 26% of the units can be monitored during this period to inform the future decision maker of the suitability of the site for the change of use. I am satisfied that the design and configuration of the subject premises is satisfactory to allow the co-location and the trial period is appropriate to allow the full implications of serviced apartments and the impacts on permanent residential apartment users as in Zhang:

"The likely impact or suitability will never be capable of complete assessment. Indeed that is the very purpose of the probationary or trial period. The scope and purpose of the Act is better served by permitting experimentation, at least in circumstances where adverse effects will cease if the development consent were not, in the event, extended. The focus is then on likely impact during the probationary period."

Clause 6 of the DCP as set out in the contentions, seeks to ensure that reasonable levels of amenity are achieved in residential buildings, including serviced apartments. The strategy in cl 6.1 is to ensure that residential buildings provide high amenity, and serviced apartments should have a comparable level of amenity to residential buildings, so that any subsequent conversion of serviced apartments to permanent residential stock is not constrained by poor amenity. The Court notes that for the purpose of this section, the term dwelling unit refers to units in both residential buildings and serviced apartments. The objective of this section is' to enhance the amenity of residential buildings and serviced apartments in terms of daylight, sun access, ventilation, privacy, outlook, noise, safety, recreation facilities and storage'.

Under the provision for safety and design, the DCP states that:

the routes between building entrances and dwelling units should be designed to maximise personal safety. The route from car parking areas to the lift lobby is particularly important in this regard. Clear lines of sight and well-lit routes are required, circuitous narrow routes and other places that allow concealment should be avoided. Under this provision it also states that common areas, corridors should be a minimum of 2 m in width, to facilitate ease of movement and may be required to be increased to reduce the confining effect of long and/or double loaded corridors.

While the DCP has the same requirements for residential and serviced apartments, the emphasis would appear to ensure the amenity of residential apartments, built as serviced apartments where they are converted to residential apartments.

The design of the subject building as shown in the plans provided to the Court, in my assessment, does not create an impediment to the co-location of serviced apartments with residential apartments. I make this assessment in respect of not only the common lobby area and lift access, but the width of corridors and the clear lines of sight provided by the design, to provide surveillance opportunities. The design of the reception area and common lobby at the ground floor, in my assessment, could appropriately accommodate the reception desk for check-in and check-out purposes without unreasonable impact on and obstruction for permanent residential occupants of the building.

I agree with Mr Wise that serviced apartments are not a form of housing and do not provide for greater housing choice, as serviced apartments generally provide short-term accommodation, not regarded as permanent residential accommodation. The uses of serviced apartments and residential apartments are two different uses, and the Council's guideline seeks to separate lift access and separate entrance for the residential dwellings. While there are no specific objectives for this requirement, an underlying purpose could be to reduce potential conflicts between different uses, and to provide for an appropriate level of residential amenity for permanent occupants.

This requirement must be a fundamental element or focus for my assessment. The provision in the DCP 213.1 notes the relevant LEP clause as 12(1) that refers to strategies for achieving aims of the LEP. These aims include:

(a) Development of the City of Sydney as a vibrant, culturally diverse, multi-use city centre and;

(b) Continued growth of a permanent residential population in central Sydney and the provision of a full range of housing including affordable housing;

(c) Provision of appropriate development potential;

(d) Provision of visitor and tourist accommodation;

(f) Protection and enhancement of the amenity of residents, workers and visitors.

These strategies also inform my assessment under 2.13.1, and also having regard to the aims of the LEP to establish the City of Sydney as the best place to live in, work in and visit

The number of units proposed for serviced accommodation is 49 out of 190 units, and this represents some 26%. The trial period will provide for an assessment of the impact of this proportion of serviced apartments, compared to residential apartments, as well as the co-location on the various levels. Similarly, the trial period will allow for user conflicts, in terms of the permanent residents and the serviced apartment guests to be ascertained.

With respect to the contention of financial burden, the experts agreed that the building can be modified from a class 2 residential apartments, to class 3 serviced apartments in accordance with the BCA, and this cost is accepted by the applicant to be at its expense. The question of the general wear and tear on common property, is a matter more appropriately addressed through the owners' corporation and appropriate arrangements with the management for the serviced apartments, in terms of management and maintenance of common property, for the benefit of all users.

In my overall assessment of the application, a trial period will provide for the fulfilment of the objects of the Act, to encourage the promotion and coordination of the orderly and economic use and development of land.

In terms of the aims of the LEP and the strategy to protect and enhance the amenity of residents, workers and visitors to the city, this is a common aim for both permanent residents and visitors to serviced apartments alike, and with the design of the subject building, its location and opportunities, I am satisfied in the circumstances of this case that the aims and strategies of the LEP are not undermined and the proposal is not inconsistent, where the architectural design and configuration of the building provides the opportunity for the two uses to coexist in a compatible way.

The Court must have regard to the objectives of the zone in which development is proposed to be carried out, and the objectives of the zone include to encourage central Sydney's role and growth as one of the Asia-Pacific region's principal centres for finance, commerce, retailing tourism, cultural activities, entertainment and government, as well as:

(d) to provide for increased residential development with appropriate amenity and to ensure the maintenance of a range of housing choices and;

(e) to need to permit a diversity of users which reinforce the multi-use character of central Sydney.

In my assessment, the proposed development meets these objectives, and is not antipathetic to the other objectives contained in cl 36.

In my overall merits assessment I am satisfied that the circumstances of this case are such that it should not be used as a precedent given the unique factors of the suitability of the design configuration of the existing building and the proportion of serviced apartments at some 26% relative to the total number of units. Consistent with the authority of Zhang it is appropriate to allow a trial period to establish if the amenity of the residential apartments can be reasonably maintained with the co-location of the two uses to allow a further assessment having regard to the trial.

From the floor plan attached to the Statement of Facts and Contentions and the plans filed with the court, these demonstrate to my satisfaction that the co-location of residential and serviced apartments could be accommodated without unreasonable impacts on permanent residents and maintaining the amenity for both groups of users.

The large entry lobby off Quay Street and the access to three lifts that serves all units in a direct manner from the car park or lobby could be managed to facilitate the co-location of the uses. The floor plans of each level of units shows that the width of the corridors meets Council's DCP guideline of 2 metres and the floor plate is generally linear and there is sufficient width given the need for trolleys for the serviced apartments. The car park entry from Bijou Lane provides straightforward ingress and egress with an intercom system to the reception desk and the location of this is separated from the main pedestrian entry foyer to minimize potential conflicts.

The servicing of 49 apartments could be managed outside of peak am and pm periods when permanent residents are generally leaving and returning from work and university. Furthermore, one lift could be used for servicing if necessary while two lifts would still be available for residents and serviced apartment occupants.

I am satisfied that the design of the building could overcome inherent conflicts associated with co-location of residential and serviced apartments using the same access points and being located on the same levels while maintaining the amenity of both user groups. Similarly in terms of SEPP 65 for design considerations the configuration and layout of the building would not lead to unacceptable user conflicts and surveillance given the design of the building.

Conditions

At the end of the proceedings, the parties agreed on many of the conditions however a number were still in dispute. The conditions in Annexure A, identifies the apartment numbers to be used as serviced apartments for a two year time-limited consent. Some 37 car parking spaces are also identified for use with the serviced apartments.

Condition 3 is that the applicant bear the costs associated with the necessary BCA upgrade works, and this is agreed to by the applicant.

The Council proposes a restriction on serviced apartments, such that they not be used for permanent residential purposes, or any other use. I accept that this condition should be imposed for the time-limited consent. This will allow monitoring of impacts of serviced apartments that are co-located with residential apartments within the same building and on the same levels. I note the agreement of the owners with the Oak managment, allows for owners to stay in the serviced apartments for short term stays.

Condition 7 restricts the use as serviced apartments to a minimum of a 7 consecutive night stay, and this is agreed to by the applicant. As such the booking arrangements and websites will need to reflect this and the Plan of Management will be required to provide details.

Condition 8 requires a Plan of Management, and this must be submitted to the Council and approved prior to the issue of the occupation certificate. The Plan is to address a number of issues including security of common areas, card access, car park security measures, CCTV, house rules. And importantly the applicant is to investigate the most effective mechanisms to implement the Plan given the complexity of relationships with the owners' corporation, the caretaker, and owner's agreements with the serviced apartment management. The plan of management to be submitted to the Council for approval must include appropriate by-laws or other mechanisms for the implementation of the Plan.

A condition is also imposed with respect to noise levels, in accordance with the Protection of the Environment Operations Act 1997. The conditions for general noise and mechanical plant and equipment and mechanical ventilation are also considered appropriate, given the different use of serviced apartments within a residential apartment building. Condition 21 relates to alterations and additions in accordance with the BCA, and condition 22 requires a fire safety certificate, prior to an occupation certificate being issued.

Orders

Accordingly, based on my assessment above, the formal orders of the court are:

(1) The appeal in respect of the property known as 'Oaks Harmony' at 107 to 121 Quay Street Haymarket is upheld.

(2) The development application submitted to the Sydney City Council and as amended for the use of 49 of 190 apartments as serviced apartments is granted a two year time-limited consent, with a minimum stay of 7 nights and subject to the conditions contained in annexure A.

(3) The exhibits are returned to the parties with the exception of exhibits 1, 6, D and E.

J S Murrell

Commissioner of the Court

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Annexure A - Conditions of Consent

Decision last updated: 11 March 2011

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Citations

Oaks Hotels and Resorts (NSW) No. 2 Pty Ltd v The Council of the City of Sydney [2011] NSWLEC 1049

Most Recent Citation

Council of the City of Sydney v Oaks Hotels and Resorts (NSW) No.2 Pty Limited (No 2 re Maestri) [2011] NSWLEC 235

Cases Citing This Decision

2

Council of the City of Sydney v Oaks Hotels and Resorts (NSW) No.2 Pty Limited (No 2 re Maestri) [2011] NSWLEC 235

Council of the City of Sydney v Oaks Hotels and Resorts (NSW) No.2 Pty Ltd (No 2 re Harmony) [2011] NSWLEC 234

Cases Cited

1

Statutory Material Cited

5

Zhang v Canterbury City Council [2001] NSWCA 167

Medium Neutral Citation:	Oaks Hotels & Resorts (NSW) No. 2 Pty Ltd v The Council of the City of Sydney [2011] NSWLEC 1049
Hearing dates:	9 June 2010, 23 August 2010 plans filed
Decision date:	01 March 2011
Jurisdiction:	Class 1
Before:	Murrell C
Decision:	1. The appeal in respect of the property known as Oaks Harmony at 107 to 121 Quay Street Haymarket is upheld. 2. The development application submitted to the Sydney City Council and as amended and for 49 of 190 residential apartments to be used as serviced apartments is granted a two year time-limited consent, subject to the conditions contained in annexure A. 3. The exhibits are returned to the parties with the exception of exhibits 1, 6, D and E.
Catchwords:	DEVELOPMENT APPLICATION: conversion of 49 of 190 residential apartments to serviced apartments within an existing building known as 'Harmony". Conflicts with, and impact of serviced apartments on the amenity for residential apartments in the same building and on the same floors; inconsistencies with LEP, DCP and SEPP 65; and precedential effect.
Legislation Cited:	Environmental Planning and Assessment Act 1979 Protection of the Environment Operations Act 1997 State Environmental Planning Policy No. 65 Sydney Local Environmental Plan 2005 Central Sydney Development Control Plan 1996
Cases Cited:	Botany Bay City Council v Premier Customs Services Pty Ltd [2009] NSWCA 226 Goldin & Anor v Minister for Transport Administering the Ports Corporatisation and Waterways Management Act 1995 [2002] NSWLEC 75 Jarasius v Forestry Commission of New South Wales (1989) 17 LGRA Jonah Pty Ltd v Pittwater Council [2006] NSWLEC 99 144 LGERA 408 Stockland Development Pty Ltd v Manly Council [2004] NSWLEC 472 revised - 01/10/2004 The Oaks Hotels & Resorts Pty Ltd v City of Holdfast Bay and Another [2010] SAERDC 16 Zhang v Canterbury City Council [2001] NSWCA 167
Category:	Principal judgment
Parties:	Oaks Hotels & Resorts (NSW) No. 2 Pty Ltd (Applicant) The Council of the City of Sydney (Respondent)
Representation:	Counsel: Mr T Hale SC (Applicant) Mr J Maston (Barrister) (Applicant) Mr M Baird (Barrister) (Respondent) Solicitors: Minter Ellison (Applicant) The Council of the City of Sydney (Respondent)
File Number(s):	10055 of 2010