Australia: NSW land acquisition update – favouring the dispossessed landowner

Last Updated: 23 December 2017
Article by Dennis Loether

If your Council is involved in an acquisition, it is imperative you are aware of recent amendments to the Land Acquisition (Just Terms Compensation) Amendment Act 2016 (the Act).

These amendments not only have the effect of increasing the amount of compensation payable to dispossessed landowners, but they add further obligations in the acquisition process.

The amendments are designed to further assist dispossessed landowners while they are also aimed at making the acquisition process more transparent. With that in mind, following is a summary of the 6 key changes to the Act:

  1. Changes to negotiation period
    Under Section 10A of the Act, State authorities, before issuing a proposed compulsory acquisition notice, are now required to make an attempt for at least 6 months to acquire the land by agreement.

    This is consistent with the overall objective of encouraging resolution of acquisitions by agreement. You may only shorten the 6 month period in exceptional circumstances. You will need the approval of both the responsible Minister and the concurrent approval of the Minister responsible for the Act.

    The obligation to attempt to acquire the land by agreement for at least 6 months does not apply to:

    • acquisition of crown land; or
    • an acquisition of easements and rights to use land (or a tunnel) under the surface; or
    • an acquisition from an owner who cannot be located or who declines to negotiate.

    The owner of the land and the State authority can of course agree to a shorter, or longer, period of negotiation.

    It is also important to note that following the giving of a proposed compulsory acquisition notice, negotiations may continue during the standard minimum period of 90 days before the land can be compulsorily acquired

  2. Increased compensation
    Disadvantage from relocation
    The amount of compensation payable for non-financial disadvantage resulting from relocation has increased pursuant to Section 60(2) of the Act.

    The definition of solatium has been replaced with the term disadvantage resulting from relocation. The maximum amount payable, arising from the necessity of a person to relocate his or her principal place of residence as a result of the acquisition, has increased from $27,235 to $75,000.

    Of course this head of compensation is in addition to other matters that include the market value of the land being acquired, and legal and valuation costs.

    The amount will be increased on 1 July each year in accordance with increases in the Consumer Price Index. The increased compensation payment will also apply retrospectively to former residential landowners and tenants whose acquisitions were settled on or after 26 February 2014.

    Market value
    Fundamentally the definition of market value has not changed as contained in section 56(1) of the Act.

    There is however a new subsection, 56(3) which allows for the market value of the land to be adjusted where the land has a special value for a particular purpose for the landowner.

    • if the land is for a particular purpose; and there is no general market for land use for that
    • purpose; and
    • the owner genuinely proposes to continue after the acquisition to use other land for that purpose, then

    for the purpose of paying compensation, the market value of the land is taken to be the reasonable cost to the owner of equivalent reinstatement in some other location.

    That cost is to be reduced by any costs for which compensation is payable for loss attributable to disturbance and by any likely improvement in the owner's position because of the relocation.

  3. Hardship review
    Introduction of a merits review of owner initiated acquisition in case of hardship is pursuant to Section 27A of the Act. Division 3 of the Act has not changed. It allows the owner of land to require the State authority, by notice in writing, to acquire land if:
    • the land is designated for acquisition by that authority for a public purpose; and
    • the owner considers that he or she will suffer hardship if there is any delay in the acquisition of the land under the Act.
    What constitutes hardship isn't always clear but the Act provides hardship means:
    • the owner is unable to sell the land, or is unable to sell the land at its market value, because of the designation of the land for acquisition for a public purpose; and
    • it has become necessary for the owner to sell all or any part of the land without delay for pressing personal, domestic or social reasons, or in order to avoid the loss of income.

    Landowners may now seek a review of unsuccessful hardship applications.

    The new section 27A provides the mechanism for review. In summary, it provides:
    • an owner of land who has given a notice requiring the authority to acquire the land may apply to the Secretary of the Department of Finance, Services and Innovation for a review of a decision of the authority not to acquire the land because:
      1. the land is not designated by the operation of this Division for acquisition by the authority for a public purpose, or
      2. the owner will not suffer hardship if there is any delay in the acquisition of the land, or
      3. the authority is not otherwise required under this Division to acquire the land.

    The application will be sent to a reviewer for determination. The reviewer is to be a suitably qualified person appointed by the Minister who is not associated with the authority of the State or the applicant.

    The reviewer will either quash the decision or if not so satisfied, confirm the decision.

    The reviewer is to endeavour to determine the application within 28 days after the application is referred and the decision of the reviewer is final.

  4. Land not required for acquired purpose being offered first to its former owner

    If during a period of 10 years after the acquisition, the acquiring authority proposes to dispose of land because it is no longer required for the public purpose for which it was acquired, there is an opportunity for the former owner to reacquire the land.

    Under Section 71A of the Act, the acquiring authority must first offer the land for sale to the former owner at the market value of the land at the time the offer is made. There is however a rider to the requirement to offer the land to the new owner in that the new section adopts the words "if practicable". This is important as, for a number of reasons, it might not be practicable to do so.

    Further, the offer is not required if:
    • the authority has made substantial improvements to the land;
    • the land is crown land; and
    • the land is proposed to be disposed of to another authority of the state for a public purpose.

  5. Post acquisition occupation

    Under Section 34 of the Act, a person who was in lawful occupation of land immediately before it was compulsorily acquired and to whom compensation is payable, is entitled to remain in occupation until the compensation is paid to that person or the authority makes the advance payment of not less than 90% of the amount of compensation offered by the authority.

    At present, a person can also remain in occupation of a building that is the person's principal place of residence, or the person's place of business, for 3 months after it is compulsorily acquired, even though that person ceases to be entitled to remain in occupation.

    Previously, rent could be charged by the acquiring authority from the date of acquisition until the former owner vacates.

    The amendment now provides that rent is not payable during the relevant 3 month period after acquisition by a former owner who remains in occupation of any part of a building that is the person's principal place of residence, pursuant to Section 34(A) of the Act.

  6. Strengthening the role of the Valuer-General (VG)
    There are several changes aimed at strengthening the role of the VG.

    Claims for compensation can now be lodged with either the acquiring authority or the VG. The other requirements as previously detailed in section 39 of the Act, for example, that the claim be in the form prescribed by the regulations remain unchanged but for an added qualification. The qualification is that as soon as is practicable after a State authority or the VG receives a claim for compensation, they must provide each other with a copy of the claim.

    The acquiring authority must provide the VG with a list of issues that the authority believes are relevant to the determination of the amount of compensation.

    The list must be provided within 7 days after the authority has compulsorily acquired the land. The government has also encouraged landowners to provide information in support of their claim as soon as is practicable to the VG. Of course, the VG will not be confined to consideration of those issues alone.

    The VG will now be required to provide the compensation determination, including a land valuation report, directly to the former landowner at the same time as the acquiring authority.

    The period for the determination has been increased from 30 to 45 days, under Section 42(1) of the Act. The period commences from the publication of the acquisition notice.

A Summary and Lessons
So these are the impacts of the changes that have come into effect.

For acquiring authorities, you will need to ensure you are on top of timeframes when compulsorily acquiring properties. This also needs to be factored into timeframes for completion of projects.

The overriding benefits of the reforms are in favour of the dispossessed landowner. Rent exemptions, more time to negotiate, more compensation, potential right to re- purchase land no longer required for acquisition, to name a few.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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