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Converting Existing Premises or Acquiring and Developing Land into a Medical or Healthcare Practice

Acquiring and developing land into a medical or healthcare practice

Are you considering acquiring a new property with the intention to build or substantially renovate a medical or healthcare practice? Or, do you already own a property that you intend to convert into a medical practice? Where do you start?

The first step is to do your due diligence and find out if your intentions can become reality. It is important that you understand whether the property can be used for the proposed purpose, developed into the practice (including the construction of a new building) and consider whether the proposed practice can be subdivided (if intended).

It is also necessary to consider the commercial structure at the outset so that there are no adverse consequences, such as the liability to pay additional stamp duty.

Planning considerations

If you are acquiring (or already own) a property or intend leasing a premises with a view to operating a medical practice, there will be a range of planning matters to consider and planning processes to follow, in order to ensure that the use of the premises is authorised and lawful.

A medical centre may or may not require a planning permit, depending on the planning controls affecting the land under the local Council’s planning scheme and the details of the proposal.  In addition, each planning scheme in Victoria will have policies, decision guidelines and planning control provisions specific to its scheme and these will need to be reviewed carefully to determine the likelihood of obtaining a planning permit (if required) for any medical centre proposal.

If you are converting an existing premises, your proposal may need a planning permit for the change of use of the land as well as for business signage, changes to car parking requirements and for any building works.

Under the relevant planning scheme, key questions include:

  • What is the zoning of your property?
  • Are there any overlays affecting the property (heritage, environment, flooding)?
  • Do the planning scheme controls affecting your property allow the proposed use with a permit, or is it prohibited?
  • Does your proposal meet the definition of ‘Medical centre’ under the planning scheme?
  • What components of the proposal require a planning permit – building works, the proposed use or uses at the premises?
  • What requirements must be met under the planning controls affecting your property?
  • What are the key concerns with a medical centre proposal and the likely conditions that may be imposed on a planning permit?

Land use term – medical centre

Each Council area uses the Victorian Planning Provisions (VPP) as a reference tool to ensure consistent provisions for various matters in Victoria including standard zones and overlays to be applied to a planning scheme.  A particular Council may add local provisions in schedules to any given zone or overlay.

Under the VPP (and in all the planning schemes) a ‘medical centre’ is defined as:

Land used to provide health or surgical services (including preventative care, diagnosis, medical and surgical treatment, pathology services, and counselling) to out-patients only.

A medical centre may typically include general medical practitioners in a family practice, as well as centres that provide other health care services co-located in the same premises or standalone such as physiotherapy, dentist, chiropractic and psychology professionals.

It is necessary to carefully consider whether all components of the proposal fall within the definition. Decisions of the Victorian Civil and Administrative Tribunal (VCAT) will provide guidance on the characterisation of your proposed use and whether it falls within the definition under the VPP.

Under the VPP, the land use term ‘medical centre’ is included in the land use term ‘office’.  Office is defined under the VPP as:

Land used for administration, or clerical, technical, professional or other like business activity. No goods or materials intended for manufacture, sale, or hire may be stored on the land. Other than electoral office and medical centre, it does not include any other defined use.

The term ‘office’ includes ‘medical centre’, so it is necessary to consider this when reviewing the permit triggers under the relevant zone in the planning scheme affecting the property.

Will a medical centre always require a planning permit?

The short answer is no.

Depending on the planning controls affecting the specific location/zoning of the land, the use of land as a medical centre will either:

  • be allowed as of right without a planning permit being required; or
  • require a planning permit; or
  • be prohibited.

It requires a review of each zone to see the result.

Planning permit not required

Several zones under the VPP allow a medical centre ‘as of right’, i.e. without a planning permit, if certain conditions are met.  Some examples include:

  • Low Density Residential Zone

The purpose of this zone includes to: “provide for low density residential development on lots, which, in the absence of reticulated sewerage, can treat and retain all wastewater.”  In the Table of uses under this zone a permit is not required for a medical centre if the following condition is met: “The gross floor area of all buildings must not exceed 250 square metres. The Site must adjoin, or have access to, a Road in a Road Zone”.

  • Mixed Use Zone

The purpose of this zone includes to: “provide for a range of residential, commercial, industrial and other uses which complement the mixed-use function of the locality.” A permit is not required for a medical centre if the following condition is met “The gross floor area must not exceed 250 square metres”.

  • General Residential Zone

The purpose of this zone includes the following: “To encourage a diversity of housing types and housing growth particularly in locations offering good access to services and transport. To allow educational, recreational, religious, community and a limited range of other non-residential uses to serve a local community needs in appropriate locations”. A permit is not required for a medical centre if the following condition is met: “The gross floor area of all buildings must not exceed 250 square metres.  Must not require a permit under clause 52.06-3. The site must adjoin, or have access to, a Road in a Road zone”.

If the condition is met, a planning permit will not be required for the change of use of the premises to a medical centre.  If the condition cannot be met, a planning permit will be required.

Other circumstances include where the land is zoned Commercial 2 or Commercial 3. In these zones:

  • the land use term ‘Office’ is listed as a use that does not require a permit and does not exclude a medical centre;
  • medical centre is not specified in any section of the land use tables;
  • the definition of ‘Office’ includes ‘Medical centre’; and
  • so, the use of land as a medical centre will on its face, fall within the category that does not require a planning permit under these zones.

Planning permit required for change of use

A medical centre will require a planning permit if the relevant zone under the planning scheme specifies the medical centre use as one which requires a permit.  Additionally, if the zone does not specify the medical centre use elsewhere in the Table of land uses, it will be a use that requires a planning permit.

Range of planning considerations and requirements

Typically, medical centres are sought to be established in commercial zones and some residential zones, in a town centre, located with other facilities or aged care facilities, located on the same side of a road to a town centre, or in or near a group of shops.

In addition, a well located medical centre may be established in areas adjacent to commercial zones and in residential zones where the particular neighbourhood and amenity of the area lends itself, in planning terms, to the establishment of a medical centre (sufficient buffer to adjoining residential development, close to public transport, on a road that can accommodate extra traffic).

In assessing and deciding an application, the deciding responsible authority (referred to here as the Council) will consider a number of decision guidelines and policies that are located throughout the provisions of the planning scheme. Council must decide whether the proposal will produce acceptable outcomes in terms of the orderly planning of the area, the effect on the amenity of the area and the proximity of the land to any public land, amongst other matters.   Council will take into account the policy titled ‘Non-Residential Uses in Residential and Future Residential Areas policy’, that is contained in most planning schemes if it applies to the land in question and having regard to the details of the proposal and the relevant planning controls.

Ancillary uses and separate uses – requirements to comply with the planning scheme

A use that is properly considered ‘ancillary’ (a natural adjunct) to a medical centre, will be authorised under a planning permit for the use of the land as a medical centre, being an activity ancillary to the principal use. Typically, a dispensary that is located in the medical centre and that services patients of the centre will likely be considered part of the medical centre.  It will depend on the operations and the approved plans of the premises.

It is necessary to be aware that a use that is not properly characterised as a medical centre or ancillary to a medical centre, may require a separate planning permit, or it may even be prohibited under the relevant zone. These possibilities need to be examined early on.  For example, a standalone chemist shop will likely be considered as falling within the separate land use term ‘Shop’.  Under the relevant zone a Shop may require a planning permit, or it could be prohibited.

What about restrictive covenants?

It is important to note that Council is unable to issue planning permits for any development that contravenes a restrictive covenant on title that prohibits the use of the property as a medical centre. However, in some circumstances, consideration can be given to the removal of the restrictive covenant to enable the proposed use of the premises.

What are the other elements of a medical centre that might require authorisation under a planning permit?

There may be elements of a medical centre that require specific authorisations under a planning permit, such as:

  • Carparking – the relevant planning scheme will contain a number of requirements to be met regarding the provision of adequate on-site car parking spaces, related to the floor space of the premises, the number of medical practitioners and the locality of the area and zoning of the land. Depending on the circumstances, a planning permit may be required if the number of car parking spaces deviates from the standard requirements; and
  • Associated business identification signage – the relevant planning scheme will also contain a number of requirements relating to the size, type and number of signs, depending on the size of the building, the zone and the locality of the area. A planning permit may be required depending on the details of the proposal; and
  • Associated buildings and works – for example you might be retaining a standalone residential dwelling but constructing features inside or outside that require a planning permit, each element must be considered against the relevant provisions of the planning scheme.

Common concerns and conditions on permit

The concerns that commonly arise, for example by objectors to an application for a medical centre, are traffic, car parking, access and noise. Council may approve an application and address these concerns by imposing appropriate conditions, such as specifying the hours and days of operation and acoustic measures to buildings or fencing. Other conditions may include the maximum number of practitioners at the premises.

Compliance and future changes

Once a planning permit is issued, it is imperative that you comply with the planning permit, the conditions on the permit and all ongoing requirements and restrictions contained in the permit and the plans endorsed under the permit.  If, at a later date you wish to expand the operation outside the parameters of what is authorised under the permit and plans, you will need to amend the permit under either secondary consent conditions or by application to Council or VCAT.

The material outlined above does not address the full suite of property and planning considerations and requirements under a planning scheme that may apply to a specific medical centre proposal.

We work collaboratively with town planners, responsible authorities and other consultants and can assist by providing you with planning and property due diligence based on the proposed medical or health care practice to be operated, prior to or post acquisition of a property.  In addition, we can assist you with lodging your planning application, during the planning permit application (including engaging or liaising with any consultants), dealings with Council and any referral authorities or, in relation to the acquisition, leasehold interest, subdivision and/or property development.

To discuss your requirements further, please contact Kristy Muhlhan, Principal, who heads our Property and Development Pillar at Burke & Associates Lawyers on kmuhlhan@burkelawyers.com.au on (03) 9822 8588.


Insight written by
Kristy Muhlhan

Contacts

Meghan Warren

Principal

Meghan Warren

Principal
LL.B GAICD B.Bus (FinPlan)
Meghan is one of the few lawyers in Australia admitted in the State (Victoria) and Federal jurisdictions of Australia, and as an Attorney at Law to the New York State Bar in the United States.

Kristy Muhlhan

Principal

Kristy Muhlhan

Principal
LL.B (Hons) GRAD DIP. L.P., GAICD.
Since 2014, she has been an owner and Principal of the firm and has mastered a broad range of essential commercial and business skills which go hand in hand with the work she does for...

Rosy Roberts

Principal

Rosy Roberts

Principal
LL.B (Hons) B.A GAICD
Rosy has extensive experience in Litigation & Alternative Dispute Resolution having represented clients in all Victorian State Courts and the High Court of Australia. She is also a VCAT appointed Administrator.

Anthony Burke

Consultant

Anthony Burke

Consultant
B.A LL.B DIP.FIN. MGT
Tony is an LIV accredited business law specialist and a VCAT appointed Administrator. In 2008 he was President of the Law Institute of Victoria and served for two years as a director of the Law...

George Hanger

Associate

George Hanger

Associate
LL.B BA
George was admitted to legal practice in May 2015 after completing a Bachelor of Arts at the University of Melbourne and a Bachelor of Laws at Monash University.

Stewart Davis

Associate

Stewart Davis

Associate
LL.B (Hons) B.Com
As well as property law, Stewart has had exposure to VCAT administration matters and commercial law, particularly servicing developer clients.

Emma Dickens

Paralegal

Emma Dickens

Paralegal
Emma previously completed a Bachelor of Legal and Dispute studies at RMIT University in 2015.

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