Mark Baker-Jones

22 October 2013 — In June, a developer of a large resort and residential community was dealt a blow when its development application was overturned in the Queensland Planning and Environment Court. They had not adequately taken into account climate change-related sea level rise.

Law firm DLA Piper said the decision marked a critical turning point in planning law, with a recognition that long-term climate change impacts needed to be adequately considered when deciding development application approvals.

Mark Baker-Jones, special counsel for DLA Piper’s Real Estate and Commercial Property Group, is about to embark on a series of seminars with consultancy Net Balance to talk about why it’s time for property developers to stop lagging behind and start seriously factoring in climate risk.

“I think [property developers] have an understanding of their climate change risk, just not a complete understanding of their risk,” Mr Baker-Jones told The Fifth Estate.

He said property developers generally thought in fairly short timeframes, due to the limited time they were involved in projects.

“That’s not a statement on whether or not climate change is accepted in the property development space – that’s not the issue – but developers often view climate risks in terms of the relatively short timeframes they’re involved with development projects,” he said.

“They may only carry a project for five years so they’ll plan, obtain approvals and move on with a view that climate change impacts won’t affect the project in that short time. The problem is, this thinking only takes into account the direct impacts of climate change, the physical impacts, whereas the indirect impacts like legal risk can be more enduring.”

The decision of the court now means that when thinking about climate change, developers need to look more broadly and not focus solely on the immediate-term risks, he said.

Local governments also need to increase their awareness and understanding of their climate legal risks, if they want to minimise their exposure to liability and potential litigation.

“Because climate change adaptation is largely concerned with protection of the built environment, rather than the natural environment, it is based more in planning law than environmental law, and planning law increasingly requires governments to take climate change into account,” Mr Baker-Jones said.

“Local government should ensure that the impacts of climate change are being considered when assessing development.”

Not all local councils were doing this, he said, though things were gradually changing as awareness grew.

“As we become more familiar with how we might be affected by climate change, particularly the indirect effects, we become more aware of how it will affect our decisions,” he said.

For property developers, the risk wasn’t just in relation to development applications, but also to obtaining finance and insurance.

“If financiers are going to fund property developer, they will want to be assured that the necessary approvals can be obtained,” said Mr Baker-Jones.

If they could not be sure of this, they would be unlikely to finance a project.

The same was true with insurance. If land turned out to be uninsurable then it was going to affect financing ability.

Broader changes were also beginning to occur in the business world, Mr Baker-Jones said, and these could be a driver for increasing an understanding of climate change risk. A proposal for changes to ASX Corporate Governance Principles and Recommendations could see corporations compelled to disclose how they have regard to environmental, social and governance risks, each of which is potentially affected by climate change.

If this were to happen, we would see a general need to assess corporate climate risk and to report on that risk, Mr Baker-Jones said.

Where does liability lie?

Where liability lay for developments impacted by climate change was an incredibly complex decision, Mr Baker-Jones said, with a lot of variables to determine who the responsible party was.

“What we’re saying to decision makers, particularly local government, is that before you make a decision, you need to look at who carries liability for those decisions.”

There were various avenues for affected property owners to seek redress for damage due to climate change-related natural hazards.

Local government was the obvious “soft target” for compensation, he said, though the state and previous owners and developers could also be liable under some circumstances.

Mr Baker-Jones said it may be necessary to establish such things as whether a duty exists, in statute or common law, a duty say to warn, in order to determine where liability lies. There may also be questions of whether there was reliance on information provided to the property owner that led to exposure to the risk.

The key was to be aware of and obtain advice as to where legal risk is, and ensure that decision makers understand the consequences of their decisions when climate change is a factor.

Mr Baker-Jones said that local governments were calling out for help on this topic, and he claimed that DLA Piper was one of the only law firm providing advice on climate change risk in planning.

“Few law firms have ventured into this space. It’s a new area of planning law.”

Climate Change and the Property Development Sector is being hosted by Net Balance in Melbourne, Brisbane and Sydney from 30 October.

Go to https://www.netbalance.com/insights/events for more information.