Rates exemption allowed for community housing provider

Insights5 Nov 2015

A recent decision of the New South Wales Court of Appeal in Community Housing Limited v Clarence Valley Council [2015] NSWCA 327 has allowed a community housing provider to claim a rates exemption.

A recent decision of the New South Wales Court of Appeal in Community Housing Limited v Clarence Valley Council [2015] NSWCA 327 has allowed a community housing provider to claim a rates exemption. As a result of this decision, a new revenue risk has emerged for councils, particularly those councils with a significant amount community housing style developments.

Over the past decade, there has been an increase in community housing style developments, in part due to initiatives such as The State Environmental Planning Policy (Affordable Rental Housing) 2009. This growth is expected to continue with strategic focus on greater density in urban areas. In many instances this greater density involves increased amounts of community housing style developments operated by community housing providers.

This case involves Community Housing Limited (CHL), a charitable organisation which provides affordable housing for those who ‘do not have sufficient household income to obtain adequate access to safe and secure housing’. CHL sought rates exemptions for land it owned in six separate councils asserting that they qualified for rates exemptions pursuant to section 556(1)(h) of the Local Government Act 1993 (LG Act) because the subject land was used for charitable purposes. These rates exemptions were rejected. CHL subsequently commenced proceedings in Class 4 of the Land and Environment Court, arguing that it was entitled to a rates exemption because of its status as a public benevolent institution and public charity together with the fact that the subject land was being used for charitable purposes.

At first instance, the Court Justice found that CHL was not entitled to a rates exemption. The Court considered CHL’s constitution, specifically clauses 3(a) to (c) which outline the company’s objects, and held that section 556(1)(h) of the LG Act did not apply because clause 3(c) of the constitution, which relates to vocational training, does not have a charitable context (each of the purposes are required to be exclusively charitable).

CHL successfully challenged this decision in the Court of Appeal which held that a charitable purpose extends to vocational training and therefore clause 3(c) of the constitution does satisfy section 556 of the LG Act. The Court of Appeal also confirmed that CHL’s use of the land is charitable, despite leasing parts of the land to entities that were not charitable. So therefore, CHL was entitled to a rates exemption.

The Court of Appeal also confirmed that, despite the expiration of the 30 day statutory limitation period pursuant to section 574 of the LG Act, section 674 of the LG Act provides a separate power to commence proceedings to challenge the validity of a rates notice. It was held that judicial review proceedings are not an appeal for the purposes of section 574 of the LG Act, and therefore CHL was not out of time.

This decision may encourage other community housing providers or charitable organisations to seek a rates exemption. The revenue risk this poses for councils is obvious. Individual circumstances may vary and councils need to assess any rates exemption applications according to its merits. The Court of Appeal decision is directly relevant to any rates exemption application a council receives. Hall & Wilcox can assist councils in considering rates exemptions applications to ensure that councils appropriately consider and determine these applications in light of recent Court decisions.