Wednesday, January 27, 2016

‘Hundreds of millions in compensation’?

Jan 15, 2016 by Anil Netto

In all my years of observing politics, whether local or foreign, I have never before come across an administration that so frequently warns of the possibility of having to pay “(hundreds of) millions in compensation” to developers or landlords. To me, this mantra seems to be a favourite fall-back position (to browbeat critics into silence?).

The latest occasion was when prominent lawyer Agatha Foo presented Penang Forum’s position on ‘special projects’ on hill land during a meeting with the state government in Komtar on 11 January 2016.

In a nutshell:

In 1996, a Development and Control Masterplan was drawn up. This was just a guideline that was never gazetted. Under this guideline, several areas of hill land under conservation were scandalously classified as housing (bungalow lots). No thanks to the BN administration back then.

In 2007, the Penang Structure Plan was gazetted, thus making it a legal document. This forbade development more than 250 feet above sea level and on slopes more than 25 degree gradient. But it made an exception, allowing limited development for ‘special projects’. Unfortunately, it did not provide a definition for special projects.

In 2009, the State Planning Committee came up with a guideline to define special projects, which seemed to widen their scope. It allowed public infrastructure and, for cases where planning permission had been approved before the Structure Plan was adopted, it accepted any change of conditions to housing.

Crucially, the 2009 guideline also accepted the hill land areas that were classified as housing zones in the 1996 masterplan, which was really only a guideline.

Penang Forum’s contention is that these areas should have been rezoned back to their original status, i.e. hill land under the Land Conservation Act 1960, in compliance with the Penang Structure Plan forbidding development above 250 feet.

No compensation need be payable as the rezoning would only apply to areas where no planning application had been approved and no development work had started (thus distinguishing it from the Boustead case in George Town where piling work had already begun and heritage conditions were later imposed to lower the height). Penang Forum is not asking for the revocation or modification of planning permission or asking that land be taken over for a public purpose; so the question of compensation should not arise.

Penang Forum also noted that planning permissions can only be extended five times; so, planning permissions approved before 2008 could not have been extended beyond 2012; therefore the 22 projects approved since 2012 are deemed new approvals. (The state government, however, claims applications can be submitted anytime.)
Stringent new conditions for hill land can be imposed when extending planning permissions.

If the Structure Plan only allows limited development for special projects, how could 55 high-rise blocks (including a hotel), approved since 2008, be regarded as “limited development”?

To this, the chief minister, after warning that the state government might be liable to pay “millions in compensation” if it did not approve these projects, then invited Agatha to meet his state legal advisors and try and convince them regarding Penang Forum’s position.

[The full text is available at this external link:]
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This is the full text of Penang Forum’s position:

Penang Forum’s position on ‘special projects’
Special projects in the context of hill land development in Penang have been controversial. Penang Forum provides its definition.

Before 2008
The relevant official documents governing use of hill land are:
  • Land Conservation Act (LCA) 1960;
  • Development Control and Planning Master Plan 1996 (Pelan Dasar) approved by the State Planning Committee, but not gazetted and is therefore merely a guideline; and
  • The Penang Structure Plan 2020 (Structure Plan), gazetted in 2007.

Some plots of land above 250 feet that were removed from gazetted ‘hill land’ under the LCA and given planning permission for residential use in the Pelan Dasar were empty plots intended for residential bungalows.

The Structure Plan forbids development on gazetted ‘hill land’ and in areas more than 250 feet above sea level and/or on hill-slopes steeper than 25 degrees. (paragraph DK3 L2).

However, DK3 L4 in the Structure Plan states that “limited development for special projects in areas at or higher than 250 feet” must be subjected to stringent controls in compliance with hill land development guidelines and any other guidelines imposed by the State, and approvals under EIA and the State Planning Committee. It follows that these stringent requirements should apply to the above mentioned bungalow lots in the Pelan Dasar which have approved planning permission.

DS30 L5 of the Structure Plan states that housing development is allowed in areas where change of conditions (rezoning) had been approved and officially confirmed for housing before the Structure Plan was adopted. As this paragraph is in a section that does not specifically deal with hill land, it is irrelevant to this context of special projects.

After 2008

In 2009, the State Planning Committee came up with Guidelines for Special Projects (2009 Guidelines) to define and categorise “special projects” into:

Category 1: public infrastructure projects like cable cars, roads, railway, reservoirs, bridges, helipads, etc.

Category 2: housing development areas where change of conditions (rezoning) had been approved and officially confirmed for housing before the Structure Plan was adopted. They include:
  • development projects which had prior planning permissions, or
  • areas shown as housing zones according to the Pelan Dasar (until the Local Plan is gazetted)

However any development in such areas is still required to comply with conditions of the Technical Department and strict control for ensuring slope stability and its surrounding environment.

Category 3: construction on hill land zoned for agriculture is limited to 1 house per acre for non-first grade land and a maximum of 6 houses per acre for first grade land.

Penang Forum’s Contention

Penang Forum’s contention is that the 2009 Guidelines have unnecessarily widened the definition of “special projects” in Category 2. It should have restricted “special projects” to cover only areas above 250 feet which have been rezoned for housing (bungalows) in the Pelan Dasar and have been granted planning permission before the adoption of the Structure Plan. It should not have widened the definition to include other areas that might have been rezoned for housing in the Pelan Dasar but have not been granted planning permission. Should there be any land titles which have been converted for building (housing) before the Structure Plan, they can be dealt with on a case to case basis.

Penang Forum’s opinion is that the State Authority should have in 2009, also amended the Pelan Dasar to rezone land above 250 feet from housing back to hill land particularly those without planning permission. The Local and State Authorities can ‘internally’ amend the Pelan Dasar as it is just a guideline and has not been gazetted. Landowners who had not taken any action to develop their land since 1996 cannot complain about any amendment to the 1996 Pelan Dasar.

Extension of planning permission (where development has not commenced)

Planning permission given before 2007 may be extended when it expires after one year (before commencement of development) and such extension can only be granted up to five times [para DS31 L1, Structure Plan]. Even then, extension is not mandatory and it is at the Council’s discretion.

Even if extensions are granted for a maximum of five times, planning permissions approved before 2008 could not have been extended beyond 2012, and therefore the 22 projects approved since 2012 (according to the list furnished to the State Assembly in Nov 2015) are deemed new approvals.

Stringent controls can be imposed when extending planning permission in line with the Structure Plan (DK3 L4) and the TCPA. New conditions, including EIA and hill land guidelines can be imposed and the conditions originally imposed can be varied [TCPA s. 24(5)].

For projects that have been granted extension after 2008, were stringent controls and new conditions imposed or original conditions varied?

The new condition imposed in the case of MPPP v Sungai Gelugor Co-op Society Bhd (often quoted by the State Authorities) which was declared null and void by the Court, is irrelevant to our above discussion. The new condition imposed therein was solely to control the price of houses after the developer has already sold their units to purchasers and has nothing to do with the control of development planning.

Is compensation payable?

Compensation is payable only if planning permission or approved building plan is revoked or modified after commencement of development. (TCPA s. 25).

Compensation is also payable only if the Local Council issues a requisition notice to discontinue development or impose new conditions after development has commenced or to alter/remove any building/works. (TCPA s. 30).

Furthermore, a purchase notice requiring the Local Authority to purchase land (TCPA s. 37) is only applicable where the application for planning permission has been refused on the grounds that the land is intended for public purpose and has therefor become incapable of reasonable beneficial use to the landowner, or that a requisition notice had been issued by the Local Authority.

The contentions of Penang Forum above do not relate to the revocation or modification of planning permission, or issuance of a requisition notice or requiring land for public purpose. Therefore the issue of compensation or purchase notice is irrelevant.

Limited development for Special Projects

Penang Forum reiterates that under the Structure Plan “limited development for special projects in areas at or higher than 250 feet”:

1. Refers to bungalow lots identified in the Pelan Dasar which have approved planning permission before adoption of the Structure Plan;

2. Must be subjected to stringent controls in compliance with
  • hill land development guidelines
  • any other guidelines imposed by the State;
  • approval under EIA; and
  • approval by the State Planning Committee.

If that is the case, how could high-rise projects and a hotel (Appendix 1) approved since 2008 be regarded as “limited development for special projects”?

Penang Forum steering committee
11 January 2016

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