Lessons for councils when regulating their own property

The NSW Ombudsman has published a new guidance note to help local councils manage conflicts of interest when acting as both developers and regulators of land within their own local government areas. 

The new publication stems directly from a recent investigation into Lane Cove Council, Investigation into enforcement of fire safety obligations at a residential building in Lane Cove, concerning the enforcement of fire safety obligations at a mixed-use residential building where the council was landowner and co-developer. 

The guidance draws on key lessons from past investigations to assist council staff to: 

• Recognise conflicts of interest: Establish clear internal accountability to distinguish between commercial property interests and statutory regulatory duties. 

• Ensure clarity of roles: Structure internal teams so regulatory functions operate independently from development roles − including engaging independent experts or neighbouring councils where appropriate. 

• Establish robust record-keeping: Implement monitoring processes that track regulatory actions and alert executive management when statutory duties are missed or delayed. 

While investigations are a core part of the NSW Ombudsman’s role, an important part of its work is focused on oversight, education, and providing practical tools to help public authorities prevent maladministration from occurring. 

The Lane Cove investigation found that the council engaged in maladministration by failing to properly manage its overlapping roles as co-developer, owner and regulator. Poor governance, inadequate record-keeping and unclear internal responsibilities resulted in non-compliance with fire safety requirements and delays in fixing underlying defects spanning more than 7 years. 

The issues raised were similar to those from a 2020 investigation into Broken Hill City Council, An inherent conflict of interest: councils as developer and regulator, which prompted amendments to the Environmental Planning and Assessment Regulation 2021, requiring all councils to adopt conflict-of-interest policies for council-related developments. 

Investigation reports identify past administrative failures, but their ultimate value lies in driving future practice. Councils are encouraged to review their internal governance frameworks against the guidance to ensure oversight across all council-related developments. 

By delivering practical guidance alongside oversight, the NSW Ombudsman continues to reinforce its role not only as an investigative body, but as a partner to help NSW public agencies build integrity into their day-to-day operations before potential issues arise. 

View the Guidance Note: Lessons for councils when regulating their own property