An easement is a right annexed to land to utilise other land of different ownership in a particular manner or to prevent the owner of the other land from utilising land in a particular manner.
Easements come in various forms, including rights of way, rights of support, easements for services, easements for light and air and the like. They often allow a person or authority to do things that would otherwise be trespassing on private or public land.
Easements are acquired – whether that is by extinguishment or creation – by certain public authorities of the Commonwealth, States and Territories over land, including in circumstances where there is significant redevelopment of a precinct, where easements are no longer needed or when there is a change in public works layout.
In NSW, an easement is an "interest" in land for the purposes of the Land Acquisition (Just Terms Compensation Act) 1991 (JTCA) and will therefore trigger the requirements of the JTCA in relation to the payment of compensation on acquisition, with some exceptions. As a result, the owner of the land benefitted by an easement (known as the 'dominant tenement') is entitled to be paid compensation for acquisition in accordance with section 37 of the JTCA.
At present, an acquiring authority must follow the provisions of the JTCA in paying market value for the acquisition of an easement interest. In NSW, the broader compensation principles presently applied by the courts for easement acquisition include the following:
- the market value paid for the easement is assessed at the date of the acquisition (even if the easement is to be temporarily removed)
- for extinguishment, an assessment is made of the natural and reasonable consequences caused by acquiring an easement and the resulting loss and damage to the dominant tenement. The test is the attitude of the hypothetical prudent purchaser and the extent to which the claimant's (being the dominant tenement) has suffered diminution in the value of their property (see Giessauf v Prospect County Council (Unreported, NSW Land and Environment Ct, 27 April 1987))
- the "before and after" approach is often the preferred valuation method adopted by the court for acquiring easements (see Chino Pty Ltd v Transport Infrastructure Development Corporation [2006] NSWLEC 768)
- a construction inquiry is undertaken so that a question is asked regarding what the dominant owner could possibly do in the exercise of its rights (see Besmaw Pty Ltd v Sydney Water Corporation [2001] NSWLEC 15)
- the court will consider the construction of the easement terms by reference to its registered terms and not by reference to extrinsic material, except for the physical characteristics of the dominant and servient tenements at the time of creation (see Tempe Recreation Reserve Trust v Sydney Water Corporation [2013] NSWLEC 221)
- considering whether severance and injurious affectation damage principles apply in the circumstances under the JTCA, based on the evidence before the court.
The awarding of compensation varies largely from case to case. Sometimes the courts have held that the amount of compensation for extinguishment of easements is for all intents and purposes, nominal, for example where there is resumption of an easement for electricity transmission lines (see Giessauf v Prospect County Council (Unreported, NSW Land and Environment Ct, 27 April 1987). Yet the court has also previously held that the creation of an easement over a reserve for the purposes of water legislation can be valuable (in the realm of $100,000 for market value) where that reserve was used for public recreation (see Tempe Recreation Reserve Trust v Sydney Water Corporation [2013] NSWLEC 221).
Considering the above matters, the valuation of easement acquisitions is factually driven and can vary widely from one case to another, depending on the property, the right that is being acquired and its appropriate construction.
If you are involved in an easement acquisition, we recommend taking four steps.
Step 1: Identify the correct interpretation of the acquired easement
This will involve considering the terminology and wording used in the instrument itself and what it does, or does not, permit. It will often be the case that a claim will collapse if the instrument is not interpreted correctly. For example, does your easement allow permanent works above the surface of the relevant land?
Step 2: Adopt a practical view
The correct approach is not just to read the grant of the easement and assume the worst but to adopt a practical view of the matter and conduct enquiries which would lead to an intelligent assessment of the risk of future intrusion. Although this is an approach adopted in QLD case law, we consider it is useful to adopt in the NSW jurisdiction
Step 3: Engage an experienced valuer
In our view, it is important to engage a valuer and any other experts relatively early on in the process (including town planners or environmental consultants, where appropriate) that will consider the above points and provide practical advice in relation to valuation.
Step 4: Adopt the correct valuation approach
Consider whether your valuer should be adopting the "before and after" approach when conducting the valuation, or the piecemeal approach.
Ultimately, claims for compensation must be based on statutory provisions in the JTCA and the above matters require detailed consideration and assessment. We consider that the time is ripe for further judicial authority in this area in an appellate court to consolidate existing principles relating to valuation assessment.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.